UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a -12
VSE CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] 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: N/A
2. Aggregate number of securities to which transaction applies: N/A
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): N/A
4. Proposed maximum aggregate value of transaction: N/A
5. Total fee paid: N/A
[ ] 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: N/A
2. Form, Schedule or Registration Statement No.: N/A
3. Filing Party: N/A
4. Date Filed: N/A
2550 Huntington Avenue, Alexandria, Virginia 22303-1499
Notice of 2009 Annual Meeting of
Stockholders and Proxy Statement
Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders
of VSE Corporation ("VSE" or the "Company") to be held on Tuesday,
May 5, 2009, commencing at 10:00 a.m., Washington, DC time, at the VSE
Building, 2550 Huntington Avenue, Alexandria, Virginia 22303-1499 (the "Annual
Meeting").
We are furnishing proxy materials to our stockholders over the Internet.
You may read, print and download our 2008 Annual Report to Stockholders, Proxy
Statement and Proxy Card at www.cfpproxy.com/3307. On March 24, 2009, we
mailed our stockholders a notice containing instructions on how to access
these materials and how to vote their shares online. The notice provides
instructions on how you can request a paper or e-mail copy of these materials
by mail, telephone or e-mail. If you requested your materials by e-mail, the
e-mail contains voting instructions and links to the materials on the
Internet. You may vote your shares by Internet, by telephone, by regular mail
or in person at the Annual Meeting. Instructions regarding the various methods
of voting are contained on the notice and on the Proxy Card.
The proxy materials describe the formal business to be transacted at the
Annual Meeting and a report on the operations of the Company. VSE directors
and officers will be present to answer any questions that you and other
stockholders may have. Included in the materials is our Annual Report on Form
10-K for the fiscal year ended December 31, 2008, that contains detailed
information concerning the Company's activities and operating performance.
The business to be conducted at the Annual Meeting consists of the
election of nine directors and the ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm for the year
ending December 31, 2009. VSE's Board of Directors (the "Board") unanimously
recommends a vote "FOR" the election of each of the director nominees and
"FOR" the ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year ending December 31,
2009. On behalf of the Board, please vote your shares now, even if you
currently plan to attend the Annual Meeting. This will not prevent you from
voting in person, but it will ensure that your vote is counted. Your vote is
important.
Please note the location for the Annual Meeting. The VSE Building is
located at 2550 Huntington Avenue, Alexandria, Virginia 22303-1499, just off
I-95/I-495 at Exit 176A (Telegraph Road-South). The building is also within
walking distance of the Huntington Avenue Metro Station (Yellow Line), using
the Lower Level exit to Huntington Avenue. I hope you will be able to join us.
Sincerely,
VSE CORPORATION
/s/ D. M. Ervine
D. M. Ervine
Executive Chairman of the Board
March 24, 2009
VSE CORPORATION
2550 Huntington Avenue, Alexandria, Virginia 22303-1499
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 2009
To the Stockholders of VSE Corporation:
Notice is hereby given that the annual meeting of stockholders of VSE
Corporation, a Delaware corporation ("VSE" or the "Company"), will be held on
Tuesday, May 5, 2009, commencing at 10:00 a.m., Washington, DC time, at the
VSE Building, 2550 Huntington Avenue, Alexandria, Virginia 22303-1499, for the
following purposes:
1. To elect nine directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and
qualified;
2. To ratify the appointment of Ernst & Young LLP as VSE's independent
registered public accounting firm for the year ending December 31,
2009; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only record holders of VSE common stock as of the close of business on
March 6, 2009, will be entitled to notice of, and to vote at, the meeting or
any adjournments thereof. The list of stockholders entitled to vote at the
meeting or any adjournments thereof will be open to the examination of any
stockholder during the 10 days prior to the meeting at VSE's offices located
at 2550 Huntington Avenue, Alexandria, Virginia 22303-1499, during ordinary
business hours.
The VSE Corporation 2008 Annual Report to Stockholders, which contains
the Company's consolidated financial statements and other information of
interest to stockholders, accompanies this proxy material.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE ANNUAL
MEETING. STOCKHOLDERS HAVE A CHOICE OF VOTING BY PROXY CARD, TELEPHONE OR THE
INTERNET, AS DESCRIBED ON YOUR PROXY CARD. CHECK YOUR PROXY CARD OR THE
INFORMATION FORWARDED BY YOUR BROKER, BANK OR OTHER HOLDER OF RECORD TO SEE
WHICH OPTIONS ARE AVAILABLE TO YOU. ANY STOCKHOLDER PRESENT AT THE ANNUAL
MEETING MAY WITHDRAW HIS OR HER PROXY AND VOTE PERSONALLY ON ANY MATTER PROPERLY
BROUGHT BEFORE THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Thomas M. Kiernan
Thomas M. Kiernan, Secretary
March 24, 2009
VSE CORPORATION
__________________________________
PROXY STATEMENT
Annual Meeting of Stockholders
to be held on May 5, 2009
__________________________________
INTRODUCTION
General
This proxy statement is being furnished to the stockholders of VSE
Corporation, a Delaware corporation ("VSE" or the "Company"), in connection
with the solicitation of proxies by VSE's Board of Directors (the "Board") for
use at the annual meeting of VSE's stockholders to be held on
Tuesday, May 5, 2009, commencing at 10:00 a.m., Washington, D.C. time, at the
VSE Building, 2550 Huntington Avenue, Alexandria, Virginia 22303-1499, and at
any adjournments thereof for the purposes specified in the accompanying notice
of meeting (the "Annual Meeting").
The mailing address of VSE's principal executive office is 2550
Huntington Avenue, Alexandria, Virginia 22303-1499. VSE's telephone number is
(703) 960-4600. On March 24, 2009, we mailed VSE stockholders a notice
containing instructions on how to access our 2009 Proxy Statement and 2008
Annual Report and vote online. The notice also included instructions on how to
receive a paper copy of the Annual Meeting materials, including the notice of
annual meeting, proxy statement, and proxy card. If you received your Annual
Meeting materials by mail, the notice of annual meeting, proxy statement, and
proxy card from our Board of Directors were enclosed. If you received your
Annual Meeting materials via e-mail, the e-mail contained voting instructions
and links to the annual report and the proxy statement on the Internet, which
are both available at www.cfpproxy.com/3307.
The close of business on March 6, 2009, is the record date for the
determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting. Holders of a majority of VSE's outstanding common stock, par
value $.05 per share (the "Stock" or "VSE Stock"), as of March 6, 2009, must
be present at the Annual Meeting, either in person or represented by properly
executed proxy, to constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker non-votes will be counted solely for
the purpose of determining whether a quorum is present. A proxy submitted by a
broker that is not voted is sometimes referred to as a broker non-vote.
As of the close of business on March 6, 2009, there were 5,128,380
shares of Stock outstanding and approximately 300 stockholders of record. Each
stockholder is entitled to one vote for each share of Stock held of record as
of the close of business on March 6, 2009, on all matters which may be
submitted to the stockholders at the Annual Meeting.
Matters to be Considered
The purpose of the Annual Meeting is to vote on the election of nine
directors to the Board and to ratify the appointment of Ernst & Young LLP as
VSE's independent registered public accounting firm for the year ending
December 31, 2009.
As of the date of this proxy statement, the Board does not intend to
present, and has not been informed that any other person intends to present,
any matter for action at the Annual Meeting other than those matters
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specifically referred to herein. If, however, any other matters are properly
presented to the Annual Meeting for action, the proxy holders will vote the
proxies, which confer authority on such holders to vote on such matters, in
accordance with their best judgment. The persons named as attorneys-in-fact in
the proxies are VSE officers.
Voting and Recommendations of the Board of Directors
All Stock represented by valid proxies will be voted at the Annual
Meeting in accordance with the directions on the proxies. If no direction is
indicated on a proxy, the Stock represented thereby will be voted as
recommended by the Board, namely "FOR" the election as VSE directors of each
of the nine nominees listed below under Proposal No. 1, and "FOR" the
ratification of the appointment of Ernst & Young LLP as VSE's independent
registered public accounting firm for the year ending December 31, 2009, as
discussed below under Proposal No. 2.
Vote Required
Directors are elected by a plurality of votes cast, including Stock
voted, and without regard to either broker non-votes or proxies as to which
authority to vote for the nominees being proposed is withheld. The
ratification of the appointment of Ernst & Young LLP as independent registered
public accounting firm will be determined by a majority of the votes cast,
without regard to broker non-votes or proxies marked "ABSTAIN."
How to Vote
VSE is making its proxy materials available to stockholders on the
Internet. You may read, print and download our 2008 Annual Report to
Stockholders, Proxy Statement and Proxy Card at www.cfpproxy.com/3307. On
March 24, 2009, we mailed a notice to stockholders containing instructions on
how to access our proxy materials and vote online. On an ongoing basis,
stockholders may request to receive proxy materials in printed form by mail or
electronically by e-mail. You may vote your shares by Internet, by telephone,
by regular mail or in person at the Annual Meeting. Each of these voting
options is described in the notice and the Proxy Card.
You should complete and return your Proxy Card, or vote using the
Internet or telephone voting options, to ensure that your vote is counted at
the Annual Meeting, or at any adjournment of the Annual Meeting, regardless of
whether you plan to attend. If you return an executed Proxy Card without
marking your instructions, your executed Proxy Card will be voted "FOR" the
election of each of the nine director nominees named in this Proxy Statement
and "FOR" the ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year ending December 31,
2009.
If you are a stockholder whose shares are not registered in your own
name, you will need appropriate documentation from the stockholder of record
to vote in person at the Annual Meeting. If you want to vote your VSE Stock
that is held in street name in person at the Annual Meeting, you will need a
written proxy card in your name from the broker, bank or other nominee who
holds your Stock.
Revocation of Proxies
A stockholder returning a proxy to VSE may revoke it at any time before
it is exercised by granting a later proxy with respect to the same Stock or by
communicating such revocation in writing to VSE's Secretary. In addition, any
stockholder who has executed a proxy but attends the Annual Meeting in person
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may cancel a previously given proxy by voting in person whether or not the
proxy has been revoked in writing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of VSE Stock as of March 6, 2009, based on VSE records, information
filed with the Securities and Exchange Commission (the "SEC"), and information
provided to VSE. Based solely on this information, no person or group of
persons beneficially owned more than five percent of VSE Stock except Calvin
S. Koonce. Information on Mr. Koonce's beneficial ownership of VSE Stock is
given below.
The voting and investment powers of the VSE Stock listed below are held
solely by the reported owner unless otherwise indicated.
________________________________________________________________________________
Shares beneficially Percent of
Name of Beneficial Owner owned class (a)
________________________________________________________________________________
Certain Beneficial Owners
-------------------------
VSE ESOP and 401(k) Plan (b) 95,499 1.9%
Non-Employee Directors
----------------------
Ralph E. Eberhart 1,700 *
Clifford M. Kendall 43,314 *
Calvin S. Koonce (c) 847,914 16.5%
James F. Lafond (d) 7,094 *
David M. Osnos (d) 17,800 *
Jimmy D. Ross (d) 4,340 *
Bonnie K. Wachtel (d) 48,736 *
Executive Officers and Other Directors
--------------------------------------
Thomas G. Dacus (d) 8,166 *
Donald M. Ervine 24,168 *
Maurice A. Gauthier (e) 1,800 *
Michael E. Hamerly (d) 13,062 *
Randy W. Hollstein 0 -
Thomas M. Kiernan 0 -
James M. Knowlton 35,006 *
James W. Lexo, Jr. 1,990 *
Thomas R. Loftus (d) 27,296 *
James E. Reed 3,244 *
Carl E. Williams 1,229 *
Crystal R. Williams 0 -
Directors, Nominees and Executive Officers as a Group
-----------------------------------------------------
(19 persons) (d) (f) 1,086,859 21.2%
* Represents less than one percent.
(a) Based on 5,128,380 shares of VSE Stock outstanding as of the March 6,
2009, record date.
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(b) These shares are held in trust for the benefit of the VSE ESOP and
401(k) Plan participants. Three VSE officers serve as trustees of the
ESOP and 401(k) Plan and share voting and investment power over the
shares held by the Plan. The mailing address for the ESOP and 401(k)
Plan is 2550 Huntington Avenue, Alexandria, Virginia 22303-1499.
(c) Mr. Koonce's mailing address is 6550 Rock Spring Drive, Suite 600,
Bethesda, Maryland 20817.
(d) Includes the following number of shares of Stock that the non-employee
directors, executive officers, other directors, and all directors,
nominees, and executive officers as a group have the right to purchase
pursuant to the exercise of stock options that are exercisable within
the next 60 days: James F. Lafond-2,000, David M. Osnos-2,000,
Jimmy D. Ross-500, Bonnie K. Wachtel-2,000, Thomas G. Dacus-4,500,
Michael E. Hamerly-3,000, Thomas R. Loftus-12,000, and all directors,
nominees, and executive officers as a group-26,000.
(e) The share amount reported above for Mr. Gauthier (1,800) does not
include 5,831 shares of VSE Stock, with subsequent vesting and issuance
dates, awarded to Mr. Gauthier on April 28, 2008, as an inducement to
become VSE's Chief Executive Officer and President. Subject to the term
of Mr. Gauthier's Employment Agreement not having terminated, the
Employment Agreement provides for vesting and issuance dates for the
5,831 shares as follows: 25% of the shares will be vested and issued to
Mr. Gauthier on April 28 of 2009 and 2010, and 50% of the shares will be
vested and issued to Mr. Gauthier on April 28, 2011.
(f) Excludes the 95,499 shares beneficially owned or controlled by the
trustees of the VSE ESOP and 401(k) Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires VSE officers and directors and persons who own more
than 10% of the VSE Stock to file reports of ownership and changes in ownership
with the SEC. Such officers, directors and stockholders are required by SEC
regulations to furnish VSE with copies of all such reports that they file.
Based solely on a review of copies of reports filed with the SEC and written
representations by certain officers and directors, VSE believes that all VSE
officers, directors and stockholders subject to the reporting requirements of
Section 16(a) filed their reports on a timely basis during 2008, except for SEC
Form 3s that were filed late on behalf of VSE executive officers Randy W.
Hollstein and Crystal R. Williams, reporting that Mr. Hollstein and Ms. Williams
owned no VSE Stock.
Proposal No. 1
--------------
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, stockholders will elect, by a plurality of the
votes cast, in person or by proxy nine VSE directors, who will constitute the
entire Board. Each nominee listed below is currently serving as a VSE director
and was elected by the stockholders at the last annual meeting of
stockholders, except for Maurice A. Gauthier, who was appointed a director by
the Board on February 23, 2009. Each nominee elected as a director will serve
until the next annual meeting of stockholders and until his or her successor
is elected and qualified. If any nominee should become unable to serve for any
reason, the proxies will be voted for such substitute nominee as shall be
designated by the Board.
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The nine nominees for election as VSE directors and certain information
regarding them are as follows:
Name and Principal Occupation Age Director since
_____________________________ ___ ______________
Ralph E. Eberhart 62 2007
General, U.S. Air Force (Ret.), formerly Commander-in-
Chief, North American Aerospace Defense Command
(NORAD) and U.S. Northern Command. General Eberhart
retired from the Air Force in 2005 after 36 years of
service. He was then appointed and continues to serve
as President of the Armed Forces Benefit Association
(AFBA) and as Chairman of its related enterprises:
5Star Bank, 5Star Life Insurance Company, AFBA 5Star
Investment Management Company, and AFBA 5Star Fund,
Inc. He is also a director of Rockwell Collins, Inc.
Donald M. Ervine 72 1987
VSE Executive Chairman of the Board. Mr. Ervine served
as the Company's Chairman and Chief Executive Officer
from 1992, and as its President and Chief Operating
Officer from 2002, through April 28, 2008.
Maurice A. Gauthier 61 2009
VSE Chief Executive Officer, President and Chief
Operating Officer. Mr. Gauthier completed a
distinguished military career of over 28 years of
service, retiring in 1997 as a Navy Captain.
Mr. Gauthier worked for VSE from October 1997 through
February 1999 as Vice President and Director of
Strategic Planning and Business Development, before
joining the Nichols Research Corporation as President
of its Navy Group. With the acquisition of Nichols
Research Corporation by Computer Sciences Corporation
(CSC) in 1999, Mr. Gauthier served as a CSC Vice
President and General Manager until rejoining VSE in
2008.
Clifford M. Kendall 77 2001
Private Investor (for more than the past five years).
Mr. Kendall is Chairman of the Board of Regents of the
University System of Maryland. Mr. Kendall was one of
the founders of Computer Data Systems, Inc., in 1968,
and he served as its Chairman and Chief Executive
Officer from 1970 to 1991 and as Chairman until
December 1997.
Calvin S. Koonce 71 1992
Chairman, Koonce Securities, Inc., a securities
broker/dealer firm (for more than the past five
years).
James F. Lafond 66 2003
Retired executive and certified public accountant.
From 1998 to 2002, Mr. Lafond was Washington Area
Managing Partner, Pricewaterhouse-Coopers LLP. He
previously served in various leadership positions at
Coopers & Lybrand (1964 to 1998). He is also a
director of WGL Holdings, Inc.
(table continued on next page)
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Name and Principal Occupation Age Director since
_____________________________ ___ ______________
David M. Osnos 77 1968
Of counsel (previously senior partner) at Arent Fox
LLP, attorneys-at-law (for more than the past five
years). He is also a director of EastGroup Properties,
Inc.
Jimmy D. Ross 72 1994
General, U.S. Army (Ret.), formerly Commanding
General, U.S. Army Materiel Command. He is also a
director of Stanley, Inc.
Bonnie K. Wachtel 53 1991
Vice President and General Counsel, Wachtel & Co.,
Inc., brokers and underwriters (for more than the past
five years). She is also a director of Information
Analysis Incorporated.
Board of Directors, Committees, and Corporate Governance
There are currently nine Board members. Except for Mr. Ervine and Mr.
Gauthier who serve as VSE's Executive Chairman and Chief Executive Officer,
respectively, all of our current directors are "independent" as defined by the
applicable rules of The NASDAQ Stock Market, Inc. ("NASDAQ"). The independent
directors regularly have the opportunity to meet without Mr. Ervine or Mr.
Gauthier in attendance. During 2008, there were six regular Board meetings,
and no director attended less than 75% of the aggregate of (a) the total
number of Board meetings (in person or by telephone) and (b) meetings of Board
committees on which he or she served (during the period that he or she
served). VSE does not have a specific policy regarding attendance at the
annual stockholders meeting. All directors, however, are encouraged to attend
if available, and VSE tries to ensure that at least one independent director
attends the annual stockholder meeting and is available to answer stockholder
questions. Seven directors, including six independent directors, attended last
year's (2008) annual meeting.
Pursuant to a Transition Agreement between the Company and Donald M.
Ervine dated as of April 22, 2008, the Board will, subject to applicable laws
and regulations and the Board's fiduciary duties to the Company and its
stockholders: (i) nominate Mr. Ervine to be elected as a VSE director by VSE's
stockholders at each annual and other meeting of VSE's stockholders at which
they will elect VSE directors and (ii) if Mr. Ervine is then a VSE director,
appoint and maintain Mr. Ervine as Chairman during the period commencing on
April 28, 2008 and continuing until at least the date of the first annual or
other meeting of VSE's stockholders in 2010 at which they will elect VSE
directors.
The Board has an Audit Committee, a Nominating and Corporate Governance
Committee, a Compensation Committee, and a Planning and Finance Committee. The
current charters for each of the Committees are available on VSE's Internet
site, www.vsecorp.com. The members of the Board committees, as of the date of
this Proxy Statement, are identified in the following table.
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Board Committees and Membership, 2008-2009
Nominating
and Corporate Planning and
Audit Compensation Governance Finance
Director Committee Committee Committee Committee
-------- --------- --------- --------- ---------
Ralph E. Eberhart X X X
Donald M. Ervine Chair
Maurice A. Gauthier X
Clifford M. Kendall X X Chair
Calvin S. Koonce X X X
James F. Lafond Chair X X
David M. Osnos X X
Jimmy D. Ross Chair X X
Bonnie K. Wachtel X X X
Audit Committee. The primary purpose of the Audit Committee is to
oversee VSE's accounting and financial reporting processes and the audits of
VSE's financial statements. The Audit Committee is directly responsible for,
among other things, the appointment, compensation, retention and oversight of
the Company's independent auditors.
All of the Audit Committee members during the past fiscal year were
independent in accordance with applicable rules of the SEC and NASDAQ. Each
member is able to read and understand fundamental financial statements,
including the Company's consolidated balance sheet and consolidated statements
of income, stockholders' equity and cash flow. The Board has determined that
Mr. Lafond is an "audit committee financial expert" as defined in Regulation
S-K Item 407(d)(5). During 2008, the Audit Committee met nine times.
Compensation Committee. The primary purpose of the Compensation
Committee is to oversee VSE's compensation structure, to review and provide
guidance to the Board regarding the compensation of VSE's officers and
directors, including the compensation of the Chief Executive Officer and other
executive officers, to review and provide guidance regarding employment
agreements, to administer certain compensation plans including stock option,
restricted stock, and deferred compensation plans, and to perform such other
duties and responsibilities as are consistent with the committee's charter.
Each of the committee members is independent in accordance with applicable
NASDAQ rules. The Compensation Committee met five times during 2008.
Matters recommended by the Compensation Committee, and any delegation of
its authority, are subject to approval by the Board; if such approval is not
received, the Compensation Committee will reconsider the recommendation or
proposed delegation. The Compensation Committee has the authority to retain
outside counsel or other experts or consultants as needed. Additional
information on the role and responsibilities of the Compensation Committee is
provided under the heading "Compensation Discussion and Analysis," below.
Nominating and Corporate Governance Committee. The primary purpose of
the Nominating and Corporate Governance Committee is to make recommendations
to the Board with respect to nominees to be proposed for election as directors
and with corporate policies regarding, among other things, business conduct,
securities trading, indemnification of VSE officers and directors, and
conflicts of interest involving VSE officers, directors, and employees. Each
of the committee members is independent in accordance with applicable NASDAQ
rules. During 2008, the Nominating and Corporate Governance Committee met two
times.
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Planning and Finance Committee. The primary purpose of the Planning and
Finance Committee is to consider and make recommendations to the Board
regarding (a) strategic planning, acquisitions, mergers, and succession
planning, (b) capitalization and long-term funding requirements, and (c)
proposals concerning the financial policies and substantive financial
transactions of the Corporation. During 2008, the Planning and Finance
Committee met two times.
Director Nominations and Qualifications. Stockholders may recommend
persons to be nominated for election as directors of VSE at the annual meeting
of stockholders. To be considered, such recommendation must be submitted in
accordance with VSE's by-laws and must be received in writing by the Corporate
Secretary of VSE no later than 90 days before the date in the current year
which corresponds to the date on which the annual meeting was held during the
immediate prior year. (Nominations for the year 2010-2011 should be received
by the Corporate Secretary no later than February 4, 2010.) Such
recommendation shall be accompanied by the proposing stockholder's name,
evidence that such stockholder is a beneficial owner of VSE Stock, and the
candidate's name, biographical data and qualifications.
The policy of the Nominating and Corporate Governance Committee is to
consider properly submitted stockholder nominations for candidates for Board
membership as described below. In evaluating such nominations, the Nominating
and Corporate Governance Committee seeks to achieve a balance of knowledge,
experience and capability on the Board and to address the membership criteria
discussed below.
Under these criteria for Board nominations, Board members should have
the highest professional and personal ethics and values, consistent with
longstanding VSE values and standards. They should have broad experience at
the policy-making level in business, government, education, technology or
public interest. They should be committed to enhancing stockholder value and
should have sufficient time to carry out their duties and to provide insight
and practical wisdom based on experience. Their service on other boards of
public companies should be limited to a number that permits them, given their
individual circumstances, to perform responsibly all director duties. Each
director must represent the interests of all stockholders.
The Nominating and Corporate Governance Committee utilizes a variety of
methods for identifying and evaluating nominees for director. Such Committee
periodically assesses the appropriate size of the Board, and whether any
vacancies on the Board are expected due to retirement or otherwise. If
vacancies are anticipated, or otherwise arise, the Nominating and Corporate
Governance Committee will consider various potential candidates for director.
Candidates may come to the attention of the Nominating and Corporate
Governance Committee through current Board members, professional search firms,
stockholders or other persons. These candidates are evaluated at regular or
special meetings of the Nominating and Corporate Governance Committee and may
be considered at any point during the year. As described above, the Nominating
and Corporate Governance Committee will consider properly submitted
stockholder nominations for candidates for the Board. Following verification
of the stockholder status of persons proposing candidates, recommendations
will be aggregated and considered by the Nominating and Corporate Governance
Committee at a regularly scheduled meeting. If any materials are provided by a
stockholder in connection with the nomination of a director candidate, such
materials will be forwarded to the Nominating and Corporate Governance
Committee. Such Committee also will review materials provided by professional
search firms or other parties in connection with a nominee who is not proposed
by a stockholder. The Committee has not in the past retained any third party
to assist in identifying nominees for Board membership.
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Lead Independent Director
The Board has established the position of Lead Independent Director. The
Lead Independent Director assists the Chairman and the other Board members in
assuring effective corporate governance. On March 2, 2007, Mr. Osnos was
appointed as Lead Independent Director, and he has served in such capacity
since that date.
Communications with the Board
Individuals may communicate with the Board by submitting an e-mail to
the VSE Board at board@vsecorp.com. All directors have access to this e-mail
address. Communications that are intended specifically for non-employee
directors should be sent to the e-mail address above to the attention of the
Lead Independent Director or Corporate Secretary. Communications to the Board
by mail can be addressed to The Board of Directors or a particular Board
member c/o VSE Corporation, 2550 Huntington Avenue, Alexandria, Virginia
22303-1499.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics that applies
to all of its directors, officers, including its principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, and employees. The Code is posted on
VSE's Internet website www.vsecorp.com. VSE intends to satisfy the disclosure
requirements under Item 5.05 of Exchange Act Form 8-K regarding any waiver or
amendment of the Code with respect to VSE's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, by posting such required information on
VSE's Internet website.
Compensation of Directors
Please refer to "Compensation Discussion and Analysis-Director
Compensation" and associated director compensation table, notes, and narrative
contained elsewhere in this Proxy Statement.
Certain Relationships and Related Transactions
On June 4, 2007, VSE acquired all of the outstanding capital stock of
Integrated Concepts and Research Corporation ("ICRC") from (a) Koniag
Development Corporation ("KDC"), which owned 80% of ICRC's capital stock, and
(b) the Nancy Ellen Lexo Living Trust (the "Trust"), which owned 20% of ICRC's
capital stock, for approximately $11.65 million paid at the closing, of which
$1.67 million will be held in escrow for up to two years to secure KDC's and
the Trust's post-closing indemnity obligations. Up to an additional $5.815
million in purchase price will be payable by VSE to KDC and the Trust, on a
pro rata basis, if ICRC achieves certain revenues during an approximate six-
year period after the closing, as provided in the purchase agreement among
VSE, KDC, the Trust, James W. Lexo, Jr. ("Mr. Lexo"), ICRC and Koniag, Inc.
Mr. Lexo is the sole trustee of the Trust and the beneficiaries of the Trust
are Mr. Lexo and his adult children. In 2008 VSE paid the Trust, and in 2009
VSE expects to pay the Trust, approximately $111,352 and $324,785,
respectively, as additional purchase price as stated above.
As part of VSE's acquisition of ICRC, ICRC's chief executive officer,
Mr. Lexo and VSE entered into an employment agreement under which Mr. Lexo is
serving as a VSE executive vice president for strategic initiatives and
business development and ICRC's chief executive officer, for a term expiring
on December 31, 2009, as extended, subject to automatic extensions for
successive one-year periods unless notice to terminate is given by VSE or the
-9-
officer at least 60 days prior to the expiration of the then current term. The
employment agreement also provides Mr. Lexo with "change of control" benefits
and other benefits generally provided to VSE officers.
There is no family relationship between any director or executive
officer of VSE and any other director or executive officer of VSE.
Please refer to "Compensation Discussion and Analysis-Narrative to
Summary Compensation Table" for information on VSE's Transition Agreement with
Mr. Ervine, VSE's Employment Agreement with Mr. Gauthier, and other VSE
employment agreements with executive officers and to "Compensation Discussion
and Analysis-Compensation Committee Interlocks and Insider Participation" for
additional information about directors and nominees for director.
Pursuant to the Company's policies, including Code of Business Conduct
and Ethics for the Directors, Officers and Employees of VSE Corporation, each
of the above-referenced relationships and related transactions was subject to
the prior consideration and approval of the Board, including a majority vote
of the disinterested directors.
VSE and the trustees of VSE's employee benefit plans have in the past
effected certain of their transactions in VSE Stock through Wachtel & Co.,
Inc., of which Ms. Wachtel is a director, officer and shareholder, and through
Koonce Securities, Inc., which is wholly owned by Mr. Koonce. During 2008 VSE
benefit plans sold approximately 8,674 shares of VSE Stock through Wachtel &
Co., Inc., for which Wachtel & Co., Inc. earned broker fees of less than
$10,000. No benefit plan transactions in VSE Stock occurred with Koonce
Securities, Inc. in 2008.
Mr. Osnos is of counsel at the law firm of Arent Fox LLP, which has
represented and is expected to continue to represent VSE on various legal
matters.
The Board unanimously recommends that stockholders vote "for" the
election of each of the nine persons nominated to serve as a director of VSE
for the ensuing year.
Proposal No. 2
--------------
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Based on the recommendation of its Audit Committee, the Board has
appointed the firm of Ernst & Young LLP to be VSE's independent registered
public accounting firm for the year ending December 31, 2009, and recommends
to stockholders that they vote for ratification of that appointment. Although
not required to do so, the Board has determined that it would be desirable to
request stockholders' approval of this appointment. The ratification of the
appointment of VSE's independent auditors will require the affirmative vote by
the holders of a majority of the outstanding Stock present in person or
represented by proxy at the Annual Meeting. If such approval is not received,
the Board will reconsider the appointment.
In 2008 and 2007, Ernst & Young LLP services included an audit of VSE's
consolidated financial statements and reviews of the consolidated financial
statements included in VSE's Form 10-Qs filed with the SEC for each of the
quarters ended March 31, June 30, and September 30. Ernst & Young LLP services
also included an audit of the effectiveness of our internal control over
financial reporting as of December 31, 2008 and 2007.
-10-
Ernst & Young LLP's fees for professional services rendered for the
years ended December 31, 2008 and December 31, 2007, were as follows:
2008 2007
Audit fees (1) $836,519 $716,896
Audit-related fees (2) 16,900 90,000
Tax fees (3) 17,960 21,820
_______________
(1) Includes fees and expenses related to the annual audits and to
interim reviews, notwithstanding when the fees and expenses were
billed.
(2) Includes fees and expenses for services rendered from January
through December of the fiscal year, notwithstanding when the fees
and expenses were billed. The 2008 amount represents fees
associated with VSE's acquisition of G&B Solutions, Inc. of
$16,900. The 2007 amount represents fees and expenses for work
performed to assist in the Company's preparation for the
implementation of Section 404 of the Sarbanes-Oxley Act ($70,000),
and fees associated with VSE's acquisition of ICRC ($20,000).
(3) Includes fees and expenses for tax advisory services.
The Audit Committee approves in advance all audit and non-audit services
provided by the independent auditors prior to their engagement with respect to
such services. The Audit Committee has delegated to the committee's chairman
the authority to pre-approve additional audit-related and non-audit services
not prohibited by law to be performed by VSE's independent auditors and
associated fees up to a maximum for any one non-audit service equal to the
lesser of $30,000 or 25% of the audit fees for VSE's most recent completed
fiscal year, provided that the committee's chairman shall report any decisions
to pre-approve such audit-related or non-audit services and fees to the full
Audit Committee at its next regular meeting. The Audit Committee approved in
advance all of the audit and non-audit services provided by the independent
auditors in 2008 and 2007.
A representative of Ernst & Young LLP is expected to attend the Annual
Meeting, will have an opportunity to make a statement, if he or she desires to
do so, and will be available to respond to appropriate questions.
The Board unanimously recommends that stockholders vote "for" the
proposal to ratify the appointment of Ernst & Young LLP to serve as VSE's
independent registered public accounting firm for the year ending December 31,
2009.
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three non-employee directors (Messrs.
Lafond and Kendall and Ms. Wachtel), each of whom is considered an
"independent" director for the purposes of the applicable rules of NASDAQ and
the SEC. The Audit Committee's responsibilities are set forth in its charter,
a copy of which is available on VSE's Internet site, www.vsecorp.com. The
Board and the Audit Committee believe that the Audit Committee members are and
were at the time of the actions described in this report "independent"
directors as independence is defined by NASDAQ Rule 4200(a)(15).
-11-
The Audit Committee has implemented the requirements of the Sarbanes-
Oxley Act of 2002 and the Marketplace Rules of The NASDAQ Stock Market, Inc.
with respect to the responsibilities of audit committees of public companies.
Among other matters, the Audit Committee reviews procedures on internal
control over financial reporting with management and with the Company's
independent registered public accounting firm, and it discussed with the
independent registered public accounting firm the adequacy of the Company's
internal controls and the overall scope and specific plans for their audit.
The Audit Committee has reviewed and discussed with management VSE's
audited consolidated financial statements as of and for the year ended
December 31, 2008, and has discussed with VSE's independent registered
accounting firm the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU
Section 380), as adopted by the Public Company Accounting Oversight Board in
Rule 3200T.
The Audit Committee has received and reviewed the written disclosures
and the letter from the independent registered accounting firm required by
applicable requirements of the Public Company Accounting Oversight Board
regarding the independent accountant's communications with the audit committee
concerning independence, and has discussed with the auditors the auditors'
independence and considered whether the provision of non-audit services by the
auditors is compatible with maintaining their independence.
Based on the foregoing reviews and discussions, the Audit Committee
recommended to the Board that the above referenced consolidated financial
statements be included in VSE's Annual Report on Form 10-K for the year ended
December 31, 2008, for filing with the SEC.
Audit Committee: James F. Lafond (Chairman), Clifford M. Kendall,
and Bonnie K. Wachtel
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Compensation Program, Philosophy, and Objectives
Under the supervision of the Compensation Committee of the Board, VSE
has established compensation policies designed to attract and retain qualified
executives and to link total compensation to corporate goals. The key elements
of VSE executive compensation are base salary, a performance bonus incentive
plan, and a long-term incentive plan.
The Committee oversees VSE's compensation structure. The Committee makes
all compensation decisions regarding the Chief Executive Officer and reviews
and approves the compensation of all other company executives and officers. It
reviews employment agreements, administers compensation plans including stock
option, restricted stock, and deferred compensation plans. The Committee
provides recommendations to the Board regarding director compensation and
performs such other duties and responsibilities as are consistent with its
charter. Actions of the Committee are subject to Board approval. If approval
is not received, the Committee will reconsider the action.
Under the Committee's supervision, VSE seeks to establish a compensation
structure that is competitive, reasonable, and performance-based.
"Competitive" means salaries and benefits sufficient to attract and retain the
executives and employees VSE requires, while maintaining labor rates that
permit the Company to compete effectively in the markets we serve. We test for
competitive labor rates by measuring our prices for services against the
prices of competitors and by monitoring our ability to successfully recruit
-12-
and retain employees. We also measure our salaries against compensation
surveys for similarly situated executives and employees in companies having
substantially comparable revenues, margins, and market capitalization.
"Reasonable" means compensation that is consistent with the pay and benefits
provided by other companies in our industry, reimbursable under cost-type
government contracts, and perceived as "fair" relative to formal and informal
benchmarks such as internal pay scales, financial results, and public
perception. "Performance-based" means that compensation is earned, measured,
and tested against standards of financial growth and profitability.
VSE's executive officers are identified as the following officers, if
appointed by the Board:
* Executive Chairman of the Board
* Chief Executive Officer
* Chief Financial Officer
* President
* Chief Operating Officer
* Presidents of each of the Corporation's principal business segments
* Secretary and General Counsel
* Corporate Vice Presidents as identified by the Chief Executive
Officer.
Currently, VSE has 12 executive officers, including two executive officers who
are expected to retire in 2009. For compensation oversight, VSE officers
include the senior officers of VSE's wholly owned subsidiaries Energetics
Incorporated ("Energetics"), ICRC, and G & B Solutions, Inc. ("G&B").
Role of Executive Officers in Compensation Decisions
At the end of the fiscal year, the Committee meets in executive session
to review the performance and fix the compensation of VSE's Chief Executive
Officer (the "CEO"). The Committee also reviews and approves the compensation
of all other executives and officers based on recommendations submitted by the
CEO. The Committee can exercise its discretion in approving, disapproving, or
modifying any recommended salary increases or proposed awards to executives or
other officers.
In submitting recommendations to the Committee with respect to the
compensation of other VSE executives and officers, the CEO evaluates the
performance and recommends salary increases, bonuses, benefit plan
participation, and all other elements of compensation affecting the
executives. The CEO also considers evaluations and recommendations made by
other executives in submitting recommendations to the Committee with respect
to other officers. The Compensation Committee reviews all proposed officer
salary increases in December of each year.
Review of Executive Compensation
During 2006 the Committee engaged PricewaterhouseCoopers LLP to provide
consulting services initially with respect to designing procedures for making
performance-based awards under the 2006 VSE Corporation Restricted Stock Plan
and subsequently to perform a compensation analysis for VSE executive officers
and directors. The Committee met and conferred with PricewaterhouseCoopers
representatives numerous times during 2006 in both executive sessions and in
sessions including certain executive officers.
In making compensation decisions, the Committee measured each element of
total compensation against a peer group of publicly traded companies developed
with PricewaterhouseCoopers. The peer group, which is periodically reviewed
-13-
and updated by the Committee, consists of companies which the Committee
believes are substantially representative based on industry group, market
capitalization, revenues, and profit margin. These companies identified in
2006 are as follows:
* Allied Defense Group, Inc. * Hawk Corporation
* Analex Corporation (acquired * Alabama Aircraft Industries, Inc.
in 2007) (formerly Pemco Aviation Group, Inc.)
* Astronics Corporation * Sparton Corporation
* Dynamics Research Corporation * SYS (acquired in 2008)
* ENGlobal Corporation * Todd Shipyards Corporation
* Essex Corporation (acquired
in 2007)
For comparison purposes, VSE's annual revenues are above the median
revenues of the peer group. Because of variation among the companies
comprising the peer group, PricewaterhouseCoopers also developed blended
consensus data based on published survey data, proxy statement title match
data, and top five highest paid data.
During 2007 the Committee met with representatives of Equilar, Inc. who
demonstrated the capabilities and potential uses of its executive compensation
database product and analytic tools. The Committee subsequently authorized VSE
to license the product and tools. The Committee also consulted with Corbin
Company, a management consulting firm identified by the Company, to assist the
Committee in the use of the Equilar product and tools as well as other
compensation survey data available to Corbin Company. The Committee requested
Corbin Company to review VSE's industry peer group (Analex Corporation, Essex
Corporation and SYS are no longer independent companies) and to provide
analysis and recommendations regarding executive compensation. Based on
discussions with and the recommendations of Corbin Company, the Committee in
executive session decided to maintain base salary target levels at the lower
end of peer group level (25% to 50%), coupled with a performance-based
incentive compensation plan so that total compensation levels can meet or
exceed the upper end of the peer group; to provide for an annual base salary
escalation adjustment; to update the peer group based on VSE's recent growth;
and to address the wage compression issue (VSE often is required to pay new
employees as much or more than it pays incumbent employees in similar
positions).
During 2008 the Committee interviewed three compensation consultant and
advisory firms having nationwide experience. In the Committee's judgment, at
this time it will be better served to utilize (a) the compensation and best
practices information provided by the Equilar databases, (b) other
compensation survey data related to specific compensation questions, analyses
and recommendations, and (c) the use of outside consultants on an as required
basis, than to retain an outside compensation consultant and advisory firm.
The Committee directed the staff to develop information for an updated peer
group, and this task is proceeding.
Other information considered by the Committee in completing its 2008
reviews included industry peer group data developed by the staff, purchased
third-party industry survey data, and commercially available survey data on
director compensation.
Executive Compensation Components
For 2008, 2007 and 2006 the principal components of compensation for VSE
executive officers were base salary, performance-based incentive compensation,
long-term incentive compensation, deferred supplemental compensation and
retirement and other benefits generally available to all employees.
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The Committee has no preestablished policy or target for the allocation
of compensation between either cash and non-cash or short-term and long-term
incentive compensation. However, based on the compensation philosophy and
objectives discussed above, the Committee intends that a significant part of
total compensation for executives and officers should be at risk and subject
to incentives based on achieving short and long-term performance-based goals.
For the three-year period ended December 31, 2008, the percentages of
total compensation of each component of executive compensation was
approximately as follows (please refer to the Summary Compensation Table below
for detailed amounts):
Aggregate Percentages of Executive Compensation Components, 2006-2008
Aggregate
Executive Percentage for
Compensation Component 2006 - 2008
---------------------- -----------
Base salaries 35%
Performance-based incentive compensation 35%
Long-term incentive compensation 21%
Deferred supplemental compensation 8%
All other 1%
Based on this schedule, for the three-year period ended December 31,
2008, approximately 64% of executive compensation (performance-based incentive
compensation, long-term incentive compensation, and deferred supplemental
compensation) was at risk and subject to incentives based on achieving
performance-based goals.
Base Salary
VSE provides named executive officers and other employees with base
salary to compensate them for services rendered during the fiscal year. Base
salaries for the named executive officers are determined for each executive
based on his or her position and responsibility, experience and education,
internal pay scales, market survey data, recent VSE hiring experience, and
employment agreement where applicable. Base salaries for executives are
generally expected to range between the 25th and 50th percentile of blended
compensation survey data, so that when coupled with a performance-based
incentive compensation plan, total executive compensation can meet or exceed
the upper end of the peer group. Base salaries for executives, including the
base salary of the CEO, are reviewed by the Committee in executive session at
the end of each fiscal year and include any recommendations made by the CEO
with respect to the other executive officers. Subject to Board approval, the
Committee recommends changes to executive base salary that are implemented at
the beginning of the next fiscal year.
Based on its review, including the PricewaterhouseCoopers benchmark
data, the Equilar database, and the other industry compensation data referred
to above, the Committee approved annual base salary escalation adjustments at
the rate of 3.5%, 4.5%, and 4.0% for 2007, 2008 and 2009, respectively. The
Committee also approved base salary increases to adjust for merit increases
and peer group comparison as follows: for 2007-Mr. Dacus ($9,000); for 2008-
Mr. Ervine ($7,000), Mr. Loftus ($6,000), Mr. Dacus ($3,000), and Mr. Knowlton
($6,000); and for 2009-Mr. Loftus ($28,000), Mr. Lexo ($31,000), and Mr. Dacus
($14,000).
-15-
Base Salaries of Named Executive Officers, 2006 - 2009
Named Executive Officer 2006 2007 2008 2009
----------------------- ---- ---- ---- ----
Donald M. Ervine $325,000 $337,000 $360,000 $360,000
Maurice A. Gauthier -- -- 415,000 415,000
Thomas R. Loftus 175,000 182,000 197,000 225,000
Thomas G. Dacus 192,000 208,000 221,000 235,000
James M. Knowlton 200,000 208,000 223,000 223,000
James W. Lexo -- 185,000 194,000 225,000
Performance-Based Incentive Compensation
During 2004 the Committee approved a performance bonus plan based on
achieving annual financial results in excess of financial thresholds
established by the Committee and submitted to the Board at the beginning of
each year. The goals consist principally of revenue and pretax income targets
for operating group executives, and return on equity for corporate staff,
corporate officers, and corporate executives, including the CEO and the Chief
Financial Officer (return on equity as defined is net income for the year
divided by total stockholders' equity at the beginning of the year). To
participate in the bonus program, an executive must be an employee during the
fiscal year that the bonus is earned and at the time the bonus is distributed.
During 2008 the performance bonus pool thresholds were established as follows:
* The bonus pool for operations is determined by a percentage of pretax
income formula based on a return on beginning VSE stockholder equity in
excess of a 12% threshold. Individual operating group executives'
bonuses are capped at 100% of salary.
* The bonus pool for corporate staff, corporate officers, and corporate
executives is determined as a percentage of salary based on VSE's return
on equity in excess of a 12% threshold. Individual administrative
bonuses are capped at 15% of salary for corporate staff, 65% of salary
for corporate officers, and 100% of salary for corporate executives,
including the CEO and the Chief Financial Officer.
Performance bonuses for corporate executives, including the CEO and the
Chief Financial Officer, range from 2% of base salary for achieving a return
on equity of 12% to 100% of base salary for achieving a return on equity of
27% or higher for the years 2007 through 2009 and 25% or higher for 2006.
For 2008, 2007 and 2006 VSE achieved annual returns on equity (net
income) of approximately 34% ($19.0 million), 37% ($14.1 million) and 26%
($7.8 million), respectively, and the Committee approved aggregate annual
performance bonuses under the plan of about $8.5 million, $6.5 million and
$3.7 million, respectively. The performance bonuses for 2008 were paid to
about 500 employees, including approximately $1.5 million paid to the named
executive officers under the plan. Amounts paid to the named executive
officers are reported in the Summary Compensation Table below under the
heading "Non-equity Incentive Plan Compensation."
Long-Term Incentive Compensation
In prior years, VSE executives and other officers received, in addition
to cash, equity-based compensation for their services to VSE. The equity
compensation was provided in the form of options to purchase VSE Stock granted
under VSE's 2004 Stock Option Plan approved by stockholders on May 3, 2004,
and substantially similar predecessor plans for prior years. In December 2005,
the Board discontinued awarding options to purchase VSE Stock. Options
outstanding as of December 30, 2005, were not affected by this Board action.
In lieu of long-term incentive compensation for 2006, the Committee
recommended that the Board authorize an increase in VSE's contribution to the
Deferred Supplemental Compensation Plan for 2006. See "Deferred Supplemental
Compensation" discussion below.
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The Board believes that compensating executives with restricted VSE
Stock, rather than stock options, is a more appropriate and effective form of
equity-based compensation. As with the former use of stock options, the use of
restricted stock is intended to foster a long-term focus on VSE performance
and to provide our executives with a means to establish an equity stake in VSE
which will, in turn, align their interests with those of our stockholders. In
addition, the vesting provisions and other restrictions on sale of the equity
awards encourage executive retention.
VSE's 2006 Restricted Stock Plan was approved by the Board on February
9, 2006, and by our stockholders on May 2, 2006. During 2006 the Committee
engaged PricewaterhouseCoopers to provide consulting services with respect to
designing procedures for making performance-based awards under VSE's
Restricted Stock Plan, and in December 2006, the Committee adopted written
procedures for making these awards. The awards under the Restricted Stock Plan
are subject to Committee authorization based on audited financial results,
including total compensation costs, reasonableness of total employee
compensation and other factors determined by the Committee and Board.
In general, a dollar-denominated award equal to a percentage of a
participant's base salary can be earned under the Restricted Stock Plan based
on the return on equity achieved by VSE for the prior fiscal year. The awards
range from 2.5% of base salary for a 12% return on equity to 60% of base
salary for a return on equity of 25% or higher. The awards are subject to a
two-year vesting schedule: one-third of the award vests after completion of
VSE's annual financial audit and one-third on each of the next two
anniversaries of such initial vesting date. As each third of the dollar-
denominated award vests, the award is converted into restricted VSE Stock
based on the fair market value (closing market price) of VSE Stock at the date
of conversion. The restricted stock is subject to a two-year holding period
and to other restrictions on sale.
The Committee may, in its sole discretion, reduce or totally eliminate
an award to the extent it determines that such reduction or elimination is
appropriate under facts and circumstances the Committee deems relevant.
For 2008 and 2007, the first two years of full operation of the Plan,
VSE's annual return on beginning equity was approximately 34% and 37%,
respectively, and the named executive officers were awarded a restricted stock
bonus under the Plan equal to 60% of their base salary for each year, subject
to vesting and other restrictions. Amounts paid to the named executive
officers are reported in the Summary Compensation Table below under the
heading "Stock Awards."
Deferred Supplemental Compensation
VSE has a non-qualified, non-contributory Deferred Supplemental
Compensation Plan for all VSE officers. The plan provides, at the Board's
discretion, for an annual contribution to the plan not to exceed 12% of VSE's
consolidated net income for the year. Each officer's allocation from the
annual contribution bears the same percentage to the annual contribution as
that officer's salary bears to total annual officer salaries.
* For 2008 an annual contribution of 8% of VSE's consolidated net income
(approximately $1,463,000) was authorized and allocated to 39
participant accounts, including about $404,000 allocated to accounts for
the named executive officers.
* For 2007 an annual contribution of 8% of VSE's consolidated net income
(approximately $1,110,000) was authorized and allocated to 33
participant accounts, including about $285,000 allocated to accounts for
the named executive officers.
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* For 2006 an annual contribution of 10% of VSE's consolidated net income
(approximately $768,000) was authorized and allocated to 28 participant
accounts, including about $229,000 allocated to accounts for the named
executive officers. Two percentage points of the 10% contribution rate
authorized for 2006 represented a contribution for the discontinued
stock option plan discussed above in "Long-Term Incentive Compensation."
The plan was amended in 2008 to comply with the nonqualified deferred
compensation provisions of Section 409A of the Internal Revenue Code of 1986,
as amended ("IRC Section 409A"). Benefits are payable to participants on
retirement or resignation, subject to a vesting schedule, two-year non-
competition agreement, and other plan provisions, or in the event of a change
of control of VSE. The Board believes the vesting schedule and completion of
the non-competition agreement prior to receiving a distribution encourage
executive retention. Amounts contributed to the plan on behalf of the named
executive officers are included in the Summary Compensation Table under the
heading "All Other Compensation."
Retirement and Other Benefits
All VSE officers are entitled to participate in company fringe benefit
programs, including the VSE Employee 401(k) Plan, which is an Internal Revenue
Service qualified plan available to all eligible employees.
During 2008 and 2007 VSE paid a 401(k) matching contribution equal to
100% of the employee deferral on the first 3% of the employee pay deferred and
50% of the employee deferral on the next 2% of the employee pay deferred, with
all such contributions fully vested when made. During 2006 VSE paid a 401(k)
matching contribution equal to 50% of the first 6% of employee pay deferred
into the employee's 401(k) account, subject to a vesting schedule.
Amounts contributed to the VSE 401(k) Plan on behalf of the named
executive officers are included in the Summary Compensation Table under the
heading "All Other Compensation."
Perquisites and Other Personal Benefits
VSE does not provide any of its executives, including the named
executive officers, with perquisites or other personal benefits having a total
annual value in excess of $10,000. The Committee periodically reviews the
levels of perquisites and other personal benefits provided to the named
executive officers.
The Company has entered into employment and transition agreements with
specified employees, including the named executive officers (see Summary
Compensation Table discussion below). The agreements are designed to promote
stability and continuity of senior management. Information regarding
applicable payments under these agreements for the named executive officers is
also summarized below under the caption "Potential Payments on Termination or
Change of Control." The employment and transition agreements were amended in
2009 to comply with the nonqualified deferred compensation provisions of IRC
Section 409A.
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Tax and Accounting Implications
Deductibility of Executive Compensation
As part of its role, the Committee reviews and considers the
deductibility of executive compensation under Section 162(m) of the Internal
Revenue Code which provides that companies may not deduct compensation of more
than $1,000,000 that is paid to certain individuals. VSE believes that
compensation paid under its incentive plans is generally fully deductible for
federal income tax purposes. However, in certain situations, the Committee may
approve compensation that will not meet these requirements to ensure
competitive levels of total compensation for its executive officers. For 2008,
2007 and 2006, VSE believes that all compensation paid to the named executive
officers is deductible for federal income tax purposes, except for deferred
supplemental compensation contributions which may not be deducted until
distributed in accordance with IRS regulations.
Nonqualified Deferred Compensation
In 2004, the American Jobs Creation Act of 2004 became law changing the
tax rules applicable to nonqualified deferred compensation arrangements. The
Company's Deferred Supplemental Compensation Plan and all VSE employment and
transition agreements were amended in 2008 and 2009 to comply with the
nonqualified deferred compensation provisions of IRC Section 409A.
A more detailed discussion of the VSE's nonqualified deferred
compensation plan is provided above under the heading "Deferred Supplemental
Compensation."
Accounting for Stock-Based Compensation
Beginning on January 1, 2006, the Company began accounting for stock-
based payments in accordance with the requirements of FASB Statement 123(R).
Summary Compensation Table
The table below summarizes the total compensation paid or earned by each
of the named executive officers. Mr. Ervine served as VSE's Principal
Executive Officer (CEO) from 1992 until he resigned that office effective
April 28, 2008, on which date Mr. Gauthier was appointed VSE's CEO. VSE's
Principal Financial Officer (Mr. Loftus) has served as VSE's Chief Financial
Officer since 2002.
[The balance of this page is intentionally left blank,
and the next page is the Summary Compensation Table]
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Summary Compensation Table
Change in
pension
value and
Non- non-
equity qualified
incentive deferred
plan compen- All other
Stock Option compen- sation compen-
Name and principal Year Salary Bonus awards awards sation earnings sation Total
position ($) ($) ($)(1) ($) ($) (2) ($) ($) (3) ($)
------------------ ---- ------ ----- ------- ------ ------- -------- --------- -----
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Donald M. Ervine 2008 360,000 -- 366,000 -- 360,000 -- 105,807 1,191,807
Executive Chairman of 2007 337,000 -- 202,000 -- 337,000 -- 93,439 969,639
the Board of Directors (4) 2006 325,000 -- -- -- 325,000 -- 74,377 724,377
Maurice A. Gauthier 2008 284,000 -- 368,800 -- 284,000 -- 109,955 1,046,755
CEO, President and
Chief Operating
Officer (5)
Thomas R. Loftus 2008 197,000 -- 118,200 -- 197,000 -- 60,194 572,394
Executive Vice 2007 182,000 -- 109,200 -- 182,000 -- 53,932 527,132
President and Chief 2006 175,000 -- -- -- 175,000 -- 41,220 391,220
Financial Officer
Thomas G. Dacus 2008 221,000 -- 132,600 -- 221,000 -- 67,005 641,605
Executive Vice 2007 208,000 -- 124,800 -- 208,000 -- 61,081 601,881
President and 2006 192,000 -- -- -- 192,000 -- 46,854 430,854
President, Federal
Group
James M. Knowlton 2008 223,000 -- 133,800 -- 223,000 -- 66,928 646,728
Executive Vice 2007 208,000 -- 124,800 -- 208,000 -- 58,967 599,767
President, International 2006 200,000 -- -- -- 200,000 -- 47,052 447,052
Group (6)
James W. Lexo 2008 194,000 -- 116,400 -- 194,000 -- 58,828 563,228
Executive Vice 2007 108,000 -- -- -- 24,440 -- 31,369 163,809
President, Strategic
Planning and Business
Initiatives (7)
Notes to Summary Compensation Table
1. The amounts reported in column (e) represent annual performance-based
awards under VSE's Restricted Stock Plan. The awards are subject to a two-year
vesting schedule: one-third of the award vests after completion of VSE's
annual financial audit and one-third on each of the next two anniversaries of
such initial vesting date. Restricted Stock awarded under the Plan is further
subject to a two-year holding period and other restrictions on sale. See
discussion above under the caption "Executive Compensation Components-Long-
Term Incentive Compensation." With respect to Mr. Ervine and Mr. Gauthier, the
amounts reported in column (e) also include stock awards of $150,000 and
$200,000, respectively, as discussed below-please see "Ervine Transition
Agreement" and "Gauthier Employment Agreement" in the Narrative to Summary
Compensation Table below.
2. The amounts reported in column (g) represent cash paid to the named
executive officer under VSE's Performance Bonus Plan. This plan is discussed
above under the caption "Executive Compensation Components-Performance-Based
Incentive Compensation."
3. The amounts reported in column (i) represent 401(k) plan matching
contributions allocated to each of the named executive officers' account
pursuant to VSE's Employee ESOP/401(k) Plan discussed above under the caption
"Executive Compensation Components-Retirement and Other Benefits." Also
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reported in column (i) is the amount allocated to each of the named executive
officers' account in VSE's Deferred Compensation Plan. See discussion above
under the caption "Executive Compensation Components-Deferred Supplemental
Compensation." With respect to Maurice A. Gauthier, the amount reported in
column (i) also includes $25,000 paid as an inducement to enter into
employment with VSE as discussed in the "Gauthier Employment Agreement" below.
4. Mr. Ervine retired, effective April 28, 2008, as CEO/President/ Chief
Operating Officer ("COO") after 25 years of service to VSE. He was appointed
Executive Chairman of the Board effective April 28, 2008, pursuant to his
Transition Agreement (the "Ervine Transition Agreement") described below.
5. Mr. Gauthier began as CEO/President/COO effective April 28, 2008, in
accordance with his Employment Agreement (the "Gauthier Employment Agreement")
described below. The compensation reported in the Summary Compensation Table
for Mr. Gauthier covers the period of April 28, 2008 through December 31,
2008.
6. Mr. Knowlton resigned as President, International Group, effective
January 5, 2009. He continues to support VSE business development efforts and
is planning to retire in 2009, completing more than 25 years of service to the
Company.
7. Mr. Lexo joined VSE on June 4, 2007, in accordance his Employment
Agreement described below (please see "Other Employment Agreements"). The
compensation reported in the Summary Compensation Table for Mr. Lexo for 2007
covers the period of June 4, 2007 through December 31, 2007. See caption above
"Election of Directors-Certain Relationships and Related Transactions" for
information on additional purchase price amounts payable to Mr. Lexo over the
period 2007 through 2013 in connection with the acquisition of ICRC in 2007.
Narrative to Summary Compensation Table
See "Compensation Discussion and Analysis" above for a description of
the compensation plans pursuant to which the amounts listed in the "Summary
Compensation Table" were paid or awarded and the criteria for such payments
and awards.
Ervine Transition Agreement
Pursuant to an agreement dated as of April 22, 2008 between VSE and Mr.
Ervine (the "Transition Agreement"), Mr. Ervine, effective as of April 28,
2008, resigned as VSE's CEO, President and Chief Operating Officer and agreed
to serve as Executive Chairman of the Board until December 31, 2008, followed
by service as Non-executive Chairman of the Board for a period of two years
from January 1, 2009 through December 31, 2010. On the occasion of his
resignation as CEO, President and Chief Operating Officer and in recognition
of his 25 years of loyal and dedicated service to VSE and its stockholders,
the Board awarded Mr. Ervine a grant of 4,374 shares of VSE Stock pursuant to
VSE's Restricted Stock Plan (4,374 shares of VSE Stock at the April 21, 2008,
closing price of $34.30 represented an award of approximately $150,000).
In addition, Mr. Ervine will make himself available during normal
business hours to provide such mentoring, consulting and advisory services as
are reasonably requested by the Board or the CEO, with special emphasis on
services as stockholders' advocate; corporate governance and oversight;
quality management system/information technology system; sustainment of the
corporate culture for honesty, integrity, and quality work in all business
dealings; strategic planning; business and corporate financial planning;
mergers and acquisitions; succession planning (all levels); banking
relationships; customer relations; investor relations; facilities and
infrastructure and relocation planning; and advocate for continued growth and
profitability. Mr. Ervine will also continue to perform the following
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currently assigned duties: Chairman of the Boards of Directors of VSE's
subsidiaries, and Chairman of the Board's Planning and Finance Committee.
During his term of service as Executive Chairman of the Board, or, as the case
may be, a VSE director, Mr. Ervine continued as an officer and employee of VSE
and was paid his current base salary of $360,000 per annum and continued to
participate in all VSE fringe and compensation benefit programs, including the
Performance Bonus Plan, Deferred Compensation Plan and Restricted Stock Plan.
During his two-year term of service as Non-executive Chairman of the Board,
or, as the case may be, a VSE director, Mr. Ervine will be paid a consulting
fee at the base rate of $216,000 per annum, and he will be eligible for a
performance incentive bonus not to exceed $216,000 per year if VSE achieves
certain annual return on equity target percentages.
During the term of the Transition Agreement, the Board will, subject to
applicable laws and regulations and the Board's fiduciary duties to the
Company and its stockholders: (a) nominate Mr. Ervine to be elected as a VSE
director by VSE's stockholders at each annual and other meetings of VSE's
stockholders at which they will elect VSE directors and (b) if Mr. Ervine is
then a VSE director, appoint and maintain Mr. Ervine as Chairman until at
least the date of the first annual or other meeting of VSE's stockholders in
2010 at which they will elect VSE directors. The Transition Agreement also
includes undertakings by Mr. Ervine regarding the provision of his services in
a professional and diligent manner during the term of the Transition
Agreement, covenants regarding the safeguarding and return of confidential
data for period of one-year following termination of the Transition Agreement,
and in the event of a termination of the Transition Agreement prior to
December 31, 2010, for the payment of a lump sum equal to the compensation and
fees Mr. Ervine would have earned under the Transition Agreement if Mr. Ervine
had continued to serve until December 31, 2010.
On December 30, 2008, VSE and Mr. Ervine executed a Statement of
Amendment Number One to the Transition Agreement for the purpose of modifying
certain provisions of the Transition Agreement to ensure compliance with IRC
Section 409A. The modifications generally relate to the timing aspects of
certain compensatory provisions in the Transition Agreement.
On December 31, 2008, VSE and Mr. Ervine executed a Statement of
Amendment Number Two to the Transition Agreement to extend the terms of Mr.
Ervine's services under the Transition Agreement (a) as Executive Chairman
until March 31, 2009, and (b) as Non-Executive Chairman until March 31, 2011.
As a result of the extension of Mr. Ervine's services as Executive Chairman
until March 31, 2009, the Statement of Amendment Number Two also provides that
Mr. Ervine will participate in VSE's 2006 Restricted Stock Plan, on a pro rata
basis (being one fourth of the restricted stock award that Mr. Ervine would
have otherwise been entitled had he been a participant for the entire fiscal
year), for restricted stock awards in respect of VSE's fiscal year ending
December 31, 2009.
Gauthier Employment Agreement
Pursuant to an agreement dated as of April 22, 2008 between VSE and Mr.
Gauthier (the "Employment Agreement"), Mr. Gauthier serves as CEO, President
and COO at a base salary of $415,000 per annum. Mr. Gauthier is employed for a
term ending on April 28, 2010, subject to automatic extensions for successive
one-year periods unless notice not to renew is given by VSE or Mr. Gauthier at
least 60 days prior to the expiration of the term or any such one-year
extension of the term. Mr. Gauthier's base salary is subject to review each
January, provided that the base salary shall not be less than $415,000 per
annum. Mr. Gauthier also is eligible to receive an annual performance bonus
each year as determined by the Board under VSE's Performance Bonus Plan. As an
inducement to become VSE's CEO, President and Chief Operating Officer, Mr.
Gauthier received a cash bonus of $25,000 and a grant of 5,831 shares of VSE
Stock, with subsequent vesting and issue dates, subject to Mr. Gauthier's
employment not having been terminated, as follows: 25% of the shares will vest
and be issued to Mr. Gauthier on April 28, 2009 and 2010, and the remaining
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50% of the shares will vest and be issued to Mr. Gauthier on April 28, 2011
(5,831 shares of VSE Stock at the April 21, 2008, closing price of $34.30
represented an award of approximately $200,000).
Mr. Gauthier's employment may be terminated by the Board for willful and
gross misconduct, and his employment may also be terminated in the case of
death or disability, which prevents Mr. Gauthier from substantially fulfilling
his duties for a period in excess of 90 work days during any period of 365
consecutive days. If Mr. Gauthier's employment is terminated because of death
or illness or disability, he or his beneficiary, as the case may be, will be
paid his annual base salary then in effect for one full year from the date of
death or disability.
Mr. Gauthier's employment also may be terminated without cause with five
days' prior notice and on payment of the lesser of $830,000 if before the
first anniversary of the April 28, 2008 effective date of the Employment
Agreement (the "Effective Date") or such amount as would not trigger the
application of Section 280G of the Internal Revenue Code of 1986, as amended
(the "280G Limitation"). If Mr. Gauthier's employment is terminated between
the first and second anniversary of the Effective Date, Mr. Gauthier will be
entitled to a lump sum severance compensation payment equal to the lesser of
two times his annual base salary then in effect or the 280G Limitation. If a
Change of Control, as defined, occurs, Mr. Gauthier may terminate the
Employment Agreement for Good Reason, as defined, on 30 days' notice. If Mr.
Gauthier or VSE terminates the Employment Agreement for Good Reason within 365
days after a Change of Control occurs, Mr. Gauthier shall be entitled to a
payment of the lesser of $830,000 or the 280G Limitation if termination occurs
before the first anniversary of the Effective Date or the lesser of three
times his annual base salary then in effect or the 280G Limitation if
termination occurs after the first anniversary of the Effective Date.
The Employment Agreement includes undertakings by Mr. Gauthier regarding
exclusive services and business opportunities during the term of his
employment, covenants regarding the safeguarding and return of confidential
data and the non-solicitation of employees for a two-year period following
termination, and a covenant not to be involved, directly or indirectly, in a
business enterprise that competes with VSE during the term of his employment
and for two-year period thereafter. Mr. Gauthier also agrees that VSE is
entitled to appropriate equitable remedies, including specific performance and
injunctive relief if he breaches any of the two-year post-termination
covenants.
Other Employment Agreements
Pursuant to an agreement entered into in 1997 and expiring on January 1,
2010, as extended, Mr. Knowlton serves in an executive capacity, subject to
automatic extensions for successive one-year periods unless notice to
terminate is given by the officer at least 90 days prior to the expiration of
the then current term. The terms and conditions in Mr. Knowlton's agreement
are similar to those of Mr. Gauthier's 2008 agreement except that (a) Mr.
Knowlton is employed at a minimum base salary equal to his annual base salary
in effect on the date the agreement was signed, subject to annual and special
reviews, (b) Mr. Knowlton will be reappointed to serve in his current or
comparable capacity, (c) in the event of termination without cause, Mr.
Knowlton's lump sum severance compensation payment shall equal his annual base
salary then in effect, and (d) in the event of a Change of Control of VSE, as
defined, Mr. Knowlton may terminate the agreement and will be entitled to a
lump sum severance compensation payment equal to two times his annual base
salary then in effect.
Pursuant to separate agreements entered into in 2004 and expiring on
December 31, 2009, as extended, Mr. Dacus and Mr. Loftus each serve in his
executive officer's capacity, subject to automatic extensions for successive
one-year periods unless notice to terminate is given by either VSE or the
officer at least 90 days prior to the expiration of the then current term. The
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terms and conditions in the executive officer agreements are similar to those
of Mr. Gauthier's 2008 agreement except that (a) each of the executive
officers is employed at a minimum base salary equal to the executive officer's
annual base salary in effect on the date the agreement was signed, subject to
annual and special reviews, (b) each of the executive officers will be
reappointed to serve in the executive officer's current or comparable
capacity, (c) in the event of termination without cause, each executive
officer's lump sum severance compensation payment shall equal his annual base
salary then in effect, and (d) in the event of a Change of Control of VSE, as
defined, each executive officer may terminate the agreement and will be
entitled to a lump sum severance compensation payment equal to one times his
annual base salary then in effect.
Pursuant to an agreement entered into in 2007 and expiring on December
31, 2009, as extended, Mr. Lexo serves in an executive officer's capacity,
subject to automatic extensions for successive one-year periods unless notice
to terminate is given by VSE or the officer at least 60 days prior to the
expiration of the then current term. The terms and conditions of Mr. Lexo's
agreement with VSE are similar to those of Mr. Gauthier's 2008 agreement
except that (a) Mr. Lexo is employed at a base salary subject to annual
reviews, (b) Mr. Lexo will be reappointed to serve in his current or
comparable capacity, (c) in the event of termination without cause, Mr. Lexo's
lump sum severance compensation payment shall equal his annual base salary
then in effect, and (d) in the event of a Change of Control of VSE, as
defined, Mr. Lexo may terminate the agreement and will be entitled to a lump
sum severance compensation payment equal to his annual base salary then in
effect.
Grants of Plan-Based Awards
The table below reports all grants of plan-based awards to each of the
named executive officers for the fiscal year ended December 31, 2008.
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Awards in Fiscal Year 2008 Table]
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Grants of Plan-Based Awards in Fiscal Year 2008 Table
All other
option
Estimated future payouts under Estimated future payouts All other awards: Exer- Grant
non-equity incentive plan under equity incentive plan stock number of cise or date fair
awards awards awards: securities base value of
------------------------------ --------------------------- number under- price of stock
Thresh- Target Maxi- Thresh- Target Maxi- of shares lying option and
Grant old mum old mum or units options awards option
Name Date ($) ($) (S) ($) ($) (S) (#) (#) ($/Sh) awards
---- ---- ------- ------ ----- ------- ------ ----- --------- ---------- -------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)
Donald M. 4/22/08 -- -- -- -- -- -- 4,374 -- -- $150,000
Ervine 12/31/08 2,250 9,000 54,000
(2)(3)
Maurice A. 12/17/08 10,375 41,500 249,000 -- -- -- -- -- -- --
Gauthier (4)
Thomas R. 12/17/08 5,625 22,500 135,000 -- -- -- -- -- -- --
Loftus
Thomas G. 12/17/08 5,875 23,500 141,000 -- -- -- -- -- -- --
Dacus
James M. -- -- -- -- -- -- -- -- -- -- --
Knowlton (5)
James W. 12/17/08 5,625 22,500 135,000 -- -- -- -- -- -- --
Lexo
Notes to Grants of Plan-Based Awards Table
1. The amounts reported above represent potential payments to the named
executive officer under VSE's Restricted Stock Plan. This plan is discussed
above under the caption "Executive Compensation Components-Performance-Long-
Term Incentive Compensation."
2. On April 22, 2008, the Board awarded Mr. Ervine a grant of 4,374 shares
of VSE Stock pursuant to VSE's Restricted Stock Plan in recognition of his 25
years of loyal and dedicated service to VSE and its stockholders.
3. Mr. Ervine's Transition Agreement as amended on December 31, 2008 (see
above), provides that he will participate in VSE's Restricted Stock Plan on a
pro rata basis (being one fourth of the restricted stock award that he would
have otherwise been entitled had he been a participant for the entire fiscal
year), for restricted stock awards in respect of VSE's fiscal year ending
December 31, 2009.
4. The amount reported above for Mr. Gauthier represents potential payments
to him under VSE's Restricted Stock Plan. The amount reported above excludes a
grant of 5,831 shares of VSE Stock on April 22, 2008, pursuant to the
"Gauthier Employment Agreement," with subsequent vesting and issue dates,
subject to Mr. Gauthier's employment not having been terminated (5,831 shares
of VSE Stock at the April 21, 2008, closing price of $34.30 represented an
award of approximately $200,000).
5. Mr. Knowlton is planning to retire in 2009.
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Narrative to Grants of Plan-Based Awards Table
VSE has a Restricted Stock Plan approved by stockholders on May 2, 2006.
Pursuant to procedures adopted by the Board, employees granted an Award will
earn an amount equal to a graduated percent of annual salary based on VSE's
return on equity for the subsequent fiscal year as follows: threshold 2.5% of
salary, target 10% of salary, and maximum 60% of salary. Return on equity is
determined on completion of VSE's annual financial audit, and the date of
Award occurs on the first business day of the subsequent month. The awards are
subject to a two-year vesting schedule: one-third of the award vests after
completion of VSE's annual financial audit and one-third on each of the next
two anniversaries of such initial vesting date. As each third of the dollar-
denominated award vests, the award is converted into restricted VSE Stock
based on the fair market value (closing market price) of VSE Stock at the date
of conversion. The restricted stock is subject to a two-year holding period
and to other restrictions on sale.
Awards and payment under the Restricted Stock Plan are subject to
Compensation Committee authorization based on audited financial results,
including all compensation costs, reasonableness of total employee
compensation, and other factors as determined by the Compensation Committee
and Board. The date of Award, vesting date, and pricing of the vested amount
of the Award are based on the date audited financial results become available.
Notwithstanding the determination of the amount of an employee Award pursuant
to the procedures indicated above, the Committee may, in its sole discretion,
reduce the amount of or totally eliminate an Award to the extent the Committee
determines that such reduction or elimination is appropriate under facts and
circumstances as the Committee deems relevant.
Outstanding Equity Awards at Fiscal Year End
The table below reports all outstanding equity awards for each of the
named executive officers for fiscal year ended December 31, 2008.
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and the next page is the Outstanding Equity
Awards in Fiscal Year End Table]
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Outstanding Equity Awards at Fiscal Year End Table
Option awards (1) Stock awards
-------------------------------------------------------------- ---------------------------------------------------
Equity
incentive
Equity plan
incentive awards:
Equity plan market or
incentive Market awards: payout
plan awards: value of number of value of
Number of number of Number of shares unearned unearned
Number of securities securities shares or or units shares, shares,
securities underlying underlying units of of stock units or units or
underlying unexercised unexercised Option stock that that other rights other rights
unexercised options (#) unearned exercise Option have not have not that have that have
options (#) unexercis- options price expira- vested vested not vested not vested
Name exercisable able (#) ($) tion date (#) ($) (#) ($)
---- ----------- ----------- ----------- -------- --------- ---------- -------- ------------ ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Donald M. -- -- -- -- - -- -- -- 340,800
Ervine
Maurice A. -- -- -- -- -- -- -- -- 168,800
Gauthier
Thomas. R. 12,000 -- -- 12.585 12/31/09 -- -- -- 191,000
Loftus
Thomas G. 4,500 -- -- 12.585 12/31/09 -- -- -- 215,800
Dacus
James M. -- -- -- -- - -- -- -- 217,000
Knowlton
James W. -- -- -- -- - -- -- -- 116,400
Lexo
Notes to Outstanding Equity Awards Table
1. The options reported above were granted under VSE's 2004 Stock Option
Plan. The options were granted as of January 1, 2005 and expire on
December 31, 2009. All of the options listed above have a five-year term and
vest in four equal annual installments commencing on the grant date.
2. As discussed above, VSE's Restricted Stock Plan provides for dollar-
denominated awards that are subject to a two-year vesting schedule: one-third
of the award vests after completion of VSE's annual financial audit and one-
third on each of the next two anniversaries of such initial vesting date. As
each third of the dollar-denominated award vests, the award is converted into
restricted VSE Stock based on the fair market value (closing market price) of
VSE Stock at the date of conversion. Accordingly, the number of shares of
restricted stock that have not vested is not presently determinable (see
discussion above under the caption "Executive Compensation Components-
Performance-Long-Term Incentive Compensation"). The aggregate dollar-
denominated value of all such awards that have not vested as of December 31,
2008, is reported in column (j) of the table.
Narrative to Outstanding Equity Awards Table
On December 30, 2005, the Board discontinued awarding options to
purchase VSE Stock. Options outstanding as of December 30, 2005, were not
affected by this Board action. See discussion above under the caption
"Executive Compensation Components-Long-Term Incentive Compensation."
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Option Exercises and Stock Vested
The following table reports stock options exercised and stock awards
vested by VSE's named executive officers during the fiscal year ended
December 31, 2008.
Option Exercises and Stock Vested During Fiscal Year 2008 Table
Option awards (1) Stock awards (2)
---------------------------------------- ---------------------------------------
Number of shares Value realized on Number of shares Value realized on
acquired on exercise exercise acquired on vesting vesting
Name (#) ($) (#) ($)
---- -------------------- ----------------- ------------------- -----------------
(a) (b) (c) (d) (e)
Donald M. Ervine 7,500 213,629 1,492 45,670
Maurice A. Gauthier -- -- -- --
Thomas R. Loftus -- -- 807 24,702
Thomas G. Dacus -- -- 922 28,222
James M. Knowlton 6,000 165,425 922 28,222
James W. Lexo -- -- -- --
Notes to Options Exercises and Stock Vested Table
1. The "Value Realized on Exercise" represents the difference between
the fair market value and the exercise price of VSE Stock on the date of
exercise.
2. The number of shares acquired on vesting reported in column (d)
excludes the number of shares withheld equal to the minimum amount of taxes
required to be withheld by the Company under applicable law, as follows:
Ervine-710 shares, Loftus-383 shares, Dacus-438 shares, and Knowlton-438
shares. The value realized on vesting reported in column (e) represents the
number of vested shares acquired valued at the closing market price for VSE
Stock ($30.61 per share) on the vesting date (March 3, 2008), excluding the
number of shares withheld equal to the minimum amount of taxes required to be
withheld by the Company under applicable law.
Pension Benefits
VSE does not provide pension arrangements or post-retirement health
coverage for executives and employees. VSE and Energetics sponsor
participation in the VSE Corporation Employee 401(k) Plan, Energetics sponsors
a Profit Sharing Plan, ICRC sponsors a 401(k) Plan, and G&B sponsors a 401(k)
Plan; all of the plans are IRS-qualified, defined contribution, money-purchase
plans. VSE also has a nonqualified deferred compensation plan as discussed
below.
Nonqualified Deferred Compensation
The following table provides information related to potential benefits
payable to each named executive officer under VSE's Deferred Supplemental
Compensation Plan as of and for the year ended December 31, 2008.
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Nonqualified Deferred Compensation Table
Executive Registrant Aggregate
contributions contributions Aggregate earnings withdrawals/ Aggregate balance
Name (1) in last FY in last FY (2) in last FY distributions at last FYE (3)
($) ($) ($) ($) ($)
-------- ------------- ------------- ------------------ ------------- -----------------
(a) (b) (c) (d) (e) (f)
Donald M. Ervine -- 98,948 (246,439) -- 873,383
Maurice A. Gauthier -- 76,043 -- -- 76,043
Thomas R. Loftus -- 54,145 (48,437) -- 213,945
Thomas G. Dacus -- 60,742 (34,446) -- 179,532
James M. Knowlton -- 61,291 (77,090) -- 310,269
James W. Lexo -- 53,322 (5,082) -- 75,909
Notes to Nonqualified Deferred Compensation Table
1. Each of the named executive officers in column (a) has been a
participant in the plan or predecessor plans for more than 20 years, except
for Mr. Dacus, Mr. Lexo and Mr. Gauthier who have been participants for seven
years, two years and one year, respectively.
2. Amounts reported in column (c) are reported in the Summary Compensation
Table, column (i). Aggregate earnings (losses) reported in column (d) are not
reported in the Summary Compensation Table.
3. Amounts reported in column (f) include aggregate contributions by VSE
that were reported as compensation to the named executive officers in VSE's
Summary Compensation Table for previous years and aggregate earnings that were
not reported as compensation. Aggregate contributions by VSE previously
reported in the Summary Compensation Tables for the years 2000 through 2008,
the period for which plan records identifying contributions to individual
participants are available, and aggregate earnings (losses) for the same
period, were:
Aggregate Registrant Contributions and Earnings, 2000-2008
Aggregate
Registrant Aggregate
Name Contributions ($) Earnings ($)
---- ----------------- ------------
Donald M. Ervine 343,961 (77,168)
Maurice A. Gauthier 76,043 --
Thomas R. Loftus 188,506 (21,168)
Thomas G. Dacus 200,493 (20,963)
James M. Knowlton 221,321 (29,463)
James W. Lexo 80,991 (5,082)
Narrative to Nonqualified Deferred Compensation Table
VSE has a non-qualified, non-contributory Deferred Supplemental
Compensation Plan ("DSC Plan") for all VSE officers. The plan was adopted by
the Board in 1994 as the successor to a predecessor plan adopted in 1985,
which succeeded a plan originally established in the mid-1970s.
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The current plan provides, at the Board's discretion, for an annual
contribution to the plan not to exceed 12% of VSE's consolidated net income
for the year. Each officer's allocation from the annual contribution bears the
same percentage to the annual contribution as that officer's salary bears to
total annual officer salaries. For 2008 an annual contribution of 8% of VSE's
consolidated net income (approximately $1,463,000) was authorized and
allocated to 39 participant accounts.
Benefits under the plan are payable to the participant on retirement or
resignation, subject to a vesting schedule, non-competition agreement, and
other plan provisions, or in the event of a change of control of VSE. VSE
contributions to the plan are irrevocable and shall be used to pay benefits
under the plan, subject to the claims of the general creditors of VSE.
VSE contributions to the plan are deposited in a plan trust. VSE invests
the plan trust assets in an account managed by BNY Mellon Wealth Management.
The managed account contains investments in a diversified portfolio of
individual company equity securities and in several mutual funds, including
Class M shares of the BNY Mellon Bond Fund, BNY Mellon Small Cap Stock Fund
(MPSSX), BNY Mellon Mid Cap Stock Fund (MPMCX), BNY Mellon International Fund
(MPITX), and BNY Mellon Emerging Market Fund (MEMKX), and a Money Market
Demand Account.
Potential Payments on Termination or Change of Control
The following table sets forth potential payments to our executive
officers on termination of employment with VSE or a change of control of VSE.
The amounts shown assume that such termination or termination on change of
control was effective as of December 31, 2008, and are estimates of the
amounts that would be paid to the executives on their termination. The actual
amounts to be paid can only be determined at the time of such executive's
separation from VSE or any of VSE's subsidiaries.
Potential Payments on Termination or Change of Control Table
Termination Termination
Without on Change
Name Benefit Cause ($) of Control ($)
---- ------- ----------- --------------
Donald M. Ervine Salary 522,000 522,000
DSC Plan 873,383 873,383
Stock Options N/A N/A
Restricted Stock 340,800 340,800
Maurice A. Gauthier Salary 830,000 830,000
DSC Plan 76,043 76,043
Stock Options N/A N/A
Restricted Stock 397,550 397,550
Thomas R. Loftus Salary 197,000 197,000
DSC Plan 213,945 213,945
Stock Options 319,740 319,740
Restricted Stock 191,000 191,000
Thomas G. Dacus Salary 221,000 221,000
DSC Plan 179,532 179,532
Stock Options 119,902 119,902
Restricted Stock 215,800 215,800
James M. Knowlton Salary 223,000 446,000
DSC Plan 310,269 310,269
Stock Options N/A N/A
Restricted Stock 217,000 217,000
James W. Lexo Salary 194,000 194,000
DSC Plan 75,909 75,909
Stock Options N/A N/A
Restricted Stock 116,400 116,400
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Notes to Potential Payments on Termination or Change of Control Table
Table excludes information with respect to contracts, agreements, plans,
or arrangements to the extent they do not discriminate in scope, terms, or
operation in favor of executive officers and that are available generally to
all salaried employees-for example, qualified benefit plan distributions and
payment for unused vacation pay.
With respect to the potential value of stock options reported in the
"Potential Payments on Termination or Change of Control Table," the Company
assumed that the value was approximately equal to the closing price of VSE
Stock on December 31, 2008 ($39.23 per share) less the exercise price for such
options as reported in the "Outstanding Equity Awards at Fiscal Year End
Table" above.
Narrative to Potential Payments on Termination or Change of Control Table
Payments Made Pursuant to Ervine Transition Agreement
The amounts reported in the above table for Mr. Ervine are based on his
Transition Agreement dated April 22, 2008, as amended December 30 and December
31, 2008, pursuant to which Mr. Ervine has agreed to serve as VSE's Non-
executive Chairman of the Board for a period of two years from April 1, 2009
through March 31, 2011 (see "Narrative to Summary Compensation Table" above).
Pursuant to the Transition Agreement, as amended, Mr. Ervine is paid a
fee of $216,000 per annum, and he will be eligible for a performance incentive
bonus not to exceed $216,000 per year if VSE achieves certain annual return on
equity target percentages. In the event of a termination without cause or of a
change of control, Mr. Ervine is entitled to receive payment for the amounts
that would have been payable through the expiration of the term of the
Transition Agreement (March 31, 2011 as amended). No provision has been made
for payment in the event of death or disability, except in the case of a
termination without cause or of a change of control, in which case his
surviving spouse or estate is entitled to receive a lump sum equal to the fee
Mr. Ervine would have earned ($216,000 per annum) if Mr. Ervine had continued
to serve hereunder through the expiration of the term of the Transition
Agreement, as amended.
The balance of the discussion below refers solely to the named
executives other than Mr. Ervine.
Payments Made On Termination
On termination of employment with VSE or any of VSE's subsidiaries, a
named executive officer is entitled to receive amounts earned during his term
of employment. Such amounts include:
* salary through date of termination
* unused vacation pay
* reimbursement for company business and travel expenses.
The executive also retains a vested interest in and is entitled to receive
payment in accordance with respective plan documents and other applicable
procedures, restrictions (such as termination-for-cause), and expiration
dates:
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* ESOP and 401(k) account
* Profit Sharing Plan account (Energetics only)
* DSC Plan account
* Stock Options (must be exercised within three months of termination, and
within one year if terminated pursuant to a lay off, not to exceed the
Stock Option termination date)
* Restricted Stock.
The executive officer is also entitled to continue participation in VSE's
group health plans for a period of 18 months (COBRA continuation coverage)
following termination on payment of 102% of the monthly premium charged to VSE
for such coverage. VSE has no executive-only health benefit plans.
In the event of involuntary termination without cause, VSE executives
are eligible for up to four months of outplacement assistance services having
an estimated value of about $6,250.
Payments Made On Retirement
In the event of the retirement of a named executive officer, in addition
to the items identified above:
* Vested stock options may be exercised within three years of the date of
retirement, not to exceed the option termination date.
Payments Made On Death or Disability
Pursuant to employment agreements with each named executive officers, in
the event of the death or disability for any period of six consecutive months
of a named executive officer, in addition to the benefits listed under the
headings "Payments Made On Termination" and "Payments Made On Retirement"
above, the named executive officer (or designated beneficiary) will be paid
the executive's base salary then in effect for one full year following the
date of death or disability. In addition, vested stock options may be
exercised within one year of the date of death or termination due to
disability, not to exceed the option termination date.
Payments Made On Change of Control
VSE has entered into an employment agreement with each of the named
executive officers. Pursuant to these agreements, if a change of control of
VSE occurs, the executive may terminate the employment agreement on 30 days'
notice. If an executive's employment is terminated following a change of
control, in addition to the benefits listed above under the heading "Payments
Made On Termination," the executive officer will receive:
* a lump sum payment of one or two times the executive's base salary
* full vesting and payment of the executive's DSC Plan account
* full vesting and payment of the executive's Restricted Stock Plan
benefits
* full vesting of the executive's unexercised stock options.
The employment agreements and change of control provisions for each of
the named executive officers are substantially similar. Generally, pursuant to
the agreements, a change of control is deemed to have occurred on the
occurrence of any of the following events:
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* 30% or more of VSE's outstanding stock is acquired beneficially by one
or more persons acting together in concert or otherwise;
* a cash tender or exchange offer is completed for an aggregate of 40% or
more of VSE's outstanding stock;
* VSE's stockholders approve an agreement to merge, consolidate,
liquidate, or sell all or substantially all of VSE's assets, unless
after the merger or consolidation, VSE is the surviving corporation and
more than 50% of VSE's outstanding stock is beneficially owned by
existing VSE stockholders both before and after the merger or
consolidation;
* two or more directors are elected to the Board without having previously
been nominated and approved by the members of the Board immediately
prior to such election.
Director Compensation
The following table provides information related to the compensation of
our non-employee directors for fiscal year 2008.
Director Compensation Table
Change in
pension value
and non-
qualified
Fees earned Non-equity deferred
or paid incentive plan compensation All other
Name in cash Stock awards Option awards compensation earnings compensation Total
($) (1) (2) ($) (3) ($) (4) ($) ($) ($) ($)
---- ----------- ------------ ------------- -------------- ------------- ------------ -----
(a) (b) (c) (d) (e) (f) (g) (h)
Ralph E. Eberhart 36,000 23,960 -- -- -- -- 59,960
Clifford M. Kendall 46,000 23,960 -- -- -- -- 69,960
Calvin. S. Koonce 39,000 23,960 -- -- -- -- 62,960
James F. Lafond 48,000 23,960 -- -- -- -- 71,960
David M. Osnos 33,000 23,960 -- -- -- -- 56,960
Jimmy D. Ross 38,000 23,960 -- -- -- -- 61,960
Bonnie K. Wachtel 42,000 23,960 -- -- -- -- 65,960
Notes to Director Compensation Table
1. The amount reported in column (b) combines amounts paid for director
fees and meeting fees. See "Narrative to Director Compensation Table" below.
2. Pursuant to the 2004 Directors Stock Plan, Mr. Koonce elected to receive
all, and General Ross elected to receive half, of his annual director fees of
$24,000 for 2008 in VSE Stock in lieu of cash. Mr. Koonce received 696 shares
($23,977), and General Ross received 348 shares ($11,989), of VSE Stock per
their respective elections. The dollar amount recognized for financial
statement reporting purposes in accordance with FAS 123R was the fair market
value of the VSE Stock received based on the closing price of VSE Stock on
December 3, 2008 ($34.45 per share), the valuation date specified in the plan.
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3. Pursuant to the 2006 Restricted Stock Plan, each non-employee director
was granted a Restricted Stock Award of 500 shares of VSE Stock on January 2,
2008. The dollar amount recognized for financial statement reporting purposes
in accordance with FAS 123R is based on the closing price of VSE Stock on
January 2, 2008 ($47.92 per share).
4. As of December 31, 2008, each of the non-employee directors named above
held stock options covering shares of VSE Stock as follows: General Eberhart-0
shares, Mr. Kendall-0 shares, Mr. Koonce-0 shares, Mr. Lafond-2,000 shares,
Mr. Osnos-2,000 shares, General Ross-500 shares, Ms. Wachtel-2,000 shares.
Narrative to Director Compensation Table
During 2008, each non-employee director was compensated with director
fees at an annual rate of $24,000, and the chairman of the Audit Committee was
compensated additionally at an annual rate of $5,000 (total director fee of
$29,000). In addition, each non-employee director was compensated at a rate of
$1,000 for each Board meeting attended, and Committee members were compensated
at a rate of $1,000 for each Committee meeting attended.
Pursuant to the VSE Corporation 2004 Non-Employee Directors Stock Plan
approved by stockholders in 2004, each non-employee director can elect that
all or a portion of his or her annual cash compensation for services as a VSE
director be paid in VSE Stock at fair market value determined in accordance
with the plan. Mr. Koonce and General Ross each elected to participate in the
Plan for 2008.
Pursuant to the VSE Corporation 2004 Stock Option Plan approved by
stockholders in 2004, each non-employee director was granted, as of January 1
each year commencing with January 1, 2005, a nondiscretionary five-year option
to purchase up to 1,000 shares of VSE Stock. In December 2005, the Board
discontinued awarding options to purchase VSE Stock. Options outstanding as of
December 30, 2005, were not affected by this Board action. The total number of
stock options held by each non-employee director as of December 31, 2008, is
indicated in Note 4 of Notes to Director Compensation Table.
Following approval of the 2006 Restricted Stock Plan by stockholders on
May 1, 2006, each non-employee director was granted a Restricted Stock Award
of 600 shares of VSE Stock on June 27, 2006 (the initial grant of 300 shares
has been adjusted for the June 11, 2007 two-for-one stock split). VSE Stock
issued pursuant to the Restricted Stock Plan is fully vested when issued, but
the certificates for such Stock bear a restrictive legend prohibiting the
sale, transfer, pledge and assignment of such Stock for a two-year period
commencing on the issue date. When all restrictions on the certificates
bearing a restrictive legend have lapsed, VSE issues a non-restrictive
certificate to the directors (subject to any applicable securities law
restrictions). Directors appointed during the year will be eligible for a pro
rata annual award.
During 2006 the Compensation Committee engaged PricewaterhouseCoopers to
perform a compensation analysis for VSE executive officers and directors. The
Committee met and conferred with PricewaterhouseCoopers representatives at
numerous times in 2006, and on December 5, 2006, PricewaterhouseCoopers
reported that its benchmarking survey indicated that the equity portion of
total non-employee director compensation was below peer group benchmarking
averages (see "Review of Executive Compensation" above for further information
on the PricewaterhouseCoopers engagement). Based on the total compensation
analysis, and on the recommendation of its Compensation Committee, the Board
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authorized non-employee director Restricted Stock Awards for each non-employee
director of 800 shares of VSE Stock beginning on January 1, 2007 (as adjusted
for the June 11, 2007 two-for-one stock split) and 500 shares on January 1,
2008.
No compensation is paid to any non-employee director for personal
services rendered to VSE pursuant to a consulting services agreement between
the director and VSE, or any of VSE's subsidiaries, unless authorized as a
special assignment by the Board. No such authorization was requested for or on
behalf of any director in 2008. The foregoing procedures do not restrict
reimbursement for expenses incurred by a director for attending meetings of
the Board or its authorized committees.
Changes in Non-Employee Director Compensation in 2009
During 2008 the Compensation Committee reviewed the compensation
arrangements for non-employee directors. The Compensation Committee considered
director compensation survey data based on VSE's existing 2006 industry peer
group and also additional director compensation survey data for small and
medium companies published by the National Association of Corporate Directors.
Based on its discussions and reviews, the Compensation Committee recommended
several changes in director compensation. The recommended changes were
approved by the Board on December 17, 2008, and are effective as of January 1,
2009:
* The individual non-employee director annual retainer fee was increased
from $24,000 to $35,000.
* The individual non-employee director annual stock grant under the 2006
Restricted Stock Plan was set as the number of shares of VSE Stock equal
to $35,000 divided by the closing price of VSE Stock on the first
trading day following January 1, rounded to the nearest 100 shares. On
January 2, 2009, each non-employee director was granted a Restricted
Stock Award of 900 shares.
* The additional annual fee for service as chairman of the Audit Committee
was increased from $5,000 to $10,000, and an additional fee for service
as chairman of the Compensation Committee was initiated at the annual
rate of $10,000.
* There was no change in the rate for Board and Committee meeting fees-
each non-employee directors is compensated at the rate of $1,000 for
each Board meeting attended, and each non-employee director Committee
member is compensated at a rate of $1,000 for each Committee meeting
attended.
Compensation Committee Interlocks and Insider Participation
During 2008, the Compensation Committee was composed of General Ross,
Mr. Kendall, Mr. Koonce, and General Eberhart. No member of the Committee was
at any time during 2008 or at any other time an officer or employee of VSE. No
executive officer of VSE serves or has served as a member of the Compensation
Committee of another entity that has an executive officer who serves on VSE's
Compensation Committee. No executive officer of VSE served on the board of
directors or compensation committee of any entity which has one or more
executive officers serving as members of the Board or Compensation Committee.
Mr. Koonce is a major stockholder of VSE. See table above for "Security
Ownership of Certain Beneficial Owners and Management."
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Compensation Committee Report
The Compensation Committee reviewed this Compensation Discussion and
Analysis and discussed its contents with VSE management. Based on the review
and discussions, the Committee has recommended to the Board that this
Compensation Discussion and Analysis be included in the Proxy Statement.
Jimmy D. Ross, Committee Chairman
Ralph E. Eberhart
Clifford M. Kendall
Calvin S. Koonce
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at VSE's 2010 annual
meeting of stockholders must have been received by VSE's Secretary at VSE's
principal executive offices, 2550 Huntington Avenue, Alexandria, Virginia
22303-1499, by no later than the close of business on November 24, 2009, to be
considered for inclusion in VSE's proxy material relating to such meeting.
In addition, under our By-Laws stockholders may recommend persons to be
nominated for election as directors of the Company at the annual meeting of
stockholders. To be considered for nomination, such recommendation must be
received in writing by the Secretary of the Company no later than 90 days
before the date which corresponds to the date on which the annual meeting of
stockholders was held during the immediate prior year, i.e., February 4, 2010.
Such recommendation shall be accompanied by the name of the stockholder
proposing the candidate, evidence that stockholder is a beneficial owner of
VSE Stock as of the record date established for the determination of
stockholders entitled to notice of, and to vote at, the annual meeting of
stockholders, the name of candidate being proposed for nomination, and the
candidate's biographical data and qualifications.
OTHER MATTERS
VSE will bear the costs of the solicitation of proxies for use at the
Annual Meeting. In addition to the use of the mails, proxies may be solicited
by personal interview, telephone and telegram by VSE directors, officers and
employees. Arrangements will also be made with brokerage houses and other
custodians, nominees, and fiduciaries, who are record holders of Stock, for
forwarding solicitation material to the beneficial owners of the Stock. VSE
will, on the request of such record holders, pay the reasonable expenses for
completing the mailing of such materials to the beneficial owners.
A copy of the VSE's Annual Report on Form 10-K (without exhibits) for
the year ended December 31, 2008, will be furnished without charge on written
or telephonic request to Thomas M. Kiernan, Vice President, 2550 Huntington
Avenue, Alexandria, VA 22303-1499 or call (703) 329-4721. The Form 10-K is
also available at www.vsecorp.com .
By Order of the Board of Directors
Thomas M. Kiernan, Secretary
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_______________________________________________________________________________
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE VSE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Donald M. Ervine and Thomas M. Kiernan
as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to vote as designated below, all the Common Stock of VSE
Corporation held of record by the undersigned on March 6, 2009, at the annual
meeting of stockholders scheduled to be held on May 5, 2009, and at any
adjournment thereof.
1. ELECTION OF DIRECTORS
for all nominees listed [ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
below, except as marked to
the contrary below.
(01) Ralph E. Eberhart
(02) Donald M. Ervine
(03) Maurice A. Gauthier INSTRUCTION: To withhold authority to vote
(04) Clifford M. Kendall for any nominee(s), mark "For All Except"
(05) Calvin S. Koonce and write that nominee's name in the space
(06) James F. Lafond provided below.
(07) David M. Osnos
(08) Jimmy D. Ross __________________________________________
(09) Bonnie K. Wachtel
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP as the independent
registered public accountant of VSE Corporation for the year ending December 31,
2009.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before this meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 and 2.
Please be sure to date and sign
this proxy card in the box below.
___________________________________________
Date
_____ Sign above __________________________
________________________________________________________________________________
Detach above card, sign, date and mail in postage paid envelope provided.
VSE CORPORATION
Please sign exactly as it appears printed hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee, or guardian, please give full title as such. If signing as a
corporation, please sign full corporate name by President or other authorized
officer. If signing as a partnership, please sign in partnership name by
authorized person.
PLEASE ACT PROMPTLY
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVOLOPE.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
____________________________________________
____________________________________________
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