VSE CORPORATION
2550 Huntington Avenue, Alexandria, Virginia 22303-1499
Notice of 2003
Annual Meeting of
Stockholders and
Proxy Statement
Fellow Stockholders:
You are cordially invited to attend the annual meeting of
stockholders of VSE Corporation to be held on Friday, May 2, 2003,
commencing at 10:00 a.m., Washington, D.C. time, at the VSE Corporation
Building, 2550 Huntington Avenue, Alexandria, Virginia 22303-1499. The
matters expected to be considered at the annual meeting are described in
the accompanying notice of meeting and proxy statement.
At the meeting we will also review the activities of the company
during the past year and current activities. Stockholders will have an
opportunity to ask questions. I hope you will be able to join us.
To ensure that your VSE common stock is voted at the meeting, please
promptly sign and date the enclosed proxy card and return it to VSE in
the enclosed envelope. Your vote is important.
Please note the location for this meeting. The VSE Corporation
Building is located at 2550 Huntington Avenue, Alexandria, Virginia
22303-1499, just off I-95/I-495 at Exit 176 (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.
Very truly yours,
VSE CORPORATION
/s/ D. M. Ervine
D. M. Ervine
Chairman, President, and CEO/COO
April 2, 2003
VSE CORPORATION
2550 Huntington Avenue, Alexandria, Virginia 22303-1499
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2003
To the Stockholders of VSE Corporation:
Notice is hereby given that the annual meeting of stockholders of
VSE Corporation, a Delaware corporation ("VSE"), will be held on
Friday, May 2, 2003, commencing at 10:00 a.m., Washington, D.C. time, at
the VSE Corporation Building, 2550 Huntington Avenue, Alexandria,
Virginia 22303-1499, for the following purposes:
1. To elect seven 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 certified public accountants for the year ending
December 31, 2003;
3. To approve an amendment to VSE's 1998 Stock Option Plan to
increase the VSE Stock issuable thereunder by 75,500 shares;
and
4. 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 18, 2003, 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 2002 Annual Report to Stockholders, which
contains consolidated financial statements and other information of
interest to stockholders, accompanies this proxy material.
Whether or not you expect to attend the meeting, please promptly complete,
sign, date and return the enclosed proxy. To return your proxy you may use the
self-addressed stamped envelope. If you attend the meeting, you may, if you
wish, withdraw your proxy and vote you shares personally.
By Order of the Board of Directors
/s/ C. S. Weber
C. S. Weber, Secretary
April 2, 2003
VSE CORPORATION
PROXY STATEMENT
Annual Meeting of Stockholders
to be held on May 2, 2003
INTRODUCTION
General
This proxy statement is being furnished to the stockholders of VSE
Corporation, a Delaware corporation ("VSE"), in connection with the
solicitation of proxies by VSE's board of directors (the "Board") for use
at VSE's annual meeting of stockholders to be held on Friday, May 2, 2003,
commencing at 10:00 a.m., Washington, D.C. time, at the VSE Corporation
Building, 2550 Huntington Avenue, Alexandria, Virginia 22303-1499, and at
any adjournments thereof for the purposes specified in the accompanying
notice of meeting (the "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. This proxy statement and the accompanying
notice and form of proxy are first being provided to the holders of VSE
common stock, par value $.05 per share (the "stockholders"), on or about
April 2, 2003.
The close of business on March 18, 2003, is the record date for the
determination of stockholders entitled to notice of, and to vote at, the
Meeting. Holders of a majority of VSE's outstanding common stock, par
value $.05 per share (the "Stock" or "VSE Stock"), as of March 18, 2003,
must be present at the Meeting, either in person or represented by proxy,
to constitute a quorum for the transaction of business. As of the close
of business on March 18, 2003, there were 2,188,635 shares of Stock
outstanding and approximately 295 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 18, 2003, on all matters
which may be submitted to the stockholders at the Meeting.
Voting and Revocation of Proxies
All Stock represented by valid proxies will be voted at the Meeting
in accordance with the directions on the proxies. If no direction is
indicated on a proxy, the Stock represented thereby will be voted for the
election as VSE directors of the seven nominees listed below under
"Election of Directors" as discussed below.
Votes cast by proxy or in person at the Meeting will be tabulated
by the inspectors of election appointed for the Meeting. The inspectors
of election will treat abstentions as Stock that is present and entitled
to vote for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted
to stockholders for a vote. If a broker indicates on a proxy that such
broker does not have discretionary authority as to certain Stock to vote
on a particular matter, such shares will not be considered as present and
entitled to vote with respect to such matter.
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 Meeting other than those
specifically referred to herein. If, however, any other matters are
properly presented to
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the 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.
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
Meeting 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 Stock as of March 18, 2003. The voting and
investment powers of the Stock listed below are held solely by the
reported owner unless otherwise indicated.
Shares beneficially Percent of
Name of Beneficial Owner owned class
- ------------------------- ------------------- ----------
Certain Beneficial Owners
- -------------------------
VSE Corporation Employee
ESOP/401(k) Plan (a) 348,298 15.9%
Non-employee Directors
- ----------------------
Clifford M. Kendall (b) 25,581 1.2%
Calvin S. Koonce (b) (c) 469,056 21.4%
David M. Osnos (b) 4,625 *
Jimmy D. Ross (b) 8,057 *
Bonnie K. Wachtel (b) 30,875 1.4%
Named Executive Officers and Other Directors
- --------------------------------------------
Thomas G. Dacus (b) 500 *
Donald M. Ervine (b) 93,498 4.3%
Robert J. Kelly (b) 3,750 *
James M. Knowlton (b) 51,241 2.3%
Thomas R. Loftus (b) 17,322 *
Craig S. Weber (b) 72,944 3.3%
Group
- -----
Directors, Nominees, and
Executive Officers as a group
(12 persons) (b) (d) 858,262 39.1%
* Represents less than 1% of outstanding Stock.
-2-
(a) These shares are held in trust for the benefit of the ESOP/401(k)
Plan participants. Three VSE officers serve as Plan trustees. The
Plan participants have voting power over 281,880 shares allocated
to their respective ESOP accounts, while the Plan trustees share
voting and investment power over the remaining 66,418 shares. The
mailing address for the ESOP/401(k) Plan is 2550 Huntington Avenue,
Alexandria, Virginia 22303-1499.
(b) Includes the following number of shares of Stock which the non-
employee directors, named executive officers, other directors, and
all directors, nominees, and executive officers as a group (12
persons) have the right to purchase pursuant to the exercise of
stock options which are exercisable within the next 60 days:
Clifford M. Kendall-562, each of Calvin S. Koonce, David M. Osnos,
Jimmy D. Ross, and Bonnie K. Wachtel-2,625, Thomas G. Dacus-500,
Donald M. Ervine-46,000, Robert J. Kelly-3,750, James M. Knowlton-
25,750, Thomas R. Loftus-11,500, Craig S. Weber-14,000, and
all directors, nominees, and executive officers as a group (12
persons)-122,062.
(c) Mr. Koonce's mailing address is 6550 Rock Spring Drive, Suite 600,
Bethesda, Maryland 20817. Includes 5,500 shares held in a brokerage
account for which Mr. Koonce has discretionary authority.
(d) The group consists of 12 persons. The 855,262 shares beneficially
owned include 66,418 shares beneficially owned or controlled by the
trustees of the ESOP/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 VSE's Stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("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
persons subject to the reporting requirements of Section 16(a) filed the
reports on a timely basis.
Item No. 1
----------
ELECTION OF DIRECTORS
Nominees
At the Meeting, stockholders will elect, by a plurality of the votes
cast, seven 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.
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 seven nominees for election as VSE directors and certain
information regarding them are as follows:
Name and Principal Occupation Age Director since
- ----------------------------- --- --------------
David M. Osnos 71 1968
Of counsel (previously Senior Partner) at Arent Fox Kintner
Plotkin & Kahn, PLLC, attorneys-at-law (for more than the
past five years); also a director of EastGroup Properties
and Washington Real Estate Investment Trust.
Donald M. Ervine 66 1987
VSE Chairman of the Board and Chief Executive Officer since
1992. Also appointed President and Chief Operating Officer
in March 2002.
Bonnie K. Wachtel 47 1991
Vice President and General Counsel, Wachtel & Co., Inc.,
Brokers and Underwriters (for more than the past five
years). Also a director of Integral Systems Inc. and
Information Analysis Inc.
Calvin S. Koonce 65 1992
Chairman, Koonce Securities, Inc., a securities
broker/dealer firm (for more than the past five years).
Jimmy D. Ross 66 1994
General, U.S. Army (Ret.), formerly Commanding General,
U.S. Army Materiel Command. General Ross has served as
an executive officer of Cypress International, Inc.,
a marketing consulting firm, since January 2000. From
1994 to 1999, he served as Senior Vice President,
Biomedical Services, of the American Red Cross.
Robert J. Kelly 65 1996
Admiral, U.S. Navy (Ret.), formerly Commander in Chief,
U.S. Pacific Fleet. Admiral Kelly has served as Chairman
of the Board of Energetics Incorporated, a VSE subsidiary
("Energetics"), since August 1995, and was appointed
President of Energetics in March 1999.
Clifford M. Kendall 71 2001
Chairman of the Board, On-Site Sourcing, Inc. He is also
a director of Affiliated Computer Services, Inc. ("ACS")
and Washington Real Estate Investment Trust. Mr. Kendall
was one of the founders of Computer Data Systems, Inc.
("CDSI") in 1968, and he served as its Chairman and
Chief Executive Officer from 1970 to 1991 and as Chairman
until December 1997. CDSI was acquired by ACS in 1997.
-4-
Committees of the Board
Audit Committee. The audit committee met five times during 2002 and
is composed solely of non-employee directors, including Mr. Koonce, who
chairs the committee, Mr. Kendall, General Ross, and Ms. Wachtel. The
audit committee is primarily concerned with the effectiveness of VSE
accounting policies and practices, financial reporting and internal
controls. The committee recommends to the Board the firm to be appointed
as VSE's independent certified public accountants and reviews the scope
of the annual examination of VSE's books and records. The committee also
reviews the audit findings and recommendations of the independent public
accountants, considers the organization and work of VSE's internal audit
function, and monitors the extent to which the findings and
recommendations of these groups have been implemented.
Compensation Committee. The compensation committee met four times
during 2002 and is composed solely of non-employee directors, including
General Ross, Chairman, Mr. Kendall, Mr. Koonce and Ms. Wachtel. The
committee is primarily concerned with corporate compensation policies,
including incentive compensation, and with the compensation of the chief
executive officer and certain other executive officers and employees.
Nominating and Corporate Ethics Committee. The nominating and
corporate ethics committee met twice during 2002 and consists of Admiral
Kelly, Chairman, and Mr. Osnos. The committee is primarily concerned with
making 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. Stockholders of VSE 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 secretary of VSE generally by February 15th, but in any
event no later than 90 days before the date in the current year which
corresponds to the date on which the meeting was held during the
immediate prior year.
Planning Committee. The planning committee did not meet during
2002. The committee consists of Mr. Ervine, Chairman, Admiral Kelly,
Mr. Koonce and General Ross. The committee is primarily concerned with
making recommendations to the Board with respect to business development
opportunities, including acquisitions.
Finance Committee. The finance committee met three times during
2002. The committee consists of Mr. Osnos, Chairman, Mr. Ervine,
Mr. Koonce and Ms. Wachtel. The committee is primarily concerned with
making recommendations to the Board with respect to VSE's capitalization
and long-term funding requirements.
VSE's Chairman and Chief Executive Officer (Mr. Ervine) is an ex
officio member of all standing committees of the Board. Mr. Ervine does
not, however, participate in meetings or discussions of the compensation
committee concerned with establishing his salary or bonus.
Board Meetings
During 2002 the Board held six regular meetings and acted four times
by unanimous written consent. No director attended fewer than 75% of the
aggregate of (a) the total number of Board regular and special meetings
held (during the period during which he or she has been a director) and
(b) the total number of meetings held by all Board committees on which
he or she served.
-5-
Compensation of Directors
Each non-employee director is compensated at an annual rate of
$17,200, prorated in the event of a partial year of service. Directors
who are employees of VSE receive no additional compensation for service
as a director. In addition, no compensation is paid to a 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 2002.
The foregoing procedures do not restrict reimbursement for expenses
incurred by a director for attending meetings of the Board or its
authorized committees.
Each non-employee director, including each of the non-employee
directors named in the foregoing table, is granted, as of January 1 each
year, a nondiscretionary five-year option to purchase 750 shares of VSE
Stock (750 shares represents the maximum number of shares which may be
covered by options issued annually to each non-employee director pursuant
to either or both of the VSE Corporation 1996 and 1998 Stock Option
Plans). Each option is vested 25% immediately on the date of the grant
and 25% on each successive anniversary date after the grant (100% vested
after three years). The option price per share for each nondiscretionary
grant is not less than the fair market value of VSE Stock as of the date
the option is awarded. See "Security Ownership of Certain Beneficial
Owners and Management" above for further information on the stock options
held by each VSE director.
Pursuant to the VSE Corporation 1998 Non-employee Directors Stock
Plan (the "Directors Stock Plan"), each non-employee director has the
ability to elect that payment of all or a portion of his or her annual
compensation for service as a VSE director (currently $17,200 per year)
be paid in VSE Stock at fair market value determined in accordance with
Section 7(a) of the Directors Stock Plan. For 2002, Mr. Kendall,
Mr. Koonce and General Ross elected to have sixty, sixty, and fifty
percent, respectively, of their annual compensation paid in VSE Stock.
Certain Relationships and Related Transactions
Pursuant to an agreement dated as of October 21, 1998, Donald M.
Ervine serves as the Chief Executive Officer of VSE at a base salary of
$254,000 per annum. Mr. Ervine is employed for a term ending on
January 1, 2004, subject to automatic extensions for successive one-year
periods unless notice to terminate is given by Mr. Ervine at least 90
days prior to the expiration of the term or any such one-year extension
of the term. Mr. Ervine's base salary is subject to review in January of
each year, provided that the base salary shall not be less than $254,000
per annum. Mr. Ervine is also eligible to receive an annual performance
bonus each year as determined by the Board or its compensation committee.
Mr. Ervine's employment may be terminated by the Board for willful and
gross misconduct and in the case of death or disability which prevents
Mr. Ervine from substantially fulfilling his duties for a period in
excess of six months. If Mr. Ervine'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. Ervine's employment may also
be terminated without cause on 60 days prior notice and on payment of a
lump sum severance compensation payment equal to two times his annual
base salary then in effect. The agreement includes a covenant by
Mr. Ervine not to be involved, directly or indirectly, in a business
enterprise that competes with VSE during the term of his employment and
for two years thereafter. Under the terms of the agreement, Mr. Ervine
will be nominated to serve as a director and will be elected Chairman of
the Board during the term of his employment. If a change of control of
VSE, as defined, occurs and, without his consent, Mr. Ervine is assigned
duties materially inconsistent with his position and status with VSE,
Mr. Ervine may terminate the agreement and will be entitled to a lump sum
severance compensation payment equal to three times his annual base
salary then in effect.
-6-
The October 21, 1998, agreement described above replaced and superseded
on substantially the same terms and conditions a prior employment agreement
with Mr. Ervine dated as of January 1, 1996.
Pursuant to an agreement dated as of January 15, 1999, Admiral
Robert J. Kelly, U.S. Navy (Ret.), serves as President and Chief
Operating Officer of Energetics Incorporated ("Energetics"), a wholly
owned subsidiary of VSE. Admiral Kelly is employed for a term ending on
January 1, 2004, subject to automatic extensions for successive one-year
periods unless notice to terminate is given by either Admiral Kelly or
VSE at least 90 days prior to the expiration of the term or any such
one-year extension of the term. Other terms and conditions of Admiral
Kelly's agreement are substantially similar to those of Mr. Ervine's 1998
agreement except that (a) Admiral Kelly is employed at a minimum base
salary of $166,000 per annum, and (b) Admiral Kelly will be nominated to
serve as a director of VSE and a director of Energetics during the term
of the agreement.
Pursuant to separate agreements entered into in December 1997 and
expiring on January 1, 2004, subject to automatic extensions for
successive one-year periods unless notice to terminate is given at least
90 days prior to the expiration of the term or any such one-year
extension of the term, Mr. Knowlton and Mr. Weber each have agreements
with VSE to continue to serve in the executive officer's current or in
a comparable capacity. The terms and conditions the executive officer
agreements are similar to those of Mr. Ervine's 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 or her 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 two times his or her annual base
salary then in effect.
There is no family relationship between any director or executive
officer of VSE and any other director or executive officer of VSE.
The law firm of Arent Fox Kintner Plotkin & Kahn, PLLC, of which
Mr. Osnos is of counsel, has represented and is expected to continue to
represent VSE on various legal matters.
VSE and the trustees of its employee benefit plans effect certain
of their transactions in VSE stock and employee benefit plan investments,
respectively, 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. No transactions occurred with Koonce
Securities, Inc. in 2002.
The Board recommends a vote FOR the proposal to elect each of the
seven persons nominated to serve as a director of VSE for the ensuing
year, and your proxy will be so voted unless you specify otherwise.
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Item No. 2
----------
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Based on the recommendation of its audit committee, the Board has
appointed the firm of Ernst & Young LLP to be VSE's independent certified
public accountants for the year ending December 31, 2003, 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 approval of this appointment by stockholders. The
ratification of the appointment of VSE's independent certified public
accountants will require the affirmative vote by the holders of a
majority of the outstanding Stock present in person or represented by
proxy at the Meeting. If such approval is not received, the Board will
reconsider the appointment.
Arthur Andersen LLP served as VSE's independent certified public
accountants for the first three months of 2002. On May 15, 2002, on the
recommendation of its audit committee, the Board dismissed Arthur
Andersen LLP as VSE's independent public accountants and approved the
selection of Ernst & Young LLP to serve as VSE's independent public
accountants for the fiscal year ended December 31, 2002. In 2002 Arthur
Andersen LLP services included reviews of the consolidated financial
statements included in VSE's Form 10-Q for the quarter ended March 31,
2002. Arthur Andersen LLP billed VSE for professional services rendered
for the quarter ended March 31, 2002, as follows:
Audit fees . . . . . . . . . . . . . . . . . . . . . . . .$ 13,100 (1)
Financial information systems design and implementation . .$ -0-
All other fees . . . . . . . . . . . . . . . . . . . . . .$ -0-
(1) Includes fees for reviews of consolidated financial statements
included in VSE's Form 10-Q for the quarter ended March 31, 2002.
In 2002 Ernst & Young LLP services included an examination of VSE's
consolidated financial statements and the financial statements of certain
subsidiaries and benefit plans and reviews of the consolidated financial
statements included in VSE's Forms 10-Q for each of the quarters ended
June 30, 2002, and September 30, 2002.
Ernst & Young LLP billed VSE for professional services rendered for
the year ended December 31, 2002, as follows:
Audit fees . . . . . . . . . . . . . . . . . . . . . . . .$118,000 (1)
Financial information systems design and implementation . .$ -0-
All other fees . . . . . . . . . . . . . . . . . . . . . .$ 15,000 (2)
(1) Includes fees for reviews of consolidated financial statements
included in VSE's Form 10-Qs for each of the quarters ended
June 30, 2002, and September 30, 2002.
(2) Includes employee benefit plan audits and other non-audit services.
A representative of Ernst & Young LLP is expected to attend the
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.
-8-
The Board recommends a vote FOR the proposal to ratify the
appointment of Ernst & Young LLP to serve as VSE's independent certified
public accountants for the fiscal year ending December 31, 2003, and your
proxy will be so voted unless you specify otherwise.
Item No. 3
----------
APPROVAL OF AMENDMENT TO VSE CORPORATION 1998 STOCK OPTION PLAN
The stockholders are asked to consider and vote on an amendment to
the VSE Corporation 1998 Stock Option Plan (the "1998 Plan") to increase
by 75,500 shares the VSE Stock authorized for issuance thereunder.
In December 1997 the Board adopted, and in May 1998 the stockholders
approved, the 1998 Plan. Under the 1998 Plan 343,750 shares of VSE Stock
were reserved for issuance pursuant to the exercise of stock options
granted thereunder. On March 13, 2003, the Board adopted an amendment to
the 1998 Plan, subject to stockholder approval at the Meeting, to
increase by 75,500 shares the VSE Stock authorized for issuance
thereunder. If the amendment is approved by the stockholders, the
aggregate number of shares of VSE Stock which will be authorized for
issuance under the 1998 Plan will increase by 75,500 shares from 343,750
to 419,250. As of the record date, 341,250 shares of VSE Stock were
covered by outstanding options granted under the 1998 Plan and 2,500
shares of VSE Stock remained available under the 1998 Plan for the future
grant of options.
Approval of the amendment to the 1998 Plan will require the
affirmative vote by the holders of a majority of the outstanding Stock
present in person or represented by proxy at the Meeting. If such
approval is not received, the Board will reconsider the amendment to the
1998 Plan. The following summary of the 1998 Plan, as amended, is
qualified in its entirety by reference to the complete text of the 1998
Plan. Except for the number of shares of VSE Stock issuable thereunder,
the 1998 Plan and the 1998 Plan, as amended by the proposed amendment,
are in all respects identical.
VSE anticipates that, following stockholders' approval of the
amendment to increase the number of shares available for issuance under
the 1998 Plan, VSE will from time to time grant awards to eligible
executive officers and key employees as part of VSE's overall
compensation strategy. Under the 1998 Plan, each non-employee director
will receive a total of 750 stock options on January 1 of each year. VSE
has not, however, made any specific determinations regarding the
executive officers and key employees eligible to receive awards, the size
of the awards or the term of the awards.
Under the 1998 Plan, as amended, an aggregate of up to 419,250
shares of Stock (representing approximately 19.2% of the currently
outstanding Stock) may be purchased pursuant to the grant of options. Of
the 75,500-share increase, 7,625 shares will be reserved for
nondiscretionary options issued to non-employee directors of VSE and the
remaining 67,875 shares will be reserved for discretionary options issued
to executive officers and key employees. Of the aggregate of 419,250
shares of Stock issuable under the 1998 Plan, as amended, 23,250 shares
are reserved for non-discretionary options issued to non-employee
directors of VSE and 396,000 shares are reserved for discretionary
options issued to executive directors and key employees. Options under
the 1998 Plan are not intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended. (See
"Federal Income Tax
-9-
Consequences" below.) The 1998 Plan will terminate on the earliest of
May 6, 2008, or the date on which all options under the 1998 Plan have
been exercised or terminated.
The purpose of the 1998 Plan is to make awards to non-employee
directors, executive officers and key employees of VSE and its
subsidiaries, and thereby to further VSE's growth by providing long-term
incentives and an identity of interests with the stockholders. VSE
operates in a highly specialized field in which success is substantially
dependent on the expertise of qualified and highly motivated key
personnel. Management believes that adoption of the amendment to the 1998
Plan will be of material assistance in recruiting, motivating and
retaining key personnel.
Currently VSE has five non-employee directors, six executive
officers and approximately 25 other key employees.
The Board is authorized, subject to the provisions of the 1998 Plan,
to construe and interpret the 1998 Plan, and to make all determinations
necessary or advisable for the administration of the 1998 Plan. The Board
may designate persons other than Board members to carry out its
responsibilities under the 1998 Plan, under such conditions and
limitations as it may prescribe, except that the Board may not delegate
its authority with respect to the grant of options under the 1998 Plan.
The portion of the 1998 Plan which relates to the grant of options will
be administered by the Board, provided that a majority of the Board and
a majority of the members acting on the matter are non-employee
directors. Alternatively, if the Board shall not satisfy the foregoing
provisions, or if the Board shall otherwise so specify, the portion of
the 1998 Plan which relates to the grant of options shall be administered
by a committee of at least three directors, all of whom must be non-employee
directors. In administering the 1998 Plan, the Board may (but is not required
to) consider the recommendations of its compensation committee.
Under the 1998 Plan, the option price per share shall not be less
than the fair market value of the Stock as of the date each option is
granted. The fair market value of the Stock, as defined in the 1998 Plan,
means on any given date the average closing price of the Stock as
reported on the consolidated transaction reporting system for the
National Association of Securities Dealers for such of the 30 calendar
days prior to the date of the award during which trades of the Stock
occurred. The closing price of the Stock on March 17, 2003, was $9.75 per
share.
Options will be exercisable over the exercise period specified by
the Board, but in no event will such period exceed five years from the
date of grant. Options will terminate three months following voluntary
termination of employment. If the participant dies while an employee,
vested options may be exercised within one year after the participant's
death (but not after the option termination date). If the participant
retires, vested options may be exercised within three years after the
retirement date (but not after the option termination date). If the
participant's employment is terminated for disability or due to a lay off
by VSE, vested options may be exercised within one year after termination
(but not after the option termination date). Also, if a participant's
employment is terminated for cause (as defined in the 1998 Plan), all of
his or her options will terminate on the date of such termination for
cause.
The option price shall be paid in full at the time of exercise in
cash or, with the Board's approval, Stock held by the participant for at
least six months having an aggregate fair market value equal to the
aggregate option price of the options exercised or in a combination of
cash and Stock.
Each option granted under the 1998 Plan will vest 25% immediately
on the date of the grant and 25% on each successive anniversary date
after the date of the grant (100% vested after
-10-
three years). In the event of a "change-of-control" of VSE (as defined
in the 1998 Plan), all options granted under the 1998 Plan which have
not terminated and are held by participants will become immediately vested
and may be exercised without regard to any vesting period.
Federal Income Tax Consequences
The following is a brief summary of certain federal income tax
consequences relating to options granted under the 1998 Plan. This
summary is solely for general information and does not make specific
representations to any participant. Therefore, each participant is urged
to consult with his or her own tax adviser regarding the exercise of
options and the sale of Stock acquired under the 1998 Plan regarding
federal, state and local tax consequences.
The grant of stock options will have no immediate tax consequences
to VSE or the optionee. If Stock received on the exercise of an option
is not subject to a substantial risk of forfeiture, the optionee will
recognize ordinary income equal to the excess, if any, of the fair market
value of the shares at the time of exercise over the exercise price. It
is not contemplated that VSE will, upon the exercise of an option, issue
or deliver Stock that is subject to a substantial risk of forfeiture.
Stock received on the exercise of an option will be treated as
subject to a substantial risk of forfeiture for up to a six month period
if the sale of the shares at a profit during such six months could
subject the optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended ("Section 16(b)"). Under these
circumstances, however, the optionee has a right to elect, within a
30-day period from the date of exercise of the option, to include in
his or her taxable income for the taxable year of exercise an amount
equal to the excess of the fair market value of such shares at the time
of the exercise over the exercise price. If the optionee does not make the
preceding election, the optionee will recognize ordinary income upon the
expiration of the above-referenced six month period. The amount of such
income will be equal to the excess of the fair market value of the shares
at that time over the exercise price, and the holding period for
determining whether any capital gain or loss on the subsequent sale or
exchange of the shares is long-term or short-term capital gain or loss
will commence at that time.
Where ordinary income is recognized by an optionee as described
above in connection with shares received on the exercise of an option,
VSE will be entitled to a deduction in the amount of ordinary income so
recognized by the optionee, provided appropriate tax withholding
procedures are implemented or VSE otherwise establishes that the optionee
has reported the income on his or her tax return. The 1998 Plan requires
the employee to pay or make arrangements acceptable to the Board
regarding withholding taxes due upon exercise of an option. With the
Board's approval, the optionee may make such payments in whole or in part
by surrendering Stock.
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NEW PLAN BENEFITS
As discussed above, under the 1998 Plan, each non-employee director
will receive a total of 750 stock options on January 1 of each year. VSE
has not made any specific determination regarding the executive officers
and key employees eligible to receive awards under the 1998 Plan, the
size of the awards or the term of the awards. The following table sets
forth information regarding awards made under the 1998 Plan for the
fiscal year ended December 31, 2002.
Name and Position Number of
Units
- ------------------ ---------
Donald M. Ervine, Chairman of the Board, 12,000
President and CEO/COO
Thomas G. Dacus, Vice President and 2,000
Director, Federal Group
James M. Knowlton, Executive Vice President 6,000
and Director, International Group
Thomas R. Loftus, Senior Vice President and 5,000
Chief Financial Officer
Craig S. Weber, Executive Vice President, 6,000
Chief Administrative Officer and Secretary
Executive Group (composed of six persons) 36,000
Non-Executive Director Group 3,750
(five non-employee directors)
Non-Executive Officer Group (thirteen 24,000
persons)
The Board recommends a vote FOR the proposal to approve the
amendment to the 1998 Plan, and your proxy will be so voted unless you
specify otherwise.
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about VSE Stock that may
be issued upon exercise of options, warrants and rights under VSE's
equity compensation plans as of December 31, 2002, including the 1998
Plan (without giving effect to the proposed amendment).
Plan Category Number of Shares to Weighted Average Number of Shares
be Issued upon Exercise Price of Remaining
Exercise of Outstanding Options Available for
Outstanding Options (b) Future Issuance
(a) (1) Under Equity
Compensation
Plans(excluding
shares reflected in
column (a)) (c) (2)
- ---------------------------------------------------------------------------------
Equity compensation 241,500 $8.40 2,500
plans approved by
stockholders
- ---------------------------------------------------------------------------------
Equity compensation 750 $6.50 -0-
plan not approved by
stockholders
- ---------------------------------------------------------------------------------
Total 242,250 $8.40 2,500
- ---------------------------------------------------------------------------------
(1) Includes options covering 63,750 shares of VSE Stock effective as
of January 1, 2003.
(2) Excludes 349,485 shares of VSE Stock held by the VSE Corporation
Employee ESOP/401(k) Plan, which shares may be transferred to Plan
participants on retirement or termination of VSE employment or
pursuant to ESOP diversification.
AUDIT COMMITTEE REPORT
The Audit Committee (the "Committee") of the Board is composed of
four non-employee directors, each of whom is considered "independent"
pursuant to the Nasdaq Stock Market listing standards. The Committee's
responsibilities are set forth in its Charter, the latest revision of
which was filed as Appendix A to VSE's Proxy Statement dated April 2,
2001. 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" as independence is defined in Rule 4200(a)(15) of the
National Association of Securities Dealers' listing standards.
The Committee has reviewed and discussed with management VSE's
audited consolidated financial statements as of and for the year ended
December 31, 2002, and has discussed with VSE's independent auditors the
matters required to be discussed by Statement on Auditing Standards No.
61, Communication with Audit Committees, as amended, issued by the
Auditing Standards Board of the American Institute of Certified Public
Accountants.
The Committee has received and reviewed the written disclosures and
the letter from the independent auditors required by Independence
Standard No. 1, Independence Discussions with
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Audit Committees, as amended, issued by the Independence Standards Board,
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 Committee
recommended to the Board that the consolidated financial statements
referred to above be included in VSE's Annual Report on Form 10-K for the
year ended December 31, 2002.
Audit Committee: Calvin S. Koonce (Chair), Clifford M. Kendall,
Jimmy D. Ross, and Bonnie K. Wachtel
COMPENSATION COMMITTEE REPORT
The Board has established a compensation committee to (a) review
corporate compensation policies, including incentive compensation, (b)
set the compensation of the chief executive officer (the "CEO"), and (c)
review the compensation of certain other executive officers and
employees. The committee is composed entirely of non-employee directors
(see "Committees of the Board" above).
Compensation Philosophy
VSE's overall compensation philosophy is based on aligning employee
compensation with industry standards and with financial performance
objectives established by the Board. Under the committee's supervision,
VSE has established compensation policies designed to attract and retain
qualified executive and corporate officers and link total executive
compensation to corporate goals. The key elements of VSE executive
compensation are base salary, a performance bonus, and a long-term
incentive plan.
Base Salary
The base salaries for executive officers and other corporate
officers are established primarily on comparability to the range of
compensation paid by companies of similar size and industry, as
determined by commercially available wage and salary surveys. Size is
determined primarily by reference to annual revenues and number of
employees. VSE's industry group is engineering and technical services
(formerly SIC Code 8711). National and geographic differences in
compensation are considered based on the executive's primary area of
operations and responsibility. VSE targets a salary range generally
between the 25th and the 50th percentile indicated by such surveys.
Performance Bonus
During 2002 the committee approved a performance bonus plan based
on achieving specified levels of pretax income for each business unit or
operating group (for operations employees) and for the consolidated
company as a whole (for staff employees). The performance bonus plan for
VSE's top executives (CEO/COO, CAO, and CFO) is based on achieving a
specified return on equity. During 2001 and 2000, the performance bonus
plan was based on achieving corporate and business unit goals, weighted
approximately as follows: 20% on achieving corporate revenue and profit
targets and 80% on achieving specified performance objectives within the
business unit, such as revenue and profit targets, proposals submitted
and won, new business development, and budget, cost, and total quality
management.
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Long-term Compensation
During 1998 the Board recommended and the stockholders approved the
adoption of the VSE Corporation 1998 Stock Option Plan (the "1998 Plan"),
which replaced a substantially similar 1996 Plan. Under the 1998 Plan,
an aggregate of 343,750 shares of VSE stock may be purchased pursuant to
the grant of options. As of the record date, none of the shares covered
by the 1998 Plan remained available for future nondiscretionary grants
to non-employee directors of VSE, and approximately 2,500 of the shares
remained available for future discretionary grants to executive officers
and key employees. If, however, the above discussed amendment to the 1998
Plan is approved by stockholders, options to purchase an additional
75,250 shares of Stock may be granted thereunder.
The purpose of the 1998 Plan is to provide non-employee directors,
executive officers, and key personnel with long-term performance
incentives and an identity of interests with the stockholders. VSE
operates in a highly specialized field in which success is substantially
dependent on the expertise of qualified and highly motivated key
personnel. Management believes that the Plans have been of material
assistance in recruiting, motivating, and retaining key personnel.
Discretionary stock options granted under the Plans are approved by
VSE's compensation committee after considering recommendations submitted
by management based on the perceived long-term contribution of key
personnel. The compensation committee independently determines in
executive session the number of stock options to be awarded to the CEO.
Awards of discretionary stock option grants approved by the compensation
committee are subject to ratification by the Board.
All Other Compensation
All VSE officers are entitled to participate in company fringe
benefit programs, including the VSE Employee ESOP/401(k) Plan, which is
an IRS qualified plan available to all eligible employees. Effective
April 1, 1999, employer contributions to the ESOP portion of the plan
were discontinued and replaced by employer contributions to the 401(k)
portion of the plan based on employee 401(k) deferrals. The employer
401(k) contribution is equal to 50% of the first 6% (5% in 2001 and 2000)
of employee pay deferred into the employee's 401(k) account. Amounts
contributed to the VSE ESOP/401(k) plan on behalf of the named executive
officers are included in the "Summary Compensation Table."
VSE has a non-qualified Deferred Supplemental Compensation Plan (the
"DSC Plan") for all VSE officers. The DSC Plan provides, at the Board's
discretion, for an annual bonus pool not to exceed 12% of VSE's
consolidated net income for the year. The annual bonus pool is allocated
to the participant accounts of corporate officers in proportion to the
ratio of the officer's performance bonus for the year (see "Performance
Bonus" above) to total officer performance bonuses for the year. Pursuant
to the DSC Plan, a bonus pool of approximately $60,000 was authorized for
2002. Benefits under the DSC Plan and predecessor DCU 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. Amounts contributed to the DSC Plan
on behalf of the named executive officers are included in the Summary
Compensation Table.
Chief Executive Officer Compensation
During each of 2002, 2001 and 2000, Mr. Ervine, VSE's chairman and
chief executive officer ("CEO"), was compensated in accordance with an
employment agreement negotiated and
-15-
approved by VSE's compensation committee in 1998. Pursuant to the
agreement, Mr. Ervine served as Chief Executive Officer of VSE and
was paid a base salary of $254,000 during 2002, 2001, and 2000. As
of February 15, 2002, Mr. Ervine assumed additional duties as President
and Chief Operating Officer of the Corporation. The agreement with
Mr. Ervine extends through January 1, 2004, and is subject thereafter
to automatic extensions for successive one-year periods unless notice to
terminate is given by Mr. Ervine at least 90 days prior to the expiration
of the term or any such one-year extension of the term. The agreement
provides for a minimum base salary of $254,000, with other terms and
conditions substantially similar to a predecessor January 1, 1996,
employment agreement (see "Certain Relationships and Related Transactions"
above for a description of the current employment agreement).
The CEO's performance bonus for 2002 was determined on the basis of
achieving consolidated pretax income for 2002 in excess of a 9% return
on equity. During 2001 and 2000, the CEO's performance bonus was
determined by the committee on the basis of five factors of approximately
equal weight: revenue growth, return on equity, return on sales,
leadership, and long-term stockholder goals. The first three factors were
measured based on interim consolidated financial statements or management
reports which were subject to adjustment based on annual audited
financial statements. The last two factors were subjective measures
evaluated by the committee in executive session. For 2002 VSE did not
achieve the level of net income and return on equity targeted for the
year, and the compensation committee recommended a $-0- bonus for the
year. Effective January 1, 2003, the compensation committee increased the
CEO's base salary to $264,000.
Pursuant to the 1998 Plan, the committee recommended that the CEO
be awarded a discretionary stock option covering 12,000 shares of VSE
Stock, effective January 1, 2003.
Compensation Committee: Jimmy D. Ross (Chairman), Clifford M.
Kendall, Calvin S. Koonce, Bonnie K.
Wachtel
Compensation Committee Interlocks and Insider Participation
No executive officer of VSE serves or has served as a member of the
compensation committee of another entity, one of whose executive officers
serves on VSE's compensation committee. No executive officer of VSE
serves or has served as a director of another entity, one of whose
executive officers serves on VSE's compensation committee.
Mr. Koonce is a major stockholder of VSE. See "Security Ownership
of Certain Beneficial Owners and Management."
The trustees of VSE's employee benefit plans effect certain of their
transactions through Koonce Securities, Inc., which is wholly owned by
Mr. Koonce, and through Wachtel & Co., Inc., of which Ms. Wachtel is a
director, officer and shareholder. No transactions occurred with Koonce
Securities, Inc., in 2002.
Mr. Osnos is of counsel at the law firm of Arent Fox Kintner Plotkin
& Kahn, PLLC, which has represented and is expected to continue to
represent VSE on various legal matters. See "Certain Relationships and
Related Transactions."
VSE's Chairman and Chief Executive Officer (Mr. Ervine) is an ex
officio member of all Board committees, including the compensation
committee. Mr. Ervine does not participate in meetings or discussions of
the compensation committee concerned with establishing his salary or
bonus.
-16-
Summary Compensation Table
The following table reports the compensation paid for the past three
years for each of the five most highly compensated VSE executive
officers, including the Chief Executive Officer.
Long-term All
Annual Compensation Other
Compensation Awards Compensation
-------------- ------------ ------------
Fiscal Salary Bonus Options
Name and Principal Position Year ($) ($) (#) ($)(1)
- --------------------------- ---- ------- ------- ------- -------
Thomas G. Dacus (2) 2002 140,000 8,000 2,000 7,243
Vice President and 2001 5,689 0 0 0
Director, Federal Group
Donald M. Ervine (3) 2002 254,000 0 12,000 5,174
Chairman of the Board, 2001 254,000 25,000 12,000 13,451
President and CEO/COO 2000 254,000 55,000 20,000 12,456
James M. Knowlton (4) 2002 170,000 20,000 6,000 11,349
Executive Vice President and 2001 170,000 10,000 1,500 6,095
Director, International Group 2000 170,000 24,000 10,000 93,795
Thomas R. Loftus (5) 2002 119,000 0 5,000 13,468
Senior Vice President and 2001 110,000 15,400 2,500 8,329
Chief Financial Officer 2000 110,000 15,000 4,000 9,106
Craig S. Weber (5) 2002 148,500 0 6,000 4,425
Executive Vice President, 2001 140,400 14,000 6,000 8,582
Chief Administrative Officer, 2000 140,400 20,000 8,000 16,801
and Secretary
(1) The column headed "All Other Compensation" includes (a)
contributions made by VSE to two defined contribution employee
benefit plans: the VSE Employee ESOP/401(k) Plan, which is
generally available to all VSE employees, and the DSC Plan (see plan
description in the "Compensation Committee Report"), and (b) in 2002
a $10,000 bonus award paid to Mr. Loftus per VSE's spot bonus
program to recognize his significant contribution towards
organization performance.
(2) The amount reported for Mr. Dacus for 2001 represents salary for the
period November 30, 2001, when he recommenced employment with VSE,
through December 31, 2001. Mr. Dacus previously served as an officer
of VSE from 1984 to 1991.
(3) Mr. Ervine also assumed the duties of VSE President and Chief
Operating Officer as of February 15, 2002.
(4) Mr. Knowlton is also President of two VSE subsidiaries, Ship
Remediation and Recycling, Inc., and VSE Services International,
Inc. Mr. Knowlton served as VSE's President and Chief Operating
Officer from February 5, 1999, to November 5, 2000.
-17-
(5) Effective March 7, 2002, Mr. Loftus was appointed Chief Financial
Officer and Mr. Weber was appointed Chief Administrative Officer.
During 2001 and 2000, Mr. Loftus served as VSE Comptroller and Mr.
Weber served as VSE Chief Financial Officer.
Option Grants in Last Fiscal Year
The following table reports the options granted in fiscal year 2002
for each of the five most highly compensated VSE executive officers,
including the chief executive officer.
Potential realizable value
------------Individual Grants---------- at assumed annual rates
of stock appreciation
for option term (1)
------------------------------------------------------------------
% of Total Hypothetical Hypothetical
Options value value
Granted to realized at realized at
Options Employees Exercise 5% stock 10% stock
Granted in Fiscal Price Expiration appreciation appreciation
Name (#)(2) Year ($/share) Date ($) ($)
- -------------------------------------------------------------------------------------------
Thomas G. Dacus 2,000 3.3% 10.73 12/31/07 5,929 13,101
Donald M. Ervine 12,000 20.0% 10.73 12/31/07 35,574 78,609
James M. Knowlton 6,000 10.0% 10.73 12/31/07 17,787 39,304
Thomas R. Loftus 5,000 8.3% 10.73 12/31/07 14,822 32,753
Craig S. Weber 6,000 10.0% 10.73 12/31/07 17,787 39,304
(1) The dollar amounts reported under the potential realizable value
columns at assumed 5% and 10% annual rates of appreciation are not
intended to forecast actual future appreciation in the stock price.
Actual gains, if any, on stock option exercises depend on the future
performance of VSE Stock. There is no assurance the amounts
reflected in this table will be achieved. The assumed rates were
compounded annually to the full five-year term of the options.
(2) Non-qualified stock options which became 25% exercisable on award
date (1/1/03) and 25% exercisable on each of the first three
anniversary dates thereafter (1/1/04, 1/1/05, and 1/1/06), except
in the event of a change in control of VSE, in which case such
options become immediately exercisable.
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Aggregate Options Exercised in Last Fiscal Year and Fiscal Year-end
Option Values
The following table reports the options exercised, exercisable, and
unexercisable as of the end of VSE's fiscal year 2002 for each of the
five most highly compensated VSE executive officers, including the chief
executive officer.
Value of unexercised
Number of unexercised in-the-money(1)
options at 12/31/02(#) options at 12/31/02($)
------------------------- -------------------------
Shares acquired Value
Name on exercise(#) realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- ----------- ----------- ------------- ----------- -------------
Donald M. Ervine -- -- 46,000 14,000 140,640 49,790
Thomas G. Dacus -- -- 500 1,500 15 45
James M. Knowlton -- -- 25,750 7,750 67,830 15,580
Craig S. Weber -- -- 14,000 9,500 46,455 22,400
Thomas R. Loftus -- -- 11,500 6,000 31,065 10,165
(1) Based on a closing VSE stock price of $10.76 per share on December
31, 2002 (Nasdaq NMS).
-19-
Performance Graph
Set forth below is a line graph comparing the cumulative total
return of VSE Stock with (a) a performance index for the broad market in
which VSE Stock is traded and (b) a published industry index. VSE Stock
is traded on the Nasdaq National Market System, and VSE's industry group
is engineering and technical services (formerly SIC Code 8711).
Accordingly, the performance graph compares the cumulative total return
for VSE Stock with (a) an index for the Nasdaq National Market System
(U.S. companies) ("Nasdaq Index") and (b) a published industry index for
SIC Code 8711 ("Industry Index").
[insert graph]
* Total return assumes reinvestment of dividends and assumes $100
invested on December 31, 1997, in VSE Stock, the Nasdaq Index, and the
Industry Index.
Performance Graph Table
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
VSE Stock 100 121 83 60 83 123
Nasdaq Index 100 141 249 156 125 87
Industry Index 100 94 104 183 201 131
-20-
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at VSE's 2004
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 Wednesday,
December 10, 2003, to be considered for inclusion in VSE's proxy material
relating to such meeting.
OTHER MATTERS
VSE will bear the costs of the solicitation of proxies for use at
the Meeting. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and telegram by directors,
officers and employees of VSE. 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.
Please sign and promptly return your proxy in the enclosed envelope.
Your vote is important.
By Order of the Board of Directors
C. S. Weber, Secretary
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