DELAWARE
|
54-0649263
|
(State or Other Jurisdiction of
|
(I.R.S. Employer
|
Incorporation or Organization)
|
Identification No.)
|
6348 Walker Lane
|
||
Alexandria, Virginia
|
22310
|
www.vsecorp.com
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
(Webpage)
|
Title of each class
|
Name of each exchange on which registered
|
Common Stock, par value $.05 per share
|
The NASDAQ Global Select Market
|
Large accelerated filer [ ]
|
Accelerated filer [x]
|
Non-accelerated filer [ ]
|
Smaller reporting company [ ]
|
Page
|
||
ITEM 1.
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
ITEM 2.
|
16
|
|
ITEM 3.
|
24
|
|
ITEM 4.
|
24
|
|
ITEM 2.
|
24
|
|
ITEM 6.
|
25
|
|
26
|
||
27-43
|
March 31,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
587
|
$
|
740
|
||||
Receivables, net
|
76,878
|
78,471
|
||||||
Inventories
|
113,633
|
109,123
|
||||||
Other current assets
|
13,184
|
9,138
|
||||||
Total current assets
|
204,282
|
197,472
|
||||||
|
||||||||
Property and equipment, net
|
63,796
|
64,308
|
||||||
Intangible assets, net
|
139,023
|
143,043
|
||||||
Goodwill
|
198,545
|
198,545
|
||||||
Other assets
|
15,274
|
13,986
|
||||||
Total assets
|
$
|
620,920
|
$
|
617,354
|
||||
|
||||||||
Liabilities and Stockholders' equity
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$
|
18,210
|
$
|
17,272
|
||||
Accounts payable
|
51,445
|
40,084
|
||||||
Current portion of earn-out obligation
|
8,015
|
9,678
|
||||||
Accrued expenses and other current liabilities
|
27,159
|
29,067
|
||||||
Dividends payable
|
594
|
591
|
||||||
Total current liabilities
|
105,423
|
96,692
|
||||||
|
||||||||
Long-term debt, less current portion
|
201,675
|
215,243
|
||||||
Deferred compensation
|
13,070
|
11,169
|
||||||
Long-term lease obligations, less current portion
|
22,914
|
23,251
|
||||||
Earn-out obligation, less current portion
|
10,445
|
10,166
|
||||||
Deferred tax liabilities
|
31,099
|
31,524
|
||||||
Total liabilities
|
384,626
|
388,045
|
||||||
|
||||||||
Commitments and contingencies
|
||||||||
|
||||||||
Stockholders' equity:
|
||||||||
Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 5,399,342 and 5,375,532 respectively
|
270
|
269
|
||||||
Additional paid-in capital
|
23,136
|
21,637
|
||||||
Retained earnings
|
213,436
|
207,478
|
||||||
Accumulated other comprehensive loss
|
(548
|
)
|
(75
|
)
|
||||
Total stockholders' equity
|
236,294
|
229,309
|
||||||
Total liabilities and stockholders' equity
|
$
|
620,920
|
$
|
617,354
|
For the three months ended March 31,
|
||||||||
2016
|
2015
|
|||||||
Revenues:
|
||||||||
Products
|
$
|
85,271
|
$
|
69,721
|
||||
Services
|
58,365
|
51,070
|
||||||
Total revenues
|
143,636
|
120,791
|
||||||
Costs and operating expenses:
|
||||||||
Products
|
69,290
|
56,183
|
||||||
Services
|
56,204
|
49,124
|
||||||
Selling, general and administrative expenses
|
1,381
|
1,159
|
||||||
Amortization of intangible assets
|
4,020
|
3,641
|
||||||
Total costs and operating expenses
|
130,895
|
110,107
|
||||||
Operating income
|
12,741
|
10,684
|
||||||
Interest expense, net
|
2,497
|
2,143
|
||||||
Income before income taxes
|
10,244
|
8,541
|
||||||
Provision for income taxes
|
3,692
|
3,321
|
||||||
Net income
|
$
|
6,552
|
$
|
5,220
|
||||
Basic earnings per share:
|
$
|
1.22
|
$
|
0.97
|
||||
Basic weighted average shares outstanding
|
5,389,184
|
5,369,695
|
||||||
Diluted earnings per share:
|
$
|
1.21
|
$
|
0.97
|
||||
Diluted weighted average shares outstanding
|
5,403,097
|
5,380,217
|
||||||
Dividends declared per share
|
$
|
0.11
|
$
|
0.10
|
For the three months ended March 31,
|
||||||||
2016
|
2015
|
|||||||
Net income
|
$
|
6,552
|
$
|
5,220
|
||||
Change in fair value of interest rate swap agreements
|
(473
|
)
|
(301
|
)
|
||||
Other comprehensive loss, net of tax
|
(473
|
)
|
(301
|
)
|
||||
Comprehensive income
|
$
|
6,079
|
$
|
4,919
|
For the three months ended March 31,
|
||||||||
2016
|
2015
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
6,552
|
$
|
5,220
|
||||
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation and amortization
|
6,241
|
6,101
|
||||||
Deferred taxes
|
(129
|
)
|
(1,313
|
)
|
||||
Stock-based compensation
|
1,028
|
788
|
||||||
Earn-out obligation adjustment
|
(1,384
|
)
|
310
|
|||||
Changes in operating assets and liabilities, net of impact of acquisition:
|
||||||||
Receivables, net
|
1,593
|
(9,195
|
)
|
|||||
Inventories
|
(4,510
|
)
|
(1,298
|
)
|
||||
Other current assets and noncurrent assets
|
(5,330
|
)
|
(741
|
)
|
||||
Accounts payable and deferred compensation
|
13,097
|
(1,246
|
)
|
|||||
Accrued expenses and other current liabilities
|
(1,429
|
)
|
1,074
|
|||||
Long-term lease obligations
|
(337
|
)
|
(280
|
)
|
||||
Net cash provided by (used in) operating activities
|
15,392
|
(580
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(1,428
|
)
|
(3,384
|
)
|
||||
Proceeds from the sale of property and equipment
|
6
|
207
|
||||||
Cash paid for acquisitions, net of cash acquired
|
-
|
(188,771
|
)
|
|||||
Net cash used in investing activities
|
(1,422
|
)
|
(191,948
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Borrowings on loan agreement
|
49,699
|
300,471
|
||||||
Repayments on loan agreement
|
(62,468
|
)
|
(104,349
|
)
|
||||
Payment of debt financing costs
|
-
|
(2,280
|
)
|
|||||
Payments on capital lease obligations
|
(264
|
)
|
(233
|
)
|
||||
Payments of taxes for equity transactions
|
(499
|
)
|
(341
|
)
|
||||
Dividends paid
|
(591
|
)
|
(535
|
)
|
||||
Net cash (used in) provided by financing activities
|
(14,123
|
)
|
192,733
|
|||||
Net (decrease) increase in cash and cash equivalents
|
(153
|
)
|
205
|
|||||
Cash and cash equivalents at beginning of period
|
740
|
263
|
||||||
Cash and cash equivalents at end of period
|
$
|
587
|
$
|
468
|
Three months ended March 31,
|
||||||||
2016
|
2015
|
|||||||
Revenue
|
$
|
143,636
|
$
|
128,196
|
||||
Income from continuing operations
|
$
|
6,552
|
$
|
5,383
|
||||
Basic earnings per share
|
$
|
1.22
|
$
|
1.00
|
||||
Diluted earnings per share
|
$
|
1.21
|
$
|
1.00
|
Three months ended March 31,
|
||||||||
2016
|
2015
|
|||||||
Basic weighted average common shares outstanding
|
5,389,184
|
5,369,695
|
||||||
Effect of dilutive restricted stock awards
|
13,913
|
10,522
|
||||||
Diluted weighted average common shares outstanding
|
5,403,097
|
5,380,217
|
Three months ended March 31,
|
||||||||
2016
|
2015
|
|||||||
Revenues:
|
||||||||
Supply Chain Management Group
|
$
|
51,143
|
$
|
46,242
|
||||
Aviation Group
|
33,546
|
22,764
|
||||||
Federal Services Group
|
47,715
|
37,792
|
||||||
IT, Energy and Management Consulting Group
|
11,232
|
13,993
|
||||||
Total revenues
|
$
|
143,636
|
$
|
120,791
|
||||
Operating income:
|
||||||||
Supply Chain Management Group
|
$
|
9,028
|
$
|
8,306
|
||||
Aviation Group
|
3,289
|
2,113
|
||||||
Federal Services Group
|
389
|
(267
|
)
|
|||||
IT, Energy and Management Consulting Group
|
888
|
1,215
|
||||||
Corporate/unallocated expenses
|
(853
|
)
|
(683
|
)
|
||||
Operating income
|
$
|
12,741
|
$
|
10,684
|
Three months ended March 31,
|
||||||||||||||||
Customer
|
2016
|
%
|
2015
|
%
|
||||||||||||
U. S. Postal Service
|
$
|
46,297
|
32.2
|
$
|
44,180
|
36.6
|
||||||||||
U.S. Navy
|
29,891
|
20.8
|
21,397
|
17.7
|
||||||||||||
U.S. Army
|
22,210
|
15.5
|
19,171
|
15.9
|
||||||||||||
U.S. Air Force
|
981
|
0.7
|
790
|
0.6
|
||||||||||||
Total-DoD
|
53,082
|
37.0
|
41,358
|
34.2
|
||||||||||||
Commercial Aviation
|
33,546
|
23.3
|
22,764
|
18.9
|
||||||||||||
Other Commercial
|
2,283
|
1.6
|
1,207
|
1.0
|
||||||||||||
Total-Commercial
|
35,829
|
24.9
|
23,971
|
19.9
|
||||||||||||
Department of Energy
|
2,903
|
2.0
|
4,444
|
3.7
|
||||||||||||
Social Security Administration
|
2,587
|
1.8
|
2,450
|
2.0
|
||||||||||||
Other Government
|
2,938
|
2.1
|
4,388
|
3.6
|
||||||||||||
Total-Other Civilian Agencies
|
8,428
|
5.9
|
11,282
|
9.3
|
||||||||||||
Total
|
$
|
143,636
|
100.0
|
$
|
120,791
|
100.0
|
Supply Chain Management
|
IT, Energy and Management Consulting
|
Aviation
|
Total
|
|||||||||||||
Balance as of December 31, 2015
|
$
|
63,113
|
$
|
30,883
|
$
|
104,549
|
$
|
198,545
|
||||||||
Balance as of March 31, 2016
|
$
|
63,113
|
$
|
30,883
|
$
|
104,549
|
$
|
198,545
|
Cost
|
Accumulated Amortization
|
Accumulated
Impairment Loss
|
Net Intangible Assets
|
|||||||||||||
March 31, 2016
|
||||||||||||||||
Contract and customer-related
|
$
|
173,084
|
$
|
(49,911
|
)
|
$
|
(1,025
|
)
|
$
|
122,148
|
||||||
Acquired technologies
|
12,400
|
(5,432
|
)
|
-
|
6,968
|
|||||||||||
Trade names – amortizable
|
16,730
|
(6,823
|
)
|
-
|
9,907
|
|||||||||||
Total
|
$
|
202,214
|
$
|
(62,166
|
)
|
$
|
(1,025
|
)
|
$
|
139,023
|
||||||
December 31, 2015
|
||||||||||||||||
Contract and customer-related
|
$
|
173,084
|
$
|
(46,611
|
)
|
$
|
(1,025
|
)
|
$
|
125,448
|
||||||
Acquired technologies
|
12,400
|
(5,151
|
)
|
-
|
7,249
|
|||||||||||
Trade names
|
16,730
|
(6,384
|
)
|
-
|
10,346
|
|||||||||||
Total
|
$
|
202,214
|
$
|
(58,146
|
)
|
$
|
(1,025
|
)
|
$
|
143,043
|
Amounts Recorded at Fair Value
|
Financial Statement Classification
|
Fair Value Hierarchy
|
Fair Value March 31, 2016
|
Fair Value December 31, 2015
|
||||
Non-COLI assets held in Deferred Supplemental Compensation Plan
|
Other assets
|
Level 1
|
$273
|
$264
|
||||
Interest rate swaps
|
Accrued expenses
|
Level 2
|
$892
|
$123
|
||||
Earn-out obligation-current
|
Current portion of earn-out obligation
|
Level 3
|
$8,015
|
$9,678
|
||||
Earn-out obligation-long-term
|
Earn-out obligation
|
Level 3
|
$10,445
|
$10,166
|
Current portion
|
Long-term portion
|
Total
|
||||||||||
Balance as of December 31, 2015
|
$
|
9,678
|
$
|
10,166
|
$
|
19,844
|
||||||
Fair value adjustment included in earnings
|
(1,663
|
)
|
279
|
(1,384
|
)
|
|||||||
Balance as of March 31, 2016
|
$
|
8,015
|
$
|
10,445
|
$
|
18,460
|
(in millions)
|
||||||||
2016
|
2015
|
|||||||
Bookings
|
$
|
51
|
$
|
45
|
||||
Revenues
|
$
|
59
|
$
|
52
|
||||
Funded Contract Backlog
|
$
|
229
|
$
|
185
|
Three months ended March 31,
|
||||||||||||||||
Contract Type
|
2016
|
%
|
2015
|
%
|
||||||||||||
Fixed-price
|
$
|
15,568
|
11
|
$
|
20,181
|
17
|
||||||||||
Cost-type
|
35,156
|
24
|
19,697
|
16
|
||||||||||||
Time and materials
|
8,223
|
6
|
11,907
|
10
|
||||||||||||
Total Federal Services and IT, Energy and Management Consulting revenues
|
58,947
|
41
|
51,785
|
43
|
||||||||||||
Supply Chain Management and Aviation revenues
|
84,689
|
59
|
69,006
|
57
|
||||||||||||
Total revenues
|
$
|
143,636
|
100
|
$
|
120,791
|
100
|
Three months ended March 31,
|
||||||||||||||||
2016
|
2015
|
Change
|
%
|
|||||||||||||
Revenues
|
$
|
143,636
|
$
|
120,791
|
$
|
22,845
|
19
|
|||||||||
Costs and operating expenses
|
130,895
|
110,107
|
20,788
|
19
|
||||||||||||
Operating income
|
12,741
|
10,684
|
2,057
|
19
|
||||||||||||
Interest expense, net
|
2,497
|
2,143
|
354
|
17
|
||||||||||||
Income before income taxes
|
10,244
|
8,541
|
1,703
|
20
|
||||||||||||
Provision for income taxes
|
3,692
|
3,321
|
371
|
11
|
||||||||||||
Net income
|
$
|
6,552
|
$
|
5,220
|
$
|
1,332
|
26
|
Three months ended March 31,
|
||||||||||||||||
2016
|
2015
|
Change
|
%
|
|||||||||||||
Revenues
|
$
|
51,143
|
$
|
46,242
|
$
|
4,901
|
11
|
|||||||||
Costs and operating expenses
|
42,115
|
37,936
|
4,179
|
11
|
||||||||||||
Operating income
|
$
|
9,028
|
$
|
8,306
|
$
|
722
|
||||||||||
Profit percentage
|
17.7
|
%
|
18.0
|
%
|
Three months ended March 31,
|
||||||||||||||||
2016
|
2015
|
Change
|
%
|
|||||||||||||
Revenues
|
$
|
33,546
|
$
|
22,764
|
$
|
10,782
|
47
|
|||||||||
Costs and operating expenses
|
30,257
|
20,651
|
9,606
|
47
|
||||||||||||
Operating income
|
$
|
3,289
|
$
|
2,113
|
$
|
1,176
|
||||||||||
Profit percentage
|
9.8
|
%
|
9.3
|
%
|
Three months ended March 31,
|
||||||||||||||||
2016
|
2015
|
Change
|
%
|
|||||||||||||
Revenues
|
$
|
47,715
|
$
|
37,792
|
$
|
9,923
|
26
|
|||||||||
Costs and operating expenses
|
47,326
|
38,059
|
9,267
|
24
|
||||||||||||
Operating income/(loss)
|
$
|
389
|
$
|
(267
|
)
|
$
|
656
|
|||||||||
Profit percentage
|
0.8
|
%
|
(0.7
|
%)
|
Three months ended March 31,
|
||||||||||||||||
2016
|
2015
|
Change
|
%
|
|||||||||||||
Revenues
|
$
|
11,232
|
$
|
13,993
|
$
|
(2,761
|
)
|
(20
|
)
|
|||||||
Costs and operating expenses
|
10,344
|
12,778
|
(2,434
|
)
|
(19
|
)
|
||||||||||
Operating income
|
$
|
888
|
$
|
1,215
|
$
|
(327
|
)
|
|||||||||
Profit percentage
|
7.9
|
%
|
8.7
|
%
|
Current Maximum Ratio
|
Actual Ratio
|
|||
Total Funded Debt/EBITDA Ratio
|
3.25 to 1
|
2.92 to 1
|
Minimum Ratio
|
Actual Ratio
|
|||
Fixed Charge Coverage Ratio
|
1.20 to 1
|
1.56 to 1
|
(a)
Exhibits
|
||
Exhibit 31.1
|
||
Exhibit 31.2
|
||
Exhibit 32.1
|
||
Exhibit 32.2
|
||
Exhibit 10.3
|
||
Exhibit 101.INS
|
XBRL Instance Document
|
|
Exhibit 101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
Exhibit 101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
Exhibit 101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
Exhibit 101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
Exhibit 101.PRE
|
XBRL Taxonomy Extension Presentation Document
|
|
VSE CORPORATION
|
||
Date: April 29, 2016
|
By:
|
/s/ M. A. Gauthier
|
M. A. Gauthier
|
||
Chief Executive Officer,
|
||
President and Chief Operating Officer
|
Date: April 29, 2016
|
By:
|
/s/ T. R. Loftus
|
T. R. Loftus
|
||
Executive Vice President and
|
||
Chief Financial Officer
|
||
(Principal Accounting Officer)
|
Date: April 29, 2016
|
/s/ M. A. Gauthier
|
M. A. Gauthier
|
|
Chief Executive Officer, President
|
|
and Chief Operating Officer
|
Date: April 29, 2016
|
/s/ T. R. Loftus
|
T. R. Loftus
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
(Principal Accounting Officer)
|
Date: April 29, 2016
|
/s/ M. A. Gauthier
|
M. A. Gauthier
|
|
Chief Executive Officer, President
|
|
and Chief Operating Officer
|
Date: April 29, 2016
|
/s/ T. R. Loftus
|
T. R. Loftus
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
(Principal Accounting Officer)
|
(i)
|
During the Term, Executive shall at all times devote his full-time attention, energies, efforts and skills to his employment hereunder and, without the Board's prior consent, Executive shall not, directly or indirectly, engage in any other business activity, whether or not for profit, gain or other pecuniary advantages, and whether or not such pursuit presented a conflict of interest with the interest of any Covered Company, provided that such prior consent of the Board shall not be required with respect to (1) business interests that neither compete with any one or more Covered Companies nor interfere with Executive's duties and obligations hereunder, and (2) Executive's part-time charitable, eleemosynary, philanthropic or professional association activities that do not interfere with Executive's duties and obligation hereunder.
|
(ii)
|
During the Term, Executive shall not, without the Board's prior consent, directly or indirectly, either as an officer, director, Executive, agent, advisor, consultant, principal, stockholder, partner, owner or in any other capacity, on Executive's own behalf or otherwise, in any way engage in, represent, be connected with or have a financial interest in, any business that is, or to Executive's knowledge is about to become, engaged in the business of providing engineering, port engineering, logistic, management, technical, information technology, law enforcement, energy, supply chain or environmental related services or products to the United States government or any department, agency, or instrumentality thereof or any state or local governmental agency or to any person, corporation, partnership, limited liability company, trust, joint venture or other entity (collectively a "Person") with which any Covered Company is currently doing or has previously done business or any subsequent line of business developed by Executive or any Covered Company during the Term. Notwithstanding the foregoing, Executive shall be permitted to own passive investments in publicly held companies provided that such investments do not exceed one percent of any such company's outstanding equity.
|
(i)
|
During the Term, Executive shall promptly disclose to Employer each business opportunity of a type that, based upon its prospects and relationship to the existing businesses of any Covered Company, Employer or any other Covered Company might reasonably consider pursuing. Upon any expiration or termination of the Term, Employer or such other Covered Company shall have the exclusive right to participate in or undertake any such opportunity on its own behalf without any direct or indirect involvement of Executive.
|
(ii)
|
During the Term, Executive shall refrain from engaging in any activity, practice or act that conflicts with, or has the potential to conflict with, the interests of any Covered Company
,
and he shall avoid any acts or omissions to act that are or would reasonably be expected to be disloyal to, or competitive with, any Covered Company.
|
(i)
|
If the Term expires on March 31, 2017 or March 31, 2018 pursuant to Section 1(a) or is terminated by Employer for Cause (as defined below) or by Executive without Good Reason (as defined below), Executive shall not, during the Two-Year Post Term Period, engage, directly or indirectly, in competition with any Covered Company, or solicit, directly or indirectly, from any Person who purchased any then existing product or service from any Covered Company during the Term, the purchase of any then existing product or service in competition with then existing products or services of any Covered Company.
|
(ii)
|
For purposes of this Agreement, Executive shall be deemed to engage in competition with a Covered Company if Executive shall, directly or indirectly
,
either individually or as an equity holder, director, officer, partner, consultant, owner, Executive, agent, or in any other capacity, consult with or otherwise assist any Person engaged in providing engineering, port engineering, logistic, management, technical, information technology, law enforcement, energy, supply chain or environmental related services or products to any Person to whom any Covered Company, during the Term, has provided or was seeking to provide any such services or products.
|
(i)
|
Termination for Cause.
|
(ii)
|
Termination Without Cause.
|
(1)
|
Employer may, in its sole discretion, without Cause, terminate the Term at any time by providing Employee with five days' prior notice thereof.
|
(2)
|
If Employer terminates the Term without Cause pursuant to this Section 6 (a)(ii)(1) and the Termination Date is not during a Change of Control Period (as defined below), Employer shall pay Executive on or prior to the Termination Date a lump sum equal (A) to two times Executive's Base Salary in effect as of the Termination Date and (B) the Annualized Performance Bonus. In the event of any such termination of the Term by Employer without Cause pursuant to Section 6(a)(ii)(1), Executive shall not be entitled to the accrual or provision of any other compensation or benefit hereunder after the Termination Date other than (A) the medical and hospitalization benefits for the first 18 months after the Termination Date; (B) the provision of all compensation and other benefits that shall have accrued hereunder as of the Termination Date, including Base Salary, Performance Bonus, paid leave benefits, and reimbursements of incurred expenses; (C) all restricted stock, restricted stock units or similar rights to acquire capital stock granted by VSE to Executive shall automatically become vested; and (D) all unvested rights of Executive under VSE's Deferred Supplemental Compensation Plan shall automatically become vested.
|
(3)
|
If Employer terminates the Term without Cause pursuant to Section 6(a)(ii)(1) during a Change of Control Period, Executive shall be entitled to (A) payment on or prior to the Termination Date of a lump sum severance compensation payment equal to the lesser of (x) three times Executive's Base Salary in effect as of the Termination Date, or (y) such amount as would not trigger the application of Section 280G of the Internal Revenue Code of 1986, as amended (the "Section 280G Limitation; (B) Annualized Performance Bonus; (C) continued medical and hospitalization benefits for the first 18 months after the Termination Date and payment of all compensation and other benefits that shall have accrued hereunder as of the Termination Date, including Base Salary, Performance Bonus, paid leave benefits, and reimbursement of incurred expenses; (D) the automatic vesting of all restricted stock, restricted stock units or similar rights to acquire capital stock of VSE granted by VSE to Executive; and (E) the automatic vesting of all unvested rights of Executive under VSE's Deferred Supplemental Compensation Plan; provided that Executive shall not be entitled, after the Termination Date, to the accrual or provision of any other compensation payable hereunder. For purposes of this Agreement, the 280G Limitation shall be applied after first giving due effect to, inter alia, the rights and benefits provided to Executive pursuant to clauses (B), (C), (D) and (E) of the immediately preceding sentence.
|
(4)
|
Notwithstanding anything herein to the contrary, any expiration of the Term as of March 31, 2017 or, as the case may be, March 31, 2018, pursuant to Section 1 shall not be considered a termination by Employer without Cause for the purposes of this Agreement, including this Section 6(a)(ii).
|
(i)
|
Executive may, in his sole discretion, without Cause, terminate the Term at any time upon 60 days' notice to the Chairman. If Executive exercises such termination right, Employer may, at its option, at any time after receiving such notice from Executive, relieve Executive of all duties and terminate the Term at any time prior to the expiration of said notice period, and such termination shall not constitute a termination without Cause pursuant to this Agreement, including Section 6(a)(ii). If the Term is terminated by Executive or Employer pursuant to this Section 6(c)(i), Executive shall not be entitled to any further Base Salary or the accrual or provision of any compensation or benefits hereunder after the Termination Date, except standard medical and hospitalization benefits in accordance with Employer's policy.
|
(ii)
|
During a Change of Control Period, Executive may terminate the Term for Good Reason upon 30 days' notice to Employer. If Executive exercises such termination right, Employer may, at its option, at any time after receiving such notice from Executive, relieve Executive of all duties hereunder and terminate the Term at any time prior to the expiration of said notice period, and such termination shall not constitute a termination without Cause pursuant to this Agreement, including Section 6(a)(ii). If the Term is terminated by Executive or Employer pursuant to this Section 6 (c)(ii), Executive shall be entitled to (1) payment on or prior to the Termination Date of a lump sum severance compensation payment equal to (A) the lesser of (x) three times Executive's Base Salary in effect as of the Termination Date, or (y) the 280G Limitation; (2) payment on or prior to the Termination Date of the Annualized Performance Bonus; (3) continued medical and hospitalization benefits for the first 18 months after the Termination Date and payment of all compensation and other benefits that shall have accrued hereunder as of the Termination Date, including Base Salary, Performance Bonus, paid leave benefits and reimbursement of incurred expenses; (4) the automatic vesting of all restricted stock, restricted stock units or similar rights to acquire capital stock of VSE granted by VSE to Executive; and (5) the automatic vesting of all unvested rights of Executive under VSE's Deferred Supplemental Compensation Plan; provided that Executive shall not be entitled, after the Termination Date, to the accrual or provision of any other compensation payable hereunder. For purposes of this Agreement, the 280G Limitation shall be applied after first giving due effect to, inter alia, the rights and benefits provided to Executive pursuant to clauses (2), (3), (4) and (5) of the immediately preceding sentence.
|
(i)
|
"Affiliate" of a Person shall mean a Person that directly or indirectly controls, is controlled by, or is under common control with the Person specified.
|
(ii)
|
"Annualized Performance Bonus" means an annual bonus amount for the year in which any Termination Date occurs, based on an estimate of VSE's performance for the period before the Termination Date, as determined by the Board's Compensation Committee, and the terms and conditions of the VSE's annual bonus or incentive plan, and prorated to reflect the number of days out of 365 during which Executive was employed by VSE during the year of the Termination Date, including the Termination Date; provided that the estimate of VSE's performance for the period before the Termination Date shall be reconciled with VSE's actual performance for the entire year in which the Termination Date occurs and the Board's Compensation Committee shall make any necessary adjustment in the amount payable. In the event of an underpayment or overpayment of the Annualized Performance Bonus based on such reconciliation, VSE shall promptly pay to Executive (or Executive's legal representatives in the event of his death) the amount of any underpayment or, as the case may be, Executive (or Executive's legal representatives in the event of his death) shall promptly pay to the Company the amount of any overpayment.
|
(iii)
|
"Change of Control" shall be deemed to have occurred upon the happening of any of the following events:
|
(1)
|
any "person," including a "group," as such terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder (collectively the "Exchange Act"), other than a trustee or other fiduciary holding voting securities of VSE ("Voting Securities") under any VSE-sponsored benefit plan, becomes the beneficial owner, as defined under the Exchange Act, directly or indirectly, whether by purchase or acquisition or agreement to act in concert or otherwise, of 45% or more of the outstanding Voting Securities;
|
(2)
|
a cash tender or exchange offer is completed for such amount of Voting Securities that, together with the Voting Securities then beneficially owned, directly or indirectly, by the offeror (and affiliates thereof) constitutes 45% or more of the outstanding Voting Securities;
|
(3)
|
except in the case of a merger or consolidation in which (x) VSE is the surviving corporation and (y) the holders of Voting Securities immediately prior to such merger or consolidation beneficially own, directly or indirectly, more than 50% of the outstanding Voting Securities immediately after such merger or consolidation (there being excluded from the number of Voting Securities held by such holders, but not from the outstanding Voting Securities, any Voting Securities received by Affiliates of the other constituent corporation(s) in the merger or consolidation in exchange for stock of such other corporation), VSE's stockholders approve an agreement to merge, consolidate, liquidate or sell all or substantially all of VSE's assets; or
|
(4)
|
a majority of VSE's directors are elected to the Board without having previously been nominated and approved by the members of the Board incumbent on the day immediately preceding such election.
|
(iv)
|
"Change of Control Period" means the period beginning on the 90
th
day preceding any Change of Control and ending on the earlier of the first anniversary of the date on which the Change of Control occurred and the date, if any, the Term expires pursuant to Section 1(a).
|
(v)
|
"Good Reason" shall mean that any one or more of the following events has occurred:
|
(1)
|
a material diminishment in the nature of Executive's authorities, duties, responsibilities or status (including offices and titles) from those in effect immediately prior to the Effective Date;
|
(2)
|
the relocation of Executive's place of employment to a location in excess of 75 miles from the place of Executive's employment immediately prior to the Effective Date, except for required travel on Employer's business to an extent substantially equivalent to Executive's business travel obligations immediately prior to the Effective Date; or
|
(3)
|
Employer's material breach of any obligation hereunder, but in each case only if Executive has provided written notice to Employer within 90 days after the condition providing the basis for such Good Reason first exists and if such Good Reason has not been corrected or cured by Employer (if curable) within 30 days after Employer has received written notice from Executive of Executive's intent to terminate Employee's employment for Good Reason and specifying in detail the basis for such termination.
|
VSE
CORPORATION, a Delaware corporation
|
|||
By:
|
/s/ Clifford M. Kendall
|
||
Clifford M. Kendall,
|
|||
Chairman of the Board of Directors
|
/s/ Maurice A. Gauthier
|
|||
Maurice A. Gauthier
|