Document

DEF 14A 1 vsec-def14axproxystatement.htm VSE CORPORATION - 2021 DEF 14A Document

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

(Amendment No. )

Filed by the Registrant [x]

Filed by a party other than the Registrant [ ]

Check the appropriate box:


[ ]			Preliminary Proxy Statement
[ ]			Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(3)(2))
[x]			Definitive Proxy Statement
[ ]			Definitive Additional Materials
[ ]			Soliciting Material Pursuant to §240.14a-12

VSE Corporation

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

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Notice of 2021 Annual Meeting of Stockholders and Proxy Statement

April 2, 2021

Fellow Stockholders:

We cordially invite you to attend the annual meeting of stockholders of VSE Corporation (“VSE” or the “Company”) to be held on Wednesday, May 5, 2021, commencing at 10:00 a.m., Eastern Daylight Time, by virtual meeting via a live audio webcast (the “Annual Meeting”). Due to the ongoing COVID-19 pandemic we will not be conducting an in-person meeting this year. You can access the virtual Annual Meeting at the meeting time at www.virtualshareholdermeeting.com/VSEC2021. The virtual meeting has been designed to provide the same rights to participate as you would have at an in-person meeting.

Proxy materials will be sent to our stockholders by mail and are available over the Internet. You may read, print and download our 2020 Annual Report to Stockholders, 2021 Proxy Statement and 2021 Proxy Vote Card at www.proxyvote.com. You may vote your VSE common stock by Internet, by regular mail or virtually during the Annual Meeting. In-person voting will not be available this year. Instructions regarding the various methods of voting are contained on the notice of the Annual Meeting and on the Proxy Card.

The proxy materials describe the formal business to be transacted at the Annual Meeting. VSE directors and officers will be present to answer 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, 2020 containing detailed information concerning the Company’s operations, financial condition and operating performance.

The business to be conducted at the Annual Meeting consists of (1) the election of eight directors; (2) to approve amendments to VSE's Certificate of Incorporation, as amended (the “Charter”) to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares; (3) to ratify the appointment of Grant Thornton LLP as VSE's independent registered public accounting firm for the year ending December 31, 2021; (4) to approve, on a non-binding advisory basis, the compensation of our named executive officers; (5) a non-binding advisory vote on the frequency of the advisory vote to approve named executive officer compensation; (6) to approve the VSE Corporation 2021 Employee Stock Purchase Plan; and (7) the transaction of any other business that may properly come before the Annual Meeting.

VSE's Board of Directors unanimously recommends a vote (1) "FOR" the election of each of the eight director nominees; (2) "FOR" the approval of the amendments to VSE's Charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares; (3) "FOR" the ratification of the appointment of Grant Thornton LLP as our independent registered accounting firm for the year ending December 31, 2021; (4) "FOR" the approval by a non-binding advisory vote of our named executive officer compensation; (5) "FOR" a non-binding advisory vote, to hold an advisory vote to approve named executive officer compensation on an annual basis; and (6) "FOR" the approval of the VSE Corporation 2021 Employee Stock Purchase Plan. Your vote is important. Please vote your VSE common stock now, as it will ensure that your vote is properly counted.

We thank you for your support and look forward to your participation in the Annual Meeting.


			Sincerely,
			VSE CORPORATION

			Gen. Ralph "Ed" Eberhart
			Chair of the Board

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VSE CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 5, 2021

April 2, 2021

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 Wednesday, May 5, 2021, commencing at 10:00 a.m., Eastern Daylight Time, by virtual meeting via live audio webcast, for the following purposes (the “Annual Meeting”):


1.			To elect eight directors to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified;
2.			To approve amendments to VSE's Charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares;
3.			To ratify the appointment of Grant Thornton LLP as VSE's independent registered public accounting firm for the year ending December 31, 2021;
4.			To approve, on a non-binding advisory basis, the compensation of our named executive officers;
5.			To provide a non-binding advisory vote on the frequency of the advisory vote to approve our named executive officer compensation;
6.			To approve the VSE Corporation 2021 Employee Stock Purchase Plan; and
7.			To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

Only record holders of VSE common stock as of the close of business on March 17, 2021 will be entitled to notice of, and to vote at, the Annual Meeting, and at any adjournments thereof. The list of stockholders entitled to vote at the Annual Meeting and at any adjournments thereof will be open to the examination of any stockholder during the 10 days prior to the Annual Meeting by appointment only.

The VSE Corporation 2020 Form 10-K and 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, THE INTERNET OR DURING THE ANNUAL MEETING, 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 THE OPTIONS AVAILABLE TO YOU. ANY STOCKHOLDER PRESENT VIRTUALLY AT THE ANNUAL MEETING MAY WITHDRAW HIS OR HER PROXY PRIOR TO HIS OR HER SHARES BEING VOTED BY VOTING PERSONALLY ON ANY MATTER PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.



			By Order of the Board of Directors
			Thomas M. Kiernan, Secretary

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TABLE OF CONTENTS


	Page

Information about this Proxy Statement		1

Voting Procedures		3

Company Overview and Financial Highlights		5

Proposal 1: Election of Directors		9

Director Compensation		16

Commitment to Environmental and Social Responsibility		18

Proposal 2: Approval of Increase in Number of Authorized Shares of Common Stock		19

Proposal 3: Appointment of Independent Registered Public Accounting Firm		21

Audit Committee Report		23

Compensation Discussion and Analysis		25

Compensation and Human Resources Committee Report		43

Executive Compensation: Compensation Tables		44

2020 Summary Compensation Table		44

Grants of Plan-Based Awards		46

Outstanding Equity Awards		48

Option Exercises and Stock Vested		49

Non-Qualified Deferred Compensation		51

Potential Payments upon Termination or Change in Control		52

Pay Ratio Disclosure Rule		54

Proposal 4: Non-Binding Advisory Vote to Approve Named Executive Officer Compensation		55

Proposal 5: Vote on Frequency of Advisory Vote to Approve Named Executive Officer Compensation		57

Proposal 6: Approval of the VSE Corporation 2021 Employee Stock Purchase Plan		59

Security Ownership of Certain Beneficial Owners and Management		66

Stockholder Proposals		67

Other Matters		67

Appendix A: VSE Corporation 2021 Employee Stock Purchase Plan		68

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VSE CORPORATION

PROXY STATEMENT

Annual Meeting of Stockholders

to be held on May 5, 2021

ABOUT THE 2021 ANNUAL MEETING AND VOTING AT THE VIRTUAL MEETING

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 Wednesday, May 5, 2021, commencing at 10:00 a.m., Eastern Daylight Time. The 2021 Stockholders Meeting will be a virtual meeting, held via live audio webcast, 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 6348 Walker Lane, Alexandria, Virginia 22310-3226. VSE’s telephone number is (703) 960-4600. Your Annual Meeting materials, including the Notice of Annual Meeting, Proxy Statement and proxy card from our Board, are enclosed. The Notice of Annual Meeting, this Proxy Statement and the accompanying proxy card are first being sent or given to stockholders entitled to notice of, and to vote at, the Annual Meeting on or about April 2, 2021. If you received your Annual Meeting materials via e-mail, the e-mail contained voting instructions and links to our 2020 Annual Report to Stockholders and this Proxy Statement on the Internet, which are both available at www.proxyvote.com.

The close of business on March 17, 2021 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 (“Stock” or “VSE Stock”), as of the close of business on March 17, 2021, 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 will be counted solely for the purpose of determining whether a quorum is present, but broker non-votes will not be treated as present for quorum purposes. A proxy submitted by a broker that is not voted is sometimes referred herein to as a broker non-vote.

As of the close of business on March 17, 2021, there were 12,691,570 shares of Stock outstanding and approximately 227 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 17, 2021, on all matters that may be submitted to the stockholders at the Annual Meeting. All Stock represented by valid proxies will be voted at the Annual Meeting in accordance with the directions on the proxies. If you are a stockholder whose Stock is not registered in your own name, you will need appropriate documentation from the stockholder of record to vote during the Annual Meeting. If you want to vote your Stock that is held in street name virtually during the Annual Meeting, you will need a valid 16-digit control number from the broker, bank or other nominee who holds your Stock.

Matters for stockholder to consider:

As discussed in more detail below, the purpose of the Annual Meeting is (1) to vote for the election of eight directors to the Board; (2) to approve amendments to VSE's Charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares; (3) to ratify the appointment of Grant Thornton LLP as VSE's independent registered public accounting firm for the year ending December 31, 2021; (4) to approve, on a non-binding advisory basis, the compensation of our named executive officers; (5) to provide a non-binding advisory vote on the frequency of the advisory vote to approve named executive officer compensation; (6) to approve the VSE Corporation 2021 Employee Stock Purchase Plan; and (7) to transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

Recommendations of the Board

The Board recommends a vote:

1.“FOR” the election of each of the eight director nominees named in this Proxy Statement;

2."FOR" approval of amendments to VSE's Charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares;

3."FOR" the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2021;

4.“FOR” the approval by a non-binding advisory vote of our named executive officer compensation;

5."FOR" a recommendation, by a non-binding advisory vote, to hold an advisory vote to approve named executive officer compensation on an annual basis; and

6."FOR" approval of the VSE Corporation 2021 Employee Stock Purchase Plan.

Vote Required

Directors are elected by a plurality of votes cast, without regard to either broker non-votes or proxies as to which authority to vote for the nominees being proposed is withheld.

The approval of amendments to VSE's Charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares requires the affirmative vote of a majority of the Stock present or by proxy, at the Annual Meeting and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect on the outcome of the proposal.

The ratification of the appointment of Grant Thornton LLP as independent registered public accounting firm will be determined by a majority of the votes cast, without regard to broker non-votes or abstentions.

The approval of the non-binding advisory resolution to approve the Company’s named executive officer compensation requires the affirmative vote of a majority of the Stock present or by proxy, at the Annual Meeting and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the advisory resolution. Broker non-votes will have no effect on the outcome of the advisory vote. The results of this advisory vote are not binding on the Board.

The advisory vote on the frequency of advisory votes to approve the Company’s named executive officer compensation will be determined based on a plurality of the votes cast. This means that the option that receives the most votes will be recommended by the stockholders to the Board. Abstentions and broker non-votes are not counted for the advisory vote on frequency of advisory votes to approve the Company’s named executive officer compensation and, therefore, will have no effect on the outcome of the proposal. The results of this advisory vote are not binding on the Board.

The approval of the VSE Corporation 2021 Employee Stock Purchase Plan requires the number of votes cast in favor of the Plan to exceed the number of votes cast against this proposal. Abstentions with respect to this proposal will have the same effect as votes against the proposal. Broker non-votes will not have any effect on the outcome of this proposal.

How to Vote

We make our proxy materials available to stockholders by mail and on the Internet. You may read, print and download our 2020 Annual Report to Stockholders (which includes our Annual Report on Form 10-K for 2020), 2021 Proxy Statement and proxy card at www.proxyvote.com. 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 Stock by Internet, by regular mail, or virtually during 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 voting option, to ensure that your vote is counted at 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 in accordance with the recommendations of the Board. In connection therewith, the Board has designated the Chair of the Board, Gen. Ralph E. Eberhart and VSE’s Corporate Secretary, Thomas M. Kiernan as proxies. If you indicate a choice with respect to any matter to be acted upon on your proxy card or voting instruction card, your Stock will be voted in accordance with your instructions.

Additionally, you may vote during the Annual Meeting by logging into the meeting website at www.virtualshareholdermeeting.com/VSEC2021, using the 16‐digit control number included on your Notice, and following the instructions provided on the website. Stock held in your name as the stockholder of record may be voted electronically during the Annual Meeting. Stock for which you are the beneficial owner but not the stockholder of record also may be voted electronically during the Annual Meeting. However, even if you plan to attend the Annual Meeting, the Company recommends that you vote your stock in advance, so that your vote will be counted if you later decide not to attend the Annual Meeting.

If you are a beneficial owner and hold Stock in street name through a broker or other nominee and do not return the voting instruction card, the broker or other nominee will vote your Stock on each matter at the Annual Meeting for which he or she has the requisite discretionary authority. Under applicable rules, brokers have the discretion to vote on routine matters and do not have the discretion to vote on non-routine matters. Because the uncontested election of directors, approval of the VSE Corporation 2021 Employee Stock Purchase Plan and any advisory vote regarding the Company’s named executive officer compensation are considered non-routine matters, brokers will not have the discretion to vote on such matters at the Annual Meeting.

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 our Corporate Secretary. In addition, any stockholder who has executed a proxy but attends the Annual Meeting may cancel a previously given proxy by voting during the meeting whether or not the proxy has been revoked in writing.

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COMPANY OVERVIEW AND FINANCIAL HIGHLIGHTS

About VSE Corporation

VSE is a leading provider of aftermarket distribution and repair services for land, sea and air transportation assets supporting government and commercial markets. Core services include maintenance, repair and overhaul (MRO) services, parts distribution, supply chain management and logistics, engineering support, and consulting and training services for global commercial, federal, military and defense customers. VSE also provides information technology and energy consulting services.

2020 Financial Highlights

The financial highlights set forth below should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in Item 7 of the 2020 Annual Report on Form 10-K, and the Consolidated Financial Statements and detailed notes included in such Annual Report.

(in thousands, except per share data)


	Years ended December 31,
	2020		2019		2018		2017		2016

Revenues	$	661,659	$	752,627	$	697,218	$	760,113	$	691,790



Net (loss) income (1)	$	(5,171)	$	37,024	$	35,080	$	39,096	$	26,793

Basic earnings per share:


Net (loss) income (1)	$	(0.47)	$	3.38	$	3.23	$	3.61	$	2.48

Diluted earnings per share:


Net (loss) income (1)	$	(0.47)	$	3.35	$	3.21	$	3.60	$	2.47

Cash dividends per common share	$	0.36	$	0.35	$	0.31	$	0.270	$	0.235

(1) Net income and basic and diluted earnings per share prior to 2017 were not impacted by the Tax Cuts and Jobs Act.


	As of December 31,
	2020		2019		2018		2017		2016

Working capital	$	215,729	$	191,158	$	176,342	$	134,563	$	110,021

Total assets	$	780,081	$	845,864	$	638,828	$	629,013	$	661,839

Long-term debt	$	230,714	$	253,128	$	151,133	$	165,614	$	193,621

Long-term operating lease obligations	$	22,815	$	24,441	$	—	$	—	$	—

Long-term lease obligations	$	—	$	—	$	18,913	$	20,581	$	21,959

Stockholders' equity	$	356,317	$	363,101	$	328,395	$	293,095	$	255,194

Executive Officers

Executive officers are listed below, as well as information concerning their age and positions held with VSE. There are no family relationships between any of our executive officers. The executive officers are appointed annually to serve until the first meeting of VSE's Board of Directors (the "Board") following the next annual meeting of stockholders and until their successors are elected and have qualified, or until death, resignation or removal, whichever is sooner.

Name

Age

Position with VSE

John A. Cuomo

Director, Chief Executive Officer and President

Stephen D. Griffin

Senior Vice President and Chief Financial Officer

Thomas M. Kiernan

Vice President, General Counsel and Corporate Secretary

Chad Wheeler

President, Fleet Segment

Robert A. Moore

President, Federal and Defense Segment

Benjamin A. Thomas

President, Aviation Segment

Mr. Cuomo joined VSE on April 15, 2019 as Chief Executive Officer and President and was elected as a VSE director by the Board effective the same date. Mr. Cuomo served as Vice President and General Manager of Boeing Distribution Services Inc., an aircraft parts and consumables distributor and subsidiary of The Boeing Company, from October 2018 to March 2019. Prior to Boeing’s acquisition of the Aerospace Solutions Group of KLX Inc., (KLX) a commercial aerospace and defense distributor of fasteners and consumables and provider of other related services, in October 2018, Mr. Cuomo served as Group Vice President and General Manager for KLX Aerospace Solutions, from December 2014 to October 2018. Mr. Cuomo has 20 years of experience in the aerospace and defense distribution and services market. Prior to his role at KLX, Mr. Cuomo served in multiple roles and functions at B/E Aerospace from April 2000 to December 2014, including Vice President & General Manager and Senior Vice President, Global Sales, Marketing & Business Development. He has a Bachelor of Science degree in International Business, a Juris Doctorate degree from the University of Miami, a Master of Business Administration degree from the University of Florida and is an alumnus of Harvard Business School, having completed the Advanced Management Program in 2021.

Mr. Griffin joined VSE in November 2020 as Senior Vice President and Chief Financial Officer. Mr. Griffin brings more than a decade of experience in senior finance leadership roles with General Electric, and most recently as Chief Financial Officer of Engine Services at GE Aviation, an aircraft engine supplier, from July 2019 to October 2020. In this role, Griffin led the financial organization for a $15 billion engine overhaul, repair and parts sales division, which included commercial pricing, contract restructuring and financial reporting. Earlier in his career, Griffin served as the CFO for GE Aviation’s Supply Chain Division, a role in which he led a team focused on product cost, sourcing, cash management and capital expenditures. While at GE, Mr. Griffin also served as a board member for multiple global joint ventures. Mr. Griffin received his B.S. in Finance and Accounting from Boston College and is a 2021 Executive MBA candidate from the University of Michigan, Ross School of Business.

Mr. Kiernan has served as VSE's Vice President, General Counsel and Corporate Secretary since November 2008. Prior to joining VSE, Mr. Kiernan served as Vice President, General Counsel, and Secretary for Intelsat General Corporation (2003-2008), a subsidiary of Intelsat, Ltd., serving government and commercial customers, where he was responsible for managing legal and regulatory compliance and directing the administration support group, including human resources, security, and contracts. Prior to joining Intelsat General Corporation, Mr. Kiernan served as a member of the Intelsat, Ltd., Office of General Counsel (2000-2003). Mr. Kiernan is a graduate of Virginia Tech (B.A., Political Science) and George Mason University School of Law. He is a member of the Virginia Bar.

Mr. Wheeler, president of our Fleet segment, has served since July 2013. Since 1991, Mr. Wheeler has served in various roles for Wheeler Fleet Solutions, Co., including Senior Vice President of Operations, Senior Vice President of Sales and Marketing, and Marketing and Sales Manager. While serving as Marketing and Sales Manager, Mr. Wheeler coordinated implementation of Wheeler Fleet's Managed Inventory Program which is used at the Vehicle Maintenance Facilities of the United States Postal Service throughout the country. Mr. Wheeler received a Marketing degree from Indiana University of Pennsylvania.

Mr. Moore joined VSE in September 2019 as president of VSE’s Federal and Defense Services segment. Prior to joining VSE, Mr. Moore held the position of Chief Business Development Officer for S&K Technologies, Inc., an IT service management company, since 2018. He was the President of RAM3, a private consulting firm, from 2017 to 2018, and Vice President of Business Development and Strategy at IAP Worldwide

Services, Inc., a provider of global-scale logistics, facilities management, and advanced professional and technical services, in 2017. Mr. Moore earned a Master of Business Administration (MBA) from Oklahoma City University, and a Bachelor of Science degree in Technology Management from the University of Maryland University College.

Mr. Thomas joined VSE in October 2020 as the President of our Aviation segment. Mr. Thomas is responsible for the strategic oversight of the MRO services and product distribution businesses, as well as sourcing, customer relationships, capital allocation and acquisitions. Previously, Mr. Thomas managed aftermarket growth strategies in the aerospace consumables market for Boeing Global Services, a service solutions provider for commercial, defense and space customers, from October 2018 to October 2020, and KLX Aerospace Solutions, a commercial aerospace and defense distributor of fasteners and consumables and provider of other related services, from October 2010 to October 2018. He has a master’s degree in business administration from Harvard Business School and a bachelor’s degree in industrial and systems engineering from the University of Southern California.

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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, eight 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 2020 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. The eight nominees for election as VSE directors and certain information regarding them are as follows:


Name and Principal Occupation	Age	Director since

John A. Cuomo	47	2019
Mr. Cuomo was appointed Chief Executive Officer and President of VSE in April of 2019. Previously Mr. Cuomo served as Vice President and General Manager of Boeing Distribution Services Inc., an aircraft parts and consumables distributor and subsidiary of The Boeing Company, from October 2018 to March 2019. Prior to Boeing’s acquisition of the Aerospace Solutions Group of KLX Inc. (KLX) in October 2018, Mr. Cuomo served as Group Vice President and General Manager for KLX Aerospace Solutions beginning December 2014. Mr. Cuomo has 20 years of experience in the aerospace and defense distribution and services market. Prior to his role at KLX, Mr. Cuomo served in multiple roles and functions at B/E Aerospace from April 2000 to December 2014, including Vice President & General Manager and Senior Vice President, Global Sales, Marketing & Business Development.

Ralph E. Eberhart	74	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 military service. He was then appointed as President (2004-2020), and continues to serve as Chair, of the Armed Forces Benefit Association (AFBA), a non-profit association, and as Chair of its related enterprise, 5Star Life Insurance Co. General Eberhart is also a director of the following publicly traded companies: Triumph Group, Inc., since 2010 and Jacobs Engineering Group Inc., since 2012.

Mark E. Ferguson III	64	2017
Admiral, US Navy (Ret.), formerly the Commander of the U.S. Naval Forces Europe and Africa and Vice Chief of Naval Operations, he retired from the US Navy after 38 years of service as a nuclear-trained surface warfare officer. Admiral Ferguson has served as the Chief Executive Officer of MK3 Global LLC, a private consulting firm, since July 2016. He serves on the board of directors of Pacific Gas and Electric Corporation and the Center for Naval Analyses.


Calvin S. Koonce	83	1992
President and Managing Director of Montgomery Investment Management, Inc., a registered investment advisor and Chairman of Koonce Securities, LLC, a registered securities broker/dealer firm. Mr. Koonce has held both positions for more than the past five years.

James F. Lafond	78	2003
Retired certified public accountant and executive. From 1998 to 2002 Mr. Lafond was the Washington Area Managing Partner, PwC LLP. From 1964 to 1998 he served in various leadership positions at Coopers & Lybrand. He served as a director of WGL Holdings, Inc., a public utility holding company and parent company of WGL Energy, and WGL Energy (formerly Washington Gas and Light), energy supplier and environmentally friendly energy technology solutions provider, from 2003 to 2018. He continues to serve as director for various private nonprofit entities.

John E. "Jack" Potter	65	2014
President and Chief Executive Officer of the Metropolitan Washington Airports Authority, an independent airport authority, since July 2011. He served as the United States Postmaster General and Chief Executive Officer of the United States Postal Service from 2001 to 2010.

Lt. Gen Jack Stultz, USA (Ret.)	68	2012
Consultant to the Defense Industry and former Chief Army Reserve/ Commanding General, U.S. Army Reserve Command from 2006 to 2012. He was an operations manager for The Procter & Gamble Company from 1979 to 2007. General Stultz entered active duty in 1974 after receiving his officer’s commission from the Army Reserve Officer Training Corps at Davidson College. General Stultz has served as the Vice Chair of Reserve Affairs for the Association of the U.S. Army (AUSA) Council of Trustees since 2016.

Bonnie K. Wachtel	65	1991
Principal and Director of Wachtel & Co., Inc., brokers and underwriters since September 1984. Ms. Wachtel serves as a director of The ExOne Company and Information Analysis Incorporated. She has served as a director for six Nasdaq listed companies and served on the hearing panel for Nasdaq Listing Qualifications from 2006 to 2016. Ms. Wachtel is a Chartered Financial Analyst and member of the District of Columbia Bar.

Board, Committees and Corporate Governance

As of the date hereof, the Board consisted of eight members, all of whom were elected by the stockholders in 2020. Except for Mr. Cuomo, all of the nominees for directors are “independent” as defined by the applicable rules of The NASDAQ Stock Market, Inc. (“NASDAQ”). Because our Board Chair has no affiliation with the Company other than serving as Chair, we do not have a senior non-executive director. Throughout 2020, the seven independent directors regularly had the opportunity to meet without any management members present. During 2020, there were eight regular Board meetings. Each of the directors attended at least 75% of the total number of Board meetings (in person or by telephone) and at least 75% of the meetings of Board committees on which he or she served (during the period that he or she served) in 2020. We do not have a specific policy regarding attendance at the annual stockholders meeting. All directors, however, are encouraged to attend if available, and we try to ensure that at least one independent director attends the annual stockholders meeting

and is available to answer stockholder questions. All eight directors virtually attended our annual meeting of stockholders in 2020.

The Board has an Audit Committee, a Nominating and Corporate Governance Committee, and a Compensation and Human Resources Committee. The current charters for each of the Board committees are available on our website, www.vsecorp.com. The Board committee members, as of the date of this Proxy Statement, are identified in the following table.

Board Committees and Membership

Director

Audit

Committee

Compensation and Human Resources

Committee

Nominating and Corporate Governance
Committee

Ralph E. Eberhart

Mark E. Ferguson III

Calvin S. Koonce

Chair

James F. Lafond

Chair

Jack E. Potter

Jack C. Stultz

Chair

Bonnie K. Wachtel

Audit Committee

The primary purpose of the Audit Committee is to oversee our accounting and financial reporting processes and the audits of our financial statements. The Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. The Audit Committee also reviews our guidelines and policies with respect to risk assessment and risk management, specifically our risk exposures in the areas of independent audit, financial reporting, internal controls and disclosure controls and internal audit, and evaluates the action management has taken to identify, monitor and control such exposures.

All of the Audit Committee members during the past fiscal year were independent in accordance with applicable rules of the Securities and Exchange Commission (the “SEC”) and NASDAQ. Each Audit Committee member is able to read and understand fundamental financial statements, including our consolidated balance sheet and consolidated statements of income, comprehensive income, stockholders’ equity and cash flows. The Board has determined that the Audit Committee's Chair, Mr. Lafond, is an “audit committee financial expert” as defined in SEC Regulation S-K Item 407(d) (5). The Audit Committee met six times during 2020.

Compensation and Human Resources Committee

The primary purpose of the Compensation and Human Resources Committee is to oversee VSE’s compensation structure, to review and provide guidance to the Board regarding the compensation of VSE’s directors and officers, including the compensation of VSE’s chief executive officer and other executive officers, to review and provide guidance regarding employment agreements, to administer certain compensation plans, including equity compensation plans, and to perform such other duties and responsibilities as are consistent with the committee’s charter. The Compensation and Human Resources Committee reviews our guidelines and policies with respect to risk assessment and risk management, specifically our risk exposures related to compensation of directors, executives and management and the administration of our performance incentive and employee benefit plans, and evaluates the actions management has taken to identify, monitor and control such exposures. Each of the Compensation and Human Resources Committee members is independent in accordance with applicable NASDAQ rules. The committee met five times during 2020.

Matters recommended by the Compensation and Human Resources Committee, and any delegation of its authority, are subject to Board approval. If such approval is not received, the Compensation and Human Resources Committee will reconsider the recommendation or proposed delegation. The Compensation and Human Resources 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 and Human Resources Committee, as well as the role of compensation consultants and executive officers in determining or recommending the amount or form of executive compensation, is provided below in the “Compensation Discussion and Analysis” section.

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 to corporate policies regarding, among other things, business conduct, securities trading, indemnification of VSE directors and officers, and conflicts of interest involving VSE directors, officers and employees. The committee also reviews our guidelines and policies with respect to risk assessment and risk management, specifically our risk exposures in the areas of corporate governance, compliance and ethics, as well as succession planning for the directors and senior management, and the actions management has taken to identify, monitor and control such exposures.

Each of the Nominating and Corporate Governance Committee members is independent in accordance with applicable NASDAQ rules. The Committee met two times during 2020.

Committee Structure and Risk

The Board has overall responsibility for oversight of our risk management plans, policies and practices. Each Board committee has been assigned oversight of certain risks associated with its respective activities as discussed in this Proxy Statement, and each committee’s charter has been revised to reflect these risk oversight responsibilities. The Board has approved a risk management policy that delineates the risk oversight responsibilities of management, the Board and its committees.

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 VSE’s Corporate Secretary no later than 90 days before the date in the year of the annual meeting that corresponds to the date on which the annual meeting was held during the immediate prior year. Nominations for the year 2022-2023 should be received by the Corporate Secretary no later than February 4, 2022. 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 directorship 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. As a group, the Board should have diverse and broad experience at the policy-making level in business, government, education, technology or public interest. Board members should be committed to enhancing stockholder value and have sufficient time to satisfy their duties as VSE directors and provide insight and practical wisdom based on experience. A Board member’s service as a member of other boards of directors of publicly traded companies should be limited so that the director is able, given his or her individual circumstances, to perform responsibly all duties as a Board

member. Each VSE director must represent the interests of all stockholders. While we do not have a formal policy regarding diversity of Board nominees or a formal definition of “diversity,” the Nominating and Corporate Governance Committee has discussed diversity considerations of potential Board nominees within the context of Board succession planning. Factors discussed as relevant to the selection of Board nominees may include nature and length of business experience, including experience in business areas related to our three business segments, race, gender, age and factors that promote alignment of the Board with the interests of stockholders. The Nominating and Corporate Governance Committee recently discussed potential retirement time frames, transition planning with regard to succession, and optimal Board size.

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 Board vacancies 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 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 Board membership. 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.

The traits identified with respect to the director nominees as qualifications to serve on the Board include:


John A. Cuomo			Experience includes 20 years in the aerospace and defense distribution and services market industry, including as an officer of Boeing Distribution Services Inc., KLX Aerospace Solutions and B/E Aerospace.

Ralph E. Eberhart			Experience as President (2004-2020) and Chair of the Armed Forces Benefit Association provides insight into challenges associated with managing complex organizations and holding management accountable for company performance. Expertise in the defense industry due to 36 years of experience in the U.S. Air Force and senior positions in the U.S. military, including assignment as Commander-in-Chief North American Aerospace Defense Command and U.S. Northern Command.

Mark E. Ferguson III			Expertise in the defense industry due to 38 years of experience in the U.S. Navy and senior positions in the U.S. military, including service as Commander, U.S. Naval Forces Europe and Africa, and as Commander, NATO Joint Force Command, Naples, Italy. He also served as the Vice Chief of Naval Operations from 2011 to 2014. Holds a master’s degree in Computer Science from the Naval Postgraduate School and has expertise in cyber defense, congressional and regulatory affairs, strategic planning, and personnel and operations management. Graduate of the National Association of Corporate Directors (NACD) Cyber Risk Oversight Program; Holds a certificate in Cyber Security Oversight from Carnegie Mellon University.


Calvin S. Koonce			Experience as sole member of Koonce Securities, LLC, a registered securities broker-dealer, and President and Managing Director of Montgomery Investment Management, Inc., a registered investment advisor, provides insight into the enhancement of stockholder value. Familiarity with VSE’s legacy federal and defense strategies and operations resulting from service as a VSE director for more than 28 years.

James F. Lafond			Experience in business management, public company accounting, financial disclosure and financial systems oversight gained from his experience as Area Managing Partner for Greater Washington at PricewaterhouseCoopers LLP (PwC). Expertise in risk management processes given his experience as Area Managing Partner for PwC and serving as an engagement partner for entities involved in many businesses, including manufacturing companies and financial institutions.

John E. ‘Jack’ Potter			Extensive management experience, leadership ability and record of accomplishment having served as United States Postmaster General for 10 years and held various management positions within the United States Postal Service prior to such appointment. More than nine years of experience as President and Chief Executive Officer of the Metropolitan Washington Airport Authority, managing large, complex and multifaceted transportation infrastructure projects. Provides insight into manufacturing, supply and distribution practices of large supply chain management organizations.

Jack C. Stultz			Experience as the Commanding General for the U.S. Army Reserve Command provides insight into the needs and requirement of our customers, as well as the trends that will shape and influence our customers into the future. More than 38 years of experience in the U.S. Army provides keen insight on the past, current and future status of the U.S. Defense Industry. More than 29 years of private industry experience provides a balanced background of significant government and industry leadership positions.

Bonnie K. Wachtel			Experience as Supervisory Control Principal and Director of Wachtel & Co., Inc. provides management experience in financial systems, people and processes. Service with the Listing Qualifications Panel of NASDAQ and holding of Chartered Financial Analyst certification provides expertise in the functioning of capital markets and insight into the enhancement of stockholder value.

Leadership Structure of the Board

The positions of Chair of the Board and VSE’s chief executive officer (“CEO”) are separated at VSE. The Board believes that this separation of positions best serves the Company’s current needs and effectively maintains independent oversight of management.

Communications with the Board

Individuals may communicate with the Board by submitting an email to the Board at board@vsecorp.com. All directors have access to this email address. Communications that are intended specifically for non-employee directors should be sent to the email address above to the attention of the 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, 6348 Walker Lane, Alexandria, Virginia 22310-3226.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics that applies to all of VSE's directors, officers, including VSE’s 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 website at www.vsecorp.com. VSE intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding any waiver or amendment of the Code with respect to VSE’s principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions, by posting such required information on VSE’s website.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines, which together with the Company’s Charter, by-laws, committee charters and other key governance practices and policies, provide the framework for the Company's corporate governance. VSE’s by-laws were reviewed, amended and adopted by the Board on July 31, 2013. Additionally, the Corporate Governance Guidelines were reviewed, amended and adopted by the Board on December 9, 2020. The Nominating and Corporate Governance Committee charter was reviewed, amended and adopted by the Board on December 9, 2020. The charter of the Audit Committee was reviewed, amended and adopted by the Board on October 28, 2020, and the Compensation and Human Resources Committee was reviewed, amended and adopted by the Board on October 28, 2020.

The guidelines, by-laws and committee charters are posted on VSE’s website at www.vsecorp.com. The Board recognizes that ensuring that the Company observes good corporate governance practices is an ongoing endeavor. As a result, the guidelines are subject to annual review by the Board to determine if they continue to promote the best interests of the Company and its stockholders and comply with all applicable laws, regulations and NASDAQ requirements.

Compensation of Non-Employee Directors for 2020

In 2020, the Company paid each non-employee director a cash retainer of $75,000 as a director’s fee for the year. Each non-employee director also received for 2020 an award under our 2006 Restricted Stock Plan for such number of shares of our restricted Stock equal to $85,000 divided by the closing price of the Stock on the first trading day in 2020, rounded to the nearest 100 shares. Pursuant to our 2006 Restricted Stock Plan, each non-employee director was granted 2,300 shares of restricted Stock on January 2, 2020. The closing price of our Stock was $37.55 per share on January 2, 2020. Non-employee directors do not receive fees for attending Board or committee meetings.

The Chairs of the Audit Committee, Compensation and Human Resources Committee and the Nominating and Corporate Governance Committee were each paid an additional annual fee of $15,000, $10,000 and $7,500, respectively.

The Chair of the Board was also paid at the rate of $75,000 per annum for serving as Chair.

Stock issued to non-employee directors pursuant to our 2006 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 two years commencing on the issue date. When all restrictions on a certificate bearing a restrictive legend have lapsed, VSE issues a non-restrictive certificate to the directors (subject to any applicable securities law restrictions). In December 2016, the Compensation and Human Resources Committee approved a resolution to permit non-employee directors to designate, on a share per share basis, tradable VSE shares they own as the shares that will be subject to the two-year transfer restriction under the 2006 Restricted Stock Plan in lieu of holding restricted Stock that would otherwise be subject to the two-year transfer

restriction, provided that the designating directors remain in compliance with the Board’s stock retention guidelines.

No compensation is paid to any non-employee director for personal services rendered to VSE pursuant to a consulting or similar 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 2020. The foregoing procedures do not restrict reimbursement for expenses incurred by a director for attending meetings of the Board or Board committees.

The following table provides information related to the compensation of each of the Company’s non-employee directors for fiscal year 2020.

2020 Director Compensation


Name _______	Fees earned or paid in cash ($) (1) _______	Stock awards ($) (2) ________	Option awards ($) _______	Non-equity incentive plan compensation ($) ________	Change in pension value and non-qualified deferred compensation earnings ($) _________	All other compensation ($) ________	Total ($) _______
Ralph E. Eberhart	150,000	86,356	—	—	—	—	236,356
Mark E. Ferguson III	75,000	86,365	—	—	—	—	161,365
Calvin. S. Koonce	85,000	86,365	—	—	—	—	171,365
James F. Lafond	90,000	86,365	—	—	—	—	176,365
John E. Potter	75,000	86,365	—	—	—	—	161,365
Jack C. Stultz	82,500	86,365	—	—	—	—	168,865
Bonnie K. Wachtel	75,000	86,365	—	—	—	—	161,365

Notes to Director Compensation Table

1.In 2020, Mr. Eberhart elected to have $29,992 of his annual cash compensation for services as a VSE director be paid in Stock. Mr. Eberhart received 773 shares of restricted Stock in lieu of cash on December 21, 2020. The dollar amount recognized for financial statement reporting purposes, in accordance with ASC 718 (Compensation-Stock Compensation) is based on the closing price of our Stock on December 21, 2020 ($38.80 per share).

2.Pursuant to the 2006 Restricted Stock Plan, each non-employee director was granted an award of 2,300 shares of restricted Stock on January 2, 2020. The dollar amount recognized for financial statement reporting purposes, in accordance with ASC 718 (Compensation-Stock Compensation) is based on the closing price of our Stock on January 2, 2020 ($37.55 per share).

Narrative to Director Compensation Table

Please see the section above entitled “Compensation of Non-Employee Directors for 2020.”

Compensation Committee Interlocks and Insider Participation

During 2020, the Compensation and Human Resources Committee consisted of four non-employee directors (Mr. Koonce, Mr. Ferguson, Mr. Potter and Ms. Wachtel). No committee member was at any time during 2020

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 (or other committee performing similar functions) of another entity that had an executive officer who served on VSE’s Compensation and Human Resources Committee during 2020. No executive officer of VSE served on the board of directors or compensation committee (or other committee performing similar functions) of any entity that had one or more executive officers serving as members of the Board or Compensation and Human Resources Committee during 2020.

Mr. Koonce is a significant stockholder of VSE. See “Security Ownership of Certain Beneficial Owners and Management” below.

Certain Relationships and Related Transactions

There is no family relationship between any director or executive officer of VSE and any other director or executive officer of VSE.

See “Compensation Discussion and Analysis-Narrative to 2020 Summary Compensation Table” below for information regarding VSE’s employment agreement with Mr. Gauthier and “Compensation Committee Interlocks and Insider Participation” above for additional information about directors and nominees for director.

Pursuant to the Company’s policies, including Code of Business Conduct and Ethics for VSE’s directors, officers and employees, any above-referenced related transactions would be subject to the prior consideration and approval of the Board, including a majority vote of the disinterested directors.

The Board unanimously recommends that Stockholders vote "FOR" the election of each of the eight persons nominated to serve as a Director of VSE for the ensuing year.

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COMMITMENT TO ENVIRONMENT AND SOCIAL RESPONSIBILITY

VSE maintains Corporate Commitments to Health, Safety and Social Responsibility and Environmental Responsibility on the Corporate Governance portion of our website. These documents outline our commitment to:

•Invest in our employees;

•Serve our clients with integrity;

•Ensuring the workplace is safe and without health risks;

•Give back to our communities and society; and

•Create long-term value for our stockholders

2020 Highlights Include:


Investing in Our People Provided opportunities for all employees to succeed	Maintaining a Safe, Healthy and Sustainable Work Environment Made progress on our commitment to health, safety and environmental responsibility	Supporting Important Causes Invested in meaningful causes that impact our communities
Maintains a workforce of 20% U.S. Military Veterans	Maintains a LEED Gold Certified headquarters building (since 2012)	Corporate and employee donations in support of: -Yellow Ribbon Fund - Habitat for Humanity of Greater Miami - Voices for a Second Chance - The Children's Aid Home of Somerset, Pennsylvania -Santa's Castle of Fort Benning, GA
Advocates for talent mobility by hiring internal candidates for promotions and transfers first.	2020 Recordable Incident Rate (RIR) of 0.60, with a benchmark of 1.50 (industry average is 2.18)	Commitment to community service and volunteering at: - Wreaths Across America - House of Heroes - Patapsco Heritage Greenway - Howard County 20-Minute Cleanups - Family and Children’s Services of Central Maryland (Adopt a Family Project)
Tracking VSE’s Net Promoter Score on a quarterly basis, which gauges employee satisfaction and loyalty.	2020 Days Away From Work (DART) of 0.27, with a benchmark of 1.0 (industry average is 1.50)	A Virginia Values Veterans (V3) Certified Company

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Proposal No. 2

APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

Currently, our authorized capital stock consists of 15,000,000 shares of common stock, par value $0.05 per share. As of the record date, March 17, 2021, the Company had 12,691,570 shares of common stock issued and outstanding, and 0 shares of common stock held in treasury. Also, as of the record date, 123,092 shares of common stock were reserved for issuance under our equity compensation plan. 602,853 of the authorized shares of common stock remain available for issuance.

In March 2021, the Board determined that the increase in the number of shares of common stock was advisable and in the best interest of the Company and our stockholders and unanimously approved an amendment to Article FOURTH of our Charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares, subject to stockholder approval of the amendment. The proposed amendment would leave us with 37,308,430 shares of common stock authorized and unissued as of the record date.

The proposed amendment would provide us with the ability to issue common stock for a variety of corporate purposes. These could include issuances in connection with equity incentive plans for our employees, to raise cash to expand or otherwise invest in our business, and for potential acquisitions. Our Board believes that it is in the best interests of the stockholders for the Board to have the flexibility to issue additional shares of common stock in any of the above circumstances. The additional authorized shares would enable us to act quickly in response to opportunities that may arise for these types of activities, in most cases without the necessity of obtaining further stockholder approval and holding a special stockholders’ meeting before such issuances(s) could proceed, except as provided under Delaware law or NASDAQ rules. For instance, under NASDAQ rules, shareholder approval is required for certain transactions, other than public offerings, involving the issuance of 20% or more of the total pre-transaction shares outstanding.

Any additional authorized shares of common stock will be identical to the shares of common stock now authorized and outstanding. The proposed increase in the number of shares of common stock will not change the number of shares of stock outstanding, have any immediate dilutive effect or change the rights of current holders of our common stock. However, to the extent that the additional authorized shares of capital stock are issued in the future, these shares may decrease existing stockholders’ percentage equity ownership and, depending on the price at which they are issued, could be dilutive to the voting rights of existing stockholders and may dilute earnings and book value on a per share basis. Stockholders do not have preemptive rights to acquire the common stock authorized by this amendment, which means that current stockholders do not have a prior right to purchase any new issue of capital stock in order to maintain their proportionate ownership of our common stock.

Although the issuance of additional shares of common stock could, in certain instances, discourage an attempt by another person or entity to acquire control of us, we have not proposed the increase in the number of authorized shares of common stock with the intention of using the additional authorized shares for anti-takeover purposes.

The Board has no present plans, arrangements or agreements to issue any of the proposed additional authorized shares of common stock. However, we review and evaluate potential capital raising activities, transactions and other corporate actions on an on-going basis to determine if such actions would be in the best interests of the Company and our stockholders.

The Board unanimously recommends that Stockholders vote "FOR" approval of amendments to VSE's charter to increase the number of authorized shares of common stock from 15,000,000 shares to 50,000,000 shares.

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Proposal No. 3

APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Based on the recommendation of its Audit Committee, the Board has appointed the firm of Grant Thornton LLP to be VSE’s independent registered public accounting firm for the year ending December 31, 2021 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 registered public accounting firm 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 and entitled to vote. If such approval is not received, the Board will reconsider the appointment.

Representatives of Grant Thornton LLP will be virtually present at the Annual Meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.

In 2019 and 2020, Grant Thornton's services included an audit of VSE’s consolidated financial statements and reviews of the consolidated interim financial statements included in VSE’s Forms 10-Q filed with the SEC for each of the quarters ended March 31, June 30, and September 30, 2020 and 2019. Grant Thornton LLP's services also included an audit of the effectiveness of VSE’s internal controls over financial reporting as of December 31, 2020 and December 31, 2019.

Audit Fees

Grant Thornton’s fees for professional services rendered for the years ended December 31, 2020 and December 31, 2019, were as follows:

Audit Fees Table


	2020		2019
Audit Fees (1)	$	1,552,678	$	1,558,654
Audit-Related Fees (2)	$	—	$	224,447
Tax Fees (3)	$	30,225	$	17,100
All Other Fees (4)	$	—	$	69,824
Total Fees	$	1,582,903	$	1,870,025

Notes to Audit Fees Table

1.Includes fees and expenses related to the annual audits, interim reviews and accounting consultations, notwithstanding when the fees and expenses were billed.

2.2019 audit-related fees include fees related to the acquisition of 1st Choice Aerospace Inc. including fees related to the audit of the Assets Acquired and Liabilities Assumed as of December 31, 2018.

3.Includes fees and expenses for tax advisory services associated with Work Opportunity Tax Credit certification assistance.

4.Includes fees related to management’s use of Grant Thornton's government contract compliance support.

Policy on Audit Committee Approval of Audit and non-Audit Services

The Audit Committee approves in advance all audit and non-audit services provided by our independent registered public accounting firm prior to its engagement with respect to such services. The Audit Committee

has delegated to its chair 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 Audit Committee’s chair shall report any decisions to pre-approve such audit-related or non-audit services and fees to the full committee at its next regular meeting. The Audit Committee approved in advance all of the audit and non-audit services provided by our independent registered public accounting firm in 2020 and 2019.

The Board unanimously recommends that Stockholders vote "FOR" the ratification of the appointment of Grant Thornton LLP as our independent registered accounting firm for the year ending December 31, 2021.

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AUDIT COMMITTEE REPORT

The Audit Committee consisted of four non-employee directors (Mr. Lafond, Mr. Ferguson, Mr. Stultz and Ms. Wachtel) for 2020, each of whom is considered an “independent” director for the purposes of the applicable rules of the SEC and NASDAQ. The Audit Committee’s responsibilities are set forth in its charter, a copy of which is available on VSE’s website, 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 5605(a)(2).

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 Grant Thornton LLP, the Company’s independent registered public accounting firm for 2020. The Audit Committee also discussed with Grant Thornton LLP 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, 2020 and the results of management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 and Grant Thornton LLP’s audit of internal control over financial reporting, and has discussed with Grant Thornton LLP the matters required to be discussed under Public Company Accounting Oversight Board (PCAOB) Auditing Standard 1301, Communications with Audit Committees.

The Audit Committee has received and reviewed the written disclosures and the letter from Grant Thornton LLP required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, regarding Grant Thornton LLP’s communications with the Audit Committee concerning independence, and has discussed with Grant Thornton LLP its 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 and management’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in VSE’s Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the SEC.


Audit Committee:			James F. Lafond, Chair
			Mark E. Ferguson III
			Jack C. Stultz
			Bonnie K. Wachtel

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COMPENSATION DISCUSSION AND ANALYSIS

OVERVIEW

Introduction

As VSE transforms the business from a legacy federal and defense contractor to a balanced commercial and defense aftermarket distribution and services company, compensation policies and practices are being modified to support long-term stockholder value and our ability to attract and retain highly qualified executives.

VSE’s compensation program is designed, and continues to be adjusted, to align executive short- and long-term compensation with the Company’s commitment to execute on market leadership, revenue growth, margin expansion and enhanced stockholder value and returns.

Executive Compensation Philosophy

VSE is shifting to a more robust pay-for-performance model that balances short- and long-term financial and business goals with the guiding mission to provide above market shareholder returns. By extension, our executive compensation program is designed with this philosophy in mind and, thus, has the primary goal of closely aligning the interests of executives and other key employees with those of stockholders.

The Compensation and Human Resources Committee (the "Committee") applies this philosophy with a focus on designing a competitive total compensation package that enables the Company to attract and retain qualified executives and senior management with the abilities to drive the business transformation and achieve the Company's financial and business goals.

As the business focuses on its transformation, the goals are:

• Attract New, and Retain Existing, Market Leading Executive Talent with the skills and experience to lead the business transformation and achieve the financial and business goals;

• Use a Pay-for-Performance Model to compensate and reward executives by paying for performance in a manner that reflects the Company’s results, the business segment performance and individual performance objectives; and

• Diversify Variable Compensation by providing a balance of both short-term and long-term compensation, and fixed plus at-risk or variable compensation, with an added focus on equity compensation to align the interests of executives with the interests of the stockholders.

This Compensation Discussion and Analysis outlines the processes, elements and decisions regarding compensation for 2020 of VSE’s “named executive officers,” consisting of VSE’s principal executive officer, the individuals serving as principal financial officer during 2020, and the three most highly compensated executive officers, other than the principal executive officer and principal financial officer, who were serving as executive officers at the end of 2020. The detail forthcoming also previews certain approved changes for 2021 compensation.

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Our named executive officers (or “NEOs”) for 2020 and their current positions are:


John A. Cuomo			Chief Executive Officer and President
Stephen D. Griffin			Senior Vice President and Chief Financial Officer
Thomas R. Loftus			Retired Executive Vice President and Chief Financial Officer
Thomas M. Kiernan			Vice President, General Counsel and Corporate Secretary
Chad M. Wheeler			President of Fleet Segment
Robert A. Moore			President of Federal & Defense Services Segment

Key NEO Compensation Decisions and Actions in 2020 and 2021

In 2020 and early 2021, the Committee and Board of Directors initiated several changes to the executive compensation program to further align the program with the market and stockholder interests:

•2020 Base Pay Freeze: Based on the CEO recommendation in January 2020, the Committee did not approve any increases to NEO base salaries in 2020;

•Annual Cash Incentive Performance Metric Update: For the NEO 2020 annual cash incentive awards, the Committee shifted from a single return on equity (ROE) metric to multiple weighted, annual financial metrics, as further described below under "2020 Incentive Compensation." This change was made to support a balanced approach to revenue growth, margin expansion and free cash flow generation for each of the business segments and to diversify the goals under the short-term awards; and

•Variable Compensation Shift to Equity for 2021: For 2021, the CEO and Committee agreed to shift a larger percentage of potential total executive compensation from deferred supplemental compensation ("DSC") to long-term time- and performance-based equity compensation. Specifically, the Committee recommended, and the Board approved, a reduction to the maximum eligibility for each participant under the DSC Plan (as defined below) for 2021 from 32% of base salary to 15% of base salary. Further, the Committee recommended, and the Board approved, a revision to the types of awards granted to our NEOs under the Restricted Stock Plan (as defined below). For 2021, in lieu of cash-denominated restricted stock awards, the NEOs have been granted both time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”), each of which are subject to a three-year vesting period. We intend to provide further detail on the RSU and PRSU awards in our future executive compensation disclosure.

Compensation and Human Resources Committee Philosophy

The principal objectives of the Committee are to (a) develop an executive compensation program that will attract and retain executive officers capable of leading and profitably growing the Company in complex, competitive and changing industries; (b) maintain a compensation structure that is competitive and performance-based; and (c) link total compensation to stockholder best interests, corporate goals and individual performance.

Compensation Program Components

The three key elements of our executive compensation program are:

•Base salary to compensate executives for services performed during the fiscal year and provide a secure and appropriate level of base pay to attract and retain executive talent;

•Annual short-term cash incentives to promote achievement of the Company’s short-term business objectives and individual objectives for the named executive officers. For 2020, the short-term cash incentive program was designed to support revenue and operating profit growth, free cash flow generation, and business transformation and leadership achievements, as discussed below; and

•Long-term incentives, including time-based and performance-based restricted stock awards along with deferred supplemental compensation. Restricted stock awards drive long-term performance and align a significant portion of NEO compensation with stockholder value creation.

Basis for Compensation Decisions

For our executives as a group, we generally set total compensation, including long-term incentives, based on numerous factors, including level of responsibility, individual performance, Company performance, market competitive data and prior experience, as described in further detail below.

Leadership Structure and Officer Transitions During 2020

In 2020, the Company was led and managed by John A. Cuomo, who joined VSE as President and Chief Executive Officer on April 15, 2019. Officers reporting directly to Mr. Cuomo during 2020 included Stephen D. Griffin, who joined VSE on November 9, 2020 as the Company’s Chief Financial Officer; Thomas R. Loftus, the previous CFO, who retired as an employee on December 31, 2020; Thomas M. Kiernan as Vice President and General Counsel; Chad M. Wheeler, as the President of our Fleet segment; Benjamin E. Thomas, who joined VSE on October 12, 2020 as President for our Aviation segment, relieving Mr. Cuomo as interim President; and Robert A. Moore, as President of our Federal and Defense Services segment.

To ensure an orderly transition of CFO responsibilities, VSE entered into a consulting agreement with Mr. Loftus pursuant to which Mr. Loftus would provide limited consulting services beginning on January 1, 2021. This agreement, as well as the compensation and benefits received by Mr. Loftus in connection with his departure, are described in further detail below under “Potential Payments Upon Termination or Change in Control.”

OVERSIGHT AND AUTHORITY OVER EXECUTIVE COMPENSATION

Compensation and Human Resources Committee Composition and Duties

The Committee is composed of four independent directors as defined by the NASDAQ listing standards and described above in the “Board, Committees and Corporate Governance” section.

The Committee is responsible for reviewing and recommending for Board approval the compensation of our CEO (principal executive officer), chief financial officer "CFO" (principal financial officer) and other executive officers, including the three other NEOs. The Committee is governed by a written charter adopted by the Board. The full text of the charter is available on VSE’s corporate website at www.vsecorp.com in the “Investor Information” section under "Corporate Governance."

The following is a summary of the Committee’s key responsibilities regarding executive compensation:

•To review and provide the Board with recommendations regarding compensation programs for the Company’s executive officers, including the NEOs;

•To review and approve corporate goals and objectives relevant to the compensation of the NEOs and make recommendations to the Board for approval of total compensation for NEOs;

•To provide recommendations to the Board regarding compensation of VSE’s non-employee directors; and

•To review and assess stockholders' say-on-pay and say-on-pay frequency votes and consider results of the most recent say-on-pay vote in evaluating and determining executive compensation.

Annual Compensation Review

In December of each year, the Committee meets to review the performance and compensation of our CEO and other NEOs.

In consultation with the CEO, the Committee reviews and approves the compensation of all other NEOs based on recommendations submitted by the CEO. In submitting these recommendations, the CEO evaluates business performance and recommends salary adjustments, bonuses, benefit plan participation and all other elements of compensation of the NEOs but does not make any recommendations regarding his own compensation. The Committee also reviews the prior year’s stockholder advisory vote on named executive officer compensation. At the 2020 annual stockholders meeting, the stockholders strongly endorsed the Committee’s compensation policies with a 97.9% approval vote. The Committee considered the voting result at meetings after the vote, and while it believes the voting result demonstrates significant support for our overall executive compensation program, the Committee remains dedicated to continuously improving the existing executive compensation program, including as described above under “Key NEO Compensation Decisions and Actions in 2020 and 2021.” However, the Committee did not make any changes to its compensation policies and practices that were specifically driven by the results of the 2020 advisory vote on named executive officer compensation. The Committee has discretion in approving, disapproving or modifying any of the CEO's recommended salary adjustments or proposed awards to the other NEOs, subject to final Board approval.

Compensation and Human Resources Committee Philosophy and Pay-Setting Process

Total executive compensation is structured to attract and retain a superior management team consistent with our corporate strategic goal of recruiting and retaining top level executives. Our approach also emphasizes investing in high performing internal candidates for career development and advancement. The strategic intent is to produce a stronger management team over time rather than incurring market driven attrition resolved through external recruitment. However, with a recent shift to our business strategies, we recently recruited externally to support new leadership hires that bring extensive aerospace and other industry experience to the Company.

The Committee believes it is important to maintain a compensation structure that is sufficiently competitive to attract and retain executives, while maintaining compensation levels that permit us to compete effectively in the markets we serve. We measure our competitiveness by monitoring our ability to recruit and retain highly qualified executives available in our chosen markets.

The Committee also believes it is important to maintain a compensation structure that is performance-based, such that approximately 60% of the total compensation target for each of our NEOs is performance-driven, based primarily on achieving and exceeding pre-established short- and longer-term financial goals.

The Committee considers multiple factors, including those described above under “Basis for Compensation Decisions,” when determining compensation levels for NEOs. These considerations compel the Committee to consider other relevant factors such as industry conditions, client satisfaction and operational performance. The Committee analyses competitive short-term and long-term performance incentives into the total compensation equation. VSE’s targeted short-term and long-term incentive compensation constitutes approximately 60% of total targeted potential compensation for our NEOs in 2020.

Role of Compensation Consultant

The Committee has the authority to engage independent compensation consultants to assist in evaluating the compensation of NEOs, as well as to provide periodic reviews of the effectiveness and competitiveness of VSE’s executive compensation structure. In April 2020, the Committee selected and retained Longnecker and Associates. Longnecker and Associates advised the Committee on a variety of compensation-related matters, including:

•Recommendations to establish and modify the Company’s peer group;

•The appropriateness of potential modifications to the Company’s bonus and long-term incentive plans, taking into account market trends and competitive practices;

•Pay levels and compensation mix for NEOs;

•Compensation level and mix for non-employee directors; and

•Emerging compensation trends.

In general, although the advice provided by Longnecker and Associates in 2020 was used for purposes of 2021 compensation decisions, it was not used for purposes of the Committee’s decisions regarding the 2020 executive compensation program, except with respect to the Committee’s determinations regarding Mr. Griffin’s initial compensation upon his appointment as the Company’s CFO.

Semler Brossy Consulting Group, LLC ("Semler Brossy") provided similar services for the Company in 2019 and 2018 but did not provide any services in 2020 or otherwise that were specifically related to our 2020 compensation decisions.

The Committee assessed the independence of Longnecker and Associates and Semler Brossy during the relevant periods pursuant to the rules of the SEC and the NASDAQ. In doing so, the Committee considered all relevant factors, including each of the specific factors set forth by the SEC and NASDAQ with respect to a compensation consultant’s independence. Specifically, and among other things, the Committee considered the nature and amount of work performed for the Committee and the fees paid for those services in relation to the compensation consultant’s total revenues. After these reviews, the Committee concluded that there were no conflicts of interest, and that Longnecker and Associates and Semler Brossy, as applicable, were independent pursuant to SEC and NASDAQ rules.

Peer Companies and Survey Data

The Company is a diversified industrial aftermarket parts and services supplier serving both government and commercial markets. In determining total compensation for our NEOs, we consider competitive market data for a peer group of publicly traded companies. These “compensation peers” generally focus on industrial service companies with comparable market capitalization size rather than companies we identify in our Annual Report on Form 10-K as “competitive peers.” The Committee does not apply a formulaic approach to setting individual elements of the NEOs’ compensation or their total compensation amounts and does not set compensation levels at any specific level or percentile against the peer group data described below. However, the Committee periodically reviews market compensation levels to determine whether the total compensation opportunity for the NEOs is appropriate compared to compensation arrangements for similarly situated executives in the market and may make recommendations to the Board as the Committee determines appropriate.

Prior Peer Group

The compensation peer group was historically selected, with the aid of Semler Brossy, on the basis of comparable service offerings, market capitalization, revenues, net income and return on equity. The nature of

our diversified business units and much of the competitive landscape balanced between private companies and larger market-cap companies, complicates identifying similar companies for comparison. Therefore, for purposes of 2020 compensation decisions, as in the prior year, the Committee continued to use a larger peer group that was determined by Institutional Shareholder Services, Inc. (ISS) beginning in 2012. ISS uses a methodology that identifies several publicly traded companies in the services industry that are comparable to our current market capitalization, revenues and profit margins. Total compensation levels for our NEOs are established at what we believe to be a competitive level relative to this group of companies.

The Committee primarily used the ISS identified peer group for purposes of 2020 compensation decisions. We identified and evaluated the following 10 companies for purposes of 2020 compensation decisions (which is the same group of companies that was disclosed in our 2020 proxy statement):


AAR Corporation			Heritage-Crystal Clean, Inc.
CBIZ, Inc.			Huron Consulting Group, Inc.
CRA International, Inc.			ICF International, Inc.
FTI Consulting, Inc.			Navigant Consulting, Inc.
GP Strategies Corporation			Resources Connection, Inc.

In preparing analyses of pay levels and compensation mix, we also refer to other commercially available survey sources, including surveys from Mercer, Culpepper and Associates, Inc., Willis Towers Watson, and Radford Inc. We did not select the constituent companies comprising the survey groups, and the identities of the companies comprising these surveys were not a material factor in the applicable compensation analysis.

Revised Peer Group

During 2020, the Committee and management team reviewed potential peers that would be more consistent with our government and commercial markets.

In October 2020, the Committee selected a new peer group that was recommended by Longnecker & Associates, which peer group includes (among other companies) certain peers used by ISS. In general, the peer group was identified by first considering similarly sized (based on revenue, market capitalization, enterprise value, asset size and total stockholder return) publicly traded companies in the diversified support services industry (specifically including aerospace and defense, automotive trading companies and distributors, and federal contracting services). The revised peer group that was recommended by Longnecker and Associates, and adopted by the Committee, is more consistent with the markets in which we operate, and the revenues of the peer companies were determined to range between 0.58 times to 2.8 times the Company’s annual revenue in 2019.

We identified and evaluated the following 17 companies as peer companies for purposes of the new peer group, an increase of seven companies, to provide more representation from each of our three business segments.


AAR Corp.	H&E Equipment Services, Inc.	Kratos Defense & Security Solutions, Inc.
Astronics Corporation	Heritage-Crystal Clean, Inc.	Motorcar Parts of America, Inc.
CRA International, Inc.	Horizon Global Corp.	Standard Motor Products, Inc.
Cubic Corporation	Huron Consulting Group Inc.	Stoneridge, Inc.
Dorman Products, Inc.	ICF International, Inc.	Vectrus, Inc.
Ducommun Incorporated	Kaman Corporation

Compared to our prior peer group, we removed CBIZ, Inc., FTI Consulting, Inc., GP Strategies Corporation, Navigant Consulting, Inc., and Resources Connection, Inc., and replaced them with peers more representative of our three business segment markets. Specifically, we added Cubic Corporation, Vectrus, Inc., H&E

Equipment Services, Inc., Standard Motor Products, Inc., Dorman Products, Inc., Kaman Corporation, Kratos Defense & Security Solutions, Inc., Ducommun Incorporated, Stoneridge, Inc., Astronics Corporation, Horizon Global Corp., and Motorcar Parts of America, Inc. Five companies remain from our prior peer group.

We have referenced this new peer group for purposes of establishing Mr. Griffin’s initial compensation and for certain 2021 compensation decisions, which we expect to further describe in future compensation disclosures.

Consideration of Risk

Our compensation programs are discretionary, balanced and significantly focused on the long term. Under this structure, the highest amount of compensation can be achieved only through consistent superior performance over sustained periods of time. In addition, some compensation is deferred or only realizable upon retirement. This provides strong incentives to manage the Company for the long term, while avoiding excessive risk-taking in the short term. Likewise, the elements of our targeted compensation are balanced among current cash payments, deferred cash payments and equity awards.

Additionally, to further align the interests of our executive officers with our stockholders' interests in pursuit of long-term value enhancement, the Committee recommended and the Board approved VSE Stock retention guidelines for directors, executive officers and other participants in VSE’s 2006 Restricted Stock Plan (the "Restricted Stock Plan") as described below in the “Stock Retention Guidelines” section.

The Committee reviews the relationship between our risk management policies and practices and the incentive compensation we provide to our NEOs to confirm that our incentive compensation encourages taking prudent risks and avoiding unnecessary and excessive risks. The Committee also reviews the relationship between risk management policies and practices, corporate strategy and senior executive compensation.

Management reviews the Company’s overall compensation structure, taking into account such factors as the overall mix of compensation, the performance metrics that are used under the Company’s incentive programs, the length of vesting periods where applicable, and the overall relationship of the Company’s compensation programs to the Company’s business risk. Management periodically reports the results of its evaluation to the Committee, including any findings of risk related to the Company’s compensation structure and practices. Management most recently provided such results to the Committee in March 2021. The Committee considers management’s conclusions in fulfilling its responsibilities with respect to the Company’s executive compensation program and also obtains assistance from its independent compensation consultant. The Committee reports risk assessment results to the Board. Based on management’s assessment, the Company has concluded that its compensation policies and procedures do not create risks that are reasonably likely to have a material adverse effect on the Company.

EXECUTIVE COMPENSATION COMPONENTS

The three key elements of our executive compensation program are (a) base salary, (b) annual short-term cash incentives, and (c) long-term incentives (restricted stock and deferred supplemental compensation).

Base Salary

The Committee believes that one of the most effective ways to compete in our markets is to offer our executive officers a competitive base salary. The Committee analyzes each executive officer’s base salary by reviewing the key executive positions within the Company in terms of scope and responsibility, job complexity, knowledge, required experience, and other relevant factors.

The Committee considers market data for each executive based on similarly situated positions within our selected peer group companies. To clarify, the Committee does not set compensation at specific target levels of

our peer group, but rather compares compensation with our peer group companies to gain a general understanding of where such compensation falls in the market. In addition to such external market considerations, the Committee also considers internal pay equity among our executives, including the NEOs, for base salary planning. While the foregoing discussion of how the Committee determines base salaries summarizes the material factors considered by the Committee, it is not intended to be exhaustive. The Committee did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors. The Committee conducted an overall analysis of the factors described above and considered the totality of the information presented to it, including discussions with our senior management.

Based on the CEO's recommendation, the Committee determined not to approve any increases to NEO base salaries in 2020.

Base Salaries of Named Executive Officers 2019 - 2020 Table


Named Executive Officer	2019 Rate		2020 Rate		% Increase
John A. Cuomo	$	685,000	$	685,000	0	%
Thomas R. Loftus1	$	405,048	$	405,048	0	%
Stephen D. Griffin2	N/All		$	400,000	N/A
Thomas M. Kiernan	$	347,810	$	347,810	0	%
Chad M. Wheeler	$	377,731	$	377,731	0	%
Robert A. Moore	$	330,000	$	330,000	0	%

(1)Mr. Loftus, former Executive Vice President and CFO, retired from VSE Corporation effective December 31, 2020.

(2)Mr. Griffin joined VSE Corporation as Senior Vice President and CFO on November 9, 2020. His initial base salary of $400,000 was set in accordance with the terms of his employment agreement, as further described below.

2020 Incentive Compensation

The actual incentive compensation payable under our short-term cash incentive program, Deferred Supplemental Compensation ("DSC") Plan and Restricted Stock Plan described below reduces the Company’s consolidated net income that is used to calculate the aggregate incentive compensation amounts that are payable under each of such incentive plans.

2020 Annual Short-Term Cash Incentive

Our NEOs are eligible for an annual short-term cash incentive designed to reward and promote achievement of the Company’s short-term business objectives and enhance stockholder value. For 2020, the Committee recommended, and the Board adopted a short-term cash incentive opportunity that could be earned based on achieving annual financial results established by the Committee and approved by the Board at the beginning of the year (the “2020 Short-Term Incentive Program.”)

The 2020 Short-Term Incentive Program for Messrs. Cuomo, Griffin, Loftus and Kiernan consisted of four weighted factors: revenue (30%), operating profit (30%), free cash flow (30%) and subjective measures (10%), as further described below. The Committee chose these measures because they are key financial metrics that management and the Board are focused on for 2020.

Similar weighted factors are determined for each of the segment Presidents depending on their respective markets. Except for free cash flow, which is a consolidated financial metric, each of the other metrics for Messrs. Wheeler and Moore are based on applicable segment performance. For Mr. Wheeler, the weighted

factors consisted of revenue (30%) and operating profit (30%) for the Fleet segment, consolidated free cash flow (30%) and subjective measures (10%). For Mr. Moore, the weighted factors consisted of revenue (30%) and bookings (30%) for the Federal and Defense Services segment, consolidated free cash flow (30%) and subjective measures (10%). The Committee chose these measures because they are key financial metrics that management and the Board are focused on for 2020. The threshold, target, and maximum opportunity for each of the NEOs under the 2020 Short-Term Incentive Program is set forth below.


		Threshold			Target			Maximum
Name	Base Salary	% Base Salary		Dollar Amount	% Base Salary		Dollar Amount	% Base Salary		Dollar Amount
John A. Cuomo	$685,000	13	%	$85,625	90	%	$616,500	125	%	$856,250
Thomas R. Loftus1	$405,048	10	%	$40,504	55	%	$222,776	85	%	$344,291
Stephen D. Griffin2	$400,000	8	%	$32,000	50	%	$200,000	80	%	$320,000
Thomas M. Kiernan	$347,810	8	%	$27,825	50	%	$173,906	80	%	$278,249
Chad M. Wheeler	$377,731	8	%	$30,218	50	%	$188,866	80	%	$302,185
Robert A. Moore	$330,000	8	%	$26,400	50	%	$165,000	80	%	$264,000

(1) Mr. Loftus was entitled to a full-year 2020 Short-Term Incentive Program award, since his employment ended on December 31, 2020, following his resignation from his officer positions.

(2) Mr. Griffin is eligible for a prorated 2020 Short-Term Incentive Program award, based on his start date of November 9, 2020.

To receive a payout under the 2020 Short-Term Incentive Program, an NEO generally must be an employee during the fiscal year that the bonus payment is earned and subsequently when the bonus payment is payable.

The table below shows the percentage of target received with respect to each 2020 performance goal for each NEO:

Name

Revenue Factor

Operating Profit Factor (1)

Bookings Factor

Free Cash Flow Factor (2)

Subjective Factor

John A. Cuomo

Below Threshold

N/A

Below Target

Maximum Target

Thomas R. Loftus

Below Threshold

N/A

Below Target

Maximum Target

Stephen D. Griffin

Below Threshold

N/A

Below Target

Maximum Target

Thomas M. Kiernan

Below Threshold

N/A

Below Target

Maximum Target

Chad M. Wheeler

Below Target

Below Threshold

N/A

Below Target

Maximum Target

Robert A. Moore

Above Target

N/A

Below Target

At Target

(1) Operating profit is pre-home office allocation and intangibles for Messrs. Wheeler and Moore, and pre-tax for the other NEOs.

(2) Free cash flow is free cash flow less capital expenditures.

With regard to the subjective portion of the 2020 Short-Term Incentive Program award opportunity, the Committee did not establish specified goals. Rather, the Committee conducted a subjective evaluation following the end of the performance period to determine an achievement level for each NEO with respect to their subjective measurement, based on the management team as a whole and that NEO’s accomplishments during the year.

The Committee maintains discretion on annual performance bonus allocation for all NEOs. Once the bonus pool is determined, the Committee will determine the amount distributed to each NEO, taking into consideration performance execution and market factors.

As a result of the achievement levels with respect to the objective goals and the subjective analysis described above, the Committee approved a percentage of each participants base salary as follows: 30% for Mr. Cuomo; 20% for Mr. Loftus; 18% for Mr. Griffin; 18% for Mr. Kiernan; 21% for Mr. Wheeler; and 41% for Mr. Moore. Specific amounts paid to NEOs under the Executive Incentive Plan are reported in the “2020 Summary Compensation Table” below under the heading “Non-Equity Incentive Plan Compensation."

2020 Long-Term Incentive Compensation

VSE provides long-term incentive compensation to its NEOs to reward and motivate performance and align a significant portion of NEO compensation with our long-term success and stockholder value creation. The two components of the Company’s long-term incentive program are the Restricted Stock Plan and the DSC Plan.

2020 Deferred Supplemental Compensation Plan

VSE has a non-qualified DSC Plan for certain VSE corporate officers, including NEOs and other key management representatives. The objective of the DSC Plan is to compensate executives for their contribution to VSE’s profitability. The DSC Plan provides, at the Board’s discretion, for an incentive pool to be created through an annual contribution to the plan subject to two requirements: (1) that the annual funding of the plan not exceed 12% of VSE’s consolidated net income for the year, and (2) that a DSC award not exceed 32% of the participant's annual salary. Each participant’s potential allocation from the annual contribution bears the same percentage of the annual contribution as that participant’s salary bears to the total annual participant salaries.

Benefits are payable to participants on retirement or resignation, subject to the vesting schedule described below, a two-year non-competition agreement and other plan provisions, or on a change of control of VSE as described in the “Employment Contracts and Severance Agreements” section below. The Board believes the vesting schedule and completion of the non-competition agreement prior to receiving a distribution create an additional benefit of promoting executive retention.

In general, an NEO’s account under the DSC Plan vests based on the NEO’s years of service with the Company, as follows:


Years of Service						Percent Vested
0 to 5						0%
6						20%
7						40%
8						60%
9						80%
10						100%

NEOs who attain age 65 are 100% vested upon attaining five years of service.

The DSC Plan pool for 2020 is approximately $971 thousand, which equals 32% of the cumulative salaries of the 2020 DSC Plan participants, which was the amount authorized in December 2020 and allocated to 10 participant accounts, including a total of approximately $700 thousand allocated to the NEOs, as follows:


NEO						2020 DSC Plan Allocation
John A. Cuomo						$219,200
Thomas R. Loftus(1)						$129,615
Stephen D. Griffin(2)						$13,333
Thomas M. Kiernan						$111,300
Chad M. Wheeler						$120,874
Robert A. Moore						$105,600

(1) Because he was employed through December 31, 2020, Mr. Loftus was eligible for a full-year 2020 DSC Plan allocation.

(2) Pursuant to his employment agreement, Mr. Griffin was eligible for a prorated DSC Plan allocation for the 2020 plan year.

2020 Equity-Based Awards

The Committee believes that compensating executives with equity-based awards pursuant to the Restricted Stock Plan promotes a long-term focus on the Company’s operational and financial performance and provides our executives with a means to establish an equity stake in the Company that will further align their interests with our stockholders’ interests. In addition, the vesting provisions and other restrictions on sale of the equity awards encourage retention. Restricted stock awards for the NEOs generally include a three-year vesting schedule and a two-year stock sales restriction period that begins upon vesting.

Under our 2020 restricted stock awards, a dollar-denominated award equal to a percentage of a participant’s base salary can be earned based on the Company’s level of achievement of applicable Return on Equity (ROE) targets over a performance period beginning on January 1, 2020 and ending on December 31, 2020. For purposes of the restricted stock awards, ROE is calculated by dividing VSE’s adjusted net income for the year by the stockholders’ equity as of the beginning of the year, not including unusual one-time events. For 2020, the award potential ranged from 20% of base salary for a ROE below 10.5% to 75% of the base salary for a ROE of 12.5% and higher for NEOs, other than the CEO and CFO, as set forth in the table below. For the CEO, the Restricted Stock Plan award could have ranged from 30% of base salary for a ROE below 10.5% to 120% of base salary for a ROE of 12.5% or higher. For each NEO who served as CFO during the year, the Restricted Stock Plan award could have ranged from 25% of base salary for a ROE below 10.5% to 75% of base salary for a ROE of 12.5% or higher. Pursuant to his employment agreement, Mr. Griffin’s 2020 performance-based restricted stock award opportunity was prorated based on his period of service during 2020.

In general, one-third of an NEO’s earned restricted stock award (as determined based on ROE performance) vests after completion of our annual financial audit and one-third vests on each of the next two anniversaries of such initial vesting date. As each third of the earned dollar-denominated award vests, the vested portion of the award is converted into restricted stock based on the closing market price of our stock at the date of conversion.

Payouts made under the Restricted Stock Plan are subject to Committee authorization based on audited financial results, including total compensation costs, competitiveness of total executive compensation and other factors determined by the Committee and Board. 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 2020, VSE’s ROE was 8.0%, as approved by the Committee and the Board, compared to the floor of 10.5%. As a result, the CEO earned restricted stock equal to 30% of his base salary compared to the maximum

target of 120% of his base salary, Mr. Loftus earned restricted stock equal to 25% of his base salary, Mr. Griffin earned restricted stock equal to 25% of his base salary actually earned during his period of service during 2020, and the other NEOs earned restricted stock equal to 20% of their base salary, in each case subject to vesting and other restrictions as described above. Specific amounts initially granted to the NEOs for 2020 under the Restricted Stock Plan are reported in the 2020 Summary Compensation Table below under the heading “Stock Awards.” The following table displays the initial restricted stock award opportunities for the NEOs based on ROE performance for 2020:

2020 Restricted Stock - Compensation Table:


ROE	% of Base Salary NEOs other than CFO and CEO	% of Base Salary - CFO	% of Base Salary - CEO
12.5% & higher	70%	75%	120%
11.3%	50%	55%	75%
Below 10.5%	20%	25%	30%

In December 2020, the Committee exercised its discretion based on Mr. Cuomo’s and Mr. Kiernan’s outstanding performance for 2020 and granted to each such officer an additional award of a cash-denominated right to receive restricted stock valued at $100,000 and $35,000 respectively, subject to vesting in three substantially equal installments in each of March 2021, 2022 and 2023. As each such award vests, the vested amount will be converted into a number of shares of restricted stock based on the value of our stock at the time of vesting.

Subsequent Committee Actions for 2021:

For 2021, the Committee recommended and the Board approved changes to the long-term incentive compensation program that more heavily weighted the amounts that could be earned in stock and reduced the DSC amounts. These changes are better aligned with our incentive philosophy.

For 2021, the Committee recommended, and the Board approved a reduction to the maximum allocation for each participant under the DSC Plan from 32% of base salary to 15% of base salary. In addition, the vesting periods changed from a ten-year total vesting period to 50% vesting after three years and the remaining 50% vesting after five years of service.

For 2021, in conjunction with that change to the DSC Plan, the Committee recommended, and the Board approved a revision to the types of awards granted to our NEOs under the Restricted Stock Plan, where the Company has moved from dollar-based awards to unit-based stock awards. For 2021, in lieu of cash-denominated restricted stock awards, the NEOs have been granted both time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”), each of which is generally subject to a three-year vesting period. We expect to describe the RSU and PRSU awards in further detail in our future executive compensation disclosure.

Other Compensation

VSE executive officers, including NEOs, are eligible to participate in the VSE Employee 401(k) Plan, which is an Internal Revenue Service qualified plan available to all eligible employees.

During 2020, 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.

Specific amounts contributed to the VSE 401(k) Plan on behalf of the NEOs are included in the “2020 Summary Compensation Table” under the heading “All other compensation” set forth below.

VSE generally does not provide any of its executives, including the NEOs, with perquisites or other personal benefits having a total annual value in excess of $10,000. However, in connection with his commencement of service in 2020 as our CFO and his transition to the Washington, D.C. area, we provided Mr. Griffin with certain relocation and temporary housing benefits as described below and in the 2020 Summary Compensation Table. In addition, we provided temporary housing to Mr. Moore to assist with his transition to the Washington, D.C. area following his commencement of employment in September 2019. The Committee periodically reviews the levels of perquisites and other personal benefits provided to the NEOs.

Initial Compensation for Mr. Griffin

As discussed below under “Other Compensation Policies,” we entered into an employment agreement with Mr. Griffin in October 2020. Pursuant to his employment agreement, Mr. Griffin will receive (or has received) the following initial compensation in addition to his other compensation described above:

•Mr. Griffin received an initial bonus equal to $150,000, which was paid to him in December 2020. He is also entitled to receive an additional initial bonus equal to $75,000 no later than 180 days after the beginning of his employment term;

•In November 2020, Mr. Griffin was granted an award of 15,000 shares of fully vested VSE stock (subject to deferred payment), to be paid in three equal installments of 5,000 shares in November of 2020, 2021 and 2022, subject to two-year trading restrictions after each installment; and

•We arranged for Mr. Griffin and his family to relocate to Washington, D.C. and agreed to pay for home sale and home buy support as well as moving costs, as further described below in the 2020 Summary Compensation Table. We also agreed to arrange for temporary housing for Mr. Griffin in a furnished home or apartment for up to six months. We will reimburse Mr. Griffin for his income tax liability associated with such benefits.

Also as discussed below under “Other Compensation Policies,” we entered into an employment agreement with Mr. Moore in September 2019. Pursuant to his employment agreement, Mr. Moore will receive (or has received) the following compensation in addition to his other compensation described above:

•For plan year 2019, Mr. Moore was granted an award of fully vested VSE stock with a targeted value of $75,000, generally subject to two-year trading restrictions; and

•We arranged for Mr. Moore and his family to relocate to Washington, D.C. and agreed to pay him up to $90,000 as a moving allowance. We also agreed to arrange for temporary housing for Mr. Moore in a furnished apartment for up to nine months. We will reimburse Mr. Moore for his income tax liability associated with such benefits.

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OTHER COMPENSATION POLICIES

Employment Contracts and Severance Agreements

CEO

Pursuant to an employment agreement, dated March 15, 2019, between VSE and Mr. Cuomo (the "Employment Agreement"), Mr. Cuomo serves as VSE's CEO and President at a base salary of $685,000 per year. Mr. Cuomo is employed for a term that commenced on April 15, 2019 and will end on April 14, 2022, subject to an automatic extension for a successive one-year period unless notice not to renew is given by VSE or Mr. Cuomo, at least 90 days prior to the expiration of the term. Mr. Cuomo's base salary will be subject to review each December, commencing with December 2019, provided that his base salary shall not be less than $685,000 per year. Mr. Cuomo is also eligible to receive an annual performance bonus each year up to a maximum amount of not less than 100% of his base salary subject to the satisfaction of performance criteria to be determined by the Board under the Executive Incentive Plan. He also participates in the DSC Plan and Restricted Stock Plan. As an inducement to become VSE's CEO and President, Mr. Cuomo also received a restricted stock unit award covering 57,801 shares of VSE common stock, which award generally vests, subject to Mr. Cuomo's continued employment, as follows: 19,267 of such RSUs will vest on each of April 14, 2020, April 14, 2021 and April 14, 2022. Mr. Cuomo received a cash bonus of $25,000 to cover moving and relocation expenses.

Mr. Cuomo's employment may be terminated by the Board for “Cause” as defined in the Employment Agreement, and his employment may also be terminated in the case of his death or disability. If Mr. Cuomo's employment is terminated because of death 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 and a lump sum equal to the "Annualized Performance Bonus." In general, the Annualized Performance Bonus is the annual bonus for the year of termination, based on an estimate of performance through the termination date and prorated to reflect Mr. Cuomo’s service during the year of termination, which amount will be reconciled with actual performance following the end of the termination year (with the Company or Mr. Cuomo paying the other party the underpayment or overpayment, as applicable).

Mr. Cuomo's employment may also be terminated by VSE without Cause with 30 days' prior notice. If such a termination without Cause occurs not during the period beginning on the 90th day preceding a “change of control” (as defined in the Employment Agreement) and ending on the earlier of the first anniversary of the change of control and the date the term of the Employment Agreement expires pursuant to its terms (the “Change of Control Period”), Mr. Cuomo will be entitled to, among other things, a lump sum cash payment equal to the sum of 150% of his base salary in effect as of the termination date and the Annualized Performance Bonus. If a termination by VSE without Cause occurs during a Change of Control Period, Mr. Cuomo will be entitled to, among other things, a lump sum cash payment equal to the sum of 2.5 times his base salary and the Annualized Performance Bonus, subject to certain adjustments. If Mr. Cuomo’s employment expires on April 14, 2022 because VSE elected not to extend his employment under the Employment Agreement for one year to April 14, 2023, such expiration will be treated as a termination by VSE without Cause under the Employment Agreement. In such event, Mr. Cuomo will be entitled to, among other things, a lump sum cash payment equal to (a) the sum of 150% of his base salary and the Annualized Performance Bonus if the termination is not during a Change of Control Period and (b) the sum of one times his base salary and the Annualized Performance Bonus if the termination is during a Change of Control Period. Mr. Cuomo may terminate the Employment Agreement for “Good Reason” (as defined in the Employment Agreement), on 30 days' notice, and in such event Mr. Cuomo shall be entitled to, among other things, a lump sum cash payment equal to the sum of two times his annual base salary and the Annualized Performance Bonus, subject to certain adjustments.

The Employment Agreement includes undertakings by Mr. Cuomo regarding exclusive services and business opportunities during his employment term, and covenants regarding the safeguarding and return of confidential data, the non-solicitation of employees for a two-year period following termination and non-involvement,

directly or indirectly, in any business enterprise that competes with VSE during his employment term and for a two-year period thereafter.

Other NEOs

Employment Agreement with CFO

Pursuant to an employment agreement, dated October 14, 2020, between VSE and Mr. Griffin, Mr. Griffin serves as VSE's Senior Vice President and CFO with an initial base salary of $400,000 per year. The term of the agreement commenced on November 9, 2020 and will end on November 9, 2022, subject to an automatic extension for successive one-year periods unless notice not to renew is given by VSE or Mr. Griffin, at least 30 days prior to the expiration of the applicable term. Mr. Griffin is also eligible to participate in VSE’s bonus plan consistent with our other NEOs, with a prorated opportunity for 2020. In addition, Mr. Griffin is eligible for a prorated DSC Plan allocation for 2020. Further, Mr. Griffin will be eligible to participate in our benefit plans that are generally provided to our executive officers as in effect from time to time. He also participates in our DSC Plan and Restricted Stock Plan.

Pursuant to his employment agreement, if Mr. Griffin’s employment is terminated effective as of the expiration of the initial two-year term or sooner by us without “cause” (as defined in the employment agreement), by the Company electing not to renew the term of the agreement, or by Mr. Griffin for “good reason” (as defined in the employment agreement), in addition to accrued compensation, (1) we will make a severance payment to Mr. Griffin equivalent to 18 months of his base salary, (2) we will pay Mr. Griffin the cash equivalent of all unvested rights of Mr. Griffin under the DSC Plan, and (3) all restricted stock, RSUs or similar rights granted to Mr. Griffin will vest in full.

If, after the initial two-year term of his employment agreement, we terminate Mr. Griffin’s employment without cause or by not renewing of the employment agreement, or Mr. Griffin terminates his employment for good reason, in addition to accrued compensation, we will pay Mr. Griffin an additional severance payment equivalent to 12 months or 18 months (depending on the non-competition and non-solicitation period elected by the Company) of his base salary.

If a “change in control” (as defined in Mr. Griffin’s employment agreement) results in VSE or its successor rejecting Mr. Griffin’s employment within two years after the change in control, Mr. Griffin will be entitled to a payment in an amount equal to one year of his base salary, plus any bonus that has been earned but not paid. In such event all unvested rights of Mr. Griffin under the DSC Plan will vest in full. Pursuant to Mr. Griffin's agreement, a “change of control” means any sale of equity interests in the Company or substantially all of the assets of the Company, or any merger, conversion or consolidation of the Company, that results in a change of control for the Company, or any other event, including insolvency or bankruptcy, a result of which is that any person (or other persons acting in concert) who did not previously have this ability now has the ability to elect a majority of the Board members or otherwise control, direct or order the disposition of the assets of the Company.

Severance payments under Mr. Griffin’s employment agreement are generally subject to Mr. Griffin’s execution of a release of claims in favor of the Company. The employment agreement also includes customary confidentiality, non-competition and non-solicitation provisions.

Employment Agreement with Federal & Defense Services Segment President

Pursuant to an employment agreement, dated September 14, 2019, between VSE and Mr. Moore, Mr. Moore was entitled to an initial base salary of $330,000 per year. The term of the agreement commenced on September 30, 2019 and will end on September 30, 2021, subject to an automatic extension for successive one-year periods unless notice not to renew is given by VSE or Mr. Moore, at least 30 days prior to the expiration of the applicable term. Mr. Moore is also eligible to participate in VSE’s bonus plan consistent with our other NEOs. Further, Mr. Moore is eligible to participate in our benefit plans that are generally provided to our

executive officers as in effect from time to time. He also participates in our DSC Plan and Restricted Stock Plan.

Pursuant to his employment agreement, if Mr. Moore’s employment is terminated effective as of the expiration of the initial two-year term or sooner by us without “cause” (as defined in the employment agreement), in addition to accrued compensation, we will make a severance payment to Mr. Moore equivalent to the monthly average of his base salary for the preceding 18 months. If, after the initial two-year term of his employment agreement, we terminate Mr. Moore’s employment without cause, in addition to accrued compensation, we will pay Mr. Moore an additional severance payment equivalent to the monthly average of his base salary for the preceding 12 months or 18 months (depending upon the non-solicitation and non-competition period selected by the Company). We will provide similar benefits to Mr. Moore if he terminates his employment for “good reason” (as defined in his employment agreement).

If a “change in control” (as defined in Mr. Moore’s employment agreement) results in VSE or its successor rejecting Mr. Moore’s employment within two years after the change in control, Mr. Moore will be entitled to a payment in an amount equal to one year of his base salary, plus any bonus that has been earned but not paid.

Severance payments under Mr. Moore’s employment agreement are generally subject to Mr. Moore’s execution of a release of claims in favor of the Company. The employment agreement also includes customary confidentiality, non-competition and non-solicitation provisions.

Other Severance Arrangements

In addition to the employment agreements described above, the Company has also entered into a severance agreement with Mr. Kiernan.

On termination of Mr. Kiernan’s employment with VSE, he will be entitled to receive amounts earned during his term of employment, including salary through date of termination, unused vacation pay and reimbursement for company business and travel expenses. If VSE terminates the employment of Mr. Kiernan without "cause" or he resigns for “good reason” (as such terms are defined in his severance agreement), in addition to certain accrued compensation and benefits, Mr. Kiernan will be entitled to receive, generally subject to the execution of a release agreement and compliance with customary restrictive covenants, a severance benefit equal to continuation of his base salary for 12 months, plus the pro-rata value up to the date of termination of any additional compensation plans in which he then participates, including our performance bonus plan, DSC Plan, and Restricted Stock Plan, payable in installments in accordance with the Company's payroll practices.

During his employment with the Company, Mr. Loftus was eligible for severance benefits under his employment agreement. In the event of a termination of Mr. Loftus’ employment without “cause” (as defined in his employment agreement) or following a change in control during the term of the agreement, Mr. Loftus would have been eligible to receive, in addition to certain accrued compensation and benefits, a lump sum severance payment equal to one times his annual base salary, medical and hospitalization benefits for at least the first 18 months after the termination date, and automatic vesting of certain equity awards. In the event of Mr. Loftus’ death or disability (as defined in the employment agreement) for six consecutive months during the term of the employment agreement, he would have been eligible for continued payment of base salary for one year. For information regarding the actual compensation received by Mr. Loftus in connection with his retirement, including the consulting agreement he entered into with the Company, see “Potential Payments Upon Termination or Change in Control” below.

In general, the severance provisions provided under our agreements are designed to promote stability and continuity of senior management. Information regarding applicable payments under these agreements is also summarized in the “Executive Compensation” section below under the caption “Potential Payments Upon Termination or Change in Control.”

Executive Compensation Recovery

In March 2014, the Board approved a provision, sometimes referred to as a clawback provision, where in the event of a material misstatement of the Company’s financial statements, as determined by the Company and confirmed by the Company’s independent auditors, the Board, in its sole discretion, may direct the Company to recover all or a portion of incentive based compensation (including bonus payments, Restricted Stock awards, and deferred supplemental compensation awarded to a current or former participant in the DSC Plan). Notwithstanding the foregoing, this statement only applies to (a) a current or former participant who, as determined by the Board, was an “officer” (as defined in Section 16 of the Exchange Act) of the Company at the time of the award or anytime thereafter, and (b) a material misstatement of the Company’s financial statements that occurred within three years preceding the date on which the Company is required to prepare a restatement.

STOCK RETENTION GUIDELINES

To ensure alignment of the interests of our directors and executive officers with those of our stockholders, the Committee recommended and the Board approved Stock Retention Guidelines for directors and Restricted Stock Plan participants. Beyond the normal vesting schedule and two-year Stock sales restriction period, it is the Board’s sense that the guidelines for Restricted Stock retention be phased in over time. It is also the Board’s intent that these guidelines be subject to annual Board review and, under certain circumstances, be subject to Board waiver. The recommended guidelines for the retention of Restricted Stock are as follows:

Directors

Each current director will be expected to retain VSE Stock of market value equivalent to five years of the director’s cash portion of his or her annual retainer. Any director appointed after the date of these guidelines will be expected to retain at least as much VSE Stock as the director’s earned cumulative cash retainer until such time the market value of his or her VSE Stock is equal to at least five years of the director’s cash portion of the retainer.