Exhibit 10.1
CHANGE IN CONTROL
SEVERANCE AGREEMENT

 

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TABLE OF CONTENTS

         
1. Purpose
    3  
2. Your Agreement
    3  
3. Events That Trigger Severance Benefits
    3  
a. Termination After a Change in Control
    3  
b. Termination After a Potential Change in Control
    3  
c. Successor Fails to Assume This Agreement
    3  
4. Events That Do Not Trigger Severance Benefits
    4  
5. Termination Procedures
    4  
6. Severance Benefits
    4  
a. In General
    4  
b. Lump-Sum Payment in Lieu of Future Compensation
    4  
c. Incentive Compensation and Options
    5  
d. Group Insurance Benefit Continuation
    5  
e. Group Benefit Continuation
    5  
f. Officer Benefits
    5  
g. Medical Benefits
    5  
7. Time for Payment
    6  
8. Payment Explanation
    6  
9. Potential Limitations
    6  
a. Golden Parachute Limitation
    6  
b. Section 162(m) Limitation
    6  
10. Disability
    7  
11. Effect of Reemployment
    7  
12. Successors
    7  
a. Assumption Required
    7  
b. Heirs and Assigns
    7  
13. Amendments
    7  
14. Governing Law
    7  
15. Claims
    7  
a. When Required; Attorneys’ Fees
    7  
b. Initial Claim
    8  
c. Claim Decision
    8  
d. Appeal of Denied Claims
    8  
e. Appeal Decision
    8  
f. Procedures
    8  
g. Arbitration
    8  
16. Limitation on Employee Rights
    9  
17. Validity
    9  
18. Counterparts
    9  
19. Giving Notice
    10  
a. To the Company
    10  
b. To You
    10  

 

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20. Definitions
    10  
a. Agreement
    10  
b. Beneficial Owner
    10  
c. Board
    10  
d. Cause
    10  
e. Change in Control
    10  
(1) Acquisition of Controlling Interest
    10  
(2) Change in Board Control
    11  
(3) Merger Approved
    11  
(4) Sale of Assets
    11  
(5) Liquidation or Dissolution
    11  
(6) Private Transaction
    11  
f. Code
    11  
g. Company
    11  
h. Disability
    11  
i. Exchange Act
    12  
j. Good Reason
    12  
(1) Demotion
    12  
(2) Pay Cut
    12  
(3) Relocation
    12  
(4) Breach of Contract
    12  
(5) Improper Termination
    12  
k. Incentive Compensation
    13  
l. Management Action
    13  
m. Person
    13  
n. Potential Change in Control
    13  
(1) Agreement Signed
    13  
(2) Notice of Intent to Seek Change in Control
    13  
(3) Board Declaration
    13  
o. Separation from Service
    13  
p. Severance Benefits
    13  
q. Term of this Agreement
    14  
(2) Change in Control
    14  
21. Section 409A
    14  

 

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CHANGE IN CONTROL
SEVERANCE AGREEMENT
This Agreement between Cynthia A. Downes (“you”) and VERSAR, INC. (“Company”)
has been entered into as of September 8, 2011. This Agreement promises you
severance benefits if, following a Change of Control, you are terminated without
Cause or resign for Good Reason during the Term of this Agreement. Capitalized
terms are defined in the last section of this Agreement.

1.  
Purpose

The Company considers a sound and vital management team to be essential.
Management personnel who become concerned about the possibility that the Company
may undergo a Change in Control may terminate employment or become distracted.
Accordingly, the Board has determined that appropriate steps should be taken to
minimize the distraction certain executives may suffer from the possibility of a
Change in Control. One step is to enter into this Agreement with you while you
hold the position as Executive Vice President, Chief Financial Officer and
Treasurer. Once you no longer hold this position, except following or in
connection with the triggering of severance benefits as set forth in Section 3
below, this Severance Agreement shall immediately terminate and be null and void
as set forth in Section 20q hereof.

2.  
Your Agreement

If one or more Potential Changes in Control occur during the Term of this
Agreement, you agree not to resign for at least six full calendar months after a
Potential Change in Control occurs, except as follows: (a) you may resign after
a Change in Control occurs; (b) you may resign if you are given Good Reason to
do so; and (c) you may terminate employment on account of retirement on or after
age 65 or because you become unable to work due to serious illness or injury.

3.  
Events That Trigger Severance Benefits

  a.  
Termination After a Change in Control

You will receive Severance Benefits under this Agreement if, during the Term of
this Agreement and after a Change in Control has occurred, your employment is
terminated by the Company without Cause (other than on account of your
Disability or death) or you resign for Good Reason.

  b.  
Termination After a Potential Change in Control

You also will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and after a Potential Change in Control has occurred but
before a Change in Control actually occurs, your employment is terminated by the
Company without Cause or you resign for Good Reason, but only if either: (i) you
are terminated at the direction of a Person who has entered into an agreement
with the Company that will result in a Change in Control; or (ii) the event
constituting Good Reason occurs at the direction of such Person.

  c.  
Successor Fails to Assume This Agreement

You also will receive Severance Benefits under this Agreement if, during the
Term of this Agreement, a successor to the Company fails to assume this
Agreement, as provided in Section 12(a).

 

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4.  
Events That Do Not Trigger Severance Benefits

You will not be entitled to Severance Benefits if your employment ends because
you are terminated for Cause or on account of Disability or because you resign
without Good Reason, retire, or die. Except as provided in Section 3(c), you
will not be entitled to Severance Benefits while you remain protected by this
Agreement and remain employed by the Company, its affiliates, or their
successors.

5.  
Termination Procedures

If you are terminated by the Company after a Change in Control and during the
Term of this Agreement, the Company shall provide you with 30 days’ advance
written notice of your termination, unless you are being terminated for Cause.
The notice will indicate why you are being terminated and will set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
your termination. If you are being terminated for Cause, your notice of
termination will include a copy of a resolution duly adopted by the affirmative
vote of not less than 51 % of the entire membership of the Board (at a meeting
of the Board called and held for the purpose of considering your termination
(after reasonable notice to you and an opportunity for you and your counsel to
be heard before the Board)) finding that, in the good faith opinion of the
Board, Cause for your termination exists and specifying the basis for that
opinion in detail. If you are purportedly terminated without the notice required
by this Section, your termination shall not be effective.

6.  
Severance Benefits

  a.  
In General

If you become entitled to Severance Benefits under this Agreement, you will
receive all of the Severance Benefits described in this Section.

  b.  
Lump-Sum Payment in Lieu of Future Compensation

In lieu of any further cash compensation for periods after your employment ends,
other than cash compensation paid pursuant to any agreement governing the terms
of a Change in Control payable to all similarly situated persons, you will be
paid a cash lump sum equal to 2 times your annual base salary in effect when
your employment ends or, if higher, in effect immediately before the Change in
Control, Potential Change in Control, or Good Reason event for which you
terminate employment. In addition, and without duplication, you will be paid a
cash lump sum equal to 2 times the higher of the amounts paid to you (if any)
under any existing bonus or incentive plans in the calendar year preceding the
calendar year in which your employment ends or in the calendar year preceding
the calendar year in which the Change in Control occurred (or in which the
Potential Change in Control occurred, if benefits are payable under Section 3(b)
hereof).

 

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  c.  
Incentive Compensation and Options

The Company will pay you a cash lump sum equal to any unpaid incentive
compensation (that is not otherwise paid to you) that you have been allocated or
awarded under any existing bonus or incentive plans for measuring periods
completed before you became entitled to Severance Benefits under this Agreement.
All unvested options to purchase Company common stock will immediately vest and
remain exercisable for the longest period of time permitted under the applicable
stock option plan. All unvested restricted stock awards awarded to you will
immediately vest.

  d.  
Group Insurance Benefit Continuation

During the period that begins when you become entitled to Severance Benefits
under this Agreement and ends on the last day of the 18th calendar month
beginning thereafter, the Company shall provide, at no cost to you or your
spouse or dependents, health and dental insurance benefits (or substantially
similar benefits) it was providing to you and your spouse and dependents
immediately before you became entitled to Severance Benefits under this
Agreement. The Company subsidized health and dental insurance coverage shall be
treated as satisfying the Company’s COBRA obligations. After this subsidized
coverage ends, you, your spouse and dependents may continue any remaining COBRA
coverage at your sole cost and expense.

  e.  
Group Benefit Continuation

During the period that begins when you become entitled to Severance Benefits
under this Agreement and ends on the last day of the 24th calendar month
beginning thereafter, the Company shall provide, at no cost to you or your
spouse or dependents, the life, disability and accident benefits (or
substantially similar benefits) it was providing to you and your spouse and
dependents before you became entitled to Severance Benefits under this Agreement
(or immediately before a benefit reduction that constitutes Good Reason, if you
terminate employment for that Good Reason).

  f.  
Officer Benefits

In lieu of the medical and tax accounting benefits available to the Company’s
officers, you will be entitled to a lump sum payment of $16,000.00.

  g.  
Medical Benefits

The Company provides certain medical benefits to retired CEO’s and Vice
Presidents. If you become entitled to Severance Benefits under this Agreement,
then you are deemed to have retired for purposes of this benefit and the Company
shall provide, at no cost to you, continued medical benefits it was providing
you and your spouse and dependents immediately before you became entitled to
Severance Benefits under this Agreement.

 

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7.  
Time for Payment

Subject to the provisions of Section 21 hereof, you will be paid your cash
Severance Benefits within five days after you become entitled to Severance
Benefits under this Agreement (e.g., within five days following your termination
of employment). If the amount you are due cannot be finally determined within
that period, you will receive the minimum amount to which you are clearly
entitled, as estimated in good faith by the Company. The Company will pay the
balance you are due (together with interest at the rate provided in Internal
Revenue Code Section 1274(b) (2) (B)) as soon as the amount can be determined,
but in no event later than 30 days after you terminate employment. If your
estimated payment exceeds the amount you are due, the excess will be a loan to
you, which you must repay to the Company within five business days after demand
by the Company (together with interest at the rate provided in Code
Section 1274(b)(2)(B)). In no event will any cash Severance Benefits be paid to
you later than March 15 of the calendar year following the calendar year in
which you become entitled to such Severance Benefits.

8.  
Payment Explanation

When payments are made to you, the Company will provide you with a written
statement explaining how your payments were calculated and the basis for the
calculations. This statement will include any opinions or other advice the
Company has received from auditors or consultants as to the calculation of your
benefits. If your benefit is affected by the golden parachute limitation in
Section 9, the Company will provide you with calculations relating to that
limitation and any supporting materials you reasonably need to permit you to
evaluate those calculations.

9.  
Potential Limitations

  a.  
Golden Parachute Limitation

Your aggregate payments and benefits under this Agreement and all other
contracts, arrangements, or programs shall not exceed the maximum amount that
may be paid without triggering golden parachute penalties under Section 280G and
related provisions of the Internal Revenue Code, as determined in good faith by
the Company’s independent auditors. The preceding sentence shall not apply to
the extent the shareholder approval requirements of Code Section 280G (b)
(5) are satisfied. If your benefits must be reduced to avoid triggering such
penalties, the Company shall reduce your benefits that are not considered
deferred compensation subject to Code Section 409A before it reduces any
benefits that are considered deferred compensation subject to Code Section 409A.
If an amount in excess of the limit set forth in this Section is paid to you,
you must repay the excess amount to the Company on demand, with interest at the
rate provided in Code Section 1274(b)(2)(B). You and the Company agree to
cooperate with each other reasonably in connection with any administrative or
judicial proceedings concerning the existence or amount of golden parachute
penalties on payments or benefits you receive.

  b.  
Section 162(m) Limitation

To the extent payments or benefits under this Agreement would not be deductible
under Code Section 162(m) if made or provided when otherwise due under this
Agreement, they shall be made or provided later, immediately after Section
162(m) ceases to preclude their deduction, with interest thereon at the rate
provided in Code Section 1274(b)(2)(B).

 

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10.  
Disability

Following a Change in Control, while you are absent from work as a result of
physical or mental illness, the Company will continue to pay you your full
salary and provide you all other compensation and benefits payable to you under
the Company’s compensation or benefit plans, programs, or arrangements. These
payments will stop if and when your employment is terminated by the Company for
Disability as described in Section 20(h) hereof or at the end of the Term of
this Agreement, whichever is earlier. Severance Benefits under this Agreement
are not payable if you are terminated on account of your Disability.

11.  
Effect of Reemployment

Your Severance Benefits will not be reduced by any other compensation you earn
or could have earned from another source.

12.  
Successors

  a.  
Assumption Required

In addition to obligations imposed by law on a successor to the Company, during
the Term of this Agreement the Company will require any successor to all or
substantially all of the business or assets of the Company expressly to assume
and to agree to perform this Agreement in the same manner and to the same extent
that the Company was required to perform. If the Company fails to obtain such an
assumption and agreement before the effective date of a succession, you will be
entitled to Severance Benefits as if you were terminated by the Company without
Cause on the effective date of that succession.

  b.  
Heirs and Assigns

This Agreement will inure to the benefit of, and be enforceable by, your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If you die while any amount is still
payable to you under this Agreement, that amount will be paid to the executor,
personal representative, or administrator of your estate.

13.  
Amendments

This Agreement may be modified only by a written agreement executed by you and
an authorized officer of the Company.

14.  
Governing Law

This Agreement creates a “top hat” employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, and it shall be interpreted,
administered, and enforced in accordance with that law; the Company is the “plan
administrator.” To the extent that state law is applicable, the statutes and
common law of the State of Virginia (excluding its choice of laws statutes or
common law) shall apply.

15.  
Claims

  a.  
When Required; Attorneys’ Fees

You do not need to present a formal claim to receive benefits payable under this
Agreement. However, if you believe that your rights under this Agreement are
being violated, you must file a formal claim with the Company in accordance with
the procedures set forth in this Section. The Company will pay your reasonable
attorneys’ fees and related costs in enforcing your rights under this Agreement.

 

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  b.  
Initial Claim

Your claim must be presented to the Company in writing. Within 30 days after
receiving the claim, a claims official appointed by the Company will consider
your claim and issue his or her determination thereon in writing. With your
consent, the initial claim determination period can be extended further. If you
can establish that the claims official failed to respond to your claim in a
timely manner, you may treat the claim as having been denied by the claims
official.

  c.  
Claim Decision

If your claim is granted, the benefits or relief you are seeking will be
provided. If your claim is wholly or partially denied, the claims official
shall, within three days, provide you with written notice of the denial, setting
forth, in a manner calculated to be understood by you: (i) the specific reason
or reasons for the denial; (ii) specific references to the provisions on which
the denial is based; (iii) a description of any additional material or
information necessary for you to perfect your claim, together with an
explanation of why the material or information is necessary; and (iv) an
explanation of the procedures for appealing denied claims. If you establish that
the claims official has failed to respond to your claim in a timely manner, you
may treat the claim as having been denied by the claims official.

  d.  
Appeal of Denied Claims

You may appeal the claims official’s denial of your claim in writing to an
appeals official designated by the Company (which may be a person, committee, or
other entity) for a full and fair appeal. You must appeal a denied claim within
five days after your receipt of written notice denying your claim, or within
60 days after such written notice was due, if the written notice was not sent.
In connection with the appeals proceeding, you (or your duly authorized
representative) may review pertinent documents and may submit issues and
comments in writing. You may only present evidence and theories during the
appeal that you presented during the initial claims stage, except for
information the claims official requested you to provide to perfect the claim.
You will irrevocably waive any theories you do not in good faith pursue through
the appeal stage, such as by failing to file a timely appeal request.

  e.  
Appeal Decision

The decision by the appeals official will be made within 60 days after your
appeal request, unless special circumstances require an extension of time, in
which case the decision will be rendered as soon as possible, but not later than
ten days after your appeal request, unless you agree to a greater extension of
that deadline. The appeal decision will be in writing, set forth in a manner
calculated to be understood by you; it will include specific reasons for the
decision, as well as specific references to the pertinent provisions of this
Agreement on which the decision is based.

 

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  f.  
Procedures

The Company will adopt procedures by which initial claims and appeals will be
considered and resolved; different procedures may be established for different
claims. All procedures will be designed to afford you full and fair
consideration of your claim.

  g.  
Arbitration

In the event that any dispute arises, following satisfaction of the claim
procedures outlined in this Section 15, related to the validity, interpretation,
enforcement or performance of this Agreement, the dispute shall be submitted to
binding arbitration in accordance with the Employment Rules of the American
Arbitration Association. The aggrieved party must give written notice of any
claim to the other party no later than the expiration of the statute of
limitations (deadline for filing) that the law prescribes for the claim.
Otherwise, the claim shall be void and deemed waived. The arbitrator may award
any remedy that would otherwise be available to a court of competent
jurisdiction. The decision of the arbitrator shall be final and binding and
shall be fully enforceable in any court having jurisdiction and venue over the
parties. The arbitrator shall have no power to alter, modify, ignore, or
otherwise deviate from the express terms of this Agreement, and the arbitrator
shall be bound by controlling law. The arbitrator’s decision shall be provided
to the parties in writing and shall succinctly set forth the arbitrator’s
findings of fact, conclusions of law, and remedy, if any. The cost of such
arbitration shall be paid by the Company, except you shall pay an administrative
fee equivalent to the filing fee to initiate a similar claim in the local court
of general jurisdiction if you are the party initiating the claim. The parties
hereto agree that any action to compel arbitration pursuant to this Agreement
may be brought in the appropriate Virginia state court, and in connection with
such action to compel, the laws of Virginia shall control. Application may also
be made to such court for confirmation of any decision or award of the
arbitrator, for an order of enforcement and for any other remedies which may be
necessary to effectuate such decision or award. The parties hereto hereby
consent to the jurisdiction of the arbitrator and of such court and waive any
objection to the jurisdiction of such arbitrator and court.

16.  
Limitation on Employee Rights

This Agreement does not give you the right to be retained in the service of the
Company.

17.  
Validity

The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.

18.  
Counterparts

This Agreement may be executed in several counterparts, each of which will be
deemed an original, but all of which will constitute one and the same
instrument.

 

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19.  
Giving Notice

  a.  
To the Company

All communications from you to the Company relating to this Agreement must be
sent to the Company to its principal business office in Springfield, Virginia,
in writing, by registered or certified mail, or delivered personally.

  b.  
To You

All communications from the Company to you relating to this Agreement must be
sent to you in writing, by registered or certified mail, or delivered
personally, addressed as indicated at the end of this Agreement.

20.  
Definitions

  a.  
Agreement
       
“Agreement” means this contract, as amended.
    b.  
Beneficial Owner
       
“Beneficial Owner” has the meaning set “forth in Rule 13d-3 under the Exchange
Act.
    c.  
Board
       
“Board” means the Board of Directors of the Company.
    d.  
Cause
       
“Cause” means any of the following:

  (1)  
you fail to carry out assigned duties after being given prior warning and an
opportunity to remedy the failure,
    (2)  
you breach any material term of any employment agreement with the Company,
    (3)  
you engage in fraud, dishonesty, willful misconduct, gross negligence, or breach
of fiduciary duty (including without limitation any failure to disclose a
conflict of interest)in the performance of your duties for the Company, or
    (4)  
you are convicted of a felony or crime involving moral turpitude.

  e.  
Change in Control

“Change in Control” means the first of the following to occur after the date of
this Agreement:

  (1)  
Acquisition of Controlling Interest
       
Any Person becomes the Beneficial Owner, directly or indirectly, of securities
of the Company representing 25% or more of the combined voting power of the
Company’s then outstanding securities. In applying the preceding sentence,
securities acquired directly from the Company or its affiliates with the
company’s approval by or for the Person shall not be taken into account.

 

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  (2)  
Change in Board Control
       
During the term of this Agreement, individuals who constituted the Board as of
the date of this Agreement (or their approved replacements, as defined in the
next sentence) cease for any reason to constitute a majority of the Board. A new
director shall be considered an “approved replacement” director if his or her
election (or nomination for election) was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or were themselves approved replacement directors;
provided that any individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as the term is used in Rule
14a-11 of Regulation 14A issued under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board shall not be considered an “approved replacement”.
    (3)  
Merger Approved
       
The shareholders of the Company approve a merger or consolidation of the Company
with any other corporation unless: (a) the voting securities of the Company
outstanding immediately before the merger or consolidation would continue to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 75% of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; and (b) no Person acquires more
than 25% of the combined voting power of the Company’s then outstanding
securities.
    (4)  
Sale of Assets
       
The shareholders of the Company approve an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets.
    (5)  
Liquidation or Dissolution
       
A complete liquidation or dissolution of the Company.
    (6)  
Private Transaction
       
Any transaction or series of transactions not covered in paragraphs (1) through
(5) above the result of which is the suspension of the Company’s duty to file
reports under the Exchange Act as a result of the remaining number of holders of
the Company’s common stock following such transaction or series of transactions.

  f.  
Code
       
“Code” means the Internal Revenue Code of 1986, as amended.
    g.  
Company
       
“Company” means Versar, Inc. and any successor to its business or assets that
(by operation of law, or otherwise) assumes and agrees to perform this
Agreement. However, for purposes of determining whether a Change in Control has
occurred in connection with such a succession, the successor shall not be
considered to be the Company.
    h.  
Disability
       
“Disability” means that, due to physical or mental illness which is determined
to be total and permanent by a physician selected by the Company or its insurer
and acceptable to you or your legal representative: (i) you have been absent on
a full-time basis from your duties with the Company for 180 consecutive business
days; (ii) the Company has notified you more than 30 days prior to your intended
termination date that it intends to terminate you on account of Disability; and
(iii) you do not resume the full-time performance of your duties within 30 days
after receiving notice of your intended termination on account of Disability.
Following the expiration of the 30 day period specified above, unless you have
resumed full-time performance of your duties, your employment with the Company
shall terminate immediately.

 

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  i.  
Exchange Act
       
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
    j.  
Good Reason
       
“Good Reason” means the occurrence of any of the following events arising
without your consent:

  (1)  
Demotion
       
Your duties and responsibilities are materially and adversely altered from those
in effect immediately before the Change in Control (or, with respect to Section
3(b), the Potential Change in Control), or there is a material and adverse
change in your reporting responsibilities or in the size of the budget you
administer in effect immediately before the Change in Control (or, with respect
to Section 3(b), the Potential Change in Control), provided that no demotion
will be deemed to occur solely as a result of the Company ceasing to be a public
company, a change in your title, or your transfer to an affiliate.
    (2)  
Pay Cut
       
Your annual base salary is materially reduced.
    (3)  
Relocation
       
Your principal office is materially relocated, which increases your one-way
commute to work by more than 50 miles, based on your residence when the transfer
was announced.
    (4)  
Breach of Contract
       
The Company materially breaches this Agreement, your employment agreement or any
other agreement between you and the Company pursuant to which you perform
services for the Company or compensation and benefits are provided to you.
    (5)  
Improper Termination
       
The Company terminates your employment, other than pursuant to a notice of
termination satisfying the requirements of Section 5 hereof.

However, an event that is or would constitute Good Reason shall cease to be Good
Reason if: (a) you fail to provide written notice to the Company within 90 days
following the initial existence of the event described in paragraphs (1) through
(4) above; (b) the Company reverses or otherwise cures the event within 30 days
of receiving such notice; (c) you do not terminate employment within 180 days
after the event occurs; or (d) you were a primary instigator of the Good Reason
event and the circumstances make it inappropriate for you to receive benefits
under this Agreement (e.g., you agree temporarily to relinquish your position on
the occurrence of a merger transaction you negotiate). If you have Good Reason
to terminate employment, you may do so even if you are on a leave of absence due
to physical or mental illness or any other reason.

 

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  k.  
Incentive Compensation
       
“Incentive Compensation” means the amount of cash and/or securities paid to you
under all bonus, incentive or other programs for performance adopted by the
Company for its executive officers and other key employees.
    l.  
Management Action
       
“Management Action” means any event, circumstance, or transaction occurring
during the six-month period following a Potential Change in Control that results
from the action of a Management Group.
    m.  
Person
       
“Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Section 13(d) of that Act, and shall include a “group,” as
defined in Rule 13d-5 promulgated thereunder. However, a Person shall not
include: (i) the Company or any of its subsidiaries; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries; (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities; or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
    n.  
Potential Change in Control
       
“Potential Change in Control” means that any of the following has occurred
during the term of this Agreement, excluding any event that is Management
Action:

  (1)  
Agreement Signed
       
The Company enters into an agreement that will result in a Change in Control.
    (2)  
Notice of Intent to Seek Change in Control
       
The Company or any Person publicly announces an intention to take or to consider
taking actions that will result in a Change in Control.
    (3)  
Board Declaration
       
With respect to this Agreement, the Board adopts a resolution declaring that a
Potential Change in Control has occurred.

  o.  
Separation from Service
       
“Separation from Service” shall have the meaning set forth in Treas. Reg. §
1.409A-1(h).
    p.  
Severance Benefits
       
“Severance Benefits” means your benefits under Section 6 of this Agreement.

 

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  q.  
Term of this Agreement
       
“Term of this Agreement” means the period that commences on the date of this
Agreement and ends on the

  (1)  
earlier of:

  a.  
September 7, 2013; or
    b.  
Your ceasing to serve in the position of Executive Vice President, Chief
Financial Officer and Treasurer prior to the occurrence of a Potential Change in
Control or Change in Control; or

  (2)  
Change in Control
       
The last day of the 24th calendar month beginning after the calendar month in
which a Change in Control occurred during the Term of this Agreement. After a
Change in Control occurs, the end of the Term of this Agreement shall solely be
determined under this Section 20 (q) (2).

21.  
Section 409A

  a.  
Notwithstanding anything in this Agreement to the contrary, if any amounts that
become due under this Agreement on account of your termination of employment
constitute “nonqualified deferred compensation” within the meaning of Code
Section 409A, payment of such amounts shall not commence until you incur a
Separation from Service.
    b.  
Notwithstanding any provision to the contrary in this Agreement (other than
Section 21(c) below) no payments to which you become entitled under this
Agreement shall be made or paid to you prior to the earlier of (1) the
expiration of the six-month period measured from the date of your Separation
from Service with the Company or (2) the date of your death, if you are deemed
at the time of the Separation from Service a “specified employee” within the
meaning of Code Section 409A, and such delayed commencement is otherwise
required in order to avoid a prohibited distribution under Code
Section 409A(a)(2). Upon expiration of the applicable deferral period, all
payments deferred pursuant to this Section 21(b) shall be paid to you in a lump
sum, and any remaining payments due under this Agreement shall be paid in
accordance with the remaining payment dates specified herein.
    c.  
The six-month holdback set forth in Section 21(b) above shall not be applicable
to any cash Severance Benefits under Section 6 that are paid to you by March 15
of the calendar year following the calendar year in which you become entitled to
Severance Benefits.

IN WITNESS WHEREOF, the parties have executed this Agreement as if the date set
forth above.

             
Date 9/8/2011
  By:   Versar, Inc.      
 
  /s/ Anthony L. Otten    
 
       
 
  Anthony L. Otten, Chief Executive Officer    
 
            Date 9/8/2011   /s/ Cynthia A. Downes                   Cynthia A.
Downes    

 

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Company notices to you shall be addressed as follows (or in any other manner you
notify the Company to use):

         
 
  3600 S. 14th Street    
 
  #124    
 
  Alexandria, VA 22302    

 

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