FOURTH MODIFICATION AGREEMENT

 

THIS FOURTH MODIFICATION AGREEMENT (this "Agreement"), effective as of the 2S`h
day of September 2006, is by and between UNITED BANK, a Virginia banking
corporation (the "Bank"); and VERSAR, INC. a Delaware corporation, GEOMET
TECHNOLOGIES, LLC, a Maryland limited liability company, VERSAR GLOBAL
SOLUTIONS, INC., a Virginia corporation, and VEC, INC., a Pennsylvania
corporation and successor to Versar Environmental Company, Inc. (individually
and collectively, the "Borrower").

 

WITNESSETH THAT:

 

WHEREAS, the Bank is the owner and holder of that certain Revolving Commercial
Note dated September 26, 2003, in the amount of $5,000,000.00 made by the
Borrower payable to the order of the Bank and bearing interest and being payable
in accordance with the terms and conditions therein set forth (the 'Note"); and

 

WHEREAS, the Note is issued pursuant to the terms of a certain Loan and Security
Agreement dated September 26, 2003, between the Borrower and the Bank (as
modified in accordance with that certain First Modification Agreement dated as
of May 5, 2004, that certain Third Modification Agreement dated as of November
30, 2005 (a second modification having been drafted but never executed and
delivered), and as otherwise amended, extended, increased, replaced and
supplemented from time to time, the "Loan Agreement"); and

 

WHEREAS, as of the effective date hereof, the principal balance of the Note is
$0.00 and the parties hereto desire to modify the Loan Agreement.

 

NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

 

1.          The Loan Agreement is hereby modified as follows:

 

(a)         In Section I(A), by:

 

(i)          Deleting the definitions of "Bank Guaranty" and "Standby Letter of
Credit".

 

(ii)         Replacing the definitions of "Application", "Letter of Credit" an
"Obligations" with the following:

 

"Application" means any Standby Letter of Credit Agreement, on the Bank's form
therefor and appropriately completed, between the Borrower and the Bank,
requesting the issuance by the Bank of a Letter of Credit, and all extensions,
supplements and modifications thereto, and renewals and replacements thereof,
and "Applications" means all of said agreements.

 

 

 

  

"Letter of Credit" means any Standby Letter of Credit issued by the Bank
pursuant to an Application, for the account of any Borrower, and "Letters of
Credit" means all of said documents.

 

"Obligations" means (i) all amounts now or hereafter payable by the Borrower to
the Bank on the Note and the Applications, (ii) all other obligations or
liabilities now or hereafter payable by the Borrower pursuant to this Agreement,
(iii) all obligations and liabilities now or hereafter payable by the Borrower
under, arising out of or in connection with any other Loan Documents and any
other instrument or agreement executed in connection with the Note, any
Application, or this Agreement, and (iv) all other indebtedness, obligations and
liabilities of the Borrower to the Bank, now existing or hereafter arising or
incurred, whether or not evidenced by notes or other instruments, and whether
such indebtedness, obligations and liabilities are direct or indirect, fixed or
contingent, liquidated or unliquidated, due or to become due, secured or
unsecured, joint, several or joint and several, related or unrelated to the loan
evidenced by the Note or any Application, similar or dissimilar to the
indebtedness arising out of or in connection with the Note, any Application, or
this Agreement or of the same or a different class of indebtedness as the
indebtedness arising out of or in connection with the Note, any Application, or
this Agreement, including, without limitation, any overdrafts in any deposit
accounts maintained by the Borrower with the Bank, any indebtedness of the
Borrower that is purchased by or assigned to the Bank, and any indebtedness of
the Borrower to any assignee of all or a portion of the Note, any Application,
or any other obligation referred to in this definition.

 

(b)          In Section II, by replacing subsection (F) with the following:

 

(F)         Letter of Credit Subfeature.

 

(1)         As a subfeature under the Commitment, the Bank agrees, on the terms
and conditions set forth in this Agreement and in the applicable Applications,
to make loans to the Borrower by issuing Letters of Credit for the account of
any Borrower ("Letter of Credit Loans"); provided, that the amount allocated to
the Letter of Credit Loans is a permissive use of such amount, and not a
mandatory allocation of the proceeds of the Commitment. At no time shall the
Outstanding Letter of Credit Balance exceed the Commitment minus the outstanding
principal balance of Advances at such time (the "Letter of Credit Commitment").
Each Letter of Credit shall be issued for a term not to exceed one (1) year,
although any Letter of Credit may be automatically renewed in accordance with
the terms and conditions of said Letter of Credit and the related Application. A
Letter of Credit may be denominated only in U.S. Dollars. Each draft paid by the
Bank under a Letter of Credit shall, if such amount is available under the
Letter of Credit Commitment, be deemed an Advance and shall accrue interest at
the rate then applicable under the Note. To the extent the amount of a draft
paid by the Bank as aforesaid is unavailable under the Letter of Credit
Commitment, said amount shall be payable by the Borrower ON DEMAND and until
paid in full shall accrue interest at the rate then applicable under the Note.
Subject to the foregoing, the Borrower may borrow under this Section II(F)(1),
prepay and re-borrow.

 

 

 

 

(2)         Upon the termination of the Commitment for any reason whatsoever, or
upon the occurrence of a Default, the Bank may, at its option, demand that the
Borrower, within ten (10) days of such demand, arrange for the cancellation of
any or all of the Letters of Credit such that the Bank has no further liability
under said Letters of Credit, or in the event the Borrower fails to procure the
cancellation of either Letter of Credit within such ten (10) day period, demand
that the Borrower pay to the Bank, as cash collateral, the remaining amount
available to be drawn, if any, under said Letter of Credit and such amount shall
thereupon become immediately due and payable. In the event the Borrower pays to
the Bank or the Bank collects from the Borrower sums representing the remaining
amount available to be drawn under said Letter of Credit, the Bank shall hold
such sums in a non-interest-bearing account as security for the Borrower's
obligation to reimburse the Bank for amounts paid by the Bank under said Letter
of Credit or otherwise due hereunder. Upon the expiration of said Letter of
Credit and the Bank's reasonable determination that it has no further liability
thereunder, the Bank shall repay such sums to the Borrower to the extent they
exceed the remaining amounts actually paid by the Bank under said Letter of
Credit. The Bank's rights under this Section II(F) are in addition to other
rights and remedies which the Bank may have.

 

2.          The other "Loan Documents", as defined in the Note, are hereby
modified to the extent necessary to carry out the purposes of this Agreement.

 

3.          The Borrower hereby acknowledges and agrees that, as of the
effective date hereof, the unpaid principal balance of the Note is $0.00 and
that there are no set-offs or defenses against the Note, the Loan Agreement, or
the other Loan Documents.

 

4.          The parties to this Agreement do not intend that this Agreement be
construed as a novation of the Note, the Loan Agreement, or any of the other
Loan Documents.

 

5.          Except as hereby expressly modified, the Note and Loan Agreement
shall otherwise be unchanged, shall remain in full force and effect, and are
hereby expressly approved, ratified and confirmed. A legend shall be placed on
the face of the Note indicating that its terms have been modified hereby, and
the original of this Agreement shall be affixed to the original of the Note.

 

 

 

 

 

6.          This Agreement shall be governed in all respects by the laws of the
Commonwealth of Virginia and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns. 

 

WITNESS the following signatures and seals.

 

UNITED BANK [SEAL]     By: /S/ E. Allen Shirmer     Name: E. Allen Shirmer    
Title: Vice President       VERSAR, INC. [SEAL]     By: /S/ Lawrence W. Sinnott
    Name: Lawrence W. Sinnott     Title: Exec, VP, COO, CFO and Treasurer      
GEOMET TECHNOLOGIES, LLC [SEAL]     By: /S/ Lawrence W. Sinnott     Name:
Lawrence W. Sinnott     Title: VP and Treasurer       VERSAR GLOBAL SOLUTIONS
[SEAL]     By: /S/ Lawrence W. Sinnott     Name: Lawrence W. Sinnott     Title:
VP and Treasurer       VEC, INC. [SEAL]     By: /S/ Lawrence W. Sinnott    
Name: Lawrence W. Sinnott     Title: VP and Treasurer