exv10w111



 





Exhibit 10.111




FIRST MODIFICATION AGREEMENT




     THIS FIRST MODIFICATION AGREEMENT (this “Agreement”), effective as of the
12th day of May 2004, 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 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 $371,379.03 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)	 	adding the following new definitions:






     “Application” means (i) that certain Standby Letter of Credit
Agreement dated May 12, 2004, between the Borrower and the Bank,
requesting the issuance by the Bank of the Standby Letter of
Credit, and all extensions, supplements and modifications thereto,
and renewals and replacements thereof, or (ii) that certain Bank
Guaranty Reimbursement Agreement dated May 12, 2004, between the
Borrower and the Bank, requesting the issuance by the Bank of the
Bank Guaranty, and all extensions, supplements and modifications
thereto, and renewals and replacements thereof; and “Applications”
means both of said agreements.




     “Bank Guaranty” means that certain Irrevocable Letter of
Bank Down Payment number 5304928-4401, in the amount of
¬116,033.20, issued by the Bank for the account of GEOMET
Technologies, LLC, pursuant to the terms



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of the related Application, and all extensions, supplements
and modifications thereto, and renewals thereof.




     “Letter of Credit” means the Bank Guaranty or the Standby
Letter of Credit, and “Letters of Credit” means both of said
documents.




     “Loan Documents” means the Note, this Agreement, the
Applications and any other instrument or agreement which now or
hereafter evidences, governs, secures or guaranties the
indebtedness evidenced by the Note or either Application,
including any loan agreement, deed of trust, subordination
agreement, security agreement or guaranty, and all renewals,
extensions and modifications thereof and substitutions
therefor.




     “Outstanding Letter of Credit Balance” means the sum of
(i) the un-drawn amount of the Letters of Credit, plus (ii) all
amounts paid by the Bank in connection with drawings under the
Letters of Credit for which the Bank has not been reimbursed in
accordance with the Applications or this Agreement.




     “Revolving Loan Balance” means, at any time, the
outstanding principal balance of Advances plus the Outstanding
Letter of Credit Balance, at such time.




     “Standby Letter of Credit” means the Bank’s irrevocable
standby letter of credit number 5304928-4501, in the amount of
¬29,009.00, issued by the Bank for the account of GEOMET
Technologies, LLC, pursuant to the terms of the related
Application, and all extensions, supplements and modifications
thereto, and renewals thereof.



                         (ii) deleting the definitions of “Available Credit” and “Obligations”, and
replacing them with the following:




     “Available Credit” means that amount (which must be a
positive number) obtained by subtracting the Revolving Loan
Balance from the Commitment.




     “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, either 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 either
Application, similar or dissimilar to the indebtedness
arising out of or



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in connection with the Note, either 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, either 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,
either Application, or any other obligation referred to in
this definition.




	 	(b)	 	In Section II,





                         (i) By inserting the words “minus the Outstanding Letter of Credit
Balance” at the end of the first sentence of Section II(A)(1) and after the
words “the Commitment” in Section II(C).



                         (ii) By adding a new subsection (F), as follows:




	 	(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 the Letters of Credit for the account
of GEOMET Technologies, LLC, a Borrower. The Letters of
Credit shall be denominated in Euros, and the Borrower agrees
that the Bank’s conversion rate for U.S. Dollars to Euros, and
from Euros to U.S. Dollars, shall at all times be used and,
absent manifest error, be final. At no time shall the Bank be
required to convert the denomination of the Letters of Credit
or any amounts due under this Agreement or the Applications.
At no time shall the Outstanding Letter of Credit Balance
exceed US$200,000.00 or the Euro equivalent. Each draft paid
by the Bank under either Letter of Credit shall, if such
amount is less than the Available Credit, 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 greater than the Available Credit, 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. The Bank is hereby authorized and directed to debit
any deposit account or accounts of the Borrower with the Bank,
at its option, to reimburse the Bank for payment of all or any
part of said amount.




            (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 either or both
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



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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. Contemporaneously with the execution and delivery of this Agreement,
the Borrower shall execute and deliver to the Bank the Applications, on the
Bank’s forms therefor.



          3. The Borrower hereby acknowledges and agrees that, as of the effective
date hereof, the unpaid principal balance of the Note is $371,379.03, the
Outstanding Letter of Credit Balance is (or will be, at the issuance of both
Letters of Credit) ¬145,042.20 and that there are no set-offs or defenses
against the Note, either Application, or the Loan Agreement.



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



          5. Except as hereby expressly modified, the Loan Agreement shall otherwise
be unchanged, shall remain in full force and effect, and is hereby expressly
approved, ratified and confirmed.



          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/ Louise M. Wager	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Louise M. Wager, Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	VERSAR, INC.	 	[SEAL]
	 
	 	 	 	 	 	 
	

	 	By:
	 	/S/ Lawrence W. Sinnott	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Name: Lawrence W. Sinnott	 	 
	

	 	 	 	Title: Sr. V.P. & CFO	 	 







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	 	 	GEOMET TECHNOLOGIES, LLC	 	[SEAL]
	 
	 	 	 	 	 	 
	

	 	By:
	 	/S/ Lawrence W. Sinnott	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Name: Lawrence W. Sinnott	 	 
	

	 	 	 	Title: V.P. and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	VERSAR GLOBAL SOLUTIONS, INC.	 	[SEAL]
	 
	 	 	 	 	 	 
	

	 	By:
	 	/S/ Lawrence W. Sinnott	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Name: Lawrence W. Sinnott	 	 
	

	 	 	 	Title: V.P. and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	VEC, INC.	 	[SEAL]
	 
	 	 	 	 	 	 
	

	 	By:
	 	/S/ Lawrence W. Sinnott	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Name: Lawrence W. Sinnott	 	 
	

	 	 	 	Title: V.P. and Treasurer	 	 








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