**Exhibit 10.111**
**FIRST MODIFICATION AGREEMENT**
     THIS FIRST MODIFICATION AGREEMENT (this “Agreement”), effective as of the12th day of May 2004, is by and between UNITED BANK, a Virginia bankingcorporation (the “Bank”); and VERSAR, INC. a Delaware corporation, GEOMETTECHNOLOGIES, LLC, a Maryland limited liability company, VERSAR GLOBALSOLUTIONS, INC., a Virginia corporation, and VEC, INC., a Pennsylvaniacorporation and successor to Versar Environmental Company, Inc. (individuallyand collectively, the “Borrower”).
WITNESSETH THAT:
     WHEREAS, the Bank is the owner and holder of that certain RevolvingCommercial Note dated September 26, 2003, in the amount of $5,000,000.00 madeby the Borrower payable to the order of the Bank and bearing interest and beingpayable 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 andSecurity 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 theNote 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 valuableconsideration, 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 CreditAgreement dated May 12, 2004, between the Borrower and the Bank,requesting the issuance by the Bank of the Standby Letter ofCredit, and all extensions, supplements and modifications thereto,and renewals and replacements thereof, or (ii) that certain BankGuaranty Reimbursement Agreement dated May 12, 2004, between theBorrower and the Bank, requesting the issuance by the Bank of theBank Guaranty, and all extensions, supplements and modificationsthereto, and renewals and replacements thereof; and “Applications”means both of said agreements.**
     **“Bank Guaranty” means that certain Irrevocable Letter ofBank Down Payment number 5304928-4401, in the amount of¬116,033.20, issued by the Bank for the account of GEOMETTechnologies, LLC, pursuant to the terms**
70

 

**of the related Application, and all extensions, supplementsand modifications thereto, and renewals thereof.**
     **“Letter of Credit” means the Bank Guaranty or the StandbyLetter of Credit, and “Letters of Credit” means both of saiddocuments.**
     **“Loan Documents” means the Note, this Agreement, theApplications and any other instrument or agreement which now orhereafter evidences, governs, secures or guaranties theindebtedness evidenced by the Note or either Application,including any loan agreement, deed of trust, subordinationagreement, security agreement or guaranty, and all renewals,extensions and modifications thereof and substitutionstherefor.**
     **“Outstanding Letter of Credit Balance” means the sum of(i) the un-drawn amount of the Letters of Credit, plus (ii) allamounts paid by the Bank in connection with drawings under theLetters of Credit for which the Bank has not been reimbursed inaccordance with the Applications or this Agreement.**
     **“Revolving Loan Balance” means, at any time, theoutstanding principal balance of Advances plus the OutstandingLetter of Credit Balance, at such time.**
     **“Standby Letter of Credit” means the Bank’s irrevocablestandby letter of credit number 5304928-4501, in the amount of¬29,009.00, issued by the Bank for the account of GEOMETTechnologies, LLC, pursuant to the terms of the relatedApplication, and all extensions, supplements and modificationsthereto, and renewals thereof.**
                         (ii) deleting the definitions of “Available Credit” and “Obligations”, andreplacing them with the following:
     **“Available Credit” means that amount (which must be apositive number) obtained by subtracting the Revolving LoanBalance from the Commitment.**
     **“Obligations” means (i) all amounts now or hereafterpayable by the Borrower to the Bank on the Note and theApplications, (ii) all other obligations or liabilities nowor hereafter payable by the Borrower pursuant to thisAgreement, (iii) all obligations and liabilities now orhereafter payable by the Borrower under, arising out of orin connection with any other Loan Documents and any otherinstrument or agreement executed in connection with theNote, either Application, or this Agreement, and (iv) allother indebtedness, obligations and liabilities of theBorrower to the Bank, now existing or hereafter arising orincurred, whether or not evidenced by notes or otherinstruments, and whether such indebtedness, obligations andliabilities are direct or indirect, fixed or contingent,liquidated or unliquidated, due or to become due, secured orunsecured, joint, several or joint and several, related orunrelated to the loan evidenced by the Note or eitherApplication, similar or dissimilar to the indebtednessarising out of or**
71

 

**in connection with the Note, either Application, or thisAgreement or of the same or a different class ofindebtedness as the indebtedness arising out of or inconnection with the Note, either Application, or thisAgreement, including, without limitation, any overdrafts inany deposit accounts maintained by the Borrower with theBank, any indebtedness of the Borrower that is purchased byor assigned to the Bank, and any indebtedness of theBorrower to any assignee of all or a portion of the Note,either Application, or any other obligation referred to inthis definition.**
 (b) In Section II,
                         (i) By inserting the words “**minus the Outstanding Letter of CreditBalance**” at the end of the first sentence of Section II(A)(1) and after thewords “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 Bankagrees, on the terms and conditions set forth in thisAgreement and in the applicable Applications, to make loans tothe Borrower by issuing the Letters of Credit for the accountof GEOMET Technologies, LLC, a Borrower. The Letters ofCredit shall be denominated in Euros, and the Borrower agreesthat the Bank’s conversion rate for U.S. Dollars to Euros, andfrom Euros to U.S. Dollars, shall at all times be used and,absent manifest error, be final. At no time shall the Bank berequired to convert the denomination of the Letters of Creditor any amounts due under this Agreement or the Applications.At no time shall the Outstanding Letter of Credit Balanceexceed US$200,000.00 or the Euro equivalent. Each draft paidby the Bank under either Letter of Credit shall, if suchamount is less than the Available Credit, be deemed an Advanceand shall accrue interest at the rate then applicable underthe Note. To the extent the amount of a draft paid by the Bankas aforesaid is greater than the Available Credit, said amountshall be payable by the Borrower ON DEMAND and until paid infull shall accrue interest at the rate then applicable underthe Note. The Bank is hereby authorized and directed to debitany deposit account or accounts of the Borrower with the Bank,at its option, to reimburse the Bank for payment of all or anypart of said amount.**
            **(2) Upon the termination of the Commitment for any reasonwhatsoever, or upon the occurrence of a Default, the Bank may,at its option, demand that the Borrower, within ten (10) daysof such demand, arrange for the cancellation of either or bothof the Letters of Credit such that the Bank has no furtherliability under said Letters of Credit, or in the event theBorrower fails to procure the cancellation of either Letter ofCredit within such ten (10) day period, demand that theBorrower pay to the Bank, as cash collateral, the remainingamount available to be drawn, if any, under said Letter ofCredit and such amount shall thereupon become immediately due**
72

 

**and payable. In the event the Borrower pays to the Bank orthe Bank collects from the Borrower sums representing theremaining amount available to be drawn under said Letter ofCredit, the Bank shall hold such sums in anon-interest-bearing account as security for the Borrower’sobligation to reimburse the Bank for amounts paid by the Bankunder said Letter of Credit or otherwise due hereunder. Uponthe expiration of said Letter of Credit and the Bank’sreasonable determination that it has no further liabilitythereunder, the Bank shall repay such sums to the Borrower tothe extent they exceed the remaining amounts actually paid bythe Bank under said Letter of Credit. The Bank’s rights underthis Section II(F) are in addition to other rights andremedies 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 theBank’s forms therefor.
          3. The Borrower hereby acknowledges and agrees that, as of the effectivedate hereof, the unpaid principal balance of the Note is $371,379.03, theOutstanding Letter of Credit Balance is (or will be, at the issuance of bothLetters of Credit) ¬145,042.20 and that there are no set-offs or defensesagainst the Note, either Application, or the Loan Agreement.
          4. The parties to this Agreement do not intend that this Agreement beconstrued as a novation of the Note or the Loan Agreement.
          5. Except as hereby expressly modified, the Loan Agreement shall otherwisebe unchanged, shall remain in full force and effect, and is hereby expresslyapproved, ratified and confirmed.
          6. This Agreement shall be governed in all respects by the laws of theCommonwealth of Virginia and shall be binding upon and shall inure to thebenefit of the parties hereto and theirrespective 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  
73

 
         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  
74