Document:

exv10w107

 

Exhibit 10.107

Line of Credit Commitment Letter – United Bank

	 	 	 
	Lawrence W. Sinnott, CPA 

SVP and Chief Financial Officer

Versar, Inc.

6850 Versar Center

Springfield, Virginia 22151	 	
September 16, 2003

Dear Mr. Sinnott:

          The following Commitment Letter is to supercede the Commitment dated
September 12, 2003.

          United Bank, a Virginia banking corporation (the “Bank”) is pleased to
offer to Versar, Inc., a Delaware corporation, GEOMET Technologies, LLC, a
Maryland limited liability company, Versar Global Solutions, Inc., a Virginia
corporation, Versar Environmental Company, a Pennsylvania corporation, and all
other now or hereafter existing subsidiaries of Versar, Inc. (individually and
collectively, the “Borrower”) its commitment to establish the credit facility
described in Section I hereof (the “Loan”) subject to the terms and conditions
set forth in Section II hereof.

	I.	 	The Loan.

	 	 	 	 	 	 	 	 	 
	 	 	
A.
	 	Type of Credit
Facility:
	 	 	Revolving Line of Credit. The
Borrower may obtain advances up to the lesser of
the Borrowing Base and the Principal Amount.
Subject to the foregoing, amounts borrowed and
repaid or prepaid may be re-borrowed.
	 	 	 	 	 	 	 	 	 
	 	 	
B.
	 	“Principal Amount”:
	 	$5,000,000.00.	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
C.
	 	“Borrowing Base”:
	 	The sum of (i) 90% of the Net Unpaid Balance of all Assigned Prime
Government Accounts; and (ii) the lesser of (A) $2,000,000 and (B) the
sum of (1) 75% of the Net Unpaid Balance of all Commercial Accounts and
(2) 75% of the Net Unpaid Balance of all Other Government Accounts. As
used herein, the following terms shall have the following meanings:

120

 

		
	 	     (1) “Net Unpaid Balance” means at any date
the unpaid balance of an Eligible Account at such
date not including any unearned finance charges,
late payment charges or other similar charges, or
any extension, service or collection fees in
respect thereof.
	 
	 	     (2) “Eligible Accounts” means such Billed
Accounts for goods delivered or services rendered
owing to the Borrower as the Bank, in its
reasonable discretion, shall from time to time
elect to consider Eligible Accounts for purposes
of the Loan Documents.
	 
	 	     (3) “Billed Accounts” means accounts
receivable for which a bill has been rendered to
the account debtor and which are unpaid for no
more than ninety (90) days from the date of the
original bill.
	 
	 	     (4) “Assigned Prime Government Accounts”
means Eligible Government Accounts where the
Borrower is a prime contractor with the United
States and as to which the Borrower shall have
satisfied the requirements of the Assignment of
Claims Act of 1940, as amended, in respect
thereof and the Bank is satisfied as to the
absence of set-offs, counterclaims and other
defenses to payment on the part of the United
States.
	 
	 	     (5) “Other Government Accounts” means
Eligible Government Accounts that are owing from
a person which is a prime contractor with the
United States, and arise in respect of said prime
contract.
	 
	 	     (6) “Eligible Government Accounts” means
Eligible Accounts that are Billed Accounts owing
from the United States or from a prime contractor
with the United States.
	 
	 	     (7) “Commercial Accounts” means Eligible
Accounts other than Eligible Government Accounts.

	 	 	 	 	 	 	 
	 	 	
D.
	 	Purpose:
	 	To finance working capital and for other general
business purposes.

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E.
	 	Interest Rate:
	 	Advances under the Loan shall bear interest at
a variable rate equal to the Prime Rate plus the Variance;
provided,
however, that in no event shall the interest rate on the Loan be
less than the Floor Rate. As used herein, the following terms shall
have the following meanings:

		
	 	     (1) “Prime Rate” means that variable rate of
interest published in The Wall Street Journal
from time to time as the domestic prime rate
under the heading “Money Rates”. The Prime Rate
is not necessarily the lowest rate charged by the
Bank to borrowers. The interest rate on the Loan
will change in accordance with changes in the
Prime Rate, as and when such changes occur.
	 
	 	     (2) “Variance” and “Floor Rate” mean those
rates per annum determined with reference to the
Borrower’s Net Profit Goal, as follows: (a)
reaching Net Profit Goal for 2 consecutive fiscal
quarters, Variance of 1.25% and Floor Rate of
5.25%; (b) reaching Net Profit Goal for 3
consecutive fiscal quarters, Variance of 1.00%
and Floor Rate of 5.00%; (c) reaching Net Profit
Goal for 4 consecutive fiscal quarters, Variance
of 0.75% and Floor Rate of 4.75%; (d) reaching
Net Profit Goal for 5 consecutive fiscal
quarters, Variance of 0.50% and Floor Rate of
4.50%; and (e) failure to reach Net Profit Goal
in any fiscal quarter, Variance of 1.50% and
Floor Rate of 5.50%. The Variance and Floor Rate
will be measured based upon the Borrower’s
quarterly financial statements, beginning with
the financial statements covering the first
fiscal quarter of 2004, and looking back to such
statements covering the fourth fiscal quarter of
2003. Until such time as said financial
statements are received by the Bank, the Variance
and Floor Rate shall be as set forth in clause
(e), above. Each change in the Variance and
Floor Rate shall take effect in the fiscal
quarter next following the fiscal quarter of
determination.
	 
	 	     (3) “Net Profit Goal” means quarterly net
profits (as determined in accordance with GAAP)
of $200,000.00 or more.
	 
	 	Interest on the Loan shall be calculated on the
basis of a 360-day year, for the actual number of
days elapsed.

122

 

	 	F.	 	Payments:

	 	(1)	Interest. Accrued interest shall be payable in
consecutive monthly installments, and in full on the Maturity
Date.
	 
	 	(2)	Principal. Principal shall be payable in full on
the Maturity Date.
	 
	 	(3)	Optional Prepayments. Principal on the Loan may
be prepaid in whole or in part without penalty.
	 
	 	(4)	Mandatory Prepayments. If on any day the unpaid
principal amount of the Loan exceeds the Borrowing Base, the
Borrower shall pay, and there shall become immediately due and
payable, an amount equal to such excess, together with
interest accrued thereon.

	 	G.	 	“Maturity Date”:
  November 30, 2005.
	 
	 	H.	 	Fees:   The Borrower shall pay an administrative fee of $800.00
per month to the Bank.
	 
	 	I.	 	Security:   The Loan shall be secured by a perfected first lien
on all of the assets of the Borrower.

	II.	 	Terms and Conditions. Each of the following is a precondition to the
obligation of the Bank to establish the Loan:

	 	A.	 	Documentation: The Borrower shall execute and deliver or
cause to be delivered to the Bank such instruments, documents,
certificates, opinions and assurances as the Bank may request in
connection with the establishment of the Loan (the “Loan Documents”)
and in connection with the Borrower’s authority and capacity to
accept the Loan and execute the Loan Documents (including, without
limitation, corporate resolutions, partnership agreements and
authorizations, letters of consent); and the Borrower shall be
required to take such other action in connection with the Loan as
the Bank may reasonably request. The Bank’s forms of Loan Documents
shall be used. In addition to the standard provisions that are
normally contained in documents relating to a loan similar to the
Loan, the Loan Documents shall contain the following provisions:

	 	(1)	A right of setoff.
	 
	 	(2)	A confession of judgment and waiver of exemption
clause.
	 
	 	(3)	A late fee of 5.0% of the amount of any scheduled
payment which is not paid within 7 days after its scheduled
due date.
	 
	 	(4)	A “due on sale” and “due on encumbrance” clause.

123

 

	 	(5)	The following affirmative and negative covenants:

	 	(a)	 	The Borrower shall be required to
submit to the Bank (i) annual audited consolidated
financial statements, together with financial statement
and cash flow projections, and a 10K, within ninety (90)
days of its fiscal year-end, (ii) quarterly
Borrower-prepared financial statements and a 10Q,
together with a covenant compliance certificate, within
45 days of the end of each fiscal quarter; (iii) current
contract backlog and project status reports, within 30
days after the end of each calendar quarter; (iv)
monthly borrowing base certificates and a report of the
aging of the Borrower’s receivables, within 15 days of
the end of each month; and (v) other financial
information within thirty (30) days of the Bank’s
request therefor.
	 
	 	(b)	 	The Bank shall be allowed to make
annual audits of the books and records of the Borrower
at the Bank’s discretion.
	 
	 	(c)	 	The Borrower shall satisfy the
requirements of the Assignment of Claims Act of 1940, as
amended, in respect of All Eligible Government Accounts
in excess of $500,000.00 in contract price, where the
Borrower is a prime contractor with the United States.
	 
	 	(d)	 	All payments on the Borrower’s
accounts receivable shall be paid directly to the Bank
in accordance with the Bank’s form of lockbox agreement.
	 
	 	(e)	 	During the term of the Loan, the
following financial covenants must be observed:

	 	(i)	Minimum Tangible Net Worth: $6,500,000.00.
	 
	 	(ii)	Maximum Total Liabilities to Tangible Net Worth: 2.5:1.0.
	 
	 	(iii)	Minimum Current Ratio: 1.25:1.0.
	 
	 	As used herein and in the Loan Documents, accounting
terms shall generally have their respective meanings
under GAAP.

	 	B.	 	“Closing Date”: The Loan shall be closed on such date as is
mutually satisfactory to the Borrower and the Bank, but not later
than September 30, 2003, unless we agree in writing to a later date.
In the event the Loan is not closed by the Closing Date, this
commitment shall expire and the Bank shall have no further
obligation hereunder.

124

 

	 	C.	 	Expenses: All documentation shall be prepared by the Bank’s
counsel, Troutman Sanders LLP, and shall be in form and substance
satisfactory to the Bank and its counsel. The Borrower shall be
responsible for the expenses of the Bank (including the fees of Bank
counsel) whether or not the Loan closes.
	 
	 	D.	 	Broker’s fees: Any and all brokerage commission or finder’s
fee payable in connection with the Loan shall be paid by the
Borrower and not by the Bank. The Borrower agrees to indemnify and
hold the Bank harmless from and against any claim of any broker or
finder arising out of the transactions contemplated hereby. This
obligation shall survive the expiration or termination of this
commitment.
	 
	 	E.	 	Other requirements:

	 	(1)	Verification satisfactory to the Bank of the
financial statements and projections provided to it. The
Borrower shall cooperate with Bank employees and agents in
this process and shall hold the Bank harmless from and against
any loss which may result, directly or indirectly, from these
procedures.
	 
	 	(2)	No material adverse change in the Borrower’s
financial condition or prospects, or in the condition of any
security, between the date hereof and the Closing Date.
	 
	 	(3)	The Bank shall have received from Grant Thornton
a draft financial audit of the Borrower for June 30, 2003,
showing no material changes to the Borrower’s income statement
and balance sheet.
	 
	 	(4)	The Bank will require an opinion letter from the
Borrower’s counsel, acceptable to it in form, which verifies
the proper authorization, execution, delivery, and
enforceability of the Loan Documents, and which opines as to
certain other matters required by the Bank.
	 
	 	(5)	There shall exist no default in any of the
Borrower’s obligations or in the Borrower’s compliance with
any applicable legal requirements.

          This commitment is not assignable by operation of law or otherwise without
the Bank’s prior written consent. This letter evidences an agreement between
the Borrower and the Bank only and is not to be relied upon by any third party
without the prior written consent of the Bank. No statements, agreements or
representations, oral or written, which may have been made by the Bank or by
any employee, agent or broker acting on the Bank’s behalf, with respect to the
transactions contemplated by this letter, will be of any force or effect,
except to the extent stated in this letter, and all prior agreements and
representations in respect of such transactions are merged herein so that this
letter contains the entire agreement between the Bank and the Borrower. This
letter may not be amended, modified, supplemented or terminated except by
written agreement signed by the Borrower and the Bank.

125

 

          Upon the Borrower’s acceptance of the offer contained in this letter,
signed and returned to the Bank, the Bank shall proceed with the preparation of
the Loan Documents. The Bank’s obligations hereunder shall expire unless this
letter is signed and returned to the Bank on or before September 19, 2003.

          This letter, the agreements evidenced hereby, and the transactions
contemplated hereby, shall be governed in all respects by the laws of the
Commonwealth of Virginia.

	 	 	 
	 	
Very truly yours,
	 	 	
 
	 	
UNITED BANK
	 	 	
 
	 	By:	
    /S/ Louise M. Wager
	 	 	

	 	 	
    Louise M. Wager
	 	 	
    Senior Vice President

          The undersigned hereby accept the foregoing Commitment and agree to
consummate the transactions contemplated therein.

	 	 	 	 	 	 	 
	
VERSAR, INC.
	 	[SEAL]	 	 
	 	 	 	 	 	 	Date:     9/16/03        
	 	 	 	 	 	 	 
	By:	 	
    /S/ Lawrence W. Sinnott	 	 	 	 
	 	 	

	 	 	 	 
	 	 	
    Name: Lawrence W. Sinnott	 	 	 	 
	 	 	
    Title: Sr. VP & CFO	 	 	 	 
	 	 	 	 	 	 	 
	
GEOMET TECHNOLOGIES, LLC
	 	[SEAL]	 	 
	 	 	 	 	 	 	 
	By:	 	
    /S/ Lawrence W. Sinnott	 	 	 	 
	 	 	

	 	 	 	 
	 	 	
    Name: Lawrence W. Sinnott	 	 	 	 
	 	 	
    Title: Vice President	 	 	 	 
	 	 	 	 	 	 	 
	
VERSAR GLOBAL SOLUTIONS, INC.
	 	[SEAL]	 	 
	 	 	 	 	 	 	 
	By:	 	
    /S/ Lawrence W. Sinnott	 	 	 	 
	 	 	

	 	 	 	 
	 	 	
    Name: Lawrence W. Sinnott	 	 	 	 
	 	 	
    Title: Vice President	 	 	 	 

126

 

	 	 	 	 	 	 	 
	
VERSAR ENVIRONMENTAL COMPANY	 	 	 	 
	 	 	 	 	 	 	 
	By:	 	
    /S/ Lawrence W. Sinnott	 	 	 	 
	 	 	

	 	 	 	 
	 	 	
    Name: Lawrence W. Sinnott	 	 	 	 
	 	 	
    Title: Vice President	 	 	 	 

127<PAGE>

                                                                    EXHIBIT 10.1

                         WAIVER AND AMENDMENT AGREEMENT

         WHEREAS, the City of Chaska, Minnesota (the "Municipality") and
Lifecore Biomedical, Inc., a Minnesota corporation (the "Borrower") entered into
a certain Loan Agreement dated as of September 1, 1990 (the "Loan Agreement"),
which agreement was assigned by the Municipality to Norwest Bank Minnesota,
National Association, as Trustee (the "Trustee") pursuant to a Trust Indenture
dated as of September 1, 1990 (the "Indenture") in connection with the issuance
and sale by the Municipality of its Industrial Development Revenue Bonds
(Lifecore Biomedical, Inc. Project), Series 1990 (the "Bonds"). Terms not
defined herein shall have the meanings set forth in the Indenture;

         WHEREAS, the Borrower has requested the waiver of the current terms of
Sections 6.09(a)(i) and 6.09(d)(i) of the Loan Agreement and the modification of
Sections 6.09(a)(i) and (ii) and 6.09(d)(i) and (ii) of the Loan Agreement, as
amended most recently by the Waiver and Amendment Agreement dated June 5, 2002.

         WHEREAS, the registered owners of all of the outstanding Bonds (herein
the "Bondholders") are willing to agree to the request of the Borrower and
direct the Trustee to consent thereto based on the Borrower's agreements set
forth herein;

         NOW, THEREFORE, the parties hereto hereby agree as follows:

(1)      Compliance with the current provisions of Section 6.09(a)(i) of the
         Loan Agreement is hereby waived and Sections 6.09(a)(i) and (ii) of the
         Loan Agreement are hereby amended to read as follows:

         Section 6.09 (a) Cash Flow Coverage Test. (i) For the Fiscal Year
ending June 30, 2004, Borrower shall not be subject to a minimum Cash Flow
Coverage Ratio.

         (ii) For each Fiscal Year commencing with the Fiscal Year ending June
30, 2005 ("Fiscal 2005"), the Borrower will, for the twelve-month period ending
at each fiscal quarter, maintain a minimum Cash Flow Coverage Ratio of 2.00:1.
At the Borrower's option, for purposes of computing the Cash Flow Coverage Ratio
for any of the first three quarters of Fiscal 2005, the Borrower shall be
permitted to base such calculation either upon Consolidated Adjusted Net Income
for the preceding twelve-month period or upon the Consolidated Adjusted Net
Income for the preceding six-month period, multiplied by two.

(2)      Compliance with the current provisions of Section 6.09(d)(i) of the
         Loan Agreement is hereby waived and Sections 6.09(d)(i) and (ii) of the
         Loan Agreement are hereby amended to read as follows:

<PAGE>

         Section 6.09 (d) Fixed Charges Coverage Test. (i) For the Fiscal Year
ending June 30, 2004, Borrower shall not be subject to a minimum Fixed Charges
Coverage Ratio.

         (ii) For each Fiscal Year commencing with Fiscal 2004, the Borrower
will, for the twelve-month period ending at each fiscal quarter, maintain a
minimum Fixed Charges Coverage Ratio of 1.30:1. At the Borrower's option, for
purposes of computing the Fixed Charges Coverage Ratio for any of the first
three quarters of Fiscal 2005, the Borrower shall be permitted to base such
calculation either upon Consolidated Adjusted Net Income plus rental payments on
operating leases for the preceding twelve-month period or upon the Consolidated
Adjusted Net Income plus rental payments on operating leases for the preceding
six-month period, multiplied by two.

(3)      Borrower agrees that, through July 1, 2004, it will make advance
         payments of cash into the Bond Fund established pursuant Section 5.01
         of the Indenture. At all times during this period, Borrower shall have
         made advance payments in a sufficient amount to satisfy the next two
         monthly payments payable by Borrower pursuant to the Loan Agreement.

(4)      The Bondholders hereby direct the Trustee, as assignee of the Loan
         Agreement by the Municipality, to consent to the foregoing pursuant to
         Article XII.

         IN WITNESS WHEREOF, the parties have caused this agreement to be signed
on their behalf as of this 22nd day of May, 2003.

LIFECORE BIOMEDICAL, INC.                    WELLS FARGO BANK MINNESOTA,
                                              NATIONAL ASSOCIATION, as Trustee

Signature   /s/ James W. Bracke              Signature   /s/ Martha K. Earley
          ------------------------                     ------------------------
Print James W. Bracke                        Print Martha K. Earley
Title President & CEO                        Title Assistant Vice President

PUTNAM MANAGED MUNICIPAL                     MINNESOTA TAX EXEMPT INCOME FUND II
  INCOME TRUST

Signature    /s/ Richard Wrke                Signature   /s/ Paul M. Drury
          ------------------------                     ------------------------
Print Richard Wrke                           Print Paul M. Drury
Title Senior Vice President                  Title Vice President

PUTNAM TAX FREE HIGH
  YIELD FUND

Signature   /s/ Paul M. Drury
          ------------------------
Print Paul M. Drury
Title Vice President

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