On December 1, 2016 and effective November 30, 2016, Versar, Inc. (the “Company”), certain of its subsidiaries and Bank of America. N.A. (the “Lender”) as the lender and letter of credit issuer for a revolving credit facility in the amount of $25 million and a term facility in the amount of $5 million (the “Loan Agreement”) entered into a Sixth Forbearance Agreement to which the Lender agreed, among other things, to continue to forbear from exercising any and all rights or remedies available to it under the Loan Agreement and applicable law related to certain covenant defaults for a period ending on the earliest to occur of: (a) a breach by the Company of any obligation or covenant under the Forbearance Agreement, (b) any other default or event of default under the Loan Agreement (other than the defaults acknowledged therein) or (c) December 9, 2016 (the “Forbearance Period”). Under the Company’s previously disclosed Fifth Forbearance Agreement, the Forbearance Period was set to expire on November 30, 2016. The covenant defaults under the Loan Agreement previously disclosed by the Company continued through the Company’s fiscal quarter ended October 1, 2016.

Under the Sixth Forbearance Agreement, the Company retains the ability to borrow funds under the revolving credit facility subject to a cap of $13.0 million and provided that all of the terms and conditions for borrowings are satisfied, other than the existence of the acknowledged covenant defaults and the use of such borrowings is consistent with the 13 Week Cash Flow Forecast provided to the Lender to the Sixth Forbearance Agreement. The Company was required to pay an additional forbearance fee of $10,000 as a condition precedent to the effectiveness of the Sixth Forbearance Agreement, and which sum is in addition to the remaining $281,250 installment of forbearance fees, payable upon the earlier of the occurrence of a Forbearance Termination event or December 9, 2016.

The Sixth Forbearance Agreement was entered into in consideration of the ongoing efforts of the Company to resolve such defaults or secure new financing to refinance and replace the Loan Agreement. To that end, the Company and the Lender have executed a term sheet for the purpose of finalizing an amendment to the Loan Agreement. Among other provisions, the term sheet envisions a modification of the covenants to address the outstanding defaults under the Loan Agreement. In addition, the Company will continue to: (1) report its financial status to the Lender, (2) use the services of a Chief Restructuring Officer, and (3) work with a strategic financial adviser to assist with the structuring and consummation of a transaction the purpose of which will be the replacement or repayment in full of all obligations under the Loan Agreement.

About VERSAR, INC. (NYSEMKT:VSR)

Versar, Inc. is a global project management company providing solutions to government and commercial clients primarily in three business segments: Engineering and Construction Management (ECM), Environmental Services (ESG), and Professional Services (PSG). The Company also provides tailored solutions in harsh environments and offers specialized abilities for classified projects and hazardous materials management. ECM performs Title I Design Services, Title II Construction Management Services and Title III Construction Services. ESG provides full service environmental solutions for project life cycles ranging from a few weeks to more than 15 years in duration and includes Remediation, Compliance, Natural Resources, Cultural Resources, and Unexploded Ordnance/Military Munitions Response Program (UXO/MMRP) Technical Service Areas (TSAs). PSG provides onsite environmental management, planning and engineering services to the Department of Defense (DOD) installations.

VERSAR, INC. (NYSEMKT:VSR) Recent Trading Information

VERSAR, INC. (NYSEMKT:VSR) closed its last trading session up +0.01 at 1.40 with 12,133 shares trading hands.