SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
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o Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12

VERSAR, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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Dear Stockholder:

 

You are cordially invited to attend Versar, Inc.’s Annual Meeting of Stockholders to be held at our offices, 6850 Versar Center, Springfield, Virginia 22151, on Wednesday, November 15, 2006, at 10:00 a.m. local time.

 

The matters scheduled for consideration at the meeting are the election of directors and other matters described in the enclosed Proxy Statement. We will also report to you on Versar’s condition and performance, and you will have the opportunity to question management on matters that affect the interests of all stockholders.

 

You can reach the offices of Versar by car, from either I-395 or I-495. From I-395: exit Edsall Road West to Backlick Road; left (south) on Backlick to Hechinger Drive; left on Hechinger Drive to Versar Center. From I-495: exit Braddock Road East to Backlick Road; right (south) on Backlick to Hechinger Drive; left on Hechinger Drive to Versar Center.

 

The stockholders’ interest in the affairs of Versar is encouraged and it is important that your shares be represented at the meeting. We hope you will be with us. Whether you plan to attend or not, please complete, sign, date, and return the enclosed proxy card as soon as possible in the postpaid envelope provided.  Sending in your proxy will not limit your right to vote in person or to attend the meeting, but it will assure your representation if you cannot attend. Your vote is important.

 

Sincerely yours,

 

Paul J. Hoeper

Chairman of the Board

 

October 10, 2006

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To the Stockholders of Versar, Inc.:

 

The Annual Meeting of Stockholders of Versar, Inc. (the “Company”) will be held at the Company’s offices, 6850 Versar Center, Springfield, Virginia 22151, on Wednesday, November 15, 2006, at 10:00 a.m. local time for the following purposes:

 

 

Only stockholders of record at the close of business on September 22, 2006, will be entitled to notice of and to vote at the meeting and any adjournments or postponements thereof.

 

Your attention is directed to the Proxy Statement accompanying this Notice for a more complete statement regarding the matters to be acted upon at the meeting.

 

By Order of the Board of Directors,

 

James C. Dobbs

Secretary

 

October 10, 2006

 

IMPORTANT NOTICE

 

YOUR PROXY IS IMPORTANT

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE POST-PAID ENVELOPE PROVIDED.

 

VERSAR, INC.

 

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

NOVEMBER 15, 2006

 

GENERAL

 

This Proxy Statement and the enclosed proxy card are being mailed on or about October 10, 2006, to stockholders (“Stockholders”) of Versar, Inc. (“Versar” or the “Company”) in connection with the solicitation by the Board of Directors of the Company of proxies for use at the 2006 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjournment (s) or postponement (s) thereof. The Annual Meeting will be held at 10:00 a.m. eastern standard time at the Company’s offices at 6850 Versar Center, Springfield, Virginia 22151, on November 15, 2006. Any person giving a proxy pursuant to this Proxy Statement may revoke it at any time before it is exercised at the meeting by filing with the Secretary of the Company an instrument revoking it or by delivering to the Company a duly executed proxy bearing a later date. In addition, if the person executing the proxy is present at the Annual Meeting, he or she may revoke such proxy by voting his or her shares in person. Proxies in the form enclosed, if duly signed and received in time for voting, and not revoked, will be voted at the Annual Meeting in accordance with the directions specified therein.

 

On or about October 10, 2006, the Annual Report of the Company for fiscal year 2006 (including financial statements), the Notice of Annual Meeting, this Proxy Statement, and the enclosed proxy card are being mailed in a single envelope to holders of Versar’s Common Stock, par value $.01 per share (“Common Stock”), at the close of business on September 22, 2006 (the “Record Date”).

 

Record Date and Voting Rights

 

Only holders of record of Common Stock on the Record Date are entitled to notice of and to vote at the Annual Meeting and any adjournment(s) or postponement(s) thereof. There were 8,140,364 shares of Common Stock outstanding and entitled to vote as of the Record Date. Each share of Common Stock entitles the holder to one vote on all matters of business at the meeting.

 

The By-laws of the Company require that the holders of a majority of the outstanding shares of the Company’s Common Stock entitled to vote at the Annual Meeting be present in person or represented by proxy in order for a quorum to exist for the transaction of business at that meeting. Abstentions and “broker non-votes” (which occur if a broker or other nominee does not have discretionary authority and has not received voting instructions from the beneficial owner with respect to the particular item) are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Assuming that a quorum is present for the Annual Meeting, then those nine nominees for director who receive the highest number of votes cast will be elected. Abstentions and broker non-votes will have no effect on the outcome of the election of directors.

 

Proposal No. 2 must be approved by the affirmative vote of a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote thereon. For purposes of Proposal No. 2, abstentions are counted for purposes of calculating shares entitled to vote but are not counted as shares voting and therefore have the effect of a vote against such proposal. For purposes of Proposal No. 2, broker non-votes are not counted as shares entitled to vote and therefore have no effect with respect to such proposal.

 

Any proxy which is returned by a Stockholder properly completed and which is not revoked will be voted at the Annual Meeting in the manner specified therein. Unless contrary instructions are given, the persons designated as

proxy holders in the accompanying proxy card (or their substitutes) will vote FOR the election of the Board of Directors’ nominees, for proposal No. 2 and in the proxy holders’ discretion with regard to all other matters. Any unmarked proxies, including those submitted by brokers (other than broker non-votes) or custodians, nominees or fiduciaries, will be voted in favor of the nominees for the Board of Directors and other proposals, as indicated in the accompanying proxy card.

 

The cost of preparing, assembling and mailing all proxy materials will be borne by Versar. In addition to solicitation by mail, solicitations may be made by personal interview, telephone, and telegram by officers and regular employees of the Company or its subsidiaries, acting without additional compensation. Versar anticipates that banks, brokerage houses, and other custodians, nominees, and fiduciaries will forward this material to beneficial owners of shares of Common Stock entitled to vote at the Annual Meeting, and such persons will be reimbursed by Versar for the out-of-pocket expenses incurred by them in this regard.

 

Principal Shareholders

 

The table below sets forth, as of September 22, 2006, the only persons known by the Company to be the beneficial owners of more than 5% of the outstanding shares of Common Stock.

 

 

 

 

PROPOSAL NO. 1
ELECTION OF DIRECTORS

 

Nominees for Election

 

The Board of Directors of the Company recommends the election of the persons named below who have been nominated by the Board of Directors to serve as directors of Versar until the fiscal year 2007 Annual Meeting of Stockholders and until their successors have been duly elected and qualified. The persons named in the accompanying proxy will vote for the election of the nominees named below unless authority is withheld. Each nominee is presently a director of the Company and has served as such for the time indicated opposite his or her name. If for any reason any of the persons named below should become unavailable to serve, an event that management does not anticipate, proxies will be voted for the remaining nominees and such other person or persons as may be designated by the Board of Directors.

 

 

Committees of the Board of Directors

 

The Board of Directors of Versar has standing Executive, Audit, Compensation, and Nominating & Governance Committees.

 

During fiscal year 2006, the members of the Executive Committee were Dr. Prociv (Chairman), Dr. Durfee, Mr. Galaviz, Ms. Hoeber and Mr. Hoeper. The primary duty of the Executive Committee is to act in the Board’s stead when the Board is not in session, during which time the Committee possesses all the powers of the Board in the management of the business and affairs of the Company, except as otherwise limited by law.

 

During fiscal year 2006, the Audit Committee, which the Board of Directors has determined is comprised exclusively of non-employee directors who are independent, as defined by the American Stock Exchange listing standards and the rules and regulations of the Securities and Exchange Commission, consisted of Messrs. Gallagher (Chairman), Hoeper, Galaviz and Dr. Metry. The Committee’s primary responsibilities, as defined by its written charter, are to provide oversight of the Company’s accounting and financial controls, review the scope of and procedures to be used in the annual audit, review the financial statements and results of the annual audit, and retain, and evaluate the performance of, the independent accountants and the Company’s financial and accounting personnel. The Board of Directors has determined that Mr. Hoeper qualifies as an Audit Committee Financial Expert as defined under the rules and regulations of the Securities and Exchange Commission and is independent as noted above.

 

The Compensation Committee was comprised during fiscal year 2006 of Dr. Metry (Chairman), Mr. Hansen and Ms. Hoeber. The Board of Directors has determined that Dr. Metry, Mr. Hansen and Ms. Hoeber are independent for purposes of Compensation Committee service in accordance with the listing standards of the American Stock Exchange. The Committee, pursuant to a written charter, approves goals and objectives related to executive compensation, reviews and adjusts compensation paid to the President and CEO of the Company and all executive officers, and administers the Company’s incentive compensation plans, including cash bonus and stock option and restricted share grants. The Committee also reviews and determines an appropriate compensation program for the Board of Directors.

 

The Nominating & Governance Committee was comprised, during fiscal year 2006, of Dr. Markels (Chairman), Mr. Hoeper, Mr. Gallagher and Ms. Hoeber, all independent directors in accordance with the listing standards of the American Stock Exchange. The Committee, pursuant to a written charter, reviews and approves Board committee charters, conducts assessments of Board performance, develops criteria for Board membership and proposes Board members who meet the criteria for the annual election of directors. The Committee also identifies potential Board members to fill vacancies which may occur between annual stockholder meetings. Stockholders may submit nominees for the Board of Directors in writing to the Chairman of the Nominating & Governance Committee at the Company’s Springfield office, care of the Corporate Secretary, no later than June 12, 2007 for the 2007 Annual Meeting of Stockholders. The Committee also develops and implements corporate governance principles and policies.

 

Board and Committee Meetings

 

During fiscal year 2006, the Board of Directors met six times. The Executive Committee met once. The Audit Committee met five times. The Compensation Committee met four times. The Nominating & Governance

Committee met four times. All directors of the Company attended at least 75% of all meetings of the Board and committees on which they served, except Mr. Gallagher who did not attend two of the six Board meetings.

 

Directors’ Compensation

 

Starting in fiscal year 2006, the directors’ annual fee consists of $3,000 in cash, plus the grant of 1,000 shares of restricted stock which vest over a period of one year. Each director is also paid an attendance fee in cash of $1,000 for each meeting of the Board or of its committees where the director is physically present and of $500 for each meeting attended telephonically. In addition, the Chairman of the Audit Committee is paid in cash an additional $5,000 a year for increased responsibility and work required as Chairman of this Committee and the non-employee Chairman of the Board is paid in cash an additional $12,000 a year and receives an additional 1,000 shares of restricted stock for responsibilities and efforts on behalf of the Company.

 

Compensation Committee Interlocks and Insider Participation

 

During fiscal year 2006, Dr. Metry, Mr. Hansen and Ms. Hoeber served as members of the Compensation Committee. No reported relationships or transactions exist for such Committee Members.

 

Code of Ethics

 

The Company’s Board of Director’s has adopted a Code of Ethics that applies to all directors and employees, including the Company’s principal executive officer, principal financial officer, principal accounting officer and controller. The Code of Ethics is posted on the Company’s web site www.versar.com under Investor Relations. The Company intends to disclose on its website any waivers granted under this Code of Ethics to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. As of the date of this Proxy Statement, no waivers have been requested or granted.

 

Corporate Governance

 

Versar’s Board of Directors has adopted Corporate Governance Guidelines which are posted on the Company’s website www.versar.com under Investor Relations.

 

The Company’s Nominating & Governance Committee consists of four non-employee directors, Dr. Michael Markels, Jr., James L. Gallagher, Paul J. Hoeber and Amoretta M. Hoeber, each of whom are independent directors as defined under the American Stock Exchange standards. A copy of the Committee’s Charter is posted on the Company’s website www.versar.com under Investor Relations.

 

Under the Corporate Governance Guidelines, the Nominating & Governance Committee has the responsibility for determining which individuals, including existing directors, shall be submitted to the Board for nomination and the Stockholders for election as directors. There is, however, no formal nominating or screening process or procedures. The Board of Directors determined that no formal written policy with regard to consideration of director nominees recommended by Stockholders is necessary based on the Company’s policy to consider any nominee presented by a Stockholder for consideration in a timely manner. The Corporate Governance Guidelines require that director nominees should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the Stockholders.

 

Versar has not adopted a formal process for Stockholder communications with the Board of Directors. Nevertheless, Stockholders and employees who desire to communicate directly to the Board of Directors, any of the Board’s Committees, the non-employee directors as a group or any individual director should write to the address below:

 

Name of Addressee
c/o Corporate Secretary
Versar, Inc.
6850 Versar Center
Springfield, VA 22151

 

SECURITY HOLDINGS OF MANAGEMENT

 

The following table sets forth certain information regarding the ownership of Versar’s Common Stock by the Company’s directors and each executive officer named in the Summary Compensation Table, each nominee for director and the Company’s directors and executive officers as a group, as of September 22, 2006.

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Based upon copies of reports furnished to Versar, the Company believes that all reports required to be filed by persons subject to Section 16 of the Securities Exchange Act of 1934, and the rules and regulations thereunder, have been timely filed, except for 3 late filings by Dr. Markels’ on behalf of himself and his family members.

 

EXECUTIVE COMPENSATION

 

Cash Compensation

 

The following table sets forth information on compensation paid by Versar for services rendered in all capacities during the three fiscal years ended June 30, 2006, to the Company’s Chief Executive Officer and the four most highly compensated executive officers of the Company who were serving as executive officers at the end of fiscal year 2006 (collectively the “Named Executive Officers”).

 

SUMMARY COMPENSATION TABLE

 

 

 

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUE

 

 

 

 

Employment Contracts

 

On December 1, 2002, the Company entered into an Employment Agreement with Dr. Prociv for a period of twelve months which provided for him to serve as President at a base salary of $235,000 plus any fringe benefits available to executive officers of the Company including participation in any incentive compensation programs which may be in effect. In September 2003, the Company’s Board of Directors agreed to extend Dr. Prociv’s Employment Agreement on its current terms until November 30, 2004. On September 8, 2004, the Company’s Board of Directors agreed to extend Dr. Prociv’s Employment Agreement for an additional two years at a base salary of $285,000 which amount had been previously determined by the Compensation Committee. On September 7, 2006 the Company Board of Director’s agreed to extend Dr. Prociv’s employment Agreement for an additional year at a base salary of $300,000 which amount had been previously determined by the Compensation Committee. If Dr. Prociv’s employment is terminated during the term of the Employment Agreement, except for voluntary termination or termination for cause and, except as noted below, he will be paid 12 months salary, fringe benefits, and any incentive compensation then due and shall be entitled to immediate vesting of all stock options. If there is a change in circumstances (change in title, salary reduction, or change in geographic location) following a change in control of the Company (as defined in this agreement), Dr. Prociv could terminate the agreement and upon termination would be paid 24 months salary and fringe benefits and would be entitled to immediate vesting of all stock options.

 

Change in Control Agreements

 

On January 30, 1999, the Company entered into Change-in-Control Severance Agreements with Lawrence W. Sinnott, Senior Vice President, Chief Financial Officer and Treasurer and James C. Dobbs, Senior Vice President and General Counsel, for a period of twenty-four months. In January 2001, these agreements were extended to January 31, 2004 and in March 2004 were extended to February 28, 2006. On February 1, 2006, these agreements were extended an additional two years to February 28, 2008. In addition, the Board of Directors authorized that the Vice Presidents of Human Resources and Corporate Planning be granted Change-in Control Agreements. Therefore, on March 17, 2006 the Company entered into Change-in-Control Severance Agreements with Jeffrey A. Wagonhurst, Vice President, Human Resources and Michael J. Abram, Vice President, Corporate Planning. All four agreements provide that if there is a change in circumstances (change in title, salary reduction or change in geographic location) following a change in control of the Company (as defined in the Agreement), Messrs. Sinnott, Dobbs, Wagonhurst or Abram could terminate their employment and upon termination receive 24 months salary, fringe benefits, and incentive compensation due and would be entitled to immediate vesting of all stock options.

 

STOCK PERFORMANCE GRAPH

 

The following graph and table show a comparison of the cumulative total return for the last five fiscal years on $100 invested on June 30, 2001 in Versar Common Stock, the Standard & Poor’s 500 Stock Index and Versar’s Peer Group. The Peer Group consists of four companies: CET Environmental Services, Inc.; Duratek, Inc.; Ecology & Environment, Inc.; and Matrix Service Company. The table includes the reinvestment of dividends, where applicable.

 

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

AMONG VERSAR, INC., THE S & P 500 INDEX

AND A PEER GROUP

 

 

 

 

Copyright^© 2006, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

 

CUMULATIVE SHAREHOLDER’S RETURN TABLE

 

 

REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION

 

The Compensation Committee (“Committee”) of the Board of Directors is furnishing the following report on executive compensation for fiscal year 2006. The compensation decisions reported below were made in September 2005 based upon the Company’s and each executive’s performance during the fiscal year ended June 30, 2005. The Committee provides oversight of all policies under which compensation is paid to the Company’s executive officers and stock options are granted under the Company’s stock option plans. The Committee consists entirely of non-employee directors. This report does not reflect the performance of the Company or its executives for fiscal year 2006 which will be reported in next year’s Proxy Statement.

 

Executive Compensation Philosophies and Policies

 

The Committee’s executive compensation policies are designed to provide competitive levels of compensation which integrate pay with performance, recognize individual initiative and achievements and assist the Company in attracting and retaining qualified executives. Target levels of the executive officers’ overall compensation are intended to be consistent with compensation in the Company’s industry for similar executives.

 

The Company’s executive compensation program includes three components:

 

(1) Base salary;

 

(2) Annual Bonus (stock or cash); and

 

(3) Long-term incentive awards.

 

 

In determining executive compensation for fiscal year 2006, the Committee took into account the performance of the Company’s stock, the financial performance of the Company in 2005 and the steps taken by management to address the lack of consistency in meeting the Company’s profit goals.

 

Compensation of Chief Executive Officer

 

In September 2005, the Committee reviewed Dr. Prociv’s performance and his efforts to ensure the business remains consistently profitable. Dr. Prociv was compensated pursuant to this Employment Agreement described on

page 10. Based on the Company’s failure to meet its financial goals, no salary adjustment or incentive compensation award was granted to Dr. Prociv for his performance in fiscal year 2005.

 

Compensation of Named Executive Officers

 

After a discussion of the performance of the Senior Executives, including the Named Executive Officers, based on the Company’s performance in fiscal year 2005, in September 2006 no salary increases or incentive compensation were granted to the Named Executive Officers. In November 2005, the Committee adopted a salary-at-risk program, contingent on certain named Executive Officers meeting set financial goals. Where by certain stated compensation amounts are withheld and paid in a lump-sum upon achievement of such goals. The Committee approved the following “salary-at-risk” starting January 1, 2006:

 

 

In February 2006, the Committee approved $10,000 “salary-at-risk” for Gina Foringer. Further, the Committee increased Gina Foringer’s base salary by $5,000 at its May meeting. In September 2006, the Committee determined not to pay any of “salary-at-risk” amounts referenced above, but raised Mr. Kendall and Ms. Foringer’s base salary by the salary-at-risk amounts for meeting their financial goals in fiscal year 2006.

 

Compensation Committee of the Board of Directors

 

Amir A. Metry, Chairman

James V. Hansen

Amoretta M. Hoeber

 

REPORT OF THE AUDIT COMMITTEE

 

The Board’s Audit Committee consists of four non-employee directors, James L. Gallagher, as Chairman, Paul J. Hoeper; Fernando V. Galaviz and Dr. Amir A. Metry, each of whom has been determined to be an independent director under the American Stock Exchange listing standards and the rules and regulations of the Securities and Exchange Commission. Further, the Company’s Board of Directors has determined that Mr. Hoeper is qualified as an Audit Committee Financial Expert. Pursuant to the Committee’s written charter, which meets the requirements of the Sarbanes-Oxley Act, the Committee evaluates audit performance, manages the relationship with the Company’s independent registered public accounting firm, assesses policies and procedures relating to internal controls and evaluates complaints regarding auditing and accounting matters. This report relates to the activities of the Audit Committee in carrying out such role for the past year.

 

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Company’s management has the primary responsibility for the financial statements and reporting process, which includes the Company’s systems for internal control. In carrying out its oversight responsibilities, the Committee met with management and reviewed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2006. The review included a discussion of the quality and acceptability of the Company’s financial reporting and controls, including the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements.

 

The Committee also reviewed with the Company’s independent registered public accounting firm, Grant Thornton LLP (“Grant Thornton”), who are responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles, their judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are required to be discussed with the Committee under generally accepted auditing standards and SAS (Statement on Auditing Standards) 61. In addition, the Committee discussed with Grant Thornton their independence from management and the Company, including the matters in their written disclosures required by the Independence Standards Board, including Standard No. 1, and received written disclosures required by that standard. The Committee held several private sessions with the Company’s independent auditors, Grant Thornton, at which candid discussions of financial management, accounting and internal controls took place.

 

The Committee meets periodically and privately with Grant Thornton to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

 

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2006 for filing with the Securities and Exchange Commission.

 

Under the Committee’s charter and the requirements of the Sarbanes-Oxley Act and Rule 10A-3 adopted by the Securities and Exchange Commission, the responsibility for the appointment, compensation, retention and oversight of the work of the Company’s independent registered public accounting firm rests with the Audit Committee. Based upon a review of Grant Thornton’s qualifications, resources, personnel and performance, the Committee has selected Grant Thornton as the Company’s independent registered public accounting firm for fiscal year 2007 and will submit its decision for stockholder ratification at the Annual Meeting.

 

Submitted by the Audit Committee of the Board of Directors.

 

James L. Gallagher, Chairman

Fernando V. Galaviz

Paul J. Hoeper

Dr. Amir A. Metry

Audit Fees

 

In fiscal year 2006 and 2005, Versar paid Grant Thornton $158,880 and $143,170, respectively, for quarterly reviews and the annual fiscal year audit.

 

Audit-Related Fees

 

Versar paid Grant Thornton $1,622 in fiscal year 2006 and $2,175 in fiscal year 2005 for audit-related fees for assurance and related services.

 

Tax Fees

 

In fiscal year 2006 and 2005, Versar paid $61,514 and $21,400, respectively, to Grant Thornton for federal and state tax compliance services.

 

All Other Fees

 

In fiscal year 2006 and 2005, Versar paid $18,155 and $21,400, respectively, to Grant Thornton for audits of benefit plans and review of Securities and Exchange Commission matters. In fiscal year 2005, Grant Thornton also audited the SMC Pension Plan, the benefit plan of a discontinued operation of Versar, for a fee of $21,795.

 

The Audit Committee has adopted a comprehensive pre-approval policy for services by its registered public accounting firm. All services by Grant Thornton rendered in fiscal year 2006 received prior approval by the Audit Committee. The Committee expects that all such services for fiscal year 2007 will be subject to pre-approval by the Audit Committee.

 

PROPOSAL NO. 2
APPOINTMENT OF ACCOUNTANTS

 

The Audit Committee of the Board of Directors considers it desirable that its appointment of the firm of Grant Thornton LLP (Grant Thornton) as independent registered public accounting firm of the Company for fiscal year 2007 be ratified by the Stockholders. Grant Thornton has been the Company’s accountants since the Spring of 2002. Representatives of Grant Thornton will be present at the Annual Meeting, will be given an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions from the Stockholders.

 

The Board of Directors recommends a vote “FOR” ratification of the appointment of Grant Thornton and the enclosed proxy will be so voted unless a vote against the proposal or an abstention is specifically indicated.

 

2007 ANNUAL MEETING

 

It is presently contemplated that the 2007 Annual Meeting of Stockholders will be held on or about November 14, 2007. In order for any appropriate stockholder proposal to be considered for inclusion in the proxy materials for the 2007 Annual Meeting of Stockholders, it must be received by the Secretary of the Company no later than June 12, 2007, by certified mail, return receipt requested and must comply with applicable federal proxy rules. A proposal submitted for consideration at the 2007 Annual Meeting of Stockholders subsequent to June 12, 2007 shall be considered untimely and will not be included in the Company’s proxy materials. Further, any proposals for consideration at the 2007 Annual Meeting for which the Company does not receive notice on or before August 26, 2007 shall be subject to the discretionary vote of the proxy holders at the 2007 Annual Meeting of Stockholders.

 

OTHER MATTERS

 

As of the date of this Proxy Statement, management of the Company has no knowledge of any matters to be presented for consideration at the Annual Meeting other than those referred to above. If any other matters properly come before the Annual Meeting, the persons named in the accompanying proxy intend to vote such proxy, to the extent entitled, in accordance with their best judgment.

 

By Order of the Board of Directors,

 

James C. Dobbs

Secretary

 

October 10, 2006

VERSAR, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 15, 2006

Solicited on Behalf of the Board of Directors

     The undersigned hereby authorizes Paul J. Hoeper and Theodore M. Prociv, and each of them individually, with power of substitution, to vote and otherwise represent all of the shares of Common Stock of Versar, Inc. (the “Company”), held of record by the undersigned, at the Annual Meeting of Stockholders of the Company to be held at the Company’s offices, 6850 Versar Center, Springfield, Virginia, on Wednesday, November 15, 2006 at 10:00 a.m. local time, and any adjournment(s) thereof, as indicated on the reverse side hereof.

     The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement dated, in each case, October 10, 2006. All other proxies heretofore given by the undersigned to vote shares of the Company’s Common Stock are expressly revoked.

     The shares represented by this proxy will be voted as described on the reverse hereof by the Stockholder. If not otherwise directed, this proxy will be voted FOR all nominees for directors listed in proposal 1 and FOR proposals referred to in Items 2 and 3 on the reverse side.

(continued, and to be signed and dated on the reverse side)

6    DETACH PROXY CARD HERE    6