Exhibit 10.1
STOCK OPTION AGREEMENT
          This Stock Option Agreement (this “Agreement”) is made as of
January 23, 2006 by and between Spectrum Sciences & Software Holdings Corp. (the
“Corporation”) and Michael M. Megless (the “Optionee”).
RECITALS
          A.           Optionee is an employee of Horne Engineering Services,
LLC, a subsidiary of the Corporation. In consideration of Optionee’s serving as
such, the Corporation’s board of directors has agreed to grant stock options to
the Optionee to purchase shares of the Corporation’s common stock (the
“Shares”). The stock options granted herein are not “incentive stock options”
under Section 422 of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, specifically incorporating these recitals herein, it is agreed as
follows:
AGREEMENT
SECTION 1
GRANT OF OPTIONS
1.1           NUMBER OF SHARES. Subject to the terms and conditions of this
Agreement, the Corporation grants to Optionee, Options to purchase from the
Corporation 326,353 Shares (the “Option Shares”).
1.2           EXERCISE PRICE. Each Option Share is exercisable, upon vesting, at
the lesser price of $1.55 or the fair market value of the shares at the time of
exercise (the “Option Price”).
1.3           TERM. The Expiration Date for all Options issued hereunder shall
be January 22, 2008.
1.4           VESTING. The Options granted herein shall vest immediately.
1.5           CONDITIONS OF OPTION. The Options may be exercised immediately
upon vesting, subject to the terms and conditions as set forth in this
Agreement.
SECTION 2
EXERCISE OF OPTION
2.1           DATE EXERCISABLE. The Options shall become exercisable by Optionee
in accordance with Sections 1.4 and 1.5 above.
2.2           MANNER OF EXERCISE OF OPTIONS AND PAYMENT FOR COMMON STOCK. The
Options may be exercised by the Optionee, in whole or in part, by giving written
notice to the Secretary of the Corporation, setting forth the number of Shares
with respect to which Options are being exercised. The notice shall be given
pursuant to the Notice of Exercise of Stock Option form attached to this
Agreement. The purchase price of the Option Shares upon exercise of the Options
by the Optionee shall be paid in full by check payable to the order of the
Corporation, or as otherwise permitted by the Corporation’s stock option plan.

 

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2.3           STOCK CERTIFICATES. Promptly after any exercise in whole or in
part of the Options by Optionee, the Corporation shall deliver to Optionee a
certificate or certificates for the number of Shares with respect to which the
Options were so exercised, registered in Optionee’s name.
2.4           TAX WITHHOLDING. At the time the Option is exercised, in whole or
in part, or at any time thereafter as requested by the Corporation, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a cashless exercise to the extent permitted by the Corporation), any
sums required to satisfy the federal, state, local and foreign tax withholding
obligations of the Corporation, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Corporation are satisfied. Accordingly,
the Optionee may not be able to exercise the Option when desired even though the
Option is vested, and the Corporation shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided for
herein.
SECTION 3
NONTRANSFERABILITY
3.1           RESTRICTION. The Options are not transferable by Optionee.
SECTION 4
NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE
4.1           Optionee shall not be deemed for any purpose to be a shareholder
of the Corporation with respect to any share(s) subject to the Options under
this Agreement to which the Options shall not have been exercised until such
share(s) shall be transferred to him upon the exercise of the Option(s).
SECTION 5
ADJUSTMENTS
5.1           NO EFFECT ON CHANGES IN CORPORATION’S CAPITAL STRUCTURE. The
existence of the Options shall not affect in any way the right or power of the
Corporation or its shareholders to make or authorize any adjustments,
recapitalization, reorganization, or other changes in the Corporation’s capital
structure or its business, or any merger or consolidation of the Corporation, or
any issue of bonds, debentures, preferred or preference stocks ahead of or
affecting the Option Shares, or the dissolution or liquidation of the
Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
5.2           ADJUSTMENT TO OPTION SHARES. The Option Shares are subject to
adjustment upon recapitalization, reclassification, consolidation, merger,
reorganization, stock dividend, reverse or forward stock split and the like. If
the Corporation shall be reorganized, consolidated or merged with another
corporation, Optionee shall be entitled to receive upon the exercise of the
Option the same number and kind of shares of stock or the same amount of
property, cash or securities as Optionee would have been

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entitled to receive upon the happening of any such corporate event as if
Optionee had been, immediately prior to such event, the holder of the number of
Shares covered by the Option.
SECTION 6
TERMINATION OF EMPLOYMENT OR DEATH
6.1           The terms and conditions of paragraph 9 of the Corporation’s
Amended and Restated Number 2 2004 Non-Statutory Stock Option Plan, adopted on
November 15, 2004, as may be amended from time to time in accordance with its
terms, is incorporated herein by references, and shall govern the rights and
privileges of the Optionee with respect to the issues addressed therein.
SECTION 7
MISCELLANEOUS PROVISIONS
7.1           DISPUTES. Any dispute or disagreement that may arise under or as a
result of this Agreement, or any question as to the interpretation of this
Agreement, may be determined by the Corporation’s board of directors in its
absolute and uncontrolled discretion, and any such determination shall be final,
binding, and conclusive on all affected persons.
7.2           NOTICES. Any notice that a party may be required or permitted to
give to the other shall be in writing, and may be delivered personally, by
overnight courier or by certified or registered mail, postage prepaid, addressed
to the parties at their current principal addresses, or such other address as
either party, by notice to the other, may designate in writing from time to
time.
7.3           LAW GOVERNING. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
7.4           TITLES AND CAPTIONS. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor affect the interpretation of this Agreement.
7.5           ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties and supersedes any prior understandings and agreements
between them respecting the subject matter of this Agreement.
7.6           AGREEMENT BINDING. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
7.7           PRONOUNS AND PLURALS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or plural
as the identity of the person or persons may require.
7.8           FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
7.9           PARTIES IN INTEREST. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.

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7.10           SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

         
By:
  /s/ Darryl K. Horne P.E.
 
   
 
  Name: Darryl K. Horne P.E.    
 
              Title: President and CEO    

The undersigned Optionee hereby acknowledges receipt of an executed original of
this Agreement, accepts the Options granted thereunder, and agrees to the terms
and conditions thereof.
OPTIONEE
          /s/ Michael M. Megless
 
Name: Michael M. Megless

 

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SPECTRUM SCIENCES AND SOFTWARE HOLDINGS CORP.
NOTICE OF EXERCISE OF STOCK OPTION
The undersigned hereby exercises the Stock Options granted by Spectrum Sciences
& Software Holdings Corp. and seeks to purchase ________________ shares of
Common Stock of the Corporation pursuant to said Options. The undersigned
understands that this exercise is subject to all the terms and provisions of the
Stock Option Agreement dated as of ________________.
(Check Applicable Box)
          Enclosed is a check in the sum of US $________________ as payment for
such shares.
 
 
 
Signature of Optionee
 
 
Date: _________________________