Document:

exv10w1

 

Exhibit 10.1

FIRST AMENDMENT TO

REVOLVING LINE OF CREDIT LOAN AGREEMENT, CONTRACT LINE OF CREDIT LOAN

AGREEMENT AND SECURITY AGREEMENT

     THIS FIRST AMENDMENT TO REVOLVING LINE OF CREDIT LOAN AGREEMENT, CONTRACT LINE OF CREDIT LOAN
AGREEMENT AND SECURITY AGREEMENT (“First Amendment”) is made effective as of June 30, 2005, by and
among Horne Engineering Services, LLC, a Virginia limited liability company (“HES LLC”), successor
by merger to Horne Engineering Services, Inc., a Virginia corporation, having an address at 3130
Fairview Park Drive, Suite 400, Falls Church, Virginia 22042, Darryl K. Horne and Charlene M. Horne
(each a “Guarantor” and collectively the “Guarantors”), and Bank of America, N.A., a national
banking association (the “Lender”).

RECITALS

	 	A.	 	Horne Engineering Services, Inc., a Virginia corporation (“Horne Inc”), and the
Lender entered into that certain Revolving Line of Credit Loan Agreement, Contract Line
of Credit Loan Agreement and Security Agreement, dated as of August 12, 2004 (the “Loan
Agreement”).
	 
	 	B.	 	Pursuant to the Loan Agreement, Lender made a revolving line of credit loan to
Horne Inc in the maximum principal amount of Three Million and 00/100 Dollars
($3,000,000.00) (the “Contract Loan”). Lender also made a separate revolving line of
credit loan to Horne Inc, pursuant to the terms of the Loan Agreement, in the maximum
principal amount of Four Million and 00/100 Dollars ($4,000,000.00) (the “Revolving
Loan”).
	 
	 	C.	 	The Contract Loan is evidenced by that certain Contract Note, dated August 12,
2004, in the maximum principal amount of Three Million and 00/100 Dollars
($3,000,000.00) and made payable by Horne Inc to the order of Lender.
	 
	 	D.	 	The Revolving Loan is evidenced by that certain Revolving Note, dated August
12, 2004, in the maximum principal amount of Four Million and 00/100 Dollars
($4,000,000.00) and made payable by Horne Inc to the order of Lender.
	 
	 	E.	 	Each Guarantor entered into that certain Guaranty, dated August 12, 2004, for
the benefit of Lender (the “Guaranty”), thereby, among other things, guaranteeing the
full and timely payment and performance of Horne Inc’s obligations and liabilities
under the Loan Agreement, the Contract Note, the Revolving Note, and the other Loan
Documents (each as defined in the Loan Agreement as amended hereby).
	 
	 	F.	 	Horne Inc, HES LLC, Spectrum Sciences & Software Holdings Corp., a Delaware
corporation and the sole member of HES LLC (“Spectrum”), Darryl K. Horne, Charlene M.
Horne and Michael Megless are parties to that certain Agreement and Plan of Merger made
and entered into as of April 14, 2005 (the “Merger Agreement”).
	 
	 	G.	 	Pursuant to the Merger Agreement, Horne Inc was merged with and into HES LLC
(formerly known as Horne Acquisition LLC) (the “Merger”) with HES LLC being the
surviving entity in the Merger.
	 
	 	H.	 	Pursuant to the Merger and by operation of law, HES LLC, as the successor by
merger to Horne Inc, assumed certain of the obligations and liabilities of Horne Inc,
including without limitation, the obligations and liabilities of Horne Inc under the
Loan Agreement.
	 
	 	I.	 	HES LLC and Lender have agreed to amend the Loan Agreement to, among other
things, reflect that as a result of the consummation of the Merger, HES LLC has assumed
all of the obligations

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	 	 	 	and liabilities of Horne Inc under the Loan Agreement, to
increase the maximum principal amount of the Contract Loan evidenced by the Contract
Note to Ten Million and 00/100 Dollars ($10,000,000.00),
to extend the maturity dates of the Revolving Loan and Contract Loan as evidenced by
the Revolving Note and Contract Note, respectively, and for certain additional
purposes.
	 
	 	J.	 	The Guarantors desire to enter into this First Amendment to evidence their
consent to the terms and conditions of this First Amendment and to confirm that the
Guaranty remains in full force and effect as to all credit extended under the Loan
Agreement as amended by this First Amendment.
	 
	 	K.	 	Capitalized terms used in this First Amendment and not defined herein have the
meanings ascribed to them in the Loan Agreement as modified hereby.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, HES LLC, the Guarantors and the Lender hereby agree as follows:

	1.	 	Recitals. The Recitals to this First Amendment are incorporated herein by reference
and made a part hereof.
	 
	2.	 	Representations and Warranties. To induce the Lender to enter into this First
Amendment, HES LLC warrants and represents to the Lender that:

	 	a.	 	Horne Inc has been merged with and into HES LLC with HES LLC being the surviving
entity in such merger and with Spectrum being the sole member of HES LLC; and
	 
	 	b.	 	No litigation is pending or threatened against HES LLC of which HES LLC has not
informed the Lender in writing; and
	 
	 	c.	 	HES LLC has the power and authority to execute, deliver and perform its
obligations under this First Amendment and all other documents executed in connection
herewith or pursuant hereto, and to incur the obligations provided for herein and
therein, all of which have been duly authorized and approved in accordance with HES
LLC’s organizational documents; and
	 
	 	d.	 	This First Amendment and all other documents executed in connection herewith or
pursuant hereto, constitute the valid and legally binding obligations of HES LLC
enforceable against HES LLC in accordance with their respective terms; and
	 
	 	e.	 	HES LLC’s obligations under the Loan Documents, as amended by this First
Amendment and all other documents executed in connection herewith or related hereto,
are valid and enforceable obligations, and the execution and delivery of this First
Amendment and all other documents executed in connection herewith or pursuant hereto,
shall not be construed as a novation of the Loan Agreement, any other Loan Document, or
any indebtedness evidenced thereby; and
	 
	 	f.	 	HES LLC is not in default of any of the terms and provisions of the Loan
Agreement, as amended hereby, or with respect to any other Loan Document.

	3.	 	Definition of Borrower. The definition of “Borrower” set forth in Section
1.1 of the Loan Agreement is hereby deleted in its entirety and restated as follows:
	 
	 	 	““Borrower” means Horne Engineering Services, LLC, a Virginia limited liability
company, as successor-by-merger to Horne Engineering Services, Inc., a Virginia corporation,
pursuant to the Merger Agreement.”

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	4.	 	Definition of Contract Loan Borrowing Base. The definition of “Contract Loan
Borrowing Base” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its
entirety.
	 
	5.	 	Definition of Contract Loan. The definition of “Contract Loan” set forth in
Section 1.1 of the Loan Agreement is hereby deleted in its entirety and restated as follows:
	 
	 	 	““Contract Loan” means the revolving loan facility made available by Lender
to Borrower pursuant to this Agreement in the maximum principal amount of Ten Million and
00/100 Dollars ($10,000,000.00), evidenced by the Contract Note.”
	 
	6.	 	Definition of Contract Loan Letter of Credit Sublimit. The following new definition
entitled “Contract Loan Letter of Credit Sublimit” is hereby added as a new definition
to Section 1.1 of the Loan Agreement, to be inserted in alphabetical order among the
definitions in said Section of the Loan Agreement:
	 
	 	 	““Contract Loan Letter of Credit Sublimit” means Five Million and 00/100 Dollars
($5,000,000.00).”
	 
	7.	 	Definition of Contract Loan LOC Obligations. The following new definition entitled
“Contract Loan LOC Obligations” is hereby added as a new definition to Section 1.1 of
the Loan Agreement, to be inserted in alphabetical order among the definitions in said Section
of the Loan Agreement:
	 
	 	 	““Contract Loan LOC Obligations” means, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be drawn under Letters
of Credit then outstanding which were issued under the Contract Loan, assuming compliance
with all requirements for drawings referred to in such Letters of Credit; plus (ii) the
aggregate amount of all drawings under Letters of Credit issued under the Contract Loan
which were honored by Lender but not reimbursed.”
	 
	8.	 	Definition of Contract Note. The definition of “Contract Note” set forth in
Section 1.1 of the Loan Agreement is hereby deleted in its entirety and restated as follows:
	 
	 	 	““Contract Note” means that certain Contract Note, dated August 12, 2004, as amended
by that certain First Amendment to Contract Note, dated as of June 30, 2005, evidencing
Borrower’s obligation to repay the Contract Loan, made payable by the Borrower to the order
of the Lender, in the maximum principal amount of Ten Million and 00/100 Dollars
($10,000,000.00), as such Contract Note may be amended from time to time.”
	 
	9.	 	Definition of Ending Date. The definition of “Ending Date” set forth in
Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is
substitute therefor:
	 
	 	 	““Ending Date” means December 31, 2005.”
	 
	10.	 	Definition of Funded Debt. The definition of “Funded Debt” set forth in
Section 1.1 of the Loan Agreement is hereby deleted in its entirety and restated as follows:
	 
	 	 	““Funded Debt” means the sum of all outstanding liabilities of Borrower for
borrowed money and all other interest bearing liabilities, including without limitation,
current and long term debt, indebtedness of Borrower to any Affiliate, Capitalized Leases
and the face amount of outstanding Letters of Credit, whether or not any of such items are
subordinated to the obligations owing by Borrower to the Lender, but excluding any amounts
owing under the Contract Note (such exclusion to include, without limitation, any
outstanding principal owing under the Contract Note and any Contract Loan LOC Obligations).”
	 
	11.	 	Definition of Letter of Credit Sublimit. The definition of “Letter of Credit
Sublimit” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its
entirety.
	 
	12.	 	Definition of LOC Obligations. The definition of “LOC Obligations” as set
forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and restated as
follows:

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	 	 	““LOC Obligations” means, collectively, the Contract Loan LOC Obligations and the
Revolving Loan LOC Obligations.”
	 
	13.	 	Definition of Margin. The definition of “Margin” set forth in Section 1.1 of
the Loan Agreement is hereby deleted in its entirety and restated as follows:
	 
	 	 	““Margin” means the percentage interest rates shown on the Performance Pricing Grid
to be added to the LIBOR Rate (as defined in the Revolving Note) or the Prime Rate (as
defined in the Revolving Note) to determine the rate of interest payable at any time under
the Revolving Note. The Margin regarding the LIBOR Rate shall be as stated in the “LIBOR +”
row of the Performance Pricing Grid, and the Margin regarding the Prime Rate shall be as
stated in the “Prime Rate +” row of the Performance Pricing Grid.”
	 
	14.	 	Definition of Maximum Contract Loan Commitment Amount. The definition of
“Maximum Contract Loan Commitment Amount” set forth in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and restated as follows:
	 
	 	 	““Maximum Contract Loan Commitment Amount” means Ten Million and 00/100 Dollars
($10,000,000.00), or such lesser amount that Borrower may request as hereinafter provided.”
	 
	15.	 	Definition of Merger. The following new definition entitled “Merger” is
hereby added as a new definition to Section 1.1 of the Loan Agreement, to be inserted in
alphabetical order among the definitions in said Section of the Loan Agreement:
	 
	 	 	““Merger” means the merger of Horne Engineering Services, Inc., a Virginia
corporation, with and into Horne Engineering Services, LLC, a Virginia limited liability
company (formerly known as Horne Acquisition LLC), pursuant to the Merger Agreement, with
Horne Engineering Services, LLC as the surviving entity of such merger.”
	 
	16.	 	Definition of Merger Agreement. The following new definition entitled
“Merger Agreement” is hereby added as a new definition to Section 1.1 of the
Loan Agreement, to be inserted in alphabetical order among the definitions in said Section of
the Loan Agreement:
	 
	 	 	““Merger Agreement” means that certain Agreement and Plan of Merger, made and
entered into as of April 14, 2005, by and among Horne Engineering Services, Inc., a Virginia
corporation, Horne Acquisition LLC, a Virginia limited liability company (now known as Horne
Engineering Services, LLC), Spectrum Sciences & Software Holdings Corp., a Delaware
corporation, Darryl K. Horne, Charlene M. Horne and Michael Megless.”
	 
	17.	 	Definition of Performance Pricing Grid. The definition of “Performance Pricing
Grids” as set forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety
and restated as follows:
	 
	 	 	““Performance Pricing Grid” means the following table:

	 	 	 	 	 	 	 	 	 
	Revolving Loan	 	Level 1	 	 	Level 2	 
	Funded Debt / EBITDA
	 	Ratio < 2.00x	 	Ratio 3 2.00x
	Commitment Fee
	 	 	.25	%	 	 	.25	%
	LIBOR +
	 	 	2.25	%	 	 	2.75	%
	Prime Rate +
	 	 	0.00	%	 	 	0.25	%

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	18.	 	Definition of Revolving Loan Borrowing Base. The definition of “Revolving Loan
Borrowing Base” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its
entirety and restated as follows:
	 
	 	 	““Revolving Loan Borrowing Base” means:

	 	1.	 	Ninety percent (90%) of the Borrower’s Eligible Government
Accounts, plus
	 
	 	2.	 	Eighty Five percent (85%) of the Borrower’s Eligible Subcontract Accounts,
excluding USAID Material and Equipment Accounts; plus
	 
	 	3.	 	Eighty percent (80%) of Borrower’s Eligible Commercial
Accounts, excluding (i) USAID Material and Equipment Accounts, and (ii)
Subcontract Accounts; plus
	 
	 	4.	 	(a) For the period from the date of this Agreement through
December 31, 2004, the lesser of (i) Seventy Five percent (75%) of Borrower’s
Unbilled Eligible Accounts, or (ii) $1,500,000.00; and (b) from January 1, 2005
and thereafter, the lesser of (i) Fifty percent (50%) of Borrower’s Unbilled
Eligible Accounts, or (ii) $1,500,000.00.

	 	 	In the absence of manifest error, Lender’s determination of the amount of the Revolving Loan
Borrowing Base shall be conclusive.”
	 
	19.	 	Definition of Revolving Loan Letter of Credit Sublimit. The following new definition
entitled “Revolving Loan Letter of Credit Sublimit” is hereby added as a new
definition to Section 1.1 of the Loan Agreement, to be inserted in alphabetical order among
the definitions in said Section of the Loan Agreement:
	 
	 	 	““Revolving Loan Letter of Credit Sublimit” means Five Hundred Thousand and 00/100
Dollars ($500,000.00).”
	 
	20.	 	Definition of Revolving Loan LOC Obligations. The following new definition entitled
“Revolving Loan LOC Obligations” is hereby added as a new definition to Section 1.1 of
the Loan Agreement, to be inserted in alphabetical order among the definitions in said Section
of the Loan Agreement:
	 
	 	 	““Revolving Loan LOC Obligations” means, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be drawn under Letters
of Credit then outstanding which were issued under the Revolving Loan, assuming compliance
with all requirements for drawings referred to in such Letters of Credit; plus (ii) the
aggregate amount of all drawings under Letters of Credit issued under the Revolving Loan
which were honored by Lender but not reimbursed.”
	 
	21.	 	Definition of Revolving Note. The definition of “Revolving Note” set forth
in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and restated as
follows:
	 
	 	 	““Revolving Note” means that certain Revolving Note, dated as of August 12,
2004, in the original principal amount of Four Million and 00/100 Dollars ($4,000,000.00),
as modified by that certain First Amendment to Revolving Note, dated as of June 30, 2005,
payable by Borrower to the order of the Lender, as such Revolving Note may be further
modified from time to time.”
	 
	22.	 	Definition of USAID Contract. The following new definition entitled “USAID
Contract” is hereby added as a new definition to Section 1.1 of the Loan Agreement, to be
inserted in alphabetical order among the definitions in said Section of the Loan Agreement:

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	 	 	““USAID Contract” means that certain Government Contract dated January 5, 2004
between Bechtel National, Inc. and USAID, no. SPU-C-00-04-00001-00, as said contract may be
modified, amended, restated or renewed from time to time.”
	 
	23.	 	Revolving Line of Credit. Subsections a. and d. of Section 2.1 of the Loan
Agreement, entitled “Allowed Amount of Revolving Loan Advances” and “Letter of
Credit Subfacility”, respectively, are hereby deleted in their entirety and restated as
follows:

	 	 	 	“a. Allowed Amount of Revolving Loan Advances. The aggregate principal
amount of Advances outstanding at any time under the Revolving Loan shall not exceed
the lesser of:

	 	1.	 	the difference between (i) the Maximum
Revolving Loan Commitment Amount and (ii) the Revolving Loan LOC
Obligations; or
	 
	 	2.	 	the difference between (i) the Revolving Loan
Borrowing Base and (ii) the Revolving Loan LOC Obligations.”; and

	 	 	 	“d. Letter of Credit Subfacility. At Lender’s discretion, Lender shall
issue Letters of Credit under the Revolving Loan for the account of the Borrower from
time to time upon request from the Closing Date until the Ending Date, subject to the
following terms and conditions:

	 	1.	 	the aggregate amount of Revolving Loan LOC
Obligations shall at no time exceed the Revolving Loan Letter of Credit
Sublimit;
	 
	 	2.	 	any request for a Letter of Credit to be issued
under the Revolving Loan must be delivered and received by Lender not
later than five (5) business days prior to the date that Borrower
wishes to have the Letter of Credit issued;
	 
	 	3.	 	no Letter of Credit to be issued under the Revolving Loan shall
have an original expiry date more than one year from the date of
issuance or beyond the Ending Date unless otherwise agreed to by Lender
in writing or unless Borrower’s obligation to reimburse Lender for
drawings under the Letter of Credit has been fully secured by a cash
deposit with the Lender;
	 
	 	4.	 	Borrower shall execute and deliver to Lender a
Letter of Credit Agreement with respect to each Letter of Credit to be
issued under the Revolving Loan by Lender, using the Lender’s standard
reimbursement agreement form at the time the Letter of Credit is
issued. The form and substance of each Letter of Credit, and any
reimbursement agreement required by Lender in relation to a Letter of
Credit, must be satisfactory to the Lender, in its sole judgment. At
Lender’s option, Letters of Credit shall be subject to The Uniform
Customs and Practice for Documentary Credits, as published as of the
date of issue by the International Chamber of Commerce (Publication No.
500 or the most recent publication, the “UCP”);
	 
	 	5.	 	issuance of the Letter of Credit under the
Revolving Loan shall not cause the aggregate outstanding principal
amount of all Advances to exceed the Allowed Amount of Revolving Loan
Advances, determined taking into account the increase in the amount of
the Revolving Loan LOC Obligations caused by the issuance of the Letter
of Credit;

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	 	6.	 	Lender shall not be required to issue any
Letter of Credit under the Revolving Loan if a circumstance exists that
would entitle Lender not to honor a request for an Advance under the
Revolving Loan;
	 
	 	7.	 	upon notice from Lender of any drawing under
any Letter of Credit issued under the Revolving Loan, Borrower shall,
as to be determined in Lender’s sole and absolute discretion, either
(a) deliver cash to Lender, in an amount satisfactory to secure all
Revolving Loan LOC Obligations and all amounts payable by the Borrower
to the Lender under any Letter of Credit Agreement pertaining to such
Revolving Loan LOC Obligations, or (b) immediately reimburse Lender for
the amount of the drawing, plus interest from the date of the drawing
at the highest rate of interest
then in effect under the Revolving Note. The Borrower’s obligation
to reimburse the Lender for any drawing under a Letter of Credit
shall be absolute and unconditional, irrespective of any rights of
set-off, counterclaim or defense to payment the Borrower may claim or
have against the Lender, the beneficiary of the Letter of Credit or
any other Person;
	 
	 	8.	 	unless the Borrower makes reimbursement from another source on the
day of the drawing under any Letter of Credit issued under the
Revolving Loan, the Borrower shall be deemed to have requested an
Advance under the Revolving Loan in the amount of the drawing, and (i)
Lender, at its option, may make such an Advance (irrespective of
whether Borrower would then be entitled to an Advance under the terms
of this Agreement) and apply the proceeds of the Advance to satisfy the
Borrower’s obligation to reimburse Lender for the amount drawn on the
Letter of Credit; and (ii) any such Advance shall be repayable, with
interest, in accordance with the terms and conditions of the Revolving
Note; and
	 
	 	9.	 	the provisions of the Letter of Credit
Agreement pertaining to each Letter of Credit issued under the
Revolving Loan are deemed incorporated into this Agreement by this
reference and shall be binding upon the Lender and Borrower as if fully
set forth herein. If a conflict exists between the terms of the Letter
of Credit Agreement and any other Loan Document, the terms of the
Letter of Credit Agreement shall control with respect to the Letter of
Credit issued pursuant to that Letter of Credit Agreement but not as to
other matters governed by this Agreement or such Loan Document.”

	24.	 	Revolving Loan Fees. The following new Sub-subsection 4. is added to Subsection g.
entitled “Revolving Loan Fees” of Section 2.1 of the Loan Agreement:
	 
	 	 	“ 4. a letter of credit fee for each day that any Letter of Credit issued under the
Revolving Loan is outstanding. The letter of credit fee shall be calculated and payable in
advance of issuance of such Letter of Credit. The letter of credit fee shall be determined
for each Letter of Credit to be issued under the Revolving Loan by multiplying the term of
each Letter of Credit (not taking into account any extensions or renewals of such Letter of
Credit, for which a separate fee will be owing by Borrower) by a per-diem rate equal to two
percent (2.00%) per annum, divided by 360; provided however, that (a) such fee shall cease
to be owing on a Letter of Credit on the date such Letter of Credit is drawn, on which date
Borrower shall be obligated for, among other things, payment of such fees and costs owing
under the Letter of Credit Agreement for such Letter of Credit for a drawn Letter of Credit
(or as otherwise set forth in writing with respect to drawn Letters of Credit), and (b) the
minimum letter of credit fee owed for each Letter of Credit issued under the Revolving Loan
shall be One Thousand Five Hundred and 00/100 Dollars ($1,500.00), payable upon issuance.
In addition to such fee, Borrower shall be obligated to pay to Lender the customary and
standard fees and costs charged by Lender in conjunction with the issuance of a Letter of
Credit by the Lender, as set forth in the Letter of Credit Agreement(s) executed in
conjunction with the issuance of each

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	 	 	Letter of Credit or otherwise, including without
limitation, all processing, amendment, courier and overnight delivery fees and costs.”
	 
	25.	 	Contract Line of Credit. Section 2.2 of the Loan Agreement entitled “Contract
Line of Credit” is hereby deleted in its entirety and restated as follows:

	 	“2.2 Contract Line of Credit. The Lender agrees to extend the Contract Loan
to Borrower, subject to the terms and conditions of this Agreement. Until the Ending
Date, Borrower may borrow, repay and reborrow Advances in accordance with this
Agreement.

	 
	 	a.	 	Allowed Amount of Contract Loan Advances. The aggregate principal
amount of Advances outstanding at any time under the Contract Loan shall not exceed the
difference between the (i) the Maximum Contract Loan Commitment Amount and (ii) the
Contract Loan LOC Obligations.
	 
	 	b.	 	Conditions for Contract Loan Advances. In addition to the conditions
set forth in Article 3 of this Agreement or otherwise in this Agreement, prior to any
Contract Loan Advance, Borrower shall fully and timely meet the following terms and
conditions of a Contract Loan Advance, all of which shall be satisfactorily complied
with as determined in Lender’s sole and absolute discretion:

	 	i.	 	Delivery by Borrower to Lender of a written Contract Loan
Advance request, along with procurement documentation with respect to the USAID
Contract, and the USAID Subcontract, as Lender shall request;
	 
	 	ii.	 	Delivery by Borrower to Lender of written proof of acceptance
and approval by Bechtel National, Inc. of (A) the material requisition from
Bechtel National, Inc., to Borrower and all supporting documentation thereto
(if any) issued in connection with the USAID Subcontract between Bechtel
National, Inc., and the Borrower, (B) the purchase order from Borrower to the
supplier, along with evidence of Bechtel National, Inc.’s, approval of such
purchase order and any supporting documentation thereto, for the provision of
goods and/or services to Borrower in accordance with the material requisition
in (A) above, and for which the Contract Loan Advance is being requested, and
(C) the invoice provided by the vendor of Borrower to Borrower for goods and/or
services provided to Borrower on the USAID Subcontract for which the Contract
Loan Advance is being requested; and
	 
	 	iii.	 	Delivery by Borrower to Lender of a copy of the invoice from Borrower to
Bechtel National, Inc., which evidences the Billed USAID Account owing to
Borrower under the USAID Subcontract for which the Contract Loan Advance is
being requested, along with the underlying documentation which supports the
Billed USAID Account, including without limitation, all invoices, contracts,
purchase agreements, purchase orders and change orders.

	 	c.	 	Mandatory Prepayments. If the principal outstanding under the Contract
Loan, at any time exceeds the Allowed Amount of Contract Loan Advances, then Borrower
shall make an immediate payment of principal under the Contract Loan in an amount
sufficient that the principal outstanding under the Contract Loan will no longer exceed
the Allowed Amount of Contract Loan Advances. If the amount of the Borrower’s Funded
Debt at any time exceeds the maximum amount that will enable Borrower to comply with
any of the affirmative covenants provided hereinafter (including, without limiting the
generality of the foregoing, any covenant limiting the Borrower’s ratio of Funded Debt
to EBITDA), then Borrower shall make an immediate payment of principal under the
Contract Loan in an amount sufficient to enable Borrower to comply with all applicable
financial covenants provided hereinafter.

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	 	d.	 	Procedure for Advances. Unless Borrower has previously entered into a
separate auto borrow or similar cash management service with Lender, Borrower may
request Advances by telephone through its employees or agents, as hereinafter provided.
Each Advance request must be received by Lender not later than 1:00 p.m. (Eastern
Standard time) on the date the Advance is to be made and must specify the amount of the
Advance. Lender shall deposit the Advance into Borrower’s Operating Account if
Borrower is entitled to the Advance, subject to the terms and conditions of this
Agreement. If Borrower has entered into a separate auto borrow or similar cash
management service with Lender, then the provisions of such service shall control with
respect to the procedures for making Advances to Borrower. Lender shall have the right
to terminate such auto borrow or similar cash management service at any time, as
determined by Lender in its sole and absolute discretion.

	 	e.	 	Contract Loan Letter of Credit Subfacility. At Lender’s discretion,
Lender shall issue Letters of Credit under the Contract Loan for the account of the
Borrower from time to time upon request from the Closing Date until the Ending Date,
subject to the following terms and conditions:

	 	1.	 	the aggregate amount of Contract Loan LOC
Obligations shall at no time exceed the Contract Loan Letter of Credit
Sublimit;
	 
	 	2.	 	any request for a Letter of Credit to be issued under the Contract
Loan must be delivered and received by Lender not later than five (5)
business days prior to the date that Borrower wishes to have the Letter
of Credit issued;
	 
	 	3.	 	any request for a Letter of Credit to be issued
under the Contract Loan shall be for the purpose of supporting the
USAID Contract and USAID Subcontract. Prior to the issuance of any
such Letter of Credit to a vendor of Borrower providing goods and/or
services in support of the USAID Contract and USAID Subcontract,
Borrower shall deliver to Lender the following documents, which are to
be in form and substance satisfactory to Lender, as determined in
Lender’s sole and absolute discretion: (A) a written Contract Loan
Advance request, along with all procurement documentation with respect
to the USAID Subcontract, as Lender shall request; (B) the material
requisition from Bechtel National, Inc., to Borrower and all supporting
documentation thereto (if any) issued in connection with the USAID
Subcontract between Bechtel National, Inc., and the Borrower; and (C)
the corresponding purchase order from Borrower to the supplier, along
with evidence of Bechtel National, Inc.’s, approval of such purchase
order and any supporting documentation thereto, for the provision of
goods and/or services to Borrower in accordance with the material
requisition in (B) above, and for which such vendor has required the
issuance of a Letter of Credit to support Borrower’s purchase order as
a condition of providing the goods and/or services requested by
Borrower and for which the Contract Loan Advance is being requested;
	 
	 	4.	 	no Letter of Credit to be issued under the
Contract Loan shall have an original expiry date more than six months
from the date of issuance or beyond the Ending Date unless otherwise
agreed to by Lender in writing or unless Borrower’s obligation to
reimburse Lender for drawings under the Letter of Credit has been fully
secured by a cash deposit with the Lender;
	 
	 	5.	 	Borrower shall execute and deliver to Lender a Letter of Credit
Agreement with respect to each Letter of Credit to be issued under the
Contract Loan by Lender,

9

 

	 	 	 	using the Lender’s standard reimbursement
agreement form at the time the Letter of Credit is issued. The form
and substance of each Letter of Credit, and any reimbursement agreement
required by Lender in relation to a Letter of Credit issued under the
Contract Loan, must be satisfactory to the Lender, in its sole
judgment. At Lender’s option, Letters of Credit to be issued under the
Contract Loan shall be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (Publication No. 500 or the most
recent publication, the “UCP”);
	 
	 	6.	 	issuance of the Letter of Credit under the
Contract Loan shall not cause the aggregate outstanding principal
amount of all Advances under the Contract Loan to exceed the Allowed
Amount of Contract Loan Advances, determined taking into account the
increase in the amount of the Contract Loan LOC Obligations caused by
the issuance of the Letter of Credit under the Contract Loan;
	 
	 	7.	 	Lender shall not be required to issue any
Letter of Credit under the Contract Loan if any circumstance exists
that would entitle Lender not to honor a request for an Advance under
the Contract Loan;
	 
	 	8.	 	upon notice from Lender of any drawing under a
Letter of Credit issued under the Contract Loan, Borrower shall, as to
be determined in Lender’s sole and absolute discretion, either (a)
deliver cash to Lender, in an amount satisfactory to secure all
Contract Loan LOC Obligations and all amounts payable by the Borrower
to the Lender under any Letter of Credit Agreement pertaining to such
Contract Loan LOC Obligations, or (b) immediately reimburse Lender for
the amount of the drawing, plus interest from the date of the drawing
at the highest rate of interest then in effect under the Contract Note.
The Borrower’s obligation to reimburse the Lender for any drawing
under a Letter of Credit issued under the Contract Loan shall be
absolute and unconditional, irrespective of any rights of set-off,
counterclaim or defense to payment the Borrower may claim or have
against the Lender, the beneficiary of the Letter of Credit or any
other Person;
	 
	 	9.	 	any draw against a standby Letter of Credit
issued under the Contract Loan shall be subject to Lender being
provided, in advance of such draw, evidence, in form and substance
satisfactory to Lender, as determined in Lender’s sole and absolute
discretion, that shipment of any goods provided by a vendor of Borrower
has been made in accordance with the purchase order provided by
Borrower to such vendor for such product, said evidence to include,
without limitation, copies of all invoices, purchase orders and bills
of lading;
	 
	 	10.	 	the amount of each standby Letter of Credit issued by Lender
under the Contract Loan to support a purchase order provided by
Borrower to a vendor of Borrower shall be reduced by the amount paid by
Borrower to the vendor for the goods and/or services provided under
such purchase order, Borrower agreeing to take all such action as may
be requested by Lender to provide for the reduction in the amount of
any such standby Letter of Credit, including without limitation, the
issuance of a substitute standby Letter of Credit or a modification or
amendment to the existing standby Letter of Credit;
	 
	 	11.	 	unless the Borrower makes reimbursement from
another source on the day of the drawing under any Letter of Credit
issued under the Contract Loan, the Borrower

10

 

	 	 	 	shall be deemed to have
requested an Advance under the Contract Loan in the amount of the
drawing, and (i) Lender, at its option, may make such an Advance
(irrespective of whether Borrower would then be entitled to an Advance
under the terms of this Agreement) and apply the proceeds of the
Advance to satisfy the Borrower’s obligation to reimburse Lender for
the amount drawn on the Letter of Credit; and (ii) any such Advance
shall be repayable, with interest, in accordance with the terms and
conditions of the Contract Note; and
	 
	 	12.	 	the provisions of the Letter of Credit
Agreement pertaining to each Letter of Credit issued under the Contract
Loan are deemed incorporated into this Agreement by this reference and
shall be binding upon the Lender and Borrower as if fully set forth
herein. If a conflict exists between the terms of such Letter of
Credit Agreement and any other Loan Document, the terms of the Letter
of Credit Agreement shall control with respect to the Letter of Credit
issued pursuant to that Letter of Credit Agreement but not as to other
matters governed by this Agreement or such Loan Document.

	 	f.	 	Repayment of Contract Loan; Auto Debit. Borrower promises to repay the
Contract Loan, with interest, at the time and in the manner and in accordance with the
terms provided in the Contract Note. Borrower has elected to authorize Lender to
effect payment of sums due under the Contract Note and this Agreement by means of
debiting Borrower’s account with Lender, account number
004134369668. This authorization shall not affect the obligation of Borrower to pay
such sums when due, without notice, if there are insufficient funds in such account
to make payment in full on the due date thereof, or if Lender fails to debit the
account.
	 
	 	g.	 	Use of Contract Loan Proceeds. The proceeds of the Contract Loan shall be
used to finance the timing differences associated with the obligation of Borrower to
make vendor payments and the collection of Accounts arising from the USAID Subcontract
and creating USAID Material and Equipment Accounts, and for no other purpose.
	 
	 	h.	 	Contract Loan Fees. Borrower promises to pay Lender the following fees
in consideration of entering into this Agreement. These fees are in addition to
interest payable under the Contract Note:

	 	1.	 	an up front underwriting fee of Twenty Five Thousand and 00/100
Dollars ($25,000.00), payable on or before the Closing Date. This fee is also
referenced in section 2.1 (g) of this Agreement regarding the Revolving Loan
fees.
	 
	 	2.	 	an unused fee for each day that any part of the Maximum
Contract Loan Commitment Amount is unused. The unused fee shall be calculated
and payable monthly, in arrears, commencing on the first day of the first month
after the date of this Agreement. The unused fee shall be determined for each
day by multiplying the part of the Maximum Contract Loan Commitment Amount that
is unused on that day by a per-diem rate equal to .375% divided by 360.
Contract Loan LOC Obligations shall be deducted from the Maximum Contract Loan
Commitment Amount for purposes of calculating the unused fee.
	 
	 	3.	 	the fees and costs associated with each field examination
performed by the Lender or its agents, for up to two (2) field examinations per
year. However, the Lender shall have the right to perform such additional
field examinations at any time, in its sole discretion. Each additional field
examination will be at Lender’s own expense if no Event of Default has occurred
and remains uncured at the time of the additional field examination, but shall
be at the Borrower’s expense if an Event of Default has occurred and remains
uncured at

11

 

	 	 	 	the time of the additional field examination. This fee is also
referenced in section 2.1 (g) of the Agreement regarding Revolving Loan fees.
	 
	 	4.	 	a letter of credit fee for each day that any Letter of Credit issued under
the Contract Loan is outstanding. The letter of credit fee shall be calculated
and payable in advance of issuance of such Letter of Credit. The letter of
credit fee shall be determined for each Letter of Credit to be issued under the
Contract Loan by multiplying the term of each Letter of Credit (not taking into
account any extensions or renewals of such Letter of Credit, for which a
separate fee will be owing by Borrower) by a per-diem rate equal to two percent
(2.00%) per annum, divided by 360; provided however, that (a) such fee shall
cease to be owing on a Letter of Credit on the date such Letter of Credit is
drawn, on which date Borrower shall be obligated for, among other things,
payment of such fees and costs owing under the Letter of Credit Agreement for
such Letter of Credit (or as otherwise set forth in writing with respect to
drawn Letters of Credit), and (b) the minimum letter of credit fee owed for
each Letter of Credit issued under the Contract Loan shall be One Hundred Fifty
and 00/100 Dollars ($150.00), payable upon issuance. In addition to such fee,
Borrower shall be obligated to pay to Lender the customary and standard fees
and costs charged by Lender in conjunction with the issuance of a Letter of
Credit by the Lender, as set forth in the Letter of Credit Agreement(s)
executed in conjunction with the issuance of each Letter of Credit or
otherwise, including without limitation, all processing, amendment, courier and
overnight delivery fees and costs.”

	26.	 	Corporate or Limited Liability Company Existence. Section 6.2 of the Loan Agreement
is hereby deleted in its entirety and restated as follows:
	 
	 	 	“6.2. Corporate or Limited Liability Company Existence. Preserve, maintain and keep
in full force and effect its corporate or limited liability existence and good standing in
the jurisdiction of its formation. Notwithstanding the above, Lender waives, on a one time
basis, any breach of this Section as a result of the Merger.”
	 
	27.	 	Borrowing Base Certificates. Subsection e. of Section 6.11 of the Loan Agreement
entitled “Borrowing Base Certificates” is hereby deleted in its entirety and restated
as follows:

	 	“e. Borrowing Base Certificates. Borrower shall submit a fully completed
Borrowing Base Certificate not later than twenty-five (25) days after the end of each
month, stating the Revolving Loan Borrowing Base as of the last day of the preceding
month. At Lender’s request, the Borrower shall furnish to the Lender such schedules,
certificates, lists, records, reports, information and documents to enable the Lender
to verify the Revolving Loan Borrowing Base.”

	28.	 	Monthly Reports. Subsection f. of Section 6.11 of the Loan Agreement entitled
“Monthly Reports” is hereby deleted in its entirety.
	 
	29.	 	Funded Debt to EBITDA Financial Covenant. Subsection a. of Section 6.14 of the Loan
Agreement entitled “Funded Debt to EBITDA” is hereby deleted in its entirety and
restated as follows:

	 	“a. Funded Debt to EBITDA. A maximum ratio of Funded Debt to EBITDA of 3.0
to 1.0, to be tested at the end of each fiscal quarter of Borrower, beginning with
Borrower’s fiscal quarter ending December 31, 2004.”

	30.	 	Tangible Net Worth Financial Covenant. Subsection b. of Section 6.14 of the Loan
Agreement entitled “Tangible Net Worth” is hereby deleted in its entirety and restated
as follows:

12

 

	 	“b. Tangible Net Worth. A minimum Tangible Net Worth of

	 	1.	 	One Dollar ($1.00) at all times from the
closing of the Loans to December 30, 2004; and
	 
	 	2.	 	At all times after December 30, 2004, Four
Hundred Fifty Thousand and 00/100 Dollars ($450,000.00).”

	31.	 	Fundamental Changes. Section 7.3 of the Loan Agreement is hereby deleted in its
entirety and restated as follows:
	 
	 	 	“7.3. Fundamental Changes. Amend its Articles or Certificate of Incorporation or
Organization by any amendment which would adversely affect Borrower’s ability to perform or
comply with any of the terms, conditions or agreements to be performed or complied with by
Borrower hereunder or to perform any of the transactions contemplated hereby; change its
fiscal year, name, ownership or key management; convert its organizational form into another
entity form or establish any new entity to perform the business or similar business of
Borrower; reorganize, consolidate or merge with any other corporation; or change its state
of incorporation or organization. Furthermore, Borrower shall not materially engage in any
business other than the business in which Borrower is actively engaged as of the date of
this Agreement, which business the Borrower has fully disclosed to Lender. Notwithstanding
the above, Lender waives, on a one time basis, any breach of this Section as a result of the
Merger.”
	 
	32.	 	Modification of Section 7.5 of Loan Agreement . Section 7.5 of the Loan Agreement is
hereby deleted in its entirety and restated as follows:
	 
	 	 	“7.5. Transfer of Assets. Sell, lease, assign, pledge or otherwise dispose of any
of its properties, stock or assets (including without limitation, the Collateral), whether
now owned or hereafter acquired, except in the ordinary course of business and for fair
market value. Notwithstanding the above, Lender waives, on a one time basis, any breach of
this Section as a result of the Merger.”
	 
	33.	 	Events of Default. Section 9.1(o) of the Loan Agreement is hereby deleted in its
entirety and restated as follows:
	 
	 	 	“o. a twenty five percent or greater voting control interest in Borrower is directly
or indirectly sold, assigned, transferred, encumbered or otherwise conveyed (whether in a
single or multiple transfers) without the prior written consent of the Lender.
Notwithstanding the above, Lender waives, on a one time basis, any breach of this clause (o)
as a result of the Merger.”
	 
	34.	 	Notices. Section 10.3 of the Loan Agreement is hereby amended to provide that all
notices to Borrower shall be sent to Horne Engineering Services, LLC, c/o Spectrum Sciences &
Software Holdings Corp., 3130 Fairview Park Drive, Suite 400, Falls Church, Virginia 22041,
Attention: Darryl K. Horne, President and CEO, and Michael Megless, CFO, with copies to Horne
Engineering Services, LLC, 3130 Fairview Park Drive, Suite 400, Falls Church, Virginia 22042,
Attention: Grady Wright, Predient and CEO.
	 
	35.	 	Arbitration. Section 10.19 of the Loan Agreement is hereby deleted in its entirety
and restated as follows:
	 
	 	 	“ARBITRATION.
	 
	 	 	(a) This Section concerns the resolution of any controversies or claims between the parties,
whether arising in contract, tort or by statute, including but not limited to controversies
or claims that arise out of or relate to: (i) this Agreement (including any renewals,
extensions or modifications); or (ii) any document related to this Agreement (collectively a
“Claim”). For the purposes of this arbitration provision only, the

13

 

	 	 	term “parties” shall
include any parent corporation, subsidiary or affiliate of the Lender involved in the
servicing, management or administration of any obligation described or evidenced by this
Agreement.
	 
	 	 	(b) At the request of any party to this Agreement, any Claim shall be resolved by binding
arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).
The Act will apply even though this Agreement provides that it is governed by the law of a
specified state. The arbitration will take place on an individual basis without resort to
any form of class action.
	 
	 	 	(c) Arbitration proceedings will be determined in accordance with the Act, the then-current
rules and procedures for the arbitration of financial services disputes of the American
Arbitration Association or any successor thereof (“AAA”), and the terms of this Section. In
the event of any inconsistency, the terms of this Section shall control. If AAA is
unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any
provision of this arbitration clause, any party to this Agreement may substitute another
arbitration organization with similar procedures to serve as the provider of arbitration.
	 
	 	 	(d) The arbitration shall be administered by AAA and conducted, unless otherwise
required by law, in any U.S. state where real or tangible personal property collateral for
this credit is located or if there is no such collateral, in the state specified in the
governing law section of this Agreement. All Claims shall be determined by one arbitrator;
however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party,
the Claims shall be decided by three arbitrators. All arbitration hearings shall commence
within ninety (90) days of the demand for arbitration and close within ninety (90) days of
commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of
the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may
extend the commencement of the hearing for up to an additional sixty (60) days. The
arbitrator(s) shall provide a concise written statement of reasons for the award. The
arbitration award may be submitted to any court having jurisdiction to be confirmed,
judgment entered and enforced.
	 
	 	 	(e) The arbitrator(s) will give effect to statutes of limitation in determining any Claim
and may dismiss the arbitration on the basis that the Claim is barred. For purposes of the
application of the statute of limitations, the service on AAA under applicable AAA rules of
a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this
arbitration provision or whether a Claim is arbitrable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees pursuant to the
terms of this Agreement.
	 
	 	 	(f) This Section does not limit the right of any party to: (i) exercise self-help remedies,
such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure
against any real or personal property collateral; (iii) exercise any judicial or power of
sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not
limited to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies.
	 
	 	 	(g) The filing of a court action is not intended to constitute a waiver of the right of any
party, including the suing party, thereafter to require submittal of the Claim to
arbitration.
	 
	 	 	(h) By agreeing to binding arbitration, the parties irrevocably and voluntarily waive any
right they may have to a trial by jury in respect of any Claim. Furthermore, without
intending in any way to limit this Agreement to arbitrate, to the extent any Claim is not
arbitrated, the parties irrevocably and voluntarily waive any right they may have to a trial
by jury in respect of such Claim. This provision is a material inducement for the parties
entering into this Agreement.”

	36.	 	Assumption. All references in the Loan Agreement and each other Loan Document
to the term “Borrower” shall henceforth mean and be a reference to Horne Engineering Services,
LLC, a Virginia limited liability company, successor-by-merger to Horne Engineering Services,
Inc., and (ii) HES LLC shall be deemed to

14

 

	 	 	have assumed all obligations and liabilities of
Horne Inc under the Loan Agreement and such other Loan Documents.
	 
	37.	 	Security Interest. HES LLC hereby confirms, grants and regrants to Lender a security
interest in the Collateral.
	 
	38.	 	No Dividends, Distributions, Loans or Advances. HES LLC hereby acknowledges and
agrees that, pursuant to and in accordance with the terms of the Loan Agreement, HES LLC will
not, among other things (a) declare or pay dividends on account of any interest in HES LLC, or
make any distribution of assets to HES LLC’s members, whether in cash, assets or obligations
of HES LLC, including without limitation, any dividends or distributions to Spectrum or any of
its subsidiaries; provided however, that the foregoing shall not prohibit HES LLC from paying
Accounts owing to Spectrum for goods or services provided by Spectrum to HES LLC from and
after the date of this First Amendment in the ordinary course of business as long as such
payments do not, in the aggregate, exceed the sum of $500,000.00, or (b) make loans or
advances to any person or entity that exceed in the aggregate the sum of Ten Thousand and
00/100 Dollars ($10,000.00) outstanding at any time, except reasonable advances for business
expenses of HES LLC’s employees that would be reimbursable under HES LLC’s existing expense
reimbursement policy.
	 
	39.	 	Contract Loan Fee. In consideration of Lender’s agreement to this First Amendment,
Borrower promises to pay to Lender, on demand, a contract loan fee of Seven Thousand Five
Hundred and 00/100 Dollars ($7,500.00).
	 
	40.	 	Fees, Costs and Expenses. HES LLC promises to pay, on demand, all costs (including
attorneys’ fees, costs and expenses) incurred by the Lender for the preparation of this First
Amendment and all other documents executed in connection herewith or pursuant hereto, and any
other expenses incurred by Lender in relation to this First Amendment and/or such other
documents. HES LLC also promises to pay, on demand, any and all fees and costs previously
incurred by Lender in conjunction with the previously proposed but unsigned amendments to the
Loan Agreement and other Loan Documents to increase the principal amount of the loan
evidenced by the Contract Note to Ten Million and 00/100 Dollars ($10,000,000.00), including
without limitation, the legal fees and costs owing to Bean, Kinney & Korman, P.C. in the
amount of $15,000.00 as of June 30, 2005. HES LLC hereby authorizes the Lender to advance
funds to itself or to third parties to pay such fees, costs and expenses, which advance
shall be deemed to be an Advance to the Borrower under the Loan Agreement.
	 
	41.	 	Enforceability; No Offsets or Defenses. Except as amended by this First
Amendment, the Loan Agreement remains in full force and effect and unmodified. HES LLC and
each Guarantor warrants and represents that they have no offsets or defenses to their
obligations under the Loan Agreement, as amended by this First Amendment, or under any other
Loan Document.
	 
	42.	 	Guarantor Consent and Release. Each Guarantor consents to this First Amendment,
agrees that this First Amendment does not impair such Guarantor’s liabilities or obligations
under the Guaranty, and confirms that the Guaranty remains in full force and effect as to all
credit extended under the Loan Agreement, as amended by this First Amendment. In
consideration of Lender’s agreement to this First Amendment, each Guarantor hereby releases
and waives any and all claims of any kind that each Guarantor may have against the Lender as
of the date of this First Amendment arising out of or relating to the Loan Agreement, as
amended by this First Amendment, or under any other Loan Document.
	 
	43.	 	HES LLC Release. In consideration of Lender’s agreement to this First Amendment, HES
LLC hereby releases and waives any and all claims of any kind that it may have against the
Lender as of the date of this First Amendment arising out of or relating to the Loan
Agreement, as amended by this First Amendment, or under any other Loan Document.

15

 

	44.	 	Governing Law. The provisions of this First Amendment shall be construed,
interpreted and enforced in accordance with the laws of the Commonwealth of Virginia
(excluding Virginia’s choice of law rules).
	 
	45.	 	Consent to Jurisdiction. Provisions of the Loan Agreement concerning Borrower’s
consent to the jurisdiction of state and federal courts sitting in the Commonwealth of
Virginia are incorporated into this First Amendment by reference and shall have the same force
and effect as if fully set forth in this First Amendment.
	 
	46.	 	Waiver of Trial by Jury. Provisions of the Loan Agreement concerning Borrower’s and
Lender’s mutual waiver of trial by jury in disputes between Borrower and the Lender are
incorporated into this First Amendment by reference and shall have the same force and effect
as if fully set forth in this First Amendment.

16

 

     IN WITNESS WHEREOF, the undersigned have duly executed and delivered this First Amendment
under seal as of the day and year first hereinabove set forth, the Lender having signed for the
sole purpose of evidencing its consent to the amendments herein contained and not for the purpose
of becoming a co-borrower under the Loan Agreement, as amended by this First Amendment.

	 	 	 	 	 	 	 
	 	 	HORNE ENGINEERING SERVICES, LLC, a Virginia limited liability
company, successor-by-merger to Horne Engineering Services, Inc.
	 	 	By: Spectrum Sciences & Software Holdings Corp., a Delaware
corporation, its sole member
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Darryl K. Horne
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name: Darryl K. Horne
	 	 	Title: President and CEO
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael J. Radcliffe
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name: Michael J. Radcliffe
	 	 	Title: Senior Vice President

By their endorsement below, the undersigned Guarantors, jointly and severally: (i) acknowledge the
modification and increase of the Contract Loan and the modification of the Revolving Loan being
effected by the foregoing First Amendment; (ii) further acknowledge the succession in interest of
Horne Engineering Services, LLC (formerly known as Horne Acquisition LLC), as successor-by-merger
to Horne Engineering Services, Inc., the named Borrower under their Guaranty dated August 12, 2004
(“Guaranty”); and (iii) affirm that the succession of Horne Engineering Services, LLC, as Borrower
shall not affect, impair, condition or release their obligations under the Guaranty, which shall
continue in full force and effect, without modification.

	 	 	 	 	 	 	 
	 	 	GUARANTORS:	 	 
	 
	 

	 	 	 	/s/ Darryl K. Horne
	 	(SEAL)
	 

	 	 	 	 	 	 
	 

	 	 	 	Darryl K. Horne	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Charlene M. Horne
	 	(SEAL)
	 

	 	 	 	 	 	 
	 

	 	 	 	Charlene M. Horne	 	 

17exv10w2

 

Exhibit 10.2

Effective as of June 30, 2005

Spectrum Sciences & Software Holdings Corp.

3130 Fairview Park Drive, Suite 400

Falls Church, Virginia 20852

IN RE: Horne Engineering Services, LLC

Dear Sir or Madam:

     Horne Engineering Services, LLC, a Virginia limited liability company (the “Borrower”),
successor by merger to Horne Engineering Services, Inc., a Virginia corporation is obligated to
Bank of America, N. A. (“BOA”) on (1) a revolving line of credit loan in the principal amount of
Four Million and 00/100 Dollars ($4,000,000.00) (the “Revolving Loan”), said Revolving Loan being
evidenced by a Revolving Note dated as of August 12, 2004, payable by Borrower to BOA in the
principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as modified by that certain
First Amendment to Revolving Note dated as of June 30, 2005 (collectively, the “Revolving Note”)
and (2) a second revolving line of credit loan in the principal amount of Ten Million and 00/100
Dollars ($10,000,000.00) (the “Contract Loan”, which together with the Revolving Loan are hereby
collectively referred to as the “BOA Credit Facilities”), said Contract Loan being evidenced by a
Contract Note dated as of August 12, 2004, payable by Borrower to BOA in the principal amount of
Three Million and 00/100 Dollars ($3,000,000.00), as modified and increased to a principal amount
of Ten Million and 00/100 Dollars ($10,000,000.00) by that certain First Amendment to Contract Note
dated as of June 30, 2005 (collectively, the “Contract Note”). The BOA Credit Facilities are
governed and secured by that certain Revolving Line of Credit Loan Agreement, Contract Line of
Credit Loan Agreement and Security Agreement dated as of August 12, 2004 between Borrower and BOA,
as modified by First Amendment to Revolving Line of Credit Loan Agreement, Contract Line of Credit
Loan Agreement and Security Agreement dated as of June 30, 2005 (collectively, the “BOA Loan
Agreement”). Pursuant to the BOA Loan Agreement, Borrower has granted to BOA, as security for the
payment and performance of the BOA Credit Facilities, a security interest in all assets of the
Borrower including, without limitation, all of the following property of Borrower, whether now
owned or hereafter acquired: all of Borrower’s accounts, chattel paper, commercial tort claims,
deposit accounts, documents, equipment, fixtures, general intangibles (including payment
intangibles and software), instruments, inventory, investment property, intellectual property,
money, supporting obligations (including letter of credit rights), all books and records and
computer hardware, software and systems, all policies of insurance and the proceeds thereof, all
additions and accessions to and replacements of the collateral described above, and all products
and proceeds of all of the collateral described above (collectively, the “BOA Collateral”). The
BOA Collateral secures the BOA Credit Facilities, as such facilities may be amended from time to
time, and all other obligations of Borrower to BOA, whether now existing or hereafter created
(collectively, the “BOA Debt”).

     Spectrum Sciences & Software Holdings Corp. (“Spectrum”), sole member of Borrower, has
advanced to Borrower on a book-entry basis, without other documentation, the sum of Two Million One
Hundred Fifty Thousand and 00/100 Dollars ($2,150,000.00)(the “Spectrum Loan”), which sum is
carried by Borrower on its financial balance sheet as unsecured indebtedness to Spectrum. The
Borrower is not entitled to, nor will Spectrum make, any further advances of money to Borrower,
except (i) advances made with the prior written consent of BOA; (ii) advances to or for the benefit
of Borrower with respect to specific labor or material costs charged to Borrower by its
subcontractors thereby allowing Borrower to perform on the USAID Subcontract (as defined in the BOA
Loan Agreement), and for such amounts so advanced, Spectrum may receive payment from Borrower for
the goods or services provided by Borrower to Bechtel National, Inc. which were provided by
Borrower’s subcontractors as a direct result of such advance(s) made by Spectrum, provided such
payment is made from the proceeds received by Borrower from Bechtel National, Inc. for such goods
or services provided; and (iii) such additional advances as Spectrum and Borrower may desire for
working capital; provided that any such additional advances shall constitute part of the Spectrum
Debt (as hereafter defined), shall be unsecured indebtedness and shall not be repaid to Spectrum

 

 

until the BOA Credit Facilities and BOA Debt is
finally and unavoidably paid. Further, Spectrum has not been granted and is not entitled to,
and Borrower will not grant, any security interest in any assets of Borrower to secure the Spectrum
Loan.

     As a condition and to induce BOA to extend and make advances under the BOA Credit Facilities
or any other BOA Debt to Borrower, Spectrum has agreed to and does hereby subordinate any and all
interests, liens, assignments, grants, encumbrances or any other types of transfers or claims in,
of or to any of Borrower’s assets which may arise out of or be based upon the Spectrum Loan or any
other obligation or indebtedness of Borrower to Spectrum of any kind, now existing or hereafter
entered into or agreed to by Borrower, and all renewals, extensions, or modifications of any of the
above (collectively, the “Spectrum Debt”), to any and all security interests, liens, assignments,
grants, encumbrances or any other types of transfers of the BOA Collateral provided as collateral
for the BOA Credit Facilities or other BOA Debt.

     As a further condition and to induce BOA to extend and make advances under the BOA Credit
Facilities or any other BOA Debt to Borrower, Borrower has agreed to and does hereby agree not to
make any payments on the Spectrum Debt so long as the BOA Credit Facilities are outstanding, and
Spectrum has agreed to and does hereby agree that it shall not accept any payments on the Spectrum
Debt until the BOA Credit Facilities are finally and unavoidably paid. Notwithstanding the
foregoing, so long as no Event of Default (as defined in the BOA Loan Agreement) has occurred and
is continuing, Borrower may (i) pay Accounts (as defined in the BOA Loan Agreement) owing to
Spectrum for goods or services provided by Spectrum to Borrower from and after the date of this
letter in the ordinary course of business, as long as such payments do not, in the aggregate,
exceed the sum of $500,000.00 and are not applied in any manner as a credit against the Spectrum
Loan, and (ii) pay Spectrum for the goods or services provided by Borrower to Bechtel National,
Inc. which were provided by Borrower’s subcontractors to Borrower as a direct result of advance(s)
made by Spectrum to Borrower to finance the provision of such goods and services, provided such
payment is made from the proceeds received by Borrower from Bechtel National, Inc. for such goods
or services provided.

     Borrower and Spectrum shall not modify, extend, supplement or increase the Spectrum
Debt without the prior written consent of BOA.

     BOA may, without notice to or consent of Spectrum, extend, renew, modify or increase the BOA
Credit Facilities or provide additional credit to Borrower, and may substitute, exchange or release
collateral or letters of credit securing payment of the BOA Credit Facilities or any such
additional credit as may be extended by BOA to Borrower, and may add or release any guarantor or
surety on the BOA Credit Facilities or on any such additional credit extended by BOA.

     Spectrum and Borrower shall execute and deliver to BOA such further instruments and shall take
such further action as BOA may from time to time reasonably request in order to carry out the
provisions and intent of this letter agreement and to confirm that BOA is entitled to the benefits
of this letter agreement and shall not act or permit any action prejudicial to or inconsistent with
this letter agreement.

     Spectrum represents, warrants and covenants that the Spectrum Debt is owned solely by
Spectrum, is payable only to Spectrum, is not and shall not be subject to any guaranty or surety,
and is not in default. Spectrum covenants that it shall not sell, assign or otherwise transfer any
of its interest in the Spectrum Debt.

     This letter agreement and the subordination granted herein shall terminate when BOA Credit
Facilities are finally and unavoidably paid. The BOA Credit Facilities shall be deemed not to be
paid in full, for purposes of this letter agreement, as long as BOA has any obligation with respect
to the BOA Credit Facilities to make further advances to Borrower. However, this letter agreement
and the subordination granted herein shall continue to be effective or be reinstated if any payment
on the BOA Credit Facilities is rescinded, avoided, or for any reason returned by BOA because of
any adverse claim or threatened action, as though such payment had not been made.

     Upon violation of this letter agreement by Spectrum or Borrower, BOA may accelerate the
maturity of the BOA Credit Facilities so that all amounts owing with respect to the BOA Credit
Facilities are immediately due and

2

 

payable. Any sums received by Spectrum paid in violation of
this letter agreement shall be held in trust by Spectrum. Spectrum shall pay to BOA all sums
received by Spectrum paid in violation of this letter agreement, including any funds
deemed held in trust for BOA. BOA is entitled to specific performance of this letter
agreement and Borrower and Spectrum waive any defense based upon adequacy of remedy at law which
may be asserted as a bar to the remedy of specific performance. No failure or delay on the part of
BOA to exercise any right or remedy hereunder shall operate as a waiver thereof nor shall any
partial exercise of any rights or remedies hereunder preclude any other or further exercise of such
additional rights or remedies. The remedies provided herein are cumulative of any other remedies
provided by law or otherwise held against Borrower.

     If any provision of this letter agreement is found to be invalid or unenforceable, the
remainder of such provision and all other provisions of this letter agreement shall be valid and
enforceable as if such unenforceable provisions were not written. Any notices, demands or requests
shall be sufficiently given to Spectrum or BOA if in writing and mailed or delivered to the
addresses shown for such party in this letter agreement and in the event either party hereto
changes its address prior to the date the BOA Credit Facilities are paid in full, that party shall
promptly give written notice to the other party of such change of address by registered or
certified mail, return receipt requested, all charges prepaid. This letter agreement shall be
binding upon the parties and their respective successors and assigns. BOA may assign or transfer
its rights with respect to any of the BOA Credit Facilities to any person or entity, and such
transferee shall thereupon become vested with all the rights in respect thereof granted to BOA
herein. This letter agreement is irrevocable and no waiver or modification of any provision of
this letter agreement shall be valid unless in writing and signed by all parties hereto. The
interpretation and performance of this letter agreement shall be governed by the laws of the
Commonwealth of Virginia.

     Spectrum shall pay to BOA, on demand, all fees and costs incurred by BOA in enforcing or
defending this letter agreement against Spectrum, including without limitation, reasonable
attorneys’ fees and collection costs.

     WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL PARTIES HERETO
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON THIS LETTER AGREEMENT, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS LETTER AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT
TO BOA TO ACCEPT THIS LETTER AGREEMENT.

THE PARTIES HERETO AGREE THAT THEY SHALL NOT HAVE A REMEDY OF PUNITIVE OR EXEMPLARY DAMAGES AGAINST
THE OTHER IN ANY DISPUTE AND HEREBY WAIVE ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY
HAVE NOW OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY DISPUTE WHETHER THE DISPUTE IS
RESOLVED BY ARBITRATION OR JUDICIALLY.

3

 

Spectrum, BOA and Borrower have signed this letter agreement below as of the day and year first
above written to evidence their consent and agreement hereto.

Spectrum Sciences & Software Holding Corp.,

a Delaware corporation

	 	 	 	 	 
	By:

	/s/ Darryl K. Horne
	 	(SEAL)
	 

	 	 	 
	Name: Darryl K. Horne	 	 
	Title: President and Chief Executive Officer	 	 
	Address:

	  3130 Fairview Park Drive, Suite 400	 	 
	 

	 	  Falls Church, Virginia 22042	 	 
	 

	 	  Attn: Darryl K. Horne	 	 
	 

	 	  President and Chief Executive Officer	 	 

Bank of America, N.A.

	 	 	 	 	 
	By:

	/s/ Michael J. Radcliffe
	 	(SEAL)
	 

	 	 	 
	Name: Michael J. Radcliffe
	 	 
	Title: Senior Vice President	 	 
	 
	 	 	 	 
	Address:

	  Bank of America, N.A.	 	 
	 

	 	  1101 Wootton Parkway, 4th Floor	 	 
	 

	 	  Rockville, Maryland 20852	 	 
	 

	 	  Attn: Michael J. Radcliffe	 	 
	 

	 	  Senior Vice President	 	 

Horne Engineering Services, LLC,

a Virginia limited liability company,

successor by merger to Horne Engineering Services, Inc.,

a Virginia corporation

	 	 	 	 	 	 	 
	By:	Spectrum Sciences & Software Holding Corp.,

a Delaware corporation, its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Darryl K. Horne
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name: Darryl K. Horne	 	 
	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	Address:	3130 Fairview Park Drive, Suite 400	 	 
	 	 	  Falls Church, Virginia 22042	 	 
	 	 	  Attn: Darryl K. Horne	 	 
	 	 	  President and Chief Executive Officer	 	 

4

 

Guarantors’ Consent

     Darryl K. Horne and Charlene M. Horne, as Guarantors under a Guaranty, dated as of August 12,
2004 (the “Guaranty”), guaranteeing payment and performance of the BOA Credit Facilities, consents
to the foregoing and annexed letter agreement and agrees that the transactions herein do not affect
or impair their obligations under the Guaranty.

	 	 	 
	/s/ Darryl K. Horne

	 	(SEAL)
	 

	 	 
	Darryl K. Horne
	 	 
	 
	 	 
	/s/ Charlene M. Horne

	 	(SEAL)
	 

	 	 
	Charlene M. Horne
	 	 

5

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