FIRST AMENDMENT TO REVOLVING LINE OF CREDIT LOAN AGREEMENT, CONTRACT LINE OF CREDIT LOAN AGREEMENT AND SECURITY AGREEMENT

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

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.

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.”

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:

““ 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:

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:

““ 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:

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

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;

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 th