AMENDMENT AND WAIVER
AGREEMENT
THIS AMENDMENT AND
WAIVER AGREEMENT (this “ Agreement ”) is made
and entered into as of May 11, 2005, by and among Spectrum
Sciences & Software Holdings Corp., a Delaware corporation
(“ Buyer ”), Horne Acquisition LLC, a Virginia
limited liability company and wholly owned subsidiary of Buyer
(“ Acquisition LLC ”), Horne Engineering
Services, Inc., a Virginia corporation (the “ Company
”), and Darryl K. Horne (“ Horne ”),
Charlene M. Horne and Michael Megless (“ Megless
”), the shareholders of the Company (collectively, the
“ Shareholders ”).
WHEREAS ,
pursuant to that certain Agreement and Plan of Merger, dated as of
April 14, 2005 (the “ Merger Agreement ”),
by and among Buyer, Acquisition LLC, the Company and the
Shareholders, Buyer will acquire the Company by means of a merger
transaction whereby the Company will merge with and into
Acquisition LLC, with Acquisition LLC continuing as the surviving
corporation and as a wholly owned subsidiary of Buyer (the “
Merger ”);
WHEREAS ,
the Merger Agreement currently contemplates that Horne and Megless
will serve as Chief Executive Officer and Chief Financial Officer,
respectively, of Buyer commencing as of the Closing pursuant to
employment agreements, the forms of which are attached to the
Merger Agreement as Exhibits A and B, respectively (the “
Employment Agreements ”);
WHEREAS ,
the Merger Agreement currently contemplates that the employment
agreements of William H. Ham, Jr. (“ Ham ”), as
Chief Executive Officer of Buyer, and Nancy C. Gontarek (“
Gontarek ”), as Chief Financial Officer of Buyer, are
to be assigned by Buyer to its wholly-owned subsidiary, Spectrum
Sciences & Software, Inc. (“ SPSC ”) as of
the Closing (such assignments being referred to herein as the
“ Assignments ”);
WHEREAS ,
the Merger Agreement contemplates the satisfaction of certain
conditions and performance of certain covenants by the parties
before or at the Closing of the Merger; and
WHEREAS ,
the parties desire to amend the Merger Agreement as set forth
below, waive performance of certain covenants and certain
conditions to the Closing of the Merger and make additional
covenants related to the Merger.
NOW,
THEREFORE , for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1.
Definitions . All capitalized terms herein not otherwise
defined shall have the meaning ascribed to them in the Merger
Agreement.
2. Waiver
of Covenants and Conditions by Buyer . Buyer hereby agrees that
the condition to Closing set forth in Section 6.2(h) of the
Merger Agreement is hereby waived, subject to the terms and
conditions set forth in Section 3 of this
Agreement.
3.
Hold-Back Shares . In consideration for Buyer’s waiver
set forth in Section 2 above, the Shareholders agree that
Buyer shall reserve and hold-back Four Million (4,000,000) shares
of Buyer Common Stock that are payable to the Shareholders pursuant
to Section 1.8(b) of the Merger Agreement (the “
Hold-Back Shares ”), to be disposed of in accordance
with the following provisions:
(a) Upon
receipt by Buyer of all, but not less than all, of the consents and
novations set forth on Schedule A attached hereto,
Buyer shall promptly release to the Shareholders an aggregate of
Three Million (3,000,000) Hold-Back Shares. The Hold-Back Shares
released hereunder shall be distributed to the Shareholders on a
pro rata basis as determined in accordance with Section 1.8(b)
of the Merger Agreement.
(b) To
the extent the 2005 EBITDA (as defined below), is less than
$3.25 million (such shortfall being referred to herein as the
“ EBITDA Shortfall ”), Buyer shall be entitled
to recover a number of Hold-Back Shares that is equal to the lesser
of (i) three (3) times the EBITDA Shortfall divided by
the Closing Date Price (as defined below) and (ii) the number
of Hold-Back Shares that have not then been released (or which
Buyer is not then obligated to release) pursuant to Section 3(a)
above. Any Hold-Back Shares not recoverable by Buyer pursuant to
this Section 3(b) shall be promptly distributed to the Shareholders
following the determination of 2005 EBITDA on a pro rata basis as
determined in accordance with Section 1.8(b) of the Merger
Agreement.
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