UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Form 10-Q
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/X/ Quarter report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to ___________
Commission file number 0-5404
_____________________
HADRON, INC.
(Exact name of registrant as specified in its charter)
New York 11-2120726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 824-0400
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days:
Yes X No
___ ___
As of May 7, 1997, 1,606,684 shares of the Common Stock of the
registrant were outstanding.
<PAGE>
HADRON, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 3
March 31, 1997 and June 30, 1996
Consolidated Statements of 5
Operations for the Three and Nine
Months Ended March 31, 1997 and 1996
Consolidated Statements of 6
Cash Flows for the Nine Months Ended
March 31, 1997 and 1996
Notes to Consolidated 7
Financial Statements
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
Part II Other Information:
Item 1. Legal Proceedings 13
SIGNATURES 14
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND JUNE 30, 1996
<CAPTION>
MARCH 31, JUNE 30,
ASSETS 1997 1996
------ --------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $46,300 $33,900
Restricted cash 10,000
Accounts receivable, net 2,657,500 2,680,400
Note receivable 88,000
Prepaid expenses and other 25,600 45,200
----------- -----------
Total current assets 2,817,400 2,769,500
----------- -----------
Fixed assets, net 103,000 96,800
----------- -----------
Other assets:
Goodwill, net of amortization 4,100
Note receivable 32,000
Other 14,800 4,000
----------- -----------
Total other assets 46,800 8,100
----------- -----------
Total assets $2,967,200 $2,874,400
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND JUNE 30, 1996
<CAPTION>
MARCH 31, JUNE 30,
LIABILITIES AND SHAREHOLDERS' DEFICIT 1997 1996
------------------------------------- ----------- ----------
(Unaudited)
<S> <C> <C>
Current liabilities
Accounts payable $1,354,700 $1,821,500
Other current liabilities 1,615,500 1,602,100
Note payable - other 82,500
Note payable - line of credit 296,600
-------------- -----------
Total current liabilities 3,349,300 3,423,600
-------------- -----------
Note payable - related party 250,000 275,000
Note payable - other 220,800
Other 48,300 45,300
-------------- -----------
Total long-term liabilities 519,100 320,300
-------------- -----------
Commitments and contingencies
Total Liabilities 3,868,400 3,743,900
-------------- -----------
Shareholders' deficit:
Common stock $.02 par; authorized 20,000,000
shares; issued and outstanding -
March 31, 1997, 1,506,685 shares,
and June 30, 1996, 1,503,685, respectively 30,100 30,000
Additional Capital 9,261,400 9,260,800
Accumulated deficit (10,192,700) (10,160,300)
-------------- -----------
Total shareholders' deficit (901,200) (869,500)
-------------- -----------
Total liabilities and shareholders' deficit $2,967,200 $2,874,400
============== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues $4,294,000 $4,028,400 $12,153,500 $14,488,800
---------- ---------- ---------- ----------
Operating costs and expenses:
Costs of revenue 3,943,100 3,266,800 10,943,200 12,620,100
Selling, general and administ 379,500 670,500 1,166,400 1,859,800
---------- ---------- ---------- ----------
Total operating costs and expen 4,322,600 3,937,300 12,109,600 14,479,900
---------- ---------- ---------- ----------
Operating income (loss) (28,600) 91,100 43,900 8,900
---------- ---------- ---------- ----------
Other (expense) income:
Interest expense, net (10,800) (13,000) (29,600) (123,300)
Gain on sale of assets 255,400
Other expense (5,900) (21,600) (17,700) (4,700)
---------- ---------- ---------- ----------
Total other (expense) income (16,700) (34,600) (47,300) 127,400
---------- ---------- ---------- ----------
Income (loss) before income tax (45,300) 56,500 (3,400) 136,300
Provision for income taxes 12,000 6,600 29,000 24,700
---------- ---------- ---------- ----------
Net income (loss) ($57,300) $49,900 ($32,400) $111,600
=========== ========== ========== ==========
Per share data:
Net income (loss) ($0.03) $0.03 ($0.02) $0.07
=========== ========== ========== ==========
Weighted average number of common
shares and common share equivalents
outstanding during the period 1,506,685 1,604,741 1,506,018 1,604,312
=========== =========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
-5-
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
Nine Months Ended
March 31,
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($32,400) $111,600
--------- --------
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 57,600 87,400
Gain on sale of assets (255,500)
Provision for doubtful accounts, net (75,600) 203,800
Other 700 16,300
Changes in operating assets and liabilities:
Accounts receivable (21,500) 716,900
Prepaid expenses and other 19,600 (2,000)
Other assets (10,800) 48,700
Restricted cash 10,000 90,000
Accounts payable (163,500) (392,600)
Other current liabilities 13,400 (348,800)
Change in assets and liabilities
attributable to asset sale (17,300)
Other long-term liabilities 3,000 3,100
--------- ---------
Total adjustments (167,100) 150,000
--------- ---------
Net cash provided (used) by operating activities (199,500) 261,600
--------- ---------
Cash flows from investing activities:
Proceeds from sale of assets 365,800
Property additions (59,700) (95,000)
--------- ---------
Net cash provided (used) in investing activities (59,700) 270,800
--------- ---------
Cash flows from financing activities:
Proceeds of borrowings on bank and other loans 296,600
Payments on bank and other loans (25,000) (1,073,400)
--------- ----------
Net cash provided (used) by financing activities 271,600 (1,073,400)
--------- ----------
Net increase (decrease) in cash and cash equivale 12,400 (541,000)
Cash and cash equivalents at beginning of period 33,900 640,600
--------- ----------
Cash and cash equivalents at end of period $46,300 $99,600
========= ==========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
-6-
<PAGE>
HADRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The interim consolidated financial statements for Hadron, Inc.
(the "Company") are unaudited, but in the opinion of management
reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of results for such
periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. The balance
sheet at June 30, 1996 has been derived from the audited financial
statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles
for complete financial statements. These condensed, consolidated
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1996 ("1996
Form 10-K") filed with the Securities and Exchange Commission.
Certain reclassifications have been made to prior year amounts
to conform to current year classifications.
Income per share is based on the weighted average number of
common shares outstanding during each quarter and common stock
equivalents, if dilutive.
2. Legal Proceedings
United Press International, Inc. ("UPI") and the Company are
involved in a legal dispute more fully described in the
"Management's Discussion and Analysis" section.
3. Notes Payable
In October 1993, the Company, through its wholly-owned
subsidiaries, Engineering and Information Services, Inc. ("EISI")
and SyCom Services, Inc. ("Sycom"), executed a $300,000 Convertible
Promissory Note payable to Dr. C.W. Gilluly, Chairman of the Board
and Chief Executive Officer of the Company, in connection with the
issuance of an irrevocable letter of credit required to effect an
office lease settlement. The note, bearing interest, payable
quarterly, at the prime rate plus three percent, was originally due
October 21, 1996. The due date for the remaining principal balance
of $250,000 was extended to October 21, 1997 and in December 1996
was further extended to October 21, 1998.
On April 21, 1997, Dr. Gilluly sold $25,000 of the Convertible
Promissory Note to five officers of the Company. The Company
elected to prepay the $25,000 of Notes held by the officers, and in
accordance with terms of the Notes, issued warrants to the officers
to acquire 100,000 shares of the Company's common stock. The
officers exercised the warrants and acquired the 100,000 shares at
the Exercise Price of $.25 per share.
<PAGE>
In November 1996, the Company executed a note payable for
$379,938 to a vendor to satisfy an outstanding accounts payable.
The non-interest bearing note is secured by the common stock of
SyCom. The note is payable at $7,500 monthly and requires
additional principal payments of $31,646 due on or before December
1, 1997, 1998 and 1999. At March 31, 1997, the Company has prepaid
one month and the additional payment due December 1, 1997.
4. Note Receivable
In December 1996, the Company obtained a $148,606 note
receivable from a commercial customer to satisfy an outstanding
accounts receivable. Principal and interest at 10% is due in
monthly installments of $8,000 with a final payment of $8,664 due
July 15, 1998. At March 31, 1997, the Company has received its
required monthly installments.
5. Concentration of Business
The Company provides a broad range of information technology
management services and products to businesses and federal
government agencies. Revenues from services performed under direct
and indirect long-term contracts, and subcontracts with government
defense and intelligence agencies, comprise the majority of the
Company's business. The majority of the Company's technical and
professional services business with governmental departments and
agencies is obtained through competitive procurement and through
"follow-up" services related to existing contracts. The Company
maintains a primary commitment to its direct and indirect
government clients and is also pursuing its program of business
development targeted toward commercial operations.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997
TO THE THREE MONTHS ENDED MARCH 31, 1996
Revenues for the three months ended March 31, 1997 were
approximately $4,294,000, a 7% increase from the prior year
quarter. The increase was primarily attributable to growth on
existing contracts with major government and commercial customers
of both EISI and SyCom.
Costs of revenue for the quarter ended March 31, 1997 were
approximately $3,943,000, an increase of approximately 21%. The
increase is due to the growth in EISI and SyCom contracts noted
above, coupled with HeaTreaT PRO product development expenses of
$232,000. Costs of revenue as a percentage of revenues were
approximately 92% and 81% for the quarters ending March 31, 1997
and 1996, respectively.
Selling, general and administrative expenses totaled
approximately $379,000 for the March 31, 1997 quarter, compared
with approximately $670,000 for the prior year period. The
decrease is primarily due to the Company's cost reduction program,
partially offset by HeaTreaT PRO marketing expenses of $81,000.
The Company had an operating loss of $29,000 in the current
quarter, compared to an operating profit of $91,000 in the
corresponding 1996 period. This quarter's operating loss is
primarily attributable to $313,000 of expenses incurred on behalf
of the continuing HeaTreaT PRO development and marketing programs,
only partially offset by the growth in EISI and SyCom, and cost
containment efforts.
For the quarter ended March 31, 1997, net interest and other
expense decreased approximately $18,000 from the prior period due
to one-time only losses in the prior period.
Net loss was approximately $57,000, compared to net income of
approximately $50,000 in the prior year quarter. The decrease in
net income resulted from the improved profitability of current
operations being more than offset by the product development and
marketing efforts of HeaTreaT PRO.
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1997
TO THE NINE MONTHS ENDED MARCH 31, 1996
Revenues for the nine months ended March 31, 1997 were
approximately $12,153,000, a 16% decrease from the prior year
period. Excluding $3,657,000 of 1996 period revenues of ART
Holdings Corporation's ("ART") operations, which were sold in
December 1995, revenues increased approximately $1,321,000 or 12%.
This increase resulted from the growth of existing EISI contracts.
Costs of revenue for the March 31, 1997 period were
approximately $10,943,000, a decrease comparable to the revenue
decline. Excluding $3,301,000 of 1996 period costs of revenue
related to the ART operations, costs of revenue increased
$1,624,000, a 17% increase. The increase is primarily due to the
increased staffing levels in performance of the EISI contracts,
coupled with HeaTreaT PRO product development costs of $432,000.
Costs of revenue as a percentage of revenues from ongoing
operations were approximately 90% and 86% for both periods ending
in 1997 and 1996, respectively.
Selling, general and administrative expenses of $1,166,000
decreased from $1,860,000 for the nine months ended March 31, 1996.
The decrease resulted from the Company's cost reduction program and
the elimination of support costs of $443,000 for the ART operations
from the ongoing business, partially offset by HeaTreaT PRO
marketing costs of $232,000.
The Company generated $44,000 of operating income, compared to
operating income of $9,000 in the corresponding 1996 period. The
improvement is attributable to EISI growth, cost containment
efforts and the absence of ART operating losses of $87,000. For
the nine months ended March 31, 1997, the Company spent
approximately $664,000 on the continuing development and marketing
of its HeaTreaT PRO software product.
Net interest expense decreased approximately $94,000 from the
prior period due to lower average debt levels. The other expense
increase of $13,000 resulted from the absence of one-time only net
gains realized in the prior period.
Net loss for the nine months ended March 31, 1997 was $32,000,
compared to net income of $112,000 for the prior year period. The
decrease in net income resulted from improved ongoing operations
being more than offset by the current investment in HeaTreaT PRO
and the $255,000 gain on the ART sale reported in fiscal year 1996.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The working capital deficit at March 31, 1997 decreased by
approximately $122,000 from June 30, 1996. The improvement
resulted from reduced capital expenditure needs and the
restructuring of certain accounts payable to a long-term note
payable. The Company continues to work with its customers and
vendors on the scheduling of payments.
Currently, the Company's operations generate cash flow
sufficient to cover its monthly expenses, and management believes
that cash from operations will provide the Company with adequate
cash resources to meet its obligations on a short-term basis. The
Company's ability to meet its liquidity needs on a longer-term
basis is dependent upon its ability to generate sufficient billings
to cover its current obligations, and to also continue to paydown
its accounts payable balances. While the Company's contracts with
its major customers and with other agencies and departments of the
U.S. Government are generally of more than one year in duration,
the Company, along with all other government contractors and
information management companies, faces severe competition in its
marketplaces and no assurance may be given that the Company will be
able to maintain the billing base or the size of profitable
operations that may be necessary to meet its liquidity needs. In
addition, the Company's realization of its investment
in the development and marketing of HeaTreaT PRO is dependent upon
industry acceptance. The Company completed substantially all product
development, and beta customer trial installations began in April 1997.
To date, a limited number of customer contracts have been obtained.
The Company is currently considering alternative means of financing
the continuing development and marketing of HeatTreat Pro, which may
include the sale of a substantial portion of the Company's interest
in HeaTreat Pro either outright, through a joint venture or through
some other similar transaction. There can be no assurance that such
a transaction will occur. In any event, the Company anticipates
decreases in HeaTreat Pro expense levels.
On December 31, 1996, the Company obtained a $300,000 bank
line of credit facility for working capital requirements.
Borrowings under the facility are personally guaranteed by Dr.
Gilluly and his wife. Interest is at the prime rate plus one
percent and is payable monthly. Outstanding borrowings on the line
of credit are due on December 31, 1997. At March 31, 1997, the
line of credit balance is $297,000.
In October 1993, the Company, through its wholly-owned
subsidiaries EISI and SyCom, executed a $300,000 Convertible
Promissory Note payable to Dr. Gilluly in connection with the
issuance of an irrevocable letter of credit required to effect an
office lease settlement. The note, bearing interest, payable
quarterly, at the prime rate plus three percent, was originally due
October 21, 1996. The due date for the remaining principal balance
of $250,000 was extended to October 21, 1997 and in December 1996
was further extended to October 21, 1998.
<PAGE>
At the option of Dr. Gilluly, the Note may be converted into
1,000,000 restricted shares ("Hadron Shares") of the Company's
common stock at any time prior to the maturity of the Note. The
Conversion Price for Hadron Shares under the terms of the Note is
$.25 per share and the option to convert expires on October 21,
1998. The Note is prepayable at any time. In the event the Note
is prepaid in full or in part, Dr. Gilluly is entitled to receive
a warrant, entitling Dr. Gilluly to purchase Hadron Shares equal to
the principal amount of the Note, together with all interest
thereon which is prepaid, divided by the Conversion Price of $.25
per share. As a result of prepayments totaling $50,000, Dr.
Gilluly has been issued warrants to acquire 200,000 shares of the
Company's common stock.
On April 21, 1997, Dr. Gilluly sold $25,000 of the Convertible
Promissory Note to five officers of the Company. The Company
elected to prepay the $25,000 of Notes held by the officers, and in
accordance with terms of the Notes, issued warrants to the officers
to acquire 100,000 shares of the Company's common stock. The
officers exercised the warrants and acquired the 100,000 shares at
the Exercise Price of $.25 per share.
As previously reported, in August 1991, United Press
International, Inc. ("UPI") filed for reorganization under Chapter
11 of the U.S. Bankruptcy Code. The Company, as a creditor of UPI,
filed in September 1992 a $594,621 proof of claim against UPI,
subject to a possible $500,000 setoff. In July 1993, UPI filed an
adversarial action challenging the Company's proof of claim and
demanding $500,000 plus interest based upon an alleged debt or note
payable from the Company to UPI. The Company later determined that
the claimed $500,000 indebtedness of the Company to UPI had not,
and did not, in fact, exist. In March 1994, the Company amended
its proof of claim to reflect that the Company does not owe any
amount to UPI, and to assert against UPI an aggregate claim of
$512,477.
A recent court hearing was adjourned, and a new hearing date
will be set in the near future to adjudicate UPI's challenge of the
Company's proof of claim and UPI's demand for $500,000 plus
interest based upon an alleged debt or note payable from the
Company to UPI. Management believes that the outcome of these
proceedings will not have a material effect on the Company.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information provided in Note 2 of the Notes to
Consolidated Financial Statements is incorporated herein by
reference.
Item 6. Exhibits and Reports.
(a) Exhibits
Exhibit No.
10.1 $225,000 Third Amended and Restated Convertible
Promissory Note in favor of C.W. Gilluly, dated April 21,
1997.
10.2 Form of Stock Purchase Warrant issuable in connection
with repayment of Third Amended and Restated Convertible
Promissory Note.
10.3 Note Purchase Agreement among C.W. Gilluly, Hadron, Inc.,
Engineering and Information Services, Inc. and SyCom
Services, Inc., George E. Fowler, S. Amber Gordon, Donald
Jewell, J. Anthony Vidal and Donald Ziegler dated April
21, 1997.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned there unto duly authorized.
Date: May 15, 1997 HADRON, INC.
(Registrant)
By: /S/ C.W. Gilluly By: /S/ Donald E. Ziegler
C.W. Gilluly Ed.D. Donald E. Ziegler
Chief Executive Officer Chief Financial Officer
and Chairman (Principal Financial
(Principal Executive Officer) Officer and Principal
Accounting Officer)
THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE, OF HADRON,
INC. INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS
THIRD AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
$225,000.00 WASHINGTON, D.C. April 21, 1997
FOR VALUE RECEIVED, ENGINEERING AND INFORMATION SERVICES,
INC., a Virginia corporation, and SYCOM SERVICES, INC., a
Delaware corporation (collectively, "Makers"), hereby promise to
pay to the order of C.W. GILLULY ("Payee"), at his domicile at
415 First Street, S.E., in the City of Washington, District of
Columbia, or at such other place as may be designated by Payee,
the principal sum of TWO HUNDRED TWENTY FIVE THOUSAND AND NO/lOO
DOLLARS ($225,000.00), together with interest from the date
hereof until maturity at the rate of three percent (3%) per annum
over the Prime Rate (hereinafter defined) from time to time in
effect. Said interest rate shall be adjusted as and when any
change in the Prime Rate shall occur. For purposes hereof, the
term "Prime Rate" shall mean the highest prime rate per annum
published from time to time in the money rates column or section
of The Wall Street Journal as the interest rate in effect for
corporate loans at large U.S. money center commercial banks
(whether or not such rate has actually been charged by any such
bank). In the event The Wall Street Journal ceases publication
of such prime rate, the term "Prime Rate" shall mean the prime
rate per annum announced from time to time by any U.S. money
center commercial bank selected by Payee. This Third Amended and
Restated Convertible Promissory Note represents an amendment of
the Second Amended and Restated Convertible Promissory Note dated
December 31, 1996 and issued by Makers in favor of Payee in the
principal amount of $250,000.00.
1. Interest on the unpaid principal balance of this note shall
be due and payable quarterly as it accrues, the first such
payment of accrued interest being due and payable on or before
June 15, 1997, and successive payments of accrued interest being
due and payable on or before the 15th day of each succeeding
June, September, December and March thereafter until October 21,
1998, when, if not sooner paid, the entire principal balance of
this note, together with all accrued but unpaid interest thereon,
shall be paid in full. The principal balance of this note,
together with all accrued but unpaid interest thereon, shall be<PAGE>
due and payable on October 21, 1998.
2. (a) At any time prior to the payment in full of all
amounts, principal and interest, due under this note, whether
before or after the date such amounts are due hereunder, the
outstanding principal amount of this note together with all
accrued but unpaid interest thereon may, at the option of Payee,
be converted into fully paid and non-assessable, restricted
shares ("Hadron Shares") of the common stock, par value $0.02 per
share, of Hadron, Inc. ("Hadron Common Stock") at the Conversion
Price (as hereinafter defined) in accordance with this Section 2.
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Makers and Hadron, Inc.
("Hadron") written notice of his election to convert this note
into Hadron Shares in accordance with the terms hereof; and upon
the delivery of such notice, and the surrender of this note to
either of the Makers, Makers shall cause Hadron to issue and
deliver to Payee a certificate or certificates for the number of
full Hadron Shares issuable upon the conversion of this note and
cash as hereinafter provided in respect of any fraction of a
Hadron Share issuable upon such conversion. Such conversion
shall be deemed to have been effected as of the date Payee
delivers notice of his election to convert ("Conversion Date");
provided, however, that Payee shall not deliver notice of his
election to convert this note within ten (10) trading days prior
to a date on which Hadron is required to make any filing with the
United States Securities and Exchange Commission. As of the
Conversion Date, the rights of Payee as holder of this note shall
cease with respect to this note and the person in whose name any
certificate for Hadron Shares is issued shall be deemed to have
become the holder of record of the Hadron Shares represented
thereby. Any and all notices to be given by Payee hereunder
shall be in writing and delivered by hand or mailed, postage
prepaid, by certified or registered U.S. mail, return receipt
requested, to Makers and Hadron at 4900 Seminary Road, Suite 800,
Alexandria, Virginia 22311, and shall be deemed given upon
receipt.
(c) Hadron shall not be required to issue fractions of
Hadron Shares upon conversion of this note. If any fractional
interest in a Hadron Share shall be deliverable upon the
conversion of this note, Makers shall cause Hadron to make a cash
payment therefor on the basis of the Conversion Price.
(d) The price at which the outstanding principal amount of
this note together with all accrued but unpaid interest thereon
may be converted into Hadron Shares on a per share basis (the
"Conversion Price") shall be equal to $.25 per share.
3. Makers may at any time prepay this note, in full or in part,<PAGE>
and all payments hereunder, whether designated as payments of
principal or interest, shall be applied first to the payment of
accrued interest and the balance to principal. Interest shall
immediately cease on any principal amount so prepaid.
4. In the event Makers shall prepay this note as hereinabove
provided, Payee shall be entitled to receive, and Makers shall
cause Hadron to execute, issue and deliver to Payee,
simultaneously with any and all such payments, a warrant
("Warrant") which shall be in proper form for issuance and
transfer, registered in the name of Payee, and issued in respect
to the number of Hadron Shares determined as hereinafter
provided. Each Warrant (a) shall expire on October 21, 2003; (b)
shall entitle Payee to purchase, in accordance with the terms
thereof, the number of Hadron Shares equal to the quotient
obtained by dividing (i) the principal amount of this note
together with all interest thereon prepaid by Makers, by (ii) the
Conversion Price; (c) may be exercised in full or in part during
its term at the price per Hadron Share equal to the Conversion
Price; and (d) shall otherwise be in form and substance
satisfactory to Hadron and Payee.
5. Payee agrees and acknowledges that the Hadron Shares
issuable upon conversion of this note, the Warrants and the
Hadron Shares issuable upon exercise of the Warrants are and
shall be restricted securities. Except for transfers, sales or
other dispositions pursuant to an effective registration
statement under the Securities Act of 1933 and any applicable
state securities laws (the "Acts"), such securities may not be
transferred, sold or otherwise disposed of by Payee or any other
holder hereof or thereof unless prior to transferring, selling or
otherwise disposing of any of such securities, Payee or such
holder delivers to Hadron prior to the disposition an opinion of
counsel, reasonably acceptable to Hadron, to the effect that
registration is not required under the Acts. If, in the opinion
of such counsel, such transfer, sale or other disposition may be
effected without such registration, the securities may thereafter
be transferred, sold or otherwise disposed of, and Makers shall
cause Hadron to do all things necessary to facilitate such
transfer, sale or other disposition, including the prompt
transfer of such securities on the books of Hadron and the
issuance of certificates representing such securities, free of
any restrictive legends or stop transfer instructions unless
otherwise required by such opinion, all in accordance with such
notice and opinion.
6. It is expressly agreed that time is of the essence of this
note, and if default shall be made in the payment of principal or
interest hereunder, as the same shall become due and payable; or
should either Maker institute proceedings to be adjudicated a
bankrupt or insolvent, or consent to the institution of any such<PAGE>
proceedings against it or fail to cause the dismissal or stay of
any such proceedings within thirty (30) days after commencement,
or consent to any filing of any petition or the appointment of a
receiver of such Maker's property; or should Payee conclude that
the prospect of payment of this note is impaired for any reason;
then in any such event, Payee may, at his option, declare the
entire principal of this note together with all accrued but
unpaid interest thereon immediately due and payable whereupon
this note shall become due and payable in full, both as to
principal and interest, and failure to exercise said option shall
not constitute a waiver on the part of Payee hereof of the right
to exercise said option at any other time.
7. All past due principal and interest on this note shall bear
interest from the due date thereof until paid at the lesser of:
(a) fifteen percent (15%) per annum or
(b) the highest rate permitted by law.
8. If this note is not paid at maturity, however such maturity
is brought about, and the same is placed in the hands of an
attorney for collection, or suit is brought on same, or the same
is collected through probate, bankruptcy or other judicial
proceedings, then Makers agree and promise to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Makers, and any and all co-makers, guarantors, sureties and
endorsers of this note, expressly and severally waive all
notices, demands for payment, presentation for payment, protests
and notices of intention to accelerate with regard to each, every
and all installments or other payments hereof and hereunder.
10. Notwithstanding anything to the contrary contained herein,
Makers shall be jointly and severally liable for the payment and
performance of and compliance with any and all obligations,
covenants, provisions, terms and conditions contained in this
note to be paid, performed or complied with by Makers.
11. The payment and performance of this note are secured by that
certain Assignment and Security Agreement dated October 21, 1993
by and between Makers, as debtor, and Payee, as secured party,
covering the collateral more particularly described therein.
12. Hadron joins in the execution of this note for the sole
purposes of (a) acknowledging and agreeing to the provisions
hereof regarding conversion of this note to Hadron Shares and the
issuance of Warrants for Hadron Shares, (b) agreeing at all times
to reserve and keep available from its authorized Hadron Common
Stock, solely for issuance and delivery upon conversion of this
note or exercise of the Warrants, a sufficient number of Hadron<PAGE>
Shares to permit the full-conversion of this note and the full
exercise of Warrants, and (c) agreeing to take such corporate
action and obtain all authorizations and approvals as may be
necessary in order that Hadron may validly and legally issue to
Payee upon conversion of this note, and upon the exercise of any
and all Warrants, fully paid and non-assessable Hadron Shares at
the prices determined in accordance with this note.
EXECUTED as of the 21st day of April 1997.
ENGINEERING AND INFORMATION
SERVICES, INC., a Virginia
corporation
By: /S/ DONALD JEWELL
DONALD JEWELL
President
SYCOM SERVICES, INC., a
Delaware corporation
By: /S/ J. ANTHONY VIDAL
J. ANTHONY VIDAL
President
ACKNOWLEDGED AND AGREED TO As of the 21st day of April 1997.
HADRON, INC., a New York corporation
By: /S/ GEORGE E. FOWLER
George E. Fowler
President
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
HADRON, INC.
AMENDED FORM OF STOCK PURCHASE WARRANT
1. Grant.
Hadron, Inc., a New York corporation (hereinafter
"Company"), for value received hereby grants to C.W. Gilluly or
his assigns (hereinafter "Holder") under the terms herein the
right to purchase _________________ fully paid and non-assessable
shares of the Company's $.02 par value common stock which number
was determined in accordance with paragraph 4 of the Third
Amended and Restated Convertible Promissory Note dated as of
________________, 1997 and issued in favor of Holder by
Engineering and Information Services, Inc. and SyCom Services,
Inc. as co-makers (the "Makers") in the original principal amount
of $225,000.00 (the "Third Amended Note").
2. Expiration.
The right to exercise this warrant shall expire on October
21, 2003.
3. Exercise Price.
The per share exercise price of this Warrant shall be $0.25.
4. Exercise of Shares for Exercise Price.
The Holder at his or her option may remit the total exercise
price (the "Total Exercise Price") under this Warrant (number of
shares received on exercise times the per share exercise price)
by reducing the number of shares for which the Warrant is
otherwise exercisable by the number of shares having fair market
value equal to the Total Exercise Price.
5. Promissory Note.
This Warrant is subject to the terms of the Third Amended
Note, a copy of which is on file and may be examined at the
Company's offices in Alexandria, Virginia during regular business
hours.
<PAGE>
6. Exercise Procedure.
This Warrant may be exercised by presenting it and tendering
the exercise price in legal tender or by bank cashier's or
certified check at the principal office of the Company along with
a written subscription substantially in the form of Exhibit A
hereof. The date on which this Warrant is thus surrendered,
accompanied by tender or payment as hereinbefore or hereinafter
provided, is referred to herein as the Exercise Date. The
Company shall forthwith at its expense (including the payment of
issue taxes) issue and deliver the proper number of shares, and
such shares shall be deemed issued for all purposes as of the
opening of business on the Exercise Date notwithstanding any
delay in the actual issuance thereof.
7. Sale or Exchange of Company or Assets.
If prior to issuance of stock under this Warrant, the
Company sells or exchanges all or substantially all of its
assets, or the shares of common stock of the Company are sold or
exchanged to any party other than the Holder, then the Holder at
his or her option may receive, in lieu of the stock otherwise
issuable hereunder, such money or property he would have been
entitled to receive if this Warrant had been exercised prior to
such sale or exchange.
8. Sale of Warrant or Shares.
Neither this Warrant nor the shares of common stock issuable
upon exercise of this Warrant have been registered under the
Securities Act of 1933, as amended, or under the securities laws
of any state. Neither this Warrant nor the shares of common
stock issued upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of (i) an
effective registration statement for this Warrant or the shares,
as the case may be, under the Securities Act of 1933, as amended,
and such registration or qualification as may be necessary under
the securities laws of any state, or (ii) an opinion of counsel
reasonably satisfactory to the Company that such registration or
qualification is not required. The Company shall cause a
certificate or certificates evidencing all or any of the shares
of common stock issued upon exercise of this Warrant prior to
said registration and qualification of such shares to bear the
following legend: "The shares evidenced by this certificate have
not been registered under the Securities Act of 1933, as amended,
or under the securities laws of any state. The shares may not be
sold, transferred, pledged or hypothecated in the absence of an
effective registration statement under the Securities Act of
1933, as amended, and such registration or qualification as may
be necessary under the securities laws of any state, or an
opinion of counsel satisfactory to the Company that such
registration or qualification is not required."
9. Transfer.
This Warrant shall be registered on the books of the Company
which shall be kept at its principal office for that purpose, and
shall be transferable in whole or in part but only on such books
by the Holder in person or by duly authorized attorney with
written notice substantially in the form of Exhibit B hereof, and
only in compliance with the preceding paragraph. The Company may
issue appropriate stop orders to its transfer agent to prevent a
transfer in violation of the preceding paragraph.
10. Replacement of Warrant.
At the request of Holder and on production of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case of
loss, theft, or destruction) if required by the Company, upon
delivery of an indemnity agreement with surety in such reasonable
amount as the Company may determine thereof, the Company at its
expense will issue in lieu thereof a new Warrant of like tenor.
11. Investment Covenant.
The Holder by his or her acceptance hereof covenants that
this Warrant is and any common stock issued hereunder will be
acquired for investment purposes, and that the Holder will not
distribute the same in violation of any state or federal law or
regulation.
12. Laws Governing.
This Warrant shall be construed according to the laws of the
Commonwealth of Virginia, without regard to its laws or
regulations relating to conflicts of laws.
IN WITNESS WHEREOF, Hadron, Inc. has caused this Warrant to
be signed on its behalf, in its corporate name, by its President,
and its corporate seal to be hereunto affixed and the said seal
to be attested by its Secretary, as of this ________ day of
____________ 19___ .
HADRON, INC.
Attest:
_____________________ ___________________________
By: By:
Secretary President
<PAGE> EXHIBIT A
IRREVOCABLE SUBSCRIPTION
To: Hadron, Inc.
Ladies and Gentlemen:
The undersigned hereby elects to exercise its right under
the attached Warrant by purchasing shares of
the $.02 par value common stock Hadron, Inc., and hereby
irrevocably subscribes to such issue. The certificates for such
shares shall be issued in the name of
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
_________________________________________________________________
(Taxpayer Number)
and delivered to
________________________________________________________________
(Name)
_________________________________________________________________
(Address)
The exercise price of $_____________ is enclosed.
Date:________________________________________
Signed:______________________________________
_________________________________________________________________
(Address)
_________________________________________________________________
(Signature)
<PAGE> EXHIBIT B
ASSIGNMENT
FOR VALUE
RECEIVED,________________________________________________________
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
hereby sells, assigns and transfers the attached Warrant together
with all right, title and interest therein, and does hereby
irrevocably appoint ________________________________ attorney to
transfer said Warrant on the books of Hadron Corporation, with
full power of substitution in the premises.
Done this ____ day of ___________, 19___.
Signed:______________________________________
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "Agreement"), dated as of
April 21, 1997, is made among C.W. Gilluly ("Seller"), Hadron,
Inc., a New York Corporation ("Hadron"), Engineering and
Information Services, Inc. a Virginia corporation and the wholly-
owned subsidiary of Hadron ("EISI"), Sycom Services, Inc., a
Delaware corporation and the wholly-owned subsidiary of Hadron
("Sycom," and together with EISI, the "Makers"), and George E.
Fowler, S. Amber Gordon, Donald Jewell, J. Anthony Vidal and
Donald Ziegler (the "Buyers").
WHEREAS, the Makers are currently indebted to the Seller
pursuant to the terms of a Second Amended and Restated
Convertible Promissory Note dated December 31, 1996 in the
principal amount of $250,000.00 (the "Note"), a copy of which is
attached as Exhibit A to this Agreement.
WHEREAS, the Note provides that the Seller may, at any time
amounts remain outstanding and unpaid under the Note, convert the
principal and interest then outstanding into that number of
shares of Hadron fully paid and non-assessable $0.02 par value
common stock (the "Common Stock") equal to the total principal
and interest then outstanding divided by $0.25 (the "Conversion
Right").
WHEREAS, the Note further provides that upon its prepayment
the Seller shall receive from Hadron warrants entitling Seller to
purchase from Hadron for $0.25 per share that number of shares of
Common Stock equal to the amount of the prepayment divided by
$0.25 (the "Prepayment Right").
WHEREAS, Hadron joined in the execution of the Note to (a)
acknowledge and agree to the Conversion Right and the Prepayment
Right set forth therein, (b) agree at all times to reserve and
keep available from its authorized common stock, solely for
issuance and delivery pursuant to exercise of the Conversion
Right or the Prepayment Right, a sufficient number of shares of
Common Stock to permit the full-conversion of the Note and the
full exercise of the warrants which may be issued pursuant to the
Prepayment Right, and (c) agree to take such corporate action and
obtain all authorizations and approvals as may be necessary in
order that Hadron may validly and legally issue to Gilluly upon
exercise of the Conversion Right or exercise of the warrants
issuable pursuant to exercise of the Prepayment Right, fully paid
and non-assessable shares of Common Stock at the price set forth
in the Note.
WHEREAS, each of the Buyers is an executive officer of
Hadron, EISI or Sycom.
WHEREAS, none of the Buyers presently holds more than a
nominal interest in the equity of Hadron.
<PAGE>
WHEREAS, the Seller desires that each of the Buyers hold an
equity interest in Hadron so that each will be provided an
incentive to continue their efforts on behalf of Hadron.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties, and agreements herein contained, the
parties hereto agree as follows:
1. Seller agrees to sell to each of the Buyers a two percent
(2%) share of the Note (the "Note Share(s)") on the terms and
conditions set forth herein. Each Note Share acquired by the
Buyers shall exclude any claim to interest relating to any period
prior to the date of this Agreement, all of which interest shall
be due and payable to Buyer under the terms of the Note, as
amended.
2. Each of the Buyers agrees to pay Seller Five Thousand
Dollars ($5,000.00) in same day funds for his or her respective
Note Share.
3. In addition to the right to receive payment from Makers of
principal in the amount of Five Thousand Dollars ($5,000.000) and
interest accruing thereon from the date of this Agreement at the
rate set forth in the Note, each Note Share shall convey to each
of the respective Buyers a Conversion Right and a Prepayment
Right on the same terms as currently set forth in the Note.
4. Each Note Share is to be evidenced by a promissory note
("New Note") from Makers in favor of each of the respective
Buyers in the form attached as Exhibit B hereto.
5. The Note is to be canceled and replaced with a new note to
be executed by Makers in favor of Gilluly in the amount of Two
Hundred Twenty Five Thousand Dollars ($225,000.00) in the form
attached as Exhibit C hereto.
6. The transactions contemplated by this Agreement are to be
consummated simultaneously with the execution of this Agreement.
7. Each Buyer represents and warrants, severally and not
jointly, that:
(a) Buyer understands that the New Note and the Common
Stock to which Buyer may be entitled upon exercise of the
Conversion Right or Prepayment Right (the "Securities") will not
be registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws,
(b) the Securities to be acquired by such Buyer pursuant to
this Agreement will be acquired by such Buyer for such Buyer's
own account, not as a nominee or agent, and without a view to
resale or other distribution within the meaning of the Securities
Act and the rules and regulations thereunder, and that such Buyer
will not distribute any of the Securities in violation of the
Securities Act,
(c) such Buyer (i) acknowledges that the Securities
acquired by such Buyer pursuant to this Agreement must be held
indefinitely by such Buyer unless subsequently registered under
the Securities Act or an exemption from registration is
available, (ii) is aware that any routine sales of Securities
made pursuant to Rule 144 under the Securities Act may be made
only in limited amounts and in accordance with the terms and
conditions of that Rule and that in such cases where the Rule is
not applicable, compliance with some other registration exemption
will be required, and (iii) is aware that Rule 144 is not
currently available for use by such Buyer for resale of any of
the Securities to be acquired by such Buyer pursuant to this
Agreement,
(d) such Buyer has such knowledge and experience in
financial and business matters such that such Buyer is capable of
evaluating the merits and risks of such Buyer's investment in any
of the Securities to be acquired by such Buyer pursuant to this
Agreement,
(e) such Buyer, through his or her position as an officer
of EISI, Sycom or Hadron, has access to information concerning
the operations and prospects of Makers and Hadron sufficient to
make a reasonable and informed investment decision with respect
to the Securities,
(f) such Buyer agrees that such Buyer will not sell or
otherwise transfer or dispose of Securities or any interest
therein unless such Securities have been registered under the
Securities Act or may be sold or transferred in reliance on an
exemption from such registration, and
(g) such Buyer agrees that the certificates or instruments
representing the Securities to be acquired by Buyer pursuant to
this Agreement may contain a restrictive legend noting the
restrictions on transfer described herein and required by federal
and applicable state securities laws, and that appropriate "stop-
transfer" instructions may be given to Hadron's transfer agent,
if any, provided that this paragraph (g) shall no longer be
applicable to any Securities following their transfer pursuant to
a registration statement effective under the Securities Act or in
compliance with Rule 144 or if an opinion of counsel reasonably
satisfactory to Hadron is to the effect that transfer
restrictions and the legend referred to herein are no longer
required in order to establish compliance with any provisions of
the Securities Act.
8. Hadron (a) agrees to the transfer of the Conversion Right
and the Prepayment Right from the Note to the New Notes, (b)
agrees at all times to reserve and keep available from its
authorized common stock, solely for issuance and delivery
pursuant to exercise of the Conversion Right or the Prepayment
Right set forth in the New Notes, a sufficient number of shares
of Common Stock to permit the full-conversion of each of the New
Notes and the full exercise of the warrants which may be issued
pursuant to the Prepayment Right set forth in each New Note, and
(c) agrees to take such corporate action and obtain all
authorizations and approvals as may be necessary in order that
Hadron may validly and legally issue to the Buyers upon exercise
of the Conversion Right or exercise of the warrants issuable
pursuant to exercise of the Prepayment Right set forth in the New
Notes, fully paid and non-assessable shares of Common Stock at
the price set forth in the New Notes.
9. This Agreement and the relationship between the parties
shall be governed by, and construed in accordance with, the laws
of the State of Virginia regardless of the laws that might
otherwise govern under applicable principles of conflicts of law.
<PAGE> IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
HADRON, INC.
By: /S/ GEORGE E. FOWLER
George E. Fowler
President
ENGINEERING AND INFORMATION
SERVICES, INC.
By:/S/ DONALD E. JEWELL
Donald E. Jewell
President
SYCOM SERVICES, INC.
By: /S/ J. ANTHONY VIDAL
J. Anthony Vidal
President
SELLER:
/S/ C.W. GILLULY
C.W. Gilluly
BUYERS:
/S/ GEORGE E. FOWLER
George E. Fowler
/S/ S. AMBER GORDON
S. Amber Gordon
/S/ DONALD E. JEWELL
Donald E. Jewell
/S/ J. ANTHONY VIDAL
J. Anthony Vidal
/S/ DONALD E. ZIEGLER
Donald E. Ziegler
<PAGE> EXHIBIT A
THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE, OF HADRON,
INC. INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS
SECOND AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
$250,000.00 WASHINGTON, D.C. December 31, 1996
FOR VALUE RECEIVED, ENGINEERING AND INFORMATION SERVICES,
INC., a Virginia corporation, and SYCOM SERVICES, INC., a
Delaware corporation (collectively, "Makers"), hereby promise to
pay to the order of C.W. GILLULY ("Payee"), at his domicile at
415 First Street, S.E., in the City of Washington, District of
Columbia, or at such other place as may be designated by Payee,
the principal sum of TWO HUNDRED FIFTY THOUSAND AND NO/lOO
DOLLARS ($250,000.00), together with interest from the date
hereof until maturity at the rate of three percent (3%) per annum
over the Prime Rate (hereinafter defined) from time to time in
effect. Said interest rate shall be adjusted as and when any
change in the Prime Rate shall occur. For purposes hereof, the
term "Prime Rate" shall mean the highest prime rate per annum
published from time to time in the money rates column or section
of The Wall Street Journal as the interest rate in effect for
corporate loans at large U.S. money center commercial banks
(whether or not such rate has actually been charged by any such
bank). In the event The Wall Street Journal ceases publication of
such prime rate, the term "Prime Rate" shall mean the prime rate
per annum announced from time to time by any U.S. money center
commercial bank selected by Payee. This Second Amended and
Restated Convertible Promissory Note represents an amendment of
the Amended and Restated Convertible Promissory Note dated
September 27, 1996 and issued by Makers in favor of Payee in the
principal amount of $250,000.00.
1. Interest on the unpaid principal balance of this note shall
be due and payable quarterly as it accrues, the first such
payment of accrued interest being due and payable on or before
March 15, 1997, and successive payments of accrued interest being
due and payable on or before the 15th day of each succeeding
March, June, September and December thereafter until October 21,
1998, when, if not sooner paid, the entire principal balance of
<PAGE>
this note, together with all accrued but unpaid interest thereon,
shall be paid in full. The principal balance of this note,
together with all accrued but unpaid interest thereon, shall be
due and payable on October 21, 1998.
2. (a) At any time prior to the payment in full of all
amounts, principal and interest, due under this note, whether
before or after the date such amounts are due hereunder, the
outstanding principal amount of this note together with all
accrued but unpaid interest thereon may, at the option of Payee,
be converted into fully paid and non-assessable, restricted
shares ("Hadron Shares") of the common stock, par value $0.02 per
share, of Hadron, Inc. ("Hadron Common Stock") at the Conversion
Price (as hereinafter defined) in accordance with this Section 2.
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Makers and Hadron, Inc.
("Hadron") written notice of his election to convert this note
into Hadron Shares in accordance with the terms hereof; and upon
the delivery of such notice, and the surrender of this note to
either of the Makers, Makers shall cause Hadron to issue and
deliver to Payee a certificate or certificates for the number of
full Hadron Shares issuable upon the conversion of this note and
cash as hereinafter provided in respect of any fraction of a
Hadron Share issuable upon such conversion. Such conversion shall
be deemed to have been effected as of the date Payee delivers
notice of his election to convert ("Conversion Date"); provided,
however, that Payee shall not deliver notice of his election to
convert this note within ten (10) trading days prior to a date on
which Hadron is required to make any filing with the United
States Securities and Exchange Commission. As of the Conversion
Date, the rights of Payee as holder of this note shall cease with
respect to this note and the person in whose name any certificate
for Hadron Shares is issued shall be deemed to have become the
holder of record of the Hadron Shares represented thereby. Any
and all notices to be given by Payee hereunder shall be in
writing and delivered by hand or mailed, postage prepaid, by
certified or registered U.S. mail, return receipt requested, to
Makers and Hadron at 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311, and shall be deemed given upon receipt.
(c) Hadron shall not be required to issue fractions of
Hadron Shares upon conversion of this note. If any fractional
interest in a Hadron Share shall be deliverable upon the
conversion of this note, Makers shall cause Hadron to make a cash
payment therefor on the basis of the Conversion Price.
(d) The price at which the outstanding principal amount of
this note together with all accrued but unpaid interest thereon
may be converted into Hadron Shares on a per share basis (the
"Conversion Price") shall be equal to $.25 per share.
<PAGE>
3. Makers may at any time prepay this note, in full or in part,
and all payments hereunder, whether designated as payments of
principal or interest, shall be applied first to the payment of
accrued interest and the balance to principal. Interest shall
immediately cease on any principal amount so prepaid.
4. In the event Makers shall prepay this note as hereinabove
provided, Payee shall be entitled to receive, and Makers shall
cause Hadron to execute, issue and deliver to Payee,
simultaneously with any and all such payments, a warrant
("Warrant") which shall be in proper form for issuance and
transfer, registered in the name of Payee, and issued in respect
to the number of Hadron Shares determined as hereinafter
provided. Each Warrant (a) shall expire on October 21, 2003;
(b) shall entitle Payee to purchase, in accordance with the terms
thereof, the number of Hadron Shares equal to the quotient
obtained by dividing (i) the principal amount of this note
together with all interest thereon prepaid by Makers, by (ii) the
Conversion Price; (c) may be exercised in full or in part during
its term at the price per Hadron Share equal to the Conversion
Price; and (d) shall otherwise be in form and substance
satisfactory to Hadron and Payee.
5. Payee agrees and acknowledges that the Hadron Shares
issuable upon conversion of this note, the Warrants and the
Hadron Shares issuable upon exercise of the Warrants are and
shall be restricted securities. Except for transfers, sales or
other dispositions pursuant to an effective registration
statement under the Securities Act of 1933 and any applicable
state securities laws (the "Acts"), such securities may not be
transferred, sold or otherwise disposed of by Payee or any other
holder hereof or thereof unless prior to transferring, selling or
otherwise disposing of any of such securities, Payee or such
holder delivers to Hadron prior to the disposition an opinion of
counsel, reasonably acceptable to Hadron, to the effect that
registration is not required under the Acts. If, in the opinion
of such counsel, such transfer, sale or other disposition may be
effected without such registration, the securities may thereafter
be transferred, sold or otherwise disposed of, and Makers shall
cause Hadron to do all things necessary to facilitate such
transfer, sale or other disposition, including the prompt
transfer of such securities on the books of Hadron and the
issuance of certificates representing such securities, free of
any restrictive legends or stop transfer instructions unless
otherwise required by such opinion, all in accordance with such
notice and opinion.
6. It is expressly agreed that time is of the essence of this
note, and if default shall be made in the payment of principal or
interest hereunder, as the same shall become due and payable; or
should either Maker institute proceedings to be adjudicated a
<PAGE>
bankrupt or insolvent, or consent to the institution of any such
proceedings against it or fail to cause the dismissal or stay of
any such proceedings within thirty (30) days after commencement,
or consent to any filing of any petition or the appointment of a
receiver of such Maker's property; or should Payee conclude that
the prospect of payment of this note is impaired for any reason;
then in any such event, Payee may, at his option, declare the
entire principal of this note together with all accrued but
unpaid interest thereon immediately due and payable whereupon
this note shall become due and payable in full, both as to
principal and interest, and failure to exercise said option shall
not constitute a waiver on the part of Payee hereof of the right
to exercise said option at any other time.
7. All past due principal and interest on this note shall bear
interest from the due date thereof until paid at the lesser of:
(a) fifteen percent (15%) per annum or
(b) the highest rate permitted by law.
8. If this note is not paid at maturity, however such maturity
is brought about, and the same is placed in the hands of an
attorney for collection, or suit is brought on same, or the same
is collected through probate, bankruptcy or other judicial
proceedings, then Makers agree and promise to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Makers, and any and all co-makers, guarantors, sureties and
endorsers of this note, expressly and severally waive all
notices, demands for payment, presentation for payment, protests
and notices of intention to accelerate with regard to each, every
and all installments or other payments hereof and hereunder.
10. Notwithstanding anything to the contrary contained herein,
Makers shall be jointly and severally liable for the payment and
performance of and compliance with any and all obligations,
covenants, provisions, terms and conditions contained in this
note to be paid, performed or complied with by Makers.
11. The payment and performance of this note are secured by that
certain Assignment and Security Agreement dated October 21, 1993
by and between Makers, as debtor, and Payee, as secured party,
covering the collateral more particularly described therein.
12. Hadron joins in the execution of this note for the sole
purposes of (a) acknowledging and agreeing to the provisions
hereof regarding conversion of this note to Hadron Shares and the
issuance of Warrants for Hadron Shares, (b) agreeing at all times
to reserve and keep available from its authorized Hadron Common
Stock, solely for issuance and delivery upon conversion of this
<PAGE>
note or exercise of the Warrants, a sufficient number of Hadron
Shares to permit the full-conversion of this note and the full
exercise of Warrants, and (c) agreeing to take such corporate
action and obtain all authorizations and approvals as may be
necessary in order that Hadron may validly and legally issue to
Payee upon conversion of this note, and upon the exercise of any
and all Warrants, fully paid and non-assessable Hadron Shares at
the prices determined in accordance with this note.
EXECUTED as of the 31st day of December 1996.
ENGINEERING AND INFORMATION SERVICES, INC., a Virginia
corporation
By: /S/ DONALD JEWELL
DONALD JEWELL
President
SYCOM SERVICES, INC., a Delaware corporation
By: /S/ J. ANTHONY VIDAL
J. ANTHONY VIDAL
President
ACKNOWLEDGED AND AGREED TO As of the 31ST day of December 1996.
HADRON, INC., a New York corporation
By: /S/ GEORGE E. FOWLER
George E. Fowler
President
<PAGE> EXHIBIT B
THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE, OF HADRON,
INC. INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS
CONVERTIBLE PROMISSORY NOTE
$5,000.00 WASHINGTON, D.C. _________, 1997
FOR VALUE RECEIVED, ENGINEERING AND INFORMATION SERVICES,
INC., a Virginia corporation, and SYCOM SERVICES, INC., a
Delaware corporation (collectively, "Makers"), hereby promise to
pay to the order of ____________________("Payee"), at___________
________________________ , or at such other place as may be
designated by Payee, the principal sum of FIVE THOUSAND AND
NO/1OO DOLLARS ($5,000.00), together with interest from the date
hereof until maturity at the rate of three percent (3%) per annum
over the Prime Rate (hereinafter defined) from time to time in
effect. Said interest rate shall be adjusted as and when any
change in the Prime Rate shall occur. For purposes hereof, the
term "Prime Rate" shall mean the highest prime rate per annum
published from time to time in the money rates column or section
of The Wall Street Journal as the interest rate in effect for
corporate loans at large U.S. money center commercial banks
(whether or not such rate has actually been charged by any such
bank). In the event The Wall Street Journal ceases publication
of such prime rate, the term "Prime Rate" shall mean the prime
rate per annum announced from time to time by any U.S. money
center commercial bank selected by Payee.
1. Interest on the unpaid principal balance of this note shall
be due and payable quarterly as it accrues, the first such
payment of accrued interest being due and payable on or before
June 15, 1997, and successive payments of accrued interest being
due and payable on or before the 15th day of each succeeding
June, September, December and March thereafter until October 21,
1998, when, if not sooner paid, the entire principal balance of
this note, together with all accrued but unpaid interest thereon,
shall be paid in full. The principal balance of this note,
together with all accrued but unpaid interest thereon, shall be
due and payable on October 21, 1998.
2. (a) At any time prior to the payment in full of all
amounts, principal and interest, due under this note, whether
before or after the date such amounts are due hereunder, the
outstanding principal amount of this note together with all
accrued but unpaid interest thereon may, at the option of Payee,
be converted into fully paid and non-assessable, restricted
shares ("Hadron Shares") of the common stock, par value $0.02 per
share, of Hadron, Inc. ("Hadron Common Stock") at the Conversion
Price (as hereinafter defined) in accordance with this Section 2.
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Makers and Hadron, Inc.
("Hadron") written notice of his or her election to convert this
note into Hadron Shares in accordance with the terms hereof; and
upon the delivery of such notice, and the surrender of this note
to either of the Makers, Makers shall cause Hadron to issue and
deliver to Payee a certificate or certificates for the number of
full Hadron Shares issuable upon the conversion of this note and
cash as hereinafter provided in respect of any fraction of a
Hadron Share issuable upon such conversion. Such conversion shall
be deemed to have been effected as of the date Payee delivers
notice of his or her election to convert ("Conversion Date");
provided, however, that Payee shall not deliver notice of his or
her election to convert this note within ten (10) trading days
prior to a date on which Hadron is required to make any filing
with the United States Securities and Exchange Commission. As of
the Conversion Date, the rights of Payee as holder of this note
shall cease with respect to this note and the person in whose
name any certificate for Hadron Shares is issued shall be deemed
to have become the holder of record of the Hadron Shares
represented thereby. Any and all notices to be given by Payee
hereunder shall be in
writing and delivered by hand or mailed, postage prepaid, by
certified or registered U.S. mail, return receipt requested, to
Makers and Hadron at 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311, and shall be deemed given upon receipt.
(c) Hadron shall not be required to issue fractions of
Hadron Shares upon conversion of this note. If any fractional
interest in a Hadron Share shall be deliverable upon the
conversion of this note, Makers shall cause Hadron to make a cash
payment therefor on the basis of the Conversion Price.
(d) The price at which the outstanding principal amount of
this note together with all accrued but unpaid interest thereon
may be converted into Hadron Shares on a per share basis (the
"Conversion Price") shall be equal to $.25 per share.
3. Makers may at any time prepay this note, in full or in part,
and all payments hereunder, whether designated as payments of
principal or interest, shall be applied first to the payment of
accrued interest and the balance to principal. Interest shall
immediately cease on any principal amount so prepaid.
4. In the event Makers shall prepay this note as hereinabove
provided, Payee shall be entitled to receive, and Makers shall
cause Hadron to execute, issue and deliver to Payee,
simultaneously with any and all such payments, a warrant
("Warrant") which shall be in proper form for issuance and
transfer, registered in the name of Payee, and issued in respect
to the number of Hadron Shares determined as hereinafter
provided. Each Warrant (a) shall expire on October 21, 2003; (b)
shall entitle Payee to purchase, in accordance with the terms
thereof, the number of Hadron Shares equal to the quotient
obtained by dividing (i) the principal amount of this note
together with all interest thereon prepaid by Makers, by (ii) the
Conversion Price; (c) may be exercised in full or in part during
its term at the price per Hadron Share equal to the Conversion
Price; and (d) shall otherwise be in form and substance
satisfactory to Hadron and Payee.
5. Payee agrees and acknowledges that the Hadron Shares
issuable upon conversion of this note, the Warrants and the
Hadron Shares issuable upon exercise of the Warrants are and
shall be restricted securities. Except for transfers, sales or
other dispositions pursuant to an effective registration
statement under the Securities Act of 1933 and any applicable
state securities laws (the "Acts"), such securities may not be
transferred, sold or otherwise disposed of by Payee or any other
holder hereof or thereof unless prior to transferring, selling or
otherwise disposing of any of such securities, Payee or such
holder delivers to Hadron prior to the disposition an opinion of
counsel, reasonably acceptable to Hadron, to the effect that
registration is not required under the Acts. If, in the opinion
of such counsel, such transfer, sale or other disposition may be
effected without such registration, the securities may thereafter
be transferred, sold or otherwise disposed of, and Makers shall
cause Hadron to do all things necessary to facilitate such
transfer, sale or other disposition, including the prompt
transfer of such securities on the books of Hadron and the
issuance of certificates representing such securities, free of
any restrictive legends or stop transfer instructions unless
otherwise required by such opinion, all in accordance with such
notice and opinion.
6. It is expressly agreed that time is of the essence of this
note, and if default shall be made in the payment of principal or
interest hereunder, as the same shall become due and payable; or
should either Maker institute proceedings to be adjudicated a
bankrupt or insolvent, or consent to the institution of any such
proceedings against it or fail to cause the dismissal or stay of
any such proceedings within thirty (30) days after commencement,
or consent to any filing of any petition or the appointment of a
receiver of such Maker's property; or should Payee conclude that
the prospect of payment of this note is impaired for any reason;
then in any such event, Payee may, at his or her option, declare
the entire principal of this note together with all accrued but
unpaid interest thereon immediately due and payable whereupon
this note shall become due and payable in full, both as to
principal and interest, and failure to exercise said option shall
not constitute a waiver on the part of Payee hereof of the right
to exercise said option at any other time.
7. All past due principal and interest on this note shall bear
interest from the due date thereof until paid at the lesser of:
(a) fifteen percent (15%) per annum or
(b) the highest rate permitted by law.
8. If this note is not paid at maturity, however such maturity
is brought about, and the same is placed in the hands of an
attorney for collection, or suit is brought on same, or the same
is collected through probate, bankruptcy or other judicial
proceedings, then Makers agree and promise to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Makers, and any and all co-makers, guarantors, sureties and
endorsers of this note, expressly and severally waive all
notices, demands for payment, presentation for payment, protests
and notices of intention to accelerate with regard to each, every
and all installments or other payments hereof and hereunder.
10. Notwithstanding anything to the contrary contained herein,
Makers shall be jointly and severally liable for the payment and
performance of and compliance with any and all obligations,
covenants, provisions, terms and conditions contained in this
note to be paid, performed or complied with by Makers.
11. Hadron joins in the execution of this note for the sole
purposes of (a) acknowledging and agreeing to the provisions
hereof regarding conversion of this note to Hadron Shares and the
issuance of Warrants for Hadron Shares, (b) agreeing at all times
to reserve and keep available from its authorized Hadron Common
Stock, solely for issuance and delivery upon conversion of this
note or exercise of the Warrants, a sufficient number of Hadron
Shares to permit the full-conversion of this note and the full
exercise of Warrants, and (c) agreeing to take such corporate
action and obtain all authorizations and approvals as may be
necessary in order that Hadron may validly and legally issue to
Payee upon conversion of this note, and upon the exercise of any
and all Warrants, fully paid and non-assessable Hadron Shares at
the prices determined in accordance with this note.
<PAGE>
EXECUTED as of the day of 1997.
ENGINEERING AND INFORMATION SERVICES, INC., a Virginia
corporation
By:_________________________
DONALD JEWELL
President
SYCOM SERVICES, INC., a Delaware corporation
By:__________________________
J. ANTHONY VIDAL
President
ACKNOWLEDGED AND AGREED TO as of the _____________day of
__________________ 1997.
HADRON, INC., a New York corporation
By: _______________________________
George E. Fowler
President
<PAGE> EXHIBIT C
THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE, OF HADRON,
INC. INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS
THIRD AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
$225,000.00 WASHINGTON, D.C. _____________, 1997
FOR VALUE RECEIVED, ENGINEERING AND INFORMATION SERVICES,
INC., a Virginia corporation, and SYCOM SERVICES, INC., a
Delaware corporation (collectively, "Makers"), hereby promise to
pay to the order of C.W. GILLULY ("Payee"), at his domicile at
415 First Street, S.E., in the City of Washington, District of
Columbia, or at such other place as may be designated by Payee,
the principal sum of TWO HUNDRED TWENTY FIVE THOUSAND AND NO/lOO
DOLLARS ($225,000.00), together with interest from the date
hereof until maturity at the rate of three percent (3%) per annum
over the Prime Rate (hereinafter defined) from time to time in
effect. Said interest rate shall be adjusted as and when any
change in the Prime Rate shall occur. For purposes hereof, the
term "Prime Rate" shall mean the highest prime rate per annum
published from time to time in the money rates column or section
of The Wall Street Journal as the interest rate in effect for
corporate loans at large U.S. money center commercial banks
(whether or not such rate has actually been charged by any such
bank). In the event The Wall Street Journal ceases publication
of such prime rate, the term "Prime Rate" shall mean the prime
rate per annum announced from time to time by any U.S. money
center commercial bank selected by Payee. This Third Amended and
Restated Convertible Promissory Note represents an amendment of
the Second Amended and Restated Convertible Promissory Note dated
December 31, 1996 and issued by Makers in favor of Payee in the
principal amount of $250,000.00.
1. Interest on the unpaid principal balance of this note shall
be due and payable quarterly as it accrues, the first such
payment of accrued interest being due and payable on or before
June 15, 1997, and successive payments of accrued interest being
due and payable on or before the 15th day of each succeeding
June, September, December and March thereafter until October 21,
1998, when, if not sooner paid, the entire principal balance of
this note, together with all accrued but unpaid interest thereon,
shall be paid in full. The principal balance of this note,
together with all accrued but unpaid interest thereon, shall be
due and payable on October 21, 1998.
<PAGE>
2. (a) At any time prior to the payment in full of all
amounts, principal and interest, due under this note, whether
before or after the date such amounts are due hereunder, the
outstanding principal amount of this note together with all
accrued but unpaid interest thereon may, at the option of Payee,
be converted into fully paid and non-assessable, restricted
shares ("Hadron Shares") of the common stock, par value $0.02 per
share, of Hadron, Inc. ("Hadron Common Stock") at the Conversion
Price (as hereinafter defined) in accordance with this Section 2.
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Makers and Hadron, Inc.
("Hadron") written notice of his election to convert this note
into Hadron Shares in accordance with the terms hereof; and upon
the delivery of such notice, and the surrender of this note to
either of the Makers, Makers shall cause Hadron to issue and
deliver to Payee a certificate or certificates for the number of
full Hadron Shares issuable upon the conversion of this note and
cash as hereinafter provided in respect of any fraction of a
Hadron Share issuable upon such conversion. Such conversion
shall be deemed to have been effected as of the date Payee
delivers notice of his election to convert ("Conversion Date");
provided, however, that Payee shall not deliver notice of his
election to convert this note within ten (10) trading days prior
to a date on which Hadron is required to make any filing with the
United States Securities and Exchange Commission. As of the
Conversion Date, the rights of Payee as holder of this note shall
cease with respect to this note and the person in whose name any
certificate for Hadron Shares is issued shall be deemed to have
become the holder of record of the Hadron Shares represented
thereby. Any and all notices to be given by Payee hereunder
shall be in writing and delivered by hand or mailed, postage
prepaid, by certified or registered U.S. mail, return receipt
requested, to Makers and Hadron at 4900 Seminary Road, Suite 800,
Alexandria, Virginia 22311, and shall be deemed given upon
receipt.
(c) Hadron shall not be required to issue fractions of
Hadron Shares upon conversion of this note. If any fractional
interest in a Hadron Share shall be deliverable upon the
conversion of this note, Makers shall cause Hadron to make a cash
payment therefor on the basis of the Conversion Price.
(d) The price at which the outstanding principal amount of
this note together with all accrued but unpaid interest thereon
may be converted into Hadron Shares on a per share basis (the
"Conversion Price") shall be equal to $.25 per share.
3. Makers may at any time prepay this note, in full or in part,
and all payments hereunder, whether designated as payments of
principal or interest, shall be applied first to the payment of
accrued interest and the balance to principal. Interest shall
immediately cease on any principal amount so prepaid.
<PAGE>
4. In the event Makers shall prepay this note as hereinabove
provided, Payee shall be entitled to receive, and Makers shall
cause Hadron to execute, issue and deliver to Payee,
simultaneously with any and all such payments, a warrant
("Warrant") which shall be in proper form for issuance and
transfer, registered in the name of Payee, and issued in respect
to the number of Hadron Shares determined as hereinafter
provided. Each Warrant (a) shall expire on October 21, 2003; (b)
shall entitle Payee to purchase, in accordance with the terms
thereof, the number of Hadron Shares equal to the quotient
obtained by dividing (i) the principal amount of this note
together with all interest thereon prepaid by Makers, by (ii) the
Conversion Price; (c) may be exercised in full or in part during
its term at the price per Hadron Share equal to the Conversion
Price; and (d) shall otherwise be in form and substance
satisfactory to Hadron and Payee.
5. Payee agrees and acknowledges that the Hadron Shares
issuable upon conversion of this note, the Warrants and the
Hadron Shares issuable upon exercise of the Warrants are and
shall be restricted securities. Except for transfers, sales or
other dispositions pursuant to an effective registration
statement under the Securities Act of 1933 and any applicable
state securities laws (the "Acts"), such securities may not be
transferred, sold or otherwise disposed of by Payee or any other
holder hereof or thereof unless prior to transferring, selling or
otherwise disposing of any of such securities, Payee or such
holder delivers to Hadron prior to the disposition an opinion of
counsel, reasonably acceptable to Hadron, to the effect that
registration is not required under the Acts. If, in the opinion
of such counsel, such transfer, sale or other disposition may be
effected without such registration, the securities may thereafter
be transferred, sold or otherwise disposed of, and Makers shall
cause Hadron to do all things necessary to facilitate such
transfer, sale or other disposition, including the prompt
transfer of such securities on the books of Hadron and the
issuance of certificates representing such securities, free of
any restrictive legends or stop transfer instructions unless
otherwise required by such opinion, all in accordance with such
notice and opinion.
6. It is expressly agreed that time is of the essence of this
note, and if default shall be made in the payment of principal or
interest hereunder, as the same shall become due and payable; or
should either Maker institute proceedings to be adjudicated a
bankrupt or insolvent, or consent to the institution of any such
proceedings against it or fail to cause the dismissal or stay of
any such proceedings within thirty (30) days after commencement,
or consent to any filing of any petition or the appointment of a
receiver of such Maker's property; or should Payee conclude that
the prospect of payment of this note is impaired for any reason;
then in any such event, Payee may, at his option, declare the
entire principal of this note together with all accrued but
unpaid interest thereon immediately due and payable whereupon
this note shall become due and payable in full, both as to
principal and interest, and failure to exercise said option shall
not constitute a waiver on the part of Payee hereof of the right
to exercise said option at any other time.
<PAGE>
7. All past due principal and interest on this note shall bear
interest from the due date thereof until paid at the lesser of:
(a) fifteen percent (15%) per annum or
(b) the highest rate permitted by law.
8. If this note is not paid at maturity, however such maturity
is brought about, and the same is placed in the hands of an
attorney for collection, or suit is brought on same, or the same
is collected through probate, bankruptcy or other judicial
proceedings, then Makers agree and promise to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Makers, and any and all co-makers, guarantors, sureties and
endorsers of this note, expressly and severally waive all
notices, demands for payment, presentation for payment, protests
and notices of intention to accelerate with regard to each, every
and all installments or other payments hereof and hereunder.
10. Notwithstanding anything to the contrary contained herein,
Makers shall be jointly and severally liable for the payment and
performance of and compliance with any and all obligations,
covenants, provisions, terms and conditions contained in this
note to be paid, performed or complied with by Makers.
11. The payment and performance of this note are secured by that
certain Assignment and Security Agreement dated October 21, 1993
by and between Makers, as debtor, and Payee, as secured party,
covering the collateral more particularly described therein.
12. Hadron joins in the execution of this note for the sole
purposes of (a) acknowledging and agreeing to the provisions
hereof regarding conversion of this note to Hadron Shares and the
issuance of Warrants for Hadron Shares, (b) agreeing at all times
to reserve and keep available from its authorized Hadron Common
Stock, solely for issuance and delivery upon conversion of this
note or exercise of the Warrants, a sufficient number of Hadron
Shares to permit the full-conversion of this note and the full
exercise of Warrants, and (c) agreeing to take such corporate
action and obtain all authorizations and approvals as may be
necessary in order that Hadron may validly and legally issue to
Payee upon conversion of this note, and upon the exercise of any
and all Warrants, fully paid and non-assessable Hadron Shares at
the prices determined in accordance with this note.
<PAGE>
EXECUTED as of the _________day of ____________________1997.
ENGINEERING AND INFORMATION SERVICES, INC., a Virginia
corporation
By: __________________________
DONALD JEWELL
President
SYCOM SERVICES, INC., a Delaware corporation
By: __________________________
J. ANTHONY VIDAL
President
ACKNOWLEDGED AND AGREED TO As of the ____________day of
_________________1997.
HADRON, INC., a New York corporation
By: _______________________________
George E. Fowler
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE THIRD QUARTER 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> MAR-31-1997
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 3,028
<ALLOWANCES> 370
<INVENTORY> 0
<CURRENT-ASSETS> 2,817
<PP&E> 867
<DEPRECIATION> 764
<TOTAL-ASSETS> 2,967
<CURRENT-LIABILITIES> 3,349
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> (931)
<TOTAL-LIABILITY-AND-EQUITY> 2,967
<SALES> 12,154
<TOTAL-REVENUES> 12,154
<CGS> 10,943
<TOTAL-COSTS> 12,110
<OTHER-EXPENSES> 18
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (3)
<INCOME-TAX> 29
<INCOME-CONTINUING> (32)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
