SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 2, 1997
HADRON, INC.
_________________________________________________________________
(Exact name of the registrant as specified in its charter)
New York 0-5404 11-2120726
_________________________ ____________ ____________________
(state of other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
4900 Seminary Road, Suite 800 Alexandria, Virginia 22311
_________________________________________________________________
(Address of principal executive officer) (Zip Code)
Registrant's telephone number, including area code: (703) 824-0400
Not Applicable
_________________________________________________________________
(Former name or former address, if changed since last report)
The Exhibit Index appears on Page 4
<PAGE>
Item 5. Other
In June, 1997, Hadron, Inc. (the "Company") entered into a
Line of Credit Agreement with Century National Bank pursuant to
which Century National Bank will provide the Company with a
$800,000 line of credit facility through November 30, 1998.
Century National Bank and the Company agreed that, in addition to
providing working capital, the line of credit would be used to
fund the Company's prepayment on June 2, 1997 of its $225,000
Promissory Note to its Chairman, Dr. C.W. Gilluly. Under the
terms of the original Promissory Note dated October 21, 1993,
which had been extended and amended as of April 21, 1997, the
Company issued 900,000 warrants to Dr. Gilluly to acquire the
Company's $.02 par value common stock ("Common Stock") at $.25
per share.
The Company was indebted in the approximate amount of
$288,000 to a vendor under the terms of a November 1, 1996
promissory note secured by certain assets. In order to
facilitate the line of credit, the vendor agreed to accept
$250,000 in full satisfaction of the promissory note. Such
payment was made in June 1997.
Century National Bank and the Company determined that
payment of such amount to the vendor would reduce the Company's
available working capital to a level below that which each
contemplated the Company would have as a result of the line of
credit. As a consequence, George E. Fowler, S. Amber Gordon,
Donald E. Jewell, Robert J. Lynch, Jr. and Donald E. Ziegler,
certain members of the Company's management or Board of Directors
(the "Investors"), each agreed to invest $24,000 in the Company
in the form of five separate two-year promissory notes, the
principal of which is convertible at $0.60 per share at each of
his or her respective option, into restricted shares of the
Company's common stock. Such notes also provide that upon
prepayment by the Company of principal outstanding under the
notes, the Company shall issue to the note holder a warrant to
acquire Common Stock at $0.60 per share. The number of shares
each warrant shall entitle the holder thereof to acquire shall
equal the principal prepaid giving rise to the warrant divided by
$0.60. The Company and each of the Investors entered into an
Investment Agreement dated June 20,1997 setting forth the terms
of their investment in the Company.
<PAGE>
SIGNATURE
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 thereunto duly
authorized.
HADRON, INC.
Date: July 23, 1997 By:/S/ C.W. Gilluly
C.W. Gilluly
Chairman
and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit
10.1 $800,000 Promissory Note in favor of Century National
Bank dated June 25, 1997.
10.2 $800,000 Business Loan Agreement in favor of Century
National Bank dated June 25, 1997.
10.3 Form of $24,000 Convertible Promissory Note issued in
favor of each of George E. Fowler, S. Amber Gordon,
Donald E. Jewell, Robert J. Lynch Jr. and Donald E.
Ziegler, dated June 20, 1997.
10.4 Investment Agreement among Hadron, Inc. and George E.
Fowler, S. Amber Gordon, Donald E. Jewell, Robert J.
Lynch Jr. and Donald E. Ziegler, dated June 20, 1997.
10.5 Amended Stock Purchase Warrant granted to C.W. Gilluly
and dated December 31, 1996.
10.6 Stock Purchase Warrant granted to C.W. Gilluly and dated
June 2, 1997.
<PAGE>
PROMISSORY NOTE
PRINCIPAL LOAN DATE MATURITY LOAN NO
$800,000.00 06-25-1997 11-31-1998 12348
CALL COLLATERAL ACCOUNT OFFICER INITIALS
510 07 13505 12 RH
Borrower: Hadron, Inc.; ET.AL. Lender: Century National Bank
4900 Seminary Road, Tysons Corner
Suite 800 8251 Greensboro Drive
Alexandria, VA 22311 McLean, VA 22102
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR
AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT
ANY FURTHER NOTICE.
Principal Amount: $800,000.00 Initial Rate: 10.500%
Date of Note: June 25, 1997
PROMISE TO PAY. Hadron, Inc., SYCOM SERVICES, INC. And Engineering
& Information Services, Inc. (referred to in this Note individually
and collectively as "Borrower") promises to pay to Century National
Bank ("Lender"), or order, In lawful money of the United States of
America, the principal amount of Eight Hundred Thousand & 00/100
Dollars ($800,000.00) or so much as may be outstanding, together
with Interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or If no demand Is
made, In one payment of all outstanding principal plus all accrued
unpaid Interest on November 30, 1998. In addition, Borrower will
pay regular monthly payments of accrued unpaid Interest beginning
July 31, 1997, and all subsequent Interest payments are due on the
last day of each month after that. Interest on this Note is
computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate In writing. Unless otherwise
agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
<PAGE>
VARIABLE INTEREST RATE. The interest rate on this Note is subject
to change from time to time based on changes in an Index which is
the Wall Street Journal Prime Rate (the "Index). As used herein
"Prime Rate" refers to on index listed from time to time in the
WALL STREET JOURNAL listing of Money Rates a.-id shall be the
higher of all such rates in effect at any one time. Lender will
tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other
rates as wall. The interest rate change will not occur more often
than each day. The Index currently is 8.500% per annum. The
Interest rate to be applied to the unpaid principal balance of this
Note will be at a rate of 2.000 percentage point over the Index,
resulting in an initial rate of 10.500% per annum. NOTICE: Under
no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary
or as a result of default), except as otherwise required by law.
Except for the foregoing, Borrower may pay without penalty all or
a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of
accrued unpaid interest. Rather, they will reduce the principal
balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will
be charged 5.000% of the regularly scheduled payment or $5.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained In this Note or
any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender. (c) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's
obligations under this Note or any of the Related Documents. (d)
Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (a)
Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any
creditor tries to take any of Borrower's property on or in which
Lender has a lien or security interest. This includes a
<PAGE>
garnishment of any of Borrower's accounts with Lender. (g) Any
guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A
material adverse change occurs in Borrower's financial condition,
or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
If any default, other than a default in payment, is curable and if
Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, it
may be cured (and no event of default will have occurred) if
Borrower, after receiving written notice from Lender demanding cure
of such default: (a) cures the default within fifteen (15) days; or
(b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to
be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest, together with all other applicable fees, costs and
charges, if any, immediately due and payable, without notice, and
then Borrower will pay that amount. Furthermore, subject to any
limits under applicable law, upon default, Borrower also agrees to
pay Lender's reasonable attorneys' fees equal to 15.000% of the
principal balance due on the Note, and all of Lender's other
collection expenses, whether or not there is a lawsuit and
including without limitation legal expenses for bankruptcy
proceedings. This Note shall be governed by, construed and
enforced in accordance with the laws of the District of Columbia.
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either party against
the other.
CONFESSION OF JUDGMENT. Upon a default in payment of the
Indebtedness at maturity, whether by acceleration or otherwise,
Borrower hereby irrevocably authorizes and empowers Art Lafionatis
as Borrower's attorney-in-fact to appear in the Fairfax County
clerk's officer and to confess judgment against Borrower for the
unpaid amount of this Note as evidenced by an affidavit signed by
an officer of Lender setting forth the amount then due, plus
attorney's fees as provided in this Note, plus costs of suit, and
to release all errors, and waive all rights of appeal. If a copy
of this Note, verified by an affidavit, shall have been filed in
the proceeding, it will not be necessary to file the original as a
warrant of attorney. Borrower waives the right to any stay of
execution and the benefit of all exemption laws now or hereafter in
effect. No single exercise of the foregoing warrant and power to
confess judgment will be deemed to exhaust the power, whether or
not any such exercise shall be held by any court to be invalid,
voidable, or void; but the power will continue undiminished and may
be exercised from time to time as Lender may elect until all
amounts owing on this Note have been paid in full.
<PAGE>
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $12.00
if Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all
IRA and Keogh accounts, and all trust accounts for which the grant
of a security interest would be prohibited by law. Borrower
authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all sums owing on this Note against any and all
such accounts, and at Lender's option, to administratively freeze
all such accounts to allow Lender to protect Lender's charge and
setoff rights provided on this paragraph.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note may be requested orally by Borrower or as
provided in this paragraph. All oral requests shall be confirmed
in writing on the day of the request. All communications,
instructions, or directions by telephone or otherwise to Lender are
to be directed to Lender's office shown above. The following party
or parties are authorized as provided in this paragraph to request
advances under the line of credit until Lender receives from
Borrower at Lender's address shown above written notice of
revocation of their authority: Christopher W. Gilluly, Chairman and
Chief Executive Officer. Advance requests on the line of credit
must be in a minimum amount of $5,000.00. Borrower agrees to be
liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on
this Note or by Lender's internal records, including daily computer
print-outs. Lender will have no obligation to advance funds under
this Note if: (a) Borrower or any guarantor is in default under the
terms of this Note or any agreement that Borrower or any guarantor
has with Lender, including any agreement made in connection with
the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; or (d)
Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other
agreement between Lender and Borrower.
<PAGE>
LINE OF CREDIT- REST PROVISION. Borrower hereby agrees to maintain
the line of credit balance at a $0 (Zero dollars) principal balance
for a period of 30 consecutive days at any time between June 25,
1997 and June 25, 1998.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion
of specific default provisions or rights of Lender shall not
preclude Lender's right to declare payment of this Note on its
demand. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Each Borrower
understands and agrees that, with or without notice to borrower,
Lender may with respect to any other Borrower (a) make one or more
additional secured or unsecured loans or otherwise extend
additional credit; (b) alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the item for
payment or other terms any indebtedness, including increases and
decreases of the rate of interest on the indebtedness; (c)
exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any security, with or without the substitution
of new collateral; (d) apply such security and direct the order or
manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security
agreements, as Lender in its discretion may determine; (e) release,
substitute, agree not to sue, or deal with any one or more of
Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; and (f) determine how, when and
what application of payments and credits shall be made on any other
indebtedness owing by such other borrower. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and
unless otherwise expressly stated in writing, no party who signs
this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree
that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral;
or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party
with whom the modification is made. If "Borrower" consists of more
than one party, the word "Borrower" as used in the Note shall refer
to any one or more of the parties comprising "Borrower", and each
of such parties shall be jointly and severally liable pursuant to
this Note.
<PAGE>
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
HADRON, INC.
By: /S/ CHRISTOPHER W. GILLULY -(SEAL)
Christopher W. Gilluly,
Chairman and Chief Executive Officer
SYCOM SERVICES INC. - Co-Borrower
By: /S/ JOHN ANTHONY VIDAL -(SEAL)
JOHN ANTHONY VIDAL
President
ENGINEERING & INFORMATION SERVICES, INC. - Co-Borrower
By: /S/ DONALD E. JEWELL - (SEAL)
DONALD E. JEWELL
President
=================================================================
NOTICE TO CUSTOMER
You are being asked to guarantee this debt. Think carefully
before you do. If the borrower doesn't pay the debt, you will
have to. Be sure you can afford to pay if you have to, and that
you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the
borrower does not pay. You may also have to pay late fees or
collection costs, which increase this amount.
The lender can collect this debt from you without first trying to
collect from the borrower. The Lender can sue the same
collection methods against you that can be used against the
borrower, such as suing you, garnishing you wages, etc. If this
debt is ever in default, that fact may become a part of YOUR
credit record.
This notice is not the contract that make you liable for the
debt.
=================================================================
<PAGE>
BUSINESS LOAN AGREEMENT
PRINCIPAL LOAN DATE MATURITY LOAN NO.
$800,000.00 06-25-1997 11-30-1998 12348
CALL COLLATERAL ACCOUNT OFFICER INITIALS
510 07 13505 12 RH
Borrower: Hadron, Inc.; ET.AL. Lender: Century National Bank
4900 Seminary Road Eye Street Office
Suite 800 1875 Eye Street, N.W.
Alexandria, VA 22311 Washington, DC 20006
THIS BUSINESS LOAN AGREEMENT between Hadron, Inc. SYCOM SERVICES,
INC. and ENGINEERING & INFORMATION SERVICES, INC. (referred to in
this Agreement individually and collectively as "Borrower") and
Century National Bank ("Lender") is made on the following terms
and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or
loans and other financial accommodations, including those which
may be described on any exhibit or schedule attached to this
Agreement. All such loans and financial accommodations, together
with all future loans and financial accommodations from Lender to
Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and
agrees that: (a) In granting, renewing, or extending any Loan,
Lender is relying upon Borrower's representations, warranties,
and agreements, as set forth in this Agreement; (b) the granting,
renewing, or extending of any Loan by Lender at all times shall
be subject to Lender's sole judgment and discretion; and (c) all
such Loans shall be and shall remain subject to the following
terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of June 16, 1997,
and shall continue thereafter until all Indebtedness of
Borrower to Lender has been performed in full and the parties
terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise
defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code. All references to
dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan
Agreement, as this Business Loan Agreement may be amended or
modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time
to time.
Borrower. The word "Borrower" means individualy and
collectively HADRON, INC., SYCOM SERVICES, INC. and
ENGINEERING & INFORMATION SERVICES, INC. and all other
persons and entities signing Borrower's Note.
<PAGE>
CERCLA. The word "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended.
Collateral. The word "Collateral" means and includes without
limitation all property and assets granted as collateral
security for a Loan, whether real or personal property,
whether granted directly or Indirectly, whether granted now
or in the future, and whether granted in the form of a
security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or
consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set
forth below In the section titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without
limitation each and all of the persons or entities granting a
Security Interest in any Collateral for the Indebtedness, and
their personal representatives, successors and assigns.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with any Indebtedness and
their personal representatives, successors and assigns.
Indebtedness. The word "Indebtedness" means and includes
without limitation all Loans, including all principal,
interest and other fees, costs and charges, if any, together
with all other present and future liabilities and obligations
of Borrower, or any one or more of them, to Lender, whether
direct or indirect, matured or unmatured, and whether
absolute or contingent, joint, several, or joint and several,
and no matter how the same may be evidenced or shall arise.
Lender. The word "Lender" means Century National Bank, its
successors and assigns.
<PAGE>
Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial
accommodations from Lender to Borrower, whether now or
hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to
this Agreement from time to time.
<PAGE>
Note. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing
Borrower's Loan obligations in favor of Lender, as well as
any substitute, replacement or refinancing note or notes
therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens
and security interests securing Indebtedness owed by Borrower
to Lender; (b) liens for taxes, assessments, or similar
charges either not yet due or being contested in good faith;
(c) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course
of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held
by Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or
permitted to be incurred under the paragraph of this
Agreement titled "Indebtedness and Liens"; (a) liens and
security interests which, as of the date of this Agreement,
have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary
amount with respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and
Include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other Instruments, agreements and documents, whether
now or hereafter existing, executed In connection with the
Indebtedness.
Security Agreement. The words "Security Agreement" mean and
include without limitation any agreements, promises,
covenants, arrangements, understandings or other agreements,
whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and
include without limitation any and all types of lions and
encumbrances, whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to
make the initial Loan Advance and each subsequent Loan Advance
under this Agreement shall be subject to the fulfillment to
Lender's satisfaction of all of the conditions set forth in
this Agreement and in the Related Documents.
<PAGE>
Loan Documents. Borrower shall provide to Lender in form
satisfactory to Lender the following documents for the Loan:
(a) the Note, (b) Security Agreements granting to Lender
security interests In the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d)
evidence of insurance as required below; and (e) any other
documents required under this Agreement or by Lender or its
counsel, including without limitation any assignments of life
Insurance described below and any guaranties described below.
Borrower's Authorization. Borrower shall have provided in
form and substance satisfactory to Lender properly certified
resolutions, duly authorizing the execution and delivery of
this Agreement, the Note and the Related Documents, and such
other authorizations and other documents and instruments as
Lender or its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to
Lender all fees, charges, and other expenses which are then
due and payable as specified in this Agreement or any Related
Document.
Representations and Warranties. The representations and
warranties set forth in this Agreement, in the Related
Documents, and in any document or certificate delivered to
Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of
any advance a condition which would constitute an Event of
Default under this Agreement.
MULTIPLE BORROWERS. This agreement has been executed by
multiple obligors who are referred to herein individually,
collectively and interchangeably as "Borrower". Unless
specifically stated to the contrary, the word "Borrower" as
used in this Agreement, including without limitation all
representations, warranties and covenants, shall include all
Borrowers. Borrower understands and agrees that, with or
without notice to Borrower, Lender may with respect to any
other Borrower (a) make one or more additional secured or
unsecured loans or otherwise extend additional credit; (b)
alter, compromise, renew, extend, accelerate, or otherwise
change one or more times the time for payment or other terms
any indebtedness, including increases and decreases of the
<PAGE>
rate of interest on the indebtedness; (c) exchange, enforce,
waive, subordinate, fail or decide not to perfect, and release
any security, with or without the substitution of new collateral;
(d) release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; (e) determine how,
when and what application of payments and credits shall be made
on any indebtedness; (f) apply such security and direct the order
or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling
security agreement or deed to trust, as Lender in its discretion
may determine; (g) sell, transfer, assign, or grant
participations in all or any part of the indebtedness; (h)
exercise or retain from exercising any rights against Borrower or
others, or otherwise act or refrain from acting; (i) settle or
compromise any indebtedness; and (j) subordinate the payment of
all or any part of any indebtedness of Borrower to Lender to the
payment of any liabilities which may be due Lender or others.
REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender, as of the date of this Agreement, as of the
date of each disbursement of Loan proceeds, as of the date of
any renewal, extension or modification of any Loan, and at all
times any Indebtedness exists:
Organization. Borrower Is a corporation which is duly
organized, validly existing, and in good standing under the
laws of the Commonwealth of Virginia and is validly existing
and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own
its properties and to transact the businesses in which It is
presently engaged or presently proposes to engage. Borrower
also is duly qualified as a foreign corporation and is in
good standing in all states In which the failure to so
quality would have a material adverse affect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of
this Agreement and all Related Documents by Borrower, to the
extent to be executed, delivered or performed by Borrower,
have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other
person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a
default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (b) any law.
governmental regulation, court decree, or order applicable to
Borrower.
Financial Information. Each financial statement of Borrower
supplied to Lender truly and completely disclosed Borrower's
<PAGE>
financial condition as of the date of the statement, and there
has been no material adverse change in Borrower's financial
condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument
or agreement required hereunder to be given by Borrower when
delivered will constitute, legal, valid and binding
obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as
previously disclosed in Borrower's financial statements or in
writing to Lender and as accepted by Lender, and except for
property tax liens for taxes not presently due and payable,
Borrower owns and has good title to all of Borrower's
properties free and clear of all Security Interests, and has
not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are
titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least
the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as
used in this Agreement, shall have the same meanings as set
forth in the "CERCLA," "SARA," the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the
foregoing. Except as disclosed to and acknowledged by Lender
in writing, Borrower represents and warrants that: (a) During
the period of Borrower's ownership of the properties, there
has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste
or substance by any person on, under, about or from any of the
properties. (b) Borrower has no knowledge of, or reason to
believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on,
under, about or from the properties by any prior owners or
occupants of any of the properties, or (ii) any actual or
threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the
properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on,
under, about or from any of the properties; and any such
activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances,
<PAGE>
including without limitation those laws, regulations and
ordinances described above. Borrower authorizes Lender and
its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of
the Agreement. Any inspections or tests made by Lender shall
be at Borrower's expense and for Lender's purposes only and
shall not be construed to create any responsibility or
liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the
properties for hazardous waste and hazardous substances.
Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any
such laws, and (b) agrees to Indemnity and hold harmless
Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this
section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or
threatened release occurring prior to Borrower's ownership or
interest in the properties, whether or not the same was or
should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to
indemnity, shall survive the payment of the indebtedness and
the termination or expiration of this Agreement and shall not
be affected by Lender's acquisition of any interest in any of
the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those
for unpaid taxes) against Borrower is pending or threatened,
and no other event has occurred which may materially adversely
affect Borrower's financial condition or properties, other
than litigation, claims, or other events, if any, that have
been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns
and reports of Borrower that are or were required to be filed,
have been filed, and all taxes, assessments and other
governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted
any Security Agreements, or permitted the filing or attachment
of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of
Borrower's Loan and Note, that would be prior or that may in
<PAGE>
any way be superior to Lender's Security Interests and rights
in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security
Agreements directly or indirectly securing repayment of
Borrower's Loan and Note and all of the Related Documents are
binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan
proceeds solely for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to
which Borrower may have any liability complies in all material
respects with all applicable requirements of law and
regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been
taken to terminate any such plan, and (iv) there are no
unfunded liabilities other than those previously disclosed to
Lender in writing.
Location of Borrower's Offices and Records. Borrower's place
of business, or Borrower's Chief executive office, if Borrower
has more than one place of business, is located at 4900
Seminary Road, Suite 800, Alexandria, VA 2231 1. Unless
Borrower has designated otherwise in writing this location Is
also the office or offices where Borrower keeps its records
concerning the Collateral.
Information. All information heretofore or contemporaneously
herewith furnished by Borrower to Lender for the purposes of
or in connection with this Agreement or any transaction
contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be, true
and accurate in every material respect on the date as of which
such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any
material fact necessary to make such information not
misleading.
Survival of Representations and Warranties. Borrower
understands and agrees that Lender, without Independent
Investigation, Is relying upon the above representations and
warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in
full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement
shall be terminated in the manner provided above, whichever is
the last to occur.
<PAGE>
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all
material adverse changes in Borrower's financial condition,
and (b) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in
accordance with generally accepted accounting principles,
applied on a consistent basis, and permit Lender to examine
and audit Borrower's books and records at all reasonable
times.
Financial Statements. Furnish Lender with, as soon as
available, but in no event later than ninety (90) days after
the end of each fiscal year, Borrower's balance sheet and
income statement for the year ended, prepared by Borrower.
All financial reports required to be provided under this
Agreement shall be prepared in accordance with generally
accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information
and statements, lists of assets and liabilities, agings of
receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as
Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public
liability insurance, and such other Insurance as Lender may
from time to time reasonably require with respect to
Borrower's properties and operations, in form, amounts,
coverages and with insurance companies acceptable to Lender.
Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10)
days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act,
omission or default of Borrower or any other person. In
connection with all policies covering assets In which Lender
holds or Is offered a security interest for the Loans,
Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
<PAGE>
Insurance Reports. Furnish to Lender, upon request of Lender,
reports on each existing Insurance policy showing such
Information as Lender may reasonably request, including
without limitation the following: (a) the name of the Insurer;
(b) the risks Insured; (c) the amount of the policy; (d) the
properties Insured; (e) the then current property values on
the basis of which Insurance has been obtained, and the manner
of determining those values; and (f) the expiration date of
the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent
appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The
cost of such appraisal shall be paid by Borrower.
Life Insurance. As soon as practical, obtain and maintain
life insurance In form and with insurance companies acceptable
to Lender on the following individuals in the amounts
indicated below and, at Lender's option, cause such insurance
coverage to be pledged, made payable to, or assigned to Lender
on Lender's forms. Lender, at its discretion, may apply the
proceeds of any insurance policy to the unpaid balances of any
Indebtedness:
Names of Insured Amounts
Christopher Gilluly $482,407.22
Martha Gilluly $483,057.52
Guaranties. Prior to disbursement of any Loan proceeds,
furnish executed guaranties of the Loans in favor of Lender,
on Lender's forms, and in the amounts and by the guarantors
named below:
Guarantors Amounts
Martha A. Gilluly Unlimited
Christopher W. Gilluly Unlimited
Subordination. Prior to disbursement of any Loan proceeds,
deliver to Lender subordination agreements on Lender's forms,
executed by Borrower's creditors named below, subordinating all
of Borrower's indebtedness to such creditors, or such lesser
amounts as may be agreed to by Lender in writing, and any
security interests in collateral securing that indebtedness to
the Loans and security interests of Lender.
Names of Creditors Amounts
S. Amber Gordon $24,000.00
Robert J. Lynch, Jr. $24,000.00
George E. Fowler $24,000.00
Donald E. Jewell $24,000.00
Donald E. Ziegler $24,000.00
<PAGE>
Other Agreements. Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between
Borrower and any other party and notify Lender immediately in
writing of any default In connection with any other such
agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the
contrary by Lender In writing.
Taxes, Charges and Liens. Pay and discharge when due all of
Its Indebtedness and obligations, including without limitation
all assessments, taxes, governmental charges, levies and
liens, of every kind and nature, imposed upon Borrower or its
properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that. if unpaid,
might become a lien or charge upon any of Borrower's
properties, income, or profits. Provided however, Borrower
will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality
of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance
with generally accepted accounting practices. Borrower, upon
demand of Lender, will furnish to Lender evidence of payment
of the assessments, taxes, charges, levies, liens and claims
and will authorize the appropriate governmental official to
deliver to Lender at any time a written statement of any
assessments. taxes, charges, levies, liens and claims against
Borrower's properties, Income, or profits.
Performance. Perform and comply with all terms, conditions,
and provisions set forth In this Agreement and in the Related
Documents in a timely manner, and promptly notify Lender it
Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under
any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the
present executive and management personnel; provide written
notice to Lender of any change in executive and management
personnel; conduct its business affairs in a reasonable and
prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and
operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding
standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
<PAGE>
Inspection. Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan
or Loans and Borrower's other properties and to examine or
audit Borrower's books, accounts, and records and to make
copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains
any records (including without limitation computer generated
records and computer software programs for the generation of
such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and
to provide Lender with copies of any records it may request,
all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender,
provide Lender at least annually and at the time of each
disbursement of Loan proceeds with a certificate executed by
Borrower's chief financial officer, or other officer or person
acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as
of the date of the certificate and further certifying that, as
of the date of the certificate, no Event of Default exists
under this Agreement.
Environmental Compliance and Reports. Borrower shall comply
in all respects with all environmental protection federal,
state and local laws, statutes, regulations and ordinances;
not cause or permit to exist, as a result of an intentional or
unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result
to the environment, unless such environmental activity is
pursuant to and in compliance with the conditions of a permit
issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any
notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality
concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental
activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender
such promissory notes, mortgages, deeds of trust, security
agreements, financing statements, instruments, documents and
other agreements as Lender or its attorneys may reasonably
request to evidence and secure the Loans and to perfect all
Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not,
without the prior written consent of Lender:
<PAGE>
Indebtedness and Liens. (a) Except for trade debt Incurred in
the normal course of business and Indebtedness to Lender
contemplated by this Agreement, create, incur or assume
indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer,
mortgage, assign, pledge, lease, grant a security Interest In,
or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business
activities substantially different than those in which
Borrower is presently engaged, (b) cease operations,
liquidate, merge, transfer, acquire or consolidate with any
other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other
than dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a "Subchapter S
Corporation" (as defined in the Internal Revenue Code of 1986,
as amended), Borrower may pay cash dividends on its stock to
its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their
ownership of shares of stock of Borrower, or (d) purchase or
retire any of Borrower's outstanding shares or alter or amend
Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or
advance money or assets, (b) purchase, create or acquire any
interest In any other enterprise or entity, or (c) Incur any
obligation as surety or guarantor other than In the ordinary
course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to
make any Loan to Borrower, whether under this Agreement or
under any other agreement, Lender shall have no obligation to
make Loan Advances or to disburse Loan proceeds if: (a)
Borrower or any Guarantor is in default under the terms of
this Agreement or any of the Related Documents or any other
agreement that Borrower or any Guarantor has with Lender; (b)
Borrower or any Guarantor becomes insolvent, files a petition
in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in
Borrower's financial condition, in the financial condition of
any Guarantor, or In the value of any Collateral securing any
Loan; or (d) any Guarantor seeks, claims or otherwise attempts
to limit, modify or revoke such Guarantor's guaranty of the
Loan or any other loan with Lender (e) Lender in good faith
deems itself insecure, even though no Event of Default shall
have occurred.
<PAGE>
RIDER TO BUSINESS LOAN AGREEMENT. An Exhibit, titled "RIDER
TO BUSINESS LOAN AGREEMENT", is attached to this Agreement and
by this reference is made a part of this Agreement just as if
all the provisions, terms and conditions of the Exhibit had
been fully set forth in this Agreement.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessor security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's
right, title and interest in and to, Borrower's accounts with
Lender (whether checking, savings, or some other account),
including without limitation all accounts hold jointly with
someone else and all accounts Borrower may open In the future,
excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums
owing on the Indebtedness against any and all such accounts,
and, at Lender's option, to administratively freeze all such
accounts to allow Lender to protect Lender's charge and setoff
rights provided on this paragraph.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Borrower or any Grantor to comply
with or to perform when due any other term. obligation.
covenant or condition contained In this Agreement or In any of
the Related Documents, or failure of Borrower to comply with
or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and
Borrower.
Default In Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or
any Grantor's ability to repay the Loans or perform their
respective obligations under this Agreement or any of the
Related Documents.
False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Borrower or any
Grantor under this Agreement or the Related Documents is false
or misleading in any material respect at the time made or
misleading at any time thereafter.
<PAGE>
Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any Security Agreement to create a valid
and perfected Security Interest) at any time and for any
reason.
Insolvency. The dissolution or termination of Borrower's
existence as a going business, or a trustee or receiver is
appointed for Borrower or for all or a substantial portion of
the assets of Borrower, or Borrower makes a general assignment
for the benefit of Borrower's creditors, or Borrower files for
bankruptcy, or an involuntary bankruptcy petition is filed
against Borrower and such involuntary petition remains
undismissed for sixty (60) days.
Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by
any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment,
or levy on or of any of Borrower's deposit accounts with
Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the
case may be, as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding,
and if Borrower or Grantor gives Lender written notice of the
creditor or forfeiture proceeding and furnishes reserves or a
surety bond for the creditor or forfeiture proceeding
satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the
Indebtedness or any Guarantor dies or becomes Incompetent, or
revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness. Lender, at its option, may, but
shall not be required to, permit the Guarantor's estate to
assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so,
cure the Event of Default.
<PAGE>
Events Affecting Co-Borrowers. Any of the preceding events
occurs with respect to any co-borrower of any of the indebtedness
or any co-borrower dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any of the
indebtedness. Lender, at its option, may, but shall not be
required to, permit the co-borrower's estate to assume
unconditionally the obligations on the indebtedness in a manner
satisfactory to Lender, and , in doing so, cure the Event of
Default.
Change In Ownership. Any change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in
Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is
impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on
Indebtedness, is curable and if Borrower or Grantor, as the
case may be, has not been given a notice of a similar default
within the preceding twelve (1 2) months, it may be cured (and
no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default: (a) cures the
default within ten (10) days; or (b) If the cure requires more
than ten (10) days, Immediately initiates steps which Lender
deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable
and necessary steps sufficient to produce compliance as soon
as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall
occur, except where otherwise provided in this Agreement or the
Related Documents, all commitments and obligations of Lender
under this Agreement or the Related Documents or any other
agreement immediately will terminate (including any obligation to
make Loan Advances or disbursements), and, at Lender's option,
all sums owing in connection with the Loans, including all
principal, Interest, and all other fees, costs and charges, if
any, will become Immediately due and payable, all without notice
of any kind to Borrower, except that in the case of an Event of
Default of the type described in the "Insolvency" subsection
above, such acceleration shall be automatic and not optional. In
addition, Lender shall have all the rights and remedies provided
in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform
an obligation of Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights
and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
<PAGE>
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of
or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.
Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the
District of Columbia. Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or
counterclaim brought by either party against the other.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret
or define the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents
to Lender's safe or transfer, whether now or later, of one or
more participation interests in the Loans to one or more
purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or
more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters.
Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also
agrees that the purchasers of any such participation interests
will be considered as the absolute owners of such interests in
the Loans and will have all the rights granted under the
participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a
participation interest and unconditionally agrees that either
Lender or such purchaser may enforce Borrower's obligation
under the Loans irrespective of the failure or insolvency of
any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests
may enforce its interests irrespective of any personal claims
or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of
Lender's out-of-pocket expenses incurred in connection with
this Agreement or in connection with the Loans made pursuant
to this Agreement. Subject to any limits under applicable
law, If Lender hires an attorney to help enforce this
Agreement or to collect any Indebtedness, Borrower agrees to
pay Lender's reasonable attorneys' fees, and all of Lender's
other collection expenses, whether or not there is a lawsuit
and including legal expenses for bankruptcy proceedings.
<PAGE>
Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimilie, and shall be effective when actually delivered
If hand delivered or when deposited with a nationally
recognized overnight courier or deposited as certified or
registered mail in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is
to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To
the extent permitted by applicable law, If there Is more than
one Borrower, notice to any Borrower will constitute notice to
all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current addressees).
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as
to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending
provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, If the
offending provision cannot be so modified, it shall be
stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the
context of any provisions of this Agreement makes It
appropriate, including without limitation any representation,
warranty or covenant, the word "Borrower" as used herein shall
include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make
any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
Successors and Assigns. All covenants and agreements
contained by or on behalf of Borrower shall bind its
successors and assigns and shall inure to the benefit of
Lender, its successors and assigns. Borrower shall not,
however, have the right to assign Its rights under this
Agreement or any interest therein, without the prior written
consent of Lender.
Survival. All warranties, representations, and agreements of
Borrower in this Agreement shall survive the making of the
Loan or Loans contemplated hereby, and shall be deemed made
and redated by Borrower at the time of the making of each
disbursement of Loan proceeds.
Time Is of the Essence. Time Is of the essence In the
performance of this Agreement.
<PAGE>
Waiver. Indulgence by Lender with respect to any of the terms
and conditions of this Agreement or the failure of Lender to
exercise any of its rights under this Agreement shall not
constitute a waiver thereof, and Borrower shall remain liable
for the strict performance of such terms and conditions until
this Agreement shall be terminated. No provision of this
Agreement may be waived or modified orally, but all such
waivers or modifications shall be In writing. Whenever the
consent of Lender Is required under this Agreement, the
granting of such consent by Lender in one instance shall not
constitute Lender's continuing consent in subsequent
instances, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
THIS BUSINESS LOAN AGREEMENT IS SIGNED, SEALED AND DELIVERED
EFFECTIVE IN ALL RESPECTS AS OF June 25, 1997.
BORROWER:
Hadron, Inc.
By: /S/ CHRISTOPHER W. GILLULY (SEAL)
Christopher W. Gilluly,
Chairman and Chief Executive Officer
SYCOM SERVICES INC. - Co-Borrower
By: /S/ JOHN ANTHONY VIDAL -(SEAL)
JOHN ANTHONY VIDAL
President
ENGINEERING & INFORMATION SERVICES, INC. - Co-Borrower
By: /S/ DONALD E. JEWELL - (SEAL)
DONALD E. JEWELL
President
LENDER:
Century National Bank
By: /S/ Robert Hutchins
Authorized Officer
<PAGE>
THIS NOTE, THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE,
OF HADRON, INC. INTO WHICH THIS NOTE IS CONVERTIBLE AND THE
WARRANT WHICH MAY BE ISSUED PURSUANT TO THE TERMS OF THIS NOTE
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
FORM OF
CONVERTIBLE PROMISSORY NOTE
$24,000.00 ALEXANDRIA, VIRGINIA June 20, 1997
FOR VALUE RECEIVED, HADRON, INC, a New York corporation
("Hadron") hereby promises to pay to the order ___________________
("Payee"), at 1163 Old Gate Court, McLean, Virginia 22102, or at
such other place as may be designated by Payee, the principal sum
of TWENTY FOUR THOUSAND DOLLARS ($24,000.00), together with
interest from the date hereof until maturity at the rate of ten
percent (10%) per annum, compounded quarterly.
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
September 20, 1997, and successive payments of accrued interest
being due and payable on or before the 20th day of each
succeeding December, March, June and September thereafter until
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 June 20,
1999 (the "Maturity Date").
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 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").
The number of Hadron Shares into which this note shall be
convertible shall be determined by dividing the total principal
then outstanding by the Conversion Price as hereinafter defined
in accordance with this Section 2.
<PAGE>
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Hadron written notice of
Payee's 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 Hadron, Hadron shall
promptly thereafter 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 Payee's election to
convert ("Conversion Date"); provided, however, that Payee shall
not deliver notice of Payee's 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 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, Hadron shall 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 $0.60 per share.
3. Hadron 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. Upon payment of principal under this note, Payee shall be
entitled to receive and Hadron shall execute, issue and deliver
to Payee promptly after such payment 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. Such Warrant:
<PAGE>
(a) shall be exercisable:
i) through June 20, 2001, if the payment of principal
giving rise thereto is paid either prior to or on the
Maturity Date, or
ii) through the end of the last day in the period which
begins on June 21, 2001 and which extends the same number of
days which pass from the Maturity Date through the day on
which the principal giving rise thereto is paid;
(b) shall entitle Payee to purchase, in accordance with the
terms thereof, that number of Hadron Shares equal to the quotient
of the principal paid giving rise to the warrant divided by 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 Warrant and the Hadron
Shares issuable upon exercise of the Warrant 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 Hadron shall
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 Hadron 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 Hadron's property; or should Payee conclude that the
<PAGE>
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 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 Hadron agrees and promises to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Hadron, 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. Hadron (a) acknowledges and agrees 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 Warrant, a sufficient number of Hadron Shares to
permit the full conversion of this note and the full exercise of
the Warrant, and (b) 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 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.
11. This Note shall be subordinate and junior in right of
payment in all respects to amounts outstanding under the Line of
Credit Agreement entered into between Hadron and Century National
Bank on or about June 25, 1997.
EXECUTED this 20th day of June 1997.
HADRON, INC., a New York corporation
By: /S/ C.W. GILLULY
_____________________
C.W. Gilluly, Ed.D.
Chairman and
Chief Executive Officer
INVESTMENT AGREEMENT
This Investment Agreement (the "Agreement"), dated as of June 20,
1997, is made among Hadron, Inc., a New York Corporation ("Hadron"),
and S. Amber Gordon, George E. Fowler, Donald E. Jewell, Donald E.
Ziegler and Robert J. Lynch, Jr. (collectively the "Investors").
WHEREAS, each of the Investors is either an executive officer or
director of Hadron.
WHEREAS, Hadron is entering into a Line of Credit Agreement with
Century National Bank ("Lender") whereby Lender will provide to Hadron
on the terms set forth in such agreement, including the personal
guarantee of C.W. Gilluly (Hadron's Chairman and Chief Executive
Officer), a line of credit of up to $800,000 (the "Loan").
WHEREAS, the Lender and Hadron negotiated the balance of the Loan
with the understanding that the Loan proceeds would be used to pay in
full Hadron's indebtedness to C.W. Gilluly in the amount of
$225,000.00 under the terms of the Third Amended and Restated
Convertible Promissory Note dated April 21, 1997 (the "Gilluly Note")
and they contemplated that the balance of the Loan proceeds would
provide Hadron sufficient working capital and capital for business
development for the immediate future.
WHEREAS, Hadron is currently indebted to the law firm of
Bracewell & Patterson in the approximate amount of $288,000.00 under
the terms of a November 1, 1996 promissory note in the original amount
of $379,937.75 (the "Bracewell Note").
WHEREAS, upon learning of the Loan and the additional capital to
be provided to Hadron thereby (net of payment of the Gilluly Note),
Bracewell & Patterson demanded that the Company pay to it all amounts
outstanding under the Bracewell Note.
WHEREAS, Hadron has agreed to pay and Bracewell & Patterson has
agreed to accept $250,000.00 in full satisfaction of the Bracewell
Note.
WHEREAS, payment of the Bracewell Note will reduce the balance of
new capital available to Hadron from the Loan proceeds to a level
below that deemed desirable by the Lender and Hadron to meet Hadron's
immediate need for additional capital.
<PAGE>
WHEREAS, the Investors have agreed to provide Hadron at least
$120,000.00 of additional capital on the terms set forth herein to
offset in part the reduction of the Loan proceeds available to Hadron
as a consequence of payment of the Bracewell Note.
NOW THEREFORE, in consideration of the foregoing and the
representations and agreements herein contained, the parties hereto
agree as follows:
1. Hadron agrees to issue to each of the Investors at or prior to
the closing of the Loan a two (2) year promissory note in the form
attached as Exhibit A hereto in the amount set forth next to each
Investor's name under the heading "Investment" on Schedule 1 to this
Agreement. Each promissory note, among other things:
a) shall bear interest at the rate of ten percent (10%) per
annum compounded quarterly;
b) shall provide that the principal thereof be convertible
until all principal due thereunder is paid, at the respective
Investor's option, into fully paid and non-assessable, restricted
shares of Hadron's common stock, par value $0.02 per share (the
"Common Stock"), on the basis of $0.60 per share, which value the
Board of Directors of Hadron determined to be the fair market
value of one restricted share of Hadron; common stock as of June
12, 1997 (the date on which the Hadron Board of Directors
approved in substance this Agreement);
c) may be prepaid by Hadron in full or part prior to maturity;
d) shall provide for the issuance to the respective Investor of
a warrant to acquire Common Stock (in the form of warrant
attached as Exhibit B hereto) upon payment by Hadron of the
principal due thereunder, and
e) shall be subordinate and junior in right of payment in all
respects to the Loan;
all on such terms as set forth in the form of promissory note attached
as Exhibit A hereto.
<PAGE>
2. Each Investor agrees to pay to Hadron in same day funds,
simultaneously with Hadron's issuance of the promissory note to such
Investor pursuant to paragraph 1 above, the amount set forth next to
each Investor's name under the heading "Investment" on Schedule 1 to
this Agreement.
3. Each Investor represents and warrants, severally and not jointly,
that:
(a) the Investor understands that the promissory note to be
issued to such Investor by Hadron pursuant to paragraph 1 above
(the "Note"), the warrant to which such Investor may be entitled
upon non-payment of amounts due under the note at maturity (the
"Warrant") and the Common Stock to which Investor may be entitled
upon conversion of the Note or upon exercise of the Warrant
(collectively, 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 Investor pursuant to
this Agreement will be acquired by such Investor for such
Investor'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 Investor will not distribute any of the Securities in
violation of the Securities Act,
(c) such Investor (i) acknowledges that the Securities acquired
by such Investor pursuant to this Agreement must be held
indefinitely by such Investor 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 Investor for resale of any of
the Securities to be acquired by such Investor pursuant to this
Agreement,
(d) such Investor has such knowledge and experience in financial
and business matters such that such Investor is capable of
evaluating the merits and risks of such Investor's investment in
any of the Securities to be acquired by such Investor pursuant to
this Agreement,
<PAGE>
(e) such Investor, through his or her position as an officer or
director of Hadron, has access to information concerning the
operations and prospects of Hadron sufficient to make a
reasonable and informed investment decision with respect to the
Securities,
(f) such Investor agrees that such Investor 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 Investor agrees that the certificates or instruments
representing the Securities to be acquired by Investor 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.
4. Hadron (a) agrees at all times to reserve and keep available from
its authorized common stock, solely for issuance and delivery upon
conversion of the Note or exercise of the Warrant by any or all of the
Investors, a sufficient number of shares of Common Stock to permit the
full conversion of the Note and the full exercise of the Warrant by
any or all of the Investors, and (b) 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 Investors
upon conversion of the Note or exercise of the Warrant by any or all
of the Investors, fully paid and non-assessable shares of Common Stock
at the prices determined in accordance with the Note and the Warrant
held by each Investor.
5. This Agreement and the relationship between the parties shall be
governed by, and construed in accordance with, the laws of the
Commonwealth 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. INVESTORS:
By: /S/ C.W. Gilluly /S/ AMBER GORDON
_____________________________ _____________________________
C.W. Gilluly, Ed.D. S. Amber Gordon
Chairman and
Chief Executive Officer
/S/ ROBERT J. LYNCH, JR.
_____________________________
Robert J. Lynch, Jr.
/S/ GEORGE E. FOWLER
_____________________________
George E. Fowler
/S/ DONALD E. JEWELL
_____________________________
Donald E. Jewell
/S/ DONALD E. ZIEGLER
_____________________________
Donald E. Ziegler
<PAGE>
SCHEDULE 1
INVESTOR INVESTMENT
S. Amber Gordon $24,000
Robert J. Lynch, Jr. $24,000
George E. Fowler $24,000
Donald E. Jewell $24,000
Donald E. Ziegler $24,000
<PAGE> EXHIBIT A
FORM OF PROMISSORY NOTE
<PAGE>
THIS NOTE, THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE,
OF HADRON, INC. INTO WHICH THIS NOTE IS CONVERTIBLE AND THE
WARRANT WHICH MAY BE ISSUED PURSUANT TO THE TERMS OF THIS NOTE
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
FORM OF
CONVERTIBLE PROMISSORY NOTE
$24,000.00 ALEXANDRIA, VIRGINIA June 20, 1997
FOR VALUE RECEIVED, HADRON, INC, a New York corporation
("Hadron") hereby promises to pay to the order ___________________
("Payee"), at 1163 Old Gate Court, McLean, Virginia 22102, or at
such other place as may be designated by Payee, the principal sum
of TWENTY FOUR THOUSAND DOLLARS ($24,000.00), together with
interest from the date hereof until maturity at the rate of ten
percent (10%) per annum, compounded quarterly.
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
September 20, 1997, and successive payments of accrued interest
being due and payable on or before the 20th day of each
succeeding December, March, June and September thereafter until
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 June 20,
1999 (the "Maturity Date").
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 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").
The number of Hadron Shares into which this note shall be
convertible shall be determined by dividing the total principal
then outstanding by the Conversion Price as hereinafter defined
in accordance with this Section 2.
<PAGE>
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Hadron written notice of
Payee's 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 Hadron, Hadron shall
promptly thereafter 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 Payee's election to
convert ("Conversion Date"); provided, however, that Payee shall
not deliver notice of Payee's 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 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, Hadron shall 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 $0.60 per share.
3. Hadron 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. Upon payment of principal under this note, Payee shall be
entitled to receive and Hadron shall execute, issue and deliver
to Payee promptly after such payment 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. Such Warrant:
<PAGE>
(a) shall be exercisable:
i) through June 20, 2001, if the payment of principal
giving rise thereto is paid either prior to or on the
Maturity Date, or
ii) through the end of the last day in the period which
begins on June 21, 2001 and which extends the same number of
days which pass from the Maturity Date through the day on
which the principal giving rise thereto is paid;
(b) shall entitle Payee to purchase, in accordance with the
terms thereof, that number of Hadron Shares equal to the quotient
of the principal paid giving rise to the warrant divided by 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 Warrant and the Hadron
Shares issuable upon exercise of the Warrant 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 Hadron shall
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 Hadron 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 Hadron's property; or should Payee conclude that the
<PAGE>
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 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 Hadron agrees and promises to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Hadron, 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. Hadron (a) acknowledges and agrees 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 Warrant, a sufficient number of Hadron Shares to
permit the full conversion of this note and the full exercise of
the Warrant, and (b) 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 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.
11. This Note shall be subordinate and junior in right of
payment in all respects to amounts outstanding under the Line of
Credit Agreement entered into between Hadron and Century National
Bank on or about June 25, 1997.
EXECUTED this 20th day of June 1997.
HADRON, INC., a New York corporation
By: /S/ C.W. GILLULY
_____________________
C.W. Gilluly, Ed.D.
Chairman and
Chief Executive Officer
<PAGE> EXHIBIT B
FORM OF WARRANT<PAGE>
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.
FORM OF STOCK PURCHASE WARRANT
1. Grant.
Hadron, Inc., a New York corporation (hereinafter
"Company"), for value received hereby grants to
_____________________________ or his or her 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. This
Warrant is subject to the terms of the Convertible Promissory
Note dated as of June 20, 1997 and issued in favor of Holder by
the Company in the original principal amount of $24,000 (the
"Note").
2. Expiration.
If this Warrant is issued to Holder as a consequence of the
payment of principal either before or on the Note's maturity
date, this warrant may be exercised through June 20, 2001, at the
end of which period it shall expire. If this Warrant is issued
to Holder as a consequence of the payment of principal after the
Note's maturity date, this warrant may be exercised through the
end of the last day in the period which begins on June 21, 2001
and which extends the same number of days which pass from the
Note's maturity date through the day on which the principal
giving rise to the Warrant is paid, at the end of which period it
shall expire.
3. Exercise Price.
The per share exercise price of this Warrant shall be $0.60.
<PAGE>
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. Exercise.
This Warrant may be exercised in whole or in part at any
time until its expiration. If exercised in part, Hadron shall
issue to Holder a new warrant (the "Substitute Warrant") on the
same terms as set forth herein for the balance of the original
40,000 shares represented by this Warrant with respect to which
the Holder has not then previously exercised this Warrant or any
Substitute Warrant.
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 as he would have been
entitled to receive if this Warrant had been exercised prior to
such sale or exchange.
<PAGE>
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 Chief
Executive Officer, 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: S. Amber Gordon By: C. W. Gilluly
Secretary Chief Executive Officer
<PAGE> EXHIBIT A
IRREVOCABLE SUBSCRIPTION
To: Hadron, Inc.
Ladies and Gentlemen:
The undersigned hereby elects to exercise his/her 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, Inc., with full
power of substitution in the premises.
Done this ____ day of ___________, 19___.
Signed:______________________________________
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
AMENDED STOCK PURCHASE WARRANT
1. Grant.
Hadron, Inc., a New York corporation (hereinafter
"Company"), for value received hereby grants to C.W. Gilluly or
assigns (hereinafter "Holder") under the terms herein the right
to purchase 120,000 fully paid and non-assessable shares of the
Company's $.02 par value common stock.
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.
Holder at his 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 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 Original 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.
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. 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 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 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
party other than the Holder, then the Holder at his 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."
<PAGE>
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 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 31st day of December,
1996.
HADRON, INC.
Attest:
/S/ S. AMBER GORDON /S/ GEORGE FOWLER
____________________ __________________
By: S. AMBER GORDON By: GEORGE FOWLER
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:______________________________________
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE
RECEIVED,_____________________________________________________
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
__________________ 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 ___________________ Corporation, with
full power of substitution in the premises.
Done this ____ day of ___________, 19__.
Signed:______________________________________
<PAGE>
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 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 900,000 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 April 21,
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."
<PAGE>
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.
<PAGE>
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 2nd day of June 1997
.
HADRON, INC.
Attest:
/S/ S. AMBER GORDON /S/ GEORGE E. FOWLER
_____________________ ___________________________
By: S. Amber Gordon By: George E. Fowler
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:______________________________________
<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:______________________________________
