UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Form 10-Q
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/X/ Quarter report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1996 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to ___________
Commission file number 0-5404
_____________________
HADRON, INC.
(Exact name of registrant as specified in its charter)
New York 11-2120726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 824-0400
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days:
Yes X No
___ ___
As of February 7, 1997, 1,506,685 shares of the Common Stock of the
registrant were outstanding.
<PAGE>
HADRON, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 3
December 31, 1996 and June 30, 1996
Consolidated Statements of 5
Operations for the Three and Six
Months Ended December 31, 1996 and 1995
Consolidated Statements of 6
Cash Flows for the Six Months Ended
December 31, 1996 and 1995
Notes to Consolidated 7
Financial Statements
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
Part II Other Information:
Item 1. Legal Proceedings 13
SIGNATURES 14
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND JUNE 30, 1996
<CAPTION>
DEC. 31, JUNE 30,
ASSETS 1996 1996
(Unaudited)
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 45,400 $ 33,900
Restricted cash 10,000
Accounts receivable, net 2,579,200 2,680,400
Note receivable 93,300
Prepaid expenses and other 46,400 45,200
----------- -----------
Total current assets 2,718,900 2,735,600
----------- -----------
Fixed assets, net 97,000 96,800
----------- -----------
Other assets:
Goodwill, net of amortization 4,100
Note receivable 47,300
Other 13,100 4,000
----------- -----------
Total other assets 60,400 8,100
----------- -----------
Total assets $2,876,300 $2,840,500
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND JUNE 30, 1996
<CAPTION>
DEC. 31, JUNE 30,
LIABILITIES AND SHAREHOLDERS' DEFICIT 1996 1996
(Unaudited)
----------- ----------
<S> <C> <C>
Current liabilities
Accounts payable $1,349,600 $1,821,500
Other current liabilities 1,800,400 1,602,100
Note payable - other 75,000
----------- -----------
Total current liabilities 3,225,000 3,423,600
----------- -----------
Note payable - related party 250,000 275,000
Note payable - other 243,300
Other 47,300 45,300
----------- -----------
Total long-term liabilities 540,600 320,300
----------- -----------
Commitments and contingencies
Total Liabilities 3,765,600 3,743,900
----------- -----------
Shareholders' deficit:
Common stock $.02 par; authorized 20,000,000
shares; issued and outstanding -
December 31, 1996, 1,506,685 shares,
and June 30, 1996, 1,503,685 shares,
respectively 30,100 30,000
Additional Capital 9,261,400 9,260,800
Accumulated deficit (10,135,400) (10,160,300)
----------- -----------
Total shareholders' deficit (843,900) (869,500)
----------- -----------
Total liabilities and shareholders' deficit $2,921,700 $2,874,400
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues $4,085,000 $4,701,400 $7,859,500 $10,460,400
---------- ---------- -------- -----------
Operating costs and expenses:
Costs of revenue 3,679,600 4,352,500 7,000,100 9,353,300
Selling, general and administrative 379,200 563,800 786,900 1,189,300
---------- ------------ -------- -----------
Total operating costs and expenses 4,058,800 4,916,300 7,787,000 10,542,600
---------- ------------ -------- -----------
Operating income (loss) 26,200 (214,900) 72,500 (82,200)
---------- ------------ -------- -----------
Other (expense) income:
Interest expense, net (8,600) (52,200) (18,800) (110,300)
Gain on sale of assets 255,400 255,400
Other (expense) income 2,000 42,900 (11,800) 16,900
---------- ------------ -------- -----------
Total other (expense) income (6,600) 246,100 (30,600) 162,000
---------- ------------ -------- -----------
Income before income taxes 19,600 31,200 41,900 79,800
Provision for income taxes 9,000 17,000 18,100
---------- ------------ -------- -----------
Net income $ 10,600 $ 31,200 $24,900 $ 61,700
========== ============ ======== ===========
Per share data:
Net income $0.00 $0.02 $0.01 $0.04
========== ============ ======== ===========
Weighted average number of common
shares and common share equivalents
outstanding during the period 1,785,685 1,634,379 1,723,758 1,598,060
========== ============ ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
-5-
<PAGE>
<TABLE>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
Six Months Ended
December 31,
1996 1995
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 24,900 $ 61,700
--------- ---------
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 43,700 68,300
Gain on sale of assets (255,400)
Provision for doubtful accounts, net (39,000) (26,000)
Other 700 16,200
Changes in operating assets and liabilities:
Accounts receivable (400) 1,197,500
Prepaid expenses and other (1,200) (42,700)
Other assets (9,100) 31,000
Restricted cash 10,000 60,000
Accounts payable (153,600) (336,000)
Other current liabilities 198,300 (270,100)
Change in assets and liabilities
attributable to asset sale (17,300)
Other long-term liabilities 2,000 2,000
--------- ---------
Total adjustments 51,400 427,500
--------- ---------
Net cash provided by operating activities 76,300 489,200
--------- ---------
Cash flows from investing activities:
Proceeds from sale of assets 200,800
Property additions (39,800) (66,100)
--------- ---------
Net cash used in investing activities (39,800) 134,700
--------- ---------
Cash flows from financing activities:
Payments on bank and other loans (25,000) (773,800)
--------- ---------
Net cash used by financing activities (25,000) (773,800)
--------- ---------
Net increase (decrease) in cash and cash equivalents 11,500 (149,900)
Cash and cash equivalents at beginning of period 33,900 640,600
--------- ---------
Cash and cash equivalents at end of period $ 45,400 $ 490,700
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
-6-
<PAGE>
HADRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The interim consolidated financial statements for Hadron, Inc.
(the "Company") are unaudited, but in the opinion of management
reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of results for such
periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. The balance
sheet at June 30, 1996 has been derived from the audited financial
statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles
for complete financial statements. These condensed, consolidated
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1996 ("1996
Form 10-K") filed with the Securities and Exchange Commission.
Certain reclassifications have been made to prior year amounts
to conform to current year classifications.
Income per share is based on the weighted average number of
common shares outstanding during each quarter and common stock
equivalents, if dilutive.
2. Legal Proceedings
United Press International, Inc. ("UPI") and the Company are
involved in a legal dispute more fully described in the
"Management's Discussion and Analysis" section. The Company does
not believe that it will ultimately incur any liability as a result
of the UPI lawsuit and has made no provision in its financial
statements for this matter.
3. Notes Payable
In October 1993, the Company, through its wholly-owned
subsidiaries, Engineering and Information Services, Inc. ("EISI")
and SyCom Services, Inc. ("Sycom"), executed a $300,000 Convertible
Promissory Note payable to Dr. C.W. Gilluly, Chairman of the Board
and Chief Executive Officer of the Company, in connection with the
issuance of an irrevocable letter of credit required to effect an
office lease settlement. The note, bearing interest, payable
quarterly, at the prime rate plus three percent, was originally due
October 21, 1996. The due date for the remaining principal balance
of $250,000 was extended to October 21, 1997 and in December 1996
was further extended to October 21, 1998.
<PAGE>
In November 1996, the Company executed a note payable for
$379,938 to a vendor to satisfy an outstanding accounts payable.
The non-interest bearing note is secured by the common stock of
SyCom. The note is payable at $7,500 monthly and requires
additional principal payments of $31,646 due on or before December
1, 1997, 1998 and 1999. At December 31, 1996, the Company has
prepaid two months and the additional payment due December 1, 1997.
4. Note Receivable
In December 1996, the Company obtained a $148,606 note
receivable from a commercial customer to satisfy an outstanding
accounts receivable. Principal and interest at 10% is due in
monthly installments of $8,000 with a final payment of $8,664 due
July 15, 1998. An $8,000 principal payment was received in
December 1996.
5. Concentration of Business
The Company provides a broad range of information technology
management services and products to businesses and federal
government agencies. Revenues from services performed under direct
and indirect long-term contracts, and subcontracts with government
defense and intelligence agencies, comprise the majority of the
Company's business. The majority of the Company's technical and
professional services business with governmental departments and
agencies is obtained through competitive procurement and through
"follow-up" services related to existing contracts. The Company
maintains a primary commitment to its direct and indirect
government clients and is also pursuing its program of business
development targeted toward commercial operations.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1996
TO THE THREE MONTHS ENDED DECEMBER 31, 1995
Revenues for the three months ended December 31, 1996 were
approximately $4,085,000, a 13% decrease from the prior year
quarter. Excluding $1,233,000 of 1995 period revenues of ART
Holdings Corporation's ("ART") operations, which were sold in
December 1995, revenues increased approximately $614,000 or 18%.
The increase was primarily attributable to growth on existing
contracts with major government customers of EISI.
Costs of revenue for the quarter ended December 31, 1996 were
approximately $3,680,000, a decline of approximately 15%.
Excluding the $1,207,000 of 1995 period costs of revenue associated
with the sold ART operations, costs of revenue increased $545,000
or 17%. The increase is due to the growth in EISI contracts noted
above. Costs of revenue as a percentage of revenues on ongoing
operations were approximately 90% for both periods.
Selling, general and administrative expenses totaled
approximately $379,000 for the December 31, 1996 quarter, compared
with approximately $564,000 for the prior year period. The
decrease is primarily due to the Company's cost reduction program
and the elimination of support costs of $149,000 for the ART
operations from the ongoing business.
The Company generated $26,000 of operating income in the
current quarter, compared to an operating loss of $215,000 in the
corresponding 1995 period. The improvement is attributable to the
growth in EISI, cost containment efforts and the absence of ART
operating losses of $123,000. The Company incurred approximately
$212,000 of expenses in the continuing development and marketing of
its HeaTreaT suite of software products during the December 31,
1996 quarter.
For the quarter ended December 31, 1996, net interest expense
decreased approximately $43,000 from the prior period due to lower
outstanding borrowings. The lower borrowing levels resulted from
the sale of ART and the improved cash flows and operating profits.
Other income decreased $41,000 due to one-time only gains in the
prior period.
Net income was approximately $11,000, compared to
approximately $31,000 in the prior year quarter. The decrease in
net income resulted from improved ongoing operations being more
<PAGE>
than offset by the $255,000 gain on the ART sale reported in the
December 1995 quarter.
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1996
TO THE SIX MONTHS ENDED DECEMBER 31, 1995
Revenues for the six months ended December 31, 1996 were
approximately $7,859,000, a 25% decrease from the prior year
period. Excluding $3,606,000 of 1995 period revenues of ART,
revenues increased approximately $999,000 or 15%. This increase
resulted from the growth on existing EISI contracts.
Costs of revenue for the December 31, 1996 period were
approximately $7,000,000, a decrease comparable to the revenue
decline. Excluding $3,290,000 of 1995 period costs of revenue
related to the ART operations, costs of revenue increased $945,000,
a 16% increase. The increase is primarily due to the increased
staffing levels in performance of the EISI contracts. Costs of
revenue as a percentage of revenues on ongoing operations were
approximately 89% for both periods.
Selling, general and administrative expenses of $787,000
decreased from $1,189,000 for the six months ended December 31,
1995. The decrease resulted from the Company's cost reduction
program and the elimination of support costs of $428,000 for the
ART operations from the ongoing business.
The Company generated $73,000 of operating income, compared to
an operating loss of $82,000 in the corresponding 1995 period. The
improvement is attributable to EISI growth, cost containment
efforts and the absence of ART operating losses of $112,000. For
the six months ended December 31, 1996, the Company spent
approximately $402,000 on the continuing development and marketing
of its HeaTreaT software products.
Net interest expense decreased approximately $91,000 from the
prior period due to the lower debt levels noted above. Other
expense resulted from the absence of one-time only gains realized
in the prior period.
Net income for the six months ended December 31, 1996 was
$25,000, compared to $62,000 for the prior year period. The
decrease in net income resulted from improved ongoing operations
being more than offset by the $255,000 gain on the ART sale
reported in 1995.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The working capital deficit at December 31, 1996 decreased by
approximately $194,000 from June 30, 1996. The improvement
resulted from improved profitability, reduced capital expenditure
needs and the restructuring of certain accounts payable to a long-
term note payable. The Company continues to work with its
customers and vendors on the scheduling of payments.
Currently, the Company's operations generate cash flow
sufficient to cover its monthly expenses, and management believes
that cash from operations will provide the Company with adequate
cash resources to meet its obligations on a short-term basis. The
Company's ability to meet its liquidity needs on a longer-term
basis is dependent upon its ability to generate sufficient billings
to cover its current obligations, and to also continue to paydown
its accounts payable balances. While the Company's contracts with
its major customers and with other agencies and departments of the
U.S. Government are generally of more than one year in duration,
the Company, along with all other government contractors and
information management companies, faces severe competition in its
marketplaces and no assurance may be given that the Company will be
able to maintain the billing base or the size of profitable
operations that may be necessary to meet its liquidity needs. In
addition, the Company's realization of its investment of resources
in the development and marketing of HeaTreat is dependent upon
industry acceptance. To date, a limited number of customer
contracts have been obtained.
On December 31, 1996, the Company obtained a $300,000 bank
line of credit facility for working capital requirements.
Borrowings under the facility are personally guaranteed by Dr. C.W.
Gilluly and his wife. Interest is at the prime rate plus one
percent and is payable monthly. Outstanding borrowings on the line
of credit are due on December 31, 1997.
In October 1993, the Company, through its wholly-owned
subsidiaries EISI and SyCom, executed a $300,000 Convertible
Promissory Note payable to Dr. C.W. Gilluly in connection with the
issuance of an irrevocable letter of credit required to effect an
office lease settlement. The note, bearing interest, payable
quarterly, at the prime rate plus three percent, was originally due
October 21, 1996. The due date for the remaining principal balance
of $250,000 was extended to October 21, 1997 and in December 1996
was further extended to October 21, 1998.
At the option of Dr. Gilluly, the Note may be converted into
1,000,000 restricted shares ("Hadron Shares") of the Company's
common stock at any time prior to the maturity of the Note. The
Conversion Price for Hadron Shares under the terms of the Note is
$.25 per share and the option to convert expires on October 21,
<PAGE>
1998. The Note is prepayable at any time. In the event the Note
is prepaid in full or in part, Dr. Gilluly is entitled to receive
a warrant, entitling Dr. Gilluly to purchase Hadron Shares equal to
the principal amount of the Note, together with all interest
thereon which is prepaid, divided by the Conversion Price of $.25
per share. As a result of prepayments totaling $50,000, Dr.
Gilluly has been issued warrants to acquire 200,000 shares of the
Company's common stock.
As previously reported, in August 1991, United Press
International, Inc. ("UPI") filed for reorganization under Chapter
11 of the U.S. Bankruptcy Code. The Company, as a creditor of UPI,
filed in September 1992 a $594,621 proof of claim against UPI,
subject to a possible $500,000 setoff. In July 1993, UPI filed an
adversarial action challenging the Company's proof of claim and
demanding $500,000 plus interest based upon an alleged debt or note
payable from the Company to UPI. The Company later determined that
the claimed $500,000 indebtedness of the Company to UPI had not,
and did not, in fact, exist. In March 1994, the Company amended
its proof of claim to reflect that the Company does not owe any
amount to UPI, and to assert against UPI an aggregate claim of
$512,477.
A recent court hearing was adjourned, and a new hearing date
will be set in the near future to adjudicate UPI's challenge of the
Company's proof of claim and UPI's demand for $500,000 plus
interest based upon an alleged debt or note payable from the
Company to UPI. The Company does not believe it will ultimately
incur any liability as a result of the UPI lawsuit and has made no
provision in its financial statements for this matter.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information provided in Note 2 of the Notes to
Consolidated Financial Statements is incorporated herein by
reference.
Item 6. Exhibits and Reports.
(a) Exhibits
Exhibit No.
10.1 Form of Stock Purchase Warrant issuable in connection
with repayment of Second Amended and Restated Convertible
Promissory Note.
10.2 $250,000 Second Amended and Restated Convertible
Promissory Note in favor of C.W. Gilluly, dated December
31, 1996.
10.3 Amended Stock Purchase Warrant granted to C.W. Gilluly
and dated December 31, 1996.
10.4 $379,937.75 Promissory Note in favor of Bracewell &
Patterson, L.L.P. dated November 1, 1996.
10.5 Pledge Agreement in favor of Bracewell & Patterson dated
November 1, 1996.
10.6 $148,606.60 Promissory Note with Tri-City Heat Treat
Company in favor of Hadron, Inc. dated December 16, 1996.
10.7 $300,000 Promissory Note in favor of Century National
Bank dated December 31, 1996.
10.8 $300,000 Business Loan Agreement in favor of Century
National Bank dated December 31, 1996.
10.9 Employment Agreement with Donald E. Ziegler dated
December 30, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned there unto duly authorized.
Date: February 14, 1997 HADRON, INC.
(Registrant)
By:/S/ C.W. Gilluly By:/S/ Donald E. Ziegler
C. W. Gilluly Ed.D. Donald E. Ziegler
Chief Executive Officer Chief Financial Officer
and Chairman (Principal Financial
(Principal Executive Officer) Officer and Principal
Accounting Officer)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
HADRON, INC.
AMENDED FORM OF STOCK PURCHASE WARRANT
1. Grant.
Hadron, Inc., a New York corporation (hereinafter
"Company"), for value received hereby grants to C.W. Gilluly or
his assigns (hereinafter "Holder") under the terms herein the
right to purchase _________________ fully paid and non-assessable
shares of the Company's $.02 par value common stock which number
was determined in accordance with paragraph 4 of the Second
Amended and Restated Convertible Promissory Note dated as of
December 31, 1996 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
$250,000.00 (the "Second 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
which price was determined in accordance with paragraph 4 of the
Second Amended Note.
4. Exercise of Shares for Exercise Price.
The 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
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.
<PAGE>
5. Promissory Note.
This Warrant is subject to the terms of the Second 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.
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
<PAGE>
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
<PAGE>
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 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 ________ day of
____________ 19___ .
HADRON, INC.
Attest:
_____________________ ___________________________
By: By:
Secretary President
<PAGE>
EXHIBIT A
IRREVOCABLE SUBSCRIPTION
To: Hadron, Inc.
Ladies and Gentlemen:
The undersigned hereby elects to exercise its right under
the attached Warrant by purchasing shares of
the $.02 par value common stock Hadron, Inc., and hereby
irrevocably subscribes to such issue. The certificates for such
shares shall be issued in the name of
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
_________________________________________________________________
(Taxpayer Number)
and delivered to
________________________________________________________________
(Name)
_________________________________________________________________
(Address)
The exercise price of $_____________ is enclosed.
Date:________________________________________
Signed:______________________________________
_________________________________________________________________
(Address)
_________________________________________________________________
(Signature)
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE
RECEIVED,_____________________________________________________
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
__________________ 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:______________________________________
THE SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE, OF HADRON,
INC. INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS
SECOND AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
$250,000.00 WASHINGTON, D.C. December 31, 1996
FOR VALUE RECEIVED, ENGINEERING AND INFORMATION SERVICES,
INC., a Virginia corporation, and SYCOM SERVICES, INC., a
Delaware corporation (collectively, "Makers"), hereby promise to
pay to the order of C.W. GILLULY ("Payee"), at his domicile at
415 First Street, S.E., in the City of Washington, District of
Columbia, or at such other place as may be designated by Payee,
the principal sum of TWO HUNDRED FIFTY THOUSAND AND NO/lOO
DOLLARS ($250,000.00), together with interest from the date
hereof until maturity at the rate of three percent (3%) per annum
over the Prime Rate (hereinafter defined) from time to time in
effect. Said interest rate shall be adjusted as and when any
change in the Prime Rate shall occur. For purposes hereof, the
term "Prime Rate" shall mean the highest prime rate per annum
published from time to time in the money rates column or section
of The Wall Street Journal as the interest rate in effect for
corporate loans at large U.S. money center commercial banks
(whether or not such rate has actually been charged by any such
bank). In the event The Wall Street Journal ceases publication of
such prime rate, the term "Prime Rate" shall mean the prime rate
per annum announced from time to time by any U.S. money center
commercial bank selected by Payee. This Second Amended and
Restated Convertible Promissory Note represents an amendment of
the Amended and Restated Convertible Promissory Note dated
September 27, 1996 and issued by Makers in favor of Payee in the
principal amount of $250,000.00.
1. Interest on the unpaid principal balance of this note shall
be due and payable quarterly as it accrues, the first such
payment of accrued interest being due and payable on or before
March 15, 1997, and successive payments of accrued interest being
due and payable on or before the 15th day of each succeeding
March, June, September and December thereafter until October 21,
1998, when, if not sooner paid, the entire principal balance of
<PAGE>
this note, together with all accrued but unpaid interest thereon,
shall be paid in full. The principal balance of this note,
together with all accrued but unpaid interest thereon, shall be
due and payable on October 21, 1998.
2. (a) At any time prior to the payment in full of all
amounts, principal and interest, due under this note, whether
before or after the date such amounts are due hereunder, the
outstanding principal amount of this note together with all
accrued but unpaid interest thereon may, at the option of Payee,
be converted into fully paid and non-assessable, restricted
shares ("Hadron Shares") of the common stock, par value $0.02 per
share, of Hadron, Inc. ("Hadron Common Stock") at the Conversion
Price (as hereinafter defined) in accordance with this Section 2.
(b) In the event Payee elects to convert this note to
Hadron Shares, Payee shall deliver to Makers and Hadron, Inc.
("Hadron") written notice of his election to convert this note
into Hadron Shares in accordance with the terms hereof; and upon
the delivery of such notice, and the surrender of this note to
either of the Makers, Makers shall cause Hadron to issue and
deliver to Payee a certificate or certificates for the number of
full Hadron Shares issuable upon the conversion of this note and
cash as hereinafter provided in respect of any fraction of a
Hadron Share issuable upon such conversion. Such conversion shall
be deemed to have been effected as of the date Payee delivers
notice of his election to convert ("Conversion Date"); provided,
however, that Payee shall not deliver notice of his election to
convert this note within ten (10) trading days prior to a date on
which Hadron is required to make any filing with the United
States Securities and Exchange Commission. As of the Conversion
Date, the rights of Payee as holder of this note shall cease with
respect to this note and the person in whose name any certificate
for Hadron Shares is issued shall be deemed to have become the
holder of record of the Hadron Shares represented thereby. Any
and all notices to be given by Payee hereunder shall be in
writing and delivered by hand or mailed, postage prepaid, by
certified or registered U.S. mail, return receipt requested, to
Makers and Hadron at 4900 Seminary Road, Suite 800, Alexandria,
Virginia 22311, and shall be deemed given upon receipt.
(c) Hadron shall not be required to issue fractions of
Hadron Shares upon conversion of this note. If any fractional
interest in a Hadron Share shall be deliverable upon the
conversion of this note, Makers shall cause Hadron to make a cash
payment therefor on the basis of the Conversion Price.
(d) The price at which the outstanding principal amount of
this note together with all accrued but unpaid interest thereon
may be converted into Hadron Shares on a per share basis (the
"Conversion Price") shall be equal to $.25 per share.
<PAGE>
3. Makers may at any time prepay this note, in full or in part,
and all payments hereunder, whether designated as payments of
principal or interest, shall be applied first to the payment of
accrued interest and the balance to principal. Interest shall
immediately cease on any principal amount so prepaid.
4. In the event Makers shall prepay this note as hereinabove
provided, Payee shall be entitled to receive, and Makers shall
cause Hadron to execute, issue and deliver to Payee,
simultaneously with any and all such payments, a warrant
("Warrant") which shall be in proper form for issuance and
transfer, registered in the name of Payee, and issued in respect
to the number of Hadron Shares determined as hereinafter
provided. Each Warrant (a) shall expire on October 21, 2003;
(b) shall entitle Payee to purchase, in accordance with the terms
thereof, the number of Hadron Shares equal to the quotient
obtained by dividing (i) the principal amount of this note
together with all interest thereon prepaid by Makers, by (ii) the
Conversion Price; (c) may be exercised in full or in part during
its term at the price per Hadron Share equal to the Conversion
Price; and (d) shall otherwise be in form and substance
satisfactory to Hadron and Payee.
5. Payee agrees and acknowledges that the Hadron Shares
issuable upon conversion of this note, the Warrants and the
Hadron Shares issuable upon exercise of the Warrants are and
shall be restricted securities. Except for transfers, sales or
other dispositions pursuant to an effective registration
statement under the Securities Act of 1933 and any applicable
state securities laws (the "Acts"), such securities may not be
transferred, sold or otherwise disposed of by Payee or any other
holder hereof or thereof unless prior to transferring, selling or
otherwise disposing of any of such securities, Payee or such
holder delivers to Hadron prior to the disposition an opinion of
counsel, reasonably acceptable to Hadron, to the effect that
registration is not required under the Acts. If, in the opinion
of such counsel, such transfer, sale or other disposition may be
effected without such registration, the securities may thereafter
be transferred, sold or otherwise disposed of, and Makers shall
cause Hadron to do all things necessary to facilitate such
transfer, sale or other disposition, including the prompt
transfer of such securities on the books of Hadron and the
issuance of certificates representing such securities, free of
any restrictive legends or stop transfer instructions unless
otherwise required by such opinion, all in accordance with such
notice and opinion.
6. It is expressly agreed that time is of the essence of this
note, and if default shall be made in the payment of principal or
interest hereunder, as the same shall become due and payable; or
should either Maker institute proceedings to be adjudicated a
<PAGE>
bankrupt or insolvent, or consent to the institution of any such
proceedings against it or fail to cause the dismissal or stay of
any such proceedings within thirty (30) days after commencement,
or consent to any filing of any petition or the appointment of a
receiver of such Maker's property; or should Payee conclude that
the prospect of payment of this note is impaired for any reason;
then in any such event, Payee may, at his option, declare the
entire principal of this note together with all accrued but
unpaid interest thereon immediately due and payable whereupon
this note shall become due and payable in full, both as to
principal and interest, and failure to exercise said option shall
not constitute a waiver on the part of Payee hereof of the right
to exercise said option at any other time.
7. All past due principal and interest on this note shall bear
interest from the due date thereof until paid at the lesser of:
(a) fifteen percent (15%) per annum or
(b) the highest rate permitted by law.
8. If this note is not paid at maturity, however such maturity
is brought about, and the same is placed in the hands of an
attorney for collection, or suit is brought on same, or the same
is collected through probate, bankruptcy or other judicial
proceedings, then Makers agree and promise to pay all expenses
incurred by Payee, including, without limitation, court costs and
attorneys' fees.
9. Makers, and any and all co-makers, guarantors, sureties and
endorsers of this note, expressly and severally waive all
notices, demands for payment, presentation for payment, protests
and notices of intention to accelerate with regard to each, every
and all installments or other payments hereof and hereunder.
10. Notwithstanding anything to the contrary contained herein,
Makers shall be jointly and severally liable for the payment and
performance of and compliance with any and all obligations,
covenants, provisions, terms and conditions contained in this
note to be paid, performed or complied with by Makers.
11. The payment and performance of this note are secured by that
certain Assignment and Security Agreement dated October 21, 1993
by and between Makers, as debtor, and Payee, as secured party,
covering the collateral more particularly described therein.
12. Hadron joins in the execution of this note for the sole
purposes of (a) acknowledging and agreeing to the provisions
hereof regarding conversion of this note to Hadron Shares and the
issuance of Warrants for Hadron Shares, (b) agreeing at all times
to reserve and keep available from its authorized Hadron Common
Stock, solely for issuance and delivery upon conversion of this
<PAGE>
note or exercise of the Warrants, a sufficient number of Hadron
Shares to permit the full-conversion of this note and the full
exercise of Warrants, and (c) agreeing to take such corporate
action and obtain all authorizations and approvals as may be
necessary in order that Hadron may validly and legally issue to
Payee upon conversion of this note, and upon the exercise of any
and all Warrants, fully paid and non-assessable Hadron Shares at
the prices determined in accordance with this note.
EXECUTED as of the 31st day of December 1996.
ENGINEERING AND INFORMATION SERVICES, INC., a Virginia
corporation
By: /S/ DONALD JEWELL
DONALD JEWELL
President
SYCOM SERVICES, INC., a Delaware corporation
By: /S/ J. ANTHONY VIDAL
J. ANTHONY VIDAL
President
ACKNOWLEDGED AND AGREED TO As of the 31ST day of December 1996.
HADRON, INC., a New York corporation
By: /S/ GEORGE E. FOWLER
George E. Fowler
President
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 200,000 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:______________________________________
_________________________________________________________________
(Address)
_________________________________________________________________
(Signature)
<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:______________________________________
PROMISSORY NOTE
$379,937.75 November 1, 1996
FOR VALUE RECEIVED, HADRON, INC. ("Maker"), hereby promises to
pay to the order of BRACEWELL & PATTERSON, L.L.P. ("Payee"), at
2000 K Street, N.W., Suite 500, Washington, D.C. 20006, or at such
other place as may be designated by Payee, the principal sum of
THREE HUNDRED SEVENTY-NINE THOUSAND NINE HUNDRED THIRTY-SEVEN AND
75/100 DOLLARS ($379,937.75).
1. The principal of this Note is payable in (a) 38 monthly
installments of SEVEN THOUSAND FIVE HUNDRED AND NO/100 DOLLARS
($7,500.00) each, the first such installment being due and payable
on November 1, 1996, and a like installment being due and payable
on the first day of each and every calendar month thereafter until
and including December 1, 1999, plus (b) three additional payments
of THIRTY-ONE THOUSAND SIX HUNDRED FORTY-FIVE AND 91/100 DOLLARS
($31,645.92) each, one such payment due on or before December 1,
1997, the second such payment to be due on or before December 1,
1998 and the third such payment due on or before December 1, 1999,
on which date, if not sooner paid, the outstanding principal
balance of this Note shall be due and payable in full. No interest
shall be due and payable on the principal balance of this Note.
2 Maker may at any time prepay this Note, in full or in
part, without penalty. Any and all partial prepayments shall be
applied to principal installments due hereunder in the inverse
order of their maturity.
3 The indebtedness evidenced hereby is secured by shares of
the capital stock of SyCom Services, Inc. ("SyCom") pledged by
Maker to Payee pursuant to that certain Pledge Agreement of even
date herewith, by and between Maker and Payee ("Pledge Agreement").
4. Any notice or other communication to be delivered
hereunder shall be deemed sufficiently given if in writing and
delivered personally or mailed by certified mail, postage prepaid,
if to Maker, at 4900 Seminary Road, Suite 800, Alexandria, Virginia
22311, and if to Payee, addressed to it at the address first set
forth above, unless in each case Maker or Payee has notified the
other in writing of a different address.
5 It is expressly agreed that time is of the essence of
this Note, and if default shall be made in the payment of principal
hereunder, as the same shall become due and payable, or if Maker
fails to observe or perform any other covenant or condition to be
observed or performed by Maker under this Note or the Pledge
Agreement and such default or failure continues for more than ten
<PAGE>
(10) days after delivery of written notice to Maker from Payee ( an
"Event of Default"), then in such event, Payee may, at its option,
declare the entire principal of this Note immediately due and
payable whereupon this Note shall become due and payable in full.
In the event this Note is not paid as herein provided, Payee may
also exercise its rights under the Pledge Agreement.
6. This Note shall be governed by and construed in
accordance with the laws of the District of Columbia (but not
including the choice of law rules thereof). Maker hereby
irrevocably submits to the jurisdiction and venue of the courts
sitting in the District of Columbia with respect to any action or
proceeding to interpret or enforce this Note.
7. Neither this Note nor the Pledge Agreement may be sold,
transferred, assigned or otherwise disposed of without the prior
written consent of the Maker, except upon the occurrence of an
Event of Default, after which occurrence both the Note and the
Pledge Agreement may be sold, transferred, assigned or otherwise
disposed of without the prior written consent of Maker.
IN WITNESS WHEREOF, Maker, acting by and through its duly
authorized officers, has executed this Note as of the day, month
and year first above written.
HADRON, INC.
ATTEST:
/S/ S. AMBER GORDON By: /S/ C.W. GILLULY
Name: S. Amber Gordon Name: C.W. Gilluly
Title: Secretary Title: Chief Executive Officer
[SEAL]
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") dated November 1, 1996, is
made by HADRON, INC., a New York corporation, having its
principal office at 4900 Seminary Road, Suite 800,
Alexandria, Virginia 22311 (the "Pledgor"), to and for the
benefit of BRACEWELL & PATTERSON, L.L.P., a Texas limited
liability partnership, whose address is 2000 K Street, N.W.,
Suite 500, Washington, D.C. 20006, its successors and assigns
(the "Pledgee").
PRELIMINARY STATEMENTS:
(1) The Pledgor is the owner of the shares (the "Pledged
Shares") of common stock issued by SyCom Services, Inc.
("SyCom") and described in Exhibit A hereto.
(2) The Pledgor (herein also referred to as the "Debtor")
has executed and delivered that certain Promissory Note of
even date herewith (said Note, as it may hereafter be amended
or otherwise modified from time to time, being herein referred
to as the "Note") in the original principal amount of Three
Hundred Seventy-Nine Thousand Nine Hundred Thirty-Seven and
75/100 dollars ($379,937.75) payable to the Pledgee as
evidence of indebtedness for services rendered by the Pledgee.
As a condition precedent to acceptance of the Note by the
Pledgee, the Pledgor shall have made the pledge contemplated
by this Agreement.
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt of which is
acknowledged, and in order to induce the Pledgee to accept the
Note, the Pledgor hereby agrees with the Pledgee as follows:
SECTION 1. Pledge. The Pledgor hereby pledges and
grants to the Pledgee a security interest in the following
(the "Pledged Collateral"):
(i) the Pledged Shares and the certificates
representing the Pledged Shares, and all dividends,
cash, instruments and other property from time to
time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the
Pledged Shares; and
(ii) all additional shares of stock and other
securities of SyCom from time to time acquired by
the Pledgor in any manner, and the certificates
representing such additional shares and other
securities, and all dividends, cash, instruments
and other property from time to time received,
receivable or otherwise distributed in respect of
or in exchange for any or all of such shares and
securities.
<PAGE>
SECTION 2. Security for Obligations. This Agreement
secures the payment of all obligations of the Pledgor to the
Pledgee now or hereafter existing under the Note, whether for
principal, fees, expenses or otherwise, and all obligations of
the Pledgor now or hereafter existing under this Agreement,
and under any other liability of Pledgor to Pledgee, whether
now existing or hereafter entered into (all such obligations
of the Pledgor being herein referred to as the "Obligations").
SECTION 3. Delivery of Pledged Collateral. All
certificates or instruments representing or evidencing the
Pledged Collateral shall be delivered to and held by the
Pledgee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed
but undated stock powers or other instruments of transfer or
assignment, in blank, all in form and substance satisfactory
to the Pledgee. The Pledgee shall have the right, at any time
after the occurrence of a Default (as hereinafter defined) in
its discretion and without notice to the Pledgor, to transfer
to or to register in the name of the Pledgee or any of its
nominees any or all of the Pledged Collateral. In addition,
the Pledgee shall have the right at any time after the
occurrence of a Default to exchange certificates or
instruments representing or evidencing the Pledged Collateral
for certificates or instruments of smaller or larger
denominations.
SECTION 4. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
(b) The Pledgor is the legal and beneficial owner of
record of the Pledged Collateral free and clear of any lien,
security interest, option or other charge or encumbrance
except for the security interest created by this Agreement.
(c) The pledge of the Pledged Shares pursuant to this
Agreement creates a valid and perfected first priority
security interest in the Pledged Shares, securing the payment
of the Obligations.
(d) The Pledgor (i) has the power and authority to
pledge the Pledged Collateral owned by it in the manner hereby
done or contemplated and (ii) will defend its title or
interest thereto or therein against any and all attachments,
liens, claims, encumbrances, security interests or other
impediments of any nature, however arising, of all persons
whomsoever.
(e) No authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or
<PAGE>
regulatory body or securities exchange is required either (i)
for the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or
performance of the Agreement by the Pledgor or (ii) for the
exercise by the Pledgee of the voting or other rights provided
for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement (except as may
be required in connection with such disposition by laws
affecting the offering and sale of securities generally).
(f) The Pledged Shares constitute and until the Note is
fully paid shall constitute one hundred percent (100%) of the
issued and outstanding shares of capital stock of SyCom.
(g) On the date of this Agreement the Pledgor is not in
default of any covenant of this Agreement, including but not
limited to the Special Compliance Covenants set forth in
Section 11 hereof.
(h) Pledgor has been the owner of record of the Pledged
Shares for a period of one (1) year or more prior to the date
of this Agreement.
SECTION 5. Further Assurances. The Pledgor agrees that
at any time and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all further
action, that may be necessary or desirable, or that the
Pledgee may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or
to enable the Pledgee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends; Etc. (a) So long
as no Default shall have occurred:
(i) The Pledgor shall be entitled to exercise
any and all voting and other consensual rights
pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the
terms of this Agreement or the Note; provided,
however, that the Pledgor shall not exercise or
refrain from exercising any such right if, in the
Pledgee's reasonable judgment, such action would
have a material adverse effect on the value of the
Pledged Collateral or any part thereof; and
provided further, that the Pledgor shall give the
Pledgee at least five (5) days' prior written
notice of the manner in which it intends to
exercise, or the reasons for refraining from
exercising, any such right.
(ii) The Pledgee shall be entitled to receive
and retain all cash dividends, distributions and
<PAGE>
other cash paid or payable in respect of the Pledged
Collateral. The Pledgor agrees to deliver promptly to
the Pledgee any and all cash dividends,distributions and
other cash paid in respect of the Pledged Collateral.
All such cash dividends, distributions and other cash
received by the Pledgor shall be considered and applied
as prepayments of the Note. Any and all dividends or
distributions paid or payable other than in cash in
respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral shall be, and shall
forthwith be delivered to the Pledgee to hold as, Pledged
Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Pledgee, be
segregated from the other property or funds of the
Pledgor, and be forthwith delivered to the Pledgee as
Pledged Collateral in the same form as so received (with
any necessary endorsement).
(iii) The Pledgee shall execute and deliver
(or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as
the Pledgor may reasonably request for the purpose
of enabling the Pledgor to exercise the voting and
other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the
dividends or other payments which it is authorized
to receive and retain pursuant to paragraph (ii)
above.
(b) Upon the occurrence of a Default all rights of the
Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to
Section 6(a)(i) shall cease, and all such rights shall
thereupon become vested in the Pledgee who shall thereupon
(and for so long as such Default shall continue) have the sole
right to exercise such voting and other consensual rights.
SECTION 7. Transfers and Other Liens; Additional Shares.
(a) The Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option with respect to, any of the
Pledged Collateral, or (ii) create or permit to exist any
lien, security interest, or other charge or encumbrance upon
or with respect to any of the Pledged Collateral, except for
the security interest under this Agreement.
(b) The Pledgor agrees that it will (i) cause SyCom not
to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer,
except to the Pledgor and (ii) pledge hereunder, and deliver
to Pledgee, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or
other securities of SyCom.
<PAGE>
SECTION 8. Pledgee Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Pledgee, and any partner or agent
of Pledgee, with full power of substitution, the Pledgor's
attorney-in-fact, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or
otherwise,from time to time in the Pledgee's discretion to
take any action and to execute any instrument which the
Pledgee reasonably may deem necessary or advisable to
accomplish the purposes of this Agreement, which appointment
is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, the Pledgee shall have the
right, upon the occurrence and during the continuance of a
Default, with full power of substitution either in the
Pledgee's name or in the name of each such Pledgor, to as for,
demand, sue for, collect, receipt and give acquittance for any
and all moneys due or to become due under and by virtue of any
Pledged Collateral, to endorse checks, drafts, orders and
other instruments for the payment of money payable to such
Pledgor representing any interest or dividend, or other
distribution payable in respect of the Pledged Collateral or
any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or
defend any action, claim or proceedings with respect thereto,
and to sell, assign, endorse, pledge, transfer and make any
agreement respecting, or otherwise deal with, the same.
SECTION 9. Continuing Security Interest; Transfer of'
Note; Return of Collateral. This Agreement shall create a
continuing security interest in the Pledged Collateral and
shall (i) remain in full force and effect until payment in
full of the Obligations, (ii) be binding upon the Pledgor and
its personal representatives, successors and assigns, and
(iii) inure, together with the rights and remedies of the
Pledgee hereunder, to the benefit of the Pledgee and its
successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii) the Pledgee may
assign or otherwise transfer the Note to any other person or
entity, and such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to the
Pledgee herein or otherwise. Upon the payment in full of the
Obligations, the Pledgor shall be entitled to the return, upon
its request and at its expense, of such of the Pledged
Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof. If any of the Pledged Collateral
is owned by more than one person, then Pledgee may deliver
such Pledged Collateral to any one or more of such persons,
whose receipt shall be binding on all such persons.
SECTION 10. Reasonable Care. The Pledgee shall be
deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if
the Pledged Collateral is accorded treatment substantially
equal to that which the Pledgee accords its own property, it
being understood that the Pledgee shall not have
<PAGE>
responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether
or not the Pledgee has or is deemed to have knowledge of such
matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral. No
action taken by the Pledgee or omitted to be taken with
respect to the Pledged Collateral or any part thereof shall
give rise to any defense, counterclaim or offset in favor of
any Pledgor or to any claim or action against the Pledgee.
SECTION 11. Special Compliance Covenants. Without
limiting the generality of any other provision of this
Agreement or the Note, the Pledgor covenants that the Pledgor
and SyCom will at all times be in substantial and material
compliance with applicable statutes, rules, regulations, and
guidelines. Without limiting the generality of the foregoing,
each of the following shall in and of itself be conclusive
evidence of the Pledgor's and/or SyCom's failure to maintain
substantial and material compliance with applicable statutes,
rules, regulations, and guidelines:
(a) the Pledgor's or SyCom's intentional
violation of any law, regulation, rule,
or guideline; or
(b) the Pledgor's or SyCom's intentional
failure to comply with any directive or
order of any applicable regulatory agency
(including government agencies) or board
or any court (within the time period
permitted in such directive or order, if
any); or
(c) if any applicable regulatory agency
(including government agencies) or board
or court shall conclude that the Pledgor
or SyCom has failed to maintain
substantial and material compliance with
applicable statutes, rules, regulations,
guidelines, orders, or directives, or has
engaged in unsafe or unsound practices;
or
(d) the imposition of any material fine
or other material civil or criminal
penalty upon the Pledgor or SyCom or any
of the officers of the Pledgor or SyCom
for failure to comply with any applicable
law, regulation, rule, guideline, order,
or directive.
<PAGE>
SECTION 12. Special Financial and Reporting Covenants.
Without limiting the generality of any other provision of this
Agreement or the Note the Pledgor covenants as follows:
(a) (i) the Pledgor shall provide to the
Pledgee complete quarterly and annual
financial statements, all prepared in
accordance with generally accepted
accounting principles applied on a
consistent basis with annual financial
statements of Pledgor audited by the
Pledgor's certified public accountants,
and (ii) SyCom shall provide to the
Pledgee quarterly and annual financial
statements to the extent and in the form
in which internal, unaudited financial
statements for SyCom are prepared, all of
which shall be provided to the Pledgee
within the earlier of (x) five (5) days
after the completion or issuance thereof,
or (y) in the case of annual reports,
within ninety (90) days after the last
day of the fiscal year, or (z) in the
case of quarterly reports, within forty-
five (45) days after the last day of the
fiscal quarter;
(b) the Pledgor shall on a quarterly
basis within 45 days after the last day
of each fiscal quarter submit to the
Pledgee statements of compliance with
this Agreement in form and substance
satisfactory to the Pledgee, which
statements shall be certified as true and
complete by the Chairman of the Pledgor;
(c) except only for transfers of funds
to the Pledgor's bank account to
facilitate the payment of routine
payrolls of SyCom, EISI and the Pledgor
in the ordinary course of SyCom's
business, SyCom shall not make any
material inter-company transfer of assets
without the prior written consent of the
Pledgee; and except only for purchase
money financing and "sale-leaseback"
transactions to facilitate the sale or
transfer by SyCom to its customers of
computer hardware in which SyCom takes or
retains a perfected purchase money
security interest in or title to the
goods sold or leased in the ordinary
course of SyCom's business, SyCom shall
not make any substantial or material
<PAGE>
loans or pledge SyCom assets to secure
loans to SyCom or others without the
prior written consent of the Pledgee,
which consent in each case shall not be
unreasonably withheld;
(d) the Pledgor shall maintain policies
of fire, theft, and public liability
insurance covering itself and SyCom for
its agents, properties and facilities in
commercially reasonable form, substance,
and amount with reputable insurers;
(e) SyCom shall maintain its material
properties in good working condition and
repair at all times; and
(f) the Pledgee shall be permitted to
conduct periodic reviews of the financial
and operating conditions of the Pledgor
and the Pledgor's subsidiaries, and of
the Pledgor's and SyCom's compliance with
the provisions of the Pledge Agreement,
and Pledgor and its subsidiaries shall
provide such reasonable assistance and
information in the course of such reviews
as the Pledgee may request.
SECTION 13. Remedies Upon Default. If a Default (that
is, an Event of Default under the Note or a default under any
Obligation hereunder which is not cured within ten (10) days
after delivery of written notice by the Pledgee to the
Pledgor) shall have occurred, the Pledgee may sell the Pledged
Collateral, or any part thereof, at public or private sale,
for cash, upon credit or for future delivery as the Pledgee
shall deem appropriate, subject to compliance with Federal
Securities Laws (as hereinafter defined) and applicable Blue
Sky laws. The Pledgee shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged
Collateral for their own account for investment and not with
a view to the distribution or sale thereof, and upon
consummation of any such sale the Pledgee shall have the right
to assign, transfer and deliver to the purchaser or purchasers
thereof the Pledged Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free
from any claim or right on the part of the Pledgor, and the
Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which the Pledgor now
has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
<PAGE>
The Pledgee shall give the Pledgor at least forty-five
(45) days' written notice (which the Pledgor agrees is
reasonable notice within the meaning of Section 9-504(3) of
the Uniform Commercial Code) of the Pledgee's intention to
make any sale of Pledged Collateral owned by the Pledgor.
Such notice, in the case of a public sale, shall state the
time and place for such sale. Any such public sale shall be
held at such time or times within ordinary business hours and
at such place or places as the Pledgee may fix and state in
the notice of such sale. At any such sale, the Pledged
Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Pledgee may
(in its sole and absolute discretion) determine. The Pledgee
shall not be obligated to make any sale of any Pledged
Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of such Pledged Collateral shall
have been given. The Pledgee may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the
same was so adjourned. In case any sale of all or any part of
the Pledged Collateral is made on credit or for future
delivery, the Pledged Collateral so sold may be retained by
the Pledgee until the sale price is paid by the purchaser or
purchasers thereof, but the Pledgee shall not incur any
liability in case any such purchaser or purchasers shall fail
to take up and pay for the Pledged Collateral so sold and, in
case of any such failure, such Pledged Collateral may be sold
again upon notice to the Pledgor as set forth in the first
sentence of this paragraph. At any public sale made pursuant
to this Section, Pledgee may bid for or purchase, free (to the
extent permitted by law) from any right of redemption, stay or
appraisal on the part of the Pledgor (all said rights being
also hereby waived and released to the extent permitted by
law), the Pledged Collateral or any part thereof offered for
sale and may make payment on account thereof by using any
claim then due and payable to Pledgee from the Pledgor as a
credit against the purchase price, and Pledgee may, upon
compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to the Pledgor
therefor. For purposes hereof, a written agreement to purchase
the Pledged Collateral or any portion thereof shall be treated
as a sale thereof; the Pledgee shall be free to carry out such
sale pursuant to such agreement, and the Pledgor shall not be
entitled to the return of the Pledged Collateral or any
portion thereof subject thereto, notwithstanding the fact that
after the Pledgee shall have entered into such an agreement
all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Pledgee may
proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Pledged Collateral or any
portion thereof pursuant to a judgment or decree of a court or
<PAGE>
courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed receiver.
To the extent permitted by applicable law, the Pledgee
shall have absolute discretion as to the time of application
of any such proceeds, moneys or balances in accordance with
this Agreement. Upon any sale of the Pledged Collateral by the
Pledgee (including, without limitation, a sale pursuant to a
power of sale granted by statute or under a judicial
proceeding), the receipt of the Pledgee or of the officer
making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Pledged Collateral being sold,
and such purchaser or purchasers shall not be obligated to see
to the application of any part of the purchase money paid over
to the Pledgee or such officer or be answerable in any way for
the misapplication thereof.
SECTION 14. Securities Act, etc. In view of the
position of the Pledgor in relation to the Pledged Collateral
owned by it, or because of other present or future
circumstances, a question may arise under the Securities Act
of 1933, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and
all such similar statutes as from time to time in effect being
called the "Federal Securities Laws") with respect to any
disposition of the Pledged Collateral permitted hereunder. The
Pledgor understands that compliance with the Federal
Securities Laws might very strictly limit the course of
conduct of the Pledgee if the Pledgee were to attempt to
dispose of all or any part of the Pledged Collateral, and
might also limit the extent to which or the manner in which
any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Pledgee in any
attempt to dispose of all or part of the Pledged Collateral
under applicable Blue Sky or other state securities laws or
similar laws analogous in purpose or effect. Under applicable
law, in the absence of an agreement to the contrary, the
Pledgee might be held to have certain general duties and
obligations to the Pledgor, as pledgor, to make some effort
toward obtaining a fair price even though the obligations of
the Pledgor may be discharged or reduced by the proceeds of a
sale at a lesser price. The Pledgor clearly understands that
the Pledgee is not to have any such general duty or obligation
to the Pledgor, and the Pledgor will not attempt to hold the
Pledgee responsible for selling all or any part of the Pledged
Collateral at an inadequate price even if the Pledgee shall
accept the first offer received or does not approach more than
one possible purchaser. Without limiting the generality of the
foregoing, the provisions of this section would apply if, for
example, the Pledgee were to place all or any part of the
Pledged Collateral for private placement by an investment
banking firm, or if such investment banking firm purchased all
or any part of the Pledged Collateral for its own account, or
<PAGE>
if the Pledgee placed all or any part of the Pledged
Collateral privately with a purchaser or purchasers. The
provisions of this section will apply notwithstanding the
existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price
at which the Pledgee sells all or any part of the Pledged
Collateral.
SECTION 15. Expenses. If the Pledgor fails to perform
any agreement contained herein, the Pledgee may itself
perform, or cause performance of, such agreement, and the
expenses of the Pledgee incurred in connection therewith shall
be payable by the Pledgor under this Section. To the extent
that the Pledgee fails to pay, the Pledgor will upon demand
pay to the Pledgee the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Pledgee may
incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any
of the rights of the Pledgee hereunder or (iv) the failure by
the Pledgor to perform or observe any of the provisions
hereof.
SECTION 16. Security Interest Absolute. All rights of
the Pledgee and the security interest hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of
the Note or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place
of payment of, or in any other term of, all or any
of the Obligations, or any other amendment or
waiver of or any consent to any departure from the
Note;
(c) any exchange, release or non-perfection
of any other collateral, or any release or
amendment or waiver of or consent to departure from
any guaranty, for all or any of the Obligations; or
(d) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the
Obligations or in respect of this Agreement.
SECTION 17. Amendments, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departure
by the Pledgor herefrom, shall in any event be effective<PAGE>
unless the same shall be in writing and signed by the Pledgee,
and the Pledgor, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
SECTION 18. Notices. Any notice or other communication
to be delivered hereunder shall be deemed sufficiently given
if in writing and delivered personally or mailed by certified
mail, postage prepaid, if to the Pledgor, at 4900 Seminary
Road, Suite 800, Alexandria, Virginia 22311, and if to the
Pledgee, addressed to it at the address first set forth above,
unless in each case the Pledgor or the Pledgee has notified
the other in writing of a different address.
SECTION 19. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
District of Columbia (but not including the choice of law
rules thereof). The Pledgee hereby irrevocably submits to the
jurisdiction and venue of the Courts sitting in the District
of Columbia with respect to any action or proceeding to
interpret or enforce this Agreement. Unless otherwise defined
herein or in the Note, terms defined in Article 9 of the
Uniform Commercial Code in the District of Columbia are used
herein as therein defined.
SECTION 20. Severability. If any provision hereof is or
shall at any time be invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed
in favor of the Pledgee in order to carry out the intentions
of the parties hereto as nearly as may be possible; and (ii)
the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 21. SyCom Systems, Inc. SyCom executes this
Agreement to evidence its consent and agreement to those
provisions of this Agreement that pertain to SyCom. The
Pledgor agrees that a default by SyCom under any provision of
this Agreement pertaining to SyCom shall be deemed, upon the
giving of notice and expiration of the cure period referred to
in Section 13 hereof, a Default entitling the Pledgee to
exercise its rights and remedies against the Pledgor and with
respect to the Pledged Collateral hereunder.
<PAGE>
IN WITNESS WHEREOF, the Pledgor and SyCom, acting by and
through their duly authorized officers, have caused this
Agreement to be duly executed, under seal, and delivered as of
the date first above written.
ATTEST: HADRON, INC.
/S/ S. AMBER GORDON By: /S/ C.W. GILLULY
Name: S. Amber Gordon Name: C.W. Gilluly
Title: Secretary Title: Chief Executive Officer
[SEAL]
ATTEST: SYCOM SERVICES, INC.
/S/ S. AMBER GORDON By: /S/ J. ANTHONY VIDAL
Name: S. Amber Gordon Name: J. Anthony Vidal
Title: Secretary Title: President
[SEAL]
Accepted as of this 1st day of
November, 1996.
BRACEWELL & PATTERSON, L.L.P.
By: /S/ JOHN R. COPE
Name: John R. Cope
Title: Partner
<PAGE>
EXHIBIT A TO PLEDGE AGREEMENT DATED NOVEMBER 1, 1996 BETWEEN
HADRON, INC. AND BRACEWELL & PATTERSON, L.L.P.
PLEDGED SHARES
NUMBER OF
ISSUER CERTIFICATE(S) SHARES
SyCom Services, Inc. No. 1 3,000
PROMISSORY NOTE
$148,606.60 December 16, 1996
FOR VALUE RECEIVED, TRI-CITY HEAT TREAT COMPANY ("Maker"), hereby
promises to pay to the order of HADRON, INC. ("Payee"), at 4900
Seminary Road, Suite 800, Alexandria, Virginia 22311, or at such
other place as may be designated by Payee, the principal sum of ONE
HUNDRED FORTY-EIGHT THOUSAND SIX HUNDRED SIX AND 60/100 DOLLARS
($148,606.60).
1. The Note, plus accrued interest, is payable in (a) nineteen (19)
monthly installments of EIGHT THOUSAND AND NO/100 DOLLARS
($8,000.00) each, the first such installment being due and
payable on December 20, 1996, and a like installment being due
and payable on or before the fifteenth day of each and every
calendar month thereafter until and including June 15, 1998, plus
(b) one additional payment of EIGHT THOUSAND SIX HUNDRED SIXTY-
THREE AND 82/100 DOLLARS ($8,663.82) due on or before July 15,
1998. The Note shall bear interest at the rate of 10% per
annum, calculated monthly, payable in accordance with the
Amortization Schedule attached hereto as Schedule A.
2. Maker may at any time prepay this Note, in full or in part,
without penalty. Any and all partial prepayments shall be
applied first to any penalties due pursuant to paragraph 5, then
interest outstanding, then to principal installments due
hereunder in the inverse order of their maturity.
3. Any notice or other communication to be delivered hereunder shall
be deemed sufficiently given if in writing and delivered
personally or mailed by certified mail, postage prepaid, if to
Maker, at 2020 5th Street, Rock Island, Illinois 61201, and if to
Payee, addressed to it at the address first set forth above,
unless in each case Maker or Payee has notified the other in
writing of a different address.
4. It is expressly agreed that time is of the essence of this Note,
and if default shall be made in the payment of principal
hereunder, as the same shall become due and payable, or if Maker
fails to observe or perform any other covenant or condition to be
observed or performed by Maker under this Note and such default
or failure continues for more than five (5) days after delivery
of written notice to Maker from Payee ( an "Event of Default"),
then in such event, Payee may, at its option, declare the entire
principal of this Note immediately due and payable whereupon this
Note shall become due and payable in full.
<PAGE>
5. In the event this Note is not paid as herein provided, and/or the
Note is in Default, a late payment fee in the amount of 5% of the
amount of each installment not paid with (10) days of the date it
is due will be assessed and shall be payable in addition to
principal and interest due hereunder.
6. This Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia. Maker hereby
irrevocably submits to the jurisdiction and venue of the courts
sitting in the Commonwealth of Virginia with respect to any
action or proceeding to interpret or enforce this Note.
IN WITNESS WHEREOF, Maker, acting by and through its duly
authorized officers, has executed this Note as of the day, month and
year first above written.
TRI-CITY HEAT TREAT COMPANY
ATTEST:
By: /S/ GARY D DAMEWOOD
Name:______________________ Name: Gary D. Damewood
Title:_______________________ Title: Vice President
[SEAL]
PROMISSORY NOTE
PRINCIPAL LOAN DATE MATURITY LOAN NO
$300,000.00 12-31-1996 12-31-1997 12334
Borrower: Hadron, Inc. Lender: Century National Bank
4900 Seminary Road, Eye Street Office
Suite 800 1875 Eye Street, N.W.
Alexandria, VA 22311 Washington, DC 20006
Principal Amount: $300,000.00 Initial Rate: 9.250%
Date of Note: December 31, 1996
PROMISE TO PAY. Hadron, Inc. ("Borrower") promises to pay to
Century National Bank ("Lender"), or order, In lawful money of the
United States of America, the principal amount of Three Hundred
Thousand & 00/100 Dollars ($300,000.00) 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 December 31, 1997. In addition, Borrower will
pay regular monthly payments of accrued unpaid Interest beginning
January 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.
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 8.250% per annum. The
Interest rate to be applied to the unpaid principal balance of this
Note will be at a rate of 1.000 percentage point over the Index,
resulting in an initial rate of 9.250% per annum. NOTICE: Under no<PAGE>
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
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<PAGE>
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, 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.
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.
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; and Karen Dickey, Controller. Advance
requests on the line of credit must be in a minimum amount of<PAGE>
$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.
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 December
31, 1996 and December 31, 1997.
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. 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, fall 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.
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, lnc.
By: /S/ CHRISTOPHER W. GILLULY -(SEAL)
Christopher W. Gilluly,
Chairman and Chief Executive Officer
BUSINESS LOAN AGREEMENT
PRINCIPAL LOAN DATE MATURITY LOAN NO.
$300,000.00 12-31-1996 12-31-1997 12334
Borrower: Hadron, Inc. 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. ("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 December 31,
1996, 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 Hadron, Inc. and its
successors and assigns. The word "Borrower" also includes,
as applicable, all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and
Affiliates." <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.
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<PAGE>
herein or described on any exhibit or schedule attached to
this Agreement from time to time.
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<PAGE>
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.
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.
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<PAGE>
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
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<PAGE>
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,
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<PAGE>
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
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.<PAGE>
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.
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,<PAGE>
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.
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 $459,135.77
Martha Gilluly $459,769.69
<PAGE>
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
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<PAGE>
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.
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<PAGE>
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:
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.<PAGE>
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.
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 December 31, 1996 and December 31, 1997.
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.
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<PAGE>
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
furnished, or becomes false or misleading at any time
thereafter.
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<PAGE>
guaranty 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.
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 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.
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:
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<PAGE>
other collection expenses, whether or not there is a lawsuit
and including legal expenses for bankruptcy proceedings.
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<PAGE>
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.
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 DECEMBER 31,1996.
BORROWER:
Hadron, Inc.
By: /S/ CHRISTOPHER W. GILLULY (SEAL)
Christopher W. Gilluly,
Chairman and Chief Executive Officer
LENDER:
Century National Bank
By:
Authorized Officer
December 20, 1996
Mr. Donald E. Ziegler
11005 Forest Oak Lane
Great Falls, Virginia 22066
Dear Donald:
On behalf of Hadron, Inc. (the "Company"), I am pleased to
offer you the position of Senior Vice President and Chief
Financial Officer of the Company working for George Fowler and
me. We would like you to begin on December 30, 1996.
The annual salary accompanying this position is $75,000 per
annum paid bi-weekly. The term of your employment is for one
year, subject to renewal annually, at the Company's discretion,
for two additional one-year terms; provided, however, the Company
shall have the right to terminate your employment with no further
obligation on the part of the Company if you are convicted of a
felony or a crime of moral turpitude or if you are guilty of
gross negligence or wilful misconduct. In the event that the
Company terminates your employment or decides not to renew your
employment agreement for any reason other than those specified
above, you shall receive four months' severance pay, paid out
over four months in full and complete satisfaction of any claim
you may have by virtue of such termination of or election not to
renew your agreement with the Company.
In the event your employment agreement is renewed, you shall
be entitled to an increase in annual salary which is commensurate
with the annual increase awarded to other executive officers of
the Company as determined by the Board of Directors.
During the term of your employment, you shall be entitled to
participate, on the same terms and conditions as other executive
employees of the Company, in such major medical, dental, life
insurance, 401(k), and other employee benefits which the Company
now provides or in the future may provide to its executive
employees generally. You shall be entitled to four weeks of paid
vacation per year.
As part of the Company's Stock Option Plan, you will be
provided with options to purchase an amount of shares of Hadron
stock, on a par with the Chief Executive Officer and/or the
President, and in accordance with the Plan. These options vest
over three years, and the option price is determined as set forth
in the Plan. In addition, you shall receive a car allowance in
the amount of $210 per month. Furthermore, the Company will
reimburse you for all reasonable expenses incurred in the
performance of your duties in accordance with the Company's
standard policy.
George Fowler and I look forward to the opportunity to work
with you here at Hadron. We believe you will find the position
challenging and worthy of your talents.
Very truly yours,
/S/ C.W. GILLULY
C.W. Gilluly, Ed.D. Accepted: /S/ DONALD E. ZIEGLER
Chairman and Donald E. Ziegler
Chief Executive Officer
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 45
<SECURITIES> 0
<RECEIVABLES> 3161
<ALLOWANCES> 489
<INVENTORY> 0
<CURRENT-ASSETS> 2764
<PP&E> 847
<DEPRECIATION> 750
<TOTAL-ASSETS> 2922
<CURRENT-LIABILITIES> 3225
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> (874)
<TOTAL-LIABILITY-AND-EQUITY> 2922
<SALES> 7860
<TOTAL-REVENUES> 7860
<CGS> 7000
<TOTAL-COSTS> 7787
<OTHER-EXPENSES> 12
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 42
<INCOME-TAX> 17
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> .01
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