SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 30, 2000
HADRON, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 0-5404 11-2120726
(State or other jurisdiction(Commission File Number)(IRS Employer
of incorporation) Identification No.)
5904 Richmond Highway, Suite 300, Alexandria, Virginia
22303
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (703)329-9400
(Former name or former address, if changed since last report)
<PAGE>
The Exhibit Index appears on Page 6.
Item 1. Changes in Control of Registrant.
Hadron, Inc. (the "Corporation") entered into a securities
purchase agreement dated March 30, 2000 (the "Securities Purchase
Agreement") with Jon M. Stout ("Stout"), Patricia W. Stout ("Ms.
Stout"), the Stout Dynastic Trust ("Stout Trust"), J. Richard
Knop ("Knop") and John D. Sanders ("Sanders") (collectively
Stout, Ms. Stout, Stout Trust, Knop and Sanders being referred to
as the "Purchasers") and C.W. Gilluly ("Gilluly") which was
consummated on March 30, 2000 (the "Closing Date"). Stout, Ms.
Stout, Stout Trust and Knop, are collectively referred to herein
as the "Investors."
On the Closing Date, pursuant to the Securities Purchase
Agreement, the Purchasers purchased 2,250,000 shares of Common
Stock (the "Shares") and warrants to purchase an additional
2,025,000 shares of Common Stock (the "Purchase Warrants"). In
addition, two members of the Corporation's Board of Directors,
William Howard and Robert J. Lynch, Jr. have resigned and Mr.
Stout was appointed to serve the unexpired term of one of the
directors. Promptly upon compliance with the requirements of
Section 14(f) of the Securities Exchange Act of 1934, as amended,
and Rule 14(f)-1 promulgated thereunder, two additional designees
of Investors will be appointed to serve the vacant unexpired
terms of office of former members of the Corporation's Board of
Directors. As a result, the Purchasers hold 2,313,475 shares or
45.7% of the Corporation's issued and outstanding Common Stock.
Prior to the purchase, the Corporation's Chairman and former CEO,
Gilluly, was the largest single holder of the Corporation's
Common Stock, owning 501,875 shares or 17.9% of the Corporation's
issued and outstanding Common Stock. The total consideration of
$877,500 was paid in cash and was reported by the Purchasers to
represent personal funds and funds held in a family trust for
which Stout acts as trustee.
On the Closing Date, following the execution of the
Securities Purchase Agreement, Purchasers, Gilluly and six (6)
affiliates of Boles Knop & Company L.L.C. entered into a five (5)
year voting agreement ("Voting Agreement"). Pursuant to the
Voting Agreement, during its term, each party agrees to vote all
of the Common Stock registered in his or her respective name and
to take all necessary actions so that (i) the authorized number
of members of the Board of Directors would continue to be five
(5) unless and until a greater number is directed or approved by
the Investors; (ii) the Investors would be entitled to nominate
(the "Investor Nominees") and to elect the Investor Nominees as
the majority of the members of the Board; (iii) any Investor
Nominee shall only be removed from the Board with or without
cause, only upon written request or consent of the Investors;
(iv) in the event the Investor Nominee for any reason ceases to
serve as a member of the Board of Directors, or any committee
thereof, during his term of office, the resulting vacancy shall
be filled by a newly designated Investor Nominee; and (v) upon
the written direction or consent of the Investors, the
Corporation shall take such actions as necessary to change its
corporate domicile to the state of Delaware.
As a result of the Purchaser's acquisition pursuant to the
Securities Purchase Agreement and the execution and delivery of
the Voting Agreement, the Investor members holding a majority of
the shares of Common Stock held by all Investors have the power
to vote or direct the vote of 2,866,875 shares or 56.7% of the
Corporation's issued and outstanding Common Stock on all matters
governed by the Voting Agreement. Further, in the event all
presently exercisable warrants and options held by all parties to
the Voting Agreement were exercised, the Investor members holding
a majority of the shares of the Corporation's Common Stock held
by all Investors would have the power, on all matters governed by
the Voting Agreement, to vote 5,813,885 of the 8,006,536 shares
of the Corporation's Common Stock which would, as a result, be
issued and outstanding or 72.6%, which is deemed to be the direct
and indirect beneficial ownership of the Investors.
On the Closing date, the Corporation, the Investors, Gilluly,
Sanders, George F. Fowler, S. Amber Gordon, Robert J. Lynch,
Donald E. Jewell, Jack Boles, Richard Miller, Susan Wright, Jeff
Rubin, Jonathan Catherwood and Bob Wright (the "Holders") entered
into a registration rights agreement (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement,
Investors holding a majority in interest in the outstanding
Registrable Securities (as defined in the Registration Rights
Agreement) have one right to demand that the Corporation register
all, or any portion, of their Registrable Securities for public
sale, in the manner specified in the Registration Rights
Agreement (the "Demand Registration Right"). In addition, such
Investors have the right, on unlimited occasions, to participate
and have registered all, or a portion, of their Registrable
Securities in the event the Corporation undertakes a public
offering of its Common Stock, in the manner and on the terms set
forth on the Registration Rights Agreement (the "Piggyback
Registration Rights"). The parties to the Registration Agreement
other than the Investors also have the right to participate and
have all, or a portion, of their Registrable Securities included
in a registration statement as to which the Investors exercise
either their Demand Registration Right or Piggyback Registration
Rights above-described, in the manner and on the terms specified
on the Registration Rights Agreement.
<PAGE>
Item 5. Other Events.
In connection with the Securities Purchase Agreement, United
Bank (the "Bank") delivered a letter to the Corporation agreeing
to waive certain financial covenants set forth in Section VI(A)
of the June 29, 2000 loan and security agreement between the
Bank, the Corporation, Avenue Technologies, Inc, Vail Research
and Technology Corporation, SyCom Services, Inc., Engineering &
Information Services, Inc, (collectively, the "Borrowers") and
Gilluly in the original principal amount of $1,500,000 (the
"Loan"), upon the execution and delivery to the Bank of a
guaranty of payment from Stout and an amended and restated
guaranty by Gilluly and Martha Alice Gilluly (the "Gillulys")
whereby Stout would agree to guaranty payment of fifty percent
(50%) of the principal amount of the outstanding balance of the
Loan in an amount not to exceed $750,000 and the Gillulys would
agree to guaranty payment of fifty percent (50%) the principal
amount of the outstanding balance of the Loan and the execution
of a subordination agreement of the $430,000 Note dated February
15, 2000 from the Corporation to Gilluly.
On April 12, 2000, the Bank, the Borrowers, the Gillulys and
Stout (collectively, the "Guarantors") entered into an agreement
to modify and extend the term of the Loan (the "First
Modification and Extension Agreement"). Pursuant to the First
Modification and Extension Agreement, the Borrowers and
Guarantors acknowledged that there are no set-offs or defenses
against the Note or the Loan and the maturity date of the Note
was extended to October 31, 2000. The Bank and the Gillulys also
executed an amended and restated guaranty of payment ("Amended
and Restated Guaranty of Payment") whereby the Gillulys'
liability on their obligations is not to exceed the lesser of (i)
fifty percent (50%) of the principal amount of the outstanding
balance of the Loan, and (ii) $750,000. The Bank, the Borrowers
and Stout entered into a guaranty of payment on the same date
("Guaranty of Payment"), pursuant to which Stout agreed to
guaranty the Loan, provided, however, that his liability is not
to exceed the lesser of (i) fifty percent (50%) of the principal
amount of the outstanding balance of the Loan and (ii) $750,000.
In addition, the Bank, Gilluly and the Corporation entered into a
subordination agreement whereby Gilluly agreed to Subordinate the
lien and payment of that certain $430,000 Note dated February 15,
2000 from the Corporation to Gilluly to the payment in full of
any liabilities of the Corporation to the Bank and to any liens,
encumbrances or other security for the payment of such
liabilities to the Bank. Pursuant to the subordination
agreement, the Bank consented to the payment of $200,000 of the
aforesaid $430,000 Note to Gilluly pursuant to the Securities
Purchase Agreement, and further agreed to permit the payment of
the balance of $230,000 of such Note, in accordance with the
Securities Purchase Agreement, provided the Corporation was then
in compliance with certain covenants contained in the Loan
Agreement as modified and extended.
<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 hereunto duly authorized.
Date: April 14, 2000 HADRON, INC.
(Registrant)
By: /s/ JON M. STOUT
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
4.1 Warrant issued to Jon M. Stout to purchase up to 235,161
shares of Hadron, Inc.'s Common Stock.
4.2 Warrant issued to Patricia W. Stout to purchase up to
230,769 shares of Hadron, Inc.'s Common Stock.
4.3 Warrant issued to Stout Dynastic Trust up to 1,015,380
shares of Hadron, Inc.'s Common Stock.
4.4 Warrant issued to J. Richard Knop to purchase up to 462,690
shares of Hadron, Inc.'s Common Stock.
4.5 Warrant issued to John D. Sanders to purchase up to 81,000
shares of Hadron, Inc.'s Common Stock.
9.1 Voting Agreement among certain holders of the common stock
of Hadron, Inc., C.W. Gilluly and Jon M. Stout, Patricia W.
Stout, the Stout Dynastic Trust and J. Richard Knop dated March
30, 2000.
10.1 Securities Purchaser Agreement among Hadron, Inc., C.W.
Gilluly, Jon M. Stout, Patricia W. Stout, the Stout Dynastic
Trust and J. Richard Knop dated March 30, 2000.
10.2 Registration Rights Agreement dated March 30, 2000 among
Hadron, Inc, Jon M. Stout, Patricia W. Stout, Stout Dynastic
Trust and J. Richard Knop.
10.3 First Modification and Extension Agreement United Bank.
Hadron, Inc., Avenue Technologies, Inc., Vail Research and
Technology Corporation, Sycom Services, Inc. and Engineering and
Information Services, Inc. and C.W. Gilluly, Martha Alice Gilluly
and Jon M. Stout dated April 12, 2000.
10.4 Amended and Restated Guaranty of Payment between United Bank
and C.W. Gilluly and Martha Alice Gilluly dated April 12, 2000.
10.5 Guaranty of Payment between United Bank and Jon Stout dated
April 12, 2000.
10.6 Subordination Agreement among C.W. Gilluly, United Bank and
Hadron, Inc. dated April 12, 2000.
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED 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.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received, Jon M. Stout or his
registered assigns ("Holder") is entitled, subject to the terms
set forth below, to purchase from Hadron, Inc., a New York
corporation (the "Company"), such number of shares of the Common
Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on March 30,
2000 and ending on March 30, 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
235,161 shares of the Company's Common Stock. This Warrant may
be exercised in whole or in part in as many exercises as Holder
may elect. The Exercise Price shall be payable by check for good
and sufficient United States funds.
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten trading days prior to the exercise date of this
Warrant on the principal exchange of which the Common Stock may
at the time be listed; or, if there shall have been no sales on
such exchange on any such trading day, the average of the closing
bid and asked prices on such exchange on such trading day; or, if
there is no such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales
prices as reported by NASDAQ (including its bulletin board) at
the end of each of the ten trading days prior to the date of
exercise of this Warrant in the over-the counter market; provided
that if one class of the Common Stock is listed or reported as
described in this sentence but the class of Common Stock with
respect to which Fair Market Value is being measured is not so
listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical
to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder:
Jon M. Stout
10 Maiden Bower Court
Potomac, Maryland 20854
Fax: 301/947-0544
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
11. Legend. 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 A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: March 30, 2000 HADRON, INC.
/S/ C.W. GILLULY
By: --------------------------
C.W. Gilluly
Chief Executive Officer
Attested:
/S/ S. AMBER GORDON
________________________
Secretary
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By: _____________________________
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED 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.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received, Patricia W. Stout or her
registered assigns ("Holder") is entitled, subject to the terms
set forth below, to purchase from Hadron, Inc., a New York
corporation (the "Company"), such number of shares of the Common
Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on March 30,
2000 and ending on March 30, 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
230,769 shares of the Company's Common Stock. This Warrant may
be exercised in whole or in part in as many exercises as Holder
may elect. The Exercise Price shall be payable by check for good
and sufficient United States funds.
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten trading days prior to the exercise date of this
Warrant on the principal exchange of which the Common Stock may
at the time be listed; or, if there shall have been no sales on
such exchange on any such trading day, the average of the closing
bid and asked prices on such exchange on such trading day; or, if
there is no such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales
prices as reported by NASDAQ (including its bulletin board) at
the end of each of the ten trading days prior to the date of
exercise of this Warrant in the over-the counter market; provided
that if one class of the Common Stock is listed or reported as
described in this sentence but the class of Common Stock with
respect to which Fair Market Value is being measured is not so
listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical
to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder:
Patricia W. Stout
10 Maiden Bower Court
Potomac, Maryland 20854
Fax: 301/947-0544
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
11. Legend. 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 A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: March 30, 2000 HADRON, INC.
/S/ C.W. GILLULY
By: ------------------------
C.W. Gilluly
Chief Executive Officer
Attested:
/S/ S. AMBER GORDON
________________________
Secretary
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By:
________________________________
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED 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.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received, Stout Dynastic Trust or
its registered assigns ("Holder") is entitled, subject to the
terms set forth below, to purchase from Hadron, Inc., a New York
corporation (the "Company"), such number of shares of the Common
Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on March 30,
2000 and ending on March 30, 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
1,015,380 shares of the Company's Common Stock. This Warrant may
be exercised in whole or in part in as many exercises as Holder
may elect. The Exercise Price shall be payable by check for good
and sufficient United States funds.
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten trading days prior to the exercise date of this
Warrant on the principal exchange of which the Common Stock may
at the time be listed; or, if there shall have been no sales on
such exchange on any such trading day, the average of the closing
bid and asked prices on such exchange on such trading day; or, if
there is no such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales
prices as reported by NASDAQ (including its bulletin board) at
the end of each of the ten trading days prior to the date of
exercise of this Warrant in the over-the counter market; provided
that if one class of the Common Stock is listed or reported as
described in this sentence but the class of Common Stock with
respect to which Fair Market Value is being measured is not so
listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical
to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder:
Stout Dynastic Trust
C/O Jon M. Sout
10 Maiden Bower Court
Potomac, Maryland 20854
Fax: 301/947-0544
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
11. Legend. 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 A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: March 30, 2000 HADRON, INC.
/S/ C.W. GILLULY
By: -------------------------
C.W. Gilluly
Chief Executive Officer
Attested:
/S/ S. AMBER GORDON
________________________
Secretary
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By:
________________________________
Exhibit#___
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED 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.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received, J. Richard Knop or his
registered assigns ("Holder") is entitled, subject to the terms
set forth below, to purchase from Hadron, Inc., a New York
corporation (the "Company"), such number of shares of the Common
Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on March 30,
2000 and ending on March 30, 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
462,690 shares of the Company's Common Stock. This Warrant may
be exercised in whole or in part in as many exercises as Holder
may elect. The Exercise Price shall be payable by check for good
and sufficient United States funds.
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten trading days prior to the exercise date of this
Warrant on the principal exchange of which the Common Stock may
at the time be listed; or, if there shall have been no sales on
such exchange on any such trading day, the average of the closing
bid and asked prices on such exchange on such trading day; or, if
there is no such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales
prices as reported by NASDAQ (including its bulletin board) at
the end of each of the ten trading days prior to the date of
exercise of this Warrant in the over-the counter market; provided
that if one class of the Common Stock is listed or reported as
described in this sentence but the class of Common Stock with
respect to which Fair Market Value is being measured is not so
listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical
to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder:
J. Richard Knop
2 West Washington St.
Post Office Box 978
Middleburg, Virginia 20118
Fax: 540/ 687-8112
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
11. Legend. 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 A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: March 30, 2000 HADRON, INC.
/S/ C.W. GILLULY
By: ---------------------------
C.W. Gilluly
Chief Executive Officer
Attested:
/s/ S. AMBER GORDON
________________________
Secretary
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By:
________________________________
<PAGE>
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED 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.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received, John D. Sanders or his
registered assigns ("Holder") is entitled, subject to the terms
set forth below, to purchase from Hadron, Inc., a New York
corporation (the "Company"), such number of shares of the Common
Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on March 30,
2000 and ending on March 30, 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
81,000 shares of the Company's Common Stock. This Warrant may be
exercised in whole or in part in as many exercises as Holder may
elect. The Exercise Price shall be payable by check for good and
sufficient United States funds.
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten trading days prior to the exercise date of this
Warrant on the principal exchange of which the Common Stock may
at the time be listed; or, if there shall have been no sales on
such exchange on any such trading day, the average of the closing
bid and asked prices on such exchange on such trading day; or, if
there is no such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales
prices as reported by NASDAQ (including its bulletin board) at
the end of each of the ten trading days prior to the date of
exercise of this Warrant in the over-the counter market; provided
that if one class of the Common Stock is listed or reported as
described in this sentence but the class of Common Stock with
respect to which Fair Market Value is being measured is not so
listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical
to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder:
John D. Sanders
2500 Virginia Avenue, N.W.
Apt. 1408-S
Washington, D.C. 20037
Fax: 202/ 965-4774
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
11. Legend. 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 A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: March 30, 2000 HADRON, INC.
/S/ C.W. GILLULY
By: --------------------------
C.W. Gilluly
Chief Executive Officer
Attested:
/S/ S. AMBER GORDON
________________________
Secretary
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By:
________________________________
HADRON, INC.
VOTING AGREEMENT
March 30, 2000
<PAGE>
HADRON, INC.
VOTING AGREEMENT
THIS AGREEMENT is made and entered into on March 30, 2000 by
and among each of certain holders of the common stock of HADRON,
INC., a New York corporation (the "Company"), designated as
Holders on the signature pages hereto (the "Holders"), C.W.
Gilluly ("Gilluly"), and Jon M. Stout ("Stout"), Patricia W.
Stout ("Mrs. Stout"), the Stout Dynastic Trust (the "Stout
Trust") and J. Richard Knop ("Knop") (Stout, Mrs. Stout, Stout
Trust and Knop, being collectively, the "Investors" and the
Investors together with Gilluly, being collectively, the "Voting
Group," and individually a "Member" of the Voting Group).
WHEREAS, pursuant to that certain Securities Purchase
Agreement of even date herewith (the "Purchase Agreement"), the
Investors and certain of the Holders have purchased shares of the
Company's common stock, $0.02 par value ("Common Stock"); and
WHEREAS, as a consequence of the aforesaid purchase, the
Members of the Voting Group hold a majority of the issued and
outstanding shares of Common Stock; and
WHEREAS, the Holders and the Members of the Voting Group
desire stability and continuity of management for the Company,
and desire therefore to enter into this Agreement to provide for
voting as to the number and identity of directors and to the
change in the state of the Company's corporate domicile.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Agreement to Vote. Each Holder and Member of the
Voting Group hereby agrees to hold all of the Common Stock
registered in his or its name, and any securities of the Company
issued with respect to, upon conversion of, or in exchange or
substitution for the Common Stock, and any other voting
securities of the Company subsequently acquired by such Holder or
Member, (such Common Stock and other voting securities
hereinafter collectively referred to as the "Voting Shares")
subject to, and to vote the Voting Shares in accordance with, the
provisions of this Agreement. Except as set forth in paragraph 3
hereof, any person purchasing or otherwise acquiring Voting
Shares subsequent to the date hereof shall become a party to this
Agreement and shall be subject to the obligations hereunder.
<PAGE>
2. Board of Directors.
(a) From and after the date hereof and until the
provisions of this Section cease to be effective, each Holder and
each Member (Holders and Members of the Voting Group collectively
referred to collectively as "Stockholders" and individually as
"Stockholder") shall vote all of the Voting Shares over which
such Stockholder has voting control and shall take all other
necessary or desirable actions within such Stockholder's control
(whether in his or its capacity as a stockholder, director,
member of a board committee or officer of the Company or
otherwise), and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings so that:
(1) The authorized number of members of the
Company's Board of Directors (the "Board") shall continue to be
five (5) unless and until such greater number is directed or
approved by the Investors.
(2) During the term of this Agreement, the
Investors shall be entitled to nominate (the "Investor Nominees")
and the Stockholders shall vote their shares to elect the
Investor Nominees as the majority of the members of the Board.
(3) Any Investor Nominee elected or appointed as a director
hereunder shall be removed from the Board (and thereupon from all
committees of the Board), with or without cause, only upon the
written request or consent of the Investors.
(4) In the event that any Investor Nominee
designated hereunder for any reason ceases to serve as a member
of the Board or any committee thereof during such
representative's term of office, the resulting vacancy on the
Board or committee shall be filled by a newly designated Investor
Nominee.
(5) Upon the written direction or consent of the
Investors, the Company shall take such actions as may be
necessary and convenient to change the corporate domicile of the
Company to the state of Delaware.
(b) In each case provided for herein, the direction,
consent, approval, nomination or vote of the Investors shall be
determined by the Investors holding a majority of the shares of
the Company's Common Stock held by all Investors.
<PAGE>
3. Successors in Interest.
(a) With the exception of transfers made under the conditions
set forth in paragraphs 3(a)(1) and 3(a)(2) below, any attempted
transfer of the Voting Shares shall be of no effect unless and
until the person(s) to whom such shares are being transferred
agrees in writing to be bound by the terms of this Agreement.
This agreement shall not apply to shares that are sold by the
parties during the term of this agreement, provided such sales
are either:
(1) open market sales in brokers' transactions as that term is
defined in Rule 144, under the Securities Act of 1933; or
(2) sales made after the Investors shall have declined a right
of first refusal to purchase such shares at the same price and
terms offered by a bona fide offeree in an arms length
transaction within three (3) business days after Investors
receipt of written notice specifying the price and terms and
identity of the prospective purchaser.
(b) Each certificate representing any of the Voting
Shares shall bear a legend reading as follows:
The shares evidenced hereby are subject to a Voting
Agreement dated as of March 30, 2000 (a copy of which
may be obtained without charge from the issuer) that
contains certain restrictions on the transferability of
the shares, and by accepting any interest in such
shares the person accepting such interest shall be
deemed to agree to and shall become bound by all the
provisions of such Voting Agreement.
4. Termination. This Agreement shall terminate in its
entirety and be of no further force or effect five (5) years from
the effective date of this Agreement.
5. Amendments and Waivers. Any term hereof may be amended
and the observance of any term hereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of (a) the Holders
or their assigns holding not less than a majority of the shares
of Common Stock held by all Holders; and (b) the Members of the
Voting Group or their assigns holding not less than a majority of
the shares of Common Stock held by all Members of the Voting
Group. Any amendment or waiver so effected shall be binding upon
all parties hereto, any assignee of any such party, and any other
stockholder of the Company subject to the terms of this
Agreement.
6. Stock Splits, Stock Dividends, etc. In the event of
any stock split, stock dividend, recapitalization,
reorganization, or the like, any securities issued with respect
to the Voting Shares shall become "Voting Shares" for purposes of
this Agreement and shall be endorsed with the legend set forth in
Section 3(b) hereof.
<PAGE>
7. Enforceability/Severability. The parties hereto agree
that each provision of this Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law.
If any provision of this Agreement shall nevertheless be held to
be prohibited by or invalid under applicable law, (a) such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement, and
(b) the parties shall, to the extent permissible by applicable
law, amend this Agreement, or enter into a voting trust agreement
under which the Voting Shares shall be transferred to the voting
trust created thereby, so as to make effective and enforceable
the intent of this Agreement.
8. Governing Law. This Agreement shall be governed in all
respects by the laws of the Commonwealth of Virginia without
reference to conflict of law provisions.
9. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be delivered
personally, mailed by first class mail, postage prepaid, or
delivered by courier or overnight delivery, addressed (a) to such
Stockholder's address on record with the Company. Notices that
are mailed shall be deemed received ten (10) days after deposit
in the United States mail. Notices sent by courier or overnight
delivery shall be deemed received two (2) days after they have
been so sent.
10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
agreement.
11. Injunctive Relief. Each holder of Voting Shares agrees
and acknowledges that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that each
holder of Voting Shares may, in its sole discretion, apply for
specific performance and injunctive relief in any court of
competent jurisdiction in order to enforce or prevent any
violations of the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year herein above first written.
GILLULY: INVESTORS:
/S/ C.W. GILLULY /S/ JON M. STOUT
- ---------------------- -----------------------------------
C.W. Gilluly Jon M. Stout
/S/ PATRICIA W. STOUT
-----------------------------------
Patricia W. Stout
Stout Dynastic Trust
/S/ JON M. STOUT
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By Jon M. Stout, Trustee
/S/J. RICHARD KNOP
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J. Richard Knop
HOLDERS:
/S/ JOHN D. SANDERS
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John D. Sanders
BOLES KNOP AFFILIATES
/S/ JACK BOLES
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Jack Boles
/S/ JEFF RUBIN
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Jeff Rubin
/S/ J. RICHARD KNOP
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J. Richard Knop
/S/ RICHARD MILLER
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Richard Miller
/S/ JONATHAN CATHERWOOD
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Jonathan Catherwood
/S/ BOB WRIGHT
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Bob Wright
/S/ SUSUN WRIGHT
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Susan Wright
<PAGE>
SECURITIES PURCHASE AGREEMENT
AMONG
HADRON, INC.
C.W. GILLULY
JON M. STOUT, PATRICIA W. STOUT, THE STOUT DYNASTIC TRUST
AND J. RICHARD KNOP
AND
JOHN D. SANDERS
March 30, 2000
<PAGE>
TABLE OF CONTENTS
INTRODUCTION 2
ARTICLE I DEFINITIONS 2
DEFINITIONS. 2
ARTICLE II PURCHASE AND SALE OF SHARES AND PURCHASE WARRANTS 5
2.1 PURCHASE AND SALE OF SHARES AND PURCHASE WARRANTS. 5
2.2 PURCHASE PRICE. 5
2.3 PAYMENT TERMS. 5
2.4 THE CLOSING. 5
2.5 USE OF PROCEEDS. 5
2.6 FURTHER ASSURANCES. 5
2.7 TRANSFER TAXES. 5
ARTICLE III RELATED AGREEMENTS 6
3.1 RELATED AGREEMENTS. 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
GILLULY 6
4.1 ORGANIZATION OF COMPANY. 6
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. 6
4.3 QUALIFICATION OF THE COMPANY. 6
4.4 CAPITALIZATION OF THE COMPANY; VALIDITY OF SHARES. 7
4.5 COMPANY SUBSIDIARIES. 7
4.6 NO VIOLATION. 8
4.7 CONSENTS AND APPROVALS. 8
4.8 COMPLIANCE WITH LAWS. 8
4.9 LICENSES AND PERMITS. 8
4.10 ENVIRONMENTAL MATTERS. 9
4.11 FINANCIAL STATEMENTS. 9
4.12 ABSENCE OF CHANGE. 9
4.13 UNDISCLOSED LIABILITIES. 11
4.14 CURRENT INFORMATION. 11
4.15 TAX MATTERS. 11
4.16 LABOR AND EMPLOYMENT MATTERS. 11
4.17 LITIGATION. 12
4.18 TITLE TO PROPERTIES. 12
4.19 LEASES. 12
4.20 MATERIAL CONTRACTS. 12
4.21 INTELLECTUAL PROPERTY. 13
4.22 ACCOUNTS RECEIVABLE. 14
4.23 MAINTENANCE OF TANGIBLE PERSONAL PROPERTY. 14
<PAGE>
TABLE OF CONTENTS (cont.)
4.24 INSURANCE. 14
4.25 EMPLOYEE BENEFIT PLANS. 14
4.26 INSIDER INTERESTS. 15
4.27 CERTAIN PRACTICES. 15
4.28 WORK IN PROGRESS. 15
4.29 INVESTMENT BANKING; BROKERAGE. 16
4.30 CUSTOMERS. 16
4.31 WARRANTY AND RELATED MATTERS. 16
4.32 RELATIONS. 16
4.33 RESTRICTIONS ON BUSINESS ACTIVITIES. 17
4.34 SECURITY CLEARANCES; DEFECTIVE PRICING. 17
4.35 REPORTS AND FINANCIAL STATEMENTS. 17
4.36 FULL DISCLOSURE. 17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASERS 18
5.1 AUTHORITY. 18
5.2 INVESTMENT STATUS. 18
5.3 INVESTMENT BANKING; BROKERAGE FEES. 18
ARTICLE VI ADDITIONAL COVENANTS 18
6.1 EXPENSES. 18
6.2 PUBLIC ANNOUNCEMENTS. 19
6.3 FURTHER ASSURANCES. 19
6.4 BOARD OF DIRECTORS 19
6.5 UNITED BANK. 19
6.6 GILLULY'S LOAN REPAYMENT. 19
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PURCHASERS 19
7.1 REPRESENTATIONS AND WARRANTIES. 19
7.2 PERFORMANCE OF THIS AGREEMENT. 20
7.3 CORPORATE AUTHORIZATION. 20
7.4 EXECUTIVE AGREEMENTS. 20
7.5 APPROVALS AND CONSENTS. 20
7.6 UNITED BANK APPROVAL. 20
7.7 INJUNCTION, LITIGATION, ETC. 20
7.8 LEGISLATION. 20
7.9 ESTOPPEL CERTIFICATES, ETC. 20
7.10 RESIGNATION. 21
7.11 OPINION OF COUNSEL FOR COMPANY AND GILLULY. 21
7.12 FAIRNESS OPINION. 21
7.13 ELECTION OF DIRECTORS. 21
7.14 DELIVERY OF CLOSING DOCUMENTS. 21
<PAGE>
TABLE OF CONTENTS (cont.)
7.15 INDEMNIFICATION AND CONTRIBUTION AGREEMENTS. 22
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF GILLULY AND COMPANY 22
8.1 REPRESENTATIONS AND WARRANTIES. 22
8.2 PERFORMANCE OF THIS AGREEMENT. 22
8.3 INJUNCTION, LITIGATION, ETC. 22
8.4 LEGISLATION. 22
8.5 DELIVERY OF CLOSING DOCUMENTS. 23
ARTICLE IX CLOSING 23
9.1 TIME AND PLACE OF CLOSING. 23
9.2 DELIVERIES BY COMPANY AND GILLULY. 23
9.3 DELIVERIES BY PURCHASERS. 23
ARTICLE X INDEMNIFICATION 24
10.1 INDEMNIFICATION BY COMPANY. 24
10.2 INDEMNIFICATION BY PURCHASER. 24
10.3 COMPANY'S OBLIGATIONS FOR THIRD PARTY CLAIMS. 24
10.4 PURCHASER'S OBLIGATIONS FOR THIRD PARTY CLAIMS. 25
10.5 LIMITATIONS ON INDEMNIFICATION. 26
10.6 SURVIVAL; INVESTIGATION. 27
10.7 WAIVER OF SURETYSHIP DEFENSES; LEGAL FEES. 27
ARTICLE XI GENERAL PROVISIONS 27
11.1 NOTICES. 27
11.2 GOVERNING LAW. 29
11.3 SCHEDULES. 29
11.4 HEADINGS. 30
11.5 COUNTERPARTS. 30
11.6 MISCELLANEOUS. 30
PURCHASER ALLOCATIONS 32
EXHIBITS
EXHIBIT A - Form of Purchase Warrant
EXHIBIT B - Purchaser Allocations
EXHIBIT C - Voting Agreement
EXHIBIT D - Registration Rights Agreement
EXHIBIT E - Founder Employment Agreement
<PAGE>
TABLE OF CONTENTS (cont.)
EXHIBIT F - Stout Employment Agreement
EXHIBIT G - Hadron, Inc. Certificate of Incorporation and Bylaws
SCHEDULES
SCHEDULE 4.4 - Warrants, Options and Convertible Securities
SCHEDULE 4.5 - Subsidiaries
SCHEDULE 4.7 - Consents and Approvals
SCHEDULE 4.12 - Bank Loan and Founder Loan
SCHEDULE 4.16 - Labor and Employment Matters
SCHEDULE 4.20 - Material Contracts
SCHEDULE 4.21 - Intellectual Property
SCHEDULE 4.25 - Insurance
SCHEDULE 4.26 - Employee Benefits
SCHEDULE 4.27 - Insider Interests
SCHEDULE 4.28 - Work in Progress
SCHEDULE 4.31 - Customers
SCHEDULE 4.32 - Warranties
SCHEDULE 4.33 - Banking Relations
SCHEDULE 7.11 - Opinion of Counsel for Company and Founder
<PAGE>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement"), dated as
of the 30th day of March, 2000, is made among HADRON, INC.
("Company"), a corporation organized under the laws of the State
of New York, Jon M. Stout ("Stout"), Patricia W. Stout ("Mrs.
Stout"), the Stout Dynastic Trust ("Stout Trust"), J. Richard
Knop ("Knop") and John D. Sanders ("Sanders") (collectively
Stout, Mrs. Stout, Stout Trust, Knop and Sanders being referred
to as the "Purchasers") and C.W. Gilluly ("Gilluly").
INTRODUCTION
A. The issued and outstanding capital stock of the Company
consists, as of March 20, 2000, of 2,809,526 shares of common
stock, par value $.02 per share ("Common Stock"),
B. Gilluly owns 501,875 of the outstanding shares of the
Company's Common Stock, options to purchase 82,000 shares of the
Company's Common Stock and warrants to purchase an additional
830,000 shares of the Company's Common Stock;
C. Each of the Purchasers desires to purchase, and the
Company desires to issue and sell the number of shares of Common
Stock and warrants to purchase Common Stock, in the form of
Exhibit A, set forth opposite the name of each Purchaser in
Exhibit B hereto, and to grant the Purchasers the rights set
forth herein, representing an aggregate issuance of 2,250,000
shares of Common Stock (the "Shares") and warrants to purchase an
additional 2,025,000 shares of Common Stock (the "Purchase
Warrants") for an aggregate purchase price of $877,500; and
D. The parties hereto desire to set forth herein certain
of the terms of their ongoing relationship in connection with the
Company.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
Definitions.
The following terms, as used herein, have the following
meanings:
"Bank" means United Bank or any subsequent primary lender to
the Company.
"Bank Loan" means the Loan and Security Agreement dated June
29, 1999 between the Company, Avenue Technologies, Inc., Vail
Research and Technology Corporation, Sycom Services, Inc.,
Engineering & Information Services, Inc. and United Bank.
"Closing" has the meaning set forth in Section 2.4.
<PAGE>
"Closing Date" has the meaning set forth in Section 9.1.
"Common Stock" has the meaning set forth in paragraph A of
the Introduction.
"Company" means Hadron, Inc.
"Company Employees" has the meaning set forth in
Section 4.16.
"Company Financial Statements" has the meaning set forth in
Section 4.11.
"Company's Subsidiaries" means Engineering & Information
Services, Inc., a Virginia Corporation, Vail Research and
Technology Corporation, a Maryland Corporation, SyCom Services,
Inc., a Delaware Corporation, Avenue Technologies, Inc., a
Virginia Corporation, Advanced Biosystems, Inc., a Delaware
corporation and certain inactive subsidiaries described in the
Company's most recent Form 10-K filed with the Securities and
Exchange Commission.
"Disclosure Schedules" mean each of the Schedule identified
in Article IV.
"Encumbrances" means liens, mortgages, charges, security
interests, pledges, adverse claims, and other defects in title
generally considered to be encumbrances. When referring to the
shares of stock of the Company, Encumbrances also means any
preemptive rights, rights of first refusal or restriction of any
kind.
"Environmental Permits" has the meaning set forth in
Section 4.10(a).
"ERISA" means the Employment Retirement Income Security Act
of 1974, as amended.
"Gilluly Loan" means a loan from Gilluly to the Company upon
the terms set forth in Schedule 4.12.
"Governmental Authority" means any United States federal,
state or local or any foreign or tribal government, governmental
regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered
by or with any Governmental Authority.
"Intellectual Property" has the meaning set forth in Section
4.21.
"Investors" means Jon M. Stout, Mrs. Stout, Stout Trust and
J. Richard Knop.
"Leases" has the meaning set forth in Section 4.19.
<PAGE>
"Legal Action" has the meaning set forth in Sub section
10.3(b).
"Licenses and Permits" has the meaning set forth in Section
4.9.
"Loan" has the meaning set forth in Section 6.5.
"Material Contracts" has the meaning set forth in Section
4.20.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plans" has the meaning set forth in Section
4.26(a).
"Person" means an individual, a corporation, a partnership,
an association, a labor union, a trust or any other entity or
organization, including a government, a governmental body, a
political subdivision or an agency of instrumentality thereof.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchase Warrants" has the meaning set forth in paragraph C
of the Introduction.
"Related Agreements" means the agreements identified in
Section 3.1
"Shares" has the meaning set forth in the paragraph A of the
Introduction.
"Stock Option Plan" means the 1994 Stock Option Plan of the
Company as amended in Fiscal Year 1998 under which certain
employees are granted options to purchase Common Stock in the
Company.
"Subsidiary" with respect to any party to this Agreement,
means any corporation or other business entity, whether or not
incorporated, of which at least 50% of the securities or
interests having, by their terms, ordinary voting power to elect
members of the Board of Directors, or other persons performing
similar functions with respect to such entity, is held directly
or indirectly by such party.
"Survival Date" has the meaning set forth in Section 10.4.
"to the knowledge of Gilluly and Company" means to the
knowledge of either the Company or Gilluly.
"Unit" means one share of Common Stock and a warrant to
purchase .90 shares of Common Stock.
"Welfare Plans" has the meaning set forth in Section
4.26(a).
<PAGE>
ARTICLE II
PURCHASE AND SALE OF SHARES
AND PURCHASE WARRANTS
2.1 Purchase and Sale of Shares and Purchase Warrants.
Upon the terms and conditions of this Agreement and in reliance
on the representations and warranties set forth in Article IV, at
the Closing each Purchaser will purchase from the Company, and
the Company will issue and sell to each of the Purchasers, Units
consisting of the number of shares of Common Stock and Purchase
Warrants set forth opposite the name of such Purchaser in Exhibit
B hereto for a purchase price of $0.39 per Unit; and the Company
shall grant the Purchasers the rights set forth herein. Each of
the parties agrees and consents to terms of this Agreement,
including the Company's grant of the rights set forth herein to
Investors.
2.2 Purchase Price.
TThe purchase price for all the Units ("Purchase Price") is
eight hundred seventy-seven thousand five hundred dollars
($877,500), payable as set forth in Section 2.3.
2.3 Payment Terms.
The Purchase Price for all of the Units shall be paid by wire
transfer of next day available funds or by check for good and
sufficient funds.
2.4 The Closing.
Subject to the terms and conditions of this Agreement, the sale
and purchase of the Units shall take place concurrently with the
execution of this Agreement at a closing (the "Closing"),
pursuant to Section 9.1.
2.5 Use of Proceeds.
The proceeds from the sale of the Units by the Company
hereunder shall be used by the Company for expenses associated
with the consummation of the transactions contemplated hereby,
for regular monthly payments of the Bank Loan, for the partial
repayment of Gilluly Loan as set forth in Section 6.6, for
working capital and general corporate purposes, but not without
the prior written approval of the Investors the repayment of any
other loans of the Company.
2.6 Further Assurances.
The Company and Gilluly from time to time after the Closing, at
the request of the Purchasers and without further consideration,
shall execute and deliver further instruments of transfer and
assignment and take such other action as the Purchasers may
reasonably require to more effectively transfer and assign to,
and vest in the Purchasers, the Shares and Purchase Warrants to
be sold to them hereunder and all rights thereto, and to fully
implement the provisions of this Agreement.
2.7 Transfer Taxes.
All transfer taxes, fees and duties under applicable law
incurred in connection with the initial sale and transfer of the
Shares and Purchase Warrants under this Agreement, if any, will
<PAGE>
be borne and paid by the Company and the Company shall promptly
reimburse the Purchasers for any such tax, fee or duty which any
of them is required to pay under applicable law.
ARTICLE III
RELATED AGREEMENTS
3.1 Related Agreements.
As a condition of closing under this Agreement, the Company,
Purchasers and others designated therein shall have entered into
a Voting Agreement in the form of Exhibit C and a Registration
Rights Agreement in the form of Exhibit D. Additionally, the
Company shall have entered into employment agreements with
Gilluly and Stout in the forms of Exhibit E and Exhibit F,
respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND GILLULY
The Company and, where indicated by reference to Gilluly's
knowledge, Gilluly, jointly and severally, represent and warrant
to Purchasers, except as set forth in the attached Disclosure
Schedules, the following:
4.1 Organization of Company.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York.
Copies of the Company's Certificate of Incorporation and Bylaws,
as currently in effect, are attached as Exhibit G. The minute
books of the Company contain accurate records of all meetings and
accurately reflect all material actions taken by the stockholders
and the Board of Directors of the Company.
4.2 Authority Relative to This Agreement.
The Company has the corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by the Company
of this Agreement, and the consummation by each of the
transactions contemplated hereby, have been duly authorized by
the Company's Board of Directors, and no other corporate
proceedings on the part of the Company are necessary with respect
thereto. This Agreement has been duly executed and delivered by
the Company. This Agreement constitutes a valid and binding
obligation of Gilluly and Company, enforceable against each in
accordance with its terms, except as its terms may be limited by:
(i) bankruptcy, insolvency or similar laws affecting creditors'
rights generally; or (ii) general principles of equity, whether
considered in a proceeding in equity or at law.
4.3 Qualification of the Company.
The Company has the corporate power and authority to own all of
its properties and assets and to carry on its business as now
<PAGE>
being conducted. The Company is duly qualified and in good
standing to do business in each jurisdiction in which the failure
to so qualify might have a material adverse effect upon the
business or properties of the CompanyCompany. Other than the
Company's Subsidiaries, there are no corporations, partnerships
or other entities in which the Company owns, of record or
beneficially, any direct or indirect equity or other interest or
any right to acquire the same. The Company is not a member of
(nor is any of its business conducted through) any joint venture,
partnership or limited liability company.
4.4 Capitalization of the Company; Validity of Shares.
(a) The authorized capital of the Company consists of
twenty million shares of Common Stock with a par value of two
cents ($0.02). All of the issued and outstanding shares of
capital stock of the Company are validly issued and outstanding,
fully paid and nonassessable and free of preemptive rights.
Except as disclosed in the Schedule 4.4 there are no
options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character
relating to the capital stock of the Company or obligating the
Company to issue or sell any shares of capital stock of, or other
interest in, the Company.
(b) There are no outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any
shares of Common Stock or options or warrants to purchase Common
Stock, or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any other
Person.
(c) The stock register of the Company maintained by
American Stock Trust and Transfer Company, its Transfer Agent,
accurately records (i) the name and address of each Person owning
Shares of capital stock of the Company, and (ii) the certificate
number of each certificate evidencing Shares of capital stock
issued by the Company, the number of shares evidenced by each
such certificate, the date of issuance thereof and, in the case
of cancellation, the date of cancellation.
(d) The Company's total issued and outstanding capital
stock is 2,808,560 shares of Common Stock (excepting only shares
issued after February 10, 2000 upon the exercise of options or
warrants or conversion of convertible notes existing on such
date) and the Company's total issued and outstanding shares,
together with any other shares of capital stock which may be
issuable, on a fully-diluted, as-converted basis (including, but
not limited to, any outstanding options, securities convertible
into Common Stock and/or warrants), are 4,587,952 shares of
Common Stock and equivalents.
4.5 Company Subsidiaries.
Each Subsidiary of the Company is listed on Schedule 4.5
hereto. The Company has conducted its business solely through
the Company and its Subsidiaries at all times. All assets,
properties and rights relating to the Company's business are held
by and all agreements, obligations and transactions relating to
<PAGE>
the Company's business have been entered into, incurred and
conducted by, Company and its Subsidiaries. Each Subsidiary of
Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation
and has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. Each
Subsidiary of Company is duly qualified as a foreign corporation
to do business, and is in good standing in the jurisdictions
listed on Schedule 4.5 hereto and except as set forth on Schedule
4.5 hereto, is not required to be so qualified and in good
standing in any other jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities would make such qualification necessary, if failure to
so qualify might have an adverse material effect upon the
business or property of any Company Subsidiary. All of the
outstanding shares of capital stock of each of the Subsidiaries
of Company are validly issued, fully paid and non-assessable and,
except as set forth on Schedule 4.5 hereto, and are owned by the
Company free and clear of any Encumbrances of any nature
whatsoever (whether absolute, accrued, contingent or otherwise).
Except as set forth in Schedule 4.5 hereto, there are not
outstanding rights to purchase or otherwise to receive from any
of the Subsidiaries of the Company any of the outstanding,
authorized but unissued or treasury shares of the capital stock
or any other security of any Subsidiary of the Company; there is
no outstanding security of any kind convertible into or
exchangeable for such capital stock of any Subsidiary of the
Company.
4.6 No Violation.
The execution and delivery by the Company of this Agreement
will not: (i) violate or result in a breach of any provision of
the Certificate of Incorporation or Bylaws of the Company;
(ii) result in a breach, or default, or give rise to any right of
termination, modification or acceleration or give rise to any
Encumbrance under the provisions of any agreement or other
instrument or obligation to which Gilluly or the Company is a
party or by which Gilluly, the Company, the Shares, or any of the
Company's capital stock assets, properties or businesses may be
bound; (iii) violate any law or Governmental Order applicable to
Gilluly and Company, the Company or the Shares; or (iv) cause the
acceleration of vesting or rights to exercise stock options,
warrants or to convert convertible securities of the Company.
4.7 Consents and Approvals.
Except as set forth in Schedule 4.7, and to the actual
knowledge of Gilluly, there is no requirement applicable to
Company to make any filing with, or obtain the consent or
approval of, any Person as a condition to the consummation of the
transactions contemplated by this Agreement.
<PAGE>
4.8 Compliance with Laws.
To the knowledge of the Company and the actual knowledge of
Gilluly, the business of the Company and the Company's
Subsidiaries have been operated in compliance in all material
respects with all laws and regulations, federal, state or local,
domestic or foreign, applicable to its business including,
without limitation, those related to (i) antitrust and trade
matters, (ii) civil rights, (iii) zoning and building codes, (iv)
public health and safety, (v) worker health and safety and (vi)
labor and employment and discrimination in employment.
4.9 Licenses and Permits.
The term "Licenses and Permits" as used herein means
governmental licenses, permits, approvals and authorizations,
whether federal, state and local, domestic or foreign, other than
Environmental Permits. The Company and the Company's
Subsidiaries have all of the Licenses and Permits required to
conduct their respective businesses as they are presently being
conducted excepting only those Licenses and Permits the failure
of which to obtain would not have a material adverse effect on
the business or properties of the Company or Company's
Subsidiaries. The business of the Company and the Company's
Subsidiaries have been operated in compliance with all of the
terms and conditions set forth in such Licenses and Permits. No
notice of a violation of any such License or Permit has been
received by Gilluly or the Company and the Company's
Subsidiaries, or to the knowledge of the Company or the actual
knowledge of Gilluly, recorded or published, and no proceeding is
pending or, to the knowledge of the Company of the actual
knowledge of Gilluly, threatened, to revoke any of them. Gilluly
and Company know of no facts which exist with respect to the
Company and the Company's Subsidiaries which would allow the
revocation of any of the Licenses and Permits of the Company and
the Company's Subsidiaries.
4.10 Environmental Matters.
(a) The Company and the Company's Subsidiaries have in all
material respects operated their respective businesses in
compliance with all laws and regulations relating to pollution
control and environmental contamination and the provisions of
their respective Environmental Permits, except for such
violations thereof as do not and cannot reasonably be expected to
have an adverse effect on the Company or the Company's
Subsidiaries. "Environmental Permits" means governmental permits,
approvals and authorizations, which relate to the environment or
to public health and safety or worker health and safety, as they
may be affected by the environment.
(b) Neither the Company nor any of the Company's
Subsidiaries is obligated, by itself or jointly with others, to
clean up, remedy or otherwise restore to its former condition any
building, contaminated surface water, ground water, soil or any
natural resource associated therewith.
<PAGE>
4.11 Financial Statements.
The Company has previously furnished Purchaser with true and
complete copies of its audited financial statements, including
the notes thereto for the fiscal years ending June 30, 1997, 1998
and 1999 and unaudited financial statements for the six (6)
months ending December 31, 1999 (the "Company Financial
Statements") together with the reports on such statements of the
Company's independent public accountants. Such Financial
Statements present fairly the financial position of the Company
as of such dates and the results of their operations and changes
in financial position for such periods and have been prepared in
accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis.
4.12 Absence of Change.
Since December 31, 1999, and to the actual knowledge of
Gilluly, there has not been:
(a) ANY MATERIAL CHANGE, OR DEVELOPMENT INVOLVING A PROSPECTIVE
CHANGE TO THE COMPANY OR THE COMPANY'S SUBSIDIARIES, INCLUDING,
WITHOUT LIMITATION, ANY DAMAGE, DESTRUCTION OR LOSS (WHETHER OR
NOT COVERED BY INSURANCE);
(B) ANY OBLIGATION OR LIABILITY, OTHER THAN CONTRACTS IN THE
ORDINARY COURSE OF BUSINESS, (WHETHER ABSOLUTE, ACCRUED,
CONTINGENT OR OTHERWISE) INVOLVING MORE THAN FIFTY THOUSAND
DOLLARS INCURRED BY THE COMPANY OR THE COMPANY'S SUBSIDIARIES;
(C) ANY GENERAL UNIFORM INCREASE IN THE COMPENSATION OF THE
EMPLOYEES OR CONSULTANTS OF THE COMPANY OR THE COMPANY'S
SUBSIDIARIES INCLUDING, WITHOUT LIMITATION, THOSE REQUIRED BY LAW
OR COLLECTIVE BARGAINING AGREEMENTS OR UNDERTAKING OF AN
OBLIGATION TO DO SO IN THE FUTURE;
(D) INCREASE IN THE COMPENSATION PAYABLE TO ANY OFFICER OR
DIRECTOR OF THE COMPANY OR THE COMPANY'S SUBSIDIARIES;
(E) ANY AMENDMENT TO ANY EMPLOYMENT AGREEMENT TO WHICH ANY
EMPLOYEE OR CONSULTANT OF THE COMPANY OR THE COMPANY'S
SUBSIDIARIES IS A PARTY;
(F) ANY LICENSE, SALE, TRANSFER, PLEDGE, MORTGAGE OR OTHER
DISPOSITION OF ASSETS OF THE COMPANY OR THE COMPANY'S
SUBSIDIARIES OTHER THAN IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICE;
(G) ANY DETERIORATION OF RELATIONS BETWEEN THE COMPANY OR THE
COMPANY'S SUBSIDIARIES AND THEIR RESPECTIVE MATERIAL SUPPLIERS OR
CUSTOMERS;
<PAGE>
(H) ANY DIRECT OR INDIRECT REDEMPTION, PURCHASE OR OTHER
ACQUISITION OF ANY SHARES OF THE CAPITAL STOCK, STOCK OPTIONS OR
OTHER EQUITY INTERESTS IN THE COMPANY OR IN THE COMPANY'S
SUBSIDIARIES OR UNDERTAKING OF AN OBLIGATION TO DO SO IN THE
FUTURE;
(I) ANY DECLARATION, SETTING ASIDE OR PAYMENT OF ANY DIVIDEND
(WHETHER IN CASH, CAPITAL STOCK OR PROPERTY) WITH RESPECT TO ANY
SHARES OR OTHER EQUITY INTERESTS IN THE COMPANY;
(J) ANY ISSUANCE BY THE COMPANY OR THE COMPANY'S SUBSIDIARIES OF
ANY SHARES OF ITS CAPITAL STOCK, OR ANY SECURITIES OR OBLIGATIONS
CONVERTIBLE INTO OR EXCHANGEABLE FOR, OR GIVING ANY PERSON THE
RIGHT TO ACQUIRE FROM THEM, ANY SHARES OF THEIR CAPITAL STOCK,
EXCEPT PURSUANT TO THE STOCK OPTION PLAN OR EMPLOYEE STOCK
PURCHASE PLAN;
(K) ANY ACCOUNT RECEIVABLE OWING TO THE COMPANY OR THE COMPANY'S
SUBSIDIARIES WHICH SUBSEQUENT THERETO (I) HAS HAD ASSERTED
AGAINST IT ANY CLAIM, REFUSAL TO PAY OR RIGHT OF SET-OFF, (II) AN
ACCOUNT DEBTOR HAS REFUSED OR THREATENED TO REFUSE TO PAY FOR ANY
REASON OR SUCH ACCOUNT DEBTOR, TO THE KNOWLEDGE OF THE COMPANY,
HAS BECOME INSOLVENT OR BANKRUPT OR (III) HAS BEEN PLEDGED TO ANY
THIRD PARTY; OR
(L) ANY AGREEMENT RELATING TO THE BORROWING OF MONEY OR TO THE
MORTGAGING OR PLEDGING OF, OR OTHERWISE PLACING AN ENCUMBRANCE
ON, ANY ASSET OF THE COMPANY EXCEPT FOR THE BANK LOAN AND GILLULY
LOAN WHICH ARE FULLY DESCRIBED IN SCHEDULE 4.12.
Since December 31, 1999 the Company and the Company's
Subsidiaries have operated their businesses only in the ordinary
and usual course and in a manner consistent with past practices.
4.13 Undisclosed Liabilities.
To the actual knowledge of Gilluly, the Company and the
Company's Subsidiaries have not incurred any liabilities or
obligations which are not reflected in the Company Financial
Statements, other than those incurred subsequent to such date in
the ordinary course of business and consistent with past
practices of the Company and which do not and would not be
reasonably expected to have a material adverse effect. Reserves
are reflected on the Company's balance sheet dated December 31,
1999 for all liabilities of the Company in amounts that have been
established on a basis consistent with the past practices of the
Company and in accordance with GAAP.
<PAGE>
4.14 Current Information.
Company has previously delivered to Purchasers non-public
information relating to the business and affairs of the Company
and will continue to furnish similar information until the
Closing. At the time of delivery thereof none of such
information contained, or will contain, any untrue statement of a
material fact or omitted, or will omit, to state a fact necessary
in order to make such statements made therein, in light of the
circumstances in which they were made, not misleading.
4.15 Tax Matters.
The Company and the Company's Subsidiaries have filed, in a
timely manner, all federal, state, local and foreign tax returns,
reports and declarations required by applicable law and have
collected, withheld or deposited, or made provision for the
payment of all taxes (including, without limitation, income,
sales, use, occupation, property, excise and employment taxes,
and interest and penalties thereon) in a timely manner which have
or may become due on account of such filings. The federal tax
returns for the Company have been filed with the Internal Revenue
Service through the Company's fiscal year ending June 30, 1999.
The Company and the Company's Subsidiaries have not received any
notice of audits or any assessment for unpaid taxes, do not know
of any reason why any such assessment might be made and have not
agreed to any extension of time for the assessment of any taxes.
Adequate provisions have been made for the payment of all current
taxes.
4.16 Labor and Employment Matters.
Except as set forth on Schedule 4.16, neither the Company nor
any of the Company's Subsidiaries is a party to any employment or
consulting agreements. There are no controversies, claims or
grievances pending or, to the knowledge of the Company and the
actual knowledge of Gilluly, threatened between Gilluly or the
Company or any Company Subsidiary and Company Employees, or a
labor union representing any of its employees. The Company has
delivered to Purchaser a list of all of the employees of the
Company and the Company's Subsidiaries ("Company Employees"), and
a listing of the salaries, bonuses, or other compensation
currently paid to each.
4.17 Litigation.
There are no actions, suits, claims, investigations or
proceedings pending or, to the knowledge of the Company or the
actual knowledge of Gilluly, threatened against Gilluly or the
Company, before any court, Governmental Authority or arbitrator,
domestic or foreign, that has or can reasonably be expected to
have a material adverse effect on the Company or which seek: (i)
to prevent, restrict or delay the consummation of the
transactions contemplated by this Agreement; or (ii) to limit, in
any manner, the right of Purchasers to control the business of
the Company after the consummation of the transactions
contemplated by this Agreement. Furthermore, there are no
judgments, orders or decrees of any such court, Governmental
Authority or arbitrator, domestic or foreign, that has or can
reasonably be expected to have any such effect.
<PAGE>
4.18 Title to Properties.
(a) The Company does not have any fee simple interest
in real property.
(b) The Company has good title to all of the personal
property, tangible or intangible, owned by it, free and clear of
Encumbrances except for the lien securing the Bank Loan described
in Schedule 4.12.
4.19 Leases.
The Company and the Company's Subsidiaries have complied in all
material respects with their respective obligations under all
agreements into which the Company or any of the Company's
Subsidiaries have entered, whether as lessor or lessee, which
relates to either real or personal property, other than monthly
leases of personal property, which may be canceled upon not more
than thirty (30) days notice and require the payment of not more
than one thousand dollars ($1,000) per month ("Leases") and, to
the knowledge of the Company and the actual knowledge of Gilluly,
no event has occurred or condition exists which constitutes or
can reasonably be expected to constitute a breach of the
provisions of any Lease by any party thereto. Complete copies of
all of the Leases have been delivered or made available to
Purchasers.
4.20 Material Contracts.
Schedule 4.20 sets forth a complete and correct list of each
contract, agreement or commitment of the Company or the Company's
Subsidiaries, other than Leases:
(a) upon which any substantial part of the business of
the Company or of a Company's Subsidiary is dependent or which,
if breached, could reasonably be expected to have a material
adverse effect on the Company or the respective Subsidiary;
(b) which provides for aggregate future payments by or
to the Company or any of the Company's Subsidiaries of more than
fifty thousand dollars ($50,000), except for purchase orders or
sales orders arising in the ordinary and usual course of
business, in which case they are listed only if any party thereto
is obligated to make future payments aggregating more than one
hundred thousand dollars ($100,000) in any year;
(c) which extends for more than one year from the
Closing Date and may not be cancelled by the Company with thirty
(30) or less days notice;
(d) which provides for the sale, lease or other
transfer, after the date hereof and other than in the ordinary
course of business, of any of the assets of the Company or any of
the Company's Subsidiaries except those assets securing the Bank
Loan described in Section 6.5;
(e) which relates to the employment, retirement or
termination of the services of any officer or former officer of
the Company or any of the Company's Subsidiaries, except as
disclosed on Schedule 4.16; or
(f) which contains covenants pursuant to which any
Person has agreed not to compete with any business conducted by
the Company or any of the Company's Subsidiaries or not disclose
to others information concerning the Company or any of the
Company's Subsidiaries.
<PAGE>
Each of the foregoing is referred to in this Agreement as a
"Material Contract." Each Material Contract is valid and binding
on the parties thereto and is in full force and effect. The
Company and the Company's Subsidiaries have complied in all
material respects with their respective obligations under all of
the Material Contracts and, to the knowledge of the Company and
the actual knowledge of Gilluly, no event has occurred or
condition exists which constitutes or can reasonably be expected
to constitute a breach of any such contract by any party thereto.
Complete copies of all the Material Contracts have been delivered
or made available to Purchasers.
4.21 Intellectual Property.
The term "Intellectual Property" as used herein means
registered trade names, trademarks and service marks, patents,
patent rights and copyrights, whether domestic or foreign, and
inventions, trade secrets, proprietary processes and formulae,
software and other property rights generally considered to be
intellectual property other than general know-how. The Company
and the Company's Subsidiaries own, or, to the Company's
knowledge, have the right to use, all of their respective
Intellectual Property. Schedule 4.21 contains a complete and
correct list of all such Intellectual Property (other than off-
the-shelf third party software) and any royalties, honoraria,
fees or other payments payable by the Company or any of the
Company's Subsidiaries to any Person by reason of the ownership,
use, license, sale or disposition of the Intellectual Property.
There is no claim pending or, to the knowledge of the Company,
threatened against the Company or any of the Company's
Subsidiaries alleging that its use of any Intellectual Property
infringes upon the rights of any Person and to the Company's
knowledge, no Person is infringing upon the rights of the Company
or any of the Company's Subsidiaries in their respective
Intellectual Property. All letters, patent, registrations and
certificates issued by any Governmental Authority relating to the
Intellectual Property are, to the Company's knowledge, valid and
subsisting and have been properly maintained. Complete copies of
all documents pursuant to which the Company or the Company's
Subsidiaries have acquired the right to use its Intellectual
Property, or has licensed or otherwise permitted any other Person
to use any of such Intellectual Property, have been delivered or
made available to Purchasers.
4.22 Accounts Receivable.
The Company's and the Company's Subsidiaries' accounts
receivable, including those acquired by the Company or any of the
Company's Subsidiaries subsequent to the 31st day of December,
1999 but prior to the Closing (and not collected prior to
Closing), constitute valid and enforceable claims arising from
bona fide transactions in the ordinary course of business and
will have been collected or, to the knowledge of the Company,
will be collectible in amounts not less than the aggregate amount
thereof (net of reserves established in accordance with prior
practice) carried on the books of the Company. Each of such
<PAGE>
accounts receivable, except for the lien securing the Bank Loan,
are not the subject of a pledge or assignment, and are free of
Encumbrances and has not been placed for collection with any
attorney, collection agency or similar individual or firm.
Adequate reserves for doubtful accounts have been established on
the books of the Company and are reflected on the balance sheet
in accordance with GAAP. As of the date hereof, there are no
claims, refusals to pay or other rights of set-off against any
such accounts receivable, except as specified in the Disclosure
Schedules.
4.23 Maintenance of Tangible Personal Property.
Except to the extent such maintenance or condition would not
have a material adverse effect on the business or properties of
the Company or the Company's Subsidiaries, the tangible personal
property which belongs to the Company or the Company's
Subsidiaries: (i) has been maintained in good repair in
accordance with the usual practices in the United States of
businesses which are engaged in activities similar to the
business conducted by the Company or the respective Company's
Subsidiary; (ii) is in good condition, ordinary wear and tear
excepted; and (iii) is usable in the ordinary course of the
business of the Company or the respective Company's Subsidiary as
it is presently being conducted.
4.24 Insurance.
Schedule 4.24 sets forth a list of insurance policies
maintained by the Company and any of the Company's Subsidiaries.
There is no default in any respect under any provision of any
such policy nor has the Company or the respective Company's
Subsidiary failed to give notice or present any claim thereunder
in a timely manner so as to bar recovery of any valid claim.
4.25 Employee Benefit Plans.
(a) Schedule 4.25 lists all of the employee benefit
plans and programs (except the unfunded deferred compensation
plans which are listed in Schedule 4.20), including, without
limitation, all retirement, savings and other pension plans
("Pension Plans"), all health, severance, insurance, disability
and other employee welfare plans ("Welfare Plans") and all
incentive, vacation and other similar plans that are maintained
by the Company or a Company's Subsidiary on behalf of their
respective Company Employees (collectively, the "Employee Benefit
Plans").
(b) As to each of the Pension Plans, the Company and
the Company's Subsidiaries have complied, in all material
respects, with all applicable laws and regulations in
administering such plans, including specifically the provisions
of ERISA and the qualification provisions of Section 401 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"). No non-exempt prohibited transaction, as defined in
Section 4975 of the Internal Revenue Code, has occurred with
respect to any of the Pension Plans and none of the Pension Plans
has incurred any accumulated funding deficiency, as defined in
Section 412 of the Internal Revenue Code, whether or not waived.
The Company does not sponsor, and has never sponsored, a defined
benefit plan as defined in Section 3(35) of ERISA.
<PAGE>
(c) As to each of the Welfare Plans and other Employee
Benefit Plans that are not Pension Plans, the Company and the
Company's Subsidiaries have complied, in all material respects,
with all applicable laws and regulations in the administration
thereof including, without limitation, the provisions of ERISA
when applicable.
(d) The Company and the Company's Subsidiaries have
not terminated any Pension Plan within ten years preceding the
date of this Agreement.
(e) No compensation or benefit that is or will be
payable as a result of the transactions contemplated by this
Agreement will be characterized as an "excess parachute payment"
within the meaning of Section 280G of the Internal Revenue Code.
4.26 Insider Interests.
Neither Gilluly nor any officer or director of the Company or
any of the Company's Subsidiaries: (i) competes with or has a
direct non-passive interest in any business entity which competes
with the business conducted by the Company or the Company's
Subsidiaries; (ii) has any agreement of any type with the Company
or the Company's Subsidiaries other than being an at will
employee of the Company or the Company's Subsidiaries; or (iii)
has any interest, direct or indirect, in any property, real or
personal, tangible or intangible, including, without limitation,
Intellectual Property, used in or pertaining to the business
conducted by the Company or the Company's Subsidiaries, except as
a stockholder or employee of the Company or as disclosed on
Schedule 4.26.
4.27 Certain Practices.
To the knowledge of the Company and the actual knowledge of
Gilluly, no stockholder, director, officer, employee or agent of
the Company or the Company's Subsidiaries have, directly or
indirectly, made or agreed to make, any unlawful or illegal
payment, gift or political contribution to, or taken any other
unlawful or illegal action, for the benefit of any customer,
supplier, governmental employee or other Person who is or may be
in a position to assist or hinder the business of the Company or
the Company's Subsidiaries.
4.28 Work in Progress.
Schedule 4.28 contains a complete list of all contracts on
which the Company and the Company's Subsidiaries are currently
working or which have not been completed, the customer for whom
the work is being performed, and the amount and basis for payment
and the status of the contract and the work being performed
thereunder. There is currently no work being performed for which
there is either (i) no written agreement signed by the customer,
or (ii) no funding available and committed by the customer, in
the case of contracts with a Governmental Authority.
<PAGE>
4.29 Investment Banking; Brokerage.
There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (exclusive of
professional fees to lawyers and accountants) in connection with
the transactions contemplated by this Agreement payable by the
Company the Company's Subsidiaries or Gilluly based on any
arrangement or agreement made by or on behalf of the Company the
Company's Subsidiaries or Gilluly.
4.30 Customers.
Schedule 4.30 attached hereto sets forth the name of each
customer of the Company or any of the Company's Subsidiaries who
accounted for more than ten percent (10%) of the revenues of the
Company for the twelve (12) months ended June 30, 1999 and the
six (6) months ended December 31, 1999 (the "Customers"). The
relationships of the Company and the Company's Subsidiaries with
their respective Customers are good commercial working
relationships. No Customer of the Company or the Company's
Subsidiaries has canceled or otherwise terminated its
relationship with the Company or the Company's Subsidiaries, or
has during the last twelve (12) months decreased materially its
usage or purchases of the services or products of the Company or
the Company's Subsidiaries. Schedule 4.30 attached hereto sets
forth a list of each former customer of the Company who has
terminated its relationship with the Company since January 1,
2000 and who represented greater than $100,000 of business to the
Company or the Company's Subsidiaries in the twelve (12) calendar
months preceding such termination. No Customer, has, to the best
knowledge of the Company or the Company's Subsidiaries, any plan
or intention to terminate, to cancel or otherwise materially and
adversely modify its relationship with the Company or the
Company's Subsidiaries or to decrease materially or limit its
usage, purchase or distribution of the services or products of
the Company or the Company's Subsidiaries.
4.31 Warranty and Related Matters.
Schedule 4.31 attached hereto sets forth a complete list of all
outstanding product and service warranties and guarantees on any
of the products or services that the Company or the Company's
Subsidiaries distributes, services, markets or sells for itself,
a customer or a third party (each such product or service shall
be referred to herein as a "Company Product"). There are no
existing or, to the best knowledge of the Company, threatened in
writing, product liability, warranty or other similar claims
against the Company or any of the Company's Subsidiaries alleging
that any Company Product is defective or fails to meet any
product or service warranties except as set forth in Schedule
4.31.
<PAGE>
4.32 Relations.
Other than the Bank Loan, which is described in Schedule 4.12,
all of the arrangements with any banking institution relating to
the Company's depository accounts are accurately and in all
material respects described in Schedule 4.32, indicating with
respect to each of such arrangements the type of arrangement
maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in
respect thereof.
4.33 Restrictions on Business Activities.
To the actual knowledge of Gilluly, there is no agreement,
judgment, injunction, order or decree binding upon the Company or
any of the Company's Subsidiaries or Gilluly which has or could
reasonable be expected to have the effect of prohibiting or
materially impairing the business practices of the Company or any
of the Company's Subsidiaries, the acquisition of property by the
Company or any of the Company's Subsidiaries, or the conduct of
business by the Company or any of the Company's Subsidiaries in
each case as currently conducted by the Company or any of the
Company's Subsidiaries.
4.34 Security Clearances; Defective Pricing.
(a) The Company, the Company's Subsidiaries and all of their
respective officers, directors and employees are in compliance
with the security requirements set forth in Material Contracts to
which the Company or the Company's Subsidiaries are a party or by
which the Company or any of the Company's Subsidiaries or any of
their respective properties or assets may be bound. To the
knowledge of the Company, all security clearances are in full
force and effect and there are no facts which exist or have
existed which might constitute grounds for the loss or limitation
of work under any Material Contracts.
(b) To the knowledge of the Company, the Company and its
Subsidiaries are in material compliance with all applicable
pricing, profit limitation, negotiation of profit and other
regulations applicable to Material Contracts with any
governmental entity (foreign or domestic) and there are no facts
which exist or have existed which would constitute grounds for
any valid claim under any such regulations, including, without
limitation, claims for defective pricing or price renegotiation.
4.35 Reports and Financial Statements.
Company has timely filed all reports required to be filed with
the Commission pursuant to the Exchange Act or the Securities Act
(collectively, the "SEC Reports"), and has previously made
available to Purchasers true and complete copies of all such SEC
Reports as have been requested by Purchasers. Such SEC Reports,
as of their respective dates, complied in all material respects
with the applicable requirements of the Securities Act and the
<PAGE>
Exchange Act, as the case may be, and none of the such SEC
Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.36 Full Disclosure.
None of the representations and warranties of the Company or
Gilluly made in this Article contains any untrue statement of
material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to Gilluly and to the
Company the following:
5.1 Authority.
Each Purchaser is legally competent to and has full right,
authority and power to enter into this Agreement and each
agreement, document and instrument to be executed and delivered
by or on behalf of such Purchaser pursuant to or as contemplated
by this Agreement and to carry out the transactions contemplated
hereby and thereby. This Agreement and each agreement, document
and instrument executed and delivered by each Purchaser pursuant
to or as contemplated by this Agreement constitute, or when
executed and delivered will constitute, valid and binding
obligations of each of the Purchaser enforceable in accordance
with their respective terms except as its terms may be limited
by: (i) bankruptcy, insolvency or similar laws affecting to
creditors' rights generally; or (ii) general principles of
equity, whether considered in a proceeding in equity or at law.
5.2 Investment Status.
Each Purchaser is an "accredited Purchaser" as such term is
defined in Rule 501 under the Securities Act of 1933, as amended
(the "Securities Act"). Each Purchaser is purchasing the Units
for his own account, for investment only and not with a view to,
or any present intention of, effecting a distribution of such
securities or any part thereof except pursuant to a registration
or an available exemption under applicable law. Each Purchaser
acknowledges that his respective Shares, Purchase Warrants and
the shares of Common Stock which such Purchaser may acquire
through exercise of the Purchase Warrants have not been
registered under the Securities Act or the securities laws of any
state or other jurisdiction and cannot be disposed of unless they
are subsequently registered under the Securities Act and any
applicable state laws or exemption from such registration is
available.
<PAGE>
5.3 Investment Banking; Brokerage Fees.
No Purchaser has incurred or become liable for any broker's or
finder's fee, banking fees or similar compensation relating to or
in connection with the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Expenses.
The Company and the Investors shall each be responsible for and
shall bear one half of the cost of all expenses directly and
necessarily incurred by the Company or by the Investors in
connection with the proposed Investment, including, but not
limited to, all legal fees and out-of-pocket expenses of the
Investor's counsel and the Investor's out-of-pocket expenses.
The fees and expenses of Investor's counsel and the Investor's
out-of-pocket expenses (together, the "Costs and Expenses") shall
be limited to a maximum of $35,000, half of which shall be
payable by the Company and half of which shall be payable by the
Investors at the Closing. The fees and expenses of the Company's
counsel and the Company's out-of-pocket expenses (together, the
"Costs and Expenses") shall be limited to a maximum of $25,000,
half of which shall be payable by the Company and half of which
shall be payable by the Investors at the Closing. Each Purchaser
shall pay that portion of Investors' responsibility hereunder
equal to the proportion such Purchaser's investment bears to the
total investment of all Purchasers.
6.2 Public Announcements.
The parties to this Agreement will consult with one another
before issuing any press releases or otherwise making any public
statements with respect to this Agreement and the transactions
contemplated hereby and will not issue any such press release or
make any such public statement without the consent of the other
unless such action is specifically required by law.
6.3 Further Assurances.
Gilluly, Company and Purchasers, as the case may be, will use
reasonable efforts to implement the provisions of this Agreement
and for such purpose, at the request and expense of Purchasers,
Gilluly and Company, as the case may be, will, at or after the
Closing, without further consideration, promptly execute and
deliver, or cause to be executed and delivered, such additional
documents as may be necessary to implement any provision of this
Agreement and the Related Agreements.
6.4 Board of Directors
At Closing two (2) members of the Company's Board of
Directors shall resign and Stout shall be appointed to serve the
unexpired term of one of the directors. Promptly, upon
compliance with the requirements of Section 14(f) of the Exchange
Act and Rule 14(f)-1 promulgated thereunder, two (2) additional
designees of the Investors shall be appointed to serve the vacant
unexpired terms of office of former members of the Company's
Board of Directors.
<PAGE>
6.5 United Bank.
Stout shall guarantee fifty percent 50% of the Bank Loan
to the Company in the maximum principal amount of $1,500,000 from
United Bank.
6.6 Gilluly's Loan Repayment.
Subject to approval from the Bank, Purchasers shall cause the
Company to repay, at Closing, two hundred thousand dollars
($200,000) of Gilluly's Loan and the remaining balance of
Gilluly's Loan within six months thereafter.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASERS
The obligation of Purchasers to consummate the transactions
contemplated by this Agreement shall be subject, to the extent
not waived, to each of the following conditions.
7.1 Representations and Warranties.
Except for changes expressly contemplated by this Agreement,
each of the representations and warranties of Company and of
Gilluly contained in this Agreement, which representations and
warranties include the information in the schedules corresponding
thereto, shall be true and correct in all material respects as of
the date of Closing and Gilluly and Company shall have delivered
to Purchasers a certificate to that effect signed by Gilluly as a
stockholder of the Company and a certificate to that effect
signed by an officer of the Company.
7.2 Performance of this Agreement.
Gilluly shall have, and the Company shall have, performed in
all material respects all of its obligations to be performed
before or at Closing under this Agreement and shall have
delivered to Purchasers a certificate to that effect signed by
Gilluly and the Chairman or President of the Company.
7.3 Corporate Authorization.
All corporate action required to be taken by the Company in
connection with the transactions contemplated hereby shall have
been taken, all documents incident thereto shall be reasonably
satisfactory in substance and form to Purchaser and shall have
received such originals or copies of such documents as it may
reasonably request.
7.4 Executive Agreements.
The Company, Gilluly and Stout shall have executed and
delivered Employment Agreements in the forms attached hereto as
Exhibit E and Exhibit F, respectively.
<PAGE>
7.5 Approvals and Consents.
The Company and Gilluly shall have made all filings with and
notifications of governmental authorities, regulatory agencies
and other entities required to be made by them in connection with
the execution and delivery of this Agreement and the performance
by them of the transactions contemplation hereby and the
Purchasers shall have received copies of all required
authorizations, waivers, consents and permits to permit the
consummation of the transactions contemplated by this Agreement,
in form and substance satisfactory to the Purchasers.
7.6 United Bank Approval.
The agreement by the Bank to waive any current defaults or
failure on the part of the Company to comply with any terms of
the Bank Loan and to forebear action with regard to the Bank Loan
in form and substance satisfactory to the Purchasers.
7.7 Injunction, Litigation, etc.
No order of any court or governmental agency shall be in
effect which restrains or prohibits the consummation of the
transactions contemplated by this Agreement or which would limit
or affect the ability of Purchasers to own and control a portion
of the Company, and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any
such court or governmental agency seeking to prohibit or delay or
challenging the validity of the transactions contemplated by this
Agreement.
7.8 Legislation.
No statute, rule or regulation shall have been proposed or
enacted which prohibits or might prohibit, restrict or delay the
consummation of the transactions contemplated by this Agreement.
7.9 Estoppel Certificates, etc.
Gilluly and Company shall have obtained and delivered to
Purchasers executed estoppel certificates satisfactory in form
and substance to Purchaser, and such other information with
respect to the Leases as Purchasers may reasonably request.
7.10 Resignation.
Two (2) of the existing four (4) directors of the Company
shall have submitted their resignations from such positions with
the Company as of the Closing Date.
7.11 Opinion of Counsel for Company and Gilluly.
Purchasers shall have received an opinion from McGuire, Woods,
Battle & Boothe, counsel for the Company and Gilluly, in
substantially the form attached hereto as Schedule 7.11.
7.12 Fairness Opinion.
The Company shall have obtained a fairness opinion from a
reputable firm experienced in Company valuations that confirms
the fairness of the transactions contemplated herein to the
Company and its shareholders.
<PAGE>
7.13 Election of Directors.
The Company shall have taken all necessary corporate action to
effect the appointment of Stout as a director of the Company,
conditioned upon and effective as of the completion of the
Closing and the appointment of two (2) additional directors of
the Company designated by the Investors to take office after
compliance with Section 14(f) of the Exchange Act.
7.14 Delivery of Closing Documents.
At the Closing Date, the Company and Gilluly shall have
delivered, or shall have caused to be delivered, to the
Purchasers, all in form and substance satisfactory to the
Purchasers, the following:
(a) Executed copies of the Voting Agreement and the
Registration Rights Agreement in the forms attached hereto as
Exhibit C and Exhibit D, respectively;
(b) Certificates issued by (i) the Secretary of State
(or similar authority) of the States of organization of the
Company and its Subsidiaries (other than inactive Subsidiaries)
certifying that the Company and its Subsidiaries have legal
existence and are in good standing; and (ii) the Secretary of
State (or similar authority) of each jurisdiction in which the
Company or its Subsidiaries have qualified to do business as a
foreign corporation as to such foreign qualification;
(c) Executed copies of an agreement extending the term
of the Investment Banking Agreement dated January 7, 1999
between the Company and Boles Knop & Company, L.L.C. ("Boles
Knop") to January 7, 2001 upon the same terms and conditions;
provided, however, that no fee shall be charged by Boles Knop
under the existing or any extended Investment Banking Agreement
with respect to the transactions contemplated herein;
(d) A certificate of the Secretary of the Company
which shall certify the names of the officers of the Company
authorized to sign this Agreement and the other documents,
instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with
the true signatures of such officers;
(e) Stock certificates issued, or instructions to the
Company's Transfer Agent to issue stock certificates, in the
names of the Purchasers for the shares set forth opposite each
Purchaser's name in Exhibit B;
(f) Purchase Warrants issued in the names of the
Purchasers as set forth opposite each Purchasers name in Exhibit
B; and
(g) Such other supporting documents and certificates
as the Purchasers may reasonably request and as may be required
pursuant to this Agreement.
<PAGE>
7.15 Indemnification and Contribution Agreements.
Stout and Knop shall have executed and delivered an
Indemnification and Contribution Agreement relating to Stout's
guaranty of the bank loan in form and substance satisfactory to
each.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF
GILLULY AND COMPANY
The obligation of Gilluly and Company to consummate the
transactions contemplated by this Agreement shall be subject, to
the extent not waived, to the satisfaction of each of the
following conditions.
8.1 Representations and Warranties.
Except for changes expressly contemplated by this Agreement,
each of the representations and warranties of Purchasers
contained in this Agreement shall be true and correct in all
material respects as of the date of Closing, and Purchaser shall
have delivered to Company a certificate to that effect.
8.2 Performance of this Agreement.
Purchasers shall have performed in all material respects, all
of its obligations under this Agreement and shall have delivered
to Company a certificate to that effect.
8.3 Injunction, Litigation, etc.
No order of any court or governmental agency shall be in effect
which restrains or prohibits the consummation of the transactions
contemplated by this Agreement and there shall not have been
threatened, nor shall there be pending, any action or proceeding
by or before any such court or governmental agency seeking to
prohibit or delay or challenging the validity of any of the
transactions contemplated by this Agreement.
8.4 Legislation.
No statute, rule or regulation shall have been proposed or
enacted which prohibits or might prohibit, restrict or delay the
consummation of the transactions contemplated hereby.
8.5
Delivery of Closing Documents.
(a) On the Closing Date, the Purchasers shall have
executed and delivered the Voting Agreement and Registration
Rights Agreement, substantially in the forms attached as Exhibit
C and Exhibit D, respectively; and
(b) Confirmation of bank wire transfer of the Purchase
Price to the Company's designated account.
<PAGE>
ARTICLE IX
CLOSING
9.1 Time and Place of Closing.
The Closing shall take place at the offices of Holland &
Knight, LLP, 3110 Fairview Park Drive, Suite 900, Falls Church,
Virginia 22042, at 1:00 p.m. local time on Thursday the 30th day
of March 2000 ("Closing Date").
9.2 Deliveries by Company and Gilluly.
At Closing, Company and Gilluly shall deliver to Purchaser the
following:
(a) Each of the Closing Documents listed in Section 7.14;
(b) The Executive Agreements required by Section 7.4;
(c) Copies of the certificates, consents and agreements required
by Sections 7.5, 7.6, 7.9 and 7.10;
(d) The Opinion of Counsel required by Section 7.11; and
(e) The Fairness Opinion required by Section 7.12; and
(f) Such additional documents as Purchaser may reasonably
request.
9.3 Deliveries by Purchasers.
At the Closing, Purchasers shall deliver to Gilluly and Company
the following:
(a) Each of the Closing Documents listed in Section 8.5; and
(b) Such additional documents as Gilluly and Company may
reasonably request.
<PAGE>
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Company.
Subject to the limitations contained in this Article, Company
will indemnify and hold Purchaser harmless from any damage, loss,
liability or expense including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees arising
out of:
(a) Any breach of a representation and warranty made
by Gilluly and Company in this Agreement;
(b) The breach of any agreement of Gilluly and Company
contained in this Agreement; or
(c) Any undisclosed liability or obligation of the
Company, whether civil or criminal in nature arising out of
actions that occurred prior to the Closing Date.
10.2 Indemnification by Purchaser.
Subject to the limitations contained in this Article, each
Purchaser will indemnify and hold Company harmless from any
damage, loss, liability or expense including without limitation,
reasonable expenses of investigation and reasonable attorneys'
fees arising out of:
(a) Any breach of a representation and warranty made
by such Purchaser in this Agreement; or
(b) The breach of any agreement of such Purchaser
contained in this Agreement.
10.3 Company's Obligations for Third Party Claims.
The obligation of Company to indemnify Purchaser under the
provisions of this Article with respect to claims resulting from
the assertion of liability by Persons not parties to this
Agreement (including governmental claims for penalties, fines and
assessments) shall be subject to the following terms and
conditions:
(a) Purchaser shall give prompt written notice to
Company of any assertion of liability by a third party which
might give rise to a claim for indemnification based on the
foregoing provisions of this Article, which notice shall state
the nature and basis of the assertion and the amount thereof, to
the extent known, provided, however, that no delay on the part of
Purchaser in giving notice shall relieve Company of any
obligation to indemnify unless (and then solely to the extent
that) Company are prejudiced by such delay.
<PAGE>
(b) If any action, suit or proceeding (a "Legal
Action") is brought against Purchaser with respect to which
Company may have liability under the foregoing provisions of this
Article, the Legal Action shall be defended by Company and such
defense shall include all proceedings for appeal or review which
counsel for Purchaser shall deem appropriate.
(c) Notwithstanding the provisions of the previous
subsection of this Agreement, until Company shall have assumed
the defense of any such Legal Action, the defense shall be
handled by Purchaser. Furthermore, (A) if Company fails to
provide Purchaser with evidence acceptable to Purchaser that
Company has sufficient financial resources to defend and fulfill
its indemnification obligation with respect to the Legal Action;
or (B) if the Legal Action involves other than money damages and
seeks injunctive or other equitable relief; Company shall not be
entitled to assume the defense of the Legal Action and the
defense shall be handled by Purchaser. If the defense of the
Legal Action is handled by Purchaser under the provisions of this
subsection, Company shall pay all legal and other expenses
reasonably incurred by Purchaser in conducting such defense.
(d) In any Legal Action initiated by a third party and
defended by the indemnifying party (A) the indemnified party
shall have the right to be represented by advisory counsel and
accountants, at its own expense, (B) the indemnifying party shall
keep the indemnified party fully informed as to the status of
such Legal Action at all stages thereof, whether or not the
indemnified party is represented by its own counsel, (C) the
indemnifying party shall make available to the indemnified party,
and its attorneys, accountants and other representatives, all
books and records of the indemnifying party relating to such
Legal Action and (D) the parties shall render to each other such
assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Legal Action.
(e) In any Legal Action initiated by a third party and
defended by the indemnifying party, the indemnifying party shall
not make any settlement of any claim without the written consent
of the indemnified party, which consent shall not be unreasonably
withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other equitable relief against
the indemnified party or its assets, employees or business, or
relief which the indemnified party reasonably believes could
establish a custom or precedent which will be materially adverse
to the best interests of its continuing business.
10.4 Purchaser's Obligations for Third Party Claims.
The obligation of Purchaser to indemnify Company under the
provisions of this Article with respect to claims resulting from
the assertion of liability by Persons not parties to this
Agreement (including governmental claims for penalties, fines and
assessments) shall be subject to the following terms and
conditions:
<PAGE>
(a) Company shall give prompt written notice to
Purchaser of any assertion of liability by a third party which
might give rise to a claim for indemnification based on the
foregoing provisions of this Article, which notice shall state
the nature and basis of the assertion and the amount thereof, to
the extent known, provided, however, that no delay on the part of
Company in giving notice shall relieve Purchaser of any
obligation to indemnify unless (and then solely to the extent
that) Purchaser is prejudiced by such delay.
(b) If any Legal Action is brought against Company
with respect to which Purchaser may have liability under the
foregoing provisions of this Article, the Legal Action shall be
defended by Purchaser and such defense shall include all
proceedings for appeal or review which counsel for Company shall
deem appropriate.
(c) Notwithstanding the provisions of the previous
subsection of this Agreement, until Purchaser shall have assumed
the defense of any such Legal Action, the defense shall be
handled by Company. Furthermore, (A) if Purchaser fails to
provide Company with evidence acceptable to Company that
Purchaser has sufficient financial resources to defend and
fulfill its indemnification obligation with respect to the Legal
Action; or (B) if the Legal Action involves other than money
damages and seeks injunctive or other equitable relief; Purchaser
shall not be entitled to assume the defense of the Legal Action
and the defense shall be handled by Company. If the defense of
the Legal Action is handled by Company under the provisions of
this subsection, Purchaser shall pay all legal and other expenses
reasonably incurred by Company in conducting such defense.
(d) In any Legal Action initiated by a third party and
defended by the indemnifying party (A) the indemnified party
shall have the right to be represented by advisory counsel and
accountants, at its own expense, (B) the indemnifying party shall
keep the indemnified party fully informed as to the status of
such Legal Action at all stages thereof, whether or not the
indemnified party is represented by its own counsel, (C) the
indemnifying party shall make available to the indemnified party,
and its attorneys, accountants and other representatives, all
books and records of the indemnifying party relating to such
Legal Action and (D) the parties shall render to each other such
assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Legal Action.
(e) In any Legal Action initiated by a third party and
defended by the indemnifying party, the indemnifying party shall
not make any settlement of any claim without the written consent
of the indemnified party, which consent shall not be unreasonably
withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other equitable relief against
the indemnified party or its assets, employees or business, or
relief which the indemnified party reasonably believes could
establish a custom or precedent which will be materially adverse
to the best interests of its continuing business.
<PAGE>
10.5 Limitations on Indemnification.
(a) Neither the Company nor the Purchaser shall have
any obligation to indemnify the other under this Article unless
and until the aggregate amount of its liability exceeds fifty
thousand dollars ($50,000), and thereafter the indemnified party
shall be entitled to indemnification thereunder only for the
aggregate amount of such liability in excess of fifty thousand
dollars ($50,000).
(b) All damages to which the indemnified party may be
entitled pursuant to the provisions of this Article shall be net
of any insurance coverage in which the indemnified party receives
the benefits with respect thereto.
(c) The indemnification obligations of the Company or
Purchaser under Article X shall terminate two (2) years from the
Closing Date, except with respect to any claims for
indemnification as to which the indemnified party shall have
given the indemnifying party written notice setting forth its
claim with reasonable specificity (in contradistinction to
generalized allegations) as to the nature thereof on or prior to
two (2) years from the Closing Date.
(d) Notwithstanding any other provision of the
Agreement, the Company's liability under this Article X shall not
exceed one million dollars ($1,000,000) in the aggregate.
(e) Notwithstanding any other provision of the
Agreement, Purchaser's liability under this Article X shall not
exceed one million dollars ($1,000,000) in the aggregate.
10.6 Survival; Investigation.
The representations and warranties of Gilluly and Company
contained in this Agreement shall survive any investigation by
Purchaser and shall not terminate until the second (2nd)
anniversary of the Closing (the "Survival Date") at which time
they shall lapse. Notwithstanding the provisions of the
preceding sentence, any representation or warranty in respect of
which indemnification may be sought under Sections 10.1 and 10.2
shall survive the Survival Date if written notice, given in good
faith, of the specific breach thereof is given to Gilluly and
Company prior to the Survival Date, whether or not liability has
actually been incurred.
10.7 Waiver of Suretyship Defenses; Legal Fees.
Company and Gilluly expressly waive any right arising from
Section 49-25 or 49-26 of the Code of Virginia, to require that
the Purchasers bring action against Gilluly or the Company or the
benefit of any other suretyship statutes and principles at law or
in equity requiring, inter alia, any notice to Gilluly or Company
of or prior to the commencement of any proceeding against Gilluly
or the Company for any cause of action which Purchasers may
assert arising out of or in connection with this Agreement and
the related transactional agreements set forth in the Exhibits
hereto (the "Transaction Documents") or the exhaustion of
collection remedies against Gilluly or the Company before
proceeding against and collecting from the other.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices.
All notices and other communications given hereunder shall be
in writing. Notices shall be effective when delivered, if
delivered personally. Otherwise, they shall be effective when
sent to the parties at the addresses or numbers listed below, as
follows: (i) on the business day delivered (or the next business
day following delivery if not delivered on a business day) if
sent by a local or long distance courier, prepaid telegram,
telefax or other facsimile means; or (ii) three days after
mailing if mailed by registered or certified U.S. mail, postage
prepaid and return receipt requested.
If to Gilluly to:
C.W. Gilluly
415 First Street, S.E.
Washington, D.C. 20003-1827
Telefax: (202) 544-8384
With a copy to:
MCGUIRE, WOODS, BATTLE, & BOOTHE, LLP
1750 Tysons Blvd., Suite 1800
McLean, Virginia 22102
Attention: Jocelyn West Brittin Esquire
Telefax No.: (703) 712-5050
If to Company to:
Hadron, Inc.
5904 Richmond Highway, Suite 300
Alexandria, Virginia 22303
Attn: President
Telefax: (703) 329-9409
If to Investors to:
Jon M. Stout
Patricia W. Stout
Stout Dynastic Trust
10 Maiden Bower Court
Potomac, Maryland 20854
Telefax: (301) 947-0544
With a copy to:
HOLLAND & KNIGHT, LLP
2100 Pennsylvania N.W., Suite 400
Washington, D.C. 20037
Attention: William J. Mutryn, Esquire
Telefax: (202) 955-5564
<PAGE>
If to J. Richard Knop:
2 West Washington Street
Post Office Box 978
Middleburg, VA 20118
Telefax: (540) 687-8112
If to John D. Sanders:
2500 Virginia Avenue, N.W. Apt. 1408-S
Washington, D.C. 20037
Telefax: (202) 965-4774
Any Person may change the address or number to which notices
are to be delivered to him, her or it by giving the other Persons
named above notice of the change in the manner set forth above.
11.2 Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Virginia without regard to
its choice of law rules.
11.3 Schedules.
The information contained in any schedule or exhibit which is
referred to in any section of this Agreement shall be deemed to
have been disclosed in connection with, and to be incorporated
into, that particular section only, and shall not be deemed a
part of any other section.
11.4 Headings.
The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation
of the Agreement.
11.5 Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.6 Miscellaneous.
This Agreement: (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject
matter hereof; (ii) is not intended to and shall not confer upon
any Person, other than the parties hereto, any rights or
remedies; and (iii) shall not be assigned by operation of law or
otherwise.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed and their corporate seals to be hereto
affixed and attested by their duly authorized officers.
COMPANY: GILLULY:
Hadron, Inc.
/S/ C.W. GILLULY /S/ C.W. GILLULY
______________________ ___________________________
By: C.W. Gilluly C.W. Gilluly
Title: Chairman
and Chief Executive Officer
PURCHASERS:
/S/ JON M. STOUT /S/ J. RICHARD KNOP
_________________ __________________________
Jon M. Stout J. Richard Knop
/S/ PATRICIA W. STOUT /S/ JON M. STOUT
_____________________ _________________________
Patricia W. Stout Stout Dynastic Trust
By Jon M. Stout, Trustee
/S/ JOHN D. SANDERS
____________________
John D. Sanders
<PAGE>
EXHIBIT A
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED 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.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received,
or _____ registered assigns ("Holder") is entitled, subject to
the terms set forth below, to purchase from Hadron, Inc., a New
York corporation (the "Company"), such number of shares of the
Common Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on March
, 2000 and ending on March , 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
shares of the Company's Common Stock. This Warrant may be
exercised in whole or in part in as many exercises as Holder may
elect. The Exercise Price shall be payable by check for good and
sufficient United States funds.
<PAGE>
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten (10) trading days prior to the exercise date of
this Warrant on the principal exchange of which the Common Stock
may at the time be listed; or, if there shall have been no sales
on such exchange on any such trading day, the average of the
closing bid and asked prices on such exchange on such trading
day; or, if there is no such bid and asked price occurred; or, if
the Common Stock shall not be so listed, the average of the
closing sales prices as reported by NASDAQ (including its
bulletin board) at the end of each of the ten trading days prior
to the date of exercise of this Warrant in the over-the counter
market; provided that if one class of the Common Stock is listed
or reported as described in this sentence but the class of Common
Stock with respect to which Fair Market Value is being measured
is not so listed or reported, then the Fair Market Value per
share with respect to such unlisted and unreported class shall be
identical to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
<PAGE>
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
<PAGE>
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
<PAGE>
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
<PAGE>
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder:
--------------------
--------------------
--------------------
--------------------
--------------------
Fax: --------------
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
<PAGE>
11. Legend. 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 A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
<PAGE>
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: March , 2000 HADRON, INC.
By:_________________________________
C.W. Gilluly
Chief Executive Officer
Attested:
________________________
Secretary
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By: ________________________________
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
PURCHASER ALLOCATIONS
INVESTORS SHARES OF WARRANTS TO AGGREGATE
COMMON STOCK PURCHASE PURCHASE
TO BE SHARES OF PRICE
PURCHASED FROM COMMON STOCK
THE COMPANY FROM THE
COMPANY
<S> <C> <C> <C>
Jon M. Stout 261,290 235,161 $101,903.10
Patricia W. Stout and 256,410 230,769 $99,999.90
Stout Dynastic 1,128,200 1,015,380 $439,998.00
Trust
10 Maiden Bower Ct.
Potomac, MD 20854
J. Richard Knop 514,100 462,690 $200,499
2 West Washington St.
Post Office Box 978
Middleburg, VA 20118
John D. Sanders 90,000 81,000 $35,100
2500 Virginia Ave, N.W.
Apt. 1408-S
Washington, D.C. 20037
</TABLE>
<PAGE>
Exhibit#_________
HADRON, INC.
REGISTRATION RIGHTS AGREEMENT
March 30, 2000
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT dated March 30, 2000, by and among
Hadron, Inc., a New York corporation (the "Company"), Jon M.
Stout ("Stout"), Patricia W. Stout ("Mrs. Stout"), Stout
Dynastic Trust ("Stout Trust") and J. Richard Knop ("Knop")
(Stout, Mrs. Stout, Stout Trust and Knop being each, an
"Investor" and collectively, the "Investors") and the
persons designated as Other Holders on the signature pages
hereto (each, an "Other Holder" and collectively, the "Other
Holders").
WHEREAS, the Company, the Investors and certain of the
Other Holders are simultaneously entering into a certain
Securities Purchase Agreement, dated as of the date hereof
(the "Purchase Agreement"), whereby the Investors have
agreed to purchase shares of common stock, par value $.02
per share, of the Company (" Common Stock"), and warrants to
purchase additional shares of Common Stock ("Purchase
Warrants"); and
WHEREAS, the execution of this Agreement is an
inducement and a condition precedent to the purchase by the
Investors of Common Stock and Purchase Warrants under the
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, as an
inducement to the Investors to consummate the transactions
contemplated by the Purchase Agreement, and for other good
and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company, the Investors and
the Other Holders hereby covenant and agree with each other
as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective
meanings:
"Board of Directors" means the Board of Directors
of the Company.
"Commission" shall mean the United States
Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act and the
Exchange Act.
"Common Stock" shall mean the Common Stock, par
value $.02 per share, of the Company and any other
securities into which or for which any of the securities
described above may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of
assets or otherwise.
"Company" shall refer to the Company and any
successor or successors thereto.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or any similar successor federal
statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Majority Interest" means the holders of not less
than a majority in interest in the outstanding Registrable
Securities held by all of the referenced class.
"Person" shall mean an individual, a corporation,
a partnership, a joint venture, a trust, an unincorporated
organization, a limited liability company or partnership, a
government and any agency or political subdivision thereof.
"Registrable Securities" shall mean (i) any shares
of Common Stock purchased by the Investors pursuant to the
Purchase Agreement or received by the Investors, or subject
to acquisition by any Investor upon the exercise of the
Purchase Warrants (it being understood that for purposes of
this Agreement, an Investor will be deemed to be a holder of
Registrable Securities whenever such Person has the right to
then acquire or obtain from the Company any Registrable
Securities, whether or not such acquisition has actually
been effected); (ii) any shares of Common Stock purchased
by the Other Holders pursuant to the Purchase Agreement,
owned by Other Holders on the Closing Date of the Purchase
Agreement or received by the Other Holders, or subject to
acquisition by any Other Holders upon the exercise of the
Purchase Warrants (it being understood that for purposes of
this Agreement, an Other Holder will be deemed to be a
holder of Registrable Securities whenever such Person has
the right to then acquire or obtain from the Company any
Registrable Securities, whether or not such acquisition has
actually been effected); and (iii) any other securities
issued and issuable with respect to any such shares
described in clause (i) and (ii) above by way of a stock
dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization; provided, however, that notwithstanding
anything to the contrary contained herein, "Registrable
Securities" shall not at any time include any securities (i)
registered and sold pursuant to the Securities Act, (ii)
sold to the public pursuant to Rule 144 promulgated under
the Securities Act or (iii) which could then be sold in
their entirety pursuant to Rule 144(k) without limitation or
restriction.
"Registration Expenses" shall mean the expenses so
described in Section 5 hereof.
"Securities Act" shall mean the Securities Act of
1933, as amended, or any similar successor federal statute,
and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
2. Demand Registration.
(a) At any time after the date of this Agreement, a
Majority Interest of the Investors may notify the Company
that they intend to offer or cause to be offered for public
sale all or any portion of their Registrable Securities in
the manner specified in such request. Upon receipt of such
request, the Company shall promptly deliver notice of such
request to all Persons holding Registrable Securities and
who shall then have thirty (30) days to notify the Company
in writing of their desire to be included in such
registration. If the request for registration contemplates
an underwritten public offering, the Company shall state
such in the written notice and in such event, the right of
any Person to participate in such registration shall be
conditioned upon their participation in such underwritten
public offering and the inclusion of their Registrable
Securities in the underwritten public offering to the extent
provided herein. The Company will use its reasonable best
efforts to expeditiously effect the registration of all
Registrable Securities whose holders request participation
in such registration under the Securities Act and qualified
for sale under any state blue sky law; provided, however,
that the Company shall not be required to effect
registration pursuant to a request under this Section 2 more
than one (1) time for the holders of the Registrable
Securities as a group. Notwithstanding anything to the
contrary contained herein, no request may be made under this
Section 2 within ninety (90) days after the effective date
of a registration statement filed by the Company covering a
firm commitment underwritten public offering. The Company
may postpone the filing or the effectiveness of any
registration statement pursuant to this Section 2 for a
reasonable time period, provided that such postponements
shall not exceed ninety (90) days in the aggregate during
any twelve (12) month period, if (i) the Company has been
advised by legal counsel that such filing or effectiveness
would require disclosure of a material financing,
acquisition or other corporate transaction, and the Board of
Directors of the Company determines in good faith that such
disclosure is not in the best interests of the Company and
its stockholders or (ii) the Board of Directors of the
Company determines in good faith that there is a valid
business purpose or reason for delaying filing or
effectiveness (which period may be extended an additional 30
days if such deferral will materially reduce the expenses of
such registration due to the elimination of the need for any
special audits to be performed in connection with such
registration). A registration will not count as a requested
registration under this Section 2(a) until the registration
statement relating to such registration has been declared
effective by the Commission at the request of the initiating
holders; provided, however, that if a majority in interest
of the participating Investors holding Registrable
Securities shall request, in writing, that the Company
withdraw a registration statement which has been filed under
this Section 2(a) but not yet been declared effective, a
majority in interest of such Investors may thereafter
request the Company to reinstate such Registration
Statement, if permitted under the Securities Act, or to file
another registration statement, in accordance with the
procedures set forth herein; provided however, that if the
withdrawal and filing of another registration statement
materially increases the total expenses anticipated to be
incurred with respect to the withdrawn registration, the
Investors shall share equally with the Company such
increased expenses.
(b) If a requested registration involves an underwritten
public offering and the managing underwriter of such
offering determines in good faith that the number of
securities sought to be offered should be limited due to
market conditions, then the number of securities to be
included in such underwritten public offering shall be
reduced to a number deemed satisfactory by such managing
underwriter, provided that the shares to be excluded shall
be determined in the following sequence: (i) first,
securities held by any other Persons (other than the
Investors or Other Holders holding Registrable Securities)
not having registration rights or having contractual,
incidental "piggy back" right to include such securities in
the registration statement, (ii) second, shares sought to be
registered by the Company, (iii) third, Registrable
Securities of holders (other than Investors and Other
Holders) who did not make the original request for
registration, and (iv) fourth, Registrable Securities of
holders who requested such registration pursuant to
Section 2(a), it being understood that no shares shall be
registered for the account of the Company or any shareholder
other than the Investors or Other Holders unless all
Registrable Securities for which Investors and Other Holders
have requested registration have been registered. If there
is a reduction of the number of Registrable Securities
pursuant to clauses (i), (iii) or (iv), such reduction shall
be made on a pro rata basis (based upon the aggregate number
of shares of Common Stock or Registrable Securities held by
the holders in each tranche and subject to the priorities
set forth in the preceding sentence).
(c) With respect to a request for registration pursuant to
Section 2(a) which is for an underwritten public offering,
the managing underwriter shall be chosen by the Investors
holding not less than a Majority Interest of the
Registrable Securities to be sold in such offering, subject
to the Company's consent, which such consent shall not be
unreasonably withheld. The Company may not cause any other
registration of securities for sale for its own account
(other than a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of
the Securities Act is applicable) to become effective within
one hundred eighty (180) days following the effective date
of any registration required pursuant to this Section 2 or
such lesser period as may be consented to by the managing
underwriter.
3. Piggyback Registration. If the Company at any time
proposes to register any of its Common Stock under the
Securities Act for sale to the public (including pursuant to
a demand under Section 2 hereof as provided therein and
except with respect to registration statements on Forms S-4,
S-8 or any successor form or another form not available for
registering the Registrable Securities for sale to the
public), each such time it will give written notice at the
applicable address of record to each holder of Registrable
Securities of its intention to do so. Upon the written
request of any Investor holding Registrable Securities,
given within thirty (30) days after receipt by such Person
of such notice, the Company will, subject to the limits
contained in this Section 3, use its reasonable best efforts
to cause all such Registrable Securities of any requesting
holders to be registered under the Securities Act and
qualified for sale under any state blue sky law, all to the
extent required to permit such sale or other disposition of
said Registrable Securities; provided, however, that if the
Company is advised in writing in good faith by any managing
underwriter of the Company's securities being offered in a
public offering pursuant to such registration statement that
the amount to be sold by persons other than the Company
(collectively, "Selling Stockholders") is greater than the
amount which can be offered without adversely affecting the
offering, the Company may reduce the amount offered for the
accounts of Selling Stockholders (including such holders of
shares of Registrable Securities) to a number deemed
satisfactory by such managing underwriter; and provided
further, that the shares to be excluded shall be determined
in the following sequence: (i) first, securities held by
any Persons not having any such contractual, incidental
registration rights, (ii) second, securities held by any
Persons having contractual, incidental registration rights
pursuant to an agreement which is not this Agreement, (iii)
third, in a registration requested pursuant to Section 2,
all Registrable Securities other than those held by the
participating Investors and Other Holders and (iv) fourth,
the Registrable Securities sought to be included by
participating Investors and Other Holders requesting
registration, pari pasu in accordance with the amount of
Registrable Securities sought to be included by each such
holder.
4. Registration Procedures. If and whenever the Company
is required by the provisions of this Agreement to use its
reasonable best efforts to effect the registration of any of
its securities under the Securities Act, the Company will,
as expeditiously as possible:
(a) use its reasonable best efforts diligently to prepare
and file with the Commission a registration statement on the
appropriate form under the Securities Act with respect to
such securities, which registration statement shall comply
as to form in all material respects with the requirements of
the applicable form and include all financial statements
required by the Commission to be filed therewith, and use
its reasonable best efforts to cause such registration
statement to become and remain effective until completion of
the proposed offering (but not for more than one hundred
eighty (180) days);
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective until the
completion of the offering (but not for more than one
hundred eighty (180) days) and to comply with the provisions
of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration
statement whenever the seller or sellers of such securities
shall desire to sell or otherwise dispose of the same, but
only to the extent provided in this Agreement;
(c) furnish to each selling holder and the underwriters, if
any, such number of copies of such registration statement,
any amendments thereto, any documents incorporated by
reference therein, the prospectus, including a preliminary
prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such selling
holder may reasonably request in order to facilitate the
public sale or other disposition of the securities owned by
such selling holder;
(d) use its reasonable best efforts to register or qualify
the securities covered by such registration statement under
and to the extent required by such other securities or state
blue sky laws of such jurisdictions as each selling holder
shall reasonably request, and do any and all other acts and
things which may be necessary under such securities or blue
sky laws to enable such selling holder to consummate the
public sale or other disposition in such jurisdictions of
the securities owned by such selling holder, except that the
Company shall not for any such purpose be required to
qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) within a reasonable time before each filing of the
registration statement or prospectus or amendments or
supplements thereto with the Commission, furnish to counsel
selected in the manner set forth in Section 5 below by the
holders of Registrable Securities, copies of such documents
proposed to be filed, and use its reasonable best efforts to
incorporate comments;
(f) promptly notify each selling holder of Registrable
Securities, such selling holders' counsel selected in this
manner set forth in Section 5 below and any underwriter and
(if requested by any such Person) confirm such notice in
writing, of the happening of any event which makes any
statement made in the registration statement or related
prospectus untrue or which requires the making of any
changes in such registration statement or prospectus so that
they will not contain any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein
in the light of the circumstances under which they were made
not misleading; and, as promptly as practicable thereafter,
prepare and file with the Commission and furnish a
supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Registrable
Securities, such prospectus will not contain any untrue
statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading;
(g) use its reasonable best efforts to prevent the issuance
of any order suspending the effectiveness of a registration
statement, and if one is issued use its reasonable best
efforts to obtain the withdrawal of any order suspending the
effectiveness of a registration statement at the earliest
possible moment;
(h) if reasonably requested by the managing underwriter or
underwriters (if any), any selling holder, or such selling
holder's counsel, promptly incorporate in a prospectus
supplement or post-effective amendment such information as
such Person requests to be included therein with respect to
the selling holder or the securities being sold, including,
without limitation, with respect to the securities being
sold by such selling holder to such underwriter or
underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other
terms of an underwritten offering of the securities to be
sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective
amendment;
(i) make available to each selling holder, any underwriter
participating in any disposition pursuant to a registration
statement, and any attorney, accountant or other agent or
representative retained by any such selling holder or
underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), as
shall be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection
with such registration statement subject, in each case, to
such confidentiality agreements as the Company shall
reasonably request;
(j) enter into any reasonable underwriting agreement
required by the proposed underwriter(s) for the selling
holders, if any, and use its reasonable best efforts to
facilitate the public offering of the securities;
(k) request that each prospective selling holder be
furnished a signed counterpart, addressed to the prospective
selling holder, of (i) an opinion of counsel for the
Company, dated the effective date of the registration
statement, and (ii) if and to the extent permitted by
applicable professional standards, a "comfort" letter signed
by the independent public accountants who have certified the
Company's financial statements included in the registration
statement, covering substantially the same matters with
respect to the registration statement (and the prospectus
included therein) and (in the case of the accountants'
letter) with respect to events subsequent to the date of the
financial statements, as are customarily covered (at the
time of such registration) in opinions of the Company's
counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities;
(l) use its reasonable best efforts to cause the securities
covered by such registration statement to be listed on the
securities exchange or quoted on the quotation system on
which the Common Stock is then listed or quoted;
(m) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission
and make generally available to its security holders, in
each case as soon as practicable, but not later than 90
days after the close of the period covered thereby, an
earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any comparable successor provisions); and
(n) otherwise cooperate with the underwriter(s), the
Commission and other regulatory agencies and take all
reasonable actions and execute and deliver or cause to be
executed and delivered all documents reasonably necessary to
effect the registration of any securities under this
Agreement.
5. Expenses. All reasonable expenses incurred by the
Company and the Investors in effecting the registrations
provided for in Sections 2 and 3, including, without
limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company
and one counsel for the selling stockholders as a group
(selected by a majority in interest of the Investor holders
of Registrable Securities who participate in the
registration), underwriting expenses (other than fees,
commissions or discounts), expenses of any audits incident
to or required by any such registration and expenses of
complying with the securities or blue sky laws of any
jurisdictions pursuant to Section 4(d) hereof (all of such
expenses referred to as "Registration Expenses"), shall be
paid by the Company except as expressly provided herein.
6. Indemnification.
(a) Except to the extent indemnification is provided
pursuant to section 6(b) hereof, the Company shall indemnify
and hold harmless the selling holder of Registrable
Securities, each underwriter (as defined in the Securities
Act), and each other Person who participates in the offering
of such securities and each other Person, if any, who
controls (within the meaning of the Securities Act) such
seller, underwriter or participating Person (individually
and collectively, the "Indemnified Person") against any
losses, claims, damages or liabilities (collectively, the
"liability"), joint or several, to which such Indemnified
Person may become subject under the Securities Act or any
other statute or at common law, insofar as such liability
(or action in respect thereof) arises out of or is based
upon (i) any untrue statement or alleged untrue statement of
any material fact contained, on the effective date thereof,
in any registration statement under which such securities
were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (ii) any omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading. Except as otherwise provided in
Section 6(d), the Company shall reimburse each such
Indemnified Person in connection with investigating or
defending any such liability as expenses in connection with
the same are incurred; provided, however, that the Company
shall not be liable to any Indemnified Person in any such
case to the extent that any such liability arises out of or
is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such
registration statement, preliminary or final prospectus, or
amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the
Company by such Indemnified Person or his agent or attorneys
specifically for use therein; and provided further, that the
Company shall not be required to indemnify any Indemnified
Person against any liability arising from any untrue or
misleading statement or omission contained in any
preliminary prospectus if such deficiency is corrected in
the final prospectus or for any liability which arises out
of the failure of any Indemnified Person to deliver a final
prospectus as required by the Securities Act.
(b) Except to the extent any liability results from the
Company's failure to incorporate any information or comments
furnished by a selling holder or his counsel, each selling
holder of any securities included in such registration being
effected shall indemnify and hold harmless each other
selling holder of any securities, the Company, its directors
and officers, each underwriter and each other Person, if
any, who controls the Company or such underwriter
(individually and collectively also the "Indemnified
Person"), against any liability, joint or several, to which
any such Indemnified Person may become subject under the
Securities Act or any other statute or at common law,
insofar as such liability (or actions in respect thereof)
arises out of or is based upon (i) any untrue statement or
alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement
under which securities were registered under the Securities
Act at the request of such selling holder or his agent or
attorney, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto,
or (ii) any omission or alleged omission by such selling
holder to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, in the case of (i) and (ii) to the extent,
but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was
made in such registration statement, preliminary or final
prospectus, amendment or supplement thereto in reliance upon
and in conformity with information furnished in writing to
the Company by such selling holder or his agent or attorney
specifically for use therein. Such selling holder shall
reimburse any Indemnified Person for any legal fees incurred
in investigating or defending any such liability; provided,
however, that such selling holder's obligations hereunder
shall be limited to an amount equal to the proceeds to such
selling holder of the securities sold in any such
registration.
(c) Indemnification similar to that specified in Sections
6(a) and (b) shall be given by the Company and each selling
holder (with such modifications as may be appropriate) with
respect to any required registration or other qualification
of their securities under any federal or state law or
regulation of governmental authority other than the
Securities Act.
(d) If the indemnification provided for in this Section 6
for any reason is held by a court of competent jurisdiction
to be unavailable to an indemnified party in respect of any
losses, claims, damages, expenses or liabilities referred to
therein, then each indemnifying party under this Section 6,
in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims,
damages, expenses or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by
the Company, the selling holders and the underwriters from
the offering of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company, the
other selling holders and the underwriters in connection
with the statements or omissions which resulted in such
losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. The relative
benefits received by the Company, the selling holders and
the underwriters shall be deemed to be in the same
respective proportions that the net proceeds from the
offering (before deducting expenses) received by the Company
and the selling holders and the underwriting discount
received by the underwriters, in each case as set forth in
the table on the cover page of the applicable prospectus,
bear to the aggregate public offering price of the
Registrable Securities. The relative fault of the Company,
the selling holders and the underwriters shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to
information supplied by the Company, the selling holders or
the underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent such statement or omission.
The Company, the selling holders and the
underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 6 were determined
by pro rata or per capita allocation or by any other method
of allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. In no event, however, shall a selling holder be
required to contribute any amount under this Section 6(d) in
excess of the lesser of (i) that proportion of the total of
such losses, claims, damages or liabilities indemnified
against equal to the proportion of the total Registrable
Securities sold under such registration statement which are
being sold by such selling holder or (ii) the proceeds
received by such selling holder from its sale of Registrable
Securities under such registration statement. No person
found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not found
guilty of such fraudulent misrepresentation.
7. Compliance with Rule 144. For so long as the Company
(i) has a class of securities registered under Section 12 of
the Exchange Act or (ii) is required to file reports under
Section 13 or 15(d) of the Exchange Act, the Company will
use its best efforts to file with the Commission such
information as is required under the Exchange Act for so
long as there are holders of Registrable Securities; and in
such event, the Company shall use its reasonable best
efforts to take all action as may be required as a condition
to the availability of Rule 144 under the Securities Act (or
any comparable successor rules). The Company shall furnish
to any holder of Registrable Securities upon request a
written statement executed by the Company as to the steps it
has taken to comply with the current public information
requirement of Rule 144 (or such comparable successor
rules). Subject to the limitations on transfers imposed by
this Agreement, the Company shall use its reasonable best
efforts to facilitate and expedite transfers of Registrable
Securities pursuant to Rule 144 under the Securities Act,
which efforts shall include timely notice to its transfer
agent to expedite such transfers of Registrable Securities.
8. Amendments. The provisions of this Agreement may be
amended, and the Company may take any action herein
prohibited or omit to perform any act herein required to be
performed by it, only with the written consent of the
Company, a Majority Interest of the Investors and a Majority
Interest of the Other Holders.
9. Market Stand-Off. Each Investor and Other Holder
agrees, if requested by the Company and an underwriter of
Registrable Securities of the Company in connection with any
public offering of the Company and if executive officers,
directors and all other holders of 5% of the Company's
Common Stock so agree, not to sell or otherwise transfer or
dispose of any shares held by such Investor or Other Holder
for such period, not to exceed ninety (90) days following
the effective date of the relevant registration statement in
connection with any public offering of Registrable
Securities, as such underwriter shall specify reasonably and
in good faith.
10. Transferability of Registration Rights. The
registration rights set forth in this Agreement are
transferable to each permitted transferee of the Registrable
Securities provided that: (a) the Company is given written
notice specifying the name, address, and number of
Registrable Securities being transferred, (b) the transfer
involves the lesser of all of the Registrable Securities
held by Transferor or at least 450,000 shares, (c) the
notice of transfer is accompanied by either (i) a written
opinion of legal counsel who shall be reasonably
satisfactory to the Company addressed to the Company and
reasonably satisfactory in form and substance to the
Company's counsel to the effect that the proposed transfer
may be effected without registration under the Act, or (ii)
a "no action" letter from the Commission to the effect that
the proposed transfer without registration will not result
in a recommendation by the staff of the Commission that
action to be taken with respect thereto; and provided
further that each subsequent holder of Registrable
Securities must consent in writing to be bound by the terms
and conditions of this Agreement in order to acquire the
rights granted pursuant to this Agreement. Notwithstanding
the foregoing, the registration rights set forth in this
agreement shall automatically transfer to and be binding
upon any transferee of Purchasers or Other Holders as a
result of a gift or bequest of Registrable Securities by
such transferor.
11. Rights Which May Be Granted to Subsequent Investors.
Other than permitted transferees of Registrable Securities
under Section 10 hereof, the Company shall not, without the
prior written consent of a Majority Interest of the
Investors, (a) allow purchasers of the Company's securities
to become a party to this Agreement or (b) grant any other
registration rights to any third parties other than
subordinate piggyback registration rights.
12. Damages. The Company recognizes and agrees that each
holder of Registrable Securities will not have an adequate
remedy if the Company fails to comply with the terms and
provisions of this Agreement and that damages will not be
readily ascertainable, and the Company expressly agrees
that, in the event of such failure, it shall not oppose an
application by any holder of Registrable Securities or any
other Person entitled to the benefits of this Agreement
requiring specific performance of any and all provisions
hereof or enjoining the Company from continuing to commit
any such breach of this Agreement.
13. Miscellaneous.
(a) All notices, requests, demands and other communications
provided for hereunder shall be in writing and mailed (by
first class registered or certified mail, postage prepaid),
telegraphed, sent by express overnight courier service or
electronic facsimile transmission (with a copy by mail), or
delivered to the applicable party at the addresses indicated
below:
If to the Company:
Hadron, Inc.
5904 Richmond Highway, Suite 300
Alexandria, Virginia 22303
Attn: President
With copy to Company's counsel
If to the Investors:
Jon M. Stout
10 Maiden Bower Court
Potomac, MD 20854
If to any other holder of Registrable Securities:
At such Person's address for notice as set forth in the
books and records of the Company, or, as to each of the
foregoing, at such other address as shall be designated by
such Person in a written notice to other parties complying
as to delivery with the terms of this subsection (a). All
such notices, requests, demands and other communications
shall, when mailed, telegraphed or sent, respectively, be
effective (i) two days after being deposited in the mails or
(ii) one day after being delivered to the telegraph company,
deposited with the express overnight courier service or sent
by electronic facsimile transmission, respectively,
addressed as aforesaid.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia,
without giving effect to conflict of laws principles
thereof.
(c) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(d) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of
this Agreement, and this Agreement shall be carried out as
if any such illegal, invalid or unenforceable provision were
not contained herein.
14. Dispute Resolution. Except as provided below, any
dispute arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be finally
settled by binding arbitration conducted expeditiously in
accordance with the J.A.M.S./Endispute Comprehensive
Arbitration Rules and Procedures (the "J.A.M.S. Rules").
The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. 1-16, and judgment upon the
award rendered by the arbitrators may be entered by any
court having jurisdiction thereof. The place of arbitration
shall be the Metropolitan Area of Washington, D.C.
Such proceedings shall be administered by the neutral
arbitrator in accordance with the J.A.M.S. Rules as he/she
deems appropriate, however, such proceedings shall be guided
by the following agreed upon procedures:
(i) mandatory exchange of all relevant
documents, to be accomplished within forty-five (45) days of
the initiation of the procedure;
(ii) no other discovery;
(iii) hearings before the neutral
arbitrator which shall consist of a summary presentation by
each side of not more than three (3) hours; such hearings to
take place on one or two days at a maximum; and
(iv) decision to be rendered not more than
ten (10) days following such hearings.
Notwithstanding anything to the contrary contained
herein, the provisions of this Section 14 shall not apply
with regard to any equitable remedies to which any party may
be entitled hereunder.
Each of the parties hereto (a) hereby irrevocably
submits to the jurisdiction of any United States District
Court of competent jurisdiction for the purpose of enforcing
the award or decision in any such proceeding, (b) hereby
waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or
proceeding, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution
(except as protected by applicable law), that the suit,
action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not
be enforced in or by such court, and hereby waives and
agrees not to seek any review by any court of any other
jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the
parties hereto hereby consents to service of process by
registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its or his
submission to jurisdiction and its or his consent to service
of process by mail is made for the express benefit of the
other parties hereto. Final judgment against any party
hereto in any such action, suit or proceeding may be
enforced in other jurisdictions by suit, action or
proceeding on the judgment, or in any other manner provided
by or pursuant to the laws of such other jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the
date first set forth above.
THE COMPANY: INVESTORS:
HADRON, INC.
By /S/ C.W. GILLULY /S/ JON M. STOUT
----------------- ----------------------
C. W. Gilluly, Jon M. Stout
Chairman and CEO
/S/ PATRICIA W. STOUT
----------------------
Patricia W. Stout
Stout Dynastic Trust
/S/ JON M. STOUT
----------------------
By Jon M. Stout, Trustee
/S/ J. RICHARD KNOP
----------------------
J. Richard Knop
THE OTHER HOLDERS:
/S/ C.W. GILLULY /S/ AMBER GORDON
- ------------------------- ------------------------
C. W. Gilluly S. Amber Gordon
/S. JOHN D. SANDERS /S/ ROBERT J. LYNCH
- ------------------------- ------------------------
John D. Sanders Robert J. Lynch
/S/ GEORGE E. FOWLER /S/ DONALD E. JEWELL
- ------------------------- -------------------------
George E. Fowler Donald E. Jewell
BOLES KNOP AFFILIATES
/S/ JACK BOLES /S/ JEFF RUBIN
- ------------------------- -------------------------
Jack Boles Jeff Rubin
/S/ J. RICHARD KNOP /S/ JONATHAN CATHERWOOD
- ------------------------- -------------------------
J. Richard Knop Jonathan Catherwood
/S/ RICHARD MILLER /S/ BOB WRIGHT
- ------------------------- -------------------------
Richard Miller Bob Wright
/S/ SUSAN WRIGHT
- -------------------------
Susan Wright
FIRST MODIFICATION AND EXTENSION AGREEMENT
THIS FIRST MODIFICATION AND EXTENSION AGREEMENT (this
"Agreement"), effective as of the 12th day of April 2000, is by
and among UNITED BANK, a Virginia banking corporation (the
"Bank"); HADRON, INC., a New York corporation, AVENUE
TECHNOLOGIES, INC., a Virginia corporation, VAIL RESEARCH AND
TECHNOLOGY CORPORATION, a Virginia corporation, SYCOM SERVICES,
INC., a Delaware corporation, and ENGINEERING & INFORMATION
SERVICES, INC., a Virginia corporation (hereinafter individually
and collectively called the "Borrower"); and C.W. GILLULY, MARTHA
ALICE GILLULY and JON M. STOUT (the "Guarantors").
WITNESSETH THAT:
WHEREAS, the Bank is the owner and holder of that certain
Revolving Commercial Note dated June 29, 1999, made by the
Borrower and payable to the order of the Bank, in the original
principal amount of One Million Five Hundred Thousand and no/100
Dollars ($1,500,000.00) and bearing interest and being payable in
accordance with the terms and conditions therein set forth (the
"Note"); and
WHEREAS, the Note is secured by, and issued pursuant to
the terms of, a certain Loan and Security Agreement dated June
29, 1999, between the Borrower and the Bank (as amended, the
"Loan Agreement"); and
WHEREAS, as of the effective date hereof, the principal
balance of the Note is $1,076,616.21 and the parties hereto
desire to extend the maturity date of the Note and to modify the
terms thereof and of the Loan Agreement.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. The maturity date of the Note is hereby extended to
October 31, 2000.
2. The definition of "Date of Maturity" in the Note and
the Loan Agreement is hereby changed to "October 31, 2000".
3. Contemporaneously with the execution and delivery of
this Agreement, Hadron, Inc., a Borrower, and C.W. Gilluly, one
of the Guarantors, shall execute and deliver to the Bank a
subordination agreement subordinating payment of a certain
$430,000 Note dated February 15, 2000, made by Hadron, Inc. to
the order of C.W. Gilluly, the outstanding principal balance on
the date hereof being $230,000.000, upon terms satisfactory to
the Bank.
4. The Borrower and the Guarantors hereby acknowledge
and agree that, as of the effective date hereof, the unpaid
principal balance of the Note is $1,076,616.21 and that there are
no set-offs or defenses against the Note or the Loan Agreement.
5. The Guarantors join in this Agreement for the purpose
of signifying their consent hereto and acknowledge and agree that
there are no set-offs or defenses against their guaranties and
that their guaranties of the Note shall apply to the Note as
extended hereby.
6. The parties to this Agreement do not intend that this
Agreement be construed as a novation of the Note or the Loan
Agreement.
7. Except as hereby expressly extended and modified, the
Note and Loan Agreement shall otherwise be unchanged, shall
remain in full force and effect, and are hereby expressly
approved, ratified and confirmed. A legend shall be placed on
the face of the Note indicating that its terms have been modified
hereby, and the original of this Agreement shall be affixed to
the original of the Note.
8. This Agreement shall be governed in all respects by
the laws of the Commonwealth of Virginia and shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, personal
representatives, successors and assigns.
WITNESS the following signatures and seals.
HADRON, INC.
[SEAL]
/S/ C.W. GILLULY
By: -----------------------
Name: C.W. Gilluly
Title: Chairman
AVENUE TECHNOLOGIES, INC. [SEAL]
/S/ S. AMBER GORDON
By: -------------------------
Name: S. AMBER GORDON
Title: Corporate Secretary
VAIL RESEARCH AND TECHNOLOGY
CORPORATION [SEAL]
/S/ S. AMBER GORDON
By: -------------------------
Name: S. AMBER GORDON
Title: Corporate Secretary
<PAGE>
SYCOM SERVICES, INC. [SEAL]
/S/ S. AMBER GORDON
By: ------------------------
Name: S. AMBER GORDON
Title: Corporate Secretary
ENGINEERING & INFORMATION SERVICES,
INC. [SEAL]
/S/ S. AMBER GORDON
By: -----------------------
Name: S. AMBER GORDON
Title: Corporate Secretary
/S/ C.W. GILLULY
----------------------- [SEAL]
C.W. GILLULY
/S/ MARTHA ALICE GILLULY
----------------------- [SEAL]
MARTHA ALICE GILLULY
/S/ JON M. STOUT
----------------------- [SEAL]
JON M. STOUT
UNITED BANK [SEAL]
/S/ LOUISE M. WAGER
By: -----------------------
Louise M. Wager, Vice President
<PAGE>
AMENDED AND RESTATED
GUARANTY OF PAYMENT
To induce UNITED BANK, Vienna, Virginia (the "Bank") to
continue to extend credit and other financial accommodations to
HADRON, INC., a New York corporation, AVENUE TECHNOLOGIES, INC.,
a Virginia corporation, VAIL RESEARCH AND TECHNOLOGY CORPORATION,
a Virginia corporation, SYCOM SERVICES, INC., a Delaware
corporation, and ENGINEERING & INFORMATION SERVICES, INC., a
Virginia corporation (hereinafter individually and collectively
called the "Debtor"), and to forbear in the exercise of its
rights against the Debtor, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the undersigned jointly and severally
(hereinafter individually and collectively called the
"Guarantors"), hereby unconditionally guaranty to the Bank the
full and prompt payment at maturity, including accelerated or
extended maturity, of all Obligations, as hereinafter defined, of
the Debtor to the Bank; provided, however, that the Guarantors'
liability on the Obligations shall not exceed the lesser of (i)
50% of the principal amount thereof from time to time
outstanding, plus interest thereon and fees associated therewith,
and (ii) $750,000 of the principal amount thereof from time to
time outstanding, plus interest thereon and fees associated
therewith. A reduction in the amount of the Obligations shall
not reduce, pro rata or pro tanto, the Guarantors' obligation
under this Guaranty except to the extent of payments by the
Guarantor in satisfaction of the Guarantors' obligation
hereunder. The term "Obligations" means all indebtedness,
obligations and liabilities of the Debtor to the Bank now
existing or hereafter created or arising, whether direct or
indirect, absolute or contingent, joint or several, secured or
unsecured, liquidated or unliquidated, and evidenced by (i) that
certain Commercial Note dated June 29, 1999 from the Debtor
payable to the order of the Bank in the original amount of
$1,500,000.00, (ii) that certain Revolving Commercial Note dated
June 29, 1999 from the Debtor payable to the order of the Bank in
the original amount of $1,500,000.00, and (iii) renewals,
increases, extensions, and modifications thereof and
substitutions therefor.
The Bank may at any time and from time to time, without
the consent of or notice to the Guarantors, without incurring
liability to the Guarantors, and without affecting, impairing or
releasing the obligations of the Guarantors hereunder, renew,
extend, change the manner, time, place, and terms of payment,
grant indulgences in connection with, settle, compromise, sell,
exchange, substitute, release, surrender, subordinate, or
exercise or refrain from exercising any rights with respect to,
any of the Obligations, any security therefor, the obligation of
any of the Guarantors hereunder or any other party primarily or
secondarily liable for any of the Obligations.
The liability of the Guarantors shall not be affected,
impaired or released by (i) any failure, neglect or omission by
the Bank to realize upon or collect any of the Obligations, any
obligation hereunder, or any security for or guaranty of the
Obligations or any obligation hereunder, or to exercise any
remedies of setoff or otherwise that it may have with respect to
property of the Debtor possessed by the Bank, (ii) any defense
the Debtor or any other party primarily or secondarily liable for
any of the Obligations might have to the payment of the
Obligations, (iii) any determination that any lien taken, or
attempted to be taken, by the Bank to secure the Obligations is
invalid or unperfected, (iv) any determination that any party
executing any evidence of any of the Obligations on behalf of the
Debtor was without power or authority to do so or that for any
other reason the Obligations, any security therefor, or any other
guaranty thereof, are invalid or unenforceable, or (v) any
defenses the Debtor may have or assert to the Obligations. It is
understood that nothing shall discharge or satisfy the
Guarantors' liability hereunder except the full performance and
payment of all Obligations with interest and expenses, or the
Bank's written release of the Guarantors' liability.
The Guarantors' liability hereunder shall not be
affected, impaired or released by the filing of a petition by or
against the Debtor under the provisions of any bankruptcy,
reorganization, arrangement, insolvency, liquidation or similar
law for relief of debtors, and upon the filing of such petition,
for the purpose of this Guaranty, all Obligations, at the option
of the Bank, shall be immediately due and payable.
The Guarantors represent and covenant that they are and
shall remain independently informed of the financial condition of
the Debtor and all other circumstances which bear on the risk of
non-payment of the Obligations. The Guarantors waive any right
to require the Bank to disclose to them any information the Bank
has or may have in the future concerning such condition or
circumstances.
The Guarantors subordinate all obligations of the
Debtor owing to them or any of them, whether now existing or
hereafter arising, to all Obligations of the Debtor to the Bank.
The Guarantors unconditionally waive any right they may
have to be subrogated to the rights of the Bank against the
Debtor with respect to any payment by the Guarantors hereunder,
and further unconditionally waive any right they may have of
reimbursement or indemnification from the Debtor with respect to
any such payment.
If at any time any payment by the Debtor of any
Obligation is rescinded or must otherwise be restored or returned
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Debtor or upon or as a result of the
appointment of a receiver, intervener or conservator of, or
trustee or similar officer for, the Debtor or any substantial
part of its property or otherwise, the Guarantors' obligations
hereunder with respect to such payment shall be reinstated as
though such payment had been due but not made at such time.
The Guarantors waive (i) notice of acceptance of this
Guaranty, (ii) notice of the existence or creation of the
Obligations, (iii) presentment and demand for payment of any of
the Obligations, (iv) protest and notice of dishonor and protest
and any other notice to the Guarantors or to any other party with
respect to the Obligations, and (v) the benefit of their
homestead exemptions and any other exemptions with respect to the
Obligations.
This is a guaranty of payment and not of collection.
The Guarantors waive any right, including without limitation any
right arising from Section 49-25 or 49-26 of the Code of
Virginia, to require that the Bank bring action against the
Debtor or any other party or to require that the Bank resort to
any security or to any balance of any deposit account or credit
on the books of the Bank in favor of Debtor or any other party.
All payments, whether voluntary or involuntary,
received by the Bank from the Debtor, Guarantors, or any other
source, including amounts realized from security and deposit
account balances, may be applied by the Bank to any of the
Obligations, or any other obligations of the Guarantors or any
other obligor, in whatever order the Bank elects.
The Bank may, without notice to or consent of the
Guarantors, assign or transfer all or any part of the Obliga
tions, and this Guaranty will inure to the benefit of the Bank's
assignee or transferee to the extent of such assignment or trans
fer; provided, however, that the Bank shall continue to have an
unimpaired right, superior to that of any such assignee or trans
feree, to enforce this Guaranty as to that part of the Obliga
tions the Bank has not assigned or transferred.
The Bank will have the right, in addition to any
remedies permitted by law (including, without limitation, other
rights of set-off), to set off the amount now or hereafter due
under this Guaranty against any and all accounts, credits, money,
securities, or other property now or hereafter on deposit with,
held by, or in possession of the Bank to the credit of or for the
account of each of the Guarantors, without notice to or consent
by the Guarantors. In addition to the right of set-off, to
secure the payment of their obligations under this Guaranty, each
of the Guarantors hereby assigns and grants to the Bank a
security interest in all accounts, credit, money, securities, or
other property now or hereafter on deposit with, held by, or in
the possession of the Bank to the credit of or for the account of
such Guarantor.
The Guarantors shall pay to the Bank on demand all
costs incurred by the Bank, and reasonable attorneys' fees, in
the collection or enforcement of this Guaranty, whether or not
suit is brought.
The Guarantors agree to furnish the Bank, in form
acceptable to the Bank, (i) a signed, current personal financial
statement and personal federal income tax return annually, within
30 days after the filing of the latter, and (ii) such other
financial information and data as the Bank may from time to time
request.
THE GUARANTORS IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY IN ANY SUIT, ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
GUARANTY, WHETHER SUCH SUIT, ACTION, PROCEEDING, OR COUNTERCLAIM
IS INSTITUTED BY THE BANK, THE GUARANTORS OR ANY OTHER PARTY.
The Guarantors irrevocably (i) submit to the juris
diction of any Virginia state court or federal court sitting in
the state of Virginia with respect to any suit, action, or
proceeding relating to this Guaranty, (ii) waive any objection
which the Guarantors may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient
forum, (iii) waive the right to object that any such court does
not have jurisdiction over the Guarantors, and (iv) consent to
the service of process in any such suit, action, or proceeding by
the mailing of copies of such process to the Guarantors by
certified mail at the Guarantors' addresses indicated in this
Guaranty or at such other addresses of which the Bank shall have
received notice. Nothing in this paragraph shall affect the
Bank's right to serve process in any other manner permitted by
law or to bring proceedings against the Guarantors in any other
court having jurisdiction.
The rights and remedies of the Bank under this Guaranty
and applicable law shall be cumulative and concurrent and the
exercise of any one or more of them shall not preclude the simul
taneous or later exercise by the Bank of any or all such other
rights or remedies. In the event any provision of this Guaranty
is held to be invalid, illegal, or unenforceable for any reason,
then such provision only shall be deemed null and void and shall
not affect any other provisions of this Guaranty, which shall
remain effective. No modification or waiver of any provision of
this Guaranty shall be effective unless it is in writing and
signed by the Bank, and any such waiver shall be effective only
in the specific instance and for the specific purpose for which
it is given. The failure of the Bank to exercise any option,
right or remedy, in any one or more instances, or the acceptance
by the Bank of partial payments or partial performance, shall not
constitute a waiver of the right to exercise any option, right or
remedy at any time. The nouns, pronouns and verbs used in this
Guaranty shall be construed as being of such number and gender as
the context may require.
This Guaranty is an amendment and restatement of that
certain Guaranty of Payment dated June 29, 1999 from the
Guarantors to the Bank (the "Previous Guaranty"). The Guarantors
acknowledge and agree that there are no setoffs or defenses to
the Previous Guaranty and that this Guaranty is not intended as a
novation of the Previous Guaranty.
This Guaranty shall be governed by and construed in
accordance with the laws of Virginia.
[Signatures appear on following page]
<PAGE>
Witness the following signatures and seals this 12th
day of April 2000.
/S/ C.W. GILLULY
----------------------- [SEAL]
C.W. GILLULY
SS #: ###-##-####
Address: 415 First Street, S.E.
Washington, D.C. 20003-1827
/S/ MARTHA ALICE GILLULY
----------------------- [SEAL]
MARTHA ALICE GILLULY
SS #: ###-##-####
COUNTY/CITY OF FAIRFAX
STATE OF VIRGINIA
The foregoing instrument was acknowledged before
me this 12TH day of APRIL 2000, by C.W. Gilluly
and Martha Alice Gilluly.
/S/ CARIDAD C. MILLER
-----------------------------------
Notary Public
My Commission expires: 12-31-02
GUARANTY OF PAYMENT
To induce UNITED BANK, Vienna, Virginia (the "Bank") to
continue to extend credit and other financial accommodations to
HADRON, INC., a New York corporation, AVENUE TECHNOLOGIES, INC.,
a Virginia corporation, VAIL RESEARCH AND TECHNOLOGY CORPORATION,
a Virginia corporation, SYCOM SERVICES, INC., a Delaware
corporation, and ENGINEERING & INFORMATION SERVICES, INC., a
Virginia corporation (hereinafter individually and collectively
called the "Debtor"), and to forbear in the exercise of its
rights against the Debtor, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned (the "Guarantor") hereby
unconditionally guarantees to the Bank the full and prompt
payment at maturity, including accelerated or extended maturity,
of all Obligations, as hereinafter defined, of the Debtor to the
Bank; provided, however, that the Guarantor's liability on the
Obligations shall not exceed the lesser of (i) 50% of the
principal amount thereof from time to time outstanding, plus
interest thereon and fees associated therewith, and (ii) $750,000
of the principal amount thereof from time to time outstanding,
plus interest thereon and fees associated therewith. A reduction
in the amount of the Obligations shall not reduce, pro rata or
pro tanto, the Guarantor's obligation under this Guaranty except
to the extent of payments by the Guarantor in satisfaction of the
Guarantor's obligation hereunder. The term "Obligations" means
all indebtedness, obligations and liabilities of the Debtor to
the Bank now existing or hereafter created or arising, whether
direct or indirect, absolute or contingent, joint or several,
secured or unsecured, liquidated or unliquidated, and evidenced
by (i) that certain Commercial Note dated June 29, 1999 from the
Debtor payable to the order of the Bank in the original amount of
$1,500,000.00, (ii) that certain Revolving Commercial Note dated
June 29, 1999 from the Debtor payable to the order of the Bank in
the original amount of $1,500,000.00, and (iii) renewals,
increases, extensions, and modifications thereof and
substitutions therefor.
The Bank may at any time and from time to time, without
the consent of or notice to the Guarantor, without incurring
liability to the Guarantor, and without affecting, impairing or
releasing the obligations of the Guarantor hereunder, renew,
extend, change the manner, time, place, and terms of payment,
grant indulgences in connection with, settle, compromise, sell,
exchange, substitute, release, surrender, subordinate, or
exercise or refrain from exercising any rights with respect to,
any of the Obligations, any security therefor, the obligation of
the Guarantor hereunder or any other party primarily or
secondarily liable for any of the Obligations.
The liability of the Guarantor shall not be affected,
impaired or released by (i) any failure, neglect or omission by
the Bank to realize upon or collect any of the Obligations, any
obligation hereunder, or any security for or guaranty of the
Obligations or any obligation hereunder, or to exercise any
remedies of setoff or otherwise that it may have with respect to
property of the Debtor possessed by the Bank, (ii) any defense
the Debtor or any other party primarily or secondarily liable for
any of the Obligations might have to the payment of the
Obligations, (iii) any determination that any lien taken, or
attempted to be taken, by the Bank to secure the Obligations is
invalid or unperfected, (iv) any determination that any party
executing any evidence of any of the Obligations on behalf of the
Debtor was without power or authority to do so or that for any
other reason the Obligations, any security therefor, or any other
guaranty thereof, are invalid or unenforceable, or (v) any
defenses the Debtor may have or assert to the Obligations. It is
understood that nothing shall discharge or satisfy the
Guarantor's liability hereunder except the full performance and
payment of all Obligations with interest and expenses, or the
Bank's written release of the Guarantor's liability.
The Guarantor's liability hereunder shall not be
affected, impaired or released by the filing of a petition by or
against the Debtor under the provisions of any bankruptcy,
reorganization, arrangement, insolvency, liquidation or similar
law for relief of debtors, and upon the filing of such petition,
for the purpose of this Guaranty, all Obligations, at the option
of the Bank, shall be immediately due and payable.
The Guarantor represents and covenants that he is and
shall remain independently informed of the financial condition of
the Debtor and all other circumstances which bear on the risk of
non-payment of the Obligations. The Guarantor waives any right
to require the Bank to disclose to him any information the Bank
has or may have in the future concerning such condition or
circumstances.
The Guarantor subordinates all obligations of the
Debtor owing to him, whether now existing or hereafter arising,
to all Obligations of the Debtor to the Bank.
The Guarantor unconditionally waives any right he may
have to be subrogated to the rights of the Bank against the
Debtor with respect to any payment by the Guarantor hereunder,
and further unconditionally waives any right he may have of
reimbursement or indemnification from the Debtor with respect to
any such payment.
If at any time any payment by the Debtor of any
Obligation is rescinded or must otherwise be restored or returned
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Debtor or upon or as a result of the
appointment of a receiver, intervener or conservator of, or
trustee or similar officer for, the Debtor or any substantial
part of its property or otherwise, the Guarantor's obligations
hereunder with respect to such payment shall be reinstated as
though such payment had been due but not made at such time.
The Guarantor waives (i) notice of acceptance of this
Guaranty, (ii) notice of the existence or creation of the
Obligations, (iii) presentment and demand for payment of any of
the Obligations, (iv) protest and notice of dishonor and protest
and any other notice to the Guarantor or to any other party with
respect to the Obligations, and (v) the benefit of his homestead
exemption and any other exemptions with respect to the
Obligations.
This is a guaranty of payment and not of collection.
The Guarantor waives any right, including without limitation any
right arising from Section 49-25 or 49-26 of the Code of
Virginia, to require that the Bank bring action against the
Debtor or any other party or to require that the Bank resort to
any security or to any balance of any deposit account or credit
on the books of the Bank in favor of Debtor or any other party.
All payments, whether voluntary or involuntary,
received by the Bank from the Debtor, Guarantor, or any other
source, including amounts realized from security and deposit
account balances, may be applied by the Bank to any of the
Obligations, or any other obligations of the Guarantors or any
other obligor, in whatever order the Bank elects.
The Bank may, without notice to or consent of the
Guarantor, assign or transfer all or any part of the Obligations,
and this Guaranty will inure to the benefit of the Bank's
assignee or transferee to the extent of such assignment or trans
fer; provided, however, that the Bank shall continue to have an
unimpaired right, superior to that of any such assignee or trans
feree, to enforce this Guaranty as to that part of the Obliga
tions the Bank has not assigned or transferred.
The Bank will have the right, in addition to any
remedies permitted by law (including, without limitation, other
rights of set-off), to set off the amount now or hereafter due
under this Guaranty against any and all accounts, credits, money,
securities, or other property now or hereafter on deposit with,
held by, or in possession of the Bank to the credit of or for the
account of the Guarantor, without notice to or consent by the
Guarantor. In addition to the right of set-off, to secure the
payment of his obligations under this Guaranty, the Guarantor
hereby assigns and grants to the Bank a security interest in all
accounts, credit, money, securities, or other property now or
hereafter on deposit with, held by, or in the possession of the
Bank to the credit of or for the account of the Guarantor.
The Guarantor shall pay to the Bank on demand all costs
incurred by the Bank, and reasonable attorneys' fees, in the
collection or enforcement of this Guaranty, whether or not suit
is brought.
The Guarantor agrees to furnish the Bank, in form
acceptable to the Bank, (i) a signed, current personal financial
statement and personal federal income tax return annually, within
30 days after the filing of the latter, and (ii) such other
financial information and data as the Bank may from time to time
request.
THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT HE MAY HAVE TO TRIAL BY JURY IN ANY SUIT, ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
GUARANTY, WHETHER SUCH SUIT, ACTION, PROCEEDING, OR COUNTERCLAIM
IS INSTITUTED BY THE BANK, THE GUARANTOR OR ANY OTHER PARTY.
The Guarantor irrevocably (i) submits to the juris
diction of any Virginia state court or federal court sitting in
the state of Virginia with respect to any suit, action, or
proceeding relating to this Guaranty, (ii) waive any objection
which the Guarantor may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient
forum, (iii) waives the right to object that any such court does
not have jurisdiction over the Guarantor, and (iv) consents to
the service of process in any such suit, action, or proceeding by
the mailing of copies of such process to the Guarantor by
certified mail at the Guarantor's address indicated in this
Guaranty or at such other address of which the Bank shall have
received notice. Nothing in this paragraph shall affect the
Bank's right to serve process in any other manner permitted by
law or to bring proceedings against the Guarantor in any other
court having jurisdiction.
The rights and remedies of the Bank under this Guaranty
and applicable law shall be cumulative and concurrent and the
exercise of any one or more of them shall not preclude the simul
taneous or later exercise by the Bank of any or all such other
rights or remedies. In the event any provision of this Guaranty
is held to be invalid, illegal, or unenforceable for any reason,
then such provision only shall be deemed null and void and shall
not affect any other provisions of this Guaranty, which shall
remain effective. No modification or waiver of any provision of
this Guaranty shall be effective unless it is in writing and
signed by the Bank, and any such waiver shall be effective only
in the specific instance and for the specific purpose for which
it is given. The failure of the Bank to exercise any option,
right or remedy, in any one or more instances, or the acceptance
by the Bank of partial payments or partial performance, shall not
constitute a waiver of the right to exercise any option, right or
remedy at any time. The nouns, pronouns and verbs used in this
Guaranty shall be construed as being of such number and gender as
the context may require.
This Guaranty shall be governed by and construed in
accordance with the laws of Virginia.
[Signatures appear on following page]
Witness the following signature and seal this 12th day
of April 2000.
/S/ JON M. STOUT
-------------------------- [SEAL]
JON M. STOUT
SS #: _____________________
Address: ________________________
_________________________________
COUNTY/CITY OF FAIRFAX
STATE OF VIRGINIA
The foregoing instrument was acknowledged before
me this 12TH day of APRIL 2000, by Jon M. Stout.
/S/ CARIDAD C. MILLER
_____________________________________
Notary Public
My Commission expires: 12-31-02
SUBORDINATION AGREEMENT
This Subordination Agreement (as amended or supplemented
from time to time, this "Agreement") is made and entered into as
of the 12th day of April 2000 by and among C.W. GILLULY (the
"Junior Creditor"), UNITED BANK, a Virginia banking corporation
(the "Bank"), and HADRON, INC., a New York corporation (the
"Debtor").
1. To induce the Bank to extend or continue credit and
other financial accommodations to the Debtor and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Junior Creditor hereby subordinates
the payment of all loans, advances, liabilities and indebtedness
owed by the Debtor to the Junior Creditor under that certain
$430,000.00 Note dated February 15, 2000, from the Debtor in
favor of the Junior Creditor, whether now owed or hereafter
arising, whether direct or indirect, absolute or contingent,
joint or several, secured or unsecured, liquidated or
unliquidated, and however owned, held or acquired by the Junior
Creditor, whether by assignment, discount, direct loan, purchase,
as a matter of law, or otherwise, and however evidenced, whether
by note, book entry or otherwise, whether for principal, interest
(except as provided in paragraph 4 below), fees, expenses or
otherwise, and all renewals, extensions, and modifications
thereof and substitutions therefor (the "Subordinated Debt") to
the payment in full of all loans, advances, liabilities and
indebtedness owed by the Debtor to the Bank, whether now owed or
hereafter arising, whether direct or indirect, absolute or
contingent, joint or several, secured or unsecured, liquidated or
unliquidated, and however owned, held or acquired by the Bank,
whether by assignment, discount, direct loan, overdraft,
purchase, as a matter of law, or otherwise, and however
evidenced, whether by note, check, book entry or otherwise,
whether for principal, interest, fees, expenses or otherwise, and
all renewals, extensions, and modifications thereof and
substitutions therefor (the "Senior Debt"). The Junior Creditor
further agrees that any lien, encumbrance or other security for
the payment of the Subordinated Debt, whether now existing or
hereafter arising, is and shall be expressly subordinated to any
lien, encumbrance or other security for the payment of the Senior
Debt.
Nothing herein shall be construed as preventing the payment
of $200,000 to the Junior Creditor by the Debtor as contemplated
by that certain Securities Purchase Agreement dated March 30,
2000, and the Bank hereby consents to such payment.
Notwithstanding the provisions of this paragraph 1, if (i)
no Default (as defined in the Loan and Security Agreement) has
occurred under any instrument or agreement evidencing or securing
the Senior Debt and is then continuing, (ii) the "Working
Capital" covenant set forth in Section VI(A)(4) of the Loan and
Security Agreement (defined below) (as modified pursuant to a
certain letter dated April 12, 2000, from the Bank to the Debtor)
would not be violated as a result thereof, (iii) the Debtor is
then in compliance with the covenant described in Section
VI(A)(2) of the Loan and Security Agreement (defined below)
(notwithstanding the waiver of the requirements of said sections
pursuant to a certain letter dated April 12, 2000, from the Bank
to the Debtor), and (iv) the "Adjusted Net Worth" covenant set
forth in Section VI(A)(5) of the Loan and Security Agreement
(defined below) (as modified pursuant to a certain letter dated
April 12, 2000, from the Bank to the Debtor) would not be
violated as a result thereof, then payments on the Subordinated
Debt may be received, accepted and retained by the Junior
Creditor. As used herein, the "Loan and Security Agreement"
means that certain Loan and Security Agreement dated June 29,
1999 between the Debtor (and related entities) and the Bank, all
instruments and agreements executed and delivered to the Bank in
connection therewith, and all extensions, modifications,
supplements to, and replacements of, any of the foregoing.
2. The Junior Creditor agrees that until the Senior Debt
is paid in full it will not (i) except as expressly permitted by
this Agreement, ask, demand, sue for take or receive from the
Debtor directly or indirectly, in cash, securities or other
property or by set-off or in any other manner (including, without
limitation, from or by way of collateral), payment of all or any
part of the Subordinated Debt, or (ii) commence or join with
other creditors in commencing any bankruptcy, reorganization,
receivership or insolvency proceeding against the Debtor.
3. In the event of (i) any insolvency or bankruptcy case
or proceeding or any receivership, liquidation, reorganization or
similar case or proceeding in connection therewith relative to
the Debtor or its creditors as such or to its assets, (ii) any
liquidation, dissolution or other winding up of the Debtor
whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit
of creditors or other marshalling of assets and liabilities of
the Debtor then and in any such event the Bank shall be entitled
to receive payment in full in cash or cash equivalents of all
amounts due or to become due on or in respect of all Senior Debt
before the Junior Creditor shall be entitled to receive and
retain any payment on account of the principal, interest or other
amounts due or to become due on the Subordinated Debt, and to
that end the Bank shall be entitled to receive, for application
to the payment of the Senior Debt, any payment or distribution of
any kind or character whether in cash, securities, or other
property, which may be payable or deliverable in respect of the
Subordinated Debt in any such case, proceeding, dissolution,
liquidation or other winding up or event. Accordingly, any
payment or distribution of assets of the Debtor of any kind or
character whether in cash, securities, or other property, which
would otherwise have been made to the Junior Creditor but for the
provisions of this paragraph shall instead be made by the Debtor
or by the trustee in bankruptcy, receiver liquidating trustee,
custodian, assignee, agent or other person making payment or
distribution of assets of the Debtor directly to the Bank for
application to the payment of all Senior Debt remaining unpaid to
the extent necessary to pay all Senior Debt in full in cash or
cash equivalents after giving effect to any concurrent payment or
distribution to or for the benefit of the Bank. The Junior
Creditor irrevocably authorizes and empowers the Bank to (i)
demand, sue for collect and receive every such payment or
distribution and give acquittance therefor (ii) file claims and
take such other actions, in the Bank's own name or in the name of
the Junior Creditor or otherwise, as the Bank may deem necessary
or advisable for the enforcement of this Agreement, and (iii)
vote the full amount of the Junior Creditor's claims in any
receivership, insolvency or bankruptcy proceeding in the Junior
Creditor's place and stead. The Junior Creditor further
irrevocably appoints the Bank its true and lawful attorney-in-
fact for the purposes specified herein, with full power of
substitution, and such power shall be a power coupled with an
interest. The Junior Creditor further agrees to execute and
deliver to the Bank such powers of attorney, assignments or other
instruments as may be requested by the Bank in order to enable
the Bank to enforce any and all claims upon or with respect to
any or all of the Subordinated Debt and to collect and receive
any and all payments or distributions which may be payable or
deliverable at any time upon or with respect to any of the
Subordinated Debt.
4. If, other than as permitted in this Agreement, the
Junior Creditor shall have received any payment or distribution
of assets of the Debtor of any kind or character whether in cash,
securities, or other property, before all amounts due or to
become due on or in respect of all Senior Debt have been paid in
full in cash or cash equivalents, then and in such event such
payment or distribution shall be received in trust for the Bank
and shall be forthwith paid over or delivered by the Junior
Creditor receiving the same directly to the Bank or to the extent
legally required, to the trustee in bankruptcy, receiver
liquidating trustee, custodian, assignee, agent or other person
making such payment or distribution of assets of the Debtor for
application to the payment of all Senior Debt remaining unpaid to
the extent necessary to pay all Senior Debt in full after giving
effect to any concurrent payment or distribution to or for the
Bank.
5. The Junior Creditor agrees that until the Senior Debt
is paid in full it will not (i) subordinate any part of the
Subordinated Debt to any indebtedness owed to any person other
than the Bank, or (ii) assign, transfer or pledge all or any part
of the Subordinated Debt unless such assignment, transfer or
pledge is made expressly subject to this Agreement. The Junior
Creditor agrees to mark any notes or other evidence of the
Subordinated Debt with a legend to the effect that payment of
such instrument is subordinated to payment of the Senior Debt.
6. The Junior Creditor represents and warrants that the
Junior Creditor is the lawful owner of the Subordinated Debt and
no part thereof is subject to any defense, offset or
counterclaim, and, except as disclosed in writing to the Bank
prior to the execution of this Agreement, (i) the Subordinated
Debt has not previously been subordinated to the indebtedness or
claims of any other party, (ii) no part of the subordinated Debt
is secured by property of the Debtor, and (iii) no part of the
subordinated Debt has been assigned, transferred or pledged to
any other party.
7. The Bank may at any time, and from time to time,
without the consent of or notice to the Junior Creditor, without
incurring responsibility to the Junior Creditor, and without
impairing or releasing any of the Bank's rights, or any of the
obligations of the Junior Creditor hereunder (i) change the time,
amount, manner, place or terms of payment, or change or extend
the time of payment of, or renew or otherwise alter, any
instrument or agreement evidencing any Senior Debt (whether or
not in a commercially reasonable manner), (iii) release anyone
liable in any manner for the payment or collection of any Senior
Debt, (iv) exercise or refrain from exercising any rights against
the Debtor or others (including the Junior Creditor), (v) apply
any sums received by the Bank by whomsoever paid and however
realized, to the payment of the Senior Debt in such manner as the
Bank, in its sole discretion, shall deem appropriate, and (vi)
take any other action which might otherwise constitute a defense
available to, or a discharge of, the Junior Creditor in respect
of the Subordinated Debt in respect of these provisions.
8. The terms of this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time
any payment of any of the Senior Debt is rescinded or must
otherwise be returned by the Bank upon the insolvency, bankruptcy
or reorganization of the Debtor or otherwise, all as though such
payment had been due but not made at such time.
9. No failure or delay by the Bank in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
10. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing
and is signed by the Bank, the Junior Creditor and the Debtor.
11. Subject to paragraph 6, the provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Any
reference herein to the Bank and the Junior Creditor shall
include any holder of the Senior Debt and Subordinated Debt,
respectively, as applicable.
12. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
WITNESS the following signatures and seals.
Junior Creditor:
415 First Street, S.E.
Washington, D.C. 20003-1827
/S/ C.W. GILLULY
-------------------- [SEAL]
C.W. GILLULY
Debtor:
HADRON, INC [SEAL]
5904 Richmond Highway, Suite 300
Alexandria, Virginia 22303
/S/ S. AMBER GORDON
By: ----------------------
Name: S. AMBER GORDON
Title: Executive Vice President
<PAGE>
Bank:
UNITED BANK [SEAL]
2071 Chain Bridge Road
Vienna, Virginia 22182
/S/ LOUISE M. WAGER
By:---------------------------
Louise M. Wager,
Vice President
