SECURITIES PURCHASE AGREEMENT
AMONG
HADRON, INC.
X.X. XXXXXXX
XXX X. XXXXX, XXXXXXXX X. XXXXX, THE XXXXX DYNASTIC TRUST
AND J. XXXXXXX XXXX
AND
XXXX X. XXXXXXX
March 30, 2000
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
XXXXXXX 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
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 XXXXXXX'X 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 XXXXXXX. 21
7.12 FAIRNESS OPINION. 21
7.13 ELECTION OF DIRECTORS. 21
7.14 DELIVERY OF CLOSING DOCUMENTS. 21
TABLE OF CONTENTS (cont.)
7.15 INDEMNIFICATION AND CONTRIBUTION AGREEMENTS. 22
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF XXXXXXX 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 XXXXXXX. 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
TABLE OF CONTENTS (cont.)
EXHIBIT F - Xxxxx 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
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, Xxx X. Xxxxx ("Xxxxx"), Xxxxxxxx X. Xxxxx ("Xxx.
Xxxxx"), the Xxxxx Dynastic Trust ("Xxxxx Trust"), J. Xxxxxxx
Xxxx ("Xxxx") and Xxxx X. Xxxxxxx ("Xxxxxxx") (collectively
Xxxxx, Xxx. Xxxxx, Xxxxx Trust, Xxxx and Xxxxxxx being referred
to as the "Purchasers") and X.X. Xxxxxxx ("Xxxxxxx").
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"),
X. Xxxxxxx 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.
"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.
"Xxxxxxx Loan" means a loan from Xxxxxxx 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 Xxx X. Xxxxx, Xxx. Xxxxx, Xxxxx Trust and
J. Xxxxxxx Xxxx.
"Leases" has the meaning set forth in Section 4.19.
"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 Xxxxxxx and Company" means to the
knowledge of either the Company or Xxxxxxx.
"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).
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 Xxxxxxx 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 Xxxxxxx 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
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
Xxxxxxx and Xxxxx in the forms of Exhibit E and Exhibit F,
respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND XXXXXXX
The Company and, where indicated by reference to Xxxxxxx'x
knowledge, Xxxxxxx, 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 Xxxxxxx 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
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
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 Xxxxxxx or the Company is a
party or by which Xxxxxxx, 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
Xxxxxxx 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 Xxxxxxx, 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.
4.8 Compliance with Laws.
To the knowledge of the Company and the actual knowledge of
Xxxxxxx, 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 Xxxxxxx or the Company and the Company's
Subsidiaries, or to the knowledge of the Company or the actual
knowledge of Xxxxxxx, recorded or published, and no proceeding is
pending or, to the knowledge of the Company of the actual
knowledge of Xxxxxxx, threatened, to revoke any of them. Xxxxxxx
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.
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
Xxxxxxx, 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;
(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 XXXXXXX
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 Xxxxxxx, 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.
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 Xxxxxxx, threatened between Xxxxxxx 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 Xxxxxxx, threatened against Xxxxxxx 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.
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 Xxxxxxx,
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.
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 Xxxxxxx, 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
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.
(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 Xxxxxxx 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
Xxxxxxx, 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.
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 Xxxxxxx based on any
arrangement or agreement made by or on behalf of the Company the
Company's Subsidiaries or Xxxxxxx.
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.
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 Xxxxxxx, there is no agreement,
judgment, injunction, order or decree binding upon the Company or
any of the Company's Subsidiaries or Xxxxxxx 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
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
Xxxxxxx 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 Xxxxxxx 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.
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.
Xxxxxxx, 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,
Xxxxxxx 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 Xxxxx 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.
6.5 United Bank.
Xxxxx 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 Xxxxxxx'x Loan Repayment.
Subject to approval from the Bank, Purchasers shall cause the
Company to repay, at Closing, two hundred thousand dollars
($200,000) of Xxxxxxx'x Loan and the remaining balance of
Xxxxxxx'x 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
Xxxxxxx 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 Xxxxxxx and Company shall have delivered
to Purchasers a certificate to that effect signed by Xxxxxxx 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.
Xxxxxxx 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
Xxxxxxx 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, Xxxxxxx and Xxxxx shall have executed and
delivered Employment Agreements in the forms attached hereto as
Exhibit E and Exhibit F, respectively.
7.5 Approvals and Consents.
The Company and Xxxxxxx 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.
Xxxxxxx 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 Xxxxxxx.
Purchasers shall have received an opinion from McGuire, Woods,
Battle & Xxxxxx, counsel for the Company and Xxxxxxx, 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.
7.13 Election of Directors.
The Company shall have taken all necessary corporate action to
effect the appointment of Xxxxx 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 Xxxxxxx 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 Xxxxx Xxxx & Company, L.L.C. ("Xxxxx
Xxxx") to January 7, 2001 upon the same terms and conditions;
provided, however, that no fee shall be charged by Xxxxx Xxxx
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.
7.15 Indemnification and Contribution Agreements.
Xxxxx and Xxxx shall have executed and delivered an
Indemnification and Contribution Agreement relating to Xxxxx'x
guaranty of the bank loan in form and substance satisfactory to
each.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF
XXXXXXX AND COMPANY
The obligation of Xxxxxxx 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.
ARTICLE IX
CLOSING
9.1 Time and Place of Closing.
The Closing shall take place at the offices of Holland &
Knight, LLP, 0000 Xxxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxxx,
Xxxxxxxx 00000, at 1:00 p.m. local time on Thursday the 30th day
of March 2000 ("Closing Date").
9.2 Deliveries by Company and Xxxxxxx.
At Closing, Company and Xxxxxxx 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 Xxxxxxx and Company
the following:
(a) Each of the Closing Documents listed in Section 8.5; and
(b) Such additional documents as Xxxxxxx and Company may
reasonably request.
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 Xxxxxxx and Company in this Agreement;
(b) The breach of any agreement of Xxxxxxx 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.
(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:
(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.
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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx or the Company or the
benefit of any other suretyship statutes and principles at law or
in equity requiring, inter alia, any notice to Xxxxxxx or Company
of or prior to the commencement of any proceeding against Xxxxxxx
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 Xxxxxxx or the Company before
proceeding against and collecting from the other.
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 Xxxxxxx to:
X.X. Xxxxxxx
000 Xxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Telefax: (000) 000-0000
With a copy to:
MCGUIRE, WOODS, BATTLE, & XXXXXX, LLP
0000 Xxxxxx Xxxx., Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxx Xxxxxxx Esquire
Telefax No.: (000) 000-0000
If to Company to:
Hadron, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: President
Telefax: (000) 000-0000
If to Investors to:
Xxx X. Xxxxx
Xxxxxxxx X. Xxxxx
Xxxxx Dynastic Trust
00 Xxxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telefax: (000) 000-0000
With a copy to:
HOLLAND & KNIGHT, LLP
0000 Xxxxxxxxxxxx X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telefax: (000) 000-0000
If to J. Xxxxxxx Xxxx:
0 Xxxx Xxxxxxxxxx Xxxxxx
Post Xxxxxx Xxx 000
Xxxxxxxxxx, XX 00000
Telefax: (000) 000-0000
If to Xxxx X. Xxxxxxx:
0000 Xxxxxxxx Xxxxxx, X.X. Xxx. 0000-X
Xxxxxxxxxx, X.X. 00000
Telefax: (000) 000-0000
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.
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: XXXXXXX:
Hadron, Inc.
/S/ X.X. XXXXXXX /S/ X.X. XXXXXXX
______________________ ___________________________
By: X.X. Xxxxxxx X.X. Xxxxxxx
Title: Chairman
and Chief Executive Officer
PURCHASERS:
/S/ XXX X. XXXXX /S/ J. XXXXXXX XXXX
_________________ __________________________
Xxx X. Xxxxx J. Xxxxxxx Xxxx
/S/ XXXXXXXX X. XXXXX /S/ XXX X. XXXXX
_____________________ _________________________
Xxxxxxxx X. Xxxxx Xxxxx Dynastic Trust
By Xxx X. Xxxxx, Trustee
/S/ XXXX X. XXXXXXX
____________________
Xxxx X. Xxxxxxx
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.
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
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:
--------------------
--------------------
--------------------
--------------------
--------------------
Fax: --------------
If to Company:
0000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Fax: 703/000-0000
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 , 2000 HADRON, INC.
By:_________________________________
X.X. Xxxxxxx
Chief Executive Officer
Attested:
________________________
Secretary
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 B
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
Xxx X. Xxxxx 261,290 235,161 $101,903.10
Xxxxxxxx X. Xxxxx and 256,410 230,769 $99,999.90
Xxxxx Dynastic 1,128,200 1,015,380 $439,998.00
Trust
00 Xxxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
J. Xxxxxxx Xxxx 514,100 462,690 $200,499
0 Xxxx Xxxxxxxxxx Xx.
Xxxx Xxxxxx Xxx 000
Xxxxxxxxxx, XX 00000
Xxxx X. Xxxxxxx 90,000 81,000 $35,100
0000 Xxxxxxxx Xxx, X.X.
Xxx. 0000-X
Xxxxxxxxxx, X.X. 00000
