SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 and 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 15, 1996
HALIFAX CORPORATION
(Exact name of registrant as specified in charter)
Virginia 2-84160-W 54-0829246
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number Identification No.)
5250 Cherokee Avenue, Alexandria, Virginia 22312
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 750-2202
Not Applicable
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
(a) In accordance with a Plan of Merger ("Plan") attached as
Exhibit A hereto which was duly adopted by the board of directors
of both parties to the merger, CMS Automation, Inc. ("CMS"), a
Virginia corporation, merged into CMSA Acquisition Corporation
("CMSA"), a Virginia corporation wholly owned by Halifax
Corporation, a Virginia corporation. CMS merged into CMSA on the
following basis. Pursuant to the Plan, each issued and
outstanding share of CMS common stock was converted into, and
become exchangeable for, the number of shares of validly issued,
fully paid and nonassessable common stock of Halifax equal to a
conversion ratio meaning a fraction, the numerator of which is
139,630 and the denominator of which is equal to the sum of the
number of shares of CMS issued and outstanding on the effective
date of the merger plus the number of shares that would be
represented by the conversion of $450,000 worth of debt to
equity. In this regard, CMS shareholders who held promissory
notes of CMS in the amount of $450,000 converted said debt to
equity in CMS. In addition to the initial issuance of 139,630
shares of Halifax stock to CMS shareholders which was based on
the net equity value of CMS, Halifax stock will be awarded
annually for three (3) years subsequent to the merger to the CMS
shareholders on a pro-rata basis, excluding Halifax stock issued
as a result of the conversion of debt to equity, having a value
equal to one-third of the net after tax income of CMSA operating
as a wholly owned subsidiary of Halifax.
The assets acquired included accounts receivable and the
inventory and equipment used in conducting and operating the
business of CMS which consists of computer systems integration
including wide area and local area networking, consulting,
application development and training.
Closing of the transaction took place on April 1, 1996 with
a Certificate of Merger issued by the State Corporation
Commission of Virginia effective April 9, 1996.
Item 7. Financial Statements and Exhibits
(a) & (b) It is impracticable to provide the required
financial statements and pro forma financial information at the
time of the filing of this report. Said financial statements and
information will be filed as soon as available but not later than
60 days from the date of this report.
(c) Attached as Exhibit A is a copy of the plan of acquisi-
tion as contained in the Agreement and Plan of Reorganization
entered into by the parties.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
HALIFAX CORPORATION
(Registrant)
Date: April 15, 1996 By:
Howard C. Mills, President
& Chief Executive Officer
Date: April 15, 1996 By:
Richard J. Smithson
Vice President & Treasurer
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 1, 1996,
by and among HALIFAX CORPORATION, a Virginia corporation
("Parent"), CMSA ACQUISITION CORPORATION, a Virginia corporation
and a wholly-owned subsidiary of Parent ("Sub"). CMS AUTOMATION,
INC., a Virginia corporation (the "Target") (Sub and Target being
hereinafter collectively referred to as (the "Constituent
Corporations") and those individuals who are shareholders of the
Target on the Closing Date ("Shareholders").
ARTICLE III
PLAN OF MERGER
3.1 Conversion of Target Shares in the Merger. Pursuant to this
Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any capital
stock of Target; each issued and outstanding share of Target
Common Stock, other than Target Dissenting Shares (as defined in
Section 3.4 hereof), shall be converted into, and become
exchangeable for, the number of shares of validly issued, fully
paid and nonassessable common stock of Parent ("Parent Common
Stock") equal to the Conversion Ratio. In this Agreement, the
term "Conversion Ratio" means a fraction, the numerator of which
is equal to 139,630 and the denominator of which is equal to the
sum of the number of shares of Target Common Stock issued and
outstanding as of the Closing plus the number of shares that
would be represented by the conversion of $450,000 of debt to
equity. In this regard, prior to Closing, Shareholders who hold
promissory notes of the Target in the amount of $450,000
(hereafter sometimes separately referred to as "Converting
Shareholders") shall convert the notes to Target equity. The
consideration referred to in this Section 3.1, together with any
cash payments in lieu of fractional shares as provided herein,
and the Contingent Additional Purchase Price Consideration set
forth in Section 3.6 hereof is hereinafter referred to as the
"Merger Consideration."
3.2 Status of Sub Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any
capital stock of Sub, each issued and outstanding share of common
stock of Sub shall continue unchanged and remain outstanding as a
share of common stock of the Surviving Corporation.
3.3 Exchange of Company Capital Stock Certificates. (a) On or
prior to the Closing Date, Parent shall deposit with the Escrow
Agent (as that term is defined below) the certificates
representing shares of Parent Common Stock required to effect the
exchange referred to in Section 3.3(b) below. Parent shall also
deposit with the Escrow Agent the cash payment in lieu of
fractional shares referred to in Section 3.3(d) below. Shares of
Parent Common Stock into which shares of Target Common Stock
shall be converted in the Merger shall be deemed to have been
issued at the Effective Time and the Shareholders shall have full
voting rights with respect to such shares immediately following
the Effective Time. In addition, the Shareholders shall be
entitled to receive any dividends or other distributions with a
record date after the Effective Time.
(b) From and after the Effective Time, each holder of a
certificate which immediately prior to the Effective Time
represented outstanding shares of Target Common Stock, other than
shares with respect to which dissenters' rights, if any, are
granted by reason of the Merger under the VGCL, shall be entitled
to receive in exchange therefor, upon delivery thereof to
Williams, Mullen, Christian & Dobbins (the "Escrow Agent"), and
following the period of the Escrow, a certificate or certificates
representing the number of whole shares of Parent Common Stock
into which such holder's shares of Target Common Stock were
converted pursuant to Section 3.1 and cash in lieu of any
fractional shares of such Parent Common Stock pursuant to Section
3.3(d). From and after the Effective Time, Parent shall be
entitled to treat the certificates which immediately prior to the
Effective Time represented shares of Target Common Stock and
which have not yet been surrendered for exchange as evidencing
the ownership of the number of full shares of Parent Common Stock
into which the shares of Target Common Stock represented by such
certificates shall have been converted pursuant to Section 3.1,
notwithstanding the failure to surrender such certificates.
However, notwithstanding any other provision of this Agreement,
until holders or transferees of certificates which immediately
prior to the Effective Time represented shares of Target Common
Stock have surrendered them for exchange as provided herein, no
dividends shall be paid with respect to any shares represented by
such certificates and no payment for fractional shares shall be
made. Such dividends or other distributions with a record date
after the Effective Time shall be held by the Escrow Agent in
trust for the benefit of such holders of undelivered
certificates. Upon surrender of a certificate which immediately
prior to the Effective Time represented outstanding shares of
Target Common Stock, there shall be paid to the holder of such
certificate the amount of any dividends which theretofore became
payable, but which were not paid by reason of the foregoing, with
respect to the number of whole shares of Parent Common Stock
represented by the certificate or certificates issued upon such
(c) As soon as practicable after the Effective Time, the Escrow
Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time
represented outstanding shares of Target Common Stock
(collectively, the "Target Certificates") (i) a form letter of
transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to Target Certificates shall pass,
only upon actual delivery of Target Certificates to the Escrow
Agent) and (ii) instructions for use in effecting the surrender
of Target Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of Target
Certificates for cancellation to the Escrow Agent, together with
a duly executed letter of transmittal and such other documents as
the Escrow Agent shall reasonably require and following the
period of the Escrow, the holder of such Target Certificates
shall receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock into which the
shares of Target Common Stock represented by Target Certificates
so surrendered shall have been converted pursuant to the
provisions of Section 3.1 less any adjustments pursuant to
Section 4.5 hereof, and Target Certificates so surrendered shall
forthwith be canceled. Notwithstanding the foregoing, neither the
Escrow Agent nor any party hereto shall be liable to a holder of
shares of Target Common Stock for any shares of Parent Common
Stock or dividends or distributions thereon delivered to a public
official pursuant to applicable escheat laws.
(d) Notwithstanding any other provision of this Agreement, no
certificates or scrip for fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of Target
Certificates pursuant to this Article III in the Merger and no
Parent Common Stock dividend, stock split or interest shall
relate to any fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any other
rights of a security holder. In lieu of any such fractional
shares, each holder of Target Common Stock who would otherwise
have been entitled to a fraction of a share of Parent Common
Stock upon surrender of Target Certificates for exchange pursuant
to this Article III, shall be entitled to receive from the Escrow
Agent a cash payment in lieu of such fractional share equal to
such fraction multiplied by the Valuation Price of $7.00 per
share of Parent Common stock.
3.4 Dissenting Shares. Notwithstanding anything to the contrary
contained in this Agreement or the Merger Agreement, holders of
shares of Target Common Stock with respect to which dissenters'
rights, if any, are granted by reason of the Merger under the
VGCL and who do not vote in favor of the Merger and otherwise
comply with the VGCL ("Target Dissenting Shares"), shall not be
entitled to shares of Parent Common Stock pursuant to Section
3.1, unless and until the holder thereof shall have failed to
perfect or shall have effectively withdrawn or lost such
holder's right to dissent from the Merger under the VGCL, and
shall be entitled to receive only the payment provided for
pursuant to the VGCL. If any such holder shall have failed to
perfect or shall have effectively withdrawn or lost such holder's
dissenters' rights under the VGCL, such holder's Target
Dissenting Shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration.
3.5 Closing of Transfer Books. From and after the Effective Time,
the stock transfer books of Target shall be closed and no
transfer of shares of Target Common Stock shall thereafter be
made. If, after the Effective Time, Target Certificates are
presented to Parent, they shall be canceled and exchanged for the
Merger Consideration in accordance with the procedures set forth
in this Article III.
3.6 Contingent Additional Purchase Price Consideration. (a) In
addition to the Parent Common Stock transferred to Shareholders
at Closing, on or before May 31, 1997, 1998, and 1999, Parent
shall deliver to the Shareholders shares of Parent Common Stock
having a value, as determined by the then current market value of
the Parent Common Stock, equal to one-third of the net after tax
income of Sub (Formerly Target) operating as a wholly owned
subsidiary of Parent for each of the tax years ending March 31,
1997, 1998 and 1999. Such additional shares of Parent Common
Stock shall be distributed among the Shareholders on a pro rata
basis, based on the Shareholders holdings as of the date of
Closing and set forth in Exhibit A hereto; provided, however,
that for the purposes of determining a Shareholder's pro rata
share, any shares of Target received by such Shareholders as a
result of converting a promissory note into equity of Target
prior to the Merger pursuant to Article III hereof shall not be
included. For the purposes of this paragraph only, the first
period for calculating the additional consideration shall
commence January 1, 1996 and continue through March 31, 1997.
The two remaining periods shall consist of twelve month intervals
beginning April 1, 1997 and April 1998, respectively.
Notwithstanding the foregoing, the parties hereto agree that (i)
for the purposes of determining the additional shares of Parent
Common Stock due to the Shareholders for the period ending March
31, 1997, the fair market value of the Parent Common Stock shall
be deemed to be $7.00 per share and (ii) for the purposes of
determining the additional shares of Parent Common Stock due to
the Shareholders for the periods ending March 31, 1998 and 1999,
the fair market value of the Parent Common Stock shall not exceed
$10.00 per share or be less than $6.00 per share.
Notwithstanding anything contained herein to the contrary, in the
event that a distribution of shares of Parent Common Stock
pursuant to this Section 3.6, in combination with shares
previously distributed pursuant to Article III, would increase
the number of outstanding shares of Parent Common Stock by more
than 20.0% of the number of outstanding shares of Parent Common
Stock outstanding immediately before the Closing, Parent may
deliver in lieu of additional shares of Parent Common Stock, to
the Shareholders a cash payment equal to the value of the shares
of Parent Common Stock they would have received pursuant hereto.
(b) Sub's after-tax net income shall be determined by Parent's
accounting firm. For purposes of calculating the Contingent
Additional Purchase Price Consideration the following factors
will be in effect:
(i) Sub's tax liability will be calculated as if Sub was an
independent entity and the tax rate of the Sub will be no more
than Parent's overall corporate tax rate.
(ii) Sub will get the benefit of any allowable tax-loss
carry forward from Target.
(iii) For purposes of calculating additional consideration
none of the Parent corporate overhead will be assigned to Sub
other than costs transferred from Sub to Parent.
(iv) Only Sub operating debt will be assigned to Sub.
(v) Future acquisitions of similar companies will not affect
additional consideration calculations.
(c) Parent shall notify the Shareholders in writing no later than
May 31 of each year of the accountant's determination of Sub's
after-tax net income and of the number of additional shares, if
any, that the Shareholders are entitled to receive. Such notice
shall include a copy of the accountants calculations. The
Shareholders shall then have 30 days to deliver to Parent a
written notice disputing the accountant's calculations. In the
event the Shareholders deliver such a notice, such dispute shall
be submitted for arbitration in accordance with Section 10.8
hereof.
3.7 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place (a) at the
offices of Target at 10:00 a.m., local time on April 1, 1996, or
the second business day immediately following the date on which
the last of the conditions set forth in Article VII hereof is
fulfilled or waived, or (b) at such other time and place and on
such other date as Parent and Target shall agree (the "Closing
Date").
