As filed with the Securities and Exchange Commission on March 31, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HALIFAX CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA NO. 54-0829246
(State of incorporation) (I.R.S. Employer
Identification No.)
5250 Cherokee Avenue Howard C. Mills
Alexandria, VA 22312 President and Chief
(703) 750-2202 Executive Officer
(Address, including zip code, Halifax Corporation
and telephone number, including 5250 Cherokee Avenue
area code, of registrant's Alexandria, VA 22312
principal executive offices) (703) 750-2202
(Name, address, including
zip code, and telephone
number, including area
code, of agent for
service)
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.(X)
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Securities Amount to Maximum Maximum Amount of
to be registered be Offering Aggregate Registration
Registered Price Offering Fee
(1) Per Price(2)
Share(2)
_______________________________________________________________________
Common Stock, par 350,464 $11.375 $3,986,528.00 $1,208.04
value $0.24 per share shares
(1) Plus such indeterminate number of shares pursuant to Rule 416 as
may be issued in respect of stock splits, stock dividends and
similar transactions.
(2) Estimated solely for the purpose of calculating the registration
fee. Pursuant to Rule 457, the offering price and registration
fee are computed on the basis of the average of the high and low
prices per share of the Registrant's Common Stock reported on the
American Stock Exchange on March 21, 1997.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED MARCH 31, 1997
PROSPECTUS
HALIFAX CORPORATION
350,464 SHARES OF COMMON STOCK
[Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell of the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.]
This Prospectus relates to the proposed sale of up to 350,464
shares (the "Offered Shares") of common stock, par value $0.24 per
share (the "Common Stock"), of Halifax Corporation ("Halifax" or the
"Company") which may be offered for sale from time to time by the
Selling Stockholders (as hereinafter defined). See "Selling
Stockholders." The Company will not receive any proceeds from the
sale of the Offered Shares.
The sale and/or distribution of the Offered Shares by the Selling
Stockholders may be effected from time to time to purchasers directly
by the Selling Stockholders or through brokers, agents, dealers or
underwriters in one or more transactions (which may involve crosses
and principal trades, including block transactions), in special
offerings, negotiated transactions, exchange distributions or
secondary distributions, or otherwise, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices
or at negotiated prices. To the extent required, the specific Offered
Shares to be sold, the name of the Selling Stockholders, the purchase
price, the public offering price, the name of any such brokers,
agents, dealers or underwriters, and any applicable commission or
discount with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." The
Common Stock is listed on the American Stock Exchange ("Amex") and
traded under the symbol "HX". On March 21, 1997, the closing price of
the Company's Common Stock on the Amex was $11.875 per share.
The purpose of this offering is to register 350,464 shares of
Common Stock previously issued, and to be issued under certain
circumstances, by the Company in connection with that certain
Agreement and Plan of Reorganization, dated as of April 1, 1996 (the
"Merger Agreement"), by and among Halifax, CMSA Acquisition
Corporation, a Virginia corporation and a wholly-owned subsidiary of
Halifax ("CMSA"), CMS Automation, Inc., a Virginia corporation
("CMS"), and the stockholders of CMS.
Upon any sale of the Common Stock offered hereby, the Selling
Stockholders and participating agents, brokers and dealers may be
deemed to be underwriters as that term is defined in the Securities
Act of 1933, as amended (the "Securities Act"), and commissions or
discounts or any profit realized on the resale of such securities
purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
No underwriter is initially being utilized in connection with
this offering. The Company will pay all expenses incurred in
connection with this offering other than fees and expenses (including
underwriting fees and selling commissions) of the Selling
Stockholders. See "Plan of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 31, 1997.
AVAILABLE INFORMATION
Halifax is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in accordance therewith, files periodic reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). The Company's filings may be inspected and copied or
obtained by mail upon payment of the Commission's prescribed rates at
the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Common Stock is listed on the Amex
and the Company's reports, proxy statements and other filings with the
Commission are also available for inspection at the offices of the
Amex located at 86 Trinity Place, New York, New York 10006. The
Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants
that file electronically with the Commission, including the Company,
which can be accessed at the following address: http://www.sec.gov.
The Company has filed with the Commission a Registration
Statement on Form S-3 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and in the
amendments, exhibits and schedules thereto. For further information
with respect to the Company and the Common Stock, reference is made to
the Registration Statement, and to the exhibits and schedules filed
therewith. All of these documents may be inspected without charge at
the Commission's principal office in Washington, D.C., and copies
thereof may be obtained from the Commission at the prescribed rates or
may be examined without charge at the public reference facilities of
the Commission. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission are not necessarily
complete, and in each instance reference is made to the copy of such
document so filed. Each such statement shall be qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act (Commission File No. 1-8964)
are incorporated in and made a part of this Prospectus:
(i) The Company's Annual Report on Form 10-K for the year
ended March 31, 1996;
(ii) The Company's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1996, September 30, 1996 and
December 31, 1996; and
(iii) The Company's Current Reports on Form 8-K dated April
15, 1996 (as amended by Form 8-K-Amendment 1 dated
April 15, 1996 and filed on June 18, 1996) and November
25, 1996 (as amended by Form 8-K-Amendment 1 dated
November 25, 1996 and filed on February 13, 1997).
The description of the Common Stock, which is registered under
Section 12 of the Exchange Act, is set forth under the caption
"Description of Capital Stock" contained in the Company's Registration
Statement on Form S-18 dated June 29, 1983, and is hereby incorporated
herein by reference. All documents which the Company files pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the
offering described herein shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of
such reports and documents. Any statement contained in a document
incorporated by reference, or deemed to be incorporated by reference,
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed incorporated document or in any accompanying
prospectus supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom
this Prospectus is delivered, upon written or oral request, a copy of
any or all documents described above (other than exhibits thereto,
unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates). Requests should be
addressed to Corporate Secretary, Halifax Corporation, 5250 Cherokee
Avenue, Alexandria, Virginia 22312.
THE COMPANY
The Company is a technology services and facilities services
company for commercial and governmental activities. Technology
services includes the integration, systems engineering, installation,
maintenance and training for computer systems, communications systems
and simulation systems. Facilities services includes the management,
operations and maintenance support of military bases, prisons,
waterways, major office complexes and communication sites. Services
and associated products are developed and delivered by the Company
and/or its three wholly-owned subsidiaries: CMSA, Halifax
Engineering, Inc. and Halifax Technical Services, Inc.
The Company is a Virginia corporation with its principal
executive offices at 5250 Cherokee Avenue, Alexandria, Virginia 22312.
The Company's telephone number is (703) 750-2202.
THE OFFERED SHARES
The merger contemplated by the Merger Agreement (the "Merger")
was consummated on April 1, 1996. Pursuant to the Merger, CMS was
merged into CMSA, a wholly-owned subsidiary of the Company, and
139,630 shares of Common Stock, in the aggregate (the "Initial
Shares"), were issued to the Selling Stockholders. The Merger
Agreement also provides for the issuance of additional shares of
Common Stock to the Selling Stockholders, subject to certain
conditions, as additional consideration in connection with the Merger
(the "Contingent Shares") on or before May 31 of each of 1997, 1998
and 1999. The number of Contingent Shares to be issued to the Selling
Stockholders on or before May 31, 1997 is equal to one-third of the
net after tax income of CMSA for the period January 1, 1996 through
March 31, 1997 divided by $10.50 (the deemed per share value of the
Common Stock ($7.00) adjusted for a 3:2 stock split which became
effective December 27, 1996 (the "Stock Split")). The number of
Contingent Shares to be issued to the Selling Stockholders on or
before May 31, 1998 and May 31, 1999 is equal to one-third of the net
after tax income of CMSA for the twelve-month periods beginning April
1, 1997 and April 1, 1998, respectively, divided by the then-current
market value of a share of Common Stock, which value shall be deemed
not to exceed $15.00 per share or be less than $9.00 per share (in
each case after adjustment for the Stock Split). Dependent upon the
foregoing, the Contingent Shares will be distributed to the Selling
Stockholders pro rata based on their holdings of CMS stock as of the
date of closing of the Merger without accounting for any shares of CMS
stock received by any Selling Stockholder as a result of converting a
promissory note into equity of CMS prior to the Merger.
In the event that the distribution of Contingent Shares, together
with the Initial Shares, would increase the number of outstanding
shares of Common Stock by more than 20% of the number of shares of
Common Stock outstanding immediately before the closing of the Merger,
the Company may deliver a cash payment of equal value in lieu of such
additional Contingent Shares (the "Contingent Cash Option"). The
Company had 1,168,229 shares of Common Stock outstanding immediately
before the closing of the Merger.
Pursuant to Section 6.3 of the Merger Agreement, the Company is
required to prepare and file a Registration Statement under the
Securities Act within twelve months of the date of original issuance
of Common Stock to the Selling Stockholders, which Registration
Statement covers the issuance of Initial Shares and Contingent Shares.
The Company is obligated under the Merger Agreement to use its best
efforts to cause the Registration Statement to become effective as
soon as practicable.
CMSA is a computer network integration and solutions company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Offered Shares.
PLAN OF DISTRIBUTION
The Offered Shares may be sold from time to time to purchasers
directly by the Selling Stockholders. Alternatively, the Selling
Stockholders may from time to time offer the Offered Shares through
underwriters, brokers, dealers or agents, who may receive compensation
in the form of underwriting discounts, concessions, or commissions
from the Selling Stockholders selling as principals and/or from
purchasers of the Offered Shares for whom they may act as agent. The
Offered Shares may be sold from time to time in one or more
transactions (which may involve crosses and principal trades,
including block transactions) on the Amex and any other stock
exchanges on which the Offered Shares are admitted for trading,
pursuant to and in accordance with the rules of such exchanges, in
negotiated transactions or otherwise, at a fixed offering price, which
may be changed, at varying prices determined at the time of sale, or
at negotiated prices. The Selling Stockholders may effect such
transactions by selling Offered Shares to or through securities
broker-dealers, and such broker-dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from
the Selling Stockholders and/or from purchasers of Offered Shares for
whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
If any broker-dealer purchases the Offered Shares as principal it
may effect resales of the Offered Shares from time to time to or
through other broker-dealers, and the other broker-dealers may receive
compensation in the form of concessions or commissions from the
principals and/or the purchasers of the Offered Shares for whom they
may act as agents. The Selling Stockholders and any underwriter,
dealer or agent that participates in the distribution of the Offered
Shares may be deemed underwriters under the Securities Act, and any
profit on the sale of the Offered Shares by them and any discounts,
commissions, concessions or other compensation received by any such
underwriters, dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act.
At the time a particular offer of the Offered Shares is made, to
the extent required, a Prospectus Supplement will be distributed which
will set forth the number of shares of Common Stock being offered and
the terms of the offering, including the name or names of any
underwriters, brokers, dealers or agents (whether such party is acting
as a principal or as agent for the Selling Stockholders), any
discounts, commissions, concessions and other items constituting
compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or re-allowed or paid to dealers.
The terms of the Merger Agreement provide for the Company to file
a shelf registration statement (the "Shelf Registration Statement")
covering the Offered Shares. The Registration Statement of which this
Prospectus is a part constitutes the Shelf Registration Statement.
The Company has agreed to use its best efforts to cause the Shelf
Registration Statement to become effective and keep the Shelf
Registration Statement effective until the earlier of (i) such time as
all of the Offered Shares have been disposed of or (ii) November 30,
1999.
To comply with securities laws of certain states, if applicable,
the Offered Shares will be sold in such states only through registered
or licensed brokers or dealers. In addition, in certain states the
Offered Shares may not be sold unless they have been registered or
qualified for sale in such states or an exemption from registration or
qualification is available or is complied with.
The Company will pay all of the expenses incident to the offering
and sale of the Offered Shares to the public other than the fees and
expenses (including underwriting fees and selling commissions) of the
Selling Stockholders.
SELLING STOCKHOLDERS
This Prospectus relates to Initial Shares of Common Stock that
have been issued to the Selling Stockholders pursuant to the Merger
Agreement and the maximum number of Contingent Shares of Common Stock
that are issuable to the Selling Stockholders pursuant to the Merger
Agreement if the Company exercises in full its Contingent Cash Option
(provided that there is no assurance that the Company will, or will
not, exercise, in full or in part, its Contingent Cash Option). The
Selling Stockholders may offer the Offered Shares with this
Prospectus.
The following table sets forth the name of each Selling
Stockholder and the number of shares of Common Stock acquired, and to
be acquired under certain circumstances, by each Selling Stockholder
pursuant to the Merger and being registered hereby, some or all of
which shares may be sold pursuant to this Prospectus. There is no
assurance that any of the Selling Stockholders will sell any or all of
the Offered Shares offered by them hereunder.
Initial Contingent Total Offered
Shares Covered Shares Covered Shares Covered
Selling by this by this by this
Stockholder Prospectus Prospectus Prospectus
___________ ______________ ______________ ______________
Thomas L. 32,216 40,324 72,640
Mountcastle
Richard 9,250 11,543 20,793
Barkhouser
Lester A. Hudson 9,250 11,543 20,793
George Nolde III 84,867 29,693 114,560
Irvin E. Cox 59,525 30,159 89,684
Mark A. Roberts 3,253 4,059 7,312
Stephen M. Estep 3,253 4,059 7,312
Calvin W. & 6,418 8,009 14,427
Barbara C. Fowler
Mary K. Adams 1,309 1,634 2,943
SUBTOTAL 209,441 141,023 350,464
The Selling Stockholders are former stockholders of CMS. Prior
to the consummation of the Merger, (i) Thomas L. Mountcastle was the
President and a director of CMS; (ii) George Nolde III was the
Secretary, the Treasurer and a director of CMS; (iii) Irvin E. Cox was
a Corporate Vice President and a director of CMS, (iv) Richard
Barkhouser was a director of CMS, (v) Lester A. Hudson was a director
of CMS, (vi) Mark A. Roberts was a Vice President of CMS, (vii)
Stephen M. Estep was a Vice President of CMS and (viii) Mary K. Adams
was the Controller of CMS. Since the consummation of the Merger, (i)
Thomas L. Mountcastle has been a Vice President of the Company and the
President of CMSA, (ii) Mark A. Roberts has been a Vice President of
CMSA, (iii) Stephen M. Estep has been a Vice President of CMSA and
(iv) Mary K. Adams has been the Controller of CMSA. No other
Selling Stockholder has had any relationship with CMS, the Company or
any of their respective affiliates during the past three years other
than as described above.
LEGAL MATTERS
Certain legal matters regarding the validity of the shares of
Common Stock offered hereby will be passed upon for the Company by
Ernest L. Ruffner, Esq., Secretary and General Counsel of the Company.
EXPERTS
The consolidated financial statements of the Company at March 31,
1996 and 1995 and for the two years in the period ending March 31,
1996 appearing in the Company's Annual Report on Form 10-K for the
year ended March 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of the Company for the year
ending March 31, 1994 appearing in the Company's Annual Report on Form
10-K for the year ended March 31, 1996, have been audited by Grant
Thornton LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference
in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
No dealer, salesman or other
person has been authorized to
give any information or to make
any representations not contained
in, or incorporated by reference
in, this Prospectus in connection
with the offering covered by this
Prospectus. If given or made,
such information or
representations must not be 350,464 SHARES
relied upon as having been
authorized. This Prospectus does
not constitute an offer to sell COMMON STOCK
or the solicitation of an offer
to buy any securities other than ($0.24 par value)
the securities described in this
Prospectus or an offer to sell or
the solicitation of an offer to
buy the Common Stock in any
jurisdiction where, or to any
person to whom, it is unlawful to
make such offer or solicitation.
Neither the delivery of this HALIFAX CORPORATION
Prospectus nor any sale made
hereunder shall, under any
circumstances, create an
implication that there has not
been any change in the facts set
forth in this Prospectus or in
the affairs of the Company since
the date hereof.
TABLE OF CONTENTS
Page
Available Information . . . . . 2
Information Incorporated by
Reference . . . . . . . . . . . 2
The Company . . . . . . . . . . 3
The Offered Shares . . . . . . 3
Use of Proceeds . . . . . . . . 4
Plan of Distribution . . . . . 4
Selling Stockholders . . . . . 5
Legal Matters . . . . . . . . . 5 March 31, 1997
Experts . . . . . . . . . . . . 5
________________________________________ __________________________________
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration fee . . . . . . . . . . $ 1,208.04
Stock exchange listing fees . 0
Legal fees and expenses . . . . . . . 20,000.00*
Accounting fees and expenses . . . 12,500.00*
Total . . . . . . . . . . . . . . . . $33,708.04*
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Virginia Stock Corporation Act ("VSCA")
provides for indemnification of officers and directors of the Company
under certain circumstances. A Virginia corporation may indemnify an
individual made a party to a proceeding because he is or was a
director or officer against liability incurred in the proceeding if he
(i) conducted himself in good faith, (ii) believed that his conduct
(a) was in the best interest of the corporation, in the case of
conduct in his official capacity with the corporation or (b) was at
least not opposed to the best interest of the corporation, in the case
of all other conduct and (iii) in the case of any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, a Virginia corporation may not
indemnify a director or officer if (i) in connection with a proceeding
by or in the right of the corporation, he was adjudged liable to the
corporation or (ii) in connection with any other proceeding charging
improper personal benefit to him (whether or not involving action in
his official capacity), he was adjudged liable on the basis that
personal benefit was improperly received by him.
The By-Laws of the Company (the "By-Laws") limit the liability of
an officer or director of the Company arising out of a single
transaction, occurrence or course of conduct to $100.00 in every
instance permitted by the VSCA. The By-Laws provide that the Company
shall indemnify any individual who is, was or is threatened to be made
a party to a proceeding (including a proceeding by or in the right of
the Company) because he is or was a director or officer of the Company
or is or was serving the Company or any other legal entity in any
capacity at the request of the Company while a director or officer of
the Company, against all liabilities and reasonable expenses incurred
in such proceeding, unless incurred because of his willful misconduct
or knowing violation of criminal law.
As authorized by the By-Laws, the Company has purchased and
maintained insurance (within limits and subject to certain exclusions)
against liabilities it may have under the indemnification provisions
of the By-Laws or to protect any officer, director or other person
eligible for indemnification against liabilities incurred in
connection with their service to the Company.
The foregoing represents a summary of the general effect of the
VSCA, the By-Laws and the Company's directors and officers liability
insurance coverage for purposes of general description only.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT DESCRIPTION OF EXHIBIT
(2) Agreement and Plan of Reorganization, dated as of April
1, 1996, by and among Halifax Corporation, CMSA
Acquisition Corporation, CMS Automation, Inc. and the
stockholders of CMS Automation, Inc.
(3) A. Articles of Incorporation, as amended. (Incorporated
by reference to Exhibit 3.1 of the Company's Annual
Report on Form 10-K for the year ended March 31, 1995.)
B. By-Laws, as amended. (Incorporated by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K
for the year ended March 31, 1995.)
(5) Opinion of legal counsel regarding legality of
securities being registered.
(23) A. Consent of Ernst & Young LLP
B. Consent of Grant Thornton LLP
C. Consent of Ernest L. Ruffner, Esq. - See Exhibit (5).
(24) Powers of Attorney.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 ("the Exchange Act") that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby further undertakes that,
for purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Alexandria, State of
Virginia, on March 28, 1997.
HALIFAX CORPORATION
By:/s/ Howard C. Mills
_________________________________
Howard C. Mills
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Howard C. Mills President and Chief March 28, 1997
Howard C. Mills Executive Officer
(Principal Executive Officer)
and Director
/s/ John D. D'Amore Vice President, Treasurer and March 28, 1997
John D. D'Amore Controller (Principal Accounting
and Financial Officer)
John H. Grover* Director March 28, 1997
John H. Grover
Clifford M. Hardin* Director March 28, 1997
Clifford M. Hardin
Alvin E. Nashman* Director March 28, 1997
Alvin E. Nashman
/s/ Ernest L. Ruffner Director March 28, 1997
Ernest L. Ruffner
Arch Scurlock* Director March 28, 1997
Arch Scurlock
John M. Toups* Director March 28, 1997
John M. Toups
*By: /s/ Ernest L. Ruffner
Ernest L. Ruffner
as Attorney-in-Fact
EXHIBIT INDEX
PAPER (P) OR
EXHIBIT DESCRIPTION OF EXHIBIT ELECTRONIC
(E)
(2) Agreement and Plan of E
Reorganization, dated as of April
1, 1996, by and among Halifax
Corporation, CMSA Acquisition
Corporation, CMS Automation, Inc.
and the stockholders of CMS
Automation, Inc.
(3) A. Articles of Incorporation, as --
amended. (Incorporated by
reference to Exhibit 3.1 of the
Company's Annual Report on Form 10-
K for the year ended March 31,
B. 1995.) --
By-Laws, as amended. (Incorporated
by reference to Exhibit 3.2 of the
Company's Annual Report on Form 10-
K for the year ended March 31,
1995.)
(5) Opinion of legal counsel regarding E
legality of securities being
registered.
(23) A. Consent of Ernst & Young LLP E
B. Consent of Grant Thornton LLP E
C. Consent of Ernest L. Ruffner, Esq. --
- See Exhibit (5).
(24) Powers of Attorney. E
Exhibit 2
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").
RECITALS
A. The Boards of Directors of Parent, Sub and Target have
approved the acquisition of Target by Parent.
B. The Boards of Directors of Parent, Sub and Target have
approved the merger of Target into Sub (the "Merger"), pursuant
to this Agreement and Plan of Reorganization and the transactions
contemplated hereby, in accordance with the applicable provisions
of the statutes of the State of Virginia, which permit such
Merger.
C. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
D. Each of the parties to this Agreement desires to make
certain representations, warranties and agreements in connection
with the Merger and also to prescribe various conditions thereto.
AGREEMENT
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) At the Effective Time (as deemed in Section 1.2) and subject
to the terms and conditions of this Agreement, Target shall be
merged into Sub and the separate existence of Target shall
thereupon cease, in accordance with the applicable provisions of
the General Corporation Law of the State of Virginia (the VGCL").
(b) Sub will be the surviving corporation in the Merger,
sometimes referred to herein as the "Surviving Corporation") and
will continue to be governed buy the laws of the State of
Virginia, and the separate corporate existence of Sub and all of
its rights, privileges, immunities and franchises, public or
private, and all its duties and liabilities as a corporation
organized under the VGCL will continue unaffected by the Merger.
(c) The Merger will have the effects specified by the VGCL.
1.2 Effective Time. As soon as practicable following
fulfillment or waiver of the conditions specified in Article VII
hereof, and provided that this Agreement has not been terminated
or abandoned pursuant to Article IX hereof, the surviving
corporation (Parent) will cause Articles of Merger (the "Articles
of Merger") to be filed with the office of the State Corporation
Commission of the State of Virginia. Subject to and in
accordance with the law of the State of Virginia, the Merger will
become effective April 1, 1996 (the "Effective Time"). Each of
the parties will use its best efforts to cause the Merger to be
consummated as soon as practicable following the fulfillment or
waiver of the conditions specified in Article VII hereof.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of
Incorporation of Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation after the Effective Time.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving
Corporation after the Effective Time.
2.3 Board of Directors. From and after the Effective Time, the
Board of Directors of Sub shall be the Board to Directors of the
Surviving Corporation which shall include Thomas L. Mountcastle
who shall also be elected as a vice president of Parent.
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 l, 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").
ARTICLE IV
FURTHER AGREEMENTS
4.1 Non-Competition Agreement. At or prior to the Closing,
Thomas L. Mountcastle, as a continuing employee of Sub, shall
execute a non-competition agreement (the "Agreement Not to
Compete") substantially in the form attached as Exhibit B hereto.
4.2 Continuity of Interest Agreement. At or prior to the
Closing, Shareholders, (including Converting Shareholders to the
extent of the number of shares held by them prior to conversion
under Section 3.1) Sub and Parent shall execute a continuity of
interest agreement ("Continuity of Interest Agreement")
substantially in the form attached as Exhibit C hereto.
4.3 Employment Agreement. At or prior to Closing, Parent, Sub
and Thomas L. Mountcastle shall execute an employment agreement
("Employment Agreement) substantially in the form attached as
Exhibit D hereto with such additional terms and conditions as may
be mutually agreed.
4.4 Delivery into Escrow. Prior to or at the Closing, each of
Parent and Shareholders shall execute an Escrow Agreement ("Stock
Escrow Agreement") substantially in the form attached as Exhibit
E hereto, and shall cause the Escrow Agent, as such term is
defined in the Escrow Agreement, to execute the Escrow Agreement
and at the Effective Time, the shares of Parent Common Stock and
cash which Shareholders are entitled to receive pursuant to
Article III hereof shall instead be delivered on behalf of
Shareholders to the Escrow Agent together with duly executed
stock powers by Shareholders.
4.5 Post-Closing Adjustments. (a) For the purpose of this
Agreement, the "Net Book Value" shall be the amount by which the
aggregate book amount of the total assets of Target, as
determined in accordance with this Section 4.5 and as shown on
the Closing Balance Sheet (as hereinafter defined in Section
4.5(b)) exceeds the aggregate book amount of the total
liabilities of Target, as determined in accordance with this
Section 4.5 and as shown on the Closing Balance Sheet. With
regard to the valuation of inventory in determining Net Book
Value, Parent personnel will independently determine line item
valuation on the basis of the lesser of cost or market value and
commit to said valuation prior to Closing which shall not be
subject to change during the post-closing audit.
(b) The Net Book Value shall be determined in U.S. Dollars from
statements of total assets and total liabilities of Target as of
the date of Closing (The "Closing Balance Sheet"). The Closing
Balance Sheet shall be prepared by Shareholders.
(c) The Closing Balance Sheet shall be prepared in accordance
with United States Generally Accepted Accounting Principles
("GAAP") applied on a basis consistent with those applied in the
preparation of the Financial Statements as defined in Section
5.3(d) hereof (to the extent that the principles applied in the
preparation thereof were in accordance with GAAP).
(d) Shareholders shall use their best efforts to cause the
Closing Balance Sheet to be delivered to Parent no later than
five (5) days after Closing.
(e) Parent shall have sixty (60) days after receipt by it of the
Closing Balance Sheet (the "Dispute Period") to have the
accounting firm of Ernst & Young ("Accountant") conduct an audit
and dispute any of the elements of such Closing Balance Sheet (a
"Dispute"). If Parent does not give written notice of a Dispute
(a "Dispute Notice") to Shareholders within the Dispute Period,
such Closing Balance Sheet shall be deemed to have been accepted
by Parent in the form in which it was delivered by Shareholders
and shall be final and binding upon the parties in the absence of
fraud or manifest error and the Escrow Agent shall immediately
release the Merger Consideration to the Shareholders. In the
event Parent does not agree with any amount or element reflected
on the Closing Balance Sheet, based upon the aforesaid audit,
Parent shall give the Shareholders, and the Escrow Agent written
notice thereof within such 60 day period and the Escrow Agent
shall continue to hold the Merger Consideration escrow. Such
written notice shall include a copy of the Accountant's
determination of the Dispute and shall constitute a written
demand by Parent for the amount set forth in Section 4.5(f)
hereof. Following delivery of Sub Notice, the Shareholders shall
have twenty (20) days to notify Parent and the Escrow Agent that
they dispute the Accountant's determination. In the event the
Shareholders deliver such a Notice, such dispute shall be
submitted for arbitration in accordance with Section 10.8 hereof
and the Escrow Agent shall continue to hold the Merger
Consideration. In all other cases the Accountant's determination
shall be final and binding. Following the resolution of any
Disputes, the Closing Balance Sheet shall be revised to reflect
such resolution. Following such resolution, or, if there are no
Disputes, following the expiration of the Dispute Period, the
Closing Balance Sheet shall be deemed to reflect the actual Net
Book Value of Target.
(f) In the event that following the resolution of any Dispute,
the Net Book Value as reflected on the Closing Balance Sheet is
less than $977,520, then Escrow Agent shall release to Parent
shares of Parent Common Stock held in accordance with those terms
of the Escrow Agreement applicable to this Section 4.5(f). The
amount of Parent Common Stock released to the Parent shall be
calculated by dividing the Net Book Value deficiency by the
Valuation Price of $7.00. The Escrow Agent shall release the
remainder of the merger consideration to the Shareholders. The
obligation to make payments pursuant to this Section 4.5 is
independent of, and in addition to, the indemnity obligations set
forth in Article VIII of this Agreement, and will not in any way
be subject to the limitations referred to in Section 8.5 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 General Statement. The parties make the representations and
warranties to each other which are set forth in this Article V.
The survival of all such representations and warranties shall be
in accordance with Section 10.1 hereof. All representations and
warranties of the parties are made subject to the exceptions
which are noted in the respective schedules delivered by the
parties to each other concurrently herewith and identified as, in
the case of Section 5.2, the Parent Disclosure Schedule," and in
the case of Section 5.3, the "Target Disclosure Schedule. "
Copies of all documents referenced in the Parent Disclosure
Schedule (other than documents filed by the Parent with the
Securities and Exchange Commission pursuant to the Securities Act
of 1933 as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) or Target
Disclosure Schedule shall be attached thereto.
5.2 Representations and Warranties of Parent and Sub. Parent and
Sub jointly and severally represent and warrant to Target, as of
the Date hereof and at the Effective Time, as follows:
(a) Organization, Standing and Power. Each of Parent and Sub is
a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, has all
requisite corporate power and corporate authority to own, lease,
and operate its properties and to carry on its businesses as now
being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which a failure to so qualify
would have a material adverse effect on the business, operations,
assets, condition, results of operations or prospects ("Business
Condition") of Parent and its Subsidiaries taken as a whole.
Parent has made available to Target complete and correct copies
of the Certificate of Incorporation and Bylaws of Parent and the
Articles of Incorporation and Bylaws of Sub as amended to the
date hereof.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of 3,000,000 shares of Parent
Common Stock. At the close of business as of February 29, 1996,
1,172,262 shares of Parent Common Stock were outstanding, 60,000
shares of Parent Common Stock were reserved for issuance pursuant
to outstanding options under the Parent Key Employee Stock Option
Plan (the Stock Option Plan") and 299,686 shares of Parent Common
Stock were held by Parent in its treasury. All outstanding shares
of Parent Common Stock are validity issued, fully paid,
nonassessable and not subject to preemptive rights created by
statute, Parent's Certificate of Incorporation or Bylaws or any
agreement to which Parent or any of its Subsidiaries is a party
or by which Parent or any of its Subsidiaries may be bound,
except pursuant to the Stock Option Plan. The shares of Parent
Common Stock issuable upon the Merger are duly authorized and
reserved for issuance and, when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid,
nonassessable and free of preemptive rights. As of the date
hereof, the authorized capital stock of Sub consists of 1,000
shares of Common Stock, all of which are validity issued, fully
paid and nonassessable and owned by Parent. Except for the shares
listed above issuable pursuant to the Stock Option Plan, there
are no options, warrants, calls, conversion rights, commitments,
or agreements of any character to which Parent or any Subsidiary
of Parent is a party or by which any of them may be bound
obligating Parent or any Subsidiary of Parent to issue, deliver
or sell, or cause to be issued, delivered or sold additional
shares of the capital stock of Parent or of any Subsidiary of
Parent or obligating Parent or Subsidiary of Parent to grant,
extend, or enter into any such option, warrant, call, conversion
right, commitment or agreement. Parent is the owner of all
outstanding shares of capital stock of each of its Subsidiaries
and all such shares are duly authorized, validly issued, fully
paid and nonassessable.
(c) Authority. Parent and Sub have all requisite corporate
powers and corporate authority to enter into this Agreement and,
subject to approval of this Agreement by the stockholders of Sub,
to consummate the transactions contemplated hereby and thereby.
Subject to such approval by the stockholders of Sub, the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Parent and Sub.
This Agreement has been duly executed and delivered by Parent and
constitutes valid and binding obligations of Parent enforceable
in accordance with its respective terms, except as enforcement
may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, subject to general equity principles
and to limitations on availability of equitable relief, including
specific performance, and subject to public policy limitations on
the enforceability of indemnity provisions. Subject to
satisfaction of the conditions set forth in Article VII, the
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or
acceleration of any material obligation or to loss of a material
benefit under (i) any provision of the Articles of Incorporation
or Bylaws of Parent or any of its Subsidiaries or (ii) any loan
or credit agreement, note, mortgage, indenture, lease, or other
agreement, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its Subsidiaries or
their respective properties or assets, other than any such
conflicts, violations, defaults, terminations, cancellations or
accelerations which individually or in the aggregate would not
have a material adverse effect on the Business Condition of
Parent and its Subsidiaries taken as a whole. No consent,
approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality (a "Government
Entity"), is required by or with respect to Parent in connection
with the execution or delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby,
except for (i) the filing of the Articles of Merger with the
State Corporation Commission of Virginia, and appropriate
documents with the relevant authorities of other states in which
Parent is qualified to do business and (ii) such other consents,
authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a material adverse effect on
the Business Condition of Parent and its Subsidiaries taken as a
whole.
(d) SEC Documents; Parent Financial Statements. Parent has made
available to Target true and complete copies of the most recent
statement, report, registration statement (without exhibits) and
definitive proxy statement filed by Parent with the SEC since its
initial public offering (the "Parent SEC Documents"). As of their
respective filing dates, the Parent SEC Documents complied in all
material respects with the requirements of the Exchange Act or
the Securities Act, and none of the Parent SEC Documents
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 made therein, in light of the
circumstances in which they were made, not misleading. The
financial statements of Parent included in the Parent SEC
Documents (The "Parent Financial Statements") comply as to form
in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied (except as
may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present the consolidated financial position of Parent at
the dates thereof and the consolidated results of their
operations and consolidated cash flows for the period then ended
(subject, in the case of unaudited statements, to normal,
recurring adjustments and provided that in the case of unaudited
statements, the accounts receivable are collectible in the
amounts shown thereon and inventories are not subject to write
down except in either case in an amount not material or for which
Parent has provided adequate reserves). The unaudited
consolidated balance sheet at December 31, 1995, and the related
unaudited statements of operations, shareholders' equity and cash
flows for the nine month period ended December 31, 1995 in each
case for Parent and its Subsidiaries (the Parent December 31,
1995 Financial Statements") have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the period indicated (subject to normal recurring
adjustments and such statements do not include full footnotes,
but do include footnotes as required by Form 10-Q) and fairly
present the consolidated financial position of Parent and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and consolidated cash
flows for the periods then ended.
(e) Absence of Certain Changes. Since December 31, 1995, Parent
and its Subsidiaries have conducted their respective businesses
in the ordinary course and there has not occurred any material
adverse change in the Business Condition of Parent or its
Subsidiaries taken as a whole.
(f) No Violations. The businesses of Parent and its Subsidiaries
are not being conducted in violation of any applicable law, rule
or regulation, judgment, decree or order of any Governmental
Entity except for any violations which, individually or in
aggregate, have not had and will not have a material adverse
effect on the Business Condition of Parent and its Subsidiaries,
taken as a whole. There are no judgments or outstanding orders,
injunctions, decrees, stipulations or awards "whether rendered by
a court or administrative agency or by arbitration) against
Parent or any Subsidiary of Parent or against any of their
respective properties or businesses which will, individually or
in the aggregate, have a material adverse effect on the Business
Condition of Parent and its Subsidiaries, taken as a whole.
(g) No Defaults. Neither Parent nor any Subsidiary of Parent is,
or has received written notice that it would be with the passage
of time, in default or violation of any term, condition or
provision of (i) the Articles of Incorporation or Bylaws of
Parent or any Subsidiary of Parent; (ii) any judgment, decree or
order applicable to Parent or any Subsidiary of Parent; or (iii)
any material mortgage, note, indenture, contract, agreement,
lease or other instrument or commitment to which Parent or any
Subsidiary of Parent is now a party or by which Parent or any
Subsidiary of Parent or any of their respective properties or
assets may be bound, except for any defaults or violations which
would not have a material adverse effect on the Business
Condition of Parent and its Subsidiaries taken as a whole.
(h) Disclosure. The representations and warranties made by
Parent in this Agreement when taken together with the Parent
Financial Statements do not contain any untrue statement of a
material fact, or omit to state a material fact necessary to make
the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were
furnished. To the knowledge of Parent, there is no event, fact
or condition that materially and adversely affects the Business
Condition that has not been set forth in this Agreement.
(i) Litigation. There is no action, suit or proceeding pending,
or to the knowledge of Parent, threatened, which would
individually or in the aggregate, have a material adverse effect
on the Business Condition of Parent. There is no investigation
pending or, to the knowledge of Parent, threatened against Parent
or any of its officers, or directors, before any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, instrumentality or other Governmental entity.
(j) Absence of Undisclosed Liabilities. Parent has no material
liabilities or obligations (whether absolute, accrued or
contingent), whether or not required under generally accepted
accounting principles to be accrued, shown, disclosed or
dedicated in the balance sheet of Parent except (i) liabilities
or obligations of a nature not required to be disclosed on a
balance sheet or in the footnotes thereto; (ii) liabilities
obligations or contingencies that are accrued or reserved against
in the ordinary course of business in amounts usual and normal
for Parent. Except as reflected in the Parent Financial
statements, there are no claims against or liabilities or
obligations of Parent which, individually or in the aggregate (i)
could reasonably be expected to result in a material reduction in
the stockholder's equity of Parent or (ii) could reasonably be
expected to result in or cause any material adverse change in the
Business Condition of Parent.
5.3 Representations and Warranties of Target. Target and
Shareholders severally represent and warrant to each of Parent
and Sub, as of the date hereof and at the Effective Time,
(a) Organization, Standing and Power. Target is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Virginia, has all requisite corporate power
and corporate authority to own, lease, and operate its properties
and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each
jurisdiction in which a failure to so qualify would have a
material adverse effect on the Business Condition (as defined
below) of Target. Target does not have any Subsidiaries and does
not own any equity interest, directly or indirectly, in any
corporation, partnership, joint venture or other entity. As used
in this Agreement, a "subsidiary" of any corporation or other
entity means a corporation or other entity the voting securities
of which are sufficient to elect at least a majority of the Board
of Directors or other managers of such corporation or other
entity and which are owned or otherwise controlled directly or
indirectly by such parent corporation or other entity. As used in
this Agreement, "Business Condition" shall mean the business,
financial condition, results of operations, assets or business
prospects (without giving effect to the consequences of the
transactions-contemplated by this Agreement) of Target or Parent,
as the context requires, whether reflected in financial
statements or otherwise. Target has delivered to Parent complete
and correct copies of the Articles of Incorporation and Bylaws of
Target, in each case as amended to the date hereof, together with
copies of minutes of the proceedings and actions by written
consent of the Board of Directors and stockholders of Target
since its incorporation.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of Target consists of 1,000,000 shares of Target
Common Stock. At the close of business on March 31, 1996: (i)
484,226 shares of Common Stock were outstanding, (Note: At
closing there will be additional shares of Target Common Stock
issued and reflected in the books of Target representing the
converted promissory notes in the amount of $450,000) and (ii) no
shares of Target Common Stock were held by Target in its
treasury. All outstanding shares of Target capital stock are, and
at the Closing will be, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by
statute, Target's Articles of Incorporation or Bylaws or any
agreement to which Target is a party or by which Target may be
bound. There are no options, warrants, calls, conversion rights,
commitments or agreements of any character to which Target is a
party or by which any of them may be bound obligating Target to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Target or obligating Target
to grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement.
(c) Authority. Target has all requisite corporate power and
corporate authority to enter into this Agreement and, subject to
approval of this Agreement by the stockholders of Target, to
consummate the transactions contemplated hereby. Subject to such
approval by the stockholders of Target, the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Target. This Agreement
has been duly executed and delivered by Target and constitutes
valid and binding obligations of Target enforceable in accordance
with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights,
subject to general equity principles and to limitations on
availability of equitable relief, including specific performance,
and subject to public policy limitations on the enforceability of
indemnity provisions. Subject to satisfaction of the conditions
set forth in Article VII, the execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any
violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material
obligation or to loss of a material benefit under (i) any
provision of the Articles of Incorporation or Bylaws of Target or
(ii) any loan or credit agreement, note, mortgage, indenture,
lease, or other agreement, instrument, permit, concession,
franchise, license, judgment, order, decree, or to their
knowledge, any statute, law, ordinance, rule or any such
conflicts, violations, defaults, terminations, cancellations or
accelerations which individually or in the aggregate would not
have a material adverse effect on the Business Condition of
Target. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court,
administrative agency or commission or other governmental
authority or instrumentality (a "Governmental Entity") is
required by or with respect to Target in connection with the
execution or delivery of this Agreement by Target or the
consummation by Target of the transactions contemplated hereby or
thereby, except for (i) the filing of the Certificate of Merger
with the State Corporation Commission of the State of Virginia
and appropriate documents with the relevant authorities of other
states in which Target is qualified to do business and (ii) such
other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a
material adverse effect on the Business Condition of Target.
(d) Target Financial Statements. Target's audited balance sheet
at December 31, 1995 and the related audited income statement and
shareholder's equity for the year ended December 31, 1995 (the
"Target December 31, 1995 Financial Statements") have been
prepared in accordance with generally accepted accounting
principles consistently applied with those of the prior year and
fairly present the financial position of Target as of December
31, 1995 and the results of its operations for the year then
ended. The Target December 31, 1995 Financial Statements fully
accrue all actual and contingent liabilities for current and
deferred Taxes.
(e) Inventories and Accounts Receivable. The inventories of
Target, whether finished goods, work in progress or raw
materials, shown on Target's balance sheet dated December 31,
1995 or thereafter, are all items of a quality usable or salable
in the ordinary and usual course of Target's business, except for
inventory items that have been written down to an amount not in
excess of realizable market value or for which adequate reserves
or allowances have been provided. The values at which inventories
are carried reflect an inventory valuation policy of Target which
is consistent with Target's past practice and which is in
accordance with generally accepted accounting principles applied
on a consistent basis.
The accounts receivable of Target shown on Target's balance
sheet dated December 31, 1995 or thereafter arose from valid and
enforceable transactions. To Target's knowledge, the reserve for
doubtful accounts and product returns is adequate, and the values
at which accounts receivable are carried reflect the policies of
Target consistent with Target's past practice and are in
accordance with generally accepted accounting principles applied
on a consistent basis.
(f) No Violations. The business of Target is not being conducted
in violation of any applicable law, rule or regulation, judgment,
decree or order of any Governmental Entity except for any
violations which, individually or in the aggregate, have not had
and will not have a material adverse effect on the Business
Condition of Target. There are no judgments or outstanding
orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration)
against Target or any of its properties or businesses which will,
individually or in the aggregate, have a material adverse effect
on the Business Condition of Target.
(g) No Defaults. Target is not aware of and has not received
written notice that it would be with the passage of time, in
default or violation of any term, condition, or provision of (i)
the Articles of Incorporation or Bylaws of Target; (ii) any
judgment, decree or order applicable to Target; or (iii) any
material mortgage, note, indenture, contract, agreement, lease or
other instrument or commitment to which Target is now a party or
by which Target or any of its properties or assets may be bound,
except for any defaults or violations which would not have a
material adverse effect on the Business Condition of Target.
(h) Litigation. There is no action, suit or proceeding pending,
or to the knowledge of Target, threatened, which would,
individually or in the aggregate, have a material adverse effect
on the Business Condition of Target. There is no investigation
pending or, to the knowledge of Target, threatened against Target
or any of its officers, or directors, before any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, instrumentality or other Governmental entity.
(i) Absence of Certain Changes. Since December 31, 1995, Target
has conducted its business in the ordinary course and has not
incurred: (i) any material adverse change in the Business
Condition of Target; (ii) any amendments or changes in the
Articles of Incorporation or Bylaws of Target; (iii) any damage,
destruction or loss, whether covered by insurance or not,
materially adversely affecting the properties or business of
Target; (iv) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of Target; (v) any
material increase or change in the compensation or benefits for
any employee, except in the ordinary course of business
consistent with past practice; (vi) any acquisition or sale of a
material amount of property of Target, except sales of inventory
in the ordinary course of business; (vii) any issuance by Target
of, or any commitment of Target to issue, any shares of capital
stock or securities convertible into or exchangeable or
exercisable for any shares of capital stock of Target, other than
the issuance and sale of Target Common Stock at levels consistent
with past practices; (viii) any labor dispute, other than routine
matters, none of which is material to Target, or any union
organizing campaign; (ix) any entry into any material commitment
or transaction (including any borrowing or capital expenditure)
other than in the ordinary course of business consistent with
past practice; (x) any agreement by Target to do any of the
foregoing; or (xi) any other event or condition of any character
(whether or not in the ordinary course of business) individually
or in the aggregate having a material adverse effect on the
Business Condition of Target.
(j) Absence of Undisclosed Liabilities. Target has no material
liabilities or obligations (whether absolute, accrued or
contingent), whether or not required under generally accepted
accounting principles to be accrued, shown, disclosed or
dedicated in the balance sheet of Target, except (i) liabilities
or obligations of a nature not required to be disclosed on a
balance sheet or in the footnotes thereto; (ii) liabilities
obligations or contingencies that are accrued or reserved against
in Target's balance sheet dated December 31, 1995, or (iii)
liabilities incurred or obligations or contingencies reserved
against since December 31, 1995, in the ordinary course of
business in amounts usual and normal for Target. Except as
reflected in the Target Financial Statements, there are no claims
against or liabilities or obligations of Target which,
individually or in the aggregate (i) could reasonably be expected
to result in a material reduction in the stockholder's equity of
Target from that shown in Target's balance sheet dated December
31, 1995, or result in any restatement of Target's unaudited
financial statements for prior years; or (ii) could reasonably be
expected to result in or cause any material adverse change in the
Business Condition of Target.
(k) Taxes.
(i) Target has filed, within the time and in the manner
prescribed by law, all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be
filed under federal, state, local or any foreign laws by Target,
and all such Returns are true, correct and complete in all
material respects.
(ii) Target has within the time and in the manner
prescribed by law, paid (and until the Effective Time will,
within the time and in the manner prescribed by law, pay) all
Taxes (as defined below) that are due and payable.
(iii) Target has established (and until the Effective Time
will establish) on its respective books and records reserves (to
be specifically designated as an increase to current
(liabilities) that are adequate for the payment of all Taxes not
yet due and payable.
(iv) There are no liens for Taxes upon the assets of Target
except liens for Taxes not yet due.
(v) Target has not filed (and will not file prior to the
Effective Time) any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of the subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code) owned by Target.
(vi) Except as set forth in the Target Disclosure Schedule
(which shall set forth the type of return, date filed, and date
of expiration of the statute of limitations), (i) the statute of
limitations for the assessment of federal income taxes has
expired for all federal income tax returns of Target and each of
its subsidiaries or such returns have been examined by the
Internal Revenue Service for all filing periods; (ii) the statute
of limitations for the assessment of state, local and foreign
income taxes has expired for all applicable Returns of Target and
each of its subsidiaries or such Returns have been examined by
the appropriate tax authorities for all periods; and (iii) no
deficiency for any Taxes has been proposed, asserted or assessed
against Target which have not been resolved and paid in full.
(vii) There are no outstanding waivers or comparable
consents regarding the application of the statute of limitations
with respect to any Taxes or Returns that have been given by
Target.
(viii) Except as set forth in the Target Disclosure
Schedule (which shall set forth the nature of the proceeding, the
type of return, the deficiencies proposed or assessed and the
amount thereof, and the taxable year in question), no federal,
state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with
regard to any Taxes or Returns.
(ix) Target is not a party to any tax-sharing or allocation
agreement nor does Target owe any amount under any tax-sharing or
allocation agreement.
(x) The Target has complied (and until the Effective Time
will comply) in all respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to
Sections 1441 or 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required to be so
withheld and paid over under all applicable laws.
(xi) The Target has never been (or has any liability for
unpaid Taxes because it once was) a member of an "affiliated
group" within the meaning of Section 1502 of the Code during any
part of any consolidated return year within any part of which
year any corporation other than Target was also a member of such
affiliated group.
(xii) For purposes of this Agreement. "Taxes" shall mean
all taxes, charges, fees, levies or other assessments of whatever
kind or nature, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment,
excise, estimated, severance, stamp, occupancy or property taxes,
customs duties, fees, assessments or charges of any kind
whatsoever (together with any interest and any penalties,
additions to tax or additional amounts) imposed by any taxing
authority (domestic or foreign) upon or payable by Target.
(l) Employee Benefit Plans. All material employee benefit plans,
policies, programs or arrangements covering active, former or
retired employees (collectively, the "Plans") of Target, to the
extent applicable, (i) the Plans of Target comply, an all
material respects, with the requirements of the Employee
Retirement Income Security Act of 1974, as amended (ERISA) and
the Code, and any such Plan intended to be qualified under
Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified; (ii) no such plan is covered
by Title IV of ERISA or Section 412 of the Code; (iii) neither
such plan nor Target has incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA; (iv) each
such Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and
regulations, including, but not limited to ERISA and the Code,
which are applicable to such Plans; (v) to the knowledge of
Target there are no pending or anticipated material claims
against or otherwise involving any such plans and no suit, action
or other litigation (excluding claims for benefits incurred in
the ordinary course of such Plan activities) has been brought
against or with respect to any such Plan; and (vi) all material
contributions, reserves or premium payments required to be made
as of the date hereof to such Plans have been made or provided
for.
(m) Major Contracts. Except as previously disclosed to Parent by
Target, Target is not a party to any written or oral, formal or
informal:
(i) union contract, employment contract or arrangement
providing for future compensation with any officer, consultant,
director or employee which is not terminable by it on 30 days'
notice or less without penalty or obligation to make payments
related to such termination.
(ii) plan, contract or arrangement providing for bonuses,
pensions, deferred compensation, retirement payments, profit
sharing or the like;
(iii) agreement in which Target has granted or received
manufacturing rights, most favored customer pricing provisions or
exclusive marketing rights related to any product, group of
products or territory;
(iv) agreement, license, franchise, permit, indenture or
authorization, in each case, which is material to the Business
Condition of Target, which has not been terminated, or performed
in its entirety and not renewed which may be, by its terms,
terminated, materially impaired or materially adversely affected
by reason to the execution of this Agreement, the closing of the
Merger, or the transactions contemplated hereby or thereby;
(v) except with respect to trade indebtedness incurred in
the ordinary course of business, and promissory notes held by
Converting Shareholders, instruments evidencing or related in any
way to indebtedness incurred in the acquisition of products, or
companies or other entities, or indebtedness for borrowed money
by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise which
individually is in the amount of $50,000 or more; or
(vi) contract containing covenants purporting to limit the
freedom of Target or, to Target's knowledge, any key employee of
Target to compete in any line of business in any geographic area,
other than agreements related to confidentiality and assignment
of inventions between Target and its employees in the form
heretofore furnished to Parent.
All agreements, contracts, plans, leases, instruments,
arrangements, licenses and commitments heretofore furnished to
Parent are valid and in full force and effect and Target has not,
nor to the knowledge of Target has any other party thereto,
breached any provision of, or is in default under the terms of,
any such contract, agreement, instrument, arrangement,
commitment, plan, lease or license, except for such breaches or
defaults as would not have a material adverse effect on the
Business Condition of Target.
(n) Interests of Certain Persons. To the best knowledge of
Target, none of Target's officers, directors, or key employees or
consultants has any direct or indirect interest material to
Target in any property, real or personal, tangible or intangible,
including inventions, patents, copyrights, trademarks or trade
names, used in or pertaining to Target's business, except for
such agreements that are not material to the Business Condition
of Target and except for rights of a shareholder and except for
rights under existing employee benefit plans. To the best
knowledge of Target, no officer of Target has any financial
interest in any corporation, partnership, joint venture or other
entity that is a party to any agreement with Target, except
rights of a shareholder and rights under existing employee
benefit plans. For this purpose, an ownership interest of less
than 5% of the voting stock of a publicly held company shall be
deemed to be not material.
(o) Intellectual Property.
(i) Target owns, has the right to use, sell, license and
dispose of, has the right to bring actions for the infringement
of, and, where necessary has made timely and proper application
for all patents and registered trademarks and the Target
Intellectual Property Rights as are reasonable and prudent under
the circumstances for the conduct of its businesses;
(ii) To the best of Target's knowledge, neither the
manufacture, marketing, license, sale or use of any product
currently licensed or sold by Target violates in any material
respect any license or agreement with any third-party or
infringes any valid intellectual property right of any other
party; there is no pending or, to the knowledge of Target,
threatened claim or litigation contesting the validity, ownership
or right to use, sell, license or dispose of any Target
Intellectual Property Right nor to the knowledge of Target is
there any basis for any such claim, nor has Target received any
written notice asserting that any Target Intellectual Property
Right or the proposed use, sale, license, or disposition thereof
conflicts with the rights of any other party.
As used in the Agreement, the term "Intellectual Property
Rights" shall mean all intellectual property rights necessary or
required for the conduct of the business of Target or Parent, as
appropriate, and as presently conducted and as proposed to be
conducted, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications,
franchises, licenses, inventories, know how, trade secrets,
proprietary processes and formulae, all source and object code,
algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media
constituting, describing or relating to the above, including
without limitation, manuals, memoranda and records.
(p) Customers. To Target's knowledge, none of the five largest
customers of Target during the year ended December 31, 1995
(determined on the basis of both revenues and bookings during
such periods) has materially reduced or terminated, or intends to
materially reduce or terminate, the amount of its business with
Target.
(q) Employees. No officer or key employee of Target has given
notice to Target of his or her intention to terminate his or her
employment with Target. To Target's knowledge, no employee of
Target is subject to any secrecy or noncompetition agreement or
any agreement or restriction of any kind that would impede in any
material way the ability of such employee to carry out fully all
activities of such employee in furtherance of the business of
Target now or upon consummation of the transactions contemplated
hereby.
(r) Insurance. Target has insurance policies in the type and
amounts customarily carried by persons conducting businesses
similar to those of Target.
(s) Environmental Matters. At all times prior to the date
hereof, Target has complied with, and Target's facilities are in
all material respects in compliance with, all applicable
environmental laws, orders, regulations, rules and ordinances
adopted, imposed or promulgated by any Governmental Entity
relating to the properties owned, leased or used by Target (the
"Target Properties"), the violation of which could have a
material adverse effect on the Business Condition of Target. The
environmental licenses, permits, clearances, consents and
authorizations material to the operations of Target are in full
force and effect. Target has not released or caused to be
released on or about any of the Target Properties any pollutants,
contaminations, "hazardous substances" (as that term is defined
in Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended) or regulated
substances" (as that term is defined in Section 9001 or the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq, as amended) required to be remedied by any governmental
agency with jurisdiction over the Target Properties under the
authority of laws, regulations and ordinances as in effect and
currently interpreted, which would have a material adverse effect
on the Business Condition of Target. No action, proceeding,
liability or claim exists, or to Target's knowledge is
threatened, against Target or any landfills, disposal sites,
agents and recycles used by Target. To the knowledge of Target,
there is no fact or circumstance which could involve Target in
any environmental litigation or impose any environmental
liability upon Target which would have a materially adverse
effect on the Business Condition of Target.
(t) Disclosure. The representations and warranties made by
Target in this Agreement when taken together with the Target
December 31, 1995 Financial Statements do not contain any untrue
statements of material fact, or omit to state a material fact
necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which
they were furnished. To the knowledge of Target, there is no
event, fact or condition that materially and adversely affects
the Business Condition that has not been set forth in this
Agreement.
ARTICLE VI
COVENANTS
6.1 Conduct of Business of Target Pending the Merger. Target
agrees that from the date hereof and prior to the effective Time
or earlier termination of this Agreement:
(a) Target will provide access to its books and facilities for
complete and thorough inspection by the Parent.
(b) Target will not issue any of its securities or incur any
debt other than in the ordinary course of business, or otherwise
take any action other than in the ordinary course of business
which would encumber its assets or materially affect Target's
Business Condition.
(c) Target will continue to conduct its business consistent with
past practice.
(d) Unless the Parent shall otherwise agree in writing, Target
shall not initiate, solicit, negotiate, encourage, or provide
confidential information to facilitate, and Target shall cause
any officer, director or employee of, or any attorney,
accountant, investment banker or other agent retained by Target
not to initiate, solicit, negotiate, encourage, or provide
confidential information to facilitate, any proposal or offer to
acquire all or any substantial part of the business and
properties of Target, or capital stock of Target, whether by
merger, purchase of assets, tender offer or otherwise, whether
for cash, securities or any other consideration or combination
thereof.
(e) Officers salaries will remain unchanged and Target will not
award any bonuses or dividends prior to Closing.
6.2 Approval of Shareholders. Target shall (a) cause a meeting
of its shareholders to be duly called and held in accordance with
the laws of the State of Virginia, applicable federal and state
securities laws and Target's Articles of Incorporation and By-
Laws as soon as reasonably practicable for the purpose of voting
on the adoption and approval of this Agreement, and the Merger
(the "Proposal"), (b) recommend to its shareholders approval of
the Proposal (except to the extent that the board of directors of
Target determines, after receiving the written advice of counsel,
that such act is not permitted by such board of directors in the
discharge of their fiduciary duties to Target), (c) use its best
efforts to obtain the necessary approval of its shareholders, (d)
take all action required under the VGCL with respect to the
holders of Target Dissenting Shares, and (e) in cooperation with
Parent mail to shareholders a transmittal letter in form and
substance reasonably satisfactory to Parent to be used by such
shareholders in forwarding their certificates for surrender and
exchange.
6.3 Securities Law Compliance. (a) Parent shall, within twelve
(12) months of the date of issuance of Parent Common Stock
pursuant to this Agreement prepare and file a Registration
Statement under the Securities Act, covering the issuance of
Parent Common Stock (i) into which Target Common Stock
outstanding at the Effective Time of the Merger was converted and
(ii) to be issued as Contingent Additional Purchase Price
Consideration, exclusive of shares of Target Common Stock with
respect to which dissenters' rights have been properly exercised
in accordance with the VGCL (the "Registration Statement").
Parent will use its best efforts to cause the Registration
Statement to become effective as soon as practicable.
(b) Parent will take any action required to be taken under
applicable state securities laws and Parent will also take action
to secure all necessary exemptions or clearances under all state
securities laws applicable to (i) the Merger, (ii) the issuance
of Parent Common Stock pursuant thereto.
(c) Parent will promptly deliver to Target copies of any filings
made by Parent or Sub pursuant to this Section 6.3.
6.4 Third Party Consents. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable,
all permits, authorizations, consents, waivers and approvals from
third parties or governmental authorities necessary to consummate
this Agreement and the transactions contemplated hereby,
including, without limitation, any permits, authorizations,
consents, waivers and approvals required in connection with the
Merger.
6.5 Release of Personal Guarantees. Parent and Sub shall use
their best efforts to cause, within 30 days of the date of
Closing, Target's lenders, suppliers or other creditors to
release any personal guarantees or other security given by any of
the Shareholders as security for Target's obligations to such
lender, supplier or creditor. Parent and Sub further covenant and
agree to indemnify and save harmless the Shareholders from any
liability, debt or obligation any Shareholder may incur as a
result of such personal guarantees or other security resulting
from defaults by Parent or Sub.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment of all of the following
conditions precedent at or prior to the Effective Time:
(a) The Merger and other agreements and documents related
thereto shall have been approved by Target shareholders in
accordance with Virginia law.
(b) No injunction or order or decree by any Federal, state or
foreign court shall have been issued which prevents the
consummation of Merger.
(c) No statute or regulation has been enacted which would
prevent consummation of the Merger.
(d) All governmental consents and approvals required for the
Merger have been obtained.
7.2 Conditions to Obligations Of Target to Effect the Merger.
The obligation of Target to effect the Merger is subject to
fulfillment of all of the following conditions precedent at or
prior to the Effective Time:
(a) Each of the representations and warranties made by Parent
and Sub shall be true and correct as of the date of this
Agreement and the Effective Time.
(b) All obligations of Parent and Sub under this Agreement shall
have been performed in all material respects.
(c) The Continuity of Interest Agreement in substantially the
form attached hereto as Exhibit C shall be executed by Parent and
Sub.
(d) Parent shall have delivered to Target and Shareholders the
written opinion of Parent's General Legal Counsel in the form
attached hereto as Exhibit F. dated as of the Closing Date.
(e) There shall have been no material adverse change in the
business condition of Parent.
(f) The Employment Agreement shall have been executed by Parent
and Sub.
7.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger
are subject to the fulfillment of all of the following conditions
precedent at or prior to the Effective Time:
(a) Each of the representations and warranties made by Target
and Shareholders shall be true and correct as of the date of this
Agreement and the Effective Time.
(b) All obligations of Target and Shareholders under this
Agreement shall have been performed in all material respects.
(c) The Continuity of Interest Agreement in substantially the
form attached hereto as Exhibit B, shall be fully executed and
shall be in full force and effect.
(d) All consents and approvals necessary for the Merger shall
have been obtained.
(e) Target shall have delivered to Parent and Sub the written
opinion of counsel to Target, substantially in the form attached
hereto as Exhibit G dated as of the Closing Date.
(f) There shall have been no material adverse change in the
business condition of Target.
ARTICLE VIII
INDEMNIFICATION
8.1 General Indemnification Covenants. (a) Subject to the
provisions of Sections 8.3, Shareholders individually, on a
several and not joint basis to the extent of their respective
ownership of Target Common Stock at Closing and which shall not
exceed the total value of the Merger Consideration received by
each Shareholder individually, shall indemnify, save and keep
Parent and its affiliates, successors and permitted assigns
(including Target and the Surviving Corporation) (the "Parent
Indemnitees"), harmless against and from all liability, demands,
claims, actions or causes of action, assessments, losses, fines,
penalties, costs, damages and expenses, including reasonable
attorneys' fees, disbursements and expenses (collectively,
"Damages"), sustained or incurred by any of the Parent
Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation, or
non-fulfillment of any agreement or covenant on the part of
Target or Shareholders, whether contained in this Agreement or
any exhibit or schedule hereto or any written statement furnished
or to be furnished to Parent or Sub pursuant hereto or in any
closing document delivered by Target or Shareholders to Parent or
Sub in connection herewith.
(b) Parent shall indemnify, save and keep each of the
Shareholders, their successors and permitted assigns (the
"Shareholder Indemnitees"), harmless against and from all
liability, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages, and
expenses including reasonable attorneys fees, disbursements and
expenses (collectively, "Damages"), sustained or incurred by any
Shareholder Indemnitee as a result of, arising out of or by
virtue of any misrepresentation, breach of any warranty or
representation or non-fulfillment of any agreement or covenant on
the part of Parent or Sub, whether contained in this Agreement or
any exhibit or schedule, thereto or any written statement
furnished or to be furnished to Target or Shareholders pursuant
hereto or in any closing document delivered by Parent or Sub to
Target or Shareholders in connection herewith.
8.2 Tax Indemnity. (a) Shareholders hereby agree on a several
and not joint basis to the extent of their respective ownership
of Target Common Stock at Closing and which shall not exceed the
total value of the Merger Consideration received by each
Shareholder individually, to pay, indemnify, defend and hold
Parent and Sub harmless from and against any and all Taxes of
Target and its subsidiaries with respect to any period (or any
portion thereof) up to and including the Effective Time, except
for Taxes of Target and its subsidiaries which are reflected as
current liabilities for Taxes that exist as of the Effective Time
("Current Tax Liabilities") on the Closing Balance Sheet,
together with all reasonable legal fees, disbursements and
expenses incurred by Parent and Sub in connection therewith.
(b) Parent shall prepare and file any Return of Target which is
required to be filed after the Effective Time and which relates
to any period (or portion thereof) up to and including the
Effective Time, and Parent shall, within forty five (45) days
prior to the due date of any such Return, deliver a draft copy to
Shareholders. Within thirty (30) days of the receipt of any such
Return, Shareholders may reasonably request changes, in which
event Parent and Shareholders shall attempt to agree on a
mutually acceptable resolution of the issues in dispute. If a
resolution is reached, such Return shall be filed in accordance
therewith. If a resolution is not reached, then at the expense of
Parent and Shareholders (such expense to be shared equally), such
Return shall be submitted to the firm of Ernst & Young
independent certified public accountants, which shall be directed
to resolve the issues in dispute and prepare the Return for
filing. As soon as is practicable after notice from Parent to
Shareholders at any time prior to the date any payment for Taxes
attributable to any such Return is due, provided such Return is
prepared for filing in accordance with the foregoing, an amount
equal to the excess, if any, of (i) Taxes that are due with
respect to any taxable period ending on or before the Effective
Time, or taxes that would have been due with respect to a taxable
period beginning before and ending after the Effective Time if
such period had ended on the Effective Time over (ii) the amount
of such Taxes of Target with respect to such taxable period which
are reflected as Current Tax Liabilities on the Closing Balance
Sheet shall be paid by Shareholders to Parent.
(c) The indemnity provided for in this Section 8.2 shall be
independent of any other indemnity provision hereof and, anything
in this Agreement to the contrary notwithstanding, shall survive
until the expiration of the applicable statutes of limitation for
the Taxes referred to herein, and any Taxes subject to the
indemnification for Taxes set forth in this Section 8.2 shall not
be subject to the provisions of Sections 8.1 or 8.3 hereof.
Notwithstanding anything in this Agreement to the contrary,
Shareholders will not be obligated to indemnify Parent and Sub
under any provision of this Agreement with respect to Taxes or
other liabilities that arise as a direct result of a failure of
the Merger to qualify as a reorganization within the meaning of
Section 368(a) of the Code, provided that Shareholders are not in
breach of any of their representations, covenants or agreements
contained in the Continuity of Interest Agreement and such breach
is a direct cause of such tax liability.
8.3 Conditions of Indemnification Pursuant to Section 8.1. (a)
Promptly following the receipt by either a Parent or Shareholder
Indemnitee of notice of a demand, claim, action, assessment or
proceeding made or brought by a third-party, including a
governmental agency (a "Third Party Claim"), the Indemnitee
receiving the notice of the Third Party Claim (i) shall notify
indemnitor of its existence, setting forth the facts and
circumstances of which such Indemnitee has received notice, and
(ii) if the Indemnitee giving such notice is a person entitled to
indemnification under this Article VIII (an "Indemnified Party"),
specifying the basis hereunder upon which the Indemnified Party's
claim for indemnification is asserted.
(b) The Indemnified Party shall, upon reasonable notice by
indemnitor, tender the defense of a Third-Party Claim to
indemnitor. If indemnitor accepts responsibility for the defense
of a Third-Party Claim, then indemnitor shall have the exclusive
right to contest, defend and litigate the Third-Party Claim and
shall have the exclusive right, in their discretion exercised in
good faith and upon the advice of counsel, to settle any such
matter, either before or after the initiation of litigation, at
such time and upon such terms as they deem fair and reasonable,
provided that at least ten (10) days prior to any such
settlement, they shall give written notice of their intention to
settle to the Indemnified Party. The Indemnified Party shall have
the right to be represented by counsel at its own expense in any
defense conducted by indemnitor.
(c) Notwithstanding the foregoing, in connection with any
settlement negotiated by indemnitor, no Indemnified Party shall
be required to (x) enter into any settlement (A) that does not
include the delivery by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect of
such claim or litigation, (B) if the Indemnified Party shall, in
writing to indemnitor within the ten ( 10) day period prior to
such proposed settlement, disapprove of such settlement proposal
and desire to have indemnitor tender the defense of such matter
back to the Indemnified Party, or (C) that requires an
Indemnified Party to take any affirmative actions as a condition
of such settlement, or (y) consent to the entry of any judgment
that does not include a full dismissal of the litigation or
proceeding against the Indemnified Party with prejudice;
provided, however, that should the Indemnified Party disapprove
of a settlement proposal pursuant to Clause (B) above, the
Indemnified Party shall thereafter have all of the responsibility
for defending, contesting and settling such Third-Party Claim but
shall not be entitled to indemnification by indemnitor to the
extent that, upon final resolution of such Third-Party Claim,
indemnitor's liability to the Indemnified Party but for this
proviso exceeds what indemnitor's liability to the Indemnified
Party would have been if indemnitor were permitted to settle such
Third-Party Claim in the absence of the Indemnified Party
exercising its right under clause (B) above.
(d) If, in accordance with the foregoing provisions of this
Section 8.3, an Indemnified Party shall be entitled to
indemnification against a Third-Party Claim, and if indemnitor
shall fail to accept the defense of a Third-Party Claim which has
been tendered in accordance with this Section 8.3, the
Indemnified Party shall have the right, without prejudice to its
right of indemnification hereunder, in its discretion exercised
in good faith and upon the advice of counsel, to contest, defend
and litigate such Third-Party Claim, and may settle such Third-
Party Claim, either before or after the initiation of litigation,
at such time and upon such terms as the Indemnified Party deems
fair and reasonable, provided that at least ten (10) days prior
to any such settlement, written notice of its intention to settle
is given to indemnitor. If, pursuant to this Section 8.3, the
Indemnified Party so defends or settles a Third-Party Claim for
which it is entitled to indemnification hereunder, as hereinabove
provided, the Indemnified Party shall be reimbursed by indemnitor
for the reasonable attorneys' fees and other expenses of
defending the Third-Party Claim which are incurred from time to
time, forthwith following the presentation to indemnitor of
itemized bills for said attorneys' fees and other expenses. No
failure by indemnitor to acknowledge in writing their
indemnification obligations under this Article VIII shall relieve
them of such obligations to the extent they exist.
8.4 Certain Tax and Other Matters. (a) If, in connection with
the audit of any Return, a proposed adjustment is asserted in
writing with respect to any Taxes of Target for which
Shareholders are required to indemnify Parent or Sub pursuant to
Section 8.2(a) hereof, Parent shall notify Shareholders of such
proposed adjustment within twenty (20) days after the receipt
thereof. Upon notice to Parent within twenty (20) days after
receipt of the notice of such proposed adjustment from Parent,
Shareholders may assume (at Shareholders' own cost and expense)
control of and contest such proposed adjustment.
(b) Alternatively, if Shareholders request within twenty (20)
days after receipt of notice of such proposed adjustment from
Parent, Parent or Sub, as the case may be, shall contest such
proposed adjustment. Shareholders shall be obligated to pay all
reasonable out-of-pocket costs and expenses (including legal fees
and expenses) which Parent or Sub may incur in so contesting such
proposed adjustment as such costs and expenses are incurred, and
Parent shall have the full right to contest such proposed
adjustment and shall be entitled to settle or agree to pay in
full such proposed adjustment (in its sole discretion) and
thereafter pursue its rights under this Agreement.
8.5 Payment of Indemnify Claim. (a) Upon Final Determination
that Parent is entitled to an indemnity payment from Shareholders
other than pursuant to Section 8.4 hereof, said payment shall be
made exclusively by means of an offset against the Contingent
Additional Purchase Price Consideration. Upon Final Determination
that Shareholders are entitled to an indemnity payment from
Parent, said payment shall be made in cash. With regard to any
indemnity claim, including claims made pursuant to Section 8.4, a
threshold level of $31,000 in indemnification claims shall have
accumulated against an Indemnitee before any request for
indemnification is made and payment for indemnification shall
commence only for such amounts in excess of the threshold level.
(b) For purposes of this Article VIII, a "Final Determination"
shall mean (i) a final arbitration award (ii) the entry of a
decision of a court of competent jurisdiction at such time as an
appeal may no longer be taken from such decision or (iii) the
execution of a closing agreement or its equivalent between the
particular taxpayer and the Internal Revenue Service, as provided
in Section 7121 and Section 7122, respectively, of the Code, or a
corresponding agreement between the particular taxpayer and the
particular state or local taxing authority. The obligation of
Shareholders to make any indemnity payment shall be premised on
the receipt by Shareholders from Parent or Sub of a written
notice setting forth the relevant portion of any Final
Determination, and a statement certified by the chief financial
officer of Parent and describing in reasonable detail the
calculation thereof.
8.6 Certain Information. Parent, Shareholders and Target agree
to furnish or cause to be furnished to each other (at reasonable
times and at no charge) upon request as promptly as practicable
such information (including access to books and records)
pertinent to Target and assistance relating to Target as is
reasonably necessary for the preparation, review and audit of
financial statements, the preparation, review, audit and filing
of any Tax Return, the preparation for any audit or the
prosecution or defense of any claim, suit or proceeding relating
to any proposed adjustment or which may result in Shareholders
being liable under the indemnification provisions of this Article
VIII, provided, that access shall be limited to items pertaining
solely to Target. Shareholders shall grant to Parent access to
all Tax Returns filed with respect to Target.
8.7 Release by Shareholders. Shareholders hereby release and
discharge Parent and Sub and each of its officers and directors
from, and agree and covenant that in no event will Shareholders
commence any litigation or other legal or administrative
proceeding against, Parent, Sub or any of their officers or
directors, whether in law or equity, relating to any and all
claims and demands, known and unknown, suspected and unsuspected,
disclosed and undisclosed, for damages, actual or consequential,
past, present and future, arising out of or in any way connected
with their ownership or alleged ownership of Target Common Stock
prior to the Effective Time, other than claims or demands arising
out of the transactions contemplated by this Agreement.
ARTICLE IX
TERMINATION AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time whether before or after approval by
the stockholders of the Sub and Target:
(a) by mutual consent of each of the Parent and Target;
(b) by either the Parent or Target, so long as such party has
not breached any of its obligations hereunder (except for such
breaches as are clearly immaterial), if the Merger shall not have
been consummated on or before June 1, 1996 (the "Termination
Date");
(c) unilaterally by the Parent or the Target (i) if the other
(A) fails to perform any covenant or agreement in this Agreement
in any material respect, and does not cure the failure, in all
material respects within 15 business days after the terminating
party delivers written notice of the alleged failure or (B) fails
to fulfill or complete a condition to the obligations of that
party (which condition is not waiver) by reason of a breach by
that party of its obligations hereunder, (ii) if any condition to
the obligations of that party is not satisfied (other than by
reason of a breach by that party of its obligations hereunder),
and it reasonably appears that the condition cannot be satisfied
prior to the Termination Date.
(d) unilaterally by the Parent if (i) the Target, through its
Board of Directors in the exercise of its fiduciary duties to its
stockholders, either fails to recommend to the Target's
stockholders the approval of this Agreement and the transactions
contemplated hereby or withdraws such recommendations or (ii) the
holders of more than 10% of the outstanding Target Common Stock
shall have qualified as Dissenting Stockholders.
9.2 Expense Reimbursement; Liquidated Damages. In the event (i)
the Parent terminates this Agreement pursuant to Section 9.
l(c)(i) or (d)(i), (ii) prior to the termination of this
Agreement any person, corporation, partnership or other entity or
"group" (as defined in Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder), other than the
Parent or any of its Affiliates becomes the "beneficial owner"
(as defined in Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder) of more than ten percent
of the then outstanding shares of Target Common Stock, or (iii)
the Target's stockholders shall not have approved the Merger by
June 1, 1996, or holders of less than the requisite number of
shares of Target Common Stock vote in favor of the approval of
the Merger, then the Target shall promptly pay the Parent a
termination fee in the amount of $50,000.00 to cover costs and
expenses of Parent.
9.3 Effect of Termination. In the event of termination of this
Agreement by either Parent or Target, as provided in Section 9.1,
this Agreement shall forthwith become void and there shall be no
liability on the part of either Target, Parent, Sub or their
respective officers or directors for termination (except as set
forth in Section 9.2). Nothing in this Section 9.3 shall relieve
any party from liability for any breach of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. All
representations, warranties, covenants and agreements made by any
party in this Agreement or pursuant hereto shall survive the
Merger for a period of twelve months following Closing, except
for the representations. warranties, covenants and agreements
contained in Sections 5.3(k), and 8.2 of this Agreement which
shall survive the Merger until the expiration of the applicable
statutes of limitations with respect to such matters. All claims
made by Parent by virtue of any such representations, warranties,
covenants and agreements shall be made under, and subject to the
limitations set forth in, Article VIII hereof.
10.2 Notices. All notices required or permitted to be given
hereunder shall be in writing and shall be deemed given when
delivered in person or sent by confirmed facsimile, or when
received if given by Federal Express or other nationally
recognized overnight courier service, or five (5) business days
after being deposited in the United States mail, postage prepaid,
registered or certified mail, addressed to the applicable party
as follows:
PARENT TARGET
Halifax Corporation CMS Automation, Inc.
5250 Cherokee Avenue 2215 Tomlynn Street
Alexandria, VA 22312 Richmond, VA 23230
SUB
CMSA ACQUISITION CORPORATION
5250 Cherokee Avenue
Alexandria, Virginia 22312
10.3 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and shall be binding upon and inure
to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns. The parties
and their respective affiliates make no representations or
warranties to each other except as contained in this Agreement,
and any and all prior representations and statements made by any
party or its representatives, whether verbally or in writing, are
deemed to have been merged into this Agreement, it being intended
that no such representations or statements shall survive the
execution and delivery of this Agreement.
10.4 Non-Waiver. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants
or conditions of this Agreement, to exercise any right or
privilege conferred in this Agreement; or the waiver by said
party of any breach of any of the terms, covenants or conditions
of this Agreement, shall not be construed as a subsequent waiver
of any such terms, covenants, conditions, rights or privileges,
but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall
be effective unless it is in writing and signed by an authorized
representative of the waiving party.
10.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original,
and all such counterparts shall constitute but one instrument.
10.6 Severability. The invalidity of any provision of this
Agreement or portion of a provision shall not affect the validity
of any other provision of this Agreement or the remaining portion
of the applicable provision.
10.7 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Virginia applicable to
contracts made to be performed entirely therein.
10.8 Arbitration. Any controversy or claim arising out this
Agreement shall be settled by binding arbitration in accordance
with the rules of the American Arbitration Association.
10.9 Binding Effect Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer on any person other
than the parties hereto and their respective successors and
permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, including,
without limitation, third party beneficiary rights.
10.10 Assignability. This Agreement shall not be assigned by any
party without the prior written consent of the other parties
except that Parent may assign this Agreement to a wholly-owned
subsidiary of Parent, but such assignment shall not relieve
Parent of any of its liabilities hereunder.
10.11 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
10.12 Expenses. Each party shall pay their own costs and
expenses associated with the acquisition, including brokers fees
and commissions, provided, however, in the event payment of said
costs and expenses at Closing results in a decrease in the Net
Book Value of Target below $527,520 plus $450,000 to the extent
that this prior debt has been added to Net Book Value, Parent
will pay 50% of said resulting decrease up to a maximum of
$40,000.
10.13 Brokers or Finders. Each of the Parent, Sub and Target
represents, as to itself and with respect to its Subsidiaries,
that any agent, broker, investment banker or other firm or person
entitled to any broker's or finder's fee or any other commission
or similar fee in connection with any of the transactions
contemplated by this Agreement by reason of agreements entered
into by any respective party shall be the sole responsibility of
said party. Parent and Sub agree to indemnify and hold harmless
Target and Target agrees to indemnify and hold harmless Parent
and Sub, from any liability for any commission or compensation in
the nature of brokerage or finder's fees (and the costs and
expenses of defending against such liability or asserted
liability) for which such parties or any of their officers,
directors, employees, or representatives, is direct or indirect
responsible.
IN WITNESS WHEREOF, the parties have executed this Agreement and
Plan of Reorganization on the date first above written.
PARENT SHAREHOLDERS
HALIFAX CORPORATION
By: /s/ Howard C. Mills /s/ Thomas L. Mountcastle
Howard C. Mills Thomas L. Mountcastle
President/CEO
/s/ Richard Barkhauser
Richard Barkhauser
SUB:
/s/ Lester A. Hudson
CMSA ACQUISITION CORPORATION Lester A. Hudson
By: /s/ Howard C. Mills /s/ George Nolde III
Howard C. Mills George Nolde III
President/CEO
/s/ Irvin E. Cox
Irvin E. Cox
TARGET
CMS AUTOMATION, INC. /s/ Mark A. Roberts
Mark A. Roberts
By: /s/ Thomas L. Mountcastle
Thomas L. Mountcastle /s/ Stephen M. Estep
President/CEO Stephen M. Estep
/s/ Calvin W. Fowler
Calvin W. Fowler
/s/ Barbara C. Fowler
Barbara C. Fowler
/s/ Mary K. Adams
Mary K. Adams
Exhibit 5
[Pompan, Ruffner & Werfel Letterhead]
March 6, 1997
Halifax Corporation
5250 Cherokee Avenue
Alexandria, Virginia 22312
Re: Halifax Corporation Registration
Statement on Form S-3
Ladies and Gentlemen:
I am General Counsel and Secretary of Halifax
Corporation, a Virginia corporation (the "Company").
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under
the Securities Act of 1933, as amended (the "Act") in
connection with the registration on Form S-3 by the
Company of up to 350,464 shares (the "Offered Shares") of
the Company's common stock, par value $0.24 per share
(the "Common Stock"). A portion of the Offered Shares
were issued, and the remaining Offered Shares (the
"Remaining Offered Shares") are to be issued, subject to
certain conditions, pursuant to the Agreement (as defined
below) to the Selling Stockholders (as defined in the
Registration Statement). The Agreement requires the
Company to file the Registration Statement with respect
to the resale of the Offered Shares by the Selling
Stockholders.
In connection with this opinion, I have
examined originals or copies, certified or otherwise
identified to my satisfaction, of (i) the Registration
Statement on Form S-3 (File No. 333-_______, the
"Registration Statement") as filed with the Securities
and Exchange Commission (the "Commission") on March 31,
1997 under the Act; (ii) a specimen certificate
representing the Common Stock; (iii) the Articles of
Incorporation of the Company, as presently in effect;
(iv) the By-Laws of the Company, as presently in effect;
(v) certain resolutions of the Board of Directors of the
Company relating to the issuance and sale of the Offered
Shares and related matters and (vi) that certain
Agreement and Plan of Reorganization, dated as of April
1, 1996, by and among the Company, CMSA Acquisition
Corporation, a Virginia corporation and a wholly-owned
subsidiary of the Company, CMS Automation, Inc., a
Virginia corporation ("CMS"), and the former stockholders
of CMS (the "Agreement"). I have also examined originals
or copies, certified or otherwise identified to my
satisfaction, of such records of the Company and such
other documents, certificates and records as I have
deemed necessary or appropriate as a basis for the
opinions set forth herein.
I am admitted to the bar in the Commonwealth of
Virginia, and I do not express any opinion as to the laws
of any other jurisdiction.
Based upon and subject to the foregoing, I am
of the opinion that when (i) the Registration Statement
becomes effective, (ii) certificates representing the
Remaining Offered Shares in the form of the specimen
certificate examined by me are duly executed,
countersigned, registered and delivered to the Selling
Stockholders in accordance with the Agreement and (iii)
the Offered Shares are sold pursuant to the Registration
Statement, the Offered Shares will be validly issued,
fully paid and nonassessable.
I hereby consent to the filing of this opinion
with the Commission as Exhibit 5 to the Registration
Statement. I also consent to the reference to myself
under the caption "Legal Matters" in the Registration
Statement.
Very truly yours,
POMPAN, RUFFNER & WERFEL
/s/ Ernest L. Ruffner
Exhibit (23)A
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
'Experts' in the Registration Statement on Form S-3 and
related Prospectus of Halifax Corporation to be filed on
or about March 28, 1997 for the registration of 350,464
shares of its common stock and to the incorporation by
reference therein of our report dated June 5, 1996, with
respect to the consolidated financial statements and
schedule of Halifax Corporation included in its Annual
Report on Form 10-K for the year ended March 31, 1996,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
March 25, 1997
Washington, D.C.
Exhibit (23)B
CONSENT OF GRANT THORNTON LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
'Experts' in the Registration Statement on Form S-3 and
related Prospectus of Halifax Corporation to be filed on
or about March 28, 1997, for the registration of 350,464
shares of its common stock and to the incorporation by
reference therein of our report dated June 3, 1994, with
respect to the consolidated financial statements and
schedules of Halifax Corporation included in its Annual
Report on Form 10-K for the year ended March 31, 1996,
filed with the Securities and Exchange Commission.
/s/ Grant Thornton LLP
Vienna, Virginia
March 27, 1997
Exhibit 24
HALIFAX CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the
undersigned, John H. Grover of Washington, D.C., as a
director of Halifax Corporation, a Virginia corporation,
do hereby nominate, constitute and appoint Howard C.
Mills and Ernest L. Ruffner, or either one or both of
them, my true and lawful attorneys-in-fact and agents to
do any and all acts and things and execute any and all
instruments which said attorneys-in-fact and agents, or
either of them, may deem necessary or advisable giving
and granting unto said attorneys full power and authority
to do and perform such actions as fully as I might have
or could do if personally present and executing any of
the said documents to enable Halifax Corporation to
comply with the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended (the
"Securities Act"), and any requirement of the Securities
and Exchange Commission in respect thereof, in connection
with the registration under the Securities Act of common
stock of said Halifax Corporation including,
specifically, but without limitation thereof, full power
and authority to sign my name as director and/or officer
of said Halifax Corporation to a registration statement
on Form S-3 covering such common stock and to any
amendments to said registration statement, hereby
ratifying and confirming all that said attorneys-in-fact
and agents, or either of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th
day of March, 1997.
/s/ John H. Grover
HALIFAX CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the
undersigned, Clifford M. Hardin of St. Louis, Missouri,
as a director of Halifax Corporation, a Virginia
corporation, do hereby nominate, constitute and appoint
Howard C. Mills and Ernest L. Ruffner, or either one or
both of them, my true and lawful attorneys-in-fact and
agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and
agents, or either of them, may deem necessary or
advisable giving and granting unto said attorneys full
power and authority to do and perform such actions as
fully as I might have or could do if personally present
and executing any of the said documents to enable Halifax
Corporation to comply with the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended
(the "Securities Act"), and any requirement of the
Securities and Exchange Commission in respect thereof, in
connection with the registration under the Securities Act
of common stock of said Halifax Corporation including,
specifically, but without limitation thereof, full power
and authority to sign my name as director and/or officer
of said Halifax Corporation to a registration statement
on Form S-3 covering such common stock and to any
amendments to said registration statement, hereby
ratifying and confirming all that said attorneys-in-fact
and agents, or either of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand
this 10th day of March, 1997.
/s/ Clifford M. Hardin
HALIFAX CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the
undersigned, Alvin E. Nashman of Falls Church, Virginia,
as a director of Halifax Corporation, a Virginia
corporation, do hereby nominate, constitute and appoint
Howard C. Mills and Ernest L. Ruffner, or either one or
both of them, my true and lawful attorneys-in-fact and
agents to do any and all acts and things and execute any
and all instruments which said attorneys-in-fact and
agents, or either of them, may deem necessary or
advisable giving and granting unto said attorneys full
power and authority to do and perform such actions as
fully as I might have or could do if personally present
and executing any of the said documents to enable Halifax
Corporation to comply with the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended
(the "Securities Act"), and any requirement of the
Securities and Exchange Commission in respect thereof, in
connection with the registration under the Securities Act
of common stock of said Halifax Corporation including,
specifically, but without limitation thereof, full power
and authority to sign my name as director and/or officer
of said Halifax Corporation to a registration statement
on Form S-3 covering such common stock and to any
amendments to said registration statement, hereby
ratifying and confirming all that said attorneys-in-fact
and agents, or either of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand
this 8th day of March, 1997.
/s/ Alvin E. Nashman
HALIFAX CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the
undersigned, Arch Scurlock of Arlington, Virginia, as a
director of Halifax Corporation, a Virginia corporation,
do hereby nominate, constitute and appoint Howard C.
Mills and Ernest L. Ruffner, or either one or both of
them, my true and lawful attorneys-in-fact and agents to
do any and all acts and things and execute any and all
instruments which said attorneys-in-fact and agents, or
either of them, may deem necessary or advisable giving
and granting unto said attorneys full power and authority
to do and perform such actions as fully as I might have
or could do if personally present and executing any of
the said documents to enable Halifax Corporation to
comply with the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended (the
"Securities Act"), and any requirement of the Securities
and Exchange Commission in respect thereof, in connection
with the registration under the Securities Act of common
stock of said Halifax Corporation including,
specifically, but without limitation thereof, full power
and authority to sign my name as director and/or officer
of said Halifax Corporation to a registration statement
on Form S-3 covering such common stock and to any
amendments to said registration statement, hereby
ratifying and confirming all that said attorneys-in-fact
and agents, or either of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand
this 10th day of March, 1997.
/s/ Arch Scurlock
HALIFAX CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the
undersigned, John M. Toups of McLean, Virginia, as a
director of Halifax Corporation, a Virginia corporation,
do hereby nominate, constitute and appoint Howard C.
Mills and Ernest L. Ruffner, or either one or both of
them, my true and lawful attorneys-in-fact and agents to
do any and all acts and things and execute any and all
instruments which said attorneys-in-fact and agents, or
either of them, may deem necessary or advisable giving
and granting unto said attorneys full power and authority
to do and perform such actions as fully as I might have
or could do if personally present and executing any of
the said documents to enable Halifax Corporation to
comply with the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended (the
"Securities Act"), and any requirement of the Securities
and Exchange Commission in respect thereof, in connection
with the registration under the Securities Act of common
stock of said Halifax Corporation including,
specifically, but without limitation thereof, full power
and authority to sign my name as director and/or officer
of said Halifax Corporation to a registration statement
on Form S-3 covering such common stock and to any
amendments to said registration statement, hereby
ratifying and confirming all that said attorneys-in-fact
and agents, or either of them, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand
this 10th day of March, 1997.
/s/ John M. Toups
