UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 29, 2005
HALIFAX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 1-08964 54-0829246
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
5250 Cherokee Avenue, Alexandria, Virginia 22312
(Address of principal executive offices/Zip Code)
Registrant's telephone number, including area code: (703) 658-2400
Former name, former address, and former fiscal year, if changed since last
report: N/A
Check the appropriate box below if the Form 8-K filing is intended to satisfy
the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act(17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act(17 CFR 240.13e-4(c))
Forward Looking Statements
Certain statements in this Annual Report on Form 10-K constitute "forward-
looking statements" within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. While forward-looking statements sometimes are
presented with numerical specificity, they are based on various assumptions made
by management regarding future events over which we have little or no control.
Forward-looking statements may be identified by words including "anticipate,"
"believe," "estimate," "expect" and similar expressions. We caution readers
that forward-looking statements, including without limitation, those relating to
future business prospects, revenues, working capital, liquidity, and income, are
subject to certain risks and uncertainties that would cause actual results to
differ materially from those indicated in the forward-looking statements.
Factors that could cause actual results to differ from forward-looking
statements include the concentration of our revenues, risks involved in
contracting with our customers, including difficulties to accurately estimate
costs when bidding on a contract and the occurrence of start-up costs prior to
receiving revenues and contract with fixed price provisions, government
contracting risks, potential conflicts of interest, difficulties we may have in
attracting and retaining management, professional and administrative staff,
fluctuation in quarterly results, risks related to acquisitions and acquisition
strategy, continued favorable banking relationships, the availability of capital
to finance operations and ability to make payments on outstanding indebtedness,
weakened economic conditions, acts of terrorism, risks related to competition
and our ability to continue to perform efficiently on contracts, and other risks
and factors identified from time to time in the reports we file with the
Securities and Exchange Commission ("SEC"), including our Annual Report on Form
10-K. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected.
Forward-looking statements are intended to apply only at the time they are
made. Moreover, whether or not stated in connection with a forward-looking
statement, we undertake no obligation to correct or update a forward-looking
statement should we later become aware that it is not likely to be achieved. If
we were to update or correct a forward-looking statement, you should not
conclude that we will make additional updates or correction thereafter.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On June 29, 2005, we and our subsidiaries amended and restated our Amended
and Restated Loan and Security Agreement with Provident Bank to extend the
maturity date to June 30, 2007 and revise the covenants as more fully described
in the agreement. The amount available under the agreement remains at $12.0
million. The amount outstanding under the agreement bears interest at the
bank's prime rate plus one-quarter percent (0.25%). We will also pay an unused
commitment fee on the difference between the maximum amount we can borrow and
the amount advanced, determined by the average daily amount outstanding during
the period. The difference is multiplied by one-quarter percent (0.25%). This
amount is payable on June 30, 2005 and on the last day of each quarter until the
agreement has been terminated. Additionally, we will pay a fee of $1,000 per
month. Advances under the agreement are collateralized by a first priority
security interest on all of our assets as defined in the agreement. As of June
30, 2005, $10.5 million was outstanding and $1.5 million was available to us.
The interest rate at June 30, 2005 was 5%.
The agreement contains representations, warranties and covenants that are
that are customary in connection with a transaction of this type. The agreement
contains certain covenants including, but not limited to: (i) having all persons
or entities required to make payments to us deposit such payments in a cash
collateral account by which Provident Bank, in its own discretion, may, among
other things, use such funds against our obligations owed to Provident Bank,(ii)
notifying Provident Bank in writing of any cancellation of a contract having
annual revenues in excess of $250,000, (iii) in the event receivables arise out
of government contracts, we will assign to Provident Bank all government
contracts with amounts payable of $100,000 or greater and in duration of six
months or longer, (iv) obtaining written consent from Provident Bank prior to
permitting a change in ownership of more than 25% of the stock or other equity
interests of us and our subsidiaries or permit us or any of such entities to
enter into any merger or consolidation or sell or lease substantially all of our
or its assets, and (v) obtaining prior written consent of Provident Bank,
subject to exceptions, to make payments of debt to any person or entity or
making any distributions of any kind to any officers, employees or members. The
agreement also contains certain financial covenants which we are required to
maintain including, but not limited to tangible net worth, current ratio, total
liabilities to net worth ratio, debt service coverage and current ratio, as more
fully described in the agreement.
Events of default, include, but are not limited to: (i) a determination by
Provident Bank that the financial condition of us or any person or entity that
generally is now or hereafter liable, directly, contingently or otherwise
obligated to pay Provident Bank under the agreement ("Other Obligor") is
unsatisfactory, (ii) we or an Other Obligor becoming insolvent, (iii) the
suspension of business, or commission of an act amounting to business failure by
us or any Other Obligor, and (iv) a change in more than 25% of the ownership of
us without the prior written consent of Provident Bank. Upon an event of
default, the lender may (i) accelerate and call immediately due and payable all
of the unpaid principal, accrued interest and other sums due as of the date of
default, (ii) impose the default rate of interest with or without acceleration,
(iii) file suit against us or any Other Obligor, (iv) seek specific performance
or injunctive relief to enforce performance of the our obligations (v) exercise
any rights of a secured creditor under the Uniform Commercial Code, (vi) cease
making advances or extending credit to us and stop and retract the making of any
advances which we may have requested, and (vii) reduce the maximum amount we are
permitted to borrow under the agreement. We have also authorized Provident
Bank, upon a default, but without prior notice to or demand upon us and without
prior opportunity of us to be heard, to institute an action for replevin, with
or without bond as Provident Bank may elect, to obtain possession of any of the
collateral.
On June 29, 2005, we also amended our 8% Promissory Notes and 7%
Subordinated Debentures to extend the maturity date to July 1, 2007, which date
is the next day immediately succeeding the expiration of the second Amended and
Restated Loan and Security Agreement. The holders of the 8% Promissory Notes
and 7% Subordinated Debentures are The Arch C. Scurlock Children's Trust (the
"Children's Trust") and Nancy M. Scurlock. Both are greater than 10%
shareholders of our common stock. Arch C. Scurlock, Jr., a beneficiary and
trustee of the Children's Trust, and John H. Gover, a trustee of the Children's
Trust are our directors. Subject to the prior approval of Provident Bank, which
has been obtained, we agreed to make principal and interest payments on the 8%
Promissory Notes and 7% Subordinated Debentures aggregating $1.5 million. We
intend to utilize a portion of the proceeds from the sale of our secured network
services business to make these payments to the holders of our 8% Promissory
Notes and 7% Subordinated Debentures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HALIFAX CORPORATION
Date: July 6, 2005 By: /s/Joseph Sciacca
Joseph Sciacca
Vice President, Finance & CFO