Exhibit 99.6
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE
IS SUBJECT TO CERTAIN SUBORDINATION PROVISIONS SET
FORTH IN PARAGRAPH 5 HEREIN. THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.
THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN PARAGRAPH 4 HEREIN.
PROMISSORY NOTE
U.S. $__________ August 29, 2003
Alexandria, Virginia
FOR VALUE RECEIVED, Halifax Corporation, a Virginia corporation
("Maker"), promises to pay to the order of __________________________
("Payee"), at the address or addresses specified in Section 11 herein,
the principal sum of _________________________ ($__________) (the
"Principal Sum"), together with interest, on the following terms and
conditions:
1. Purpose of Note; Right of Setoff. This Note is one of a series of
notes (collectively, the "Notes") being delivered by Maker pursuant to
the terms of that certain Agreement and Plan of Merger ("Merger
Agreement") dated August 29, 2003 by and among Maker, Microserv, Inc.,
a Washington Corporation ("Microserv"), Microserv Merger Corp., a
Delaware corporation, Microserv Merger LLC, a Delaware limited
liability company, Payee and the other shareholders of Microserv
parties to the Merger Agreement. All capitalized terms used herein but
not defined shall have their respective meanings assigned to them
pursuant to the Merger Agreement. This Note is subject to and governed
by the terms and conditions of the Merger Agreement, including without
limitation, the setoff provisions contained in Section 13.5 of the
Merger Agreement.
2. Payment of Principal Sum and Interest.
(a) Subject to the last sentence of Section 1 hereof, the
Principal Sum shall be paid in full in one lump sum payment due
eighteen (18) months from the date hereof (the "Due Date").
Notwithstanding anything in this Note to the contrary, the original
Principal Sum under this Note is subject to adjustment, (i) effective
as of the date hereof, pursuant to Section 2.8.1 of the Merger Agreement
and (ii) as of the date of incurrence of costs and expenses related to
the Independent Accountants, pursuant to Sections 2.8.5 and 2.9.5 of such
Merger Agreement. If the Principal Sum of this Note is reduced pursuant
to the previous sentence after Maker has made a payment or payments of
interest based on the incorrect balance of Principal Sum prior to such
adjustment, the Maker shall be deemed to have made a prepayment of
Principal Sum to the extent such payment or payments of interest
exceeded the amount that would have been payable had the Principal Sum
reflected the appropriate adjustment contemplated by the previous
sentence.
(b) Subject to the last sentence of Section 1 hereof, on each
October 1, January 1, April 1 and July 1 until this Note has been paid
in full, Maker shall pay all accrued but unpaid interest on the unpaid
Principal Sum. Interest shall accrue from the date of this Note on the
unpaid Principal Sum at a rate per annum equal to five percent (5%);
provided, however, that after any Event of Default hereunder, interest
shall accrue on the unpaid Principal Sum at a rate per annum equal to
ten percent (10%).
(c) If a specified payment date hereunder is a Saturday,
Sunday or a bank holiday, such payment of Principal Sum or interest, as
the case may be, shall be payable on the first business day following
such date.
3. Prepayment. Maker may at any time or from time to time, without
notice, premium or penalty, prepay the entire unpaid Principal Sum or
any part thereof, together with the accrued and unpaid interest on the
amount prepaid; provided, however, that the aggregate amount of any
prepayment must be distributed pro rata to the holders of the Notes
based on the then outstanding principal balance of the Notes.
4. Transfer Restrictions. This Note has not been registered under
the Securities Act of 1933, as amended, or any applicable state
securities law. Neither this Note, nor any interest herein, may be
sold, assigned, transferred, given, pledged or otherwise disposed
without the prior written consent of Maker.
5. Subordination: Restrictions on Payment.
(a) Unless and until Maker is notified in writing that an event of
default (a "Senior Default") has been declared under the Senior
Indebtedness (as defined below), Maker may pay, and Payee may receive,
scheduled payments of principal, interest, fees and costs hereunder.
(b) This Note is unsecured and, in the event of liquidation of Maker,
shall rank subordinate to Maker's Senior Indebtedness. Upon written
notice to Maker that any Senior Default has been declared, which notice
shall describe the nature of the Senior Default, and during the
continuance thereof, the holders of such Senior Indebtedness shall be
entitled to receive payment in full of all such Senior Indebtedness
before Payee is entitled to receive any payment on account of Principal
Sum or other amounts due (or past due) upon this Note. Any payments
received by Payee in contravention of the subordination provisions set
forth herein shall forthwith be paid over to the Senior Indebtedness
holders for application first to the Senior Debt (as defined below) and
then to Subordinated Debt (as defined below) and until so turned over
shall be held "in trust" for the benefit of the Senior Indebtedness.
For purposes of this Note, "Senior Debt" shall mean any principal,
premium, interest, fees and charges owed to Southern Financial Bank
pursuant to that certain Revolving Credit Agreement dated March 6,
2002. For purposes of this Section 5, "Subordinated Debt" shall have
the meaning set forth in Section 5(f) below. "Senior Indebtedness"
shall mean collectively the Senior Debt and the Subordinated Debt and
shall include all interest, fees and charges accruing thereon before
and after maturity and/or after the filing of any petition in
bankruptcy or the commencement of any insolvency, reorganization or
like proceeding relating to the Maker, whether or not a claim for such
amounts are allowed in such proceeding.
(c) The subordination provisions of this Note shall be enforceable by
all persons who hold, become holders of, or continue to hold, Senior
Indebtedness and such holders shall be third party beneficiaries of the
provisions of this Section 5. Upon written request of the Company,
Payee, by its acceptance hereof, agrees to execute and deliver such
agreements and documents as may reasonably be required by the holder or
holders of the Senior Indebtedness to confirm the subordination
provisions set forth in this Note.
(d) The provisions as to subordination are solely for the purpose of
defining the relative rights of the holders of the Senior Indebtedness,
on the one hand, and Payee, on the other hand, and none of such
provisions shall impair, as between Maker and Payee, the obligation of
Maker, subject to the provisions herein, to pay to Payee the Principal
Sum and interest in accordance with the terms of this Note, nor shall
any such provisions prevent Payee from exercising all remedies
otherwise permitted by applicable law or under the terms of this Note
upon default hereunder, subject to the rights, if any, under the
subordination provisions herein, of the holders of Senior Indebtedness
to receive cash, property or securities, as the case may be, prior to
payment to Payee under this Note.
(e) The subordination of this Note to the Senior Indebtedness and
the rights of the holders of Senior Indebtedness shall continue in full
force and effect until the payment in full of the Senior Indebtedness
notwithstanding any action which any holder of Senior Indebtedness,
with or without notice to, or consent of Payee, shall take or refrain
from taking with respect to the Senior Indebtedness, including, but not
limited to, (a) any amendment, extension or renewal of the Senior
Indebtedness, or (b) any forbearance, release, indulgence or other
dealing with respect to the Senior Indebtedness or any guaranty thereof
or any security therefore.
(f) Notwithstanding any other provision of this Note, the term
"Subordinated Debt" shall mean any principal, premium, interest, fees
and charges owed to Research Industries, Incorporated ("RII") pursuant
to only the following: (i) the 7% Convertible Subordinated Debenture
payable by Maker to RII, which has an outstanding balance of not more
than $800,000 as of the date hereof; and (ii) the subordinated
debentures dated October 8, 1998, October 13, 1998, November 2, 1998
and November 5, 1998, payable by Maker to RII (the "Subordinated
Debentures"), which have a combined total principal amount of
$2,400,000, and the term "Subordinated Debt" shall not include any
amounts borrowed by Maker from RII after the date hereof or any
amendments to any of the foregoing Debentures that increase the
principal amount thereof.
6. Events of Default. Upon the occurrence of an Event of Default
(as defined below), at the option of Payee, the whole unpaid Principal
Sum together with all accrued and unpaid interest thereon, and all other
sums payable under this Note, shall become due and payable immediately.
In addition to, and not in limitation of, the foregoing, before or
after acceleration of this Note, upon the occurrence of an Event of
Default, Payee may exercise any other remedies as are available at law,
in equity or otherwise. Each of the following events shall constitute
an Event of Default hereunder:
(a) any failure by Maker to pay any amount due under any of the Notes
as and when the same becomes due and payable; provided, however, that
such failure to pay shall not be an Event of Default to the extent that
Maker is exercising its rights pursuant to Section 13.5 of the Merger
Agreement; or
(b) The breach by Maker of any of the material terms or material
provisions contained in any of the Notes other than the failure
specified in (a) above, and such breach shall continue uncured for ten
(10) days after notice of such breach has been delivered to the Maker;
or
(c) The occurrence and continuance of a default or event of default
under the Senior Indebtedness for such period of time as would permit
(assuming the giving of appropriate notice if required) any of the
holders of Senior Indebtedness to accelerate the maturity thereof;
provided, however, that no payment shall be made hereunder until the
Senior Indebtedness is satisfied in full; or
(d) There shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive,
any final judgment against Maker that with other such outstanding final
judgments against Maker exceeds in the aggregate $100,000; or
(e) The occurrence of any of the following: (i) the consolidation or
merger of Maker with or into another entity where (A) the shareholders
of Maker immediately prior to such transaction do not collectively own
at least 51% of the outstanding voting securities of the surviving
corporation of such consolidation or merger immediately following such
transaction or (B) the common stock of such surviving corporation is
not listed for trading on the Nasdaq National Market System, the New
York Stock Exchange or the American Stock Exchange immediately after
the completion of such transaction, (ii) the sale of all or
substantially all of the assets of Maker in one or a series of related
transactions, (iii) the acquisition by any person, entity or group of
at least 51% of the outstanding voting securities of Maker, or (iv) the
execution by Maker of an agreement to which Maker is a party or by
which it is bound, providing for any of the events set forth above in
(i), (ii) or (iii); or
(f) the dissolution, liquidation or termination of existence of Maker,
or Maker's and its affiliates cessation to conduct the Business (as
defined in the Merger Agreement); or
(g) Maker's application for or consent to the appointment of a
receiver, trustee or liquidator for itself or any of its properties or
assets; Maker's admitting in writing its inability to pay its debts as
they come due in the ordinary course; Maker's making a general
assignment for the benefit of its creditors; Maker's commencement of a
voluntary case for relief as a debtor under the United States
Bankruptcy Code or filing of a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of
any applicable law respecting bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution or liquidation ("Bankruptcy Law");
Maker's filing any answer admitting the material allegations of a
petition filed against it in any proceeding under any such Bankruptcy
Law; or
(h) any involuntary case under the United States Bankruptcy Code being
commenced against Maker or a petition being filed against Maker seeking
similar relief under any Bankruptcy Law and such case or petition
remaining undismissed for sixty (60) days after the commencement or
filing thereof, as applicable; or
(i) an order, judgment or decree being entered, without the
application, approval or consent of Maker, by any competent
jurisdiction approving a petition seeking reorganization of Maker or of
all or a substantial part of its properties or assets, if applicable,
or appointing a receiver, trustee or liquidator of Maker and such
order, judgment or decree continuing unstayed and in effect for any
period of sixty (60) days; or
(j) if, by the order or decree of a court of competent jurisdiction,
any material portion of the property or assets of Maker shall be
sequestered and such order or decree shall have been undischarged and
unstayed for sixty (60) days after the entry thereof; or
(k) any attachment or execution process being issued against all or
any substantial part of the assets of Maker; or any Governmental Body's
seizing or appropriating custody or control, condemning or occupying
any substantial portion of Maker's assets.
7. Remedies Cumulative; Waiver of Presentment. Subject to Section 5
hereof, all rights and remedies hereby granted or otherwise available
to Payee at law or in equity shall be cumulative and concurrent and may
be pursued singly, successively or together at Payee's sole option, and
may be exercised from time to time and as often as occasion therefor
shall occur until all obligations hereunder are paid or otherwise
satisfied in full. The failure to exercise any such right or remedy
shall in no event be construed as a waiver or release of same by Payee.
Demands, presentment for payment, protest, notice of dishonor or
nonpayment and notice of the exercise of any option hereunder, are
hereby waived by Maker.
8. Expenses. The Maker shall pay the Payee, on demand, for all
reasonable costs and expenses, including, but not limited to,
reasonable attorneys' fees and costs, incurred by Payee upon the
occurrence of an Event of Default hereunder in connection with
collection of principal and interest due under this Note.
9. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of
evidence reasonably satisfactory to Maker of the loss, theft,
destruction or mutilation of this Note, and, in the case of any such
loss, theft or destruction, upon receipt of an affidavit of loss from
Payee and such bond/indemnity as may be reasonably required by Maker,
or in the case of any such mutilation, upon surrender and cancellation
of this Note, Maker will make and deliver, in lieu of this Note, a new
Note of like tenor and unpaid Principal Sum and dated as of the date to
which interest has been paid on this Note.
10. Cancellation. After the Principal Sum and interest on this Note
has been paid in full, this Note shall be surrendered to Maker for
cancellation and shall not be reissued.
11. Notices. All notices that are required or permitted hereunder
shall be in writing and shall be sufficient if personally delivered or
sent by mail, facsimile message or by a nationally recognized overnight
delivery courier. Any notices shall be deemed given upon the earlier
of the date when received at, or the third (3rd) day after the date
when sent by registered or certified mail or the day after the date
when sent by overnight delivery courier to, the address or fax number
set forth below, unless such address or fax number is changed by notice
to the other parties hereto:
If to Payee at:
[Insert Address]
with a copy to:
Stoel Rives LLP
600 University Street, Suite 3600
Seattle, Washington 98101
Attn: L. John Stevenson, Jr., Esq.
Telefax: (206) 386-7500
If to Maker
Halifax Corporation
5250 Cherokee Avenue
Alexandria, Virginia 22312
Attn: Joseph Sciacca, Chief Financial Officer
Telefax: (703) 658-2426
with a copy to:
Blank Rome LLP
One Logan Square
Philadelphia, PA 19103
Attn: Barry H. Genkin, Esq.
Telefax: (215) 832-5514
12. Captions. The descriptive headings of the various sections or
parts of this Promissory Note are for convenience only and shall not
affect the meanings or construction of any of the provisions hereof.
13. Successors and Assigns. This Note is and shall be binding upon
Maker and Maker's successors and assigns and does and shall inure to
the benefit of Payee and Payee's consented to successors and assigns.
14. Governing Law. This Note shall be governed by the laws of the
State of Delaware applicable to contracts executed and to be performed
in Delaware.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Maker has caused this Promissory Note to be executed on the date first
set forth above.
HALIFAX CORPORATION
By:
Name: Charles McNew
Title: President
[Signature page to Promissory Note issued to__________]