exv10w2






Exhibit 10.2




COMMERCIAL SECURITY AGREEMENT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal

$1,500,000.00
	 	Loan Date

06-15-2009
	 	Maturity

06-15-2010
	 	Loan No

52-01-000295
	 	Call / Coll
	 	Account
	 	Officer

MTL
	 	Initials






References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “* * *” has been omitted due to text length limitations.




	 	 	 	 	 	 	 
	Grantor:

	 	Halifax Corporation of Virginia
	 	Lender:
	 	Sonabank, a State chartered bank
	 

	 	5250 Cherokee Avenue
	 	 	 	Warrenton Loan Production Office
	 

	 	Alexandria, VA 22312
	 	 	 	550 Broadview Avenue
	 

	 	 	 	 	 	Warrenton, VA 20186






THIS COMMERCIAL SECURITY AGREEMENT dated June 15, 2009, is made and executed between Halifax
Corporation of Virginia (“Grantor”) and Sonabank, a State chartered bank (“Lender”).



GRANT OF SECURITY INTEREST. For valuable consideration. Grantor grants to Lender a security
interest in the Collateral to secure the indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral, in addition to all other
rights which Lender may have by law.



COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means the following
described property, whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located, in which Grantor is giving to Lender a security interest for
the payment of the indebtedness and performance of all other obligations under the Note and
this Agreement:




All
Inventory, Chattel Paper, Accounts, Equipment and General
Intangibles



In addition, the word “Collateral” also includes all the following, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever located:




(A) All accessions, attachments, accessories, tools, parts, supplies, replacements of and
additions to any of the collateral described herein,

whether added now or later.




(B) All products and produce of any of the property described in this Collateral section.




(C) All accounts, general intangibles, instruments, rents, monies, payments, and all other
rights, arising out of a sale, lease, consignment

or other disposition of any of the property described in this Collateral section.




(D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other
disposition of any of the property described in this
Collateral section, and sums due from a third party who has damaged or destroyed the
Collateral or from that party’s insurer, whether due
to judgment, settlement or other process.




(E) All records and data relating to any of the property described in this Collateral
section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor’s right, title, and
interest in and to all computer software required to
utilize, create, maintain, and process any such records or data on electronic media.



RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff
in all Grantor’s accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Grantor holds jointly with someone else and all accounts Grantor may
open in the future. However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts.



GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the
Collateral, Grantor represents and promises to Lender that:




Perfection of Security Interest. Grantor agrees to take whatever actions are requested by
Lender to perfect and continue Lender’s security interest in the Collateral. Upon request
of Lender, Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender’s interest upon any and all
chattel paper and instruments if not delivered to Lender for
possession by Lender. This is
a continuing Security Agreement and will continue in effect even though all or any part of
the indebtedness is paid in full and even though for a period of time Grantor may not be
indebted to Lender.




Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s address shown
above (or such other addresses as Lender may designate from time to time) prior to any (1)
change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in
the management of the Corporation Grantor; (4) change in the authorized signer(s); (5)
change in Grantor’s principal office address; (6) change in Grantor’s state of
organization; (7) conversion of Grantor to a new or different type of business entity; or
(8) change in any other aspect of Grantor that directly or indirectly relates to any
agreements between Grantor and Lender. No change in Grantor’s name or state of organization
will take effect until after Lender has received notice.




No Violation. The execution and delivery of this Agreement will not violate any law or
agreement governing Grantor or to which Grantor is a party, and its certificate or articles
of incorporation and bylaws do not prohibit any term or condition of this Agreement.




Enforceability
of Collateral. To the extent the Collateral consists of accounts, chattel
paper, or general intangibles, as defined by the Uniform Commercial Code, the Collateral
is enforceable in accordance with its terms, is genuine, and fully complies with all
applicable laws and regulations
concerning form, content and manner of preparation and execution, and
all persons appearing
to be obligated on the Collateral have authority and capacity to contract and are in fact
obligated as they appear to be on the Collateral. At the time any account becomes subject
to a security interest in favor of Lender, the account shall be a good and valid account
representing an undisputed, bona fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or previously shipped or delivered
pursuant to a contract of sale, or for services previously performed by Grantor with or for
the account debtor. So long as this Agreement remains in effect, Grantor shall not, without
Lender’s prior written consent, compromise, settle, adjust, or extend payment under or with
regard to any such Accounts. There shall be no setoffs or counterclaims against any of the
Collateral, and no agreement shall have been made under which any deductions or discounts
may be claimed concerning the Collateral except those disclosed to Lender in writing.




Location of the Collateral. Except in the ordinary course of Grantor’s business, Grantor agrees
to keep the Collateral (or to the extent the Collateral consists of intangible property
such as accounts or general intangibles, the records concerning the Collateral) at
Grantor’s address shown above or at such other locations as are acceptable to Lender. Upon
Lender’s request, Grantor will deliver to Lender in form satisfactory to Lender a schedule
of real properties and Collateral locations relating to Grantor’s operations, including
without limitation the following: (1) all real property Grantor owns or is purchasing;
(2) all real property Grantor is renting or leasing; (3) all storage facilities



 









 





					
	 
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	 	(Continued)
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Grantor
owns, rents, leases, or uses; and (4) all other properties where
Collateral is or may be located.




Removal of the Collateral. Except in the ordinary course of Grantor’s business, including
the sales of inventory, Grantor shall not remove the Collateral from its existing location
without Lender’s prior written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the Commonwealth of
Virginia, without Lender’s prior written consent. Grantor shall, whenever requested, advise
Lender of the exact location of the Collateral.




Transactions Involving Collateral. Except for inventory sold or accounts collected in the
ordinary course of Grantor’s business, or as otherwise provided for in this Agreement,
Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell inventory, but only
in the ordinary course of its business and only to buyers who qualify as a buyer in the
ordinary course of business. A sale in the ordinary course of Grantor’s business does not
include a transfer in partial or total satisfaction of a debt or any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrance, or charge, other than the security interest
provided for in this Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be commingled with
any other funds; provided however, this requirement shall not constitute consent by Lender
to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.




Title.
Grantor represents and warrants to Lender that Grantor holds good and marketable
title to the Collateral, free and clear of all liens and encumbrances except for the lien
of this Agreement. No financing statement covering any of the Collateral is on file in any
public office other than those which reflect the security interest created by this
Agreement or to which Lender has specifically consented. Grantor shall defend Lender’s
rights in the Collateral against the claims and demands of all other persons.




Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause others to keep
and maintain, the Collateral in good order, repair and condition at all times while this
Agreement remains in effect. Grantor further agrees to pay when due all claims for work
done on, or services rendered or material furnished in connection with the Collateral so
that no lien or encumbrance may ever attach to or be filed against the Collateral.




Inspection of Collateral. Lender and Lender’s designated representatives and agents shall
have the right at all reasonable times to examine and inspect the Collateral wherever
located.




Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments and liens
upon the Collateral, its use or operation, upon this Agreement, upon any promissory note or
notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so long as
Lender’s interest in the Collateral is not jeopardized in Lender’s sole opinion. If the
Collateral is subjected to a lien which is not discharged within
fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other security
satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus
any interest, costs, attorneys’ fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender
and shall satisfy any final adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any surety bond furnished in the
contest proceedings. Grantor further agrees to furnish Lender with evidence that such
taxes, assessments, and governmental and other charges have been paid
in full and in a
timely manner. Grantor may withhold any such payment or may elect to contest any lien if
Grantor is in good faith conducting an appropriate proceeding to contest the obligation to
pay and so long as Lender’s interest in the Collateral is not jeopardized.




Compliance
with Governmental Requirements. Grantor shall comply promptly with all laws,
ordinances, rules and regulations of all governmental authorities, now or hereafter in
effect, applicable to the ownership, production, disposition, or use of the Collateral,
including all laws or regulations relating to the undue erosion of highly-erodible land or
relating to the conversion of wetlands for the production of an agricultural product or
commodity. Grantor may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate appeals, so long as
Lender’s interest in the Collateral, in Lender’s opinion, is not jeopardized.




Hazardous Substances. Grantor represents and warrants that the Collateral never has been,
and never will be so long as this Agreement remains a lien on the Collateral, used in
violation of any Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any Hazardous
Substance. The representations and warranties contained herein are
based on Grantor’s due
diligence in investigating the Collateral for Hazardous Substances. Grantor hereby (1)
releases and waives any future claims against Lender for indemnity or contribution in the
event Grantor becomes liable for cleanup or other costs under any Environmental Laws, and
(2) agrees to indemnify, defend, and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement. This obligation to
indemnify and defend shall survive the payment of the indebtedness and the satisfaction of
this Agreement.




Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance,
including without limitation fire, theft and liability coverage together with such other
insurance as Lender may require with respect to the Collateral, in form, amounts, coverages
and basis acceptable to Lender and issued by a company or companies acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least thirty (30) days’ prior
written notice to Lender and not including any disclaimer of the insurer’s liability for
failure to give such a notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way by any act,
omission or default of Grantor or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest, Grantor will
provide Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if Lender so chooses “single
interest insurance,” which will cover only Lender’s interest in the Collateral.




Application of Insurance Proceeds. Grantor shall promptly notify Lender of any loss or
damage to the Collateral, whether or not such casualty or loss is
covered by insurance.
Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof
of expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of
repair or restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the
indebtedness, and shall pay the balance to Grantor. Any proceeds which have not been
disbursed within six (6) months after their receipt and which Grantor has not committed to
the repair or restoration of the Collateral shall be used to prepay the indebtedness.




Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender reports on
each existing policy of insurance showing such information as Lender may reasonably
request including the following: (1) the name of the insurer;
(2) the risks insured; (3)
the amount of the policy; (4) the property insured; (5) the then current value on the
basis of which insurance has been obtained and the manner of



 









 





					
	 
	 	COMMERCIAL SECURITY AGREEMENT	 	 
	Loan No: 52-01-000295
	 	(Continued)
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determining
that value; and (6) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have an independent
appraiser satisfactory to Lender determine, as applicable, the cash value or replacement
cost of the Collateral.




Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or
alternatively, a copy of this Agreement to perfect Lender’s security interest. At Lender’s
request, Grantor additionally agrees to sign all other documents that are necessary to
perfect, protect, and continue Lender’s security interest in the Property. Grantor will pay
all filing fees, title transfer fees, and other fees and costs involved unless prohibited by
law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is a default.
Lender may file a copy of this Agreement as a financing statement. If Grantor changes
Grantor’s name or address, or the name or address of any person
granting a security interest
under this Agreement changes, Grantor will promptly notify the Lender of such change.



GRANTOR’S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except as otherwise
provided below with respect to accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the Related Documents, provided that Grantor’s right to
possession and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender’s security Interest in such
Collateral. Until otherwise notified by Lender, Grantor may collect any of the Collateral
consisting of accounts. At any time and even though no Event of Default exists, Lender may
exercise its rights to collect the accounts and to notify account debtors to make payments
directly to Lender for application to the Indebtedness. If Lender at any time has possession
of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if Lender takes
such action for that purpose as Grantor shall request or as Lender, in Lender’s sole
discretion, shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender
shall not be required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security interest given to
secure the indebtedness.



LENDER’S
EXPENDITURES. If any action or proceeding is commenced that would materially affect
Lender’s interest in the Collateral or if Grantor fails to comply with any provision of this
Agreement or any Related Documents, including but not limited to Grantor’s failure to discharge
or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any
Related Documents, Lender on Grantor’s behalf may (but shall not
be obligated to) take any action
that Lender deems appropriate, including but not limited to discharging or paying all taxes,
liens, security interests, encumbrances and other claims, at any time levied or placed on the
Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses will become a part of the Indebtedness and, at Lender’s option, will
(A) be payable on demand; (B) be added to the balance of
the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term of any applicable
insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment
which will be due and payable at the Note’s maturity. The Agreement also will secure payment of
these amounts. Such right shall be in addition to all other rights and remedies to which Lender
may be entitled upon Default.



DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:




Payment Default. Grantor fails to make any payment when due under the Indebtedness.




Other Defaults. Grantor fails to comply with or to perform any other term, obligation,
covenant or condition, contained in this Agreement or in any of the Related Documents or to
comply with or to perform any term, obligation, covenant or condition contained in any
other agreement between Lender and Grantor.




False Statements. Any warranty, representation or statement made or furnished to Lender by
Grantor or on Grantor’s behalf under this Agreement or the Related Documents is false or
misleading in any material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.




Defective Collateralization. This Agreement or any of the Related Documents ceases to be in
full force and effect (including failure of any collateral document to create a valid and
perfected security interest or lien) at any time and for any reason.




Insolvency. The dissolution or termination of Grantor’s existence as a going business, the
insolvency of Grantor, the appointment of a receiver for any part of Grantor’s property,
any assignment for the benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws by or against
Grantor.




Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any
creditor of Grantor or by any governmental agency against any collateral securing the
Indebtedness. This includes a garnishment of any of Grantor’s accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if there is a good
faith dispute by Grantor as to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice
of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond
for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute.




Events Affecting Guarantor. Any of the preceding events occurs with respect to any
Guarantor of any of the Indebtedness or Guarantor dies or becomes incompetent or revokes or
disputes the validity
of, or liability under, any Guaranty of the Indebtedness.




Adverse Change. A material adverse change occurs in Grantor’s financial condition, or
Lender believes the prospect of payment or performance of the Indebtedness is impaired.




Insecurity. Lender in good faith believes itself insecure.




Cure Provisions. If any default, other than a default in payment is curable and if Grantor
has not been given a notice of a breach of the same provision of this Agreement within the
preceding twelve (12) months, it may be cured if Grantor, after receiving written notice
from Lender demanding cure of such default: (1) cures the
default within thirty (30)
days; or (2) if the cure requires more than thirty (30) days, immediately initiates steps
which Lender deems in Lender’s sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.



RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any
time thereafter, Lender shall have all the rights of a secured party under the Virginia
Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or
more of the following rights and remedies:




Accelerate
Indebtedness. Lender may declare the entire Indebtedness, including any prepayment
penalty which Grantor would be required to pay, immediately due and payable, without notice
of any kind to Grantor;




Assemble Collateral. Lender may require Grantor to deliver to Lender all or any portion of
the Collateral and any and all certificates of title




 











 





					
	 
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	 	(Continued)
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and other documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by Lender. Lender
also shall have full power to enter upon the property of Grantor to take possession of and
remove the Collateral. If the Collateral contains other goods not covered by this Agreement
at the time of repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.




Sell the Collateral. Lender shall have full power to sell, lease, transfer, or otherwise
deal with the Collateral or proceeds thereof in Lender’s own name or that of Grantor.
Lender may sell the Collateral at public auction or private sale. Unless the Collateral
threatens to decline speedily in value or is of a type customarily sold on a recognized
market, Lender will give Grantor, and other persons as required by law, reasonable notice
of the time and place of any public sale, or the time after which any private sale or any
other disposition of the Collateral is to be made. However, no notice need be provided to
any person who, after Event of Default occurs, enters into and authenticates an agreement
waiving that person’s right to notification of sale. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of expenditure until repaid.




Appoint Receiver. Lender shall
have the right to have a receiver appointed to take
possession of all or any part of the Collateral, with the power to protect and preserve the
Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the
Rents from the Collateral and apply the proceeds, over and above the cost of the
receivership, against the Indebtedness. The receiver may serve without bond if permitted, by
law. Lender’s right to the appointment of a receiver shall exist whether or not the
apparent value of the Collateral exceeds the Indebtedness by a substantial amount.
Employment by Lender shall not disqualify a person from serving as a receiver.




Collect Revenues, Apply Accounts. Lender,
either itself or through a receiver, may collect
the payments, rents, income, and revenues from the Collateral. Lender may at any time in
Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s
nominee and receive the payments, rents, income, and revenues therefrom and hold the same as
security for the indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine, insofar as the Collateral consists of accounts, general
intangibles, insurance policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness
or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which
mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.




Obtain Deficiency. If Lender chooses to sell any or all of the Collateral, Lender may obtain
a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender
after application of all amounts received from the exercise of the rights provided in this
Agreement. Grantor shall be liable for a deficiency even if the transaction described in
this subsection is a sale of accounts or chattel paper.




Other Rights and Remedies. Lender shall have all the rights and remedies of a secured
creditor under the provisions of the Uniform Commercial Code, as may be amended from time to
time. In addition, Lender shall have and may exercise any or all other rights and remedies
it may have available at law, in equity, or otherwise.




Election of Remedies. Except as may be prohibited by applicable law, all of Lender’s rights
and remedies, whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election
to make expenditures or to take action to perform an obligation of Grantor under this
Agreement, after Grantor’s failure to perform, shall not affect
Lender’s right to declare a
default and exercise its remedies.



MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are a part of this Agreement:




Amendments. This Agreement, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Agreement. No
alteration of or amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Attorneys’ Fees; Expenses. Grantor agrees that if Lender hires an attorney to help enforce
this Agreement, Grantor will pay, subject to any limits under applicable law, Lender’s
attorneys’ fees and all of Lender’s other collection expenses, whether or not there is a
lawsuit and including without limitation additional legal expenses for bankruptcy
proceedings.




Caption Headings. Caption headings in this Agreement are for convenience purposes only and
are not to be used to interpret or define the provisions of this Agreement.




Governing Law. This Agreement will be governed by federal law applicable to Lender and, to
the extent not preempted by federal law, the laws of the Commonwealth of Virginia without
regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the
Commonwealth of Virginia.




Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender’s request to submit to
the jurisdiction of the applicable courts for Fauquier County, Commonwealth of Virginia.




No Waiver by Lender. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a waiver of such right or
any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender’s right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender’s
rights or of any of Grantor’s obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or withheld in the sole
discretion of Lender.




Notices.
Any notice required to be given under this Agreement shall be given in writing,
and shall be
effective when actually delivered, if hand delivered, when actually received by
telefacsimile (unless otherwise required by law), when deposited with a nationally
recognized overnight courier, or, if mailed, when deposited in the United States mail, as
first class, certified or registered mail postage prepaid, directed to the addresses shown
near the beginning of this Agreement, Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party’s address. For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor’s current address.
Unless otherwise provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.




Power of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable
attorney-in-fact for the purpose of executing any documents necessary to perfect, amend,
or to continue the security interest granted in this Agreement or to demand termination
of filings of other



 









 





					
	 
	 	COMMERCIAL SECURITY AGREEMENT	 	 
	Loan No: 52-01-000295
	 	(Continued)
	 	Page 5







secured parties. Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses
for the perfection and the continuation of the perfection of
Lender’s security interest in
the Collateral.




Severability. If a court of competent jurisdiction finds any provision of this Agreement to
be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the
offending provision illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so
modified, it shall be
considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not affect the
legality, validity or enforceability of any other provision of this Agreement.




Successors and Assigns. Subject to any limitations stated in this Agreement on transfer of
Grantor’s interest, this Agreement shall be binding upon and inure to the benefit of the
parties, their heirs, personal representatives, successors and
assigns. If ownership of the
Collateral becomes vested in a person other than Grantor, Lender, without notice to Grantor,
may deal with Grantor’s successors with reference to this Agreement and the indebtedness by
way of forbearance or extension without releasing Grantor from the obligations of this
Agreement or liability under the Indebtedness.




Survival of Representations and Warranties. All representations, warranties, and agreements
made by Grantor in this Agreement shall survive the execution and delivery of this Agreement,
shall be continuing in nature, and shall remain in full force and effect until such time as
Grantor’s indebtedness shall be paid in full.




Time is of the Essence. Time is of the essence in the performance of this Agreement.




Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by any party against any other party.



DEFINITIONS. The following capitalized words and terms shall have the following meanings when
used in this Agreement. Unless specifically stated to the contrary, all references to dollar
amounts shall mean amounts in lawful money of the United States of America. Words and terms
used in the singular shall include the plural, and the plural shall include the singular, as
the context may require. Words and terms not otherwise defined in
this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:




Agreement. The word “Agreement” means this Commercial Security Agreement, as this Commercial
Security Agreement may be amended or modified from time to time, together with all exhibits
and schedules attached to this Commercial Security Agreement from time to time.




Borrower. The word “Borrower” means Halifax Corporation of Virginia and includes all
co-signers and co-makers signing the Note and all their successors and assigns.




Collateral. The word “Collateral” means all of Grantor’s right, title and interest in and to
all the Collateral as described in the Collateral Description section of this Agreement.




Default. The word “Default” means the Default set forth in this Agreement in the section titled
“Default”.




Environmental
Laws. The words “Environmental Laws” mean any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as emended, 42 U.S.C. Section 9601, et seq.
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.




Event of Default. The words “Event of Default” mean any of the events of default set forth
in this Agreement in the default section of this Agreement.




Grantor. The word “Grantor” means Halifax Corporation of Virginia.




Guarantor.
The word “Guarantor” means any guarantor, surety, or accommodation party of any or
all of the Indebtedness.




Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note.




Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their
quantity, concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The
words “Hazardous Substances” are used in their very broadest sense and include without
limitation any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term “Hazardous Substances” also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.




Indebtedness. The word “Indebtedness” means the Indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other indebtedness and
costs and expenses for which Grantor is responsible under this Agreement or under any of the
Related Documents.




Lender. The word “Lender” means Sonabank, a State chartered bank, its successors and assigns.




Note. The word “Note” means the Note executed by Halifax Corporation of Virginia in the
principal amount of $1,500,000.00 dated June 15, 2009, together
with all modifications of
and renewals, replacements, and substitutions for the note or credit agreement.




Property. The word “Property” means all of Grantor’s right, title and interest in and to all
the Property as described in the “Collateral Description” section of this Agreement.




Related
Documents. The words “Related Documents” mean all promissory notes, credit
agreements, loan agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in connection with the
Indebtedness.



GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND
AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 15, 2009.



THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.



 









 





					
	 
	 	COMMERCIAL SECURITY AGREEMENT	 	 
	Loan No: 52-01-000295
	 	(Continued)
	 	Page 6






	 	 	 	 	 
	GRANTOR:



HALIFAX CORPORATION OF VIRGINIA

 	 	
	By:  	/s/ Joseph Sciacca
 	(Seal) 
	 	Joseph Sciacca,  	 
	 	Chief Financial Officer
of Halifax Corporation of Virginia 	 
	 



LASER
PRO Lending, VA S.42.00.004 Corp, Harland Financial Solutions, Inc.
1957, 2009. All Rights Reserved, VA c:\CFRLPLICAO.FC TR-1743 PR-22



STATE
COMMONWEALTH
OF VIRGINIA 

CITY/COUNTY OF FAIRFAX; to wit:






     The foregoing document was acknowledged before me in the foregoing
jurisdiction this 15th day of JUNE 2009, by JOSEPH SCIACCA.



/s/
Suzanne K. Green 
Notary Public




My
commission expires: September 30, 2009




Registration Number: 123531