Document:

exv10w1

 

Exhibit 10.1

February 8, 2008

Mr. Martin R. Ferron

95 Trinity Oaks Circle

The Woodlands, TX 77381

Dear Martin:

You have tendered your resignation as an officer and director of Helix Energy Solutions Group, Inc.
(hereinafter referred to as the “Company”), and have elected to terminate your employment with the
Company on February 18, 2008. The purpose of this letter (the “Agreement”) is to set forth certain
agreements and understandings regarding, among other things:

	 	•	 	Your employment separation;
	 
	 	•	 	Certain benefits the Company has agreed to provide to you upon your separation
from employment;
	 
	 	•	 	Your agreement to certain obligations of confidentiality, non-solicitation
and cooperation; and
	 
	 	•	 	Your release of any and all claims against the Company.

When you and the Company have signed this Agreement, it will constitute a complete agreement on all
of these issues.

	1.	 	EFFECTIVE DATE:
	 
	 	 	Your employment with the Company will terminate on February 18, 2008 (the “Effective
Date”).
	 
	2.	 	SEPARATION:
	 
	 	 	The Company will provide you with two kinds of separation benefits at the time of your
termination. First, you will receive regular separation benefits as described in Section
2(a) below. Second, in recognition of your specialized knowledge, and of your position as
an officer of the Company, the Company is offering you the benefits described in Section
2(b) below You will receive the separation benefits described in Section 2(a) below even
if you decline to sign this Agreement and execute the release of claims.

			
	 	 	 
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	 	(a)	 	Terms of Separation

	 	 	Health and Welfare Benefits – If you are participating in medical, dental, and/or
vision coverage for yourself and any eligible dependent(s), all active coverage will end as
of the last day of February, 2008. The Company will send you a packet regarding
continuation of benefits under the Consolidated Omnibus Benefits Reconciliation Act
(“COBRA”), and you and/or your eligible dependent(s) may elect to continue coverage for an
additional 18 months, provided you timely enroll for coverage and, subject to the provision
entitled “COBRA Premiums” in Section 2(b) below, make the required premium payments.
	 
	 	 	All other welfare benefits end as of the Effective Date.
	 
	 	 	401(k) Plan – You have the option of leaving your money in the Helix Energy
Solutions Group, Inc. Employee Retirement Savings Plan (the “Savings Plan”), or you may
request a distribution of your account balance at any time after the Effective Date.
	 
	 	 	Stock Options – Except as provided below, your rights with respect to any Company
stock option and restricted stock grants will be determined by the written agreements
governing those grants and the 1995 Long Term Incentive Plan (the “1995 LTIP”) of Helix
Energy Solutions Group, Inc. and the Helix Energy Solutions Group, Inc. 2005 Long Term
Incentive Plan (the “2005 LTIP”), as applicable.
	 
	 	 	You are not eligible for any future equity awards.
	 
	 	 	Final Expenses – The Company agrees to reimburse you for all outstanding business
expenses in accordance with Company policy. You will prepare and submit a final expense
account reimbursement request for expenses incurred prior to the Effective Date. Such an
expense account reimbursement request will be reviewed and paid in accordance with Company
policy.
	 
	 	 	Perquisites – All perquisites terminate as of the Effective Date and you will
receive no perquisite payments for any period after the Effective Date.
	 
	 	 	Vacation – You will be paid $64,927 for 25.5 accrued but unused vacation days (based
on your 2007 salary), less applicable tax withholdings, on or before February 19, 2008. You
will not accrue further vacation.

	 	(b)	 	Separation Benefits

	 	 	You acknowledge that the benefits set forth below include valuable new consideration
justifying your agreement to provide the releases set forth in Section 4 of this Agreement.
The following separation benefits shall be provided if you sign, deliver, and do not revoke
this Agreement.

			
	 	 	 
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	 	 	Separation Payment – On the date that is six months following the date of your
separation from service the Company shall pay you the sum of $607,945, less applicable tax
withholdings. On January 15, 2009, the Company shall pay you the sum of $1,117,665, less
applicable tax withholdings.
	 
	 	 	Restricted Stock – You have been awarded 199,347 shares of restricted stock under
the 2005 LTIP that are scheduled to vest after the Effective Date. The Company agrees that a
total of 95,156 restricted shares that would otherwise vest within the two-year period after
the Effective Date (specifically, 23,808 shares of restricted stock granted pursuant to a
restricted stock award agreement between you and the Company dated January 3, 2005; 21,060
shares of restricted stock granted pursuant to a restricted stock award agreement between
you and the Company dated January 3, 2006; 35,830 shares of restricted stock granted
pursuant to a restricted stock award agreement between you and the Company dated January 2,
2007; and 14,458 shares of stock granted pursuant to a restricted stock award agreement
between you and the Company dated January 2, 2008), will vest on February 18, 2008. Unless
you elect otherwise by remitting to the Company cash in an amount necessary to satisfy the
Company’s tax withholding obligations arising with respect to the vesting of your restricted
stock, the Company shall satisfy its tax withholding obligations by withholding shares with
a fair market value equal to the withholding obligation. The parties agree that the terms
of the above-referenced restricted stock award agreements shall be amended to reflect such
accelerated vesting.
	 
	 	 	Stock Options – You have been awarded nonqualified stock options (“NSOs”) under the
1995 LTIP with respect to 23,178 shares of the Company’s Common Stock (the “Stock”) that are
scheduled to vest after the Effective Date. The Company agrees that such NSOs with respect
23,178 shares of Stock (specifically, NSOs with respect to 5,658 shares of Stock awarded
pursuant to a nonqualified stock option agreement dated March 17, 2003 between you and the
Company; and NSOs with respect to 17,520 shares of Stock awarded pursuant to a nonqualified
stock option agreement dated February 25, 2004 between you and the Company) that would
otherwise vest within the two year period after the Effective Date, will vest on February
18, 2008. The period of exercisability of your NSOs granted on March 17, 2003 and February
25, 2004 shall be extended until April 19, 2009. The parties agree that the terms of the
above-referenced nonqualified stock option agreements shall be amended to reflect such
accelerated vesting and continued exercisability on the terms specified herein.
	 
	 	 	2007 Annual Bonus –Your 2007 annual incentive bonus in an amount equal to $978,000,
less applicable tax withholdings, will be paid to you on or before February 19, 2008.
	 
	 	 	COBRA Premiums – If you elect to continue your medical, dental, and/or vision
coverage for yourself and your eligible dependents, your COBRA premiums for the first 12
months of COBRA coverage will be paid by the Company.

			
	 	 	 
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	3.	 	COVENANTS:

	 	(a)	 	Non-Solicitation

Following the Effective Date, you shall not, directly or indirectly:

     (1) for a period of eighteen (18) months thereafter, interfere with the relationship of
the Company or any affiliate with, or attempt to entice away from the Company or any
affiliate, or attempt to induce to cease doing business with the Company or any affiliate,
any individual or entity who was or is a material customer or material supplier of, or who
has maintained a material business relationship with, the Company or its affiliates; or

     (2) for a period of eighteen (18) months thereafter, employ, engage as a consultant or
adviser, or solicit the employment, engagement as a consultant or adviser, of any employee
or agent of the Company or any of its affiliates, or cause or attempt to cause any
individual or entity to do any of the foregoing.

(b) Cooperation and Assistance

Definition of Cooperation – As used in this Agreement, “cooperate” and “cooperation”
includes making yourself available in response to all reasonable requests for information by
the Company, the Securities and Exchange Commission (“SEC”), the Department of Justice
(“DOJ”) or any other governmental authority with jurisdiction over the matter at hand,
whether the request is informal or formal (e.g., in response to a subpoena in a legal
proceeding), and includes fully, completely, and truthfully answering questions, assisting
the Company in its prosecution or defense of any proceeding, civil or criminal, or providing
testimony in any related proceeding, civil or criminal.

Agreement
to Cooperate - You agree, acknowledge, represent and warrant that:

     (1) you have (i) not engaged in, nor encouraged any individual, in any way, to engage
in the destruction or secretion of any information, in any form, including but not limited
to documents and emails (“documentation”), that might be relevant to any investigation;
(ii) turned over all documentation in response to prior requests; and (iii) responded, fully
and truthfully, to all questions related to or arising from the subject matter of any such
investigation that have been posed to you by employees, representatives of the Company, or
any government agency;

     (2) for a period of two (2) years after the Effective Date, upon reasonable request,
you will cooperate fully with the Company and its affiliates, past or present, in connection
with any internal investigation initiated by the Company, its affiliates, and any successors
in interest, as well as with any external investigation initiated by any government or
agency or instrumentality thereof in accordance with the Company’s directives;

			
	 	 	 
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     (3) for a period of two (2) years after the Effective Date, upon reasonable request of
the Company, any subsidiary of the Company, or any successor-in-interest, you will provide
all documentation and information in your possession, custody, or control that is related to
any internal or external investigation of the Company and its affiliates; and

     (4) after two (2) years after the Effective Date, you agree upon request to provide
continuing reasonable cooperation with the Company or any of its affiliates in responding to
internal or governmental investigations.

All reasonable expenses you incur in rendering cooperation under this subsection 3(b) will
be reimbursed by the Company.

(c) Confidentiality

Confidential Information – During the course of your employment with the Company,
you have had access and received confidential information. You are obligated to keep
confidential all such confidential information for a period of not less than eighteen (18)
months following the Effective Date of this Agreement. Moreover, you understand and
acknowledge that your obligation to maintain the confidentiality of trade secrets and other
intellectual property is unending. As an exception to this confidentiality obligation you
may disclose the confidential information (i) in connection with enforcing your rights under
any plan or agreement related to this Agreement, or if compelled by law, and in either case,
you shall provide written notice to the Company prior to the disclosure or (ii) if the
Company provides written consent prior to the disclosure.

			
	 	 	 
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	 	(d)	 	Property

	 	 	Agreement to Return Company Property – Immediately prior to the Effective Date, or
such earlier date as the Company may reasonably determine appropriate, you will return to
the Company all Company property in your possession, including but not limited to,
computers, BlackBerry, credit cards and all files, documents and records of the Company, in
whatever medium and of whatever kind or type. You agree and hereby certify that you have
returned, or will return prior to the Effective Date, all proprietary or confidential
information or documents relating to the business and affairs of the Company and its
affiliates. You further agree that should it subsequently be determined by the Company
that, notwithstanding the foregoing certification, you have inadvertently failed to return
all proprietary or confidential information and documents in your possession or control
relating to the business and affairs of the Company and its affiliates, you will be
obligated to promptly return to the Company such proprietary or confidential information and
documents in your possession or control relating to the business and affairs of the Company
and its affiliates.
	 
	4.	 	RELEASE OF CLAIMS:
	 
	 	 	In consideration for the separation benefits described in Section 2 of this Agreement, you
hereby provide the Company with an irrevocable and unconditional release and discharge of
claims. For purposes of this Section 4, the term “Company” means the released parties
identified in this Section 4.
	 
	 	 	This release and discharge of claims applies to (i) the Company each and all of its
subsidiaries and affiliated companies; (ii) the Company’s shareholders, officers, agents,
employees, directors, supervisors, representatives (including without limitation, Owen E.
Kratz), and their successors and assigns, whether or not acting in the course and scope of
employment, and (iii) all persons acting by, through, under, or in concert with any of the
foregoing persons or entities.
	 
	 	 	The claims subject to this release include, without limitation, any and all claims related
or in any manner incidental to your employment with the Company or the termination of that
employment relationship. The parties understand the word “claims” to include all actions,
claims, and grievances, whether actual or potential, known or unknown, and specifically but
not exclusively all claims arising out of your employment with the Company and the
termination of your employment. All such claims (including related attorneys’ fees and
costs) are forever barred by this Agreement and without regard to whether those claims are
based on any alleged breach of a duty arising in a statute, contract, or tort; any alleged
unlawful act, including, without limitation, age discrimination; any other claim or cause or
cause of action; and regardless of the forum in which it might be brought. This release
applies to any claims brought by any person or agency on behalf of you or any class action
pursuant to which you may have any right or benefit.

			
	 	 	 
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	 	 	You promise never to file a lawsuit asserting any claims that are released by you and
further promise not to accept any recoveries or benefits which may be obtained on your
behalf by any other person or agency or in any class action for any claims released by you
and do hereby assign any such recovery or benefit to the Company. If you sue the the Company
in violation of this Agreement, you shall be liable to the Company for its reasonable
attorneys’ fees and other litigation costs incurred in defending against such a suit.
Additionally, if you sue the Company in violation of this Agreement, the Company can
require you to return all monies and other benefits paid to you pursuant to this Agreement.
	 
	 	 	Notwithstanding the foregoing, the release contained herein shall not apply to (i) any
rights that you may have under the Savings Plan, (ii) any rights you may have under this
Agreement, (iii) your rights under applicable law (i.e., the COBRA law) to continued medical
insurance coverage at your expense, and (iv) your statutory right to file a charge with the
Equal Employment Opportunity Commission (“EEOC”) or the Texas Workforce Commission/Civil
Rights Division (“TWCCRD”), to participate in an EEOC or TWCCRD investigation or
proceeding, or to challenge the validity of the release, consistent with the requirements of
29 U.S.C. § 626(f)(4).
	 
	 	 	In connection with this release, you understand and agree that:

     (1) You have a period of 21 days within which to consider whether you execute this
Agreement, that no one hurried you into executing this Agreement during that 21 day period,
and that no one coerced you into executing this Agreement;

     (2) You have carefully read and fully understand all the provisions of the release set
forth in Section 4 of this Agreement, and declare that the Agreement is written in a manner
that you understand;

     (3) You are, through this Agreement, releasing the Company from any and all claims you
may have against the Company and the other parties specified above, as provided above, and
that this Agreement constitutes a release and discharge of claims arising under the Age
Discrimination in Employment Act (ADEA), 29 U.S.C. § 621-634, including the Older Workers’
Benefit Protection Act, 29 U.S.C. § 626(f);

     (4) You declare that your agreement to all of the terms set forth in this Agreement is
knowing and voluntary;

     (5) You knowingly and voluntarily intend to be legally bound by the terms of this
Agreement;

     (6) You acknowledge that the Company is hereby advising you in writing to consult with
an attorney of your choice prior to executing this Agreement; and

     (7) You understand that rights or claims that may arise after the date this Agreement
is executed are not waived. You understand that you have a period of seven

			
	 	 	 
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	 	 	days to revoke your agreement to give the Company a complete release in exchange for
separation benefits, and that you may deliver notification of revocation by letter or
facsimile addressed to the Company’s General Counsel. You understand that this will not
become effective and binding, and that none of the separation benefits described above in
Section 2 of this Agreement will be provided to you until after the expiration of the
revocation period. The revocation period commences when you execute this Agreement and ends
at 11:59 p.m. on the seventh calendar day after execution, not counting the date on which
you execute this Agreement. You understand that if you do not deliver a written notice of
revocation to the Company’s General Counsel before the end of the seven-day period described
above, this Agreement will become final, binding and enforceable.
	 
	 	 	The Company’s decision to offer separation benefits in exchange for a release of claims
shall not be construed as an admission by the Company of (i) any liability whatsoever, (ii)
any violation of any of your rights or those of any person, or (iii) any violation of any
order, law, statute, duty, or contract. The Company specifically disclaims any liability to
you or to any other person for any alleged violation of any rights possessed by you or any
other person, or for any alleged violation of any order, law, statute, duty, or contract on
the part of the Company, its employees or agents or related companies or their employees or
agents.
	 
	 	 	You represent and acknowledge that in executing this Agreement you do not rely and have not
relied upon any representation or statement made by the Company, or by any of the Company’s
agents, attorneys, or representatives with regard to the subject matter, basis, or effect of
the release set forth in this Agreement, other than those specifically stated in this
Agreement.
	 
	 	 	The release set forth in this Section 4 of this Agreement shall be binding upon you, and
your heirs, administrators, representatives, executors, successors, and assigns, and shall
inure to the benefit of the Released Parties . You expressly warrant that you have not
assigned, transferred or sold to any person or entity any rights, causes of action, or
claims released in this Agreement.
	 
	5.	 	MISCELLANEOUS:
	 
	 	 	Exclusive Rights and Benefits – Except as otherwise provided in this Agreement, the
benefits described in this Agreement supersede, negate and replace any other benefits owed
to or offered by the Company to you, including, without limitation, any rights under the
Amended and Restated Employment Agreement dated February 15, 1999 between you and the
Company (the “Employment Agreement”), which is hereby superseded and negated by the
execution of this Agreement.
	 
	 	 	Entire Agreement – This Agreement sets forth the entire agreement between you and
the Company with respect to each and every issue addressed in this Agreement, and, except
for any of the Company’s benefit plans and related agreements in which you have participated
as an employee and officer of the Company, this entire, integrated

			
	 	 	 
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	 	 	Agreement fully supersedes any and all prior agreements or understandings, oral or written,
between you and the Company pertaining to the subject matter of this Agreement, including,
without limitation, the Employment Agreement. Notwithstanding anything contained herein,
nothing in this Agreement shall affect, limit or negate any provision of the Company’s
By-Laws or Articles of Incorporation with respect to indemnification of current or former
officers and/or directors of the Company.
	 
	 	 	Exclusive Choice of Law and Arbitration Agreement — This Agreement constitutes an
agreement that has been executed and delivered in the State of Texas, and the validity,
interpretation, performance, and enforcement of that agreement shall be governed by the laws
of that State.
	 
	 	 	In the event of any dispute or controversy arising out of or under this Agreement, or
concerning the substance, interpretation, performance, or enforcement of this Agreement, or
in any way relating to this Agreement (including issues relating to the formation of the
agreement and the validity of this arbitration clause), the parties agree to resolve that
dispute or controversy, fully and completely, through the use of final, binding arbitration.
This arbitration agreement applies to any disputes arising under (i) the common law,
(ii) federal or state statutes, laws or regulations, and also to (iii) any dispute about the
arbitrability of any claim or controversy. The parties further agree to hold knowledge of
the existence of any dispute or controversy subject to this Agreement to arbitrate,
completely confidential. You understand and agree that this confidentiality obligation
extends to information concerning the fact of any request for arbitration, any ongoing
arbitration, as well as all matters discussed, discovered, or divulged (whether voluntarily
or by compulsion) during the course of such arbitration proceeding. Any arbitration
conducted pursuant to this arbitration provision will be conducted in accordance with the
rules of the American Arbitration Association in accordance with its rules then in effect
governing employment disputes and the arbitrator shall have full authority to award or grant
all remedies provided by law. The arbitrator will have the discretion to permit discovery
that the arbitrator deems appropriate for a full and fair hearing. The arbitrator will issue
a reasoned award, and the award of the arbitrator shall be final and binding. A judgment
upon the award may be entered and enforced by any court having jurisdiction. Any
arbitration proceeding resulting hereunder will be conducted in Houston, Texas before an
arbitrator selected by you and the Company by mutual agreement, or through the American
Arbitration Association. This arbitration agreement does not limit or affect the right of
the Company to seek an injunction to maintain the status quo in the event that the Company
believes that you have violated any provision of Section 3 of this Agreement. This
arbitration agreement does not limit your right to file an administrative charge concerning
the validity of the release set forth in Section 4 of this Agreement, with any appropriate
state or federal agency.
	 
	 	 	Multiple Counterparts/Electronic Copies- This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of such counterparts
together shall constitute a single instrument. An electronic copy (including in .pdf format)
or facsimile of a signature hereto will be binging upon the signatory as if it were an
original signature.

			
	 	 	 
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	 	 	Meaning of Separation From Service — For the purposes of this Agreement, “separation
from service” has the meaning ascribed to that term in section 409A of the Internal Revenue
Code of 1986, as amended and the rules and regulations issued thereunder by the Department
of Treasury and the Internal Revenue Service. It is intended that the date of your
separation from service will be the Effective Date.
	 
	 	 	Severability and Headings — The invalidity or unenforceability of a term or
provision of this Agreement shall not affect the validity or enforceability of any other
term or provision of this Agreement, which shall remain in full force and effect. Any titles
or headings in this Agreement are for convenience only and shall have no bearing on any
interpretation of this Agreement.
	 
	 	 	Binding Nature – This Agreement shall be binding on the Company, its successors and
assigns, and in the event of your death prior to the payment of benefits hereunder, the cash
payments described in Section 2(b) hereof would be made to your estate. 

			
	 	 	 
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Please initial each page and sign below.

ENTERED INTO in Houston, Texas as of the 8th day of February, 2008.

	 	 	 	 	 
	HELIX ENERGY SOLUTIONS GROUP, INC.
	 
	 	 	 	 
	By:

	 	/s/ Bart H. Heijermans
	 	 
	 

	 	 	 	 
	 

	 	Name: Bart H. Heijermans	 	 
	 

	 	Title: Executive Vice President and Chief Operating Officer	 	 
	 
	 	 	 	 
	ENTERED INTO in Houston, Texas as of the 8th of February, 2008.
	 
	 	 	 	 
	 

	 	/s/ Martin R. Ferron	 	 
	 

	 	 	 	 
	 

	 	Martin R. Ferron	 	 

			
	 	 	 
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EXHIBIT 10.1

-COPY-

SECOND AMENDMENT AND WAIVER

     This SECOND AMENDMENT AND WAIVER (this “Amendment”) is entered into as of January
31, 2008, among HALIFAX CORPORATION OF VIRGINIA, f/k/a Halifax Corporation, a Virginia
corporation (“Halifax”), HALIFAX ENGINEERING, INC., a Virginia corporation
(“Engineering”), MICROSERV LLC, a Delaware limited liability company (“Microserv”) and
HALIFAX ALPHANATIONAL ACQUISITION, INC., a Delaware corporation (“AlphaNational”;
collectively with Halifax, Engineering and Microserv, “Borrower”), and PROVIDENT BANK,
a Maryland banking corporation (“Bank”).

WITNESSETH:

     WHEREAS, the Borrower and the Bank entered into that certain Fourth Amended and Restated
Loan and Security Agreement dated as of June 29, 2007 (as amended, restated, supplemented or
modified from time to time, including the amendments and waivers set forth in that certain
First Amendment and Waiver dated November 13, 20007, the “Loan Agreement”; capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to such terms in
the Loan Agreement);

     WHEREAS, the following Events of Default have occurred under the Loan Agreement: (a)
Borrower failing to maintain a minimum Tangible Net Worth plus Subordinated Debt of not less
than $4,000,000.00 as of December 31, 2007; (b) Borrower failing to maintain a ratio of Total
Liabilities less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not greater
than 4.0:1 as of December 31, 2007; (c) Borrower failing to maintain a Current Ratio equal to
or greater than 1.4:1 as of December 31, 2007; and (d) Borrower failing to pay the principal,
interest and late charges owed under the Auxiliary Revolver Facility at the December 31, 2007
maturity thereof (the “Existing Defaults”);

     WHEREAS, the Existing Defaults are continuing and remain unwaived, and the Borrower has
requested that the Bank waive the Existing Defaults;

     WHEREAS, the Bank has agreed to the requested waiver on the terms and conditions provided
herein; and

     WHEREAS, the Borrower has further requested that certain terms and conditions of the Loan
Agreement and the Promissory Notes evidencing the Revolving Line of Credit and the Auxiliary
Revolver Facility be amended, and the Bank has agreed to the requested amendments on the terms
and conditions provided herein;

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Amounts Due. The Borrower acknowledges and agrees that as of January 30, 2008
the outstanding principal balance due under: (a) the Line of Credit is Five Million
Eighty-Eight Thousand Four Hundred Forty Nine Dollars and 55/100 ($5,088,449.55) with accrued
interest due in the amount of Thirty Thousand Eight Hundred Eighty Dollars and 00/100
($30,880); and

 

 

(b) the Auxiliary Revolver Facility is Nine Hundred Hundred Thousand Dollars and 00/100 ($$900,000)
with accrued interest due in the amount of Seventeen Thousand Nine Hundred Nine Dollars and 20/100
($17,909.20) and that such sums are in fact now due and owing without defense, set-off or
counterclaim whatsoever.

     2. Amendment to the Loan Agreement.

          A. Section I.A.4 of the Loan Agreement is hereby modified and amended by
replacing the definition of “Auxiliary Maximum Credit Amount” with the following:

“Auxiliary Maximum Credit Amount” means Nine Hundred Thousand Dollars
($900,000) as such amount may be reduced by the payments described in
Section II.A.2. below.

          B. Section I.A.15 of the Loan Agreement is hereby modified and amended by
replacing the definition of “Maximum Line of Credit Amount” with the following:

“Maximum Line of Credit Amount” means Six Million Dollars ($6,000,000).

          C. Section II.A.1. of the Loan Agreement is hereby modified and amended by
adding the following to the end thereof:

“Notwithstanding the foregoing, the Borrower cannot request any advance under the
Line of Credit after April 28, 2008, and all amounts outstanding under the Line of
Credit shall be due and paid in full on April 30, 2008. Provided, however, that if
the Borrower provides the Bank with evidence, satisfactory in the sole and absolute
discretion of the Bank, that Borrower has received an indefeasible capital infusion
of not less than $1,250,000 in the form either of stockholders’ equity or
subordinated debt acceptable to the Bank, in the Bank’s sole and absolute
discretion, by no later than 5:00 p.m., on April 15, 2008, then the Borrower, upon
notice from the Bank, shall be permitted to continue to borrower funds under the
Line of Credit until July 29, 2008 and all amounts outstanding under the Line of
Credit shall thereafter be due and paid in full on July 31, 2008.”

          D. Section II.A.2. of the Loan Agreement is hereby modified and amended by
replacing the last sentence thereof with the following:

“The Borrower shall make payments of $25,000 each on the 15th day of February,
March, and April 2008 which sums shall be applied to the reduction of the principal
amount outstanding hereunder and such payments shall constitute permanent reductions
of the Auxiliary Maximum Credit Amount. Notwithstanding the provisions set forth
above regarding the operation of the Auxiliary Revolver Facility, the Borrower
cannot request any advance under the Auxiliary Revolver Facility after February 1,
2008 and all amounts outstanding under the Auxiliary Revolver Facility shall
thereafter be due and paid in full as set forth above and finally on April 30, 2008.
Provided, however, that if the

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Borrower provides the Bank with evidence, satisfactory in the sole and absolute
discretion of the Bank, that the Borrower has received an indefeasible capital
infusion of not less than $1,250,000 in the form either of stockholders’ equity or
subordinated debt acceptable to the Bank, in the Bank’s sole and absolute
discretion, by no later than 5:00 p.m., on April 15, 2008, then, upon notice from
the Bank, the Borrower shall make principal payments of $25,000 each on the 15th day
of May, June and July 2008 and all amounts outstanding under the Auxiliary Revolver
Facility shall thereafter be due and paid in full on July 31, 2008. The Borrower
shall arrange for the Escrow Agent to pay any funds or proceeds due to the Borrower
from the INDUS Escrow directly to the Bank to be applied, provided the Borrower is
not in default hereunder, towards the reduction of the principal balance of the
Auxiliary Revolver Facility. If the Borrower is in default hereunder any payment
received derived from INDUS Escrow funds shall applied in the manner determined by
the Bank. In the event that the Bank consents to the Borrower’s sale or financing of
any of the Borrower’s assets outside of assets sold or financed in the ordinary
course of the Borrower’s business, the proceeds of such sale or financing shall be
paid directly to the Bank to be applied to the reduction of the principal balance of
the Auxiliary Revolver Facility. If the Borrower is in default hereunder any payment
received derived from such sale or financing shall applied in the manner determined
by the Bank. The phrase “ INDUS Escrow” shall mean the funds held by an escrow agent
in favor of the Borrower relating to the Borrower’s sale of its secure network
business.”

          E. Section II. C of the Loan Agreement is hereby modified and amended by
replacing the first sentence thereof with the following:

“The interest rates on the Loan, and the method of calculating interest upon the
Loan, the term of the Loan, the method and times of repayment, and other conditions
pertaining to the repayment of the Loan shall, at the option of Bank, be evidenced
by Bank’s form of promissory note, and/or as otherwise set forth herein or in
appropriate writings between the parties as determined by Bank.”

          F. Section V.G of the Loan Agreement is hereby modified and amended by
replacing the entire Section with the following:

“G. Field Examination. Bank or any of its agents or representatives may
from time to time, during normal business hours, inspect, check, make copies of or
extracts from the books, records and files of Borrower, and visit and inspect
Borrower’s offices and any of the Collateral wherever located. Borrower shall make
the same available at any time for such purposes, and shall pay all expenses related
to such inspections. Unless an Event of Default has occurred and is continuing, the
Borrower will be charged for no more than one field examination during each six
month period commencing on February 1, 2008.”

          G. Section VI of the Loan Agreement is hereby modified and amended by
replacing the opening paragraph thereof with the following:

3

 

“VI. EVENTS OF DEFAULT. The occurrence of any of the following, or the failure by
Borrower to comply with Paragraph V.M.6, or the failure of Borrower to make any
payment hereunder when due, shall automatically be a default hereunder:”

     3. Waiver. The Bank acknowledges that the Existing Defaults currently exist. Subject
to the fulfillment of the conditions precedent to the effectiveness of this Amendment set forth in
Section 4, the Bank hereby waives the Existing Defaults.

     4. No Other Amendments or Waivers. Except in connection with the amendments and the
waivers expressly set forth above, the execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Bank under the Loan Agreement
or any of the other related documents, nor constitute a waiver of any provision of the Loan
Agreement or any of the other related documents. Except for the amendments set forth above, the
text of the Loan Agreement and all other related documents shall remain unchanged and in full
force and effect and hereby ratifies and confirms its respective obligations thereunder. The
Borrower acknowledges and expressly agrees that the Bank reserves the right to, and does in fact,
require strict compliance with all terms and provisions of the Loan Agreement.

     5. Conditions Precedent to Effectiveness. This Amendment shall become effective as of
the date hereof when, and only when, the Bank shall have received the following, in form and
substance satisfactory to the Bank:

	 	a.	 	counterparts of this Amendment executed by each Borrower;
	 
	 	b.	 	payment in full, in immediately available funds, to the Bank of
one-half of amendment fee described below in the amount of $17,250, such fee being fully
earned and non-refundable upon the effectiveness of this Amendment;
	 
	 	c.	 	payment in full of all other fees and expenses due and payable
to the Bank under the Loan Agreement and in connection with the execution and delivery
of this Amendment and the transactions described herein, including, without
limitation, the fees and expenses of counsel to the Bank, if any; and
	 
	 	d.	 	such other information, documents, including amended and
restated promissory notes, instruments, certificates or approvals as may be set forth
within this Agreement or as the Bank or the Bank’s counsel may reasonably
require.

     6. Additional Agreements. The Borrower agrees as follows:

	a.	 	The Bank shall, upon receipt from Borrower of a payroll ACH file for clearing, place an
administrative hold on account number 2065310687 in the amount of any gross payroll to be paid
therefrom.

4

 

	b.	 	The Borrower shall, within ten days of the date of this Agreement, provide the
Bank with evidence, satisfactory to the Bank, that the escrow agent holding
the funds from the INDUS settlement shall have been notified of the Bank’s
security interest in the Borrower’s interest in such escrow funds. In the event
that the Borrower agrees to compromise its claim to the INDUS settlement
funds, it shall notify the Bank of such settlement and provided that such
settlement shall result in the net payment of no less than $275,000 from the
INDUS escrow and provided further that the Borrower is not in default
hereunder or under the terms of the Loan Agreement, the Bank shall consent
to such compromise and receive payment of funds as provided in the Loan
Agreement.
	 
	c.	 	By no later than April 15, 2008, the Borrower shall deliver to the Bank either:
(i) a commitment for financing in sufficient amount to completely pay-off the
Line of Credit and the Auxiliary Revolver Facility; or (ii) an engagement
letter with an advisory firm satisfactory to the Bank to assist the Borrower in
evaluating and pursuing alternative refinancing sources or the sale of all or
substantially all of the Borrower’s assets.

	d.	 	By no later than February 15, 2008, the Borrower shall close any accounts
maintained at any other financial institution (other than accounts relating to
VDOT, INDUS and existing Liberty Bank accounts) and transfer the funds to
the Borrower’s accounts at the Bank.
	 
	e.	 	By no later than February 15, 2008, the Borrower shall identify to the Bank all
locations at which it maintains inventory valued at greater than $10,000. The
Borrower shall use its best efforts to provide the Bank, by February 29, 2008,
with agreements, acceptable in form and substance to the Bank, in which the
landlords or customers in whose locations such inventory are located
acknowledge the Bank’s lien on such inventory, permit the Bank to remove
such inventory in the event of a default by the Borrower hereunder or under
the Loan Agreement, and subordinate their rights in such inventory to the
Bank’s rights.
	 
	f.	 	By no later than April 15, 2008, the Borrower shall deliver to the Bank either; (i) a
commitment for financing in sufficient amount to completely pay-off the Line of Credit and the
Auxiliary Revolver Facility by no later than April 30, 2008; or (ii) an Account Control
Agreement executed by Liberty Bank in form and substance acceptable to the Bank covering any
accounts maintained by the Borrower at Liberty Bank.
	 
	g.	 	On a monthly basis commencing on February 10, 2008, the Borrower shall deliver copies of
the account statements for the prior month on the VDOT escrow funds in accounts at SunTrust
Bank, N.A.

5

 

	 	h.	 	By no later than February 29, 2008, the Borrower shall deliver a listing of the names and
address of all of its account debtors and vendors.
	 
	 	i.	 	Upon notice from the Bank, in the Bank’s sole and absolute discretion, the Automatic
Credit Advance procedure of the Borrower’s ARTS Service shall cease. Notwithstanding
anything to the contrary in any agreement or the Reporting Requirements Addendum with the
Bank, the Borrower shall, commencing in February, 2008: (i) upload Receivable data into ARTS
upon each advance request, and in any event shall upload such data at least every two weeks;
(ii) submit to the Bank Borrowing Base Certificates, in form and substance satisfactory to the
Bank, every two weeks; (iii) within 10 days of each month end, submit a Borrowing Base
Certificate reflecting activity for the entire previous month, accompanied by a reconciliation
of reported sales, credits, collections, ending Receivable balances, loan balance to
subsidiary records, and bank statements.
	 
	 	j.	 	The Financial Covenants set forth in the Financial Covenants Addendum continue to apply to
the Borrower and shall be measured next by the Bank as of March 31, 2008. The following
Financial Covenants are hereby modified and amended with the following:

	 	(i)	 	Financial Covenant II. A shall be modified and amended to read as follows: Borrower
shall at all times maintain a minimum Tangible Net Worth plus Subordinated Debt of not
less than $1.0 million as of March 31, 2008, and
	 
	 	(ii)	 	Financial Covenant II.B shall be modified and amended to read as follows:
Borrower shall at all times maintain a ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not
greater than                      as of March 31, 2008.
	 
	 	(iii)	 	Financial Covenant II.C shall be modified and amended to read as follows:
Borrower shall at all times maintain a Debt Service Coverage Ratio
greater than or equal to                      for the quarter ended March 31, 2008.
	 
	 	(iv)	 	Financial Covenant II.D shall be modified and amended to read as
follows: Borrower failing to maintain a Current Ratio equal to or greater
than 1.0 as of March 31, 2008;.

For purposes of covenant measurements, any capital infusion or issuance of subordinated debt
shall be deemed to have occurred after March 31, 2008.

	 	k.	 	The Borrower has advised the Bank that it is considering a sale/leaseback transaction for
certain software owned by the Borrower, to be sold to HP Financial Services, Inc. and
concurrently leased back to the Borrower. Such software to include (i) Mobile Tech Site
Callmunica or (Call Response & SLA

6

 

	 	 	 	Processor); Service Management Automator (Update/Closing Systems);
Inventory Tracking System; and Electronic Partner Interface. Such
transaction requires the Bank’s consent under the Loan Agreement.
	 
	 	 	 	The Bank will consent to the contemplated sale/leaseback transaction provided
the Borrower meets the following conditions: (i) it delivers to the Bank, prior
to the sale/leaseback transaction, all of documents in any way related to the
transaction and the Bank, in its sole discretion, determines that such
documentation is acceptable; (ii) all net proceeds to the Borrower from the
sale/leaseback transaction are paid directly to the Bank to be applied, provided
the Borrower is not in default, to reduce the principal balance of the Auxiliary
Revolver Facility (if the Borrower is in default, the proceeds shall be applied
as determined by the Bank in its sole and absolute discretion); (iii) monthly
payments due on the lease shall not exceed $23,240; and (iv) upon completion of
the sale/leaseback transaction, all Accounts Receivable due from HP Financial
Services, Inc. will be excluded from Eligible Accounts Receivable.
	 
	 	1.	 	The Borrower hereby authorizes the Bank to file such
financing statements or amended financing statements as it deems necessary to
prefect the security interests granted to the Bank in the Loan Agreement
without further signature of the Borrower.

     7. Representations and Warranties of the Borrower. In consideration of the execution
and delivery of this Amendment by the Bank, the Borrower hereby represents and warrants in favor of
the Bank: (a) each Borrower has the power and authority (i) to enter into this Amendment and (ii)
to do all acts and things as are required or contemplated hereunder to be done, observed and
performed by the Borrower; (b) the Borrower has the power and has taken all necessary action to
authorize it to execute, deliver, and perform this Amendment in accordance with the terms hereof
and to consummate the transactions contemplated hereby; (c) (i) the Borrower has obtained all
necessary governmental, shareholder and third party approvals, (ii) all such necessary
governmental, shareholder and third party approvals are in full force and effect, (iii) none of
such necessary governmental, shareholder and third party approvals is the subject of any pending
or, to the best of the Borrower’s knowledge, threatened attack or revocation, by the grantor of the
governmental, shareholder or third party approval and (iv) the Borrower is not required to obtain
any additional necessary governmental, shareholder or third party approval in connection with the
execution, delivery, and performance of this Amendment, in accordance with its terms, or the
consummation of the transactions contemplated hereby or thereby; (d) the execution, delivery, and
performance of this Amendment in accordance with its terms and the consummation of the transactions
contemplated hereby do not and will not (i) violate any applicable law, (ii) conflict with, result
in a breach of, or constitute a default under the charter, bylaws and other governing documents of
each Borrower or under any indenture, agreement, or other instrument to which the Borrower is a
party or by which the Borrower or any of its

7

 

properties may be bound, or (iii) result in or require the creation or imposition of any lien upon
or with the Borrower except liens permitted by the Loan Agreement; (e) this Amendment has been duly
executed and delivered by each Borrower, and is a legal, valid and binding obligation of each
Borrower, enforceable in accordance with its terms except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditor’s rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity or at law); (f)
after giving effect to this Amendment, no Event of Default exists under the Loan Agreement; (g) as
of the date hereof, all representations and warranties of the Borrower set forth in the Loan
Agreement are true, correct and complete in all material respects; and (h) the Loan Agreement
constitutes the legal, valid and binding obligations of each Borrower, enforceable in accordance
with its terms except to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditor’s
rights generally or by general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).

     8. Amendment Fee. The Borrower agrees to pay the Bank an amendment fee equal to
$34,500 which fee shall be fully earned and non-refundable upon the effectiveness of this
Amendment. Borrower shall pay $17,250 of the fee upon execution of this Agreement and shall pay
the remaining $17,250 on or prior to 5:00 p.m., eastern time, March 31, 2008, provided, however,
that its obligation to make such $17,250 payment shall be discharged if the Borrower fully and
finally repays all sums outstanding under the revolving Line of Credit and the Auxiliary Revolver
Facility prior to 5:00 p.m., eastern time, March 31, 2008.

     9. Counterparts. This Amendment may be executed in multiple counterparts, each of
which shall be deemed to be an original and all of which, taken together, shall constitute one and
the same agreement. In proving this Amendment in any judicial proceedings, it shall not be
necessary to produce or account for more than one such counterpart signed by the party against
whom such enforcement is sought. Any signatures delivered by a party by facsimile transmission or
by e-mail transmission of an adobe file format document (also known as a PDF file) shall be deemed
an original signature hereto.

     10. Reference to and Effect on the Note Documents. Upon the effectiveness of this
Amendment, on and after the date hereof, each reference in the Loan Agreement to “this Agreement”,
“hereunder”, “hereof or words of like import referring to the Loan Agreement, and each reference
in the other related documents to “the Loan Agreement”, “thereunder,” “thereof or words of like
import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as
amended hereby.

     11. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all costs and
expenses in connection with the preparation, execution, and delivery of this Amendment and the
other instruments and documents to be delivered hereunder, including, without limitation, the
amendment fee to be paid pursuant to Sections 5 and 8 of this Amendment, and the fees and
out-of-pocket expenses of counsel for the Bank with respect thereto and with respect to advising
the Bank as to its rights and responsibilities hereunder and thereunder. In addition, the Borrower
agrees to pay any and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Amendment and the other instruments and

8

 

documents to be delivered hereunder, and agrees to save the Bank harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or omission to pay such
taxes.

     12. Release of Claims. This Amendment is intended to be a further accommodation by
Bank to Borrower. In consideration of all such accommodations, and acknowledging that Bank will be
specifically relying on the following provisions as a material inducement in entering into this
Amendment, and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, each Borrower, on behalf of itself and its shareholders and subsidiaries,
hereby releases, remises and forever discharges Bank and its agents, servants, employees,
directors, officers, attorneys, accountants, consultants, affiliates, representatives, receivers,
trustees, subsidiaries, predecessors, successors and assigns (collectively, the “Released
Parties”) from any and all claims, damages, losses, demands, liabilities, obligations, actions
and causes of action whatsoever (whether arising in contract or in tort, and whether at law or in
equity), whether known or unknown, matured or contingent, liquidated or unliquidated, in any way
arising from, in connection with, or in any way concerning or relating to the Loan Agreement, the
other related documents, or any dealings with any of the Released Parties in connection with the
transactions contemplated by such documents or this Amendment prior to the execution of this
Amendment. This release shall be and remain in full force and effect notwithstanding the discovery
by any Borrower after the date hereof (a) of any new or additional claim against any Released
Party, (b) of any new or additional facts in any way relating to the subject matter of this
release, (c) that any fact relied upon by it was incorrect or (d) that any representation made by
any Released Party was untrue or that any Released Party concealed any fact, circumstance or claim
relevant to Borrower’s execution of this release; provided, however, this release
shall not extend to any claims arising after the execution of this Amendment in connection with the
Loan Agreement. Each Borrower acknowledges and agrees that this release is intended to, and does,
fully, finally and forever release all matters described in this Section 12,
notwithstanding the existence or discovery of any such new or additional claims or facts, incorrect
facts, misunderstanding of law, misrepresentation or concealment.

     13. Section Titles. The section titles contained in this Amendment are included for
the sake of convenience only, shall be without substantive meaning or content of any kind
whatsoever, and are not a part of the agreement between the parties.

     14. Entire Agreement. This Amendment and the other related documents constitute the
entire agreement and understanding between the parties hereto with respect to the transactions
contemplated hereby and thereby and supersede all prior negotiations, understandings and
agreements between such parties with respect to such transactions.

     15. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

     16. Time of the Essence. Time is of the essence with respect to all the terms and
conditions of this Agreement.

9

 

     17. Voluntary Agreement and Advice of Counsel. The Borrower acknowledges, affirms and
agrees that they: (a) are entering into this Agreement of their own choice without coercion or
duress of any kind; (b) are not relying upon any representations, whether written or oral, not
contained in this Agreement; (c) have had the opportunity to be represented by counsel of their own
choice; and (d) understand the meaning and effect of all of the terms and provisions of this
Agreement including the releases and waivers contained in Section 12.

[Remainder of page intentionally left blank.]

[Signatures follow]

10

 

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the day and year first written above.

	 	 	 	 	 
	BORROWER:                               	HALIFAX CORPORATION OF VIRGINIA

 	 
	 	By:  	/s/ Joseph Sciacca
 	(SEAL)
	 	 	Name:  	Joseph Sciacca 	 
	 	 	Title: Chief Financial Officer 	 
	 
	 	HALIFAX ENGINEERING, INC. 

 	 
	 	By:  	/s/ Joseph Sciacca
 	(SEAL)
	 	 	Name:  	Joseph Sciacca 	 
	 	 	Title:  	Vice President, Secretary and Treasurer 	 
	 
	 	MICROSERV LLC

 	 
	 	By:  	/s/ Joseph Sciacca
 	(SEAL)
	 	 	Name:  	Joseph Sciacca 	 
	 	 	Title:  	Vice President, Secretary and Treasurer 	 
	 
	 	HALIFAX ALPHANATIONAL ACQUISITION,

INC.

 	 
	 	By:  	/s/ Joseph Sciacca
 	(SEAL)
	 	 	Name:  	Joseph Sciacca 	 
	 	 	Title:  	Vice President, Secretary and Treasurer 	 
	 
	BANK:                                     	PROVIDENT BANK

 	 
	 	By:  	/s/ Michael McShane
 	(SEAL)
	 	 	Name:  	Michael McShane  	 
	 	 	Title:  	Senior Vice President 	 
	 

Second Amendment and Waiver

to Loan Agreement

January, 2008

11

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