Document:

exv10w1

 

Exhibit 10.1

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

     It is hereby agreed as of the 8th day of November, 2004, by and between
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”), of Baltimore, Maryland, and the successor by merger to Southern
Financial Bank that this Amended and Restated Loan and Security Agreement (the
“Agreement”) combines, amends and replaces the Security Agreement dated as of
March 6, 2002, Change in Terms Agreements dated as of March 12, 2002 and April
3, 2003 and ARTS Security and Finance Agreement dated as of September 9, 2003,
each executed by Halifax and Bank, as amended. The terms of the Agreement are
as follows:

I. DEFINITIONS

	A.	 	Specific Definitions. The following terms have the following
definitions (each definition is equally applicable to the singular and
plural forms of the terms used, as the context requires):

	1.	 	“Account Debtor” means any person or entity who is or who may
become obligated to make payments to Borrower, including, but not
limited to, payments owed to Borrower under, with respect to, or on
account of Receivables.
	 
	2.	 	“Assignment of Claims Act” means, collectively, the
Assignment of Claims Act of 1940, as amended, 31 U.S.C. § 3727, 41
U.S.C. § 15, any applicable rules, regulations and interpretations
issued pursuant thereto, and any amendments to any of the foregoing.
	 
	3.	 	“Borrowing Base” has the meaning ascribed to such term in the
Formula Advance Addendum executed the date hereof by and between
Borrower and Bank.
	 
	4.	 	“Collateral” means all of the now owned and hereafter
acquired assets, properties and property rights of Borrower with
respect to which Borrower has at any time granted a security
interest or lien to Bank or has at any time otherwise assigned or
pledged to Bank as security for any of the Obligations.
	 
	5.	 	“Equipment” means all of the now owned and hereafter acquired
machinery, equipment, furniture, fixtures (whether or not attached
to real property), vehicles, supplies and other personal property of
Borrower other than inventory, including any leasehold interests
therein and all substitutions, replacement parts and annexations
thereto, and including all improvements and accessions thereto and
all spare parts, tools, accessories and attachments now owned or
hereafter acquired in connection therewith, and any maintenance
agreements applicable thereto, and all proceeds and products
thereof, including sales proceeds, and all rights thereto.
	 
	6.	 	“G.A.A.P.” means, with respect to any date of determination,
generally accepted accounting principles as used by the Financial
Accounting Standards Board and/or the American Institute of
Certified Public Accountants consistently applied and maintained
throughout the periods indicated.
	 
	7.	 	“Government” means the United States of America or any agency
or instrumentality thereof.
	 
	8.	 	“Government Contract” means any contract with the Government
under which Borrower is the prime contractor.
	 
	9.	 	“Inventory” means all of Borrower’s now owned and hereafter
acquired inventory, wherever located, including, but not limited to,
goods, wares, merchandise, materials, raw materials, parts,
containers, goods in process, finished goods, work in progress,
bindings or component materials, packaging and shipping materials
and other tangible or intangible personal property held for sale or
lease or furnished or to be furnished under contracts of service or
which contribute to the finished products or the sale, promotion,
storage and shipment thereof, all goods returned for credit,
repossessed, reclaimed or otherwise reacquired by Borrower, whether
located at facilities owned or leased by Borrower, in the course of
transport to or from Account Debtors, placed on consignment, or held
at storage locations, and all proceeds and products thereof and all
rights thereto, including, but not limited to all sales proceeds,
all chattel paper related to any of the foregoing and all documents,
including, but not limited to, documents of title, bills of lading
and warehouse receipts related to any of the foregoing.
	 
	10.	 	“Line of Credit” means any line of credit facility extended
by Bank to Borrower pursuant to Paragraph II.A of this Agreement and
otherwise in accordance with the terms of this Agreement.
	 
	11.	 	“Loan” means one or more credit facilities, including any
Line of Credit, provided by Bank to Borrower pursuant to the terms
of this Agreement and all accompanying Loan documents, including,
but not limited to, one or more promissory notes of Borrower payable
to the order of Bank, as the same may be amended, modified,
extended, renewed, supplemented, restated or replaced from time to
time.
	 
	12.	 	“Maximum Line of Credit Amount” means Twelve Million Dollars
($12,000,000).

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	13.	 	“Obligations” means collectively the obligations of Borrower
to pay to Bank: (i) any and all sums due to Bank under or pursuant
to the Loan or otherwise under the terms of this Agreement or any
accompanying Loan documents; (ii) any and all sums advanced by Bank
to preserve or protect the Collateral or to preserve, protect, or
perfect Bank’s security interests and liens in the Collateral; (iii)
the expenses of retaking, holding, preparing for sale, selling or
otherwise disposing of or realizing on the Collateral, or of any
exercise by Bank of Bank’s rights in the event of a default by
Borrower, together with Bank’s attorneys’ fees, expenses of
collection, and court costs; and (iv) any other indebtedness or
liability of Borrower to Bank, whether direct or indirect (by way of
endorsement, guaranty, pledge or otherwise), liquidated or
unliquidated, joint or several, absolute or contingent, contemplated
or uncontemplated, or otherwise arising from any loan, note, letter
of credit, guaranty, overdraft, or any other duty owed by Borrower
to Bank, now existing or hereafter arising.
	 
	14.	 	“Other Obligor” means any person or entity that is now or
hereafter liable, directly, contingently or otherwise, upon or in
connection with any of the Obligations or that has granted any lien
or security interest to or for the benefit of Bank to secure any of
the Obligations, including, but not limited to, any guarantor,
surety, endorser, or co-maker of any of the Obligations.
	 
	15.	 	“Receivables” means all of Borrower’s now owned and hereafter
acquired and/or created Accounts, accounts receivable, contracts,
contract rights, Instruments, Documents, Chattel Paper, Deposit
Accounts, notes, notes receivable, drafts, acceptances, General
Intangibles (including, but not limited to, trademarks, tradenames,
licenses, copyrights and patents), and other choses in action (not
including salary or wages), and all proceeds and products thereof,
and all rights thereto, including, but not limited to, proceeds of
Inventory and returned goods and proceeds arising from the sale or
lease of or the providing of Inventory, goods, or services by
Borrower, as well as all other rights of any kind, contingent or
non-contingent, of Borrower to receive payment, benefit, or credit
from any person or entity, including, but not limited to, the right
to receive tax refunds or tax rebates.
	 
	16.	 	“VDOT Contract” means Contract #844 between Halifax
Technology Services Company (predecessor by merger to Halifax) and
Virginia Department of Transportation and Virginia Retirement
Systems for Provision of Services for Information
Technology/Enterprise Architecture, dated November 1, 1998, as
amended.
	 
	17.	 	“VDOT Vendor Liens/Assignments” means liens on or assignments
of receivables from the VDOT Contract given to vendors supplying
equipment and software provided by Borrower to the customer pursuant
to the VDOT Contract, but only to the extent they relate to the
acquisition of such equipment and software.

	B.	 	UCC Definitions. The terms “Accounts,” “As-Extracted
Collateral,” “Chattel Paper,” “Deposit Accounts,” “Documents,”
“Electronic Chattel Paper,” “Fixtures,” “General Intangibles,” “Goods,”
“Investment Property,” Instruments, “ “Letter-of-Credit Rights,”
“Payment Intangibles,” “Software” and “Tangible Chattel Paper” have the
respective meanings given to those terms in Maryland Uniform
Commercial Code — Secured Transactions, Title 9, Commercial Law
Article, Annotated Code of Maryland, as amended (“Article
9”).
	 
	C.	 	Accounting Terms. The accounting terms used in this Agreement
have the meanings customarily given them in accordance with G.A.A.P.,
unless this Agreement expressly provides a different meaning.

II. BASIC TERMS OF LOAN

	A.	 	Line of Credit. Subject to the continued
compliance of Borrower with the terms of this
Agreement and all other accompanying Loan documents
and the continued absence of any default by Borrower
or any Other Obligor hereunder and thereunder, Bank
may advance to Borrower, for use by Borrower as
hereafter provided, such sums as Borrower may request,
but which shall not exceed in the aggregate at any one
time outstanding the lesser of the Borrowing Base or
the Maximum Line of Credit Amount. Borrower shall not
request any advance of proceeds of the Line of Credit
which exceeds the Maximum Line of Credit Amount or the
Borrowing Base or which would cause the aggregate
amount of advances made and outstanding under the Line
of Credit to exceed the Maximum Line of Credit Amount
or the Borrowing Base. If the aggregate amount of
advances made and outstanding under the Line of Credit
shall at any time and for any reason exceed the
Maximum Line of Credit Amount or the Borrowing Base,
Borrower shall immediately pay Bank the excess. Each
advance shall be by automatic credit. Bank shall make
all advances by depositing funds in Borrower’s
commercial account number 20-65310679 or such Bank
account as may be agreed upon by Borrower and Bank.
Borrower shall use the proceeds of the Line of Credit
for short term working capital purposes including the
financing of Borrower’s contracts and accounts
receivable. Within such limitations and subject to
all of the terms and conditions set forth herein and
in the other accompanying Loan documents, Borrower may
borrow, repay, and reborrow funds under the Line of
Credit in accordance with the terms and conditions of
this Agreement.
	 
	B.	 	Advance Procedure. With respect to each advance and all
matters and transactions in connection therewith, Borrower hereby
irrevocably authorizes Bank to accept, rely upon, act upon and comply
with any oral or written instructions, requests, confirmations and
orders of any employee or representative of Borrower who is so
authorized or designated as a signer of Loan documents under the
provisions of Borrower’s most recent Banking and Borrowing Resolutions
or similar document on file with Bank. Borrower acknowledges that the
transmission between Borrower and Bank of any such instructions,
requests, confirmations and orders involves the possibility of errors,
omissions, mistakes and discrepancies and agrees to adopt such internal
measures and operational procedures as may be necessary to protect its
interest. By reason thereof, Borrower hereby assumes all risk of loss
and responsibility for, releases and discharges Bank from any and all
responsibility or liability for, and agrees to indemnify, reimburse on
demand and hold Bank harmless from, any and all claims, actions,
damages, losses, liability and expenses by reason of, arising out of, or
in any way connected with or related to: (i) Bank’s accepting, relying
and acting upon, complying with or observing any such instruction,
request, confirmation or order; and (ii) any such error, omission,
mistake, or discrepancy, provided such error, omission, mistake or
discrepancy is not the result of negligence on the part of Bank.
	 
	C.	 	Evidence of Loan; Terms of Repayment. 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

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	 	 	of Bank be evidenced by Bank’s form of promissory note or as otherwise set forth in
appropriate writings between the parties as determined by Bank. The
Loans shall be subject to annual internal reviews of the Bank concurrent
with the delivery of the Borrowers’ annual modified financial
statements, with the next review expected to be completed by August 31,
2005. In the absence of a promissory note or other applicable writing,
the Loan shall be deemed to be otherwise conclusively evidenced by
Bank’s record of advances of proceeds of the Loan and Bank’s record of
receipt of repayments and other bookkeeping entries reflecting the
payment of principal and interest, and interest shall be deemed to
accrue at the interest rate reflected on Bank’s records.
	 
	D.	 	Statement of Account. Bank may at any time or from time to
time render a statement or statements of account to Borrower for the
Obligations or any portion thereof. Each such statement shall be deemed
to be correct and conclusively binding on Borrower unless Borrower
notifies Bank to the contrary in writing within thirty (30) days from
the date of any such statement which Borrower deems to be incorrect.
	 
	E.	 	ARTS Fee. Borrower shall pay Bank a monthly ARTS fee of
$1,000 per month. Bank may debit Borrower’s operating account to
effectuate such payment, payable in arrears.
	 
	F.	 	Unused Commitment Fee. Borrower agrees to pay an unused
commitment fee on any difference between the Maximum Line of Credit
Amount and the amount of advances under the Line of Credit, determined
by the average of the daily amount of credit outstanding during the
specified period. The fee will be calculated by multiplying such
difference by one-quarter percent (0.25%). This fee is due on December
31, 2004, and on the last day of each following quarter until the Line
of Credit has been terminated, payable in arrears. Bank may debit
Borrower’s operating account to effectuate such payment.
	 
	G.	 	Commitment Fee. Prior to the execution of this Agreement,
Borrower has paid Bank a non-refundable commitment fee of Thirty
Thousand Dollars ($30,000).

III. GRANT OF SECURITY INTEREST

	A.	 	Collateral. As collateral security for all Obligations of
Borrower to Bank, and in consideration of advances from Bank to
Borrower, Borrower (other than Halifax) hereby grants and pledges to
Bank, and Halifax hereby confirms and restates its prior grant and
pledge to Bank of, a continuing security interest in all of the
following property:

	1.	 	All of Borrower’s Equipment;
	 
	2.	 	All of Borrower’s Receivables;
	 
	3.	 	All of Borrower’s Inventory;
	 
	4.	 	All of Borrower’s now owned or hereafter acquired Goods,
Chattel Paper (including without limitation all Electronic Chattel
Paper and Tangible Chattel Paper), Instruments, Documents,
Investment Property, General Intangibles (including without
limitation all Payment Intangibles and Software), Deposit Accounts,
Letter-of-Credit Rights, As-Extracted Collateral and Fixtures.

Borrower also hereby grants and pledges (or with respect to Halifax,
confirms and restates its prior grant and pledge) to Bank of a continuing
security interest in: (i) all proceeds (including insurance proceeds) and
products of the above-described Collateral; (ii) any of Borrower’s assets
in which Bank has been or is hereafter granted a security interest under
any other security agreements, notes or other obligations or liabilities
between Borrower and Bank; (iii) any accounts, property, securities,
Investment Property or monies of Borrower which may at any time be
maintained at, assigned to, delivered to, or come into possession of,
Bank, as well as all proceeds and products thereof; and (iv) all of the
books and records pertaining to any of the above-described items of
Collateral.

	B.	 	Borrower’s Obligations. Borrower’s Obligations under this
Agreement are irrevocable, absolute and unconditional, and direct,
immediate and primary.

IV. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants that:

	A.	 	Accuracy. All information, financial statements and data
submitted to Bank by Borrower or any Other Obligor are true, accurate
and complete in all material respects.
	 
	B.	 	Authority. Halifax is duly organized and existing in good
standing under the laws of the Commonwealth of Virginia. Engineering,
Microserv and AlphaNational are each duly organized and existing in good
standing under the laws of the State of Delaware. Borrower is qualified
to do business and in good standing in all jurisdictions where it
conducts its business or its Receivables are located, and has all
requisite power, authority, licenses and permits to own its property and
carry on its business, and Borrower shall deliver to Bank a written
opinion of counsel to such effect if requested by Bank. None of the
terms and conditions herein, or of any other agreement executed by
Borrower, are in violation of the charter or by-laws, or other
organizational documents of Borrower, any contractual obligation
Borrower may have with any third party, or any order or decree by which
Borrower is bound, and the execution and delivery of this Agreement have
been duly authorized by appropriate corporate, limited liability company
or partnership action, and Borrower shall deliver to Bank a written
opinion of counsel to such effect if requested by Bank.

	 
	C.	 	Litigation. No litigation or other proceeding before any
court or administrative agency is pending, or to the knowledge of
Borrower, is threatened against Borrower, the outcome of which could
materially impair Borrower’s financial condition or its ability to carry
on its

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	 	 	business. Borrower is not the subject of any pending bankruptcy
proceeding nor subject to the continuing jurisdiction of a bankruptcy
court as the result of an approved plan of reorganization.
	 
	D.	 	Financing Statements. No financing statement relating to any
of the Collateral is on file in any place, except for any financing
statement (i) naming Bank of America or The Savings Bank of Manchester
as secured party (each of which shall be terminated within sixty (60)
days of the date of this Agreement), (ii) naming Bank as secured party
or (iii) which solely identifies VDOT Vendor Liens/Assignments.
	 
	E.	 	Assurance of Title. Borrower is the owner of all of the
Collateral, or, if proceeds of any note or notes secured hereby are
being used to purchase the Collateral, Borrower shall be the owner
thereof, free and clear of all claims, encumbrances, charges and liens,
except for VDOT Vendor Liens/Assignments, purchase money security
interests or as herein provided.
	 
	F.	 	Addresses. The principal place of business of Borrower, the
books and records relating to Borrower’s business and the Collateral,
and the Collateral (other than trunk stock) are located at the
address(es) set forth on Exhibit A to this Agreement.
	 
	G.	 	Hazardous Substances. Borrower has never received any
notification, citation, complaint or notice of investigation relating to
the making, storing, handling, generating or transporting of any
materials or substances which under applicable laws require special
handling in collection, storage, treatment or disposal (“Hazardous
Substances”), and Borrower does not own, make, store, handle, dispose of
or transport any Hazardous Substances in violation of any applicable
laws.
	 
	H.	 	ERISA. Borrower and each of its affiliates and subsidiaries
(“ERISA Affiliates”) which are under common control, or are part of a
controlled group, within the meaning of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), are in compliance with all
applicable provisions of ERISA with regard to each of its employee
benefit plans (as defined in ERISA) (“Employee Benefit Plans”). Neither
a reportable event (as defined in ERISA) nor a prohibited transaction
(as defined in ERISA) has occurred with respect to any Employee Benefit
Plan of Borrower or any ERISA Affiliate. Immediately upon the
occurrence of any such reportable event, Borrower shall promptly furnish
to Bank notice thereof, as filed with Pension Benefit Guaranty
Corporation (“PBGC”). Neither Borrower nor any ERISA Affiliate has
completely or partially withdrawn from any multiemployer plan and no
such multiemployer plan is in reorganization, all as provided by ERISA.
Borrower and each ERISA Affiliate has met its minimum funding
requirements and has no unfulfilled obligations under ERISA to
contribute to any Employee Benefit Plan. Borrower shall promptly notify
Bank of any assertion by PBGC of liability of Borrower or any ERISA
Affiliate under Title IV of ERISA. The failure of Borrower to pay
within 30 days the amount of any liability under Title IV of ERISA
demanded by PBGC shall constitute a default hereunder.
	 
	I.	 	Taxes. There are no unpaid Federal, State, city, county, or
other taxes owed by Borrower, there are no Federal, State, city, county
or other tax liens presently filed against Borrower, and there are no
outstanding personal property taxes of any kind.
	 
	J.	 	Debarment and Suspension. No event has occurred and, to the
knowledge of Borrower, no condition exists that may result in the
debarment or suspension of Borrower from any contracting with the
Government, and neither Borrower nor any affiliate of Borrower has been
subject to any such debarment or suspension prior to the date of this
Agreement.
	 
	K.	 	Subsidiaries. Except for Engineering, AlphaNational and
Microserv, Halifax does not have any subsidiaries with assets having a
value in excess of $100. None of Engineering, AlphaNational and
Microserv has any subsidiaries with assets having a value in excess of
$100.
	 
	L.	 	VDOT Contract. Borrower has provided Bank a true and complete
copy of the VDOT Contract (including any amendments to the original
contract).

V. COVENANTS

   
Borrower covenants that:

	A.	 	Costs. Borrower shall pay all costs and expenses incident to
the making of the Loan and perfection of Bank’s security interests
hereunder, including, but not limited to, all attorneys’ fees (to the
extent not prohibited by law) and all recordation costs and taxes
incident to filing of financing statements and continuation statements
in respect thereof.
	 
	B.	 	Further Documents. Borrower shall execute and deliver to Bank
from time to time any instruments or documents, including, but not
limited to, financing statements, amendments, continuation statements,
mortgages, loss payable endorsements for insurance policies, and
assignments of insurance policies and proceeds, and shall do all things
necessary or convenient to carry into effect the provisions of this
Agreement. Borrower designates Bank or any of its officers as
attorney-in-fact to sign Borrower’s name on any such instruments or
documents, to file the same as may be appropriate, and to request and
endorse Borrower’s name to any and all requests described in Section
9-210 of Article 9. Borrower agrees that filed photocopies of financing
statements and continuation statements shall be sufficient to perfect
Bank’s security interest hereunder.
	 
	C.	 	Taxes. Borrower shall pay and discharge, when due, all taxes,
levies, liens, and other charges on any of its assets and shall pay
promptly, when due, all other taxes, including withholding taxes.
	 
	D.	 	Laws. Borrower shall comply at all times with all laws,
ordinances, rules and regulations of any Federal, State, municipal or
other public authorities having jurisdiction over Borrower, the
Collateral or any of Borrower’s other assets, including, but not limited
to, ERISA and all laws relating to Hazardous Substances.

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	E.	 	Name and Location. Borrower shall immediately advise Bank in
writing of the opening of any new place of business or the closing of
any of its existing places of business, and of any change in Borrower’s
name or the location of the places where the Collateral, or books and
records pertaining to the Collateral, are kept.
	 
	F.	 	Books and Records. Borrower shall maintain such records with
respect to the Collateral and the condition (financial and otherwise)
and operation of Borrower’s business as Bank may request from time to
time, and shall furnish Bank such information with respect to the
Collateral, Account Debtors, and the condition (financial and otherwise)
and operation of Borrower’s business, including, but not limited to,
balance sheets, operating statements, and other financial information,
as Bank may request from time to time. Bank may at any time and without
prior notice to Borrower and without the consent of Borrower directly
contact Account Debtors and verify or confirm the status of the
Receivables. Borrower shall furnish Bank or cause to be furnished to
Bank such financial information with respect to any Other Obligor,
including, but not limited to, balance sheets, operating statements,
personal financial statements and other financial information, as Bank
may request from time to time. Bank may discuss the affairs, finances
and accounts of Borrower with any of Borrower’s officers and directors
and its independent accountants.
	 
	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 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,
such examinations will not be conducted more frequently than
semi-annually. Until the first full-scope field examination has been
completed and its results communicated to the Bank, Borrower’s advances
under the Line of Credit shall not exceed Ten Million Five Hundred
Thousand Dollars ($10,500,000).
	 
	H.	 	Reporting Requirements. In addition to such other information
(financial and otherwise) as Bank may require from time to time,
Borrower shall submit to Bank all information to be submitted pursuant
to the Reporting Requirements Addendum attached hereto, as amended from
time to time.
	 
	I.	 	Misrepresentation. Borrower shall not make or furnish Bank
any representation, warranty, or certificate in connection with or
pursuant to this Agreement which is materially false.
	 
	J.	 	Insurance. Borrower has and shall maintain insurance on all
of its assets and properties, including, but not limited to, the
Collateral, at all times and against hazards, with companies, in amounts
and in form acceptable to Bank. Borrower shall annually submit to Bank
original insurance certificates providing that such insurance policies
have a Lenders Loss Payable Clause and Additional Insured, and shall be
noncancellable unless thirty (30) days prior notice of cancellation is
provided to Bank. In event of any loss thereunder, the carriers named
therein are hereby directed to make such payment for loss solely to
Bank, and not to Borrower and Bank jointly or to any other person. If
any insurance losses are paid by check, draft or other instruments
payable to Borrower or to Borrower and Bank jointly, Bank may endorse
the name of Borrower thereon and do such other things as Bank may deem
advisable in order to reduce the same to cash. In addition, Borrower
shall maintain at all times, public liability insurance and all other
coverages required by Bank, naming Bank as additional insured, with
companies, in amounts and in form acceptable to Bank. All loss
recoveries received by Bank upon any insurance may be applied and
credited by Bank at its discretion to the Obligations.
	 
	K.	 	Bank’s Duty of Care. Except as provided in this Paragraph
V.K., Bank’s sole duty with respect to the Collateral shall be to use
reasonable care in the custody, use, operation and preservation of the
Collateral in its possession, and Borrower shall reimburse Bank for all
costs and expenses, including insurance costs, taxes and other charges,
incurred in connection with the custody, use, operation, care or
preservation of the Collateral, such reimbursement to be secured as
provided above in Paragraph III. In the event that Bank takes
possession of the Collateral by foreclosure as provided in Paragraph
VII.C. herein or otherwise, Bank may, but shall be under no obligation
to, take such actions as it may deem appropriate to protect the
Collateral by insurance or otherwise, and any expense so incurred shall
likewise be reimbursed and secured as provided above in Paragraph III.
Bank shall incur no liability to Borrower for any failure to provide
adequate protection or insurance for the Collateral acquired by Bank.
Bank shall not be obligated to take any steps necessary to preserve any
rights in any of the Collateral against prior parties, and Borrower
hereby agrees to take such steps. Borrower hereby waives the defense of
unjustifiable impairment of collateral with respect to the Collateral
and any other collateral for any of the Obligations.
	 
	L.	 	Equipment. If the Collateral includes Equipment, then the covenants in this Paragraph V.L. apply:

	1.	 	Repair. Borrower shall keep and maintain the Equipment in good order and repair and in working condition.
	 
	2.	 	Personalty. The Equipment shall be and shall remain
personal property and nothing shall affect the character of the same
or cause the same to become realty without the written consent of
Bank, or prevent Bank in its option from removing same from premises
on which they may become attached, in event of default hereunder.
	 
	3.	 	No Sale of Equipment. Without the prior written
consent of Bank, Borrower shall not sell or otherwise dispose of any
of the Equipment, except that items of Equipment may be sold or
exchanged if such Equipment either (a) is replaced in the ordinary
course of Borrower’s business to the satisfaction of Bank by
Equipment of a similar value and which is subject to a security
interest of Bank that is prior to all liens other than purchase
money security interests or (b) has a fair market value (in the
aggregate) of less than Ten Thousand Dollars ($10,000).
	 
	4.	 	Vehicles. If the Collateral includes a motor vehicle
for which a certificate of title is issuable, Borrower shall deliver
to Bank the certificate of title issued with respect to such vehicle
and shall cause a statement of Bank’s security interest to be noted
as a lien on such certificate of title.

	M.	 	Receivables. If the Collateral includes Receivables, then the
covenants in this Paragraph V.M. apply:

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	1.	 	Bona Fide. Each and every Receivable shall (i) be
bona fide, be for a certain undisputed claim or demand for the
amount Borrower represented to be owing thereon, (ii) represent a
sale and delivery of personal property sold or work and labor done,
(iii) not be subject to any set-off, counterclaim, or contingent
liability upon the fulfillment of any contract or condition
whatsoever, and (iv) shall not be subject to any prohibition or
limitation upon assignment except as required by the Assignment of
Claims Act.
	 
	2.	 	Books. If requested by Bank, Borrower shall make all
necessary entries in its books to disclose the grant of a security
interest in Receivables to Bank, and permit Bank to verify
Receivables.
	 
	3.	 	Mail. Upon demand, Borrower shall open all mail only
in the presence of a representative of Bank, who may take therefrom
any remittance on Receivables securing the Obligations. Bank is
also granted the power of attorney to have mail delivered to Bank,
and not to Borrower, and to open all mail and take therefrom any
remittance on any Receivables.
	 
	4.	 	Signatures. Bank or its representative may endorse or
sign the name of Borrower on remittances in respect of Receivables,
invoices, assignments, financing statements, notices to Account
Debtors, bills of lading, storage receipts, or other instruments or
documents in respect of Receivables or the property covered thereby.
	 
	5.	 	Collections. Borrower shall notify all Account
Debtors to make payment of their Receivables to Bank for the deposit
to the Cash Collateral Account as herein provided. Each Account
Debtor shall be instructed to pay its Receivables (i) if by paper
check, by mailing such check to the following address: Halifax
Corporation, P.O. Box 9002, Warrenton, VA 20188, and (ii) if by
electronic funds transfer, by wiring funds to Halifax Corporation,
a/c # 76-65310763, Provident Bank ABA # 2520 7301 8. If Borrower
receives any payment of a Receivable, it shall receive such payments
on accounts as agent of and for Bank and shall transmit to Bank, on
the day thereof, or at other mutually agreed upon intervals, all
original checks, drafts, acceptances, notes and other evidences of
payment received in payment of or on account of Receivables,
including all cash monies similarly received by Borrower. For such
purpose, Borrower does hereby grant to Bank access to any post
office boxes in which mail is received. Until delivery of all such
remittances to Bank, Borrower shall keep the same separate and apart
from Borrower’s own funds, capable of identification as the property
of Bank, and shall hold the same in trust for Bank. Further,
Borrower agrees that Bank may pay, for the account of Borrower, any
taxes, levies, or other charges affecting Borrower’s assets,
including, but not limited to, Inventory or Equipment which Borrower
fails to pay, including all other taxes and levies, and any such
payment shall constitute a liability of Borrower. Bank shall have
the right to receive, indorse, assign and deliver in Bank’s name or
Borrower’s name any and all checks, drafts and other instruments for
the payment of money relating to the Receivables, and Borrower
hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Borrower constitutes Bank or Bank’s
designee as Borrower’s attorney-in-fact with power with respect to
the Receivables: (i) to endorse Borrower’s name upon any notes,
acceptances, checks, drafts, money orders or other evidences of
payment of Collateral that may come into Bank’s possession; (ii) to
sign Borrower’s name on any invoices relating to any of the
Receivables, drafts against Account Debtors, assignments and
verifications of Receivables and notices to Account Debtors; (iii)
to notify the post office authorities to change the address for
delivery of mail addressed to Borrower to such address as Bank may
designate; (iv) to receive, open, and dispose of mail addressed to
Borrower; (v) to do all other acts and things necessary, proper, or
convenient to carry out the terms and conditions and purposes and
intent of this Agreement. The power of attorney hereby granted,
being coupled with an interest, is irrevocable while any of the
Obligations remain unpaid or unperformed. Bank may, without notice
to or consent from Borrower and without affecting Borrower’s
obligations hereunder, sue upon or otherwise collect, extend the
time of payment of or compromise or settle for cash, credit or
otherwise upon any terms, any of the Receivables or any securities,
guaranties, instruments or insurances applicable thereto or release
the obligor thereon. Bank is authorized and empowered to accept the
return of any Collateral represented by any of the Receivables
without notice to or consent by Borrower, all without discharging or
in any way affecting Borrower’s liability to Bank. Bank does not,
by anything herein or in any assignment or otherwise, assume any of
Borrower’s obligations under any contract or agreement assigned to
Bank, and Bank shall not be responsible in any way for the
performance by Borrower of any of the terms and conditions thereof.
	 
	6.	 	Cash Collateral Account. All remittances in payment
of the Receivables securing the Obligations shall be deposited with
Bank (or any other bank designated by Bank) in an account designated
as “Provident Bank (name of Borrower), Cash Collateral Account”, if
the Bank should desire. Such deliveries and deposits shall be made
daily and each deposit shall be accompanied by a report in such form
as Bank shall require. All funds held in the Cash Collateral
Account may be applied against the Obligations at the discretion of
Borrower. In the event any checks or drafts deposited in the Cash
Collateral Account are dishonored, Bank is hereby irrevocably
authorized to debit any other account of Borrower at Bank in an
amount equal to the amount of the checks or drafts dishonored and
deposit such sums in the Cash Collateral Account. If thereafter the
dishonored check or draft is honored and Bank receives immediately
available funds therefore, Bank shall deposit such funds into the
account of Borrower which was previously debited. If any checks or
drafts deposited in the Cash Collateral Account are drawn on a
financial institution located outside of the United States of
America, Bank is hereby irrevocably authorized to debit any other
account of Borrower at Bank in an amount equal to the United States
dollar equivalent of the amount of such checks or drafts and deposit
such sums in the Cash Collateral Account. Upon receipt of
immediately available funds for any such checks or drafts Bank shall
deposit the collected funds into Borrower’s account at Bank which
was previously debited.
	 
	7.	 	Cancellation of Contracts. Borrower shall notify Bank
in writing of any cancellation of a contract having annual revenues
in excess of $250,000.
	 
	8.	 	Government Contracts. In the event any Receivables
arise out of contracts with the Government, Borrower shall assign to
Bank all Government Contracts with amounts payable of $100,000 or
greater and in duration of six (6) months or longer, and execute all other agreements, instruments and documents
and shall perform all further acts that Bank may require to ensure
compliance with the Assignment of Claims Act with respect to such
Government Contracts.

Page 6 of 21

 

	9.	 	VDOT Contract Amendments. Borrower shall promptly
provide Bank with copies of all amendments to the VDOT Contract.
	 
	10.	 	VDOT Vendor Liens/Assignments. Upon request, Borrower
shall promptly provide Bank with copies of all documents
effectuating or related to any VDOT Vendor Liens/Assignments.

	N.	 	Inventory. If the Collateral includes Inventory, then the
covenants in this Paragraph V.N. apply:

	1.	 	Signatures. Bank or its representative may endorse or
sign the name of Borrower on remittances in respect to Inventory,
assignments, invoices, financing statements, notices to debtors,
bills of lading, notices to suppliers, storage or other instruments
or documents in respect to Inventory or the property covered
thereby.
	 
	2.	 	Audit. Bank or its representative may from time to
time verify Inventory, through actual count or otherwise, and
Borrower shall make same available at any time for such purpose.
	 
	3.	 	Sales. So long as neither Borrower nor any Other
Obligor is in default of any of the Obligations, Inventory subject
to Bank’s continuing security interests may be sold by Borrower in
the ordinary course of business, but shall not otherwise be taken or
removed from Borrower’s premises.

	O.	 	Investment Property. If the Collateral includes stocks, bonds
or other Investment Property of Borrower, then the covenants in this
Paragraph V.O. apply:

	1.	 	Transfers. All certificates or instruments
representing or evidencing such investment property shall be in
suitable form for transfer by delivery, shall be in form and
substance satisfactory to Bank and shall be delivered to and held by
or on behalf of Bank; Bank is hereby authorized, at its option and
without any obligation to do so, to transfer to or to register in
the name of its nominee(s) all of any part of such Investment
Property, and to do so before or after default or the maturity of
the Obligations secured hereby, with or without notice to Borrower;
Bank shall have the right at any time to exchange certificates or
instruments representing or evidencing such Investment Property for
certificates or instruments of smaller or larger denominations; Bank
shall have control over any securities accounts or security
entitlements which constitute Collateral, pursuant to terms
acceptable to Bank.
	 
	2.	 	Dividends. In the event that a stock dividend is
declared, or any stock split-up made, with respect to any security
pledged hereunder, or cash or other property is distributed in
connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in
surplus, or property other than cash is distributed as a dividend,
all the certificates for the shares representing such stock dividend
or stock split-up, and all of such cash and other property, shall be
delivered, duly endorsed, to Bank as additional security hereunder.
	 
	3.	 	Attorney-in-Fact. Borrower hereby appoints Bank
Borrower’s attorney-in-fact with full authority in the place and
stead of Borrower and in the name of Borrower or otherwise, from
time to time in Bank’s discretion to take any action and to execute
any instrument which Bank may deem necessary or advisable to
accomplish the purposes of this Agreement, including, but not
limited to, receiving, endorsing and collecting all checks and other
Instruments made payable to Borrower representing any dividend,
interest payment, or other distribution in respect of the pledged
Investment Property or any part thereof and giving full discharge
for the same.

	P.	 	Government Contract Audits. Promptly after Borrower’s receipt
thereof, Borrower shall furnish Bank with notice of any final decision
of a contracting officer disallowing costs aggregating more than
$100,000 which disallowed costs arise out of any audit of Government
Contracts of Borrower.
	 
	Q.	 	Subsidiaries. If any Borrower creates or acquires a
subsidiary containing assets having a value in excess of $100, Borrower
shall cause such subsidiary to become a Borrower or Other Obligor
hereunder (in a form acceptable to Bank).
	 
	R.	 	Change in Control or Sale. Without the prior written consent
of Bank, Borrower shall not permit a change in ownership of more than
25% of the stock or other equity interests of Halifax, Engineering,
AlphaNational, Microserv or any other entity constituting a Borrower, or
permit any such entity to enter into any merger or consolidation, or
sell or lease substantially all of its assets.
	 
	S.	 	Sale or Assignment of Contract or Subsidiary. Without the
prior written consent of Bank, Borrower shall not sell or assign any or
all interest in any (i) contract or (ii) any subsidiary of Halifax,
Engineering, AlphaNational, Microserv or any other entity constituting a
Borrower.
	 
	T.	 	Dividends. Without the prior written consent of Bank,
Borrower shall not make any distributions on behalf of equity or pay any
dividends.
	 
	U.	 	Payments of Debt. Without the prior written consent of Bank,
Borrower shall not make any payments of debt to any person or entity, or
make any distributions (including loans or withdrawals) of any kind to
any officers, employees or members, other than (i) purchase money
financings permitted hereunder, (ii) payments to employees (including
loans and travel advances) made in the ordinary course of business,
(iii) payments to the former shareholders of the predecessor by merger
to Microserv pursuant to certain notes dated August 29, 2003 in the
original principal amount of $494,000 and maturing on February 1, 2005,
and (iv) payments to the Bank.

	 
	V.	 	Further Covenants. Without the prior written consent of Bank,
Borrower shall not: (i) other than purchase money security interests or
VDOT Vendor Liens/Assignments, pledge or grant any security interest in
any Collateral to anyone except Bank, nor permit any financing statement
(except Bank’s financing statement) to be on file in any public office
with respect thereto; (ii) other than purchase

Page 7 of 21

 

	 	 	money security interests or VDOT Vendor Liens/Assignments, permit or suffer any lien, levy or
other encumbrance to attach to any of the Collateral or to any other
assets of Borrower, except for liens and encumbrances in favor of Bank;
(iii) permit a material change in any Receivable, or a material change
in the terms of any contract giving rise to a Receivable; (iv) make any
agreement, compromise, settlement, bulk sale, lease or transfer of
assets other than in the normal course of business; (v) create, incur or
assume any liability for borrowed money, except borrowings from Bank,
trade debt, and purchase money financings not to exceed $250,000 in any
one year; (vi) assume, guarantee, endorse or otherwise become liable in
connection with the obligations of any person, firm or corporation,
except by endorsement of instruments for deposit or collection or
similar transactions in the ordinary course of business; or (vii)
purchase or acquire substantially all of the assets or the obligations
or stock of any person, firm or corporation or other enterprises
whatsoever, other than the direct obligations of the United States or
Bank.

	VI.	 	EVENTS OF DEFAULT. The following shall constitute a default hereunder if
existing fifteen (15) days after written notice thereof has been given to
the Borrower; provided, however, that the occurrence of an event under
Paragraphs VI.D, VI.F, VI.H or VI.I or a failure by Borrower to make any
payment hereunder when due shall automatically be a default hereunder:

	A.	 	Nonperformance. Default by Borrower under, or breach of any
provision or warranty of, this Agreement, any other instrument,
agreement or document in connection with any of the Obligations, or any
other instrument, agreement or document of Borrower with Bank, whether
such instrument, agreement or document presently exists or is hereafter
executed; or default by any Other Obligor under, or breach of any
provision or warranty of, this Agreement, any other instrument,
agreement or document in connection with any of the Obligations, or any
other instrument, agreement or document of any Other Obligor with Bank,
whether such instrument, agreement or document presently exists or is
hereafter executed;
	 
	B.	 	Representations and Warranties. Any warranty, representation,
or statement made to Bank by or on behalf of Borrower or any Other
Obligor proving to have been incorrect in any material respect when made
or furnished;
	 
	C.	 	Financial Condition. A determination by Bank in good faith,
but in its sole discretion, that the financial condition of Borrower or
any Other Obligor is unsatisfactory; insolvency of Borrower or any Other
Obligor; suspension of business, or commission of an act amounting to
business failure by Borrower or any Other Obligor;
	 
	D.	 	Assignments. Any assignment made by Borrower or any Other
Obligor for the benefit of creditors;
	 
	E.	 	Judgments. The entry of any final judgment against Borrower
or any Other Obligor for the payment of money in excess of $100,000.00;
	 
	F.	 	Bankruptcy. Institution of bankruptcy, insolvency,
reorganization or receivership proceedings by or against Borrower or any
Other Obligor in any State or Federal court or the appointment of a
receiver, assignee, custodian, trustee or similar official under any
Federal or State insolvency or creditors’ rights law for any property of
Borrower or any Other Obligor; provided that Borrower shall have sixty
(60) days to dismiss any involuntary bankruptcy proceeding to which it
does not consent;
	 
	G.	 	Extraordinary Acts. A dissolution, liquidation or
reorganization of Borrower or any Other Obligor which is a corporation,
partnership, limited liability company or other legal entity;
	 
	H.	 	Attachments. The levy upon or attachment of any property of
Borrower or any Other Obligor, or the recordation of any Federal, State
or local tax lien against Borrower or any Other Obligor that has not
been removed or satisfied within thirty (30) days;
	 
	I.	 	Change in Ownership. A change in more than 25% of the
ownership of Halifax without the prior written consent of Bank;
	 
	J.	 	Cross-Default. The occurrence of any event which is, or would
be with the passage of time or the giving of notice or both, a default
under any indebtedness in excess of $100,000 of Borrower or any Other
Obligor to Bank or to any person other than Bank;
	 
	K.	 	Loss or Damage; Transfer or Encumbrance. Any material loss,
theft or substantial damage not fully insured for the benefit of Bank to
any of the assets of Borrower or any Other Obligor or the transfer or
encumbrance of any material part of the assets of Borrower or any Other
Obligor other than in the ordinary course of business of Borrower or
such Other Obligor;
	 
	L.	 	Debarment or Suspension. The debarment or suspension of
Borrower or any Other Obligor from any contracting with the Government;
or
	 
	M.	 	Financial Information. The failure of Borrower or any Other
Obligor to furnish Bank such financial information as Bank may require
from time to time.

VII. REMEDIES

	A.	 	Specific Rights and Remedies. In addition to all other rights
and remedies provided by law and the Loan documents, Bank, on the
occurrence of any default, may: (i) accelerate and call due and payable
any and all of the Obligations, including all principal, accrued
interest and other sums due as of the date of default; (ii) impose the
default rate of interest provided in any promissory note evidencing the
Loan, with or without acceleration; (iii) file suit against Borrower or
against any Other Obligor; (iv) seek specific performance or injunctive
relief to enforce performance of the Obligations, whether or not a
remedy at law exists or is adequate; (v) exercise any rights of a
secured creditor under the Uniform Commercial Code, including the right
to take possession of the Collateral without the use of judicial process or hearing of any kind and the right
to require Borrower to assemble the Collateral at such place as Bank may
specify; (vi) cease making advances or extending credit to Borrower and
stop and retract the making of any advance which may have been requested
by Borrower; and (vii) reduce the Maximum Line of Credit Amount. Borrower
also hereby authorizes Bank, upon a default, but without prior notice to
or demand upon Borrower and without prior opportunity of Borrower to be
heard, to institute

Page 8 of 21

 

	 	 	an action for replevin, with or without bond as Bank may elect, to obtain possession of any of the Collateral. In such action
for replevin, a copy of this Agreement verified by affidavit of Bank or
sworn on behalf of Bank shall constitute evidence of Bank’s right to
possession of the Collateral.
	 
	B.	 	Costs of Collection. Upon the occurrence of any default, Bank
shall be entitled to recover from Borrower reasonable attorneys’ fees,
plus court costs and other expenses which may be incurred by Bank in the
enforcement or attempted enforcement of its rights hereunder, whether
against any third party, Borrower, or any Other Obligor. Expenses
recoverable from Borrower shall (to the extent not prohibited by law)
include costs of collection, including such portion of Bank’s overhead
as Bank shall allocate to collection and enforcement of the Obligations
in Bank’s sole but reasonable discretion, salaries, out-of-pocket
travel, living expenses and the hiring of agents, consultants,
accountants, or otherwise. All sums of money thus expended, and all
other monies expended by Bank to protect its interest in the Collateral
(including insurance, taxes or repairs) shall be repayable by Borrower
to Bank on demand, such repayment to be secured as provided in Paragraph
III hereof.
	 
	C.	 	Foreclosure. Upon the occurrence of any default, in addition
to other remedies provided under the Uniform Commercial Code, Bank at
any time then or thereafter, in its discretion, may lawfully enter any
of Borrower’s premises or the premises where the Collateral is located,
and with or without judicial process, lawfully remove, under Section
9-609 of the Uniform Commercial Code, the Collateral or records thereof
to such place as Bank may deem advisable, or require Borrower to
assemble and make any or all such Collateral available at such
reasonable place as Bank may direct, and realize upon (by public or
private sale or in any other manner) all or any part of the Collateral
and, unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized
market, Bank shall give Borrower, and other parties entitled to notice,
reasonable notice in writing before the sale of the Collateral or any
part thereof at public auction or private sale, in one or more sales, at
such price or prices, and upon such terms either for cash or credit or
future delivery as Bank may elect, and at any such public sale Bank may
bid for and become the purchaser of any or all of such Collateral;
and/or Bank may foreclose its security interest in the Collateral in any
way permitted by law. In connection with any notices to be given
pursuant to this Paragraph VII.C., it is agreed in all instances that
five (5) business days notice constitutes reasonable notice. Any such
notice shall be deemed given when delivered or deposited in the U.S.
mail with first class postage. The net proceeds of any such sale or
sales and any amounts received in liquidation of the Collateral, less
all costs and expenses incurred in connection therewith, including the
costs of collection described in Paragraph VII.B above and, at the
option of Bank or as required by law, less any prior lien claims, shall
be applied against the Obligations in the order that Bank in its sole
discretion shall decide, and Borrower or other party entitled thereto
shall be entitled to any surplus resulting therefrom. No action taken by
Bank pursuant hereto shall affect Borrower’s continuing liability to
Bank for any deficiency remaining after any foreclosure. It is mutually
agreed that it is commercially reasonable for Bank to disclaim all
warranties which arise with respect to the disposition of the
Collateral.
	 
	D.	 	Redemption. The purchaser at any such sale shall thereafter
hold the Collateral absolutely free from any claim or right of
whatsoever kind including any equity of redemption of Borrower, and such
demand, notice or right in equity are hereby expressly waived and
released by Borrower.
	 
	E.	 	Offset. Upon the occurrence of any default, Bank is authorized
to charge the sum then due to Bank against any and all monies held by or
on deposit with Bank on account of Borrower or its affiliates, and to
offset any amounts against any demand or depository accounts which
Borrower, or its affiliates, may have with Bank and to enforce such
other remedies as may be available at law or in equity, without
necessity of election.
	 
	F.	 	Alternative Remedies. Bank may exercise its rights and
remedies hereunder either alternatively or concurrently with its rights
under any and all other agreements between Bank and Borrower and shall
have the full right to realize upon all available Collateral, collecting
on the same or instituting proceedings in connection therewith, until
Bank receives payment in full of all amounts owing to Bank under any of
its agreements with Borrower, including principal, interest, costs and
expenses, and costs of enforcement or attempted enforcement of this or
any other agreement among or between Bank and Borrower or any Other
Obligors. Bank shall be under no obligation to pursue Bank’s rights
against any Other Obligor or any of the collateral of any Other Obligor
securing any of the Obligations before pursuing Bank’s rights against
Borrower, or the Collateral.

VIII.GENERAL PROVISIONS

	A.	 	Continuity and Termination. This Agreement shall become
effective immediately and remain in effect so long as any of the
Obligations are outstanding and unpaid, provided that the security
interests hereunder shall continue in full force and effect and are
noncancellable by Borrower prior to the termination of this Agreement.
This Agreement may be terminated by Borrower upon actual delivery of
written notice to Bank of such intention, and payment in full of all
then existing Obligations; provided, however, that such notice and
payment shall in no way affect, and this Agreement shall remain fully
operative with respect to, any Obligations (including contingent
Obligations), or commitments which may become Obligations, entered into
between Borrower and Bank prior to receipt of such notice or payment,
whichever is later.
	 
	B.	 	Right of Bank to Act with Respect to Other Obligors and
Collateral. Borrower hereby assents to any and all terms and
agreements between Bank and any Other Obligor, and all amendments and
modifications thereof, whether presently existing or hereafter made and
whether oral or in writing. Bank may, without compromising, impairing,
diminishing, or in any way releasing Borrower from the Obligations and
without notifying or obtaining the prior approval of Borrower, at any
time or from time to time: (i) waive or excuse any default by any Other
Obligor, or delay in the exercise by Bank of any or all of Bank’s rights
or remedies with respect to such default; (ii) grant extensions of time
for payment or performance by any Other Obligor; (iii) release,
substitute, exchange, surrender, or add collateral of any Other Obligor,
or waive, release, or subordinate, in whole or in part, any lien or
security interest held by Bank on any real or personal property securing payment
or performance, in whole or in part, of the obligations of any Other
Obligor; (iv) release any Other Obligor; (v) apply payments made by any
Other Obligor, to any sums owed by any Other Obligor to Bank, in any
order or manner, or to any specific account or accounts, as Bank may
elect; and (vi) modify, change, renew, extend, or amend, in any respect
Bank’s agreement with any Other Obligor, or any document, instrument, or
writing, embodying, or reflecting the same.

Page 9 of 21

 

	C.	 	Waivers By Borrower. Borrower waives: (i) any and all
notices whatsoever with respect to this Agreement or with respect to any
of the obligations of any Other Obligor to Bank, including, but not
limited to, notice of: (a) Bank’s acceptance hereof or Bank’s intention
to act, or Bank’s action, in reliance hereon; (b) the present existence
or future incurring of any of the obligations of any Other Obligor to
Bank or any terms or amounts thereof or any change therein; (c) any
default by any Other Obligor; and (d) the obtaining or release of any
guaranty or surety agreement, pledge, assignment, or other security for
any of the obligations of any Other Obligor to Bank; (ii) presentment
and demand for payment of any sum due from any Other Obligor and protest
of nonpayment; (iii) demand for performance by any Other Obligor; and
(iv) defenses based on suretyship or impairment of collateral.
	 
	D.	 	Information Concerning Collateral or Other Obligors. Bank
shall have no present or future duty or obligation to discover or to
disclose to Borrower any information, financial or otherwise, concerning
any Other Obligor or any collateral securing the Obligations. Borrower
waives any right to claim or assert any such duty or obligation on the
part of Bank. Borrower agrees to obtain all information which Borrower
considers appropriate or relevant to this Agreement from sources other
than Bank and to become and remain at all times current and continuously
apprised of all information concerning Other Obligors and any Collateral
which is material and relevant to the Obligations of Borrower under this
Agreement.
	 
	E.	 	Other Documents. The Obligations are or shall be evidenced by
notes, guaranties, addenda or other documents which are separate
agreements and may be negotiated by Bank without releasing Borrower, any
Collateral or any Other Obligor. Without limitation of the foregoing,
Borrower may have executed and delivered to Bank a Commercial Finance
Addendum, a Reporting Requirements Addendum and/or a Financial Covenants
Addendum which modify and supplement this Agreement and Borrower’s
obligations hereunder. This Agreement specifically incorporates by
reference all of the language and provisions of such notes, guaranties,
addenda or other documents. Borrower consents to any extension of time
of payment of any Obligations. If there is more than one Borrower or
Other Obligor, the obligation of each of them shall be primary, joint
and several.
	 
	F.	 	Remedies Cumulative. All rights, remedies and powers of Bank
hereunder are irrevocable and cumulative, and not alternative or
exclusive, and shall be in addition to all other rights, remedies and
powers of Bank whether in or by any other instruments, agreements or any
laws, including, but not limited to, the Uniform Commercial Code, now
existing or hereafter enacted.
	 
	G.	 	Non-Waiver. No indulgence or delay on the part of Bank in
exercising any power, privilege or right hereunder or under any other
agreement executed by Borrower to Bank in connection herewith shall
operate as a waiver thereof. No single or partial exercise of any
power, privilege or right shall preclude other or further exercise
thereof, or the exercise of any other power, privilege or right.
	 
	H.	 	Governing Law; Severability. This Agreement shall be
construed and governed by the laws of the State of Maryland, If any
part of this Agreement shall be adjudged invalid or unenforceable as of
any term of court, then such partial invalidity or unenforceability
shall not cause the remainder of this Agreement to be or become invalid
or unenforceable, and if a provision hereof is held invalid or
unenforceable in one or more of its applications, that provision shall
remain in effect in all valid or enforceable applications that are
severable from the invalid or unenforceable application or applications.
	 
	I.	 	Litigation. In the event of any litigation with respect to
this Agreement, the promissory note(s) or other agreements evidencing
and securing the Obligations, the Collateral, or any other document or
agreement applicable thereto, Borrower waives all defenses (including
the defense of statute of limitations). Borrower consents to the
jurisdiction and venue of the courts of any county or city in the State
of Maryland and to the jurisdiction and venue of the United States
District Court for the District of Maryland in any action or judicial
proceeding brought to enforce, construe or interpret this Agreement.
	 
	J.	 	Construction. All accounting terms not otherwise defined in
this Agreement shall be interpreted in accordance with G.A.A.P. The
captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this Agreement nor
the intent of any provision thereof. If this Agreement is signed by two
or more parties as Borrowers, the term “Borrower” shall mean each and
every party signing this Agreement as a Borrower. The use of singular
herein may also refer to the plural, and vice versa, and the use of the
neuter or any gender shall be applicable to any other gender or the
neuter.
	 
	K.	 	Assignment. None of the parties shall be bound by any
assignment not expressed in writing. This Agreement shall inure to and
be binding upon the heirs, personal representatives, successors, and
assigns of Borrower and Bank, and the terms “Borrower” and “Bank” shall
include and mean, respectively, the successors and assigns of Borrower
and Bank.
	 
	L.	 	Time. Time is of the essence of all Obligations.
	 
	M.	 	Joint And Several Obligations. In the event there is more
than one Borrower hereunder, all obligations and liabilities under this
Agreement shall be joint and several obligations and liabilities of each
Borrower. In addition, all covenants and agreements of Borrower
hereunder shall be applicable to each Borrower individually and all
Borrowers collectively. The occurrence of any event or occurrence set
forth herein as a default to any one Borrower shall constitute a default
under this Agreement as to all Borrowers.
	 
	N.	 	Notices. Any notice or demand required or permitted by or in
connection with this Agreement or any other loan document shall be in
writing and shall be made by hand delivery, by Federal Express or other
similar overnight delivery service, or by certified mail, unrestricted
delivery, return receipt requested, postage prepaid, addressed to the
respective parties at the appropriate address set forth on the signature
page hereof or to such other address as may be hereafter specified by
written notice by the respective parties. Notice shall be considered
given as of the date of facsimile or hand delivery, one (1) calendar day
after delivery to Federal Express or similar overnight delivery service, or three (3) calendar days after the
date of mailing, independent of the date of actual delivery or whether
delivery is ever in fact made, as the case may be, provided the giver of
notice can establish the fact that notice was given as provided herein.
If notice is tendered pursuant to the provisions of this section and is
refused by the intended recipient thereof, the notice, nevertheless,
shall be considered to have been given and shall be effective as of the
date herein provided. Notwithstanding anything to the contrary, all
notices and demands for payment from the holder actually received in
writing by Borrower shall be

Page 10 of 21

 

	 	 	considered to be effective upon the receipt thereof by Borrower regardless of the procedure or method utilized to
accomplish delivery thereof to Borrower.

	IX.	 	ADDITIONAL COVENANTS

	A.	 	Conditions to Advances. Prior to or contemporaneously with
any advance hereunder, Liberty Bank shall release any lien it may have
on Borrower’s assets.
	 
	B.	 	Primary Depository. As long as this Agreement or any other
credit agreement between Borrower and Bank remains in effect, Borrower
shall make Bank its primary depository and cash management financial
institution. All of Borrower’s Operating accounts shall provide for
automatic payments of interest, late charges and service charges.

	X.	 	ADDRESSES

	 	 	 
	Address of Chief Executive Office of Borrower:

	 	5250 Cherokee Avenue
	

	 	Alexandria, Virginia 22312
	

	 	Telephone: 703-658-2416

	 	 	 
	Address of Location of Books and Records
	 	 
	Relating to Collateral:

	 	5250 Cherokee Avenue
	

	 	Alexandria, Virginia 22312
	

	 	Telephone: 703-658-2416

	XI.	 	Waiver of Trial by Jury. Borrower and Bank agree that any suit, action, or proceeding, whether claim or
counterclaim, brought or instituted by or against either party hereto or any successor or assign of either party on or with
respect to this Agreement or any other Loan document or which in any relates, directly or indirectly, to the Obligations or
any event, transaction or the dealings of the parties with respect thereto, shall be tried only by a court and not by a
jury. BORROWER AND BANK HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
Borrower and Bank acknowledge and agree that this provision is a specific and material aspect of this Agreement between the
parties and that Bank would not extend the Loan to Borrower if this waiver of jury trial provision were not a part of this
Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Page 11 of 21

 

          IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has
executed this Agreement under seal as of the day and year first above written
at Baltimore, Maryland.

WITNESS OR ATTEST*:

*Note: Attestation of a corporate officer’s capacity to sign by another
corporate officer is required in all corporate transactions.

	 	 	 	 	 	 	 
	 	 	HALIFAX CORPORATION
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	(Signature)

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ENGINEERING, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	(Signature)

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	MICROSERV LLC
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	(Signature)

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ALPHANATIONAL ACQUISITION, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	(Signature)

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	5250 Cherokee Avenue
	 	 	Alexandria, Virginia 22312
	 	 	Telephone: 703-658-2416
	 	 	Facsimile: 703-658-2478
	 	 	Federal Tax Identification No. 54-0829246
	 
	 	 	 	 	 	 
	 	 	ACCEPTED AT FALLS CHURCH, VIRGINIA, AS OF THE DATE HEREOF:
	 	 	PROVIDENT BANK
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	 
	 	 	 	
	 	 
	

	 	 	 	E Gaye Boyette	 	 
	

	 	 	 	Senior Vice President	 	 

Page 12 of 21

 

FINANCIAL COVENANTS ADDENDUM

THIS FINANCIAL COVENANTS ADDENDUM (“Addendum”) is dated as of November 8,
2004, by and between 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 (“Bank”), a Maryland banking
corporation. This Addendum is given to supplement and amend the Amended and
Restated Loan and Security Agreement dated as of November 8, 2004, by and
between Borrower and Bank (“Loan Agreement”).

	I.	 	DEFINITIONS. The following terms have the following definitions (each
definition is equally applicable to the singular and plural forms of the
terms used, as the context requires):

	A.	 	“Current Assets” means, at any time, the aggregate amount of all
current assets, including, but not limited to, cash, cash equivalents,
marketable securities, receivables maturing within twelve (12) months
from such time, inventory (net of allowances for inventory valuation
reserve), and prepaid expenses but excluding officer, stockholder and
employee advances and receivables, all as determined in accordance with
G.A.A.P.
	 
	B.	 	“Current Liabilities” means, at any time, the aggregate amount of
all liabilities and obligations which are due and payable on demand or
within twelve (12) months from such time, or should be properly
reflected as attributable to such twelve (12) month period in
accordance with G.A.A.P. Current Liabilities shall not include
deferred income tax liabilities.
	 
	C.	 	“Current Ratio” means the ratio of Current Assets to Current
Liabilities.
	 
	D.	 	“Debt Service Coverage Ratio” means the ratio of EBITDA to the sum
of (i) Interest Expense and (ii) the current portion of long term debt
for the prior quarter.
	 
	E.	 	“EBITDA” means the sum of (i) the net income of Borrower, plus (ii)
depreciation expense and amortization, plus (iii) Interest Expense,
plus (iv) taxes, all determined in accordance with G.A.A.P.
	 
	F.	 	“G.A.A.P.” means, with respect to any date of determination,
generally accepted accounting principles as used by the Financial
Accounting Standards Board and/or the American Institute of Certified
Public Accountants consistently applied and maintained throughout the
periods indicated.
	 
	G.	 	“Interest Expense” means all finance charges reflected on the
income statement as interest expense for all obligations of Borrower to
any person, including, but not limited to, Bank, as shown on the
balance sheet in accordance with G.A.A.P.
	 
	H.	 	“Obligations” means the “Obligations,” as defined in the Loan
Agreement.
	 
	I.	 	“Subordinated Debt” means all obligations of Borrower to any
person, payment of which has been expressly subordinated to all of the
Obligations pursuant to a written agreement signed by Bank and the
holder of such debt.
	 
	J.	 	“Tangible Net Worth” means the net worth of Borrower excluding all
intangibles, including but not limited to, good will and intangible
assets, all determined in accordance with G.A.A.P.
	 
	K.	 	“Total Liabilities” means all liabilities and obligations.

	II.	 	FINANCIAL COVENANTS. Borrower shall remain in compliance with each of the covenants set forth in the Paragraphs below.

Borrower’s Initials:

	 	 	 	 	 	 	 
	                   

	 	x
	 	A.
	 	Borrower shall at all times maintain Tangible Net Worth plus Subordinated Debt of not less than $3,000,000, measured on September
30, 2004 and the last date of each subsequent quarter.
	 
	 	 	 	 	 	 
	                   

	 	x
	 	B.
	 	Borrower shall maintain a ratio of Total Liabilities less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not
greater than 6.8:1 on September 30, 2004 and the last date of each subsequent quarter.

Page 13 of 21

 

	 	 	 	 	 	 	 
	                   

	 	x
	 	C.
	 	Borrower shall at all times maintain a Debt Service Coverage Ratio greater than or equal to 1.25:1 for the quarter ending on
September 30, 2004 and the last day of each subsequent quarter.
	 
	 	 	 	 	 	 
	                   

	 	x
	 	D.
	 	Borrower shall maintain a Current Ratio equal to or greater than 1.4:1 on September 30, 2004 and the last day of each subsequent
quarter.

	III.	 	GENERAL PROVISIONS. This Addendum is hereby made a part of the Loan Agreement.

IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has
executed this Addendum under seal as of the day and year first above
written.

WITNESS OR ATTEST*:

*Note: Attestation of a corporate officer’s capacity to sign by another
corporate officer is required in all corporate transactions.

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	HALIFAX CORPORATION
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 
	(Signature)

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	(Print Name)

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ENGINEERING, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	MICROSERV LLC
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ALPHANATIONAL ACQUISITION, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	ACCEPTED AT FALLS CHURCH, VIRGINIA
	 	 	AS OF THE DATE HEREOF
	 
	 	 	 	 	 	 
	 	 	PROVIDENT BANK
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	E Gaye Boyette	 	 
	

	 	 	 	Senior Vice President	 	 

Page 14 of 21

 

FORMULA ADVANCE ADDENDUM 

     THIS FORMULA ADVANCE ADDENDUM (“Addendum”) is dated as of November 8,
2004, by and between 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 (“Bank”), a Maryland banking corporation. This Addendum is
given to supplement and amend the Amended and Restated Loan and Security
Agreement dated as of November 8, 2004 by and between Borrower and Bank (“Loan
Agreement”).

	I.	 	DEFINITIONS. All capitalized terms used in this Addendum without
definition shall have the meanings assigned to them in the Loan Agreement.
The following terms have the following definitions (each definition is
equally applicable to the singular and plural forms of the terms used, as
the context requires):

	 	1.	 	“Account Debtor” means any person or entity who is or who may
become obligated to make payments to Borrower, including, but not
limited to, payments owed to Borrower under, with respect to, or on
account of Receivables.
	 
	 	2.	 	“At Risk Work” means work performed under any Government
Contract or any other contract (i) for which funds have not been
appropriated or allocated, (ii) that has not been awarded or (iii)
for which all required contract documents, including any documents
required to modify or renew a contract previously awarded, have not
been executed.
	 
	 	3.	 	“Borrowing Base” means: (i) an amount of up to 85% of Eligible
Billed Receivables; plus (ii) an amount of up to 50% of Eligible
Inventory; provided, however, that the portion of the Borrowing Base
constituting Eligible Inventory shall not exceed $6 million; minus
(iii) such reserves and allowances as Bank in its sole discretion may
from time to time deem necessary to protect the interests of Bank.
	 
	 	4.	 	“Eligible Billed Receivables” means Eligible Receivables that
have been billed to the appropriate Account Debtor, are aged less
than 90 days from the date of the initial invoice. For the purposes
of this definition, the term “initial invoice” shall mean the first
invoice relating to the applicable goods shipped or services
rendered, and not any subsequent invoice relating thereto.
	 
	 	5.	 	“Eligible Inventory” means Inventory of Borrower which is
deemed by Bank in Bank’s sole discretion to be eligible to be
included in the Borrowing Base. Inventory which is at any time
Eligible Inventory, but which subsequently fails to meet the
requirements of Bank for eligibility, shall cease for all purposes to
be Eligible Inventory. In addition to any other criteria for
eligibility determined by Bank from time to time, Inventory shall not
be deemed to be eligible without the written consent of Bank unless
it meets the following minimum requirements: (i) it is owned by
Borrower and it is not subject to any lien, assignment or claim
(including any VDOT Vendor Liens/Assignments) except for the benefit
of Bank; (ii) it is held for sale or lease or for furnishing under
contracts of service in the ordinary course of Borrower’s business;
(iii) it is new and unused or refurbished; (iv) it does not
constitute work in progress; (v) it is not stored with a bailee,
warehouseman or similar person or entity without Bank’s prior written
approval and without appropriate documentation acceptable to Bank;
(vi) it is not returned or repossessed merchandise; (vii) it
constitutes finished goods; (viii) it does not constitute raw
materials; and (ix) it complies with any additional criteria set
forth from time to time in any written supplements to this Addendum
or the Loan Agreement. Eligible Inventory does not include any
Inventory delivered pursuant to the VDOT Contract. The value of
Eligible Inventory shall be determined by Bank in Bank’s sole
discretion at the least of: (i) Borrower’s net purchase cost or
manufacturing cost; (ii) the lowest market prices or (iii) any price
ceiling established under applicable laws.
	 
	 	6.	 	“Eligible Receivables” means Receivables of Borrower which are
deemed by the Bank in its sole discretion to be eligible to be
included in the Borrowing Base. A Receivable which is at any time an
Eligible Receivable, but which subsequently fails to meet the
requirements of Bank for eligibility, shall cease for all purposes to
be an Eligible Receivable. In addition to any other criteria for
eligibility determined by Bank from time to time, a Receivable shall
not be deemed to be eligible without the written consent of Bank
unless it meets the following minimum requirements: (i) it is genuine
and is in all respects what it purports to be; (ii) it arises from
goods sold or leased or from services performed in the ordinary
course of Borrower’s business and the delivery or performance has
been completed and unconditionally accepted by the Account Debtor,
without dispute, offset, contingency (other than final audits of
costs incurred under the Government Contracts) or allowance; (iii)
Borrower has possession of, or has delivered to Bank, receipts or
other satisfactory documentation evidencing delivery and acceptance;
(iv) it is not subject to any security interest, lien, assignment or
encumbrance (including any VDOT Vendor Liens/Assignments) except in
favor of Bank; (v) it is not payable from an Account Debtor who is
the subject of any bankruptcy or insolvency proceedings, and it is
not in Bank’s opinion unlikely to be paid because of insolvency,
potential bankruptcy, death or any other reason; (vi) it is not
subject to any potential claim of a surety or bonding company; (vii)
it does not arise from any transaction with any affiliated entity or
person of Borrower, or employee of Borrower; (viii) it is not payable
from any Account Debtor located outside of the United States unless
the transaction giving rise to the Receivable is supported by a
letter of credit, acceptance or other credit enhancement acceptable
to Bank; (ix) it does not arise from any sale on approval or
consignment, and it is not otherwise subject to any repurchase or
return agreement; (x) if the Account Debtor is the Government and
Borrower is a prime contractor, Borrower has as assigned its rights
to receive payment to Bank in compliance with the Assignment of
Claims Act; (xi) other than with respect to Receivables arising out
of a Government Contract, the aggregate dollar amount of Receivables
due from the Account Debtor does not exceed $500,000 or any other
limit established by Bank in writing for the Account Debtor; (xii)
less than ninety (90) days have elapsed from the initial invoice
date; (xiii) it is not payable by an Account Debtor with respect to
which 50% or more of the dollar amount of that Account Debtor’s
Receivables to Borrower have remained unpaid for more than ninety
(90) days from the date of invoice or more than ninety (90) days from

Page 15 of 21

 

	 	 	 	the due date of invoice; (xiv) it is not evidenced by chattel paper
or instruments unless Bank has agreed in writing that it may be
deemed eligible and all originals of such chattel paper or
instruments have been endorsed and delivered to Bank; (xv) it is not
subject to any offset and is not payable by any Account Debtor who
is owed any sum by Borrower; (xvi) it does not include At-Risk Work,
cost overruns, progress payments, costs incurred in excess of
approved or allowed billing rates, rebilling or retainages; and
(xvii) it complies with any additional criteria set forth from time
to time in any written supplements to this Addendum or the Loan
Agreement. Eligible Receivables do not include any Receivables from
the VDOT Contract assigned to or subject to the lien of a third
party.
	 
	 	7.	 	“Government” means the United States of America or any agency
or instrumentality thereof.
	 
	 	8.	 	“Government Contract” means any contract with the Government
under which Borrower is a prime contractor or a subcontractor.
	 
	 	9.	 	“Inventory” means all of Borrower’s now owned and hereafter
acquired inventory, wherever located, including, but not limited to,
goods, wares, merchandise, materials, raw materials, parts,
containers, goods in process, finished goods, work in progress,
bindings or component materials, packaging and shipping materials and
other tangible or intangible personal property held for sale or lease
or furnished or to be furnished under contracts of service or which
contribute to the finished products or the sale, promotion, storage
and shipment thereof, all goods returned for credit, repossessed,
reclaimed or otherwise reacquired by Borrower, whether located at
facilities owned or leased by Borrower, in the course of transport to
or from Account Debtors, placed on consignment, or held at storage
locations, and all proceeds and products thereof and all rights
thereto, including, but not limited to, all sales proceeds, all
chattel paper related to any of the foregoing and all documents,
including, but not limited to, documents of title, bills of lading
and warehouse receipts related to any of the foregoing.
	 
	 	10.	 	“Receivables” means all of Borrower’s now owned and hereafter
acquired and/or created accounts, accounts receivable, contracts,
contract rights, instruments, documents, chattel paper, notes, notes
receivable, drafts, acceptances, general intangibles (including, but
not limited to, trademarks, tradenames, licenses and patents), and
other choses in action (not including salary or wages), and all
proceeds and products thereof, and all rights thereto, including, but
not limited to, proceeds of Inventory and returned goods and proceeds
arising from the sale or lease of or the providing of Inventory,
goods, or services by Borrower, as well as all other rights of any
kind, contingent or non-contingent, of Borrower to receive payment,
benefit, or credit from any person or entity, including, but not
limited to, the right to receive tax refunds or tax rebates.

	II.	 	COVENANTS. Borrower covenants that:

	 	A.	 	Eligibility of Receivables and/or Inventory. Within
fifteen (15) days after learning thereof, Borrower shall notify Bank
of any event or circumstance which disqualifies as an Eligible
Receivable any Receivable reported to Bank as an Eligible Receivable,
and any event or circumstance which Borrower has reason to know or
believe would cause any Receivable reported to Bank as an Eligible
Receivable to be disqualified as an Eligible Receivable. Within
fifteen (15) days after learning thereof, Borrower shall notify Bank
of any event or circumstance which disqualifies as Eligible Inventory
any Inventory reported to Bank as Eligible Inventory, and any event
or circumstance which Borrower has reason to know or believe would
cause any Inventory reported to Bank as Eligible Inventory to be
disqualified as Eligible Inventory. Bank may, at any time and
without prior notice to Borrower and without the consent of Borrower,
directly contact Account Debtors of Borrower and verify the existence
and status of the Receivables.

	III.	 	REMEDIES. In addition to all other rights and remedies provided by law,
the Loan Agreement and the Loan documents, Bank, on the occurrence of any
default hereunder or thereunder, may reduce the Maximum Line of Credit
Amount and/or the Borrowing Base.
	 
	IV.	 	GENERAL PROVISIONS. This Addendum is hereby made a part of the Loan
Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Page 16 of 21

 

     IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has
executed this Addendum under seal as of the day and year first above written.

WITNESS OR ATTEST*:

*Note: Attestation of a corporate officer’s capacity to sign by another
corporate officer is required in all corporate transactions.

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	HALIFAX CORPORATION
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	(Signature)

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Chief Financial Officer	 	 
	(Print Name)
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ENGINEERING, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	MICROSERV LLC
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ALPHANATIONAL ACQUISITION, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	ACCEPTED AT FALLS CHURCH, VIRGINIA
	 	 	AS OF THE DATE HEREOF
	 
	 	 	 	 	 	 
	 	 	PROVIDENT BANK
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	E Gaye Boyette	 	 
	

	 	 	 	Senior Vice President	 	 

Page 17 of 21

 

	 	 	 	 	 
	Baltimore, Maryland
	 	 	 	 
	November 8, 2004

	 	 	 	$12,000,000 

PROMISSORY NOTE

(Revolving Line of Credit)

IMPORTANT NOTICE

THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.

     FOR VALUE RECEIVED, the undersigned (collectively “Borrower”) promises to
pay to the order of PROVIDENT BANK, a Maryland banking corporation (“Lender”),
at the Lender’s offices at 114 East Lexington Street, Baltimore, Maryland 21202
or at such other place as the holder of this Promissory Note may from time to
time designate, the principal sum of Twelve Million and NO/100 Dollars
($12,000,000), or so much as has been disbursed to the Borrower hereunder,
together with interest thereon at the rate or rates hereafter specified and any
and all other sums which may be owing to the Lender by the Borrower pursuant to
this Promissory Note. The following terms shall apply to this Promissory Note.

	1.	 	INTEREST. The unpaid principal amount outstanding from time to
time pursuant to this Promissory Note shall bear interest at one-quarter
percent (0.25%) per annum above the rate of interest announced from time
to time by the Lender as its prime commercial lending rate of interest, it
being understood that such announced rate bears no inference, implication,
representation, or warranty that such announced rate is charged to any
particular customer or customers of the Lender. Interest on the principal
amount outstanding shall be adjusted daily with the rate for each day
being the rate in effect at the close of business on that day.
	 
	2.	 	CALCULATION OF INTEREST. Interest shall be calculated on the
basis of a three hundred sixty (360) days per year factor applied to the
actual days on which there exists an unpaid balance hereunder.
	 
	3.	 	REPAYMENT.

(a) Principal: The principal balance of this Promissory Note and
any accrued but unpaid interest shall be paid in full by the Borrower in
immediately available funds on or before November 7, 2006.

(b) Interest: Accrued interest shall be paid by the Borrower, in
arrears, in immediately available funds on the first day of each successive
month beginning on December 1, 2004.

All amounts owed by the Borrower to the Lender shall be payable by
preauthorized debit of Account #20-65310679 and Borrower agrees to
maintain a balance in such account which is at least equal to the payment
amount on each payment due date.

	4.	 	LATE PAYMENT CHARGE. If any payment due hereunder (including any
payment in whole or in part of principal) is not received by the holder
within fifteen (15) calendar days after its due date, the Borrower shall
pay a late payment charge equal to five percent (5%) of the amount then
due.
	 
	5.	 	APPLICATION OF PAYMENTS. All payments made pursuant to this
Promissory Note shall be applied first to late payment charges or other
sums owed to the holder, next to accrued interest, and then to principal,
or in such other order or proportion as the holder, in the holder’s sole
and absolute discretion, may elect from time to time.
	 
	6.	 	PREPAYMENT. The Borrower may prepay this Promissory Note in whole
or in part at any time or from time to time without premium or additional
interest.
	 
	7.	 	DEFAULT. Upon a failure to pay any sum due pursuant to this
Promissory Note or a default in the performance of any of the covenants,
conditions or terms of the Amended and Restated Loan and Security
Agreement, dated the date hereof, executed by Borrower and Lender (the
“Agreement”), or of any other agreement or document made by any Borrower
for the benefit of the Lender or any holder (collectively with the
Agreement and the “Loan Documents”), the holder of this Promissory Note,
in the holder’s sole and absolute discretion and without notice or demand,
may exercise any of the following rights, in addition to any rights or
remedies under applicable law or any of the Loan Documents:

	(a)	 	Default Rate of Interest. The holder may raise the rate
of interest accruing on the unpaid balance due under this Promissory
Note by two (2) percentage points above the rate of interest otherwise
applicable until such time as such default has been cured to the
Lender’s entire satisfaction, independent of whether the holder of
this Promissory Note elects to accelerate the unpaid principal balance
as a result of such default.

Page 18 of 21

 

	(b)	 	Acceleration. The holder may declare the entire unpaid
principal balance plus accrued interest and all other sums due
hereunder immediately due and payable. Reference is made to the Loan
Documents for further and additional rights of the holder to declare
the entire unpaid principal balance plus accrued interest and all
other sums due hereunder immediately due and payable. The Borrower
agrees that a default under this Promissory Note or a default by the
Borrower under any of the Loan Documents is a default by the Borrower
under all other liabilities and obligations of the Borrower to the
holder, and that the holder shall have the right to declare
immediately due and payable all of such other liabilities and
obligations.
	 
	(c)	 	Confession of Judgment. The Borrower authorizes any
attorney admitted to practice before any court of record in the United
States to appear on behalf of the Borrower in any court in one or more
proceedings, or before any clerk thereof or prothonotary or other
court official, and to confess judgment against the Borrower, without
prior notice or opportunity of the Borrower for prior hearing, in
favor of the holder of this Promissory Note in the full amount due on
this Promissory Note (including principal, accrued interest and any
and all penalties, fees and costs) plus court costs and reasonable
legal fees. In addition to all other courts in which judgment may be
confessed against the Borrower upon this Promissory Note, the Borrower
agrees that venue and jurisdiction shall be proper in the Circuit
Court of any County of the State of Maryland or of Baltimore City,
Maryland, or in the United States District Court For The District Of
Maryland. For the purpose of allowing the holder of this Promissory
Note to file a confession of judgment in the Commonwealth of Virginia
to recover any sums of money due hereunder, the Borrower hereby duly
constitutes and appoints David Matuszewski its attorney in fact to
confess judgment against the Borrower in the Circuit Court for the
County of Fairfax, Virginia and in any other circuit court or court
located in the Commonwealth of Virginia, and the Borrower acknowledges
and agrees that jurisdiction and venue shall be proper in such court
and in any other city or county in the Commonwealth of Virginia The
Borrower waives the benefit of any and every statute, ordinance, or
rule of court which may be lawfully waived conferring upon the
Borrower any right or privilege of exemption, homestead rights, stay
of execution, or supplementary proceedings, or other relief from the
enforcement or immediate enforcement of a judgment or related
proceedings on a judgment. The authority and power to appear for and
enter judgment against the Borrower shall not be exhausted by one or
more exercises thereof, or by any imperfect exercise thereof, and
shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions
from time to time, in the same or different jurisdictions, as often as
the holder shall deem necessary or advisable.

	8.	 	INTEREST RATE AFTER JUDGMENT. If judgment is entered against the
Borrower on this Promissory Note, the amount of the judgment entered
(which may include principal, interest, penalties, fees, and costs) shall
bear interest at the higher of the above described default interest rate
as determined on the date of the entry of the judgment, or the legal rate
of interest then applicable to judgments in the jurisdiction in which
judgment was entered.
	 
	9.	 	EXPENSES OF COLLECTION. If this Promissory Note is referred to an
attorney for collection, whether or not judgment has been confessed or
suit has been filed, the Borrower shall pay all of the holder’s costs,
fees (including, but not limited to, the holder’s attorneys’ fees,
paralegal charges and expenses) and all other expenses resulting from such
referral.
	 
	10.	 	WAIVERS. The Borrower, and all parties to this Promissory Note,
whether maker, indorser, or guarantor, waive presentment, notice of
dishonor and protest.
	 
	11.	 	EXTENSIONS OF MATURITY. All parties to this Promissory Note,
whether maker, indorser, or guarantor, agree that the maturity of this
Promissory Note, or any payment due hereunder, may be extended at any time
or from time to time without releasing, discharging, or affecting the
liability of such party.
	 
	12.	 	NOTICES. Any notice or demand required or permitted by or in
connection with this Promissory Note shall be in writing and shall be made
by hand delivery, by Federal Express or other similar overnight delivery
service, or by certified mail, unrestricted delivery, return receipt
requested, postage prepaid, addressed to the respective parties at the
appropriate address set forth on the signature page hereof or to such
other address as may be hereafter specified by written notice by the
respective parties. Notice shall be considered given as of the date of
facsimile or hand delivery, one (1) calendar day after delivery to Federal
Express or similar overnight delivery service, or three (3) calendar days
after the date of mailing, independent of the date of actual delivery or
whether delivery is ever in fact made, as the case may be, provided the
giver of notice can establish the fact that notice was given as provided
herein. If notice is tendered pursuant to the provisions of this section
and is refused by the intended recipient thereof, the notice,
nevertheless, shall be considered to have been given and shall be
effective as of the date herein provided. Notwithstanding anything to the
contrary, all notices and demands for payment from the holder actually
received in writing by the Borrower shall be considered to be effective
upon the receipt thereof by the Borrower regardless of the procedure or
method utilized to accomplish delivery thereof to the Borrower.
	 
	13.	 	LIABILITY; ASSIGNABILITY; BINDING NATURE. If more than one person
or entity is executing this Promissory Note as a Borrower, all liabilities under this Promissory Note shall be
joint and several with respect to each of such persons or

Page 19 of 21

 

	 	 	entities. This Promissory Note may be assigned by the Lender or any holder at any time.
This Promissory Note shall inure to the benefit of and be enforceable by
the Lender and the Lender’s successors and assigns and any other person to
whom the Lender may grant an interest in the Borrower’s obligations to the
Lender, and shall be binding and enforceable against the Borrower and the
Borrower’s personal representatives, successors and assigns.
	 
	14.	 	INVALIDITY OF ANY PART. If any provision or part of any provision
of this Promissory Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Promissory
Note and this Promissory Note shall be construed as if such invalid,
illegal or unenforceable provision or part thereof had never been
contained herein, but only to the extent of its invalidity, illegality or
unenforceability.
	 
	15.	 	MAXIMUM RATE OF INTEREST; COMMERCIAL LOAN. Notwithstanding any
provision of this Promissory Note or the Loan Documents to contrary, the

Borrower shall not be obligated to pay interest pursuant to this
Promissory Note in excess of the maximum rate of interest permitted by the
laws of any state determined to govern this Promissory Note or the laws of
the United States applicable to loans in such state. If any provision of
this Promissory Note shall ever be construed to require the payment of any
amount of interest in excess of that permitted by applicable law, then the
interest to be paid pursuant to this Promissory Note shall be held subject
to reduction to the amount allowed under applicable law, and any sums paid
in excess of the interest rate allowed by law shall be applied in
reduction of the principal balance outstanding pursuant to this Promissory
Note. The Borrower acknowledges that it has been contemplated at all
times by the Borrower that the laws of the State of Maryland will govern
the maximum rate of interest that it is permissible for the holder of this
Promissory Note to charge the Borrower pursuant to this Promissory Note.
The Borrower warrants that this Promissory Note evidences a commercial
loan transaction within the meaning of Sections 12-101(c) and 12-103(e),
Commercial Law Article, Annotated Code of Maryland, as
amended, and that no proceeds of such loan transaction are being used by
the Borrower for any consumer purpose.
	 
	16.	 	CHOICE OF LAW; CONSENT TO VENUE AND JURISDICTION; ACTIONS AGAINST
LENDER. This Promissory Note shall be governed, construed and
interpreted strictly in accordance with the laws of the State of Maryland.
The Borrower consents to the jurisdiction and venue of the courts of any
county in the State of Maryland or the courts of Baltimore City, Maryland
or to the jurisdiction and venue of the United States District Court for
the District of Maryland in any action or judicial proceeding brought to
enforce, construe or interpret this Promissory Note. The Borrower agrees
to stipulate in any future proceeding that this Promissory Note is to be
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Maryland, even if it was, in fact,
executed and delivered elsewhere. Any action brought by the Borrower
against the Lender which is based, directly or indirectly, or in whole or
in part, upon this Promissory Note or any matter related to this
Promissory Note or any other Loan Document shall be brought only in the
courts of the State of Maryland.
	 
	17.	 	WAIVER OF JURY TRIAL. The Borrower (by its execution hereof) and
the Lender (by its acceptance of this Promissory Note) agree that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by the Borrower, the Lender or any successor or assign of the
Borrower or the Lender on or with respect to this Promissory Note or any
other Loan Document or which in any way relates, directly or indirectly,
to the obligations of the Borrower to the Lender pursuant to this
Promissory Note or any other Loan Document, or the dealings of the parties
with respect thereto, shall be tried only by a court and not by a jury.
The Borrower and the Lender hereby expressly waive any right to a trial by
jury in any such suit, action, or proceeding.

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned execute this Promissory Note under seal, as Borrower, as of the
date first written above.

	 	 	 	 	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	HALIFAX CORPORATION
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	By:
	 	 	 	(SEAL)	 	 
	
	 	 	 	
	 	 	 	 
	

	 	 	 	 	 	Joseph Sciacca	 	 	 	 
	Name:

	 	 	 	 	 	Chief Financial Officer	 	 	 	 
	

	 	

	 	 	 	5250 Cherokee Avenue	 	 	 	 
	

	 	 	 	 	 	Alexandria, Virginia 22312	 	 	 	 

Page 20 of 21

 

	 	 	 	 	 	 	 
	 	 	MICROSERV LLC
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	

	 	 	 	5250 Cherokee Avenue	 	 
	

	 	 	 	Alexandria, Virginia 22312	 	 
	 
	 	 	 	 	 	 
	 	 	HALIFAX ALPHANATIONAL ACQUISITION, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	(SEAL)
	

	 	 	 	
	 	 
	

	 	 	 	Joseph Sciacca	 	 
	

	 	 	 	Vice President, Secretary and Treasurer	 	 
	

	 	 	 	5250 Cherokee Avenue	 	 
	

	 	 	 	Alexandria, Virginia 22312	 	 

Notice Address For Lender:

Provident Bank

7799 Leesburg Pike

North Tower – Suite 200

Falls Church, Virginia 22043

Attention: E Gaye Boyette

With a copy to:

Provident Bank

Legal and Compliance Department

114 East Lexington Street

Baltimore, Maryland 21202

Attention: General Counsel

Page 21 of 21exv10w2

 

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made by and among
Halifax Corporation, a Virginia corporation (the “Company”), and L. L.
Whiteside, Charles A. Harper, Morris Horn and Dan Lane (each, a “Purchaser” and
collectively, the “Purchasers”).

RECITALS

     A. Pursuant to that certain Agreement and Plan of Merger (the “Merger
Agreement”) dated of even date herewith by and among the Company,
Halifax-AlphaNational Acquisition, Inc., a Texas corporation and subsidiary of
the Company (“Buyer”), AlphaNational Technology Services, Inc., a Texas
corporation (“Target”), and each of the Purchasers, Target will be merged with
and into Buyer through the consummation of the transactions more fully
described in the Merger Agreement (the “Transactions”).

     B. Pursuant to the Merger Agreement, each of the Purchasers will receive
from the Company and the Company will issue to each of the Purchasers shares of
the Company’s common stock, $0.24 par value per share (“Common Stock”). Such
issuance of shares of Common Stock pursuant to the Merger Agreement is referred
to herein as the “Offering”.

     C. To induce the Purchasers to accept Common Stock in the Offering and to
otherwise close the Transactions, the Company is willing, under certain
circumstances, to register under the Securities Act of 1933, as amended, and
the rules and regulations thereunder (collectively, the “Securities Act”), the
Common Stock issued to the Purchasers.

     D. The parties desire to impose certain rights and restrictions on the
transfer of the Common Stock issued pursuant to the Offering.

     NOW THEREFORE, intending to be legally bound, the parties hereto agree as
follows:

     1. Required Registration.

          (a) At any time after the twelve month anniversary of the closing of the
Transactions, but subject to Section 7.5.3 of the Merger Agreement, and
assuming the Company is eligible to register its securities as a secondary
offering on Form S-3 (or a successor form), holders of at least fifty percent
(50%) of the then outstanding shares of the Registrable Securities (as defined
in Section 8 hereof) may request, in writing, that the Company effect the
registration of Registrable Securities owned by such holders on a Form S-3 (or
a successor form) that may be used for the registration of Registrable
Securities. If the holders initiating the registration intend to distribute
the Registrable Securities by means of an underwriting, they shall so advise
the Company in their request. In the event such registration is underwritten,
the right of other holders to participate shall be conditioned on such holders’
participation in such underwriting. Upon receipt of any such request, the
Company shall promptly give written notice of such proposed registration to all
holders of the Registrable Securities and holders of Common Stock who have

 

 

been granted registration rights. Such holders shall have the right, by
giving written notice to the Company within thirty (30) days after the Company
provides its notice, to elect to have included in such registration a number of
their securities, including the Registrable Securities, as such holders may
request in such notice of election; provided that if the underwriter (if any)
managing the offering determines that, because of marketing factors, all of the
securities, including the Registrable Securities, requested to be registered by
all holders may not be included in the offering, then the number of shares to
be included in such offering shall be reduced, and shares shall be excluded
from such offering in a number deemed necessary by such managing underwriter.
In the event an exclusion of shares is necessary, subject to priority rights,
if any, of holders of shares subject to registration rights agreements dated
prior to the date hereof, if any (“Prior Registration Rights Holders”), the
Company shall include shares in such registration in the following order: (i)
first, the securities of the Prior Registration Rights Holders; (ii) second,
the securities of the Purchasers or their successors or assigns where such
persons hold Registrable Securities; and (iii) third, the other securities
requested to be included therein by the other holders of the Company securities
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the number of shares owned by each such holder.
To the extent that all of the Registrable Securities requested to be included
in the underwritten offering cannot be included, holders of Registrable
Securities shall participate in such offering pro rata, based on the number of
shares of Registrable Securities each holder proposed to include. Thereupon,
the Company shall, as expeditiously as possible, use its best efforts to effect
the registration (on a form that may be used for the registration of the
Registrable Securities) of all the Registrable Securities which the Company has
been requested to so register.

          (b) The Company shall not be required to effect more than one registration
pursuant to the first sentence of paragraph (a) above; provided, however, in
the event of a proration pursuant to the foregoing paragraph (a) which results
in any Purchaser and/or other holders of Registrable Securities having less
than all of the requested securities being included in a current registration,
then, to the extent of such unincluded Registrable Securities, each of the
Purchasers and/or other holders of Registrable Securities shall receive an
additional demand registration right upon the expiration of any blackout
period, upon the request of the holders of fifty percent (50%) of the remaining
Registrable Securities, and the Company shall be obligated to file an
additional registration statement on Form S-3 (or a successor form), which
registration statement shall contain a current prospectus, relating to the
Registrable Securities; and (ii) the Company shall use its best efforts to
effect the registration of such Registrable Securities as promptly as
practicable thereafter.

          (c) The Registration Expenses (as defined in Section 4) shall be paid by
the Company with respect to all registrations effected pursuant to this
Section.

          (d) The Company may delay the filing or effectiveness of any registration
statement for a period of up to 120 days after the date of a request pursuant
to this Section 1 if at the time of such request to register Registrable

Securities: (i) the Company is engaged or has fixed plans to engage within
thirty (30) days of the time of the request in a firm commitment underwritten
public offering, or (ii) the Company furnishes to the Purchasers and other
holders of Registrable Securities requesting registration a certificate signed
by a senior executive officer of the Company stating that the Company is
engaged in any other activity which, in the good faith

2

 

determination of the Company’s Board of Directors, is a material
non-public event which would be adversely affected by the requested
registration to the material detriment of the Company. In such case, the
Company may at its option direct that such request be delayed for a period not
in excess of 120 days from the effective date of such offering or the date of
commencement of such other material activity, as the case may be, provided,
however, the Company may not utilize the right set forth in this clause (ii)
more than once in any 12-month period.

     2. Piggyback Registration.

          (a) Each time that the Company proposes to register a public offering
solely of its authorized but unissued Common Stock or shares held in Treasury
(“Primary Shares”) or other securities, other than pursuant to a Registration
Statement on Form S-4 or Form S-8 or similar or successor forms (collectively,
“Excluded Forms”), the Company shall promptly give written notice of such
proposed registration to all holders of the Registrable Securities, which shall
offer such holders the right to request inclusion of any Registrable Securities
in the proposed registration statement.

          (b) Each holder of the Registrable Securities shall have twenty (20) days
or such longer period as shall be set forth in the notice from the receipt of
such notice to deliver to the Company a written request specifying the number
of shares of Common Stock such holder intends to sell and the holder’s intended
plan of disposition.

          (c) In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under Section 2(b) may specify that the Registrable Securities be
included in the underwriting on the same terms and conditions as the shares of
Common Stock, if any, otherwise being sold through underwriters under such
registration.

          (d) Upon receipt of a written request pursuant to Section 2(b), the
Company shall promptly use its best efforts to cause all such Registrable
Securities to be registered to the extent required to permit sale or
disposition as set forth in the written request.

          (e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than
the holders of Registrable Securities (such other shares hereinafter
collectively referred to as the “Other Shares”), would interfere with the
successful marketing of the securities proposed to be included in the
underwritten public offering, then the number of such shares to be included in
such underwritten public offering shall be reduced, and shares shall be
excluded from such underwritten public offering in a number deemed necessary by
such managing underwriter. In the event an exclusion of shares is necessary,
shares shall be included in the following order: (i) first, the Primary
Shares; (ii) second, the shares of Prior Registration Rights Holders requested
to be included in the registration pursuant to the terms of the registrations
rights agreement with such holders; (iii) third, the securities held by any of
the Purchasers or their respective successors or assigns requesting
registration; (iv) fourth, the Other Shares not included in items (i) and (ii)
above. To the extent all of the Registrable Securities requested to be
included in the underwritten

3

 

public offering can not be included, holders of Registrable Securities
shall participate in such offering pro rata based on the number of shares of
Registrable Securities each holder proposes to include.

          (f) All shares of Common Stock that are not included in the underwritten
public offering shall be withheld from the market by the holders thereof for a
period, not to exceed ninety (90) days following any public offering, that the
managing underwriter reasonably determines as necessary in order to effect the
underwritten public offering. The holders of such shares shall execute such
documentation as the managing underwriter reasonably requests to evidence this
lock-up.

     3. Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, the Company shall use its reasonable best efforts
to effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof; and pursuant
thereto the Company shall as expeditiously as possible:

          (a) prepare and file with the Securities and Exchange Commission (the
“Commission”) a registration statement on the appropriate form under the
Securities Act, which form shall be available for the sale of such Registrable
Securities in accordance with the intended method or methods of distribution
thereof, and use its commercially reasonable efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to the counsel selected by the holders of a majority of the
Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents shall be subject to the
review and comment of such counsel);

          (b) notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the
Commission, such amendments, post-effective amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary or appropriate to keep such registration statement effective for
the period required for sale of the Registrable Securities, (provided that in
no event shall the Company be obligated to keep such registration statement
effective (i) if the Company is eligible to use the Form S-3, at such time as
there are no longer any Registrable Securities outstanding, and (ii) if the
Company is not eligible to register on Form S-3, until such time as each of the
Purchasers are eligible to sell all of the Registrable Securities pursuant to
Rule 144 (k)), cause such prospectus as so supplemented to be filed as required
under the Securities Act, and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement or
supplement to the prospectus;

          (c) if requested by the managing underwriter or underwriters or a holder
of Registrable Securities being sold in connection with an underwritten
offering, immediately incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriters and the holders of a
majority in interest of the Registrable Securities being sold reasonably agree
should be included therein relating to the plan of distribution with respect to

4

 

such Registrable Securities, including, without limitation, information
with respect to the principal amount of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering, and make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment;

          (d) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;

          (e) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
where such registration or qualification is required as any seller reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller (provided
that the Company shall not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this subparagraph (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction);

          (f) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which the prospectus included in such registration statement as then in effect,
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made, and, at the request of any such seller, the Company
shall promptly prepare a supplement or amendment to such prospectus so that,
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact required to
be stated therein or omit to state any fact necessary to make the statements
therein not misleading;

          (g) cause all such Registrable Securities to be listed on the securities
exchange on which similar securities issued by the Company are then listed or
traded, and, if not so listed or traded, to be listed on the AMEX;

          (h) cooperate with the selling holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; enable such Registrable Securities to be in
such denominations and registered in such names as the selling holders or the
managing underwriters, if any, may request at least ten Business Days prior to
any sale of Registrable Securities; and provide a transfer agent and registrar
for all such Registrable Securities not later than the effective date of such
registration statement;

          (i) enter into such customary agreements (including, if there is an
underwriter, underwriting agreements in customary form including, without
limitation, the requirement to

5

 

obtain an opinion of counsel to the Company and a “comfort letter” from
the independent public accountants to the Company in the usual and customary
form for such an underwritten offering);

          (j) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company that are customary, and cause the
Company’s officers, directors, employees and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;

          (k) cooperate, and cause the Company’s officers, directors, employees and
independent accountants to cooperate, with the selling holders of Registrable
Securities and the managing underwriters, if any, in the sale of the
Registrable Securities and take any actions necessary to promote, facilitate or
effectuate such sale;

          (l) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, an earning statement covering the period of at
least twelve months, beginning with the first fiscal quarter beginning after
the effective date of the registration statement, which earning statement shall
satisfy the provisions of Section 11(a) of the Securities Act;

          (m) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and

          (n) otherwise use its best effects to take all other steps necessary to
effect the registration of the Registrable Securities.

     4. Registration Expenses.

          (a) All expenses incident to the Company’s performance of or compliance
with this Agreement, including without limitation all registration and filing
fees (including, if applicable, the fees and expenses of any “qualified
independent underwriter” and its counsel as may be required under the rules and
regulations of the NASD), fees and expenses of compliance with securities or
blue sky laws (including fees and disbursements of counsel for the underwriters
or selling holders in connection with blue sky qualifications and determination
of their eligibility for investment under applicable laws), printing expenses,
messenger, telephone and delivery expenses, fees and disbursements of
custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants (including the expenses of any special
audit and “cold comfort” letters required by or incident to such performance),
underwriters (excluding underwriters’ discounts and commissions) and other
Persons retained by the Company (all such expenses being herein called
“Registration Expenses”), shall be borne by the Company and the Company shall,
in any event, pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the

6

 

expense of any annual audit or quarterly review, the expense of any
liability insurance if such insurance coverage is obtained by the Company and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the American Stock Exchange.

          (b) Each holder of securities included in any registration hereunder shall
pay those expenses which are not Registration Expenses which are allocable to
the registration of such holder’s securities so included (such as the fees and
disbursements of any counsel engaged by any holder of the Registrable
Securities), and any such expenses not so allocable, such as the underwriting
discount and any selling commissions shall be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.

     5. Indemnification and Contribution.

          (a) The Company agrees to indemnify and hold harmless each holder of
Registrable Securities which is included in a registration statement pursuant
to the terms of this Agreement, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses, including without limitation
attorneys’ fees, except as limited by Paragraph 5(c), which arise out of or are
based upon: (i) any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, or with respect to a prospectus,
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
holder expressly for use therein or by such holder’s failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such holder with a sufficient number of
copies of the same; and (ii) any violation by the Company of the Securities
Act, the Exchange Act (as defined below), any applicable state securities law
or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law. In connection with an underwritten offering,
the Company shall indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.

          (b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company and any
underwriter reasonably requests for use in connection with any such
registration statement or prospectus and shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses, including without limitation attorneys’ fees, except as limited
by Paragraph 5(c), resulting from any untrue or alleged untrue statement of
material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make

7

 

the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder.

          (c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall
not impair any Person’s right to indemnification hereunder to the extent such
failure has not materially prejudiced the indemnifying party) and (ii) unless
in such indemnified party’s reasonable judgment (based upon a written opinion
of counsel) a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall
not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent shall not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim.

          (d) If the indemnification provided for in this Section 5 is unavailable
to an indemnified party under paragraphs (a) or (b) hereof in respect to any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the Company and the holder of
Registrable Securities in connection with the statements or omissions that
resulted in such losses, claim, damages, liabilities or expenses. The relative
fault of the Company and the holder of Registrable Securities in connection
with the statements that resulted in such losses, claims, liabilities or
expenses shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of material facts or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the holder of the Registrable Securities and the parties relative
intent, knowledge, access to information and opportunity to correct such
statement or omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 5(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or, except as provided in Section 5(c), defending any such action
or claim.

          (e) Notwithstanding any other provision of this Section, the liability of
any holder of Registrable Securities for indemnification or contribution under
this Section shall be individual to each holder and shall not exceed an amount
equal to the number of shares sold by such holder of Registrable Securities
multiplied by the net amount per share which such holder receives in such
underwritten offering.

          (f) The indemnification and contribution provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by
or on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall

8

 

survive the transfer of securities.

     6. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person’s securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such underwriting
arrangements; provided that no holder of Registrable Securities included in any
underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters other than representations and
warranties directly regarding such holder and such holder’s intended method of
distribution.

     7. Restrictions on Transfer of Common Stock. Prior to
the twelve month anniversary of the Closing Date (as defined in the Merger
Agreement) and/or such later date in accordance with Section 7.5.3 of the
Merger Agreement, none of the Purchasers shall transfer, sell, assign, pledge,
encumber or otherwise dispose of (collectively, “Transfer”) their respective
shares of Common Stock issued pursuant to the Offering without the prior
written consent of the Company. Thereafter, Transfers, if any, of the Common
Stock issued pursuant to the Offering shall be in accordance with all
securities laws applicable thereto.

     8. Definitions.

     “AMEX” means the American Stock Exchange.

     “Exchange Act” means the Securities Exchange Act of
1934, as amended.

     “NASD” means the National Association of Securities
Dealers.

     “Person” means any individual, corporation,
partnership, limited liability company, trust, estate, association,
cooperative, government or governmental entity (or any branch, subdivision or
agency thereof) or any other entity.

     “Registrable Securities” means (i) any of the shares of
Common Stock issued in the Offering and (ii) any other securities that
subsequently may be issued or issuable with respect to such shares of Common
Stock as a result of a stock split or dividend or any sale, transfer,
assignment or other transaction involving such shares of the Company and any
securities into which such shares of Common Stock may thereafter be changed as
a result of merger, consolidation, recapitalization or other similar
transaction. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when they have been distributed to the
public pursuant to an offering registered under the Securities Act or eligible
to be sold to the public pursuant to Rule 144(k) under the Securities Act (or
any such rule then in force) or, if held by an affiliate of the Company, when
all such securities of such person are eligible for resale pursuant to Rule 144
and could be sold in one transaction in accordance with the volume limitations
contained in Rule 144(e)(1)(i). For purposes of this Agreement, a Person shall
be deemed to be a holder of Registrable Securities whenever such Person has the
right to acquire directly or indirectly such Registrable Securities (upon
conversion or exercise in connection with a

9

 

transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.

     “Securities Act” means the Securities Act of 1933, as
amended.

     9. Rule 144. In order to permit each of the Purchasers
to sell the securities of the Company that such Purchaser holds from time to
time pursuant to Rule 144 promulgated by the Commission or any successor to
such rule or any other rule or regulation of the Commission that may at any
time permit such Purchaser to sell his securities to the public without
registration (“Resale Rules”), the Company will:

          (a) comply with all rules and regulations of the Commission applicable in
connection with use of the Resale Rules;

          (b) make and keep adequate and current public information available, as
those terms are understood and defined in the Resale Rules, at all times;

          (c) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act;

          (d) furnish annually to each of the Purchasers material containing the
information required by Rule 14a-3(b) under the Exchange Act;

          (e) furnish to any Purchaser promptly upon request (i) a written statement
by the Company that it has complied with the reporting requirements of the
Resale Rules, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and any other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing such Purchaser of any rule or regulation of
the Commission which permits the selling of any shares of Common Stock held by
such Purchaser without registration; and

          (f) take any action (including cooperating with any Purchaser to cause the
transfer agent to remove any restrictive legend on certificates evidencing the
shares of Common Stock held by such Purchaser) as shall be reasonably requested
by any Purchaser or which shall otherwise facilitate the sale of shares of
Common Stock held by such Purchaser from time to time pursuant to the Resale
Rules.

     10. Miscellaneous.

          (a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement, or grant to any person any registration rights,
(“New Registration Rights”) with respect to securities of the Company if such
New Registration Rights are, in the reasonable opinion of the Purchasers,
superior in any fashion to the registration rights granted to the Purchasers
pursuant to this Agreement, unless the holders of a majority of the Registrable
Securities then outstanding consent in writing to such Registration Rights or
such other inconsistent agreement; provided however, this limitation
shall not apply to

10

 

any registration rights currently outstanding or which the
Company is legally obligated to grant as of the date hereof.

          (b) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may be amended or waived only
upon the prior written consent of the Company and holders of a majority of the
Registrable Securities.

          (c) Successors and Assigns. All covenants and
agreements in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which are
for the benefit of purchasers or holders of the Registrable Securities are also
for the benefit of, and enforceable by, any subsequent holder of the
Registrable Securities. A person is deemed to be a holder of the Registrable
Securities whenever such person is the registered holder of the Registrable
Securities. Upon the transfer of any Registrable Securities, the transferring
holder of the Registrable Securities shall cause the transferee to execute and
deliver to the Company a counterpart of this Agreement.

          (d) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

          (e) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, including by facsimile, any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same Agreement.

          (f) Descriptive Heading. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.

          (g) Governing Law. The corporate law of Virginia shall
govern all issues and questions concerning the relative rights of the Company
and its shareholders. All issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement shall be governed
by, and construed in accordance with, the laws of the Commonwealth of Virginia,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than Virginia.

          (h) Neutral Construction. In view of the fact that
each of the parties hereto has been represented by its own counsel (or has had
the opportunity to consult with counsel of its choice) and this Agreement has
been fully negotiated by all parties, the legal principle that ambiguities in a
document are construed against the draftsperson of that document shall not
apply to this Agreement.

          (i) Notices. All notices, requests, demands and other
communications required

11

 

or which may be given hereunder shall be in
writing and shall be deemed to have been duly given, made and received only
when delivered (personally, by courier service such as Federal Express, or by
other messenger) or when deposited in the United States mails, registered or
certified mail, postage prepaid, return receipt requested, addressed as set
forth below:

	 	 	 	 	 
	

	 	(a)
	 	if to the Purchasers, to:
	 
	 	 	 	 
	

	 	 	 	L. L. Whiteside
	

	 	 	 	1618 Forest Bend Lane
	

	 	 	 	Keller, Texas 76248
	 
	 	 	 	 
	

	 	 	 	Morris Horn
	

	 	 	 	3205 Denbury Street
	

	 	 	 	Fort Worth, TX 76133
	 
	 	 	 	 
	

	 	 	 	Dan Lane
	

	 	 	 	3921 Hamilton Avenue
	

	 	 	 	Fort Worth, TX 76107
	 
	 	 	 	 
	

	 	 	 	Charles A. Harper
	

	 	 	 	338 Pine Top Drive
	

	 	 	 	Valentines, VA 23887
	 
	 	 	 	 
	

	 	 	 	with a copy, given in the manner prescribed above, to:
	 
	 	 	 	 
	

	 	 	 	Holland, Johns, Schwartz & Penny LLP
	

	 	 	 	306 West Seventh Street
	

	 	 	 	Suite 500
	

	 	 	 	Fort Worth, TX 76102-4982
	

	 	 	 	Attn: Margaret E. Holland
	

	 	 	 	Telefax:
	 
	 	 	 	 
	

	 	(b)
	 	If to the Company, to:
	 
	 	 	 	 
	

	 	 	 	Halifax Corporation
	

	 	 	 	5250 Cherokee Avenue
	

	 	 	 	Alexandria, Virginia 22312
	

	 	 	 	Attn: Joseph Sciacca, Chief Financial Officer
	

	 	 	 	Telefax: (703) 658-2426
	 
	 	 	 	 
	

	 	 	 	with a copy, given in the manner prescribed above, to
	 
	 	 	 	 
	

	 	 	 	Blank Rome LLP
	

	 	 	 	One Logan Square
	

	 	 	 	Philadelphia, PA 19103
	

	 	 	 	Attn: Barry H. Genkin,
Esq. 

Telefax: (215) 832-5514

12

 

               In addition, notice by mail shall be by air mail if posted outside of the
continental United States.

               Any party may alter the addresses to which communications or copies are to
be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.

          (j) Use of Pronouns. All pronouns and any variations
thereof used herein shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or entities referred
to may require. Without in any way limiting the generality of the foregoing,
use of the pronoun “he” or “his” herein with respect to any Purchaser shall be
deemed to refer to any Purchaser that the context requires, regardless of
whether such Purchaser is male, female or an entity.

[Signature page follows]

13

 

     IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement this 30th day of September 2004.

	 	 	 	 	 
	 	 	HALIFAX CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	 	 	Name: Charles L. McNew
	 	 	Title: President and Chief Executive Officer
	 
	 	 	 	 
	 	 	PURCHASERS:
	 
	 	 	 	 
	 	 	

	 	 	L.L. Whiteside
	 
	 	 	 	 
	 	 	

	 	 	Charles A. Harper
	 
	 	 	 	 
	 	 	

	 	 	Morris Horn
	 
	 	 	 	 
	 	 	

	 	 	Daniel Lane

[Signature page to Registered Rights agreement]

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