Document:

exv4w10

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT(ASSET BASED)
	 	EXHIBIT 4.10

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call/Coll	 	Account	 	Officer	 	Initials
	$8,000,000.00
	 	 	03-06-2002	 	 	 	04-06-2004	 	 	 	76-69310769	 	 	 	 	 	 	 	 	 	 	MTL	 	 
	
 
	

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

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

	
 

	 	 	 	 	 	 	 
	Borrower:	 	
Halifax Corporation

5250 Cherokee Avenue

Alexandria, VA 22312
	 	Lender:
	 	Southern Financial Bank

37 E. Main Street

Warrenton, VA 20186

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated March 6, 2002, is made and
executed between Halifax Corporation (“Borrower”) and Southern Financial
Bank (“Lender”) on the following terms and conditions. Borrower has
received prior commercial loans from Lender or has applied to Lender for a
commercial loan or loans or other financial accommodations, including those
which may be described on any exhibit or schedule attached to this
Agreement (“Loan”). Borrower understands and agrees that: (A) in granting,
renewing, or extending any Loan, Lender is relying upon Borrower’s
representations, warranties, and agreements as set forth in this Agreement,
and (B) all such Loans shall be and remain subject to the terms and
conditions of this Agreement.

TERM.  This Agreement shall be effective as of
March 6, 2002, and shall continue in full force and effect until such time
as all of Borrower’s Loans in favor of Lender have been paid in full,
including principal, interest, costs, expenses, attorneys’ fees, and other
fees and charges, or until April 6, 2004.

ADVANCE AUTHORITY.  The following persons currently are authorized, except
as provided in this paragraph, to request advances and authorize payments
under the line of credit until Lender receives from Borrower, at Lender’s
address shown above, written notice of revocation of their authority:
Charles L. McNew, President of Halifax Corporation; and Joseph Sciacca, Vice
President-Finance of Halifax Corporation. Lender shall make advances to the
Borrower from time to time during the term of the loan upon Borrower’s
request through ARTS, provided that the outstanding principal amount of
such advances may not exceed the lesser of $8,000,000.00 or the Borrowing
base. 

LINE OF CREDIT.  Lender agrees to make Advances to Borrower from time to
time from the date of this Agreement to the Expiration Date, provided the
aggregate amount of such Advances outstanding at any time does not exceed
the Borrowing Base. Within the foregoing limits, Borrower may borrow,
partially or wholly prepay, and reborrow under this Agreement as follows:

		
	 	Conditions Precedent to Each Advance.  Lender’s obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:

		
	 	(1) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered
by Borrower to Lender.

		
	 	(2) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request

		
	 	(3) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall
be in full force and effect.

		
	 	(4) All guaranties required by Lender for the credit facility(ies)
shall have been executed by each Guarantor, delivered to Lender, and
be in full force and effect.

		
	 	(5) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower’s Accounts, Inventory, Equipment
books, records, and operations, and Lender shall be satisfied as to
their condition.

		
	 	(6) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due
and payable.

		
	 	(7) There shall not exist at the time of any Advance a condition
which would constitute an Event of Default under this Agreement, and
Borrower shall have delivered to Lender the compliance certificate
called for in the paragraph below titled “Compliance Certificate.”

		
	 	Making Loan Advances.  Advances under this credit facility, as well as
directions for payment from Borrower’s accounts, may be requested orally
or in writing by authorized persons. Lender may, but need not, require
that all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the
benefit of Borrower (1) when credited to any deposit account of Borrower
maintained with Lender or (2) when advanced in accordance with the
instructions of an authorized person. Lender, at its option, may set a
cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.

		
	 	Mandatory Loan Repayments.  If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay
to Lender an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base. On the
Expiration Date, Borrower shall pay to Lender in full the aggregate
unpaid principal amount of all Advances then outstanding and all accrued
unpaid interest, together with all other applicable fees, costs and
charges, if any, not yet paid.

		
	 	Minimum Interest Payment.  Borrower recognizes that Lender has incurred
and will continue to incur certain costs and expenses in connection with
establishing, maintaining, servicing, and administering the credit
facility. To ensure that Lender is able to recover such costs and
expenses, Borrower agrees that, notwithstanding any other provision of
this Agreement, the promissory note for the credit facility, or the
Related Documents, Lender shall be entitled to collect a minimum monthly
interest charge of Prime rate plus 0.75%, which Borrower hereby promises
and agrees to pay.

		
	 	Loan Account.  Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits
and credits as shall be appropriate in connection with the credit
facility. Lender shall provide Borrower with periodic statements of
Borrower’s account, which statements shall be considered to be correct
and conclusively binding on Borrower unless Borrower notifies Lender to
the contrary within thirty (30) days after Borrower’s receipt of any such
statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Primary Credit Facility and performance
of all other Loan, obligations and duties owed by Borrower to Lender,
Borrower (and others, if required) shall grant to Lender Security Interests
in such property and assets as Lender may require. Lender’s Security Interests
in the Collateral shall be continuing liens and shall include the proceeds
and products of the Collateral, including without limitation the proceeds of
any insurance. With respect to the Collateral, Borrower agrees and represents
and warrants to Lender:

		
	 	Perfection of Security Interests.  Borrower agrees to execute financing
statements and all documents perfecting Lender’s Security Interest and to
take whatever other actions are requested by Lender to perfect and
continue Lender’s Security Interests in the Collateral. Upon request of
Lender, Borrower will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Borrower will note
Lender’s interest upon any and all chattel paper and instruments if not
delivered to Lender for possession by Lender. Contemporaneous with the
execution of this Agreement, Borrower will execute one or more UCC
financing statements and any similar statements as may be required by
applicable law and

 

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 
	Loan No: 76-69310769	 	
(Continued)
	 	Page 2
	

        

		
	 	Lender will file such financing statements and all such similar statements
in the appropriate location or locations. Borrower hereby appoints Lender
as its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue any Security Interest. Lender
may at any time, and without further authorization from Borrower, file a
carbon, photograph, facsimile, or other reproduction of any financing
statement for use as a financing statement. Borrower will reimburse Lender
for all expenses for the perfection, termination, and the continuation of
the perfection of Lender’s security interest in the Collateral. Borrower
promptly will notify Lender before any change in Borrower’s name including
any change to the assumed business names of Borrower. Borrower also
promptly will notify Lender before any change in Borrower’s Social Security
Number or Employer Identification Number. Borrower further agrees to notify
Lender in writing prior to any change in address or location of Borrower’s
principal governance office or should Borrower merge or consolidate with
any other entity.

		
	 	Collateral Records.  Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender’s representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings. Records related to Accounts
(Receivables) are or will be located at 5250 Cherokee Avenue, Alexandria,
VA. 22312. With respect to the Inventory, Borrower agrees to keep and
maintain such records as Lender may require, including without limitation
information concerning Eligible Inventory and records itemizing and
describing the kind, type, quality, and quantity of Inventory, Borrower’s
Inventory costs and selling prices, and the daily withdrawals and additions
to Inventory. Records related to Inventory are or will be located at 5250
Cherokee Avenue, Alexandria, Va. 22312. With respect to the Equipment,
Borrower agrees to keep and maintain such records as Lender may require,
including without limitation information concerning Eligible Equipment and
records itemizing and describing the kind, type, quality, and quantity of
Equipment, Borrower’s Equipment costs, and the daily withdrawals and
additions to Equipment. Records related to Equipment are or will be located
at 5250 Cherokee Avenue, Alexandria, VA. 2312. The above is an accurate and
complete list of all locations at which Borrower keeps or maintains
business records concerning Borrower’s collateral.

		
	 	Collateral Schedules.  Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of
Accounts, Inventory and Equipment and schedules of Eligible Accounts,
Eligible Inventory and Eligible Equipment, in form and substance
satisfactory to the Lender. Thereafter supplemental schedules shall be
delivered according to the following schedule: With respect to Eligible
Accounts, schedules shall be delivered semi-monthly as set up within ARTS
program.

		
	 	Representations and Warranties Concerning Accounts.  With respect to the
Accounts, Borrower represents and warrants to Lender: (1) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (2) All Account information listed on schedules delivered to
Lender will be true and correct, subject to immaterial variance; and (3)
Lender, its assigns, or agents shall have the right at any time and at
Borrower’s expense to
inspect, examine, and audit Borrower’s records and to confirm with
Account Debtors the accuracy of such Accounts.

		
	 	Representations and Warranties Concerning Inventory.  With respect to the
Inventory, Borrower represents and warrants to Lender: (1) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Inventory; (2) All Inventory values listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; (3) The value of
the Inventory will be determined on a consistent accounting basis; (4)
Except as agreed to the contrary by Lender in writing, all Eligible
Inventory is now and at all times hereafter will be in Borrower’s physical
possession and shall not be held by others on consignment, sale on
approval, or sale or return; (5) Except as reflected in the Inventory
schedules delivered to Lender, all Eligible Inventory is now and at all
times hereafter will be of good and merchantable quality, free from
defects; (6) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender’s prior written consent, and, in such event, Borrower will
concurrently at the time of bailment cause any such bailee, warehouseman,
or similar party to issue and deliver to Lender, in form acceptable to
Lender, warehouse receipts in Lender name evidencing the storage of
Inventory; and (7) Lender, its assigns, or agents shall have the right at
any time and at Borrower’s expense to inspect and examine the Inventory and
to check and test the same as to quality, quantity, value, and condition.

		
	 	Representations and Warranties Concerning Equipment.  With respect to the
Equipment, Borrower represents and warrants to Lender: (1) All Equipment
represented by Borrower to be Eligible Equipment for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Equipment; (2) All Equipment values listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; (3) The value of
the Equipment will be determined on a consistent accounting basis; (4)
Except as agreed to the contrary by Lender in writing, all Eligible
Equipment is now and at all times hereafter will be in Borrower’s physical
possession; (5) Except as reflected in the Equipment schedules delivered to
Lender, all Eligible Equipment is now and at all times hereafter will be of
good and merchantable quality, free from defects; (6) Eligible Equipment is
not now and will not at any time hereafter be stored with a bailee,
warehouseman, or similar party without Lender’s prior written consent, and,
in such event, Borrower will concurrently at the time of bailment cause any
such bailee, warehouseman, or similar party to issue and deliver to Lender,
in form acceptable to Lender, warehouse receipts in Lender name evidencing
the storage of Equipment; and (7) Lender, its assigns, or agents shall have
the right at any time and at Borrower’s expense to inspect and examine the
Equipment and to check and test the same as to quality, quantity, value,
and condition

		
	 	Remittance Account. Borrower agrees that Lender may at any time require
Borrower to institute procedures whereby the payments and other proceeds of
the Accounts shall be paid by the Account Debtors under a remittance account
or lock box arrangement with Lender, or Lender’s agent, or with one or more
financial institutions designated by Lender. Borrower further agrees that, if
no Event of Default exists under this Agreement, any and all of such funds
received under such a remittance account or lock box arrangement shall, at
Lender’s sole election and discretion, either be (1) paid or turned over to
Borrower; (2) deposited into one or more accounts for the benefit of
Borrower (which deposit accounts shall be subject to a security assignment
in favor of Lender); (3) deposited into one or more accounts for the joint
benefit of Borrower and Lender (which deposit accounts shall likewise be
subject to a security assignment in favor of Lender); (4) paid or turned
over to Lender to be applied to the Indebtedness in such order and priority
as Lender may determine within its sole discretion; or (5) any combination
of the foregoing as Lender shall determine from time to time. Borrower
further agrees that, should one or more Events of Default exist, any and all
funds received under such a remittance account or lock box arrangement shall
be paid or turned over to Lender to be applied to the Indebtedness, again in
such order and priority as Lender may determine within its sole discretion.

CONDITIONS PRECEDENT TO EACH ADVANCE.  Lender’s obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender’s satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.

		
	 	Loan Documents.  Borrower shall provide to Lender the following documents for
the Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests in the Collateral; (3) financing statements and all other
documents perfecting Lender’s Security Interests; (4) evidence of insurance
as required below; (5) subordinations; (6) together with all such Related
Documents as Lender may require for the Loan; all in form and substance
satisfactory to Lender and Lender’s counsel.

		
	 	Borrower’s Authorization.  Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions,
authorizations, documents and instruments as Lender or its counsel, may
require.

		
	 	Fees and Expenses Under This Agreement.  Borrower shall have paid to
Lender all fees, costs, and expenses specified in this Agreement and the
Related Documents as are then due and payable.

 

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 
	Loan No: 76-69310769	 	
(Continued)
	 	Page 3
	

        

		
	 	Representations and Warranties.  The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.

		
	 	No Event of Default.  There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement
or under any Related Document.

REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:

		
	 	Organization.  Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the Commonwealth of Virginia. Borrower
is duly authorized to transact business in all other states in which
Borrower is doing business, having obtained all necessary filings,
governmental licenses and approvals for each state in which Borrower is
doing business. Specifically, Borrower is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. Borrower has the full power and authority to own its properties
and to transact the business in which it is presently engaged or presently
proposes to engage. Borrower maintains an office at 5250 Cherokee Avenue,
Alexandria, VA 22312. Unless Borrower has designated otherwise in writing,
the principal office is the office at which Borrower keeps its books and
records including its records concerning the Collateral. Borrower will
notify Lender prior to any change in the location of Borrower’s state of
organization or any change in Borrower’s name. Borrower shall do all things
necessary to preserve and to keep in full force and effect its existence,
rights and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrower’s
business activities.

		
	 	Assumed Business Names.  Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete
list of all assumed business names under which Borrower does business:
None.

		
	 	Authorization.  Borrower’s execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of Borrower’s
articles of incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (2) any law, governmental
regulation, court decree, or order applicable to Borrower or to Borrower’s
properties.

		
	 	Financial Information.  Each of Borrower’s financial statements supplied to
Lender truly and completely disclosed Borrower’s financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower’s financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.

		
	 	Legal Effect.  This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will
constitute legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.

		
	 	Properties.  Except as contemplated by this Agreement or as previously disclosed in
Borrower’s financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower’s properties
free and clear of all Security Interests, and has not executed any security
documents or financing statements relating to such properties. All of
Borrower’s properties are titled in Borrower’s legal name, and Borrower has
not used, or filed a financing statement under, any other name for at least
the last five (5) years.

		
	 	Hazardous Substances.  Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower’s ownership of Borrower’s Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance by any person on, under, about or from
any of the Collateral. (2) Borrower has no knowledge of, or reason to
believe that there has been (a) any breach or violation of any Environmental
Laws; (b) any use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance on, under, about or
from the Collateral by any prior owners or occupants of any of the
Collateral; or (c) any actual or threatened litigation or claims of any kind
by any person relating to such matters. (3) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the Collateral shall
use, generate, manufacture, store, treat, dispose of or release any
Hazardous Substance on, under, about or from any of the Collateral; and any
such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation all Environmental Laws. Borrower authorizes Lender and its agents
to enter upon the Collateral to make such inspections and tests as Lender
may deem appropriate to determine compliance of the Collateral with this
section of the Agreement. Any inspections or tests made by Lender shall be
at Borrower’s expense and for Lender’s purposes only and shall not be
construed to create any responsibility or liability on the part of Lender to
Borrower or to any other person. The representations and warranties
contained herein are based on Borrower’s due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify and hold harmless Lender
against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any
use, generation, manufacture, storage, disposal, release or threatened
release of a hazardous waste or substance on the Collateral. The provisions
of this section of the Agreement, including the obligation to indemnify,
shall survive the payment of the Indebtedness and the termination,
expiration or satisfaction of this Agreement and shall not be affected by
Lender’s acquisition of any interest in any of the Collateral, whether by
foreclosure or otherwise.

		
	 	Litigation and Claims.  No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which may
materially adversely affect Borrower’s financial condition or properties,
other than litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.

		
	 	Taxes.  To the best of Borrower’s knowledge, all of Borrower’s tax returns
and reports that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.

		
	 	Lien Priority.  Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or affecting
any of the Collateral directly or indirectly securing repayment of
Borrower’s Loan and Note, that would be prior or that may in any way be
superior to Lender’s Security Interests and rights in and to such
Collateral.

		
	 	Binding Effect.  This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof, as
well as upon their successors. representatives and assigns, and are
legally enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS.  Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:

		
	 	Notices of Claims and Litigation.  Promptly inform Lender in writing of (1)
all material adverse changes in Borrower’s financial condition, and (2) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower
or the financial condition of any Guarantor.

 

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 
	Loan No: 76-69310769	 	
(Continued)
	 	Page 4
	

        

		
	 	Financial Records.  Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit
Borrower’s books and records at all reasonable times.

		
	 	Financial Statements.  Furnish Lender with the following:

		
	 	Annual Statements.  As soon as available, but in no event later than
one-hundred-twenty (120) days after the end of each fiscal year,
Borrower’s balance sheet and income statement for the year ended, audited
by a certified public accountant satisfactory to Lender.

		
	 	Interim Statements.  As soon as available, but in no event later than
thirty (30) days after the end of each fiscal quarter, Borrower’s balance
sheet and profit and loss statement for the period ended, audited by a
certified public accountant satisfactory to Lender.

		
	 	Tax Returns.  As soon as available, but in no event later than
one-hundred-twenty (120) days after the applicable filing date for the
tax reporting period ended, Federal and other governmental tax returns,
prepared by a certified public accountant satisfactory to Lender.

		
	 	Additional Requirements.  The borrower will be required to submit to
lender, along with its audited annual financial statement, a list
including contact name, address and phone number of Borrower’s then
current clients. If at any time during the term of the loan the equity
position of the Borrower falls below the current position of a negative
$1,400,000.00, such a fall will constitute an event of default under the
Loan and pursuant to the Loan Documents.

		
	 	All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.

		
	 	Additional Information.  Furnish such additional information and statements, as
Lender may request from time to time.

		
	 	Insurance.  Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower’s
properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days prior written notice to
Lender. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission
or default of Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such lender’s loss payable or other
endorsements as Lender may require.

		
	 	Insurance Reports.  Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.

		
	 	Subordination.  Prior to disbursement of any Loan proceeds, deliver to Lender a
subordination agreement on Lender’s forms, executed by Borrower’s creditor named
below, subordinating all of Borrower’s indebtedness to such creditor, or such
lesser amount as may be agreed to by Lender in writing, and any security
interests in collateral securing that indebtedness to the Loans and security
interests of Lender.

	 	 	 	 	 
	Name of Creditor	 	Total Amount of Debt
	
	 	

	Research Industries
	 	 	$4,000,000.00	 

		
	 	Other Agreements.  Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.

		
	 	Loan Fees, Charges and Expenses.  In addition to all other agreed upon fees,
charges, and expenses, pay the following: The borrower shall pay to the lender a
commitment fee at the rate of 0.25% per annum on the average daily amount of the
excess of the Revolving Commitment over the aggregate outstanding principal
amount of advances. Such commitment fee is due quarterly in arrears commencing
on April 1, 2002 and continuing until termination of the Loan. Loan fee of
$40,000.00 is a non-refundable fee and is payable in two equal installments of
$20,000.00 upon (1) Loan closing, and (2) the first (1st) anniversary of Loan
closing. Upon Borrower acceptance of this Commitment this total fee is
considered earned by Lender. 

		
	 	Loan Proceeds.  Use all Loan proceeds solely for the following specific purposes:
Payoff existing Account Receivable line of credit currently held at Bank of
America.

		
	 	Taxes, Charges and Liens.  Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower’s properties, income, or profits.

		
	 	Performance.  Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.

		
	 	Operations.  Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner.

		
	 	Environmental Studies.  Promptly conduct and complete, at Borrower’s expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.

		
	 	Compliance with Governmental Requirements.  Comply with all laws, ordinances,
and regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act. Borrower may contest in good faith any such law,
ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, satisfactory to Lender, to protect
Lender’s interest.

		
	 	Inspection.  Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower’s other
properties and to examine or audit Borrower’s books, accounts, and records and
to make copies and memoranda of Borrower’s books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party. Borrower upon
request of Lender, shall

 

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 
	Loan No: 76-69310769	 	
(Continued)
	 	Page 5
	

        

		
	 	notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower’s expense.

		
	 	Compliance Certificates.  Unless waived in writing by Lender, provide Lender
at least annually, with a certificate executed by Borrower’s chief financial
officer, or other officer or person acceptable to Lender, certifying that
the representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as of
the date of the certificate, no Event of Default exists under this Agreement.

		
	 	Environmental Compliance and Reports.  Borrower shall comply in all respects
with any and all Environmental Laws; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on Borrower’s
part or on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning any
intentional or unintentional action or omission on Borrower’s part in
connection with any environmental activity whether or not there is damage to
the environment and/or other natural resources.

		
	 	Additional Assurances.  Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender
or its attorneys may reasonably request to evidence and secure the Loans and
to perfect all Security Interests.

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

		
	 	NEGATIVE COVENANTS.  Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

		
	 	Indebtedness and Liens.  (1) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (2) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower’s assets
(except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’s
accounts, except to Lender. * continued on page 9

		
	 	Additional Financial Restrictions.  No dividends or distributions are to be
paid to stockholders of Borrower until the equity position of the Borrower
reaches $2,000,000.00, and further distributions will cease if the equity
position falls below $2,000,000.00.

		
	 	Continuity of Operations.  (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, or (3) pay any dividends
on Borrower’s stock (other than dividends payable in its stock), provided,
however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of
dividends, if Borrower is a “Subchapter S Corporation” (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
on its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income tax
payments to satisfy their liabilities under federal and state law which
arise solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of Borrower’s stock, or purchase or
retire any of Borrower’s outstanding shares or alter or amend Borrower’s
capital structure.

		
	 	Loans, Acquisitions and Guaranties.  (1) Loan, invest in or advance money or
assets, (2) purchase, create or acquire any interest in any other enterprise
or entity, or (3) incur any obligation as surety or guarantor other than in
the ordinary course of business.

		
	 	CESSATION OF ADVANCES.  If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower’s financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.

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

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

		
	 	Payment Default.  Borrower fails to make any payment when due under the Loan.

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

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

		
	 	Insolvency.  The dissolution or termination of Borrower’s existence as a
going business, or a trustee or receiver is appointed for Borrower or for
all or a substantial portion of the assets of Borrower, or Borrower makes a
general assignment for the benefit of Borrower’s creditors, or Borrower
files for bankruptcy, or an involuntary bankruptcy petition is filed against
Borrower and such involuntary petition remains undismissed for sixty (60)
days.

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

 

 

	 	 	 	 	 
	 	 	
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	Loan No: 76-69310769	 	
(Continued)
	 	Page 6
	

        

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

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

		
	 	Change in Ownership.  Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.

		
	 	Adverse Change.  A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of
the Loan is impaired.
	 
	 	Insecurity.   Lender in good faith believes itself
insecure.

		
	 	EFFECT OF AN EVENT OF DEFAULT.  If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender’s option, all sums owing
in connection with the Loans, including all principal, interest, and all other
fees, costs and charges, if any, will become immediately due and payable, all
without notice of any kind to Borrower, except that in the case of an Event of
Default of the type described in the “lnsolvency” subsection above, such
acceleration shall be automatic and not optional. In addition, Lender shall have
all the rights and remedies provided in the Related Documents or available at
law, in equity, or otherwise. Except as may be prohibited by applicable law, all
of Lender’s rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Borrower or of any Grantor shall not
affect Lender’s right to declare a default and to exercise its rights and
remedies.

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

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

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

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

		
	 	Consent to Loan Participation.  Borrower agrees and consents to Lender’s sale
or transfer, whether now or later, of one or more participation interests in
the Loan to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy Borrower may have with respect
to such matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners of
such interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower’s obligation under the
Loan irrespective of the failure or insolvency of any holder of any interest
in the Loan. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.

		
	 	Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the Commonwealth
of Virginia. This Agreement has been accepted by Lender in the
Commonwealth of Virginia. 

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

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

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

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

		
	 	Subsidiaries and Affiliates of Borrower.  To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word “Borrower” as
used in this Agreement shall include all of Borrower’s subsidiaries and
affiliates. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accommodation to any of Borrower’s subsidiaries’ or
affiliates.

 

 

	 	 	 	 	 
	 	 	
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	Loan No: 76-69310769	 	
(Continued)
	 	Page 7
	

        

		
	 	Successors and Assigns.  All covenants and agreements contained by or on
behalf of Borrower shall bind Borrower’s successors and assigns and shall
inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower’s rights under this
Agreement or any interest therein, without the prior written consent of
Lender.

		
	 	Survival of Representations and Warranties.  Borrower understands and agrees
that in extending Loan Advances, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless
of any investigation made by Lender, all such representations, warranties
and covenants will survive the extension of Loan Advances and delivery to
Lender of the Related Documents, shall be continuing in nature, shall be
deemed made and redated by Borrower at the time each Loan Advance is made,
and shall remain in full force and effect until such time as Borrower’s
Indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to occur.

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

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

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

		
	 	Account.  The word “Account” means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered
owing to Borrower (or to a third party grantor acceptable to Lender).

		
	 	Advance.  The word “Advance” means a disbursement of Loan funds made, or to
be made, to Borrower or on Borrower’s behalf under the terms and conditions
of this Agreement.

		
	 	Agreement.  The word “Agreement” means this Business Loan Agreement (Asset
Based), as this Business Loan Agreement (Asset Based) may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Business Loan Agreement (Asset Based) from time to time.

		
	 	Borrower.  The word “Borrower” means Halifax Corporation, and all other
persons and entities signing the Note in whatever capacity.
	 
	 	Borrowing
Base. The words “Borrowing Base” mean, as determined by Lender from time
to time, the lesser of (1) $8,000,000.00 or (2) the sum of (a) 85.000%
of the aggregate amount of Eligible Accounts (not to exceed in
corresponding Loan amount based on Eligible Accounts S$,000,000.00),
plus (b)  zero % of the aggregate amount of Eligible Inventory, plus zero
% of the aggregate amount of Eligible Equipment.

		
	 	Business Day.  The words “Business Day” mean a day on which commercial banks
are open in the Commonwealth of Virginia. 
	 
	 	Collateral.   The word “Collateral”
means all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or indirectly,
whether granted now or in the future, and whether granted in the form of a
security interest, mortgage, collateral mortgage, deed of trust, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor’s lien, equipment trust, conditional sale, trust receipt,
lien, charge, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise. The word
Collateral also includes without limitation all collateral described in the
Collateral section of this Agreement.

		
	 	Eligible Accounts.  The words “Eligible Accounts” mean at any time, all of
Borrower’s Accounts which contain selling terms and conditions acceptable to
Lender. The net amount of any Eligible Account against which Borrower may
borrow shall exclude all returns, discounts, credits, and offsets of any
nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts
do not include:

		
	 	(1) Accounts with respect to which the Account Debtor is employee or agent
of Borrower.

		
	 	(2) Accounts with respect to which the Account Debtor is a subsidiary of,
or affiliated with Borrower or its shareholders, officers, or directors.

		
	 	(3) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.

		
	 	(4) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower. 

		
	 	(5) Accounts which are subject to dispute, counterclaim, or setoff.

		
	 	(6) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor.

		
	 	(7) Accounts with respect to which Lender, in its sole discretion, deems
the creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.

		
	 	(8) Accounts of any Account Debtor who has filed or has had filed against
it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian, or
receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such debts become
due.

		
	 	(9) Accounts which have not been paid in full within 90 DAYS from the
invoice date.

		
	 	(10) n/a.

		
	 	Eligible Equipment.  The words “Eligible Equipment” mean, at any time, all of
Borrower’s Equipment as defined below except:

		
	 	(1) Equipment which is not owned by Borrower free and clear of all security
interests, liens, encumbrances, and claims of third parties.

		
	 	(2) Equipment which Lender, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective, or unfit for operation.

		
	 	(3) N/A.

		
	 	Eligible Inventory.  The words “Eligible Inventory” mean at any time, all of
Borrower’s Inventory as defined below except:

		
	 	(1) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.

 

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 
	Loan No: 76-69310769	 	
(Continued)
	 	Page 8
	

        

		
	 	(2) Inventory which Lender, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective, or unfit for further processing.

		
	 	(3) N/A.

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

		
	 	Equipment.  The word “Equipment” means all of Borrower’s goods used or bought
for use primarily in Borrower’s business and which are not included in
inventory, whether now or hereafter existing.

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

		
	 	Expiration Date.  The words “Expiration Date” mean the date of termination
of Lender’s commitment to lend under this Agreement.

		
	 	GAAP.  The word “GAAP” means generally accepted accounting principles.

		
	 	Grantor.  The word “Grantor” means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, and their
personal representatives, successors and assigns.

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

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

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

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

		
	 	Inventory.  The word “Inventory” means all of Borrower’s raw materials, work
in process, finished goods, merchandise, parts and supplies, of every kind
and description, and goods held for sale or lease or furnished under
contracts of service in which Borrower now has or hereafter acquires any
right, whether held by Borrower or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes inventory
temporarily out of Borrower’s custody or possession and all returns on
Accounts.

		
	 	Lender.  The word “Lender” means Southern Financial Bank, its successors and
assigns.

		
	 	Loan.  The word “Loan” means any and all loans and financial accommodations
from Lender to Borrower whether now or hereafter existing, and however
evidenced, including without limitation those loans and financial
accommodations described herein or described on any exhibit or schedule
attached to this Agreement from time to time.

		
	 	Note.  The word “Note” means the Note executed by Borrower in the principal
amount of $8,000,000.00 dated March 6, 2002, together with all modifications
of and renewals, replacements, and substitutions for the note or credit
agreement.

		
	 	Permitted Liens.  The words “Permitted Liens” mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for
taxes, assessments, or similar charges either not yet due or being contested
in good faith; (3) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (4) purchase money liens
or purchase money security interests upon or in any property acquired or
held by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under
the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens
and security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (6) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower’s
assets
 *continued on page 9

		
	 	Primary Credit Facility.  The words “Primary Credit Facility” mean the
credit facility described in the Line of Credit section of this Agreement.

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

		
	 	Security Agreement.  The words “Security Agreement” mean and include without
limitation any agreements, promises, covenants, arrangements, understandings
or other agreements, whether created by law, contract, or otherwise,
evidencing, governing, representing, or creating a Security Interest.

		
	 	Security Interest.  The words “Security Interest” mean, without limitation,
any and all types of collateral security, present and future, whether in the
form of a lien, charge, encumbrance, mortgage, deed of trust, security deed,
assignment, pledge, crop pledge, chattel mortgage, collateral chattel
mortgage, chattel trust, factor’s lien, equipment trust, conditional sale,
trust receipt, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever whether created by law, contract, or otherwise.

 

 

	 	 	 	 	 
	 	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 
	Loan No: 76-69310769	 	
(Continued)
	 	Page 9
	

        

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) IS DATED MARCH 6, 2002. THIS AGREEMENT IS GIVEN
UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE
AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. 

BORROWER:

 

HALIFAX CORPORATION

	 	 	 	 	 	 
	By:  	/s/ CHARLES L. MCNEW

Charles L. McNew, President of Halifax Corporation	
(Seal)          
	By:  	/s/ JOSEPH SCIACCA

Joseph Sciacca, Vice President-Finance of Halifax
Corporation	(Seal)

LENDER:
 

SOUTHERN FINANCIAL BANK

	 	 	 	 	 	 
	By:  	     [SIG]

Authorized Signer	
(Seal)
	 	 	 

LASER PRO Lending Ver. 5.17 00 03 Copr. Harland Financial Solutions, Inc. 1997   2002.   All Rights Reserved.   – VA L\LaserPro\CFI\LPL\C40 FC  TR–442 PR–4

	*	 	Continued from page 5:

In addition, Debtor may secure money purchase financing not to exceed
$250,000,00 per annum. Under the provision of Contract 844 (VDOT/VRS) security
interest may be filed for financing in the ordinary course of business.exv4w11

 

EXHIBIT 4.11

PROMISSORY NOTE

	 	 	 
	$690,000

 	 	
October 8, 1998

Alexandria, Virginia

     FOR VALUE RECEIVED, the undersigned, a Virginia corporation (the
Borrower) hereby promises to pay to the order of RESEARCH INDUSTRIES
INCORPORATED, a Virginia corporation (the Lender), at 123 North Pitt Street,
Alexandria, Virginia 22314, or such other location as the holder hereof may in
writing designate, the principal sum of SIX HUNDRED AND NINETY THOUSAND AND
NO/00 DOLLARS ($690,000), in lawful money of the United States of America in
immediately available funds, on January 6, 1999, without defense, offset or
counterclaim, together with interest on the unpaid principal amount hereof, at
such office, in like money and funds, from the date hereof at the rate of eight
(8) per cent per annum.

     This Note is subject to the terms and conditions of the Subordination
Agreement dated January 27, 1998 entered into by and among Research Industries
Incorporated, Crestar Bank and Halifax Corporation.

     This Note is one of two Notes referred to in the Loan Agreement between
the Borrower and the Lender dated October 8, 1998.

     The Borrower hereby waives presentment, demand, notice of dishonor,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note. Lender shall be entitled
to recover any costs and reasonable attorney’s fees incurred in the collection
of this Note.

     This Note may be prepaid at anytime without penalty.

     This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia, without reference to conflict of laws
principles.

     IN WITNESS WHEREOF, the Borrower has caused this note to be executed by
its duly authorized President as of the day and year first above written.

	 	 
	 	BORROWER
	 
	 	HALIFAX CORPORATION

a Virginia Corporation
	 
	 	By:  /s/  HOWARD C. MILLS

	 	

	 	
Name:  Howard C. Mills

Title: President

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