e8vk

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hf4tBz6NTKSy18P4Pcj90cmyhLLXLDcKQQn/pt3+eaGJFR41LPNyNgyaTvk43UIt ZDci+wQAchfyLb/sE9xK2Q== 0000950133-08-000427.txt : 20080208 0000950133-08-000427.hdr.sgml : 20080208 20080208161422 ACCESSION NUMBER: 0000950133-08-000427 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080204 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080208 DATE AS OF CHANGE: 20080208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALIFAX CORP OF VIRGINIA CENTRAL INDEX KEY: 0000720671 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 540829246 STATE OF INCORPORATION: VA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08964 FILM NUMBER: 08589344 BUSINESS ADDRESS: STREET 1: 5250 CHEROKEE AVE CITY: ALEXANDRIA STATE: VA ZIP: 22312 BUSINESS PHONE: 7037502202 MAIL ADDRESS: STREET 1: 5250 CHEROKEE AVENUE CITY: ALEXANDRIA STATE: VA ZIP: 22312 FORMER COMPANY: FORMER CONFORMED NAME: HALIFAX CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HALIFAX ENGINEERING INC/VA DATE OF NAME CHANGE: 19911204 8-K 1 w48380e8vk.htm FORM 8-K e8vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 4, 2008

HALIFAX CORPORATION OF VIRGINIA

(Exact name of registrant as specified in its charter)


Virginia	1-08964	54-0829246

(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)


5250 Cherokee Avenue, Alexandria, Virginia		22312

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (703) 658-2400

N/A

Former name, former address, and former fiscal year, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On February 4, 2008, Halifax Corporation of Virginia (the “Company”) entered into a settlement and release agreement (the “Settlement Agreement”), with INDUS Corporation and INDUS Secure Network Solutions, LLC (collectively, “INDUS”). Under the Settlement Agreement, the Company and INDUS agreed to settle their claims against one another as set forth in the lawsuit Halifax Corporation v. INDUS Corporation and INDUS Secure Network Solutions, LLC, Case No. 2007-7575 in the Circuit Court of the County of Fairfax (Virginia).

Pursuant to the Settlement Agreement, INDUS and the Company agreed to release each other from all claims, damages, suits, losses, actions, demands, judgments, awards, liabilities and causes of action related to the Asset Purchase Agreement dated June 30, 2005, by and among the Company and INDUS. Under the Settlement Agreement, INDUS is to receive $410,000 from the escrow fund and the Company is to receive $215,000 in principal plus interest earned of $74,563 on the initial deposit in the escrow fund and remaining in the escrow fund at the time of disbursement and any remaining funds contained in the escrow fund less any costs, fees or expenses due and payable to the escrow agent. All amounts due to the Company as a result of this settlement were paid to Provident Bank as described in Item 2.03 below to partially repay the Company’s outstanding balance on its auxiliary revolver facility. The amount received by INDUS under the Settlement Agreement will be reflected as a charge to operations of approximately $410,000 during the third quarter of fiscal 2008.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On February 5, 2008, Halifax Corporation of Virginia, Halifax Engineering, Inc., Microserv LLC, and Halifax Alphanational Acquisition, Inc. (collectively under Item 2.03, the “Company”) entered into a Second Amendment and Waiver with Provident Bank (the “Bank”), effective January 31, 2008 (the “Amendment”). The Amendment amends and waives certain provisions of the Fourth Amended and Restated Loan and Security Agreement dated as of June 29, 2007 (as amended by the First Amendment and Waiver dated November 13, 2007), among the same parties to the Amendment (“Loan Agreement”), related to the terms of the line of credit and auxiliary revolver facility provided by the Bank.

Prior to the Amendment, amounts outstanding under the Loan Agreement bore interest at Provident Bank’s prime rate plus one-quarter percent (0.25%). Under the Amendment, amounts outstanding under the revolving line of credit will bear interest at Provident Bank’s prime rate plus one percent (1%) and amounts outstanding under the auxiliary revolver facility will bear interest at Provident Bank’s prime rate plus two percent (2%).

Under the Amendment, the auxiliary revolver facility maximum credit amount was reduced to $900,000 from $1,000,000 and the maximum line of credit amount was reduced to $6,000,000 from $7,500,000. Additionally, the Company cannot request any advance under the line of credit after April 28, 2008 and all amounts outstanding under the line of credit (including

outstanding principal and accrued and unpaid interest thereon) are due and payable in full on April 30, 2008 unless the Company has received an indefeasible capital infusion of not less than $1,250,000 in the form of either stockholders’ equity or subordinated debt acceptable to the Bank (“Capital Infusion”) by April 15, 2008. If the Company has received such Capital Infusion, the Company will be permitted to continue to borrow funds under the line of credit until July 29, 2008 and all amounts outstanding under the line of credit would be due and payable in full on July 31, 2008. Since January 30, 2008, as the result of a lease of equipment which was previously capitalized, the Company received $500,000 which satisfies a portion of the $1,250,000 capital infusion described above.

The Amendment also requires that the Company make payments of $25,000 each on the 15^th day of February, March and April 2008 which sums will be applied to the reduction of the principal amount outstanding under the auxiliary revolver facility and will constitute permanent reductions to the auxiliary revolver facility maximum credit amount. As of February 1, 2008, the Company cannot request any advance under the auxiliary revolver facility and all amounts outstanding under the auxiliary revolver facility (including outstanding principal and accrued and unpaid interest thereon) are due and payable in full on April 30, 2008. If, however, the Company provides the Bank with evidence that the Company has received the Capital Infusion by April 15, 2008, then, upon notice from the Bank, the Company will be required to make payments of $25,000 each on the 15^th day of May, June and July 2008 and all amounts outstanding under the auxiliary revolver facility will become due and payable in full on July 31, 2008.

As of January 30, 2008, there was outstanding principal of $5,088,450 and accrued and unpaid interest of $30,880 on the line of credit and outstanding principal of $900,000 and accrued and unpaid interest of $17,909 on the auxiliary revolver facility. Since January 30, 2008, the Company has repaid $789,563 on the auxiliary revolver facility, which included the funds the Company received from the Settlement Agreement discussed in Item 1.01 above.

The Company will not have sufficient cash to repay amounts due under the Loan Agreement and Amendment on April 30, 2008 absent an equity or debt financing or entering into a new credit facility with another financial institution or another financing transaction, which is sufficient to repay the amount outstanding to the Bank. The Company is exploring a variety of alternative financing options, including a new credit facility to replace the facility currently provided by the Bank, sale-leaseback transactions and the issuance of debt or equity to satisfy the Capital Infusion requirements set forth in the Amendment. There can be no assurances that the Company will be able to complete an equity or debt financing, enter into a new large enough credit facility on terms that are favorable to the Company or at all or a sale-leaseback transaction. The Company’s failure to complete a new financing, enter into a new credit facility or complete a sale-leaseback transaction on unfavorable terms to the Company would have a material adverse effect on the Company’s operations, financial condition, results of operations and its ability to continue as a going concern. If the Company is unable to complete a Capital Infusion by April 15, 2008, or obtain a new credit facility, the Company will be unable to meet its debt obligations to the Bank. If the Company is unable to pay its obligations to the Bank when they become due, the Company may be forced to restrict its operations and the Bank has the right, among other things, to declare an event of default which would enable the Bank to foreclose on our assets securing the Loan Agreement. Additionally, any default under the Loan Agreement will result in a cross-default of the Company’s 8% promissory notes.

The Amendment also provides that the Company must arrange for any funds or proceeds due from the INDUS escrow payable to the Company be sent directly to the Bank and be applied, in the event the Company is not in default of the Loan Agreement or Amendment, toward the reduction of the principal balance of the auxiliary revolver facility. If the Company is in default of the Loan Agreement or Amendment, any payment received from the INDUS escrow will be applied in the manner determined by the Bank. The INDUS escrow means the funds held by an escrow agent in favor of the Company relating to the Company’s sale of its secure network business. See Item 1.01 above for a discussion of the Settlement Agreement with INDUS.

In the event that the Bank consents to the Company’s sale or financing of any of the Company’s assets other than assets sold in the ordinary course of the Company’s business, including any sale/leaseback of certain assets, the proceeds of such sale or financing must be paid directly to the Bank to be applied to the reduction of the principal balance of the auxiliary revolver facility. If the Company is in default of the Loan Agreement or Amendment, the payment received by the Bank from such sale or financing will be applied in the manner determined by the Bank.

The Amendment also provides that the occurrence of an event of default, the Company’s failure to comply with its covenant regarding the cash collateral account or the failure of the Company to make any payment under the Loan Agreement or Amendment when due will automatically be considered a default under the Loan Agreement and Amendment and the Bank 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 the Company 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 the Company to assemble the collateral at such place as Bank may specify; (vi) cease making advances or extending credit to the Company 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.

In connection with the Amendment, the Bank also waived the Company’s non-compliance with certain financial and other covenants under the Loan Agreement including: (a) the Company failing to maintain a minimum tangible net worth plus subordinated debt of not less than $4,000,000 as of December 31, 2007; (b) the Company failing to maintain a ratio of total liabilities less subordinated debt to tangible net worth plus subordinated debt of not greater than 4.0:1 as of December 31, 2007; (c) the Company failing to maintain a current ratio equal to or greater than 1.4:1 as of December 31, 2007; and (d) the Company failing to pay the principal, interest and late charges owed under the auxiliary revolver facility at the December 31, 2007 maturity thereof. The failure to comply with these financial and other covenants constituted an event of default under the Loan Agreement.

The Amendment also amended certain financial covenants contained in the Loan Agreement as follows:

(i) The Company shall at all times maintain a minimum Tangible Net Worth plus Subordinated Debt of not less than $1,000,000 as of March 31, 2008.

(ii) The Company failing to maintain a Current Ratio equal to or greater than 1.0 as of March 31, 2008.

For purposes of covenant measurements, any capital infusion or issuance of subordinated debt shall be deemed to have occurred after March 31, 2008. There can be no assurances the Company will be able to comply with the financial covenants contained in the Loan Agreement and Amendment on March 31, 2008 or thereafter. In the future, the Company may not be successful in obtaining a waiver of non-compliance with these financial covenants. If the Company is unable to comply with the financial covenants, absent a waiver, it will be in default of the Loan Agreement and Amendment and the Bank can take any of the actions discussed above.

The Company is required to pay the Bank an amendment fee of $34,500. Half of such amount was due at signing of the Amendment and the other half is due by March 31, 2008. If, however, the Company fully repays amounts outstanding under the revolving line of credit and the auxiliary revolver facility by March 31, 2008, no amendment fee will be due on March 31, 2008.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits


10.1		Second Amendment and Waiver dated as of January 31, 2008 among Halifax Corporation of Virginia, Halifax Engineering, Inc., Microserv LLC, Halifax Alphanational Acquisition, Inc. and Provident Bank

10.2		Promissory Note (Auxiliary Revolver Facility) dated January 31, 2008

10.3		Promissory Note (Revolving Line of Credit) dated January 31, 2008

10.4		Settlement Agreement and Release dated February 4, 2008 by and among Halifax Corporation of Virginia, INDUS Corporation and INDUS Secure Network Solutions, LLC

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	HALIFAX CORPORATION OF VIRGINIA
Date: February 8, 2008	By:	/s/ Joseph Sciacca
		Joseph Sciacca
		Vice President, Finance & CFO

EXHIBIT INDEX


10.1		Second Amendment and Waiver dated as of January 31, 2008 among Halifax Corporation of Virginia, Halifax Engineering, Inc., Microserv LLC, Halifax Alphanational Acquisition, Inc. and Provident Bank

10.2		Promissory Note (Auxiliary Revolver Facility) dated January 31, 2008

10.3		Promissory Note (Revolving Line of Credit) dated January 31, 2008

10.4		Settlement Agreement and Release dated February 4, 2008 by and among Halifax Corporation of Virginia, INDUS Corporation and INDUS Secure Network Solutions, LLC

EX-10.1 2 w48380exv10w1.htm EXHIBIT 10.1 exv10w1

EXHIBIT 10.1

-COPY-

SECOND AMENDMENT AND WAIVER

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

WITNESSETH:

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

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

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

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

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

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

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

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

2. Amendment to the Loan Agreement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

	a.		counterparts of this Amendment executed by each Borrower;

	b.		payment in full, in immediately available funds, to the Bank of one-half of amendment fee described below in the amount of $17,250, such fee being fully earned and non-refundable upon the effectiveness of this Amendment;

	c.		payment in full of all other fees and expenses due and payable to the Bank under the Loan Agreement and in connection with the execution and delivery of this Amendment and the transactions described herein, including, without limitation, the fees and expenses of counsel to the Bank, if any; and

	d.		such other information, documents, including amended and restated promissory notes, instruments, certificates or approvals as may be set forth within this Agreement or as the Bank or the Bank’s counsel may reasonably require.

6. Additional Agreements. The Borrower agrees as follows:

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

b.		The Borrower shall, within ten days of the date of this Agreement, provide the Bank with evidence, satisfactory to the Bank, that the escrow agent holding the funds from the INDUS settlement shall have been notified of the Bank’s security interest in the Borrower’s interest in such escrow funds. In the event that the Borrower agrees to compromise its claim to the INDUS settlement funds, it shall notify the Bank of such settlement and provided that such settlement shall result in the net payment of no less than $275,000 from the INDUS escrow and provided further that the Borrower is not in default hereunder or under the terms of the Loan Agreement, the Bank shall consent to such compromise and receive payment of funds as provided in the Loan Agreement.

c.		By no later than April 15, 2008, the Borrower shall deliver to the Bank either: (i) a commitment for financing in sufficient amount to completely pay-off the Line of Credit and the Auxiliary Revolver Facility; or (ii) an engagement letter with an advisory firm satisfactory to the Bank to assist the Borrower in evaluating and pursuing alternative refinancing sources or the sale of all or substantially all of the Borrower’s assets.

d.		By no later than February 15, 2008, the Borrower shall close any accounts maintained at any other financial institution (other than accounts relating to VDOT, INDUS and existing Liberty Bank accounts) and transfer the funds to the Borrower’s accounts at the Bank.

e.		By no later than February 15, 2008, the Borrower shall identify to the Bank all locations at which it maintains inventory valued at greater than $10,000. The Borrower shall use its best efforts to provide the Bank, by February 29, 2008, with agreements, acceptable in form and substance to the Bank, in which the landlords or customers in whose locations such inventory are located acknowledge the Bank’s lien on such inventory, permit the Bank to remove such inventory in the event of a default by the Borrower hereunder or under the Loan Agreement, and subordinate their rights in such inventory to the Bank’s rights.

f.		By no later than April 15, 2008, the Borrower shall deliver to the Bank either; (i) a commitment for financing in sufficient amount to completely pay-off the Line of Credit and the Auxiliary Revolver Facility by no later than April 30, 2008; or (ii) an Account Control Agreement executed by Liberty Bank in form and substance acceptable to the Bank covering any accounts maintained by the Borrower at Liberty Bank.

g.		On a monthly basis commencing on February 10, 2008, the Borrower shall deliver copies of the account statements for the prior month on the VDOT escrow funds in accounts at SunTrust Bank, N.A.

	h.		By no later than February 29, 2008, the Borrower shall deliver a listing of the names and address of all of its account debtors and vendors.

	i.		Upon notice from the Bank, in the Bank’s sole and absolute discretion, the Automatic Credit Advance procedure of the Borrower’s ARTS Service shall cease. Notwithstanding anything to the contrary in any agreement or the Reporting Requirements Addendum with the Bank, the Borrower shall, commencing in February, 2008: (i) upload Receivable data into ARTS upon each advance request, and in any event shall upload such data at least every two weeks; (ii) submit to the Bank Borrowing Base Certificates, in form and substance satisfactory to the Bank, every two weeks; (iii) within 10 days of each month end, submit a Borrowing Base Certificate reflecting activity for the entire previous month, accompanied by a reconciliation of reported sales, credits, collections, ending Receivable balances, loan balance to subsidiary records, and bank statements.

	j.		The Financial Covenants set forth in the Financial Covenants Addendum continue to apply to the Borrower and shall be measured next by the Bank as of March 31, 2008. The following Financial Covenants are hereby modified and amended with the following:

	(i)		Financial Covenant II. A shall be modified and amended to read as follows: Borrower shall at all times maintain a minimum Tangible Net Worth plus Subordinated Debt of not less than $1.0 million as of March 31, 2008, and

	(ii)		Financial Covenant II.B shall be modified and amended to read as follows: Borrower shall at all times maintain a ratio of Total Liabilities less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not greater than as of March 31, 2008.

	(iii)		Financial Covenant II.C shall be modified and amended to read as follows: Borrower shall at all times maintain a Debt Service Coverage Ratio greater than or equal to for the quarter ended March 31, 2008.

	(iv)		Financial Covenant II.D shall be modified and amended to read as follows: Borrower failing to maintain a Current Ratio equal to or greater than 1.0 as of March 31, 2008;.

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

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

			Processor); Service Management Automator (Update/Closing Systems); Inventory Tracking System; and Electronic Partner Interface. Such transaction requires the Bank’s consent under the Loan Agreement.

			The Bank will consent to the contemplated sale/leaseback transaction provided the Borrower meets the following conditions: (i) it delivers to the Bank, prior to the sale/leaseback transaction, all of documents in any way related to the transaction and the Bank, in its sole discretion, determines that such documentation is acceptable; (ii) all net proceeds to the Borrower from the sale/leaseback transaction are paid directly to the Bank to be applied, provided the Borrower is not in default, to reduce the principal balance of the Auxiliary Revolver Facility (if the Borrower is in default, the proceeds shall be applied as determined by the Bank in its sole and absolute discretion); (iii) monthly payments due on the lease shall not exceed $23,240; and (iv) upon completion of the sale/leaseback transaction, all Accounts Receivable due from HP Financial Services, Inc. will be excluded from Eligible Accounts Receivable.

	1.		The Borrower hereby authorizes the Bank to file such financing statements or amended financing statements as it deems necessary to prefect the security interests granted to the Bank in the Loan Agreement without further signature of the Borrower.

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

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

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

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

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

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

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

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

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

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

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

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

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

[Remainder of page intentionally left blank.]

[Signatures follow]

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


BORROWER:	HALIFAX CORPORATION OF VIRGINIA
	By:	/s/ Joseph Sciacca		(SEAL)
		Name:	Joseph Sciacca
		Title: Chief Financial Officer

	HALIFAX ENGINEERING, INC.
	By:	/s/ Joseph Sciacca		(SEAL)
		Name:	Joseph Sciacca
		Title:	Vice President, Secretary and Treasurer

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

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

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

Second Amendment and Waiver
to Loan Agreement
January, 2008

EX-10.2 3 w48380exv10w2.htm EXHIBIT 10.2 exv10w2

EXHIBIT 10.2

-COPY-


Baltimore, Maryland January 31,2008		$900,000

PROMISSORY NOTE
(Auxiliary Revolver Facility)

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 Nine Hundred Thousand and NO/100 Dollars ($900,000), 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. At no time shall the principal amount outstanding under this Promissory Note and any other Promissory Note issued pursuant to the Agreement (as hereinafter defined) exceed Six Million Nine Hundred Thousand Dollars ($6,900,000). The following terms shall apply to this Promissory Note.

INTEREST. The unpaid principal amount outstanding from time to time pursuant to this Promissory Note shall bear interest at two percent (2%) 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.

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.

REPAYMENT.

(a) Principal: The Borrower shall make $25,000 payments on the 15^th day of February, March, and April 2008 which sums shall be applied to the reduction of the principal amount outstanding hereunder. The unpaid principal balance of this Promissory Note shall be paid by the Borrower in immediately available funds on April 30, 2008.

(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 February 1, 2008.

All amounts owed by the Borrower to the Lender shall be payable, when due, 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.

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.

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.

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.

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 Fourth Amended and Restated Loan and Security Agreement, dated June 29, 2007, executed by Borrower and Lender, as the same may have been subsequently amended, restated, supplemented or modified from time to time, including the Second Amendment and Waiver dated the date hereof (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, 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.

	(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.

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.

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.

LOAN AGREEMENT; SECURITY. The Auxiliary Revolver Facility is being provided by the Lender to the Borrower pursuant to the terms of the Agreement.

12.

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.

13.

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.

14.

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 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.

15.

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.

16.

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.

17.

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.

18.

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.

19.

PRIOR NOTE. This Note is an amendment and restatement of a Promissory Note (Auxiliary Revolver Facility) dated June 29, 2007 in the maximum original principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the “First Amended and Restated Note”) which itself was an amendment and restatement of a Promissory Note (Auxiliary Revolver Facility) dated July 6, 2006 in the maximum original principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the “Original Note”), as secured. Nothing contained in this Note shall in any way operate as a novation, release or discharge of any of the provisions of the Original Note as amended and restated by the First Amended and Restated Note or any other related document.

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 OF VIRGINIA, f/k/a Halifax Corporation

/s/ Arthur Whalen	By:	/s/ Joseph Sciacca	(SEAL)

Name: Arthur Whalen		Joseph Sciacca Chief Financial Officer 5250 Cherokee Avenue Alexandria, Virginia 22312


HALIFAX ENGINEERING, INC.
By:	/s/ Joseph Sciacca	(SEAL)
	Joseph Sciacca
	Vice President, Secretary and Treasurer 5250 Cherokee Avenue Alexandria, Virginia 22312

MICROSERV LLC
By:	/s/ Joseph Sciacca	(SEAL)
	Joseph Sciacca
	Vice President, Secretary and Treasurer 5250 Cherokee Avenue Alexandria, Virginia 22312

HALIFAX ALPHANATIONAL ACQUISITION, INC.
By:	/s/ Joseph Sciacca	(SEAL)
	Joseph Sciacca
	Vice President, Secretary and Treasurer 5250 Cherokee Avenue Alexandria, Virginia 22312

Notice Address For Lender:

Provident Bank
114 East Lexington Street
Baltimore, Maryland 21202
Attention: Michael McShane/453

With a copy to:

Provident Bank
Legal and Compliance Department
114 East
Lexington Street
Baltimore, Maryland 21202
Attention: General Counsel

APS2008

EX-10.3 4 w48380exv10w3.htm EXHIBIT 10.3 exv10w3

EXHIBIT 10.3

-COPY-


Baltimore, Maryland January 31, 2008		$6,000,000

PROMISSORY NOTE
(Revolving Line of Credit)

IMPORTANT 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 Six Million and NO/100 Dollars ($6,000,000), 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. At no time shall the principal amount outstanding under this Promissory Note and any other Promissory Note issued pursuant to the Agreement (as hereinafter defined) exceed Six Million Nine Hundred Thousand Dollars ($6,900,000). The following terms shall apply to this Promissory Note.

INTEREST. The unpaid principal amount outstanding from time to time pursuant to this Promissory Note shall bear interest at one percent (1%) 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 April 30, 2008.

		(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 February 1, 2008.

		All amounts owed by the Borrower to the Lender shall be payable, when due, 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.

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.

	(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.

	(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.

10.

WAIVERS. The Borrower, and all parties to this Promissory Note, whether maker, indorser, or guarantor, waive presentment, notice of dishonor and protest.

11.

LOAN AGREEMENT; SECURITY. The Line of Credit is being provided by the Lender to the Borrower pursuant to the terms of the Agreement.

12.

13.

		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.

14.		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 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.

15.		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.

16.		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.

17.		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.

18.		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.

19.		PRIOR NOTE. This Note is an amendment and restatement of a Promissory Note (Revolving Line of Credit) dated June 29, 2007 in the maximum original principal amount of Ten Million and 00/100 Dollars ($10,000,000.00) (the “First Amended and Restated Note”), which itself was an amendment and restatement of a Promissory Note (Revolving Line of Credit) dated July 6, 2006 in the maximum original principal amount of Twelve Million and 00/100 Dollars ($12,000,000.00) (the “Original Note”), as secured. Nothing contained in this Note shall in any way operate as a novation, release or discharge of any of the provisions of the Original Note as amended and restated by the First Amended and Restated Note or any other related document.

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 OF VIRGINIA, f/k/a Halifax Corporation

/s/ Arthur J Whalen		By:	/s/ Joseph Sciacca	(SEAL)
Name:	Arthur J Whalen		Joseph Sciacca Chief Financial Officer 5250 Cherokee Avenue Alexandria, Virginia 22312

		HALIFAX ENGINEERING, INC.

		By:	/s/ Joseph Sciacca	(SEAL)
			Joseph Sciacca Vice President, Secretary and Treasurer 5250 Cherokee Avenue Alexandria, Virginia 22312

		MICROSERV LLC

		By;	/s/ Joseph Sciacca	(SEAL)
			Joseph Sciacca Vice President, Secretary and Treasurer 5250 Cherokee Avenue Alexandria, Virginia 22312

		HALIFAX ALPHANATIONAL ACQUISITION, INC.

		By:	/s/ Joseph Sciacca	(SEAL)
			Joseph Sciacca Vice President, Secretary and Treasurer 5250 Cherokee Avenue Alexandria, Virginia 22312

Notice Address For Lender:

Provident Bank
114 East Lexington Street
Baltimore, Maryland 21202
Attention: Michael McShane/453

With a copy to:

Provident Bank
Legal and Compliance Department
114 East Lexington Street
Baltimore, Maryland 21202
Attention: General Counsel

EX-10.4 5 w48380exv10w4.htm EXHIBIT 10.4 exv10w4

EXHIBIT 10.4

Settlement Agreement And Release

THIS SETTLEMENT AGREEMENT AND RELEASE (“Agreement”) is made this 4th day of February, 2008, by and among (i) Halifax Corporation of Virginia (formerly Halifax Corporation) (“Halifax”), a Virginia corporation, and (ii) INDUS Corporation, a Virginia corporation, and INDUS Secure Network Solutions, LLC, a Virginia limited liability company (collectively, “INDUS”).

WHEREAS, a lawsuit styled Halifax Corporation v. INDUS Corporation and INDUS Secure Network Solutions, LLC, Case No. 2007-7575, is pending in the Circuit Court of the County of Fairfax (Virginia) (the “Pending Lawsuit”); and

WHEREAS, Exhibit 1 to the Complaint in the Pending Lawsuit is a copy of the Asset Purchase Agreement (“APA”) dated June 30, 2005, by and among Halifax and INDUS; and

WHEREAS, Exhibit 2 to the Complaint in the Pending Lawsuit is a copy of the Escrow Agreement dated June 30, 2005, by and among Halifax, INDUS Corporation, and Branch Banking and Trust Company of Virginia (“BB&T”), which Escrow Agreement establishes an “Indemnification Escrow Fund” as defined therein (the “Escrow Fund”); and

WHEREAS, Halifax and INDUS desire to settle their claims against one another as set forth in the Pending Lawsuit; and

WHEREAS, Halifax and INDUS desire to embody the terms of their settlement in this Agreement.

NOW, THEREFORE, WITNESSETH

That for and in consideration of the premises and mutual undertakings herein set forth, Halifax and INDUS agree as follows:

1. This Agreement shall not be construed as an admission or acknowledgment of liability by anyone; such liability is expressly denied.

2. Upon the fall execution of this Agreement, Halifax and INDUS shall deliver to BB&T a fully-executed joint written notice, direction, and release agreement in the form attached as Exhibit A (the “Joint Notice”) directing BB&T to disburse from the Escrow Fund (a) to INDUS Corporation the sum of Four Hundred Ten Thousand Dollars ($410,000.00) and (b) to Halifax the remaining balance which shall consist of Two Hundred Fifteen Thousand Dollars ($215,000) in principal plus (i) any interest earned since the date of the initial deposit with the Escrow Agent and remaining in the Escrow Fund at the time of disbursement and (ii) any remaining funds contained in the Escrow Fund and less any costs, fees or expenses due and payable to Escrow Agent.

3. Notwithstanding the above and in accordance with the Escrow Agreement, any unpaid annual escrow fees shall be shared equally by the parties.

4. Upon the full execution of this Agreement and disbursement from the Escrow Fund as directed by the Joint Notice, Halifax and INDUS shall cause the Pending Lawsuit to be dismissed with prejudice through securing the entry of a Dismissed Agreed Order in the form attached as Exhibit B.

5. Halifax and INDUS shall be responsible for their respective costs, including attorneys’ and expert witness fees, incurred in the Pending Lawsuit.

6. INDUS warrants it has not assigned or in any way conveyed to others, in whole or in part, any of its rights against Halifax, including as asserted or as could have been asserted in the Pending Lawsuit. Furthermore, INDUS warrants it is not involved in or aware of the pursuit

-2-

or defense of any claims by itself or others, including the United States Government, arising from or related to (i) the APA and (ii) the Pending Lawsuit.

7. Halifax warrants it has not assigned or in any way conveyed to others, in whole or in part, any of its rights against INDUS, including as asserted or as could have been asserted in the Pending Lawsuit. Furthermore, Halifax warrants it is not involved in or aware of the pursuit or defense of any claims by itself or others, including the United States Government, arising from or related to (i) the APA and (ii) the Pending Lawsuit.

8. INDUS hereby releases, remises and forever discharges Halifax and all of its officers, directors, agents, servants, employees, parents, subsidiaries, predecessors, and affiliates of and from all claims, damages, suits, losses, actions, demands, judgments, awards, liabilities and causes of action of every name and nature, anywhere in the world, whether in law or equity, whether known or unknown, whether fixed or contingent, whether pending or not pending, whether liquidated or unliquidated, from the beginning of the world to the date of full execution of this Agreement, to the extent such claims, damages, suits, losses, actions, demands, judgments, awards, liabilities and causes of action arise from or relate to either or both of (i) the APA and (ii) the Pending Lawsuit.

9. Halifax hereby releases, remises and forever discharges INDUS and all of its officers, directors, agents, servants, employees, parents, subsidiaries, predecessors, and affiliates of and from all claims, damages, suits, losses, actions, demands, judgments, awards, liabilities and causes of action of every name and nature, anywhere in the world, whether in law or equity, whether known or unknown, whether fixed or contingent, whether pending or not pending, whether liquidated or unliquidated, from the beginning of the world to the date of full execution of this Agreement, to the extent such claims, damages, suits, losses, actions, demands,

-3-

judgments, awards, liabilities and causes of action arise from or relate to (i) the APA and (ii) the Pending Lawsuit.

10. This Agreement constitutes the entire agreement between Halifax and INDUS, there being no agreement between them relating in any fashion to any matters not herein set forth.

11. This Agreement is the product of negotiation by and among Halifax and INDUS and their respective counsel. As a result, the Agreement shall not be construed, and no presumption shall arise, based on who drafted the Agreement.

12. If any provision of this Agreement is determined to be invalid or unenforceable by a court or other tribunal of competent jurisdiction, such provision shall be ineffective, and the remainder of this Agreement shall continue in effect and be construed as if the unenforceable provision had not been contained in this Agreement. Each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

13. This Agreement shall not be modified or amended except in a writing signed by Halifax and INDUS.

14. This Agreement shall bind and inure to the benefit of Halifax and INDUS and to their respective successors and assigns.

15. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to conflict of law principles.

16. This Agreement shall be executed in duplicate original but may be executed in counterparts, each of which is an original, and all of which comprise one agreement. One executed original Agreement shall be retained by counsel for each party.

-4-

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their hands on the dates indicated below.


	Halifax Corporation of Virginia
	By	/s/ Joseph Sciacca
		Joseph Sciacca
		Vice President — Finance and CFO

COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF FAIRFAX, to-wit:

Subscribed and sworn to before me this 4^th day of February, 2008, by Joseph Sciacca as Vice President — Finance and Chief Financial Officer of Halifax Corporation of Virginia.



	/s/ Suzanne K. Green
	Notary Public

My commission expires: September 30, 2009
Notary Registration Number: 123531

[SEAL]


	INDUS Corporation
	By
		Donald Shoff
		Vice President and CFO

COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF _________, to-wit:

Subscribed and sworn to before me this _____ day of February, 2008, by Donald Shoff, Vice President and Chief Financial Officer of INDUS Corporation.



	Notary Public

My commission expires: ________________


	INDUS Secure Network Solutions, LLC By INDUS Corporation, Sole Member
	By
		Donald Shoff
		Vice President and CFO

COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF ________, to-wit:

Subscribed and sworn to before me this ___ day of February, 2008, by Donald Shoff, Vice President and Chief Financial Officer of INDUS Corporation, the Sole Member of INDUS Secure Network Solutions, LLC.



	Notary Public

My commission expires: ________________

-6-

VIA FAX AND OVERNIGHT DELIVERY TO:

Branch Banking and Trust Company of Virginia
ATTN: Corporate Trust Administration, Wayne Bolin
223 West Nash Street
Wilson, NC 27893

And:

Halifax Corporation
ATTN: Chief Financial Officer
5250 Cherokee Avenue
Alexandria, VA 22312

Barry Genkin, Esq.
Blank Rome LLP
One Logan Square
Philadelphia, PA 19103-6998

INDUS Corporation
Attention: Chief Financial Officer
1951 Kidwell Drive, Eighth Floor
Vienna, VA 22182
FAX 703/506-6776

Barrett E. Pope, Esq.
DurretteBradshaw PLC
600 East Main Street, Twentieth Floor
Richmond, Virginia 23219
(804)775-6911 (fax)

Matthew S. Bergman, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037

Joseph C. Schmelter, Esq.
Stephen K. Gallagher, Esq.
Venable LLP
8010 Towers Crescent Drive, Suite 300
Vienna, Virginia 22182
FAX: 703/821-8949

JOINT WRITTEN NOTICE, DIRECTION AND RELEASE AGREEMENT

This Joint Written Notice, Direction and Release Agreement (“Agreement”) is made and entered into as of February ___, 2008 by and among INDUS Corporation, a Virginia corporation (“Depositor”), Halifax Corporation, a Virginia corporation (“Recipient”), and Branch Banking and Trust Company of Virginia, a Virginia banking corporation, as Escrow Agent (the “Escrow Agent”). Capitalized terms used herein but not defined shall have their respective meanings contained in the Escrow Agreement (as defined below).

1. Disbursement. In accordance with Section 4 of that certain Escrow Agreement dated June 30,2005 by and among Depositor, Recipient and the Escrow Agent (the “Escrow Agreement”), Depositor and Recipient hereby provide their Joint Written Notice and direct the Escrow Agent to promptly disburse the Indemnification Escrow Fund (as defined in the Escrow Agreement and equal to $625,000 in initial principal plus (i) any interest earned thereon since the date of its deposit with the Escrow Agent and (ii) any remaining funds contained in the Escrow Fund)(the “Escrow Fund”) as follows:

EXHIBIT A

a. To INDUS Corporation, Depositor, the sum of Four Hundred Ten Thousand Dollars
($410,000.00) from the Indemnification Escrow Fund by wire transfer with the following wire instructions:


		Bank Name:		M&T Bank
		Acct name:		INDUS Corporation
		Acct#:		9845407262
		ABA#:		052000113

b. To Halifax Corporation, Recipient, the remaining balance of the Escrow Fund (after payment to Depositor of the $410,000 amount set forth above), which remaining balance shall consist of $215,000 in principal plus (i) any interest earned since the date of the initial deposit with the Escrow Agent and remaining in the Escrow Fund at the time of disbursement and (ii) any remaining funds contained in the Escrow Fund and less any costs, fees or expenses due and payable to Escrow Agent, by wire transfer in accordance with the following wire instructions:


		Bank Name:		Provident Bank
		Acct Name:		Halifax Corporation
		Acct#:		2065310679
		ABA#:		252073018

2. Annual Escrow Fees. Notwithstanding the above and in accordance with the Escrow Agreement, any unpaid annual escrow fees shall be shared equally by the parties.

3. Release of Escrow Agent by Depositor. For good and valuable consideration, the receipt of which is hereby acknowledged, Depositor agrees for itself, its affiliates, shareholders, members, successors and assigns, to waive, remise, release and forever discharge the Escrow Agent, its respective affiliates, successors and assigns, and their respective past, present and future directors, managers, officers, employees, trustees, shareholders, members, partners and agents (collectively, the “Escrow Parties”) from any and all actions, causes of action, demands, rights, suits, agreements, obligations or claims, whether at law or equity, or otherwise known or unknown, that Depositor and its respective affiliates, shareholders, members, successors and assigns had, have or will have against the Escrow Parties arising from or in any way related to the disbursement contemplated by Section 1 hereof, except for any action, cause of action, demand, right, suit, agreement, obligation or claim arising from Escrow Agent’s gross negligence, willful misconduct or material breach of this Agreement or the Escrow Agreement.

4. Release of Escrow Agent by Recipient. For good and valuable consideration, the receipt of which is hereby acknowledged, Recipient hereby agrees for itself, its respective affiliates, shareholders, members, successors and assigns, to waive, remise, release and forever discharge the Escrow Parties from any and all actions, causes of action, demands, rights, suits,

-8-

EXHIBIT A

agreements, obligations or claims, whether at law or equity, or otherwise known or unknown, that Recipient and its affiliates, shareholders, members, successors and assigns had, have or will have against the Escrow Parties arising from or in any way related to the disbursement contemplated by Section 1 hereof, except for any action, cause of action, demand, right, suit, agreement, obligation or claim arising from Escrow Agent’s gross negligence, willful misconduct or material breach of this Agreement or the Escrow Agreement.

5. Counterparts; Facsimile. This Joint Written Notice, Direction and Release Agreement may be executed simultaneously in one or more counterparts, including by facsimile, each of which shall be deemed an original, and all such counterparts shall constitute one and the same instrument

Intending to be legally bound, this Joint Written Notice, Direction and Release has been executed by the undersigned on and as of the date first above written.


DEPOSITOR: INDUS CORPORATION
By
	Name:	Donald Shoff
	Title:	Vice President and CFO


RECIPIENT: HALIFAX CORPORATION
By
	Name:	Joseph Sciacca
	Title:	Vice President — Finance and CFO


Received and Accepted: ESCROW AGENT: BRANCH BANKING AND TRUST COMPANY OF VIRGINIA
By:
	Name:
	Title:

-9-

VIRGINIA:

IN THE CIRCUIT COURT OF THE COUNTY OF FAIRFAX



HALIFAX CORPORATION,	)
	)
*Plaintiff & Counterclaim Defendant,*	)
	)
v.	)	Case No. CL 2007-7575
	)
INDUS CORPORATION,	)
and	)
INDUS SECURE NETWORK SOLUTIONS, LLC,	)
	)
*Defendants & Counterclaim Plaintiffs.*	)

ORDER OF DISMISSAL WITH PREJUDICE

This day came (i) Plaintiff/Counterclaim Defendant Halifax Corporation and (ii) Defendants/Counterclaim Plaintiffs, INDUS Corporation and INDUS Secure Network Solutions, LLC, by their respective counsel, and represented to the Court that all matters in controversy between them herein have been resolved and compromised.

Accordingly, it is ORDERED that this action be and the same hereby is DISMISSED AS AGREED AND WITH PREJUDICE as having been fully settled, compromised and adjusted. All costs and fees are to be taxed against the parties incurring the same.

The Clerk is directed to remove this action from the Docket and forward certified copies of this Order to all counsel of record.

ENTERED this day of , 2008.



	Circuit Court Judge for the County of Fairfax

Exhibit B

WE ASK FOR THIS:

Barrett E. Pope (VSB #20574)
Christine A. Williams (VSB #47074)
DurretteBradshaw PLC
600 East Main Street, 20^th Floor
Richmond, Virginia 23219
(804) 775-6900 (Telephone)
(804)775-6911 (Facsimile)

Counsel for Plaintiff/Counterclaim Defendant

Stephen K. Gallagher (VSB #38085)
Michael W. Robinson (VSB #26522)
Edward O. Loughlin (VSB #70182)
Venable LLP
8010 Towers Crescent Drive, Suite 300
Vienna, Virginia 22182
(703) 760-1600 (Telephone)
(703) 821-8949 (Facsimile)

Counsel for Defendants/Counterclaim Plaintiffs

-2-

-----END PRIVACY-ENHANCED MESSAGE-----