-----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, RovOI1KZNes5rQm6iYXWATnLvF6JNm8J0haaR/vTjk2NlwiA1utEzEu1esAex2vv 2ERmJB62SN1PmkA3wRn5KQ== 0000916641-98-000963.txt : 19980820 0000916641-98-000963.hdr.sgml : 19980820 ACCESSION NUMBER: 0000916641-98-000963 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980819 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH MIDLAND CORP CENTRAL INDEX KEY: 0000924719 STANDARD INDUSTRIAL CLASSIFICATION: CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK [3272] IRS NUMBER: 541727060 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-13752 FILM NUMBER: 98694611 BUSINESS ADDRESS: STREET 1: ROUTE 28 STREET 2: P O BOX 300 CITY: MIDLAND STATE: VA ZIP: 22728 BUSINESS PHONE: 5404393266 MAIL ADDRESS: STREET 2: P.O. BOX 300 CITY: MIDLAND STATE: VA ZIP: 22728 10QSB 1 SMITH-MIDLAND CORPORATION 10QSB U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Filed Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter year ended Commission File Number June 30, 1998 1-13752 SMITH-MIDLAND CORPORATION (Name of Small Business Issuer As Specified In Its Charter) Delaware 54-1727060 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) Route 28, P.O. Box 300, Midland, Virginia 22728 -------------------------------------------------- (Address of Principal Executive Offices, Zip Code) (540) 439-3266 ------------------------------------------------ (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ------- As of August 15, 1998, the Company had outstanding 3,044,798 shares of Common Stock, $.01 par value per share. SMITH-MIDLAND CORPORATION INDEX PART I. FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements Consolidated Balance Sheets; 2 June 30, 1998 (Unaudited); and December 31, 1997 (Unaudited) Consolidated Statements of Operations 3 (Unaudited); Three months ended June 30, 1998 and 1997 Consolidated Statements of Operations 4 (Unaudited); Six months ended June 30, 1998 and 1997 Consolidated Statements of Cash Flows 5 (Unaudited); Three months ended June 30, 1998 and 1997 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 PART I - Financial Information Item 1. Financial Statements SMITH-MIDLAND CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited)
June 30, December 31, Assets 1998 1997 ------- -------- Current assets: Cash and cash equivalents $276,096 $ 288,310 Accounts receivable: Trade - billed, less allowances for doubtful accounts of $247,878 and $231,304 3,402,736 3,254,993 Trade - unbilled 433,822 410,158 Inventories: Raw materials 518,979 486,583 Finished goods 1,140,822 942,427 Prepaid expenses and other assets 279,724 69,801 Total current assets 6,052,179 5,452,272 Property and equipment, net 1,660,802 1,531,062 ----------- ----------- Other assets: Cash - restricted 1,066,762 196,977 Note receivable, officer 648,446 632,472 Other 173,314 79,443 -------------- ------------- Total other assets 1,888,522 908,892 - --------- -------------- ------------- Total Assets $9,601,503 $7,892,226 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Current maturities of notes payable $ 50,280 $2,199,228 Accounts payable -- trade 2,102,146 1,744,127 Accrued expenses and other liabilities 645,498 570,693 Customer deposits 449,912 450,474 ------------ ------------ Total current liabilities 3,247,836 4,964,522 Notes payable -- less current maturities 4,017,147 759,440 Notes payable -- related parties 109,348 115,598 ------------ ------------ Total Liabilities 7,374,331 5,839,560 Stockholders' equity: Preferred stock, $.01 par value, authorized 1,000,000 shares, none outstanding -- -- Common stock, $.01 par value, authorized 8,000,000 shares, issued and outstanding 3,044,798 and 3,044,798 30,857 30,857 Additional capital 3,450,085 3,450,085 Treasury Stock (102,300) (102,300) Retained earnings (deficit) (1,151,470) (1,325,976) ----------- ------------ Total Stockholders' Equity 2,227,172 2,052,666 ----------- ------------ Total Liabilities and Stockholders' Equity $9,601,503 $7,892,226 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 SMITH-MIDLAND CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1998 1997 ------------ ----------- Revenue $3,401,412 $3,537,513 Cost of goods sold 2,643,833 2,596,299 ---------- --------- Gross profit 757,579 941,214 ----------- ---------- Operating expenses: General and administrative expenses 368,696 577,409 Selling expenses 171,866 116,306 ----------- ------------ Total operating expenses 540,562 693,715 ----------- ------------- Operating income 217,017 247,499 ----------- ------------ Other income (expense): Royalties 23,994 44,525 Interest expense (136,172) (93,219) Interest income 15,825 24,811 Other (9,078) (19,306) ---------- ---------- Total other income (expense) (105,431) (43,189) Income (loss) before income taxes 111,586 204,310 Income tax expense (benefit) -- -- ----------- ----------- Net income (loss) $ 111,586 $ 204,310 ========== =========== Net income (loss) per share $ .04 $ .07 ============= =========== Weighted average common shares outstanding 3,044,798 3,044,798 =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 SMITH-MIDLAND CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30, 1998 1997 ------------ ----------- Revenue $ 6,428,072 $5,618,303 Cost of goods sold 4,858,896 4,149,837 ---------- --------- Gross profit 1,569,176 1,468,466 ------------- ----------- Operating expenses: General and administrative expenses 936,507 1,054,087 Selling expenses 321,282 291,872 ----------- ------------ Total operating expenses 1,257,789 1,345,959 ---------- ------------ Operating income 311,387 122,507 ----------- ------------ Other income (expense): Royalties 62,445 80,164 Interest expense (230,229) (197,233) Interest income 26,998 26,453 Other 3,905 11,144 ----------- ----------- Total other income (expense) (136,881) (79,472) Income before income taxes 174,506 43,035 Income tax expense (benefit) -- -- ------------ ------------ Net income $ 174,506 $ 43,035 ============ ============ Net income (loss) per share $ .06 $ .01 ============= ============ Weighted average common shares outstanding 3,044,798 3,044,798 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 SMITH-MIDLAND CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1998 1997 ----------- ---------- Cash flows from operating activities: Cash received from customers $ 6,318,548 $4,929,504 Cash paid to suppliers and employees (6,058,687) (4,632,418) Interest paid (230,229) (197,233) Other 14,929 15,437 -------------- -------------- Net cash provided (absorbed) by operating activities 44,561 115,290 -------------- -------------- Cash flows from investing activities: Purchases of property and equipment (289,499) (275,620) Decrease (increase) in officer note receivable -- 2,000 Decrease (increase) in related party Receivables (6,250) -- Decrease (increase) in restricted cash (869,785) -- Net cash absorbed by investing activities (1,165,534) (273,620) Cash flows from financing activities: Proceeds from bank borrowings 4,037,167 166,700 Repayments of bank borrowings (2,928,408) (329,011) Net cash provided (absorbed) by financing activities 1,108,759 (162,311) ----------- ------------ Net increase (decrease) in cash and cash equivalents (12,214) (320,641) Cash and cash equivalents at beginning of period 288,310 438,079 ------------ ---------- Cash and cash equivalents at end of period $ 276,096 $ 117,438 ============ =========== Reconciliation of net income (loss) to net cash provided (absorbed) by operating activities: Net income (loss) $ 174,506 $ 43,035 Adjustments to reconcile net income (loss) to net cash provided (absorbed) by operating activities: Depreciation and amortization 159,759 216,074 Decrease (increase) in other assets (93,871) (19,013) Decrease (increase) in: Accounts receivable - billed (147,743) (780,301) Accounts receivable - unbilled (23,664) (326,995) Inventories (230,791) 19,703 Prepaid expenses and other assets (225,897) 57,731 Increase (decrease) in: Accounts payable - trade 358,019 378,001 Accrued expenses and other liabilities 74,805 188,722 Customer deposits (562) 338,333 ---------- ----------- Net cash provided (absorbed) by operating activities $ 44,561 $ 115,290 ============= =========
The accompanying notes are an integral part of these consolidated financial statement 5 SMITH-MIDLAND CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) June 30, 1998 Basis of Presentation As permitted by the rules of the Securities and Exchange Commission (the "Commission") applicable to quarterly reports on Form 10-QSB, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the consolidated financial statements and related notes included in the Smith-Midland Corporation's Annual Report on Form 10-KSB, for the year ended December 31, 1997. In the opinion of management of Smith-Midland Corporation (the "Company"), the accompanying financial statements reflect all adjustments which were of a normal recurring nature necessary for a fair presentation of the Company's results of operations for the three- and six-month periods ended June 30, 1998 and 1997. The results disclosed in the consolidated statements of operations are not necessarily indicative of the results to be expected for any future periods. Principles of Consolidation The Company's accompanying consolidated financial statements include the accounts of Smith-Midland Corporation, a Delaware corporation and its wholly owned subsidiaries: Smith-Midland Corporation, a Virginia corporation; Easi-Set Industries, Inc., a Virginia corporation; Smith-Carolina Corporation, a North Carolina corporation; Concrete Safety Systems, Inc., a Virginia corporation; and Midland Advertising & Design, Inc., a Virginia corporation. All significant inter-company accounts and transactions have been eliminated in consolidation. Reclassifications Certain reclassifications have been made to the prior years' consolidated financial statements to conform to the 1998 presentation. Inventories Inventories are stated at the lower of cost, using the first-in, first-out (FIFO) method, or market. 6 Property and Equipment Property and equipment, net is stated at depreciated cost. Expenditures for ordinary maintenance and repairs are charged to income as incurred. Costs of betterments, renewals, and major replacements are capitalized. At the time properties are retired or otherwise disposed of, the related cost and allowance for depreciation are eliminated from the accounts and any gain or loss on disposition is reflected in income. Depreciation is computed using the straight-line method over the following estimated useful lives: Years Buildings............................................. 10-33 Trucks and automotive equipment....................... 3-10 Shop machinery and equipment.......................... 3-10 Land improvements..................................... 10-30 Office equipment...................................... 3-10 Income Taxes The provision for income taxes is based on earnings reported in the financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense is measured by the change in the deferred income tax asset or liability during the year. Effective January 1, 1993, the Company adopted SFAS 109 "Accounting for Income Taxes." The adoption of SFAS 109 did not have a material effect on the consolidated financial statements as the deferred tax asset related to the Company's net operating loss carry forward has been reserved in its entirety. No provision for income taxes has been made for the three- and six-month periods ended June 30, 1998 and 1997, as the Company does not expect to incur income tax expense for fiscal year 1998 and did not incur income tax expense in fiscal year 1997. Revenue Recognition The Company primarily recognizes revenue on the sale of its standard precast concrete products at shipment date, including revenue derived from any projects to be completed under short-term contracts. Installation services for precast concrete products, leasing and royalties are recognized as revenue as they are earned on an accrual basis. Licensing fees are recognized under the accrual method unless collectibility is in doubt, in which event revenue is recognized as cash is received. Certain sales of soundwall and SlenderwallTM concrete products are recognized upon completion of production and customer site inspections. Provisions for estimated losses on contracts are made in the period in which such losses are determined. 7 SMITH-MIDLAND CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Estimates The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Net Income (Loss) Per Share Net Income (Loss) per share is calculated based on net income and the weighted average number of shares of common stock outstanding during the period. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company generates revenues primarily from the sale, shipping, licensing, leasing and installation of precast concrete products for the construction, utility and farming industries. The Company's operating strategy has involved producing innovative and proprietary products, including SlenderwallTM, a patent-pending, lightweight, energy efficient concrete and steel exterior wall panel for use in building construction; J-J HooksTM Highway Safety Barrier, a patented, positive-connected highway safety barrier; Sierra Wall, a sound barrier primarily for roadside use; and transportable concrete buildings. In addition, the Company produces utility vaults, farm products such as cattleguards, and water and feed troughs, and custom order precast concrete products with various architectural surfaces. This Form 10-QSB contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements and the results for the three and six months ended June 30, 1998 are not necessarily indicative of the results for the Company's operations for the year ending December 31, 1998. Factors that might cause such a difference include, but are not limited to, product demand, the impact of competitive products and pricing, capacity and supply constraints or difficulties, general business and economic conditions, the effect of the Companies accounting policies and other risks detailed in the Company's Annual Report, Form 10-KSB and other filings with the Securities and Exchange Commission. Results of Operations Three months ended June 30, 1998 compared to the three months ended June 30, 1997 For the three months ended June 30, 1998, the Company had total revenue of $3,401,412 compared to total revenue of $3,537,513 for the three months ended June 30, 1997, a decrease of $136,101 or 4%. Total product sales were $2,986,406 for the three months ended June 30, 1998 compared to $3,163,570 for the same period in 1997, a decrease of $177,164 or 6%. The decrease resulted from the unusually high volume in soundwall sales enjoyed in 1997 during the same period. Soundwall sales in the second quarter of 1997 were approximately $1,694,300. vs. $1,482,400 for the same period this year. Shipping and installation revenue was $535,153 for the three months ended June 30, 1998 and $373,943 for the same period in 1997, an increase of $161,210, or 43%. The increase was attributable to the high shipping volume of stored materials primarily soundwall manufactured, invoiced, and paid for in prior periods. 9 Total cost of goods sold for the three months ended June 30, 1998 was $2,643,833, an increase of $47,534, or 2% from $2,596,299 for the three months ended June 30, 1997. The increase was primarily the result of the learning curve associated with the shift to manufacturing our Slenderwall(TM) product. The production of this architectural precast panel product has placed new demands on our production and engineering departments calling for tighter controls and the development of new innovative techniques and production processes. This is an on going necessary investment in our future and we are meeting these challenges daily while trying to contain the costs. Total cost of goods sold, as a percentage of total revenue, increased to 78% for the three months ended June 30, 1998, from 73% for the three months ended June 30, 1997 primarily due to the same reason just stated. Management anticipates that these increased costs will continue for the balance of the year. The construction of, and move into, an additional manufacturing facility at the Midland, Virginia, plant will perpetuate some of these costs. When this facility is up and operational there should be new economies and efficiencies that will help to offset the costs of this current learning curve. For the three months ended June 30, 1998, the Company's general and administrative expenses decreased $208,713 to $368,696 from $577,409 during the same period in 1997. The 36% decrease was attributed in part, to a vacancy in the controller position since April resulting in reduced salary and related expenses and in part to reduced legal, professional, and consulting fees this year vs. last year during this period. The Company is searching for a new controller so those expenses will soon return. Selling expenses for the three months ended June 30, 1998 increased $55,560 to $171,866 from $116,306 for the three months ended June 30, 1997, resulting from increased cost of marketing the Slenderwall(TM) product, and increases in wage and commission expense. The Company's operating income for the three months ended June 30, 1998 was $217,017, compared to operating income of $247,499 for the three months ended June 30, 1997, a decrease of $30,482. The reduced operating income resulted primarily from the decreased revenue and increased cost of goods sold explained above. Royalty income totaled $23,994 for the three months ended June 30, 1998, compared to $44,525 for the same three months in 1997. The decrease of $20,531, or 46%, was mostly due to a credit given reversing previously invoiced royalties of approximately $15,500.00. Interest expense was $136,172 for the three months ended June 30, 1998, compared to $93,219 for the three months ended June 30, 1997. The increase of $42,953, or 46%, was primarily due to the pay off of leases as a result of our debt restructuring which is discussed in the "Liquidity and Capital Resources" section of this report. (See page 13) Net income was $111,586 for the three months ended June 30, 1998, compared to net income of $204,310 for the same period in 1997. Net income per share for the current three month period was $.04 compared to net income per share of $.07 for the three months ended June 30, 1997. 10 Six months ended June 30, 1998 compared to the six months ended June 30, 1997 For the six months ended June 30, 1998, the Company had total revenue of $6,428,072 compared to total revenue of $5,618,303 for the six months ended June 30, 1997, an increase of $809,769 or 14%. Total product sales were $5,554,378 for the six months ended June 30, 1998 compared to $4,950,903 for the same period in 1997, an increase of $603,475 or 12%. The increase resulted from management's effort to keep the sales backlog at a level that will insure consistent factory utilization and profitability. This effort, coupled with a good first quarter revenue resulted in an improved six month benchmark. Shipping and installation revenue was $873,694 for the six months ended June 30, 1998 and $667,400 for the same period in 1997, an increase of $206,294, or 31%. The increase is attributable to strong shipping activity in both the first and second quarters of this year and the increase in 1998 sales volume over 1997. Total cost of goods sold for the six months ended June 30, 1998 was $4,858,896, an increase of $709,059, or 17% from $4,149,837 for the six months ended June 30, 1997. The increase was primarily the result of increased revenue and increased cost of goods sold as a percentage of revenue. Total cost of goods sold, as a percentage of total revenue, increased to 76% for the six months ended June 30, 1998, from 74% for the six months ended June 30, 1997 primarily due to the increased cost experienced this quarter, as explained in the quarterly results section of this report above. For the six months ended June 30, 1998, the Company's general and administrative expenses decreased $117,580 to $936,507, from $1,054,087 during the same period in 1997. The decrease was attributed to the decreased second quarter expenses explained above, offset slightly by increases in general and administrative expenses in the first quarter of this year. Selling expenses for the six months ended June 30, 1998 increased $29,410 to $321,282 from $291,872 for the six months ended June 30, 1997, resulting from increased wage and commissions expense and increases in advertising and marketing expenses. The Company's operating income for the six months ended June 30, 1998 was $311,387, compared to operating income of $122,507 for the six months ended June 30, 1997, an increase of $188,880, or 154%. The improved operating income resulted primarily from a 3.1% positive first quarter in 1998 vs. a loss in the first quarter of 1997, coupled with a 6.4% positive second quarter. Royalty income totaled $62,445 for the six months ended June 30, 1998, compared to $80,164 for the same six months in 1997. The decrease of $17,719, is largely due to a credit given for previously invoiced royalties of approximately $15,500. Interest expense was $230,229 for the six months ended June 30, 1998, compared to $197,233 for the six months ended June 30, 1997. The increase of $32,996, or 17%, was primarily due to the pay off of leases as part of our debt 11 restructuring detailed in the "Liquidity and Capital Resources" section of this report. (See page 13) Net income was $174,506 for the six months ended June 30, 1998, compared to net income of $43,035 for the same period in 1997. Net income per share for the current six month period was $.06 compared to net income per share of $.01 for the six months ended June 30, 1997. 12 Liquidity and Capital Resources The Company has financed its capital expenditures, operating requirements and growth to date primarily with proceeds from its initial public offering ("IPO") and subsequent over-allotment, bank and other borrowings, and the sale of stock to and loans from its principal stockholders. The Company had $4,176,775 of indebtedness at June 30, 1998, of which $50,280 was scheduled to mature within twelve months. The Company has successfully restructured all of its debt with the exception of one small auto loan, into one note with The First National Bank of New England, headquartered in Hartford, Connecticut. The Company closed on this loan on June 25, 1998. The Company obtained a twenty three year term at 1.5% above prime on this note secured by equipment and real estate. The term of the note dramatically improved our current debt ratios with current debt decreasing from $2,330,091 to $50,280, and the term improves our cash flow. In addition to paying off all existing debt of approximately $3,000,000, we received approximately $1,000,000, for plant expansion and new equipment. The loan is guaranteed in part by the U.S. Department of Agriculture Rural Business-Cooperative Service's loan guarantee. The Company was also granted a $500,000, operating line of credit by First National Bank of New England. This line will be used to assist day to day operating needs. Other Comments The Company has formed a team to address the effect of the year 2000 on the Company's data processing systems and operations. The Company has not completed its assessment, but expects that the costs incurred in the preparation for the year 2000 will not have a significant impact on the Company's cash flow or results of operations. The Company is currently planning to send questionnaires to its suppliers and customers to ensure that they are taking steps to be year 2000 compliant. However, if the Company and third parties upon which it relies are unable to address this issue in a timely manner, it could result in a material financial risk to the Company. In order to assure this does not occur, the Company plans to devote all resources required to resolve any significant year 2000 issues in a timely manner. 13 The Company performs a portion of its concrete pouring and curing processes on uncovered, outdoor manufacturing areas. During the winter months, cold or adverse weather causes a slowdown or cessation of these outdoor production activities, thereby reducing the Company's production capacity. However, The Company is in the process of building an additional manufacturing facility at its Midland, Virginia, location that will bring these operations inside and out of the weather correcting this problem. In addition, the Company services the construction industry primarily in areas of the United States where construction activity is inhibited by adverse weather during the winter. As a result, the Company traditionally experiences reduced revenues from December through March and realizes the substantial part of its revenues during the other months of the year. The Company typically experiences lower profits, or losses, during the winter months, and must have sufficient working capital to fund its operations at a reduced level until the spring construction season. However, as of the date of this filing, the Company's backlog is approximately $6.1 million, of approximately which $2.2 million represents firm contracts for Slenderwall(TM) and architectural pre-cast concrete products. The majority of the projects relating to this backlog are contracted to be constructed in 1998. Management believes that the Company's operations have not been materially affected by inflation. 14 PART II - Other Information Item 1. Legal Proceedings. None Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. A. The following Exhibits are filed herewith:
Exhibit No. Title 1 First National Bank of New England Loan Agreement 2 First National Bank of New England Loan Note 27 Financial Data Schedule
B. Report on Form 8-K. None. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SMITH-MIDLAND CORPORATION Date: August 15, 1998 By: /s/ Rodney I. Smith ----------------------- Rodney I. Smith Chairman of the Board, Chief Executive Officer and President (principal executive officer) Date: August 15, 1998 By: /s/ Robert V. McElhinney ---------------------------- Robert V. McElhinney Vice President of Finance, Chief Financial Officer (principal financial officer) 16 EX-1 2 EXHIBIT 1 LOAN AGREEMENT (LENDER) FIRST NATIONAL BANK OF NEW ENGLAND 12020 Sunrise Valley Drive, Suite 270 Reston, VA 20191 AND (BORROWER) SMITH-MIDLAND CORPORATION 5119 Catlett Road Midland, VA 22728 AND (GUARANTORS) Smith-Midland Corporation, a Virginia corporation Easi-Set Industries, Inc., a Virginia corporation Smith-Carolina Corporation, a North Carolina corporation Concrete Safety Systems, Inc., a Virginia corporation Midland Advertising & Design, Inc., a Virginia corporation Your request for First National Bank of New England ("LENDER") to extend a loan in the amount of $4,000,000 with a United States Department of Agriculture Rural Business-Cooperative Service (f/k/a Farmers Home Administration, hereafter referred to as "Agency") 80.00% Guarantee has been approved subject to the following provisions: 1. Requirements: (a) The Borrower shall pay a guaranty fee of 2% of the amount guaranteed prior to the disbursement of the loan. (b) The Borrower shall execute all instruments and agreements as Lender may require in order to document the loan, including: 1. Promissory Note; 2. Commercial Loan Financial Condition Affidavits; 3. Mortgage Deed; 4. Guarantee Agreement; 5. Assignment of Lease with Right to Reassignment of Lease; 6. Lessors Agreement; 7. Environmental Indemnity Agreement; 8. Security Agreements; 9. UCC-1 financing statements; 10. Any such other instruments and agreements as Lender or Lender's counsel may require in connection herewith. 2. This Authorization is subject to: (a) Receipt by Lender of evidence that there has been no unremedied adverse change since the date of application, or since any of the preceding disbursements, in the financial or any other condition of Borrower or Guarantors, which would warrant withholding or not making any such disbursement or any further disbursement. (b) The representations made by Borrower in its loan application, the requirements or conditions set forth in Lender's application form, including the supporting documents thereto, the conditions set forth herein and any future conditions imposed by Lender (with prior Agency approval). 3. Terms of Loan: (a) Repayment term, interest rate(s) and maturity. NOTE PAYABLE: The undersigned will pay principal and interest by making payments in the initial amount of $37,087.27 on the first day of each month beginning on August 1, 1998. The undersigned will make these payments until they have paid in full all principal and interest and any other sums due hereunder. Notwithstanding the foregoing, the entire indebtedness evidenced by this Note, including, but not limited to, all outstanding principal and accrued and unpaid interest, shall be due and payable in full on the twenty-third (23th) anniversary date of this Note. The undersigned's initial monthly payments shall be calculated in accordance with the full amortization of the loan evidenced by this Note by level monthly payments of principal and interest over a twenty-three (23) year period at the interest rate applicable on the date hereof. On each Adjustment Date (as herein defined), the amount of the monthly payments will be adjusted so as to provide for the full amortization of the then outstanding principal at the interest rate established at each Adjustment Date in level monthly payments of principal and interest over the remaining term of the original twenty-three (23) year amortization period. Interest Rate Interest shall accrue on the outstanding principal amount of this Note at a per annum rate of one and one-half (1.50%) percentage points above the Prime Rate on a floating basis. The initial interest rate hereunder is ten (10.0%) percent. On October 1, 1998 and on the first day of each, January, April, July, and October thereafter until all sums due hereunder are paid in full (each being referred to as an "Adjustment Date"), the interest rate on the unpaid principal balance hereunder shall be adjusted, without notice or demand, to a per annum rate of one and one-half percentage points above the Prime Rate in effect on the applicable Adjustment Date (or the following business day in the event that such Adjustment Date falls on a Saturday, Sunday or holiday), which such rate shall remain in effect until the succeeding Adjustment Date. Interest hereunder shall be computed on a daily basis and on the basis of a Three Hundred Sixty (360) day year and a thirty (30) day month. The undersigned further agrees to pay all taxes levied or assessed on this Note or the debt evidenced hereby against the holder of this Note, and further agrees to pay all costs, expenses and attorneys' fees incurred in any action to collect this Note or to defend, protect, preserve, or realize upon or foreclose any mortgage or security agreement securing this Note or to protect, defend, preserve, foreclose or sustain the lien of said mortgage or security agreement or in any litigation or controversy arising from or connected with said mortgage, security agreement, or this Note. As used herein, "Prime Rate" shall mean the lowest New York prime rate as set forth in the money rate section of the Wall Street Journal (or in any successor publication). In the event of prepayment, the Borrower will pay a penalty of 5% of the prepayment amount in year 1, 4% in year 2, 3% in year 3, 2% inyear 2, and 1% in year 5. The Borrower may prepay the loan in part or in full in years 6-23 without penalty, provided three weeks prior written notice is given to Lender. Holder should give written notice to the undersigned of each increase or decrease in the interest (and change in installment amount, if applicable) within thirty days after the effective date of each rate adjustment; however, the fluctuation of the interest rate is not contingent on whether the notice is given. If the undersigned shall be in default in payment due on the indebtedness herein and the Agency purchases its guaranteed portion of said indebtedness, the rate of interest on both the guaranteed and unguaranteed portions herein shall become fixed at the rate in effect as of the date of default. If the undersigned shall not be in default in payment when Agency purchases its guaranteed portion, the rate of interest on both the guaranteed and unguaranteed portions herein shall be fixed at the rate in effect as of the date of purchase by Agency. All payments received by the Lender, at the option of the Lender, shall be applied first to any outstanding charges and expenses incurred by the Lender in connection with this Note or any documents executed in connection with this Note, then to any unpaid and accrued interest and finally to the outstanding principal due under the Note. The undersigned agrees that the interest shall accrue at the foregoing rate on unpaid balance before and after maturity, by acceleration or otherwise. The Borrower hereby grants to the Lender and Holder hereof a lien and right of set-off for all of the Borrower's liabilities to Lender or Holder upon and against all of the Borrower's deposits, credits, and other property now owned or hereafter in the possession or control of Lender or Holder or in transit to. The Lender or Holder may at any time may apply the same or any part thereof to any of the Borrower's liabilities to Lender or Holder, whether or not matured at the time of such application, at any time after the occurrence of an "Event of Default" under the loan documents executed in connection herewith. Borrower agrees to pay a late charge equal to 5% of the payment amount due if such payment is not received within ten days of the due date. Funds received from the borrower will be applied first to interest to the date of receipt, then to principal and then to the late fee. The Borrower agrees that, in addition to other events of default stated in the Note or related loan documents, each of the following shall constitute an "event of default" under the Note: 1. Failure of Borrower or any Guarantor to pay or perform any of Borrower's or Guarantor's liabilities or obligations to Lender. 2. If Borrower or any Guarantor of any obligation of Borrower to Lender or Holder shall be in default under any security agreement, mortgage or other agreement governing, securing or relating to this Loan. (b) Use of Proceeds of Loan as follows (show specific uses for which loan is authorized): 1. Approximately $2,895,376 for debt refinance to various creditors as identified in Schedule A 2. Approximately $500,000 for building improvements 3. Approximately $409,000 for equipment 4. Approximately $195,624 for working capital and closing costs. 5. Balance, if any, to pay closing costs and working capital. NOTE: DISBURSEMENT OF LOAN PROCEEDS SHALL BE BY TWO PARTY CHECKS (PAYABLE TO BORROWER AND VENDOR, OR TO BORROWER AND CREDITOR), TO ASSURE THAT USE OF PROCEEDS COMPLIES WITH THIS LOAN AUTHORIZATION. (c) Collateral: 1. First mortgage on land and buildings located at 5119 Catlett Drive, Midland VA. 2. First mortgage on 19.1 acres of raw land located at south Side of Route 28, Midland VA. 3. First mortgage on land and buildings located at 1088 NC 65, Reidsville, N.C. 4. Title Insurance in the amount of the loan and in form and content satisfactory to Lender shall be obtained for all mortgages and shall not contain any mechanics' lien or survey exceptions. 5. A first security interest in all machinery and equipment, including power driven machinery and equipment (including titled motor vehicles), furniture and fixtures, leasehold improvements, and general intangibles now owned, to be acquired with loan proceeds or hereafter acquired together with all replacements thereof, all attachments, accessories, parts and tools belonging thereto or for use in connection therewith and proceeds of the same. UCC SEARCH BEFORE AND AFTER RECORDING REQUIRED. ---------------------------------------------- 6. A second security interest in all accounts receivable and inventory now owned, to be acquired with loan proceeds or hereafter acquired together with all replacements thereof, all attachments, accessories, parts and tools belonging thereto or for use in connection therewith and proceeds of the same subject only to a first security interest held by First National Bank of New England having an approximate unpaid balance of $500,000 UCC SEARCH BEFORE AND AFTER RECORDING REQUIRED ------------------------------------------------ 7. The unlimited corporate gurantees of Smith-Midland Corporation, a Virginia corporation; Easi-Set Industries, Inc., a Virginia corporation; Smith-Carolina Corporation, a North Carolina corporation; Concrete Safety Systems, Inc., a Virginia corporation; and Midland Advertising & Design, Inc., a Virginia corporation secured by first security interests in all machinery and equipment, including power driven machinery and equipment (excluding titled motor vehicles), furniture and fixtures, leasehold improvements, and general intangibles now owned, to be acquired with loan proceeds or hereafter acquired together with all replacements thereof, all attachments, accessories, parts and tools belonging thereto or for use in connection therewith and proceeds of the same and second security interests in all accounts receivable and inventory now owned, to be acquired with loan proceeds or hereafter acquired together with all replacements thereof, all attachments, accessories, parts and tools belonging thereto or for use in connection therewith and proceeds of the same subject only to a first security interest held by First National Bank of New England having an approximate unpaid balance of $500,000 UCC SEARCH BEFORE AND AFTER RECORDING REQUIRED ---------------------------------------------- 8. Assignment of life insurance with acknowledgment of home office on Rodney Smith in the amount of $1,000,000 which shall be decreasing term or existing permanent type insurance. Original policy to be retained by Lender. No additional life insurance is to be purchased from business income or assets without prior written approval of Agency. Proceeds from life insurance policies shall be applied at the time of death to repay the outstanding balance for the following loans: (a) $4,000,000 Agency term loan; (b) $500,000 Lender line of credit. Note: Assignment of life insurance shall be by an absolute assignment properly acknowledged by home office of insurer. Lender shall not be named as beneficiary of the policy. 9. Monthly tax escrow to be collected for all mortgaged properties equal to 1/12th of the annual real estate tax obligation. 4. To further induce Lender to make and Agency to guarantee this Loan, Lender and Agency impose the following conditions: (a) Execution of all documents required in Item 1 above. (b) Reimbursable Expenses - Borrower will, on demand, reimburse Lender for any and all expenses incurred, or which may be hereafter incurred, by Lender from time to time in connection with or by reason of Borrower's application for and the making and administration of the Loan. (c) Books, Records, and Reports - Corporate Borrower will at all times keep proper books of account in a manner satisfactory to Lender and/or Agency. Corporate Borrower hereby authorizes Lender or Agency to make or cause to be made, at Corporate Borrower's expense and in such manner and at such times as Lender or Agency may require, (a) inspections and audits of any books, records and papers in the custody or control of Corporate Borrower or others, relating to Corporate Borrower's financial or business conditions, including the making of copies thereof and extracts therefrom, and (b) inspections and appraisals of any of Corporate Borrower's assets. At a minimum, Lender will require an annual examination to be conducted at Corporate Borrowers headquarters. Such examination will inspect the books and records of the Corporate Borrower and the collateral of the Lender. Corporate Borrower will furnish to Lender and AGENCY for the twelve (12) month period ending December 31, 1998 and annually thereafter (no later than 3 months following the expiration of any such period) and at such other times and in such form as Lender may prescribe, Corporate Borrower's independent CPA-prepared audit-quality consolidated financial statements including Balance Sheet, Profit and Loss Statement, Cash Flow Statement, and supplemental schedules of Cost of Goods Sold and Operating Expenses. Corporate Borrower will submit to Lender quarterly prepared financial statements prepared by management. Corporate Borrower hereby authorizes all Federal, State, and municipal authorities to furnish reports of examinations, records, and other information from reports, returns, files and records of such authorities upon request therefor by Lender or Agency. (d) Borrower shall not execute any contracts for management consulting services without prior approval of Lender and Agency. (e) Distributions and Compensation - Borrower will not, without the prior written consent of Lender or Agency (a) if Borrower is a corporation, declare or pay any dividend or make any distribution upon its capital stock, or purchase or retire any of its capital stock, or consolidate or merge with any other company, or give any preferential treatment, make any advance, directly or indirectly, by way of loan, gift, bonus, or otherwise, to any company directly or indirectly, controlling or affiliated with or controlled by Borrower, or any other company, or to any officer, director or employee of Borrower, or of any such company, (b) if Borrower is a partnership or individual make any distribution of assets of the business of Borrower, other than reasonable compensation for services, or give any preferential treatment, make any advance, directly or indirectly, by way of loan, gift, bonus, or otherwise, to any partner or any of its employees, or to any company directly or indirectly controlling or affiliated with or controlled by Borrower, or any other company. (f) Other Provisions: 1. Corporate Borrower shall not in any way alter its form of business organization without the prior written consent of Lender. 2. Prior to the first disbursement Lender shall be in receipt of satisfactory evidence that all applicable taxes have been paid and all zoning regulations and all licensing regulations have been complied with. INSURANCE PROVISIONS 3. Borrower shall provide and maintain hazard insurance on all Real Estate mortgaged to lender in such amounts and for such coverage as shall be satisfactory in all respects to Lender. Said insurance shall be maintained for the life of the loan. Policy coverage on real property shall designate Lender as mortgagee under a standard or New York mortgage clause and shall provide a minimum to ten (10) days written notice to Lender of cancellation. 4. Prior to first disbursement, the lender must be in receipt of evidence of the kind described below from an independent authoritative source which is sufficient to indicate to the lender that the properties are not in special flood hazard areas (SFHA). Property is defined as the asset(s) financed as a part of the AGENCY financial assistance and/or other collateral deemed necessary by the field office. If such evidence is not provided to the lender, the borrower must obtain, and maintain, a Standard Flood Insurance Policy (SFIP) or other appropriate special flood hazard insurance in amounts and coverages equal to the lesser of (1) the insurable value of the property or (2) the maximum amount of coverage available. Borrower can show that special flood hazard insurance has been acquired by submitting a copy of the policy or providing evidence of premium payment for the appropriate coverage to a licensed insurance agent. Borrower will not be eligible for either any future disaster assistance or AGENCY business loan assistance if the special flood hazard insurance is not maintained as stipulated herein throughout the entire term of this loan. As evidence that the properties are not located within a special flood hazard area subject to flooding, mudslides or erosions, the lender may rely on a determination of special flood hazard area status by the borrower's property & casualty insurance company, real estate appraiser, title insurance company, a local government Agency or other authoritative source acceptable to Agency which would ordinarily have knowledge of the special flood hazard area status for the properties. 5. Borrower and Gurantors shall provide and maintain hazard insurance on all business personal property in such amounts and for such coverage as shall be satisfactory in all respects to lender. Said insurance shall be maintained for the life of the loan. Policy coverage on personal property shall designate Lender as loss payee under a standard lender's loss payable clause and shall provide a minimum of 10 days written notice to lender prior to cancellation. STANDBY PROVISIONS 6. Standby Agreement of Smith-Midland Corporation, covering the total amount of Borrower's indebtedness to related parties in the amount of $116,000 REAL ESTATE PROVISIONS 7. Prior to first disbursement on this loan, Lender to have satisfactory evidence that all real estate taxes have been paid. CORPORATION PROVISIONS 8. Corporate Requirements of SMITH-MIDLAND CORPORATION, : Prior to first disbursement on this loan, SMITH-MIDLAND CORPORATION, to provide Lender with: a) Resolution of Board of Directors b) Certificate of Good Standing from the Secretary of State's Office. c) Affidavit of Secretary of Corporation listing names of Stockholders and numbers of shares owned by each to be the same as set forth in the loan application. Borrower agrees that it will not authorize nor issue additional shares of its capital stock, nor sell, transfer, or redeem any of its outstanding shares of corporate stock without the prior written consent of Lender. 9. Corporate Requirements of Smith-Midland Corporation, a Virginia corporation.: Prior to first disbursement on this loan, Smith-Midland Corporation, a Virginia corporation to provide Lender with: a) Resolution of Board of Directors b) Certificate of Good Standing from the Secretary of State's Office. c) Affidavit of Secretary of Corporation listing names of Stockholders and numbers of shares owned by each to be the same as set forth in the loan application. Guarantor agrees that it will not authorize nor issue additional shares of its capital stock, nor sell, transfer, or redeem any of its outstanding shares of corporate stock without the prior written consent of Lender. 10. Corporate Requirements Easi-Set Industries, Inc., a Virginia corporation.: Prior to first disbursement on this loan, Easi-Set Industries, Inc., a Virginia corporation. to provide Lender with: a) Resolution of Board of Directors b) Certificate of Good Standing from the Secretary of State's Office. c) Affidavit of Secretary of Corporation listing names of Stockholders and numbers of shares owned by each to be the same as set forth in the loan application. Guarantor agrees that it will not authorize nor issue additional shares of its capital stock, nor sell, transfer, or redeem any of its outstanding shares of corporate stock without the prior written consent of Lender. 11. Corporate Requirements Smith-Carolina Corporation, a North Carolina corporation: Prior to first disbursement on this loan Smith-Carolina Corporation, a North Carolina corporation to provide Lender with: a) Resolution of Board of Directors b) Certificate of Good Standing from the Secretary of State's Office. c) Affidavit of Secretary of Corporation listing names of Stockholders and numbers of shares owned by each to be the same as set forth in the loan application. Guarantor agrees that it will not authorize nor issue additional shares of its capital stock, nor sell, transfer, or redeem any of its outstanding shares of corporate stock without the prior written consent of Lender. 12. Corporate Requirements Concrete Safety Systems, Inc., a Virginia corporation: Prior to first disbursement on this loan Concrete Safety Systems, Inc., a Virginia corporation to provide Lender with: a) Resolution of Board of Directors b) Certificate of Good Standing from the Secretary of State's Office. c) Affidavit of Secretary of Corporation listing names of Stockholders and numbers of shares owned by each to be the same as set forth in the loan application. Guarantor agrees that it will not authorize nor issue additional shares of its capital stock, nor sell, transfer, or redeem any of its outstanding shares of corporate stock without the prior written consent of Lender. 13. Corporate Requirements Midland Advertising & Design, Inc., a Virginia corporation: Prior to first disbursement on this loan Midland Advertising & Design, Inc., a Virginia corporation to provide Lender with: a) Resolution of Board of Directors b) Certificate of Good Standing from the Secretary of State's Office. c) Affidavit of Secretary of Corporation listing names of Stockholders and numbers of shares owned by each to be the same as set forth in the loan application. Guarantor agrees that it will not authorize nor issue additional shares of its capital stock, nor sell, transfer, or redeem any of its outstanding shares of corporate stock without the prior written consent of Lender. 14. Borrower agrees to comply with all existing and future state and federal regulations governing the handling, storage and use of any and all hazardous, toxic, or otherwise regulated, substances or materials; and further covenants that he will permit no such materials or substances or by-products or wastes thereof, to be permanently stored at the facility, and that borrower will operate the facility in such a manner that the site will remain free of contaminating materials, wastes, by products or substances. 15. Borrower agrees to comply with all existing and future state and federal regulations governing the maintenance and emplacement of underground storage tanks and further covenants that borrower will permit no petroleum base waste or hazardous waste to be stored at the site, and that he will operate the business in such a manner that the site will remain free of such contamination waste. MISCELLANEOUS PROVISIONS 16. Unfinanced fixed asset expenditures are limited to $300,000 per annum for a five year period. 17. Tangible net worth of Borrower shall be at least 10% of tangible assets upon closing the $4,000,000 loan and shall be evidenced by a proforma balance sheet prepared by a CPA. 18. Corporate Borrower's debt to net worth ratio, as defined under generally accepted accounting principles, shall not exceed 4.00x at 12/31/97, 3.75x at 12/31/98, and 3.50x at 12/31/99 and annually thereafter, measured annually based on the Borrower's 12/31 fiscal year end CPA-audited financial statements. 19. Corporate Borrower shall maintain minimum working capital, as defined under generally accepted accounting principles, of at least $1 (i.e. positive working capital), measured annually based on the Borrower's 12/31 fiscal year end CPA-audited financial statements. 20. Corporate Borrower's current ratio, as defined under generally accepted accounting principles, shall be at least 1.0x, measured annually based on the Borrower's 12/31 fiscal year end CPA-audited financial statements. 21. Borrower will not, prior to payment in full of the indebtedness evidenced by the Note, without prior written consent of the holder of the Note, pledge, mortgage or otherwise cause or permit to be encumbered in any manner whatsoever any of Borrower's property or assets, whether then owned or thereafter acquired. However, the holder of the Note will permit Chattel Mortgages on purchased equipment not to exceed $200,000 on an annual basis so long as the Borrower is not in default of any of its obligations. 22. Total Annual salaries or drawings by Rodney Smith including bonuses, commissions or other compensation, shall be limited to $350,000, with annual increases not to exceed 20%, provided that Smith-Midland Corporation reports a net profit. 23. During the term of the Loan, the Borrower shall not assume or agree to pay any debt, liability, or obligation of others. 24. Opinion Letter of Borrower's Counsel. 5. Parties Affected - This Agreement shall be binding upon Borrower and Borrower's successors and assigns. No provision stated herein shall be waived without the prior written consent of Agency. The Loan shall be administered as provided in the Guaranty Agreement. The terms and conditions of this Authorization and Loan Agreement shall survive the Loan Closing and shall not be merged into the Loan Documentation notwithstanding any provisions to the contrary contained herein. FIRST NATIONAL BANK OF NEW ENGLAND - ------------------------------------------------------------------------------ By Mark Korman, Vice President Date Borrower hereby agrees to the conditions imposed herein and further agrees that the terms and conditions herein are for the benefit of, and may be enforced by, Lender and Agency. This Authorization and Loan Agreement and amendments constitute the Loan Agreement between Lender and Borrower. - ------------------------------------------------------------------------------ SMITH-MIDLAND CORPORATION, Title Date - ------------------------------------------------------------------------------ Smith-Midland Corporation, a Virginia corporation Title Date - ------------------------------------------------------------------------------ Easi-Set Industries, Inc., a Virginia corporation Title Date - ------------------------------------------------------------------------------ Smith-Carolina Corporation, a North Carolina corporation. Title Date - ------------------------------------------------------------------------------ Concrete Safety Systems, Inc., a Virginia corporation Title Date - ------------------------------------------------------------------------------ Midland Advertising & Design, Inc., a Virginia corporation Title Date NOTE: Corporate applicants must execute Authorization in corporate name, by duly authorized officer, and seal must be affixed and duly attested; partnership applicants must execute in firm name, together with signature of a General Partner. - ------------------------------------------------------------------------------ INSTRUCTIONS: INDICATE THE PARAGRAPHS BEING CERTIFIED AND AGREED TO BY HAVING THE OBLIGOR INITIAL NEXT TO THE APPROPRIATE PARAGRAPHS, PRIOR TO SIGNING. - ------------------------------------------------------------------------------ CERTIFICATION AND LOAN AGREEMENT The United States Department of Agriculture Rural Business Cooperative Service (f/k/a/ Farmers Home Administration) ("Agency") in order to induce FIRST NATIONAL BANK OF NEW ENGLAND ("Lender") to make a guaranteed Loan ("Loan") to SMITH-MIDLAND CORPORATION, a Delaware corporation ("Borrower"), and in consideration therefor, Borrower and (if applicable)___________N/A ________________ ("Operating Company"), SMITH-MIDLAND CORPORATION, a Virginia corporation, SMITH-CAROLINA CORPORATION, a North Carolina corporation, EASI-SET INDUSTRIES, INC., a Virginia corporation, CONCRETE SAFETY SYSTEMS, INC., a Virginia corporation, and MIDLAND ADVERTISING & DESIGN, INC., a Virginia corporation, the guarantors of the Loan (collectively, the "Guarantors") (the Borrower, Operating Company, if applicable and the Guarantors are singularly or collectively, "Obligor") hereby certifies to, and agrees and covenants with, the Lender and the Agency and their respective successors and assigns, as follows: I. CERTIFICATIONS The Obligor hereby certifies: ____a. Adverse Change - That there has been no material adverse change in Obligor's financial condition, organization, operations or fixed assets or mortgaged real estate since the date the Loan application was signed. ____b. [INTENTIONALLY DELETED] ____c. Current Taxes - That Obligor is current on all federal, state and local taxes, including, but not limited to, income taxes, payroll taxes, real estate taxes and sales taxes. ____d. Environmental - that: 1) At the time Obligor submitted the Loan application, Obligor was in material compliance with all local, state and federal environmental laws and regulations pertaining to environmental contamination; 2) Obligor has complied, and will continue to comply, with these laws and regulations; 3) Obligor has no knowledge of any environmental contamination of any real or personal property pledged as collateral of the Loan which violates any such laws and regulations (other than what was disclosed in connection with the Environmental Investigation of the Virginia and North Carolina properties performed by EMG, dated March 18 and March 26, 1998); 4) Obligor assumes full responsibility for all costs incurred in any clean-up of environmental contamination and agrees to indemnify and hold harmless Lender and the Agency against payment of any such costs (Lender or Agency may require Obligor to execute a separate indemnification agreement); 5) Until full repayment of Loan, Obligor will promptly notify Lender and the Agency if it knows, suspects or believes there may be any environmental contamination in or around the real property securing the Loan, or if Obligor and/or such property are subject to any investigation or enforcement action by any Governmental agency pertaining to any environmental contamination of the property. ____e. Bankruptcy - That no petition in bankruptcy has been filed by, or to the undersigneds' knowledge, against the Obligor or any Guarantor of the Loan as of the date hereof. ____f. Liens - That within the preceding thirty (30) days, neither the Obligor nor any Guarantor of the Loan has granted a security interest in any of the collateral given as security for the Loan, nor has the Obligor or any such Guarantor suffered the imposition of any involuntary and/or judicial liens or encumbrances upon the loan collateral. ____g. Legal Proceedings - That there are no pending, or to the undersigneds' knowledge, threatened legal proceedings to which the Obligor or any Guarantor is a party, or to which the loan collateral or mortgaged real estate are subject, nor any contingent liabilities of the Obligor or any Guarantor which will adversely affect the transactions contemplated in connection with the Loan, except as may be disclosed in the Loan application or in an addendum hereto. ____h. Obligations - That the financial obligations of the Obligor and each Guarantor of the Loan are current and not in material default. Obligor and any such Guarantor are not in material default under any current agreement or obligations binding upon Obligor or any such Guarantor, and the Loan will not violate or be in conflict with or constitute a default under any guaranty, obligation or agreement to which Obligor or any Guarantor are bound. ____i. No Breach - That neither the execution and delivery of the Loan agreements, the consummation of the transactions contemplated thereby, nor the fulfillment of or compliance with the terms and conditions of such agreements is prevented by, limited by, or conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any evidence of indebtedness, agreement or instrument of whatever nature to which Obligor or any Guarantor are now a party or by which Obligor or any Guarantor are bound, or constitutes a default under any of the foregoing. ____j. Mechanics Liens - That within the last ninety (90) days, including the date hereof, no person, firm or corporation has furnished any labor, services or materials in connection with the construction or repair of any buildings or improvements on any of the mortgaged real estate, or on any adjoining property of the mortgagor, the obligations for which have not been paid, and that no person, firm or corporation is entitled to any mechanic's lien on said mortgaged real estate. ___k. Execution - That all parties to the Loan agreements have executed the documents freely and voluntarily, after due examination and study of the terms and conditions thereof, for good and fair consideration received by them as of the date of execution. ____l. Capacity - That no party to the Loan agreements is presently under legal, physical, mental or contractual disability, so as to be prohibited from, or incapable of, consummating the Loan transaction and/or performing their obligations and duties in accordance with the terms and provisions of the Loan agreements. ____m. Mortgaged Premises - That the mortgagor of any mortgaged real estate has good and indefeasible right, title and interest in fee simple in and to the premises, and that all necessary governmental permits and approvals for the present use thereof, including, without limitation, subdivision and occupancy approval, have been obtained. ____n. Legal Representation - That at the time of the closing, the undersigned was not represented by the Law Firm of Updike, Kelly & Spellacy, P.C. or Tydings & Rosenberg LLP nor any agent or representative thereof, nor did they pay any fee or compensation to the Law Firm of Updike, Kelly & Spellacy, P.C. or Tydings & Rosenberg LLP for personal representation in this transaction. ____o. [INTENTIONALLY DELETED]. ____p. Taxpayer Identification Numbers - That the correct taxpayer identification numbers for the undersigned are as follows: NAME TAXPAYER I.D. NO. Smith-Midland Corporation, a 54-0881620 Virginia corporation Smith-Carolina Corporation, a 56-1173767 North Carolina corporation Concrete Safety Systems, Inc., a 54-1043335 Virginia corporation Easi-Set Industries, Inc., a 54-1086270 Virginia corporation Midland Advertising & Design, Inc. 54-1396603 A Virginia corporation ____q. Commercial Transaction - That the Loan is a commercial transaction, and the documents delivered to the Lender in connection with the Loan, including, without limitation, the Note, the Deed(s) of Trust and Security Agreement, are executed and delivered as part of a commercial transaction. ____r. ERISA - That the Obligor and each Subsidiary or Affiliate of Obligor is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as it may be amended from time to time. ____s. Organization - That Smith-Midland Corporation, Easi-Set Industries, Inc., Concrete Safety Systems, Inc. and Midland Advertising & Design, Inc. are corporations duly organized under the laws of the Commonwealth of Virginia with a principal place of business at 5119 Catlett Road, Midland, Virginia 20728; that Smith-Midland Corporation, the Borrower, is a corporation organized under the laws of the State of Delaware with a principal place of business at 5119 Catlett Road, Midland, Virginia 20728; and that Smith-Carolina Corporation is a corporation duly organized under the laws of the State of North Carolina with a principal place of business at 1088 Highway 85, Reidsville, North Carolina 27320. That _______N/A___________ is a partnership duly organized under the laws of the State of ______N/A__________ with a principal place of business _________N/A_____________. That _______N/A___________ is a limited liability company duly organized under the laws of the State of ______N/A__________ with a principal place of business at __________N/A_______________. ____t. Other ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- II. AFFIRMATIVE COVENANTS The Obligor shall, and hereby agrees and covenants to: ____a. Reimbursable Expenses - Reimburse Lender for expenses incurred in the making and administration of the Loan. ____b. Books, Records and Reports - (i) Keep proper books of account in a manner satisfactory to Lender; (ii) Furnish year-end statements to Lender within ________ (__) days (if not filled in then one hundred twenty (120) days) of fiscal year end; (iii) Furnish additional financial statements or reports whenever Lender requests them; (iv) Allow Lender and/or the Agency to: (A) Inspect and audit books, records and papers relating to Obligor's financial or business condition; and (B) Inspect and appraise any of Obligor's assets; and (C) Allow all government authorities to furnish reports of examinations, or any records pertaining to Obligor, upon request by Lender or the Agency. ____c. [INTENTIONALLY DELETED] ____d. American-Made Products - To the extent feasible, purchase only American-made equipment and products with the proceeds of the Loan. ____e. Taxes - Pay all federal, state and local taxes, including, without limitation, income, payroll, real estate and sales taxes of the Obligor's business when they come due. ____f. Occupancy - Occupy, at all times during the term of the Loan, at least 51% of the total square footage and 100% of the renovated square footage of rentable property. Obligor certifies that it will not use Loan proceeds to improve or renovate any of the space leased to third parties. ____g. Other Documents - Provide Lender with all additional certifications, documents or other information Lender is required to obtain from Obligor or any third party pursuant to the Authorization issued by the Agency to Lender in connection with the Loan (the "Authorization"); ____h. Execution - Execute a note and any other documents required by Lender; ____i. Compliance with Authorization - Do everything necessary for Lender to comply with the terms and conditions of the Authorization, including, without limitation, acquire and maintain for the term of the Loan all insurance required by the Lender for such amounts and in such forms as the Lender may require, including, without limitation, real estate hazard insurance, personal property hazard insurance, flood insurance, life insurance and liability insurance. Any and all such policies shall contain all endorsements or special clauses as may be required by the Authorization. ____j. Other - ___________________________NONE______________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ III. NEGATIVE COVENANTS The Obligor shall not, without Lender's prior written consent: _____a. Distributions - Make any distribution of company assets that will adversely affect the financial condition of the Obligor. _____b. Ownership Changes - Change the ownership structure or interests in the Obligor during the term of the Loan. _____c. Transfer of Assets - Sell, lease, pledge, encumber (except by purchase money liens on property acquired after the date of the Note), or otherwise dispose of any of Obligor's property or assets, except in the ordinary course of business. _____d. Fixed Asset Limitation - Acquire by purchase or lease agreement any fixed assets totaling more than $500,000 in any year with no more than $300,000 for unfinanced expenditures for a five year period, and $200,000 for financed expenditures. _____e. Location Limitation - Acquire by purchase or by lease any additional locations. _____f. Limitation on Compensation - Give annual increases to compensation of corporate officers in excess of five percent (5%). No increases may be made unless a profit was earned in the most recent fiscal year and Borrower is in compliance with the terms and conditions of this Agreement. _____g. Other -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- IV. MISCELLANEOUS _____a. The terms and conditions hereof shall be binding upon each and every Obligor and shall inure to the benefit of the Lender and its successors and assigns. _____b. The terms and conditions hereof shall survive the closing of the Loan. _____c. If any Obligor fails to abide by any of the agreements and/or covenants contained herein or in the Authorization (as it applies to any such Obligor), and/or if any of the certifications made herein proves at any time to be incorrect or untrue, it shall constitute an event of default under the documents evidencing, securing and/or governing the Loan, immediately entitling the Lender to any and all rights and remedies it may have thereunder, including without limitation, the right to accelerate all sums due under the Loan. This Certification and Loan Agreement is executed under seal this 25 day of June, 1998. WITNESS/ATTEST: BORROWER: SMITH-MIDLAND CORPORATION, a Delaware corporation /s/ Wesley A. Taylor By: /s/ Rodney I. Smith [SEAL] - ----------------------------- ------------------------------------ Name: Wesley A. Taylor Name: Rodney I. Smith Title: President WITNESS/ATTEST: GUARANTOR: SMITH-MIDLAND CORPORATION, a Virginia corporation By: /s/ Rodney I. Smith [SEAL] ---------------------------- Name: Rodney I. Smith Title: President EASI-SET INDUSTRIES, INC., a Virginia corporation By: /s/ Rodney I. Smith [SEAL] ---------------------------- Name: Rodney I. Smith Title: Chairman of the Board SMITH-CAROLINA CORPORATION, a North Carolina corporation By: /s/ Rodney I. Smith [SEAL] ---------------------------- Name: Rodney I. Smith Title: President CONCRETE SAFETY SYSTEMS, INC., a Virginia corporation By: /s/ Rodney I. Smith [SEAL] ---------------------------- Name: Rodney I. Smith Title: President MIDLAND ADVERTISING & DESIGN, INC., a Virginia corporation By: /s/ Rodney I. Smith [SEAL] ---------------------------- Name: Rodney I. Smith Title: President COMMONWEALTH OF VIRGINIA ) ) to wit: CITY OF RICHMOND ) -------- The foregoing instrument was acknowledged before me in my jurisdiction aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of SMITH-MIDLAND CORPORATION, a Delaware corporation, on behalf of the corporation. [NOTARIAL SEAL] /s/ Denise K. Kein -------------------------- Notary Public My Commission Expires: June 30, 1999 --------------- * * * COMMONWEALTH OF VIRGINIA ) ) to wit: CITY OF RICHMOND ) -------- The foregoing instrument was acknowledged before me in my jurisdiction aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of SMITH-MIDLAND CORPORATION, a Virginia corporation, on behalf of the corporation. [NOTARIAL SEAL] /s/ Denise D. Kein ----------------------------- Notary Public My Commission Expires: June 30, 1999 ---------------- COMMONWEALTH OF VIRGINIA ) ) to wit: CITY OF RICHMOND ) -------- The foregoing instrument was acknowledged before me in my jurisdiction aforesaid, this 25th day of June, 1998 by Rodney I. Smith, Chairman of the Board of EASI-SET INDUSTRIES, INC., a Virginia corporation, on behalf of the corporation. [NOTARIAL SEAL] Denise D. Kein ------------------------- Notary Public My Commission Expires: June 30, 1999 ------------- * * * COMMONWEALTH OF VIRGINIA ) ) to wit: CITY OF RICHMOND ) I, a Notary Public of the County and State aforesaid, certify that Wesley A. Taylor personally appeared before me this day and acknowledged that he is Secretary of Smith-Carolina Corporation, a North Carolina corporation, and that by authority duly given and as an act of the corporation, the foregoing instrument was signed in its name by its President, sealed with its corporate seal and attested by him as its Secretary. Witness my hand and official stamp or seal, this 25th day of June, 1998. [NOTARIAL SEAL] /s/ Denise D. Kein ------------------------ Notary Public My Commission Expires: June 30, 1999 --------------- COMMONWEALTH OF VIRGINIA ) ) to wit: CITY OF RICHMOND ) The foregoing instrument was acknowledged before me in my jurisdiction aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of CONCRETE SAFETY SYSTEMS, INC., a Virginia corporation, on behalf of the corporation. [NOTARIAL SEAL] /s/ Denise D. Kein -------------------------- Notary Public My Commission Expires: June 30, 1999 ------------- * * * COMMONWEALTH OF VIRGINIA ) ) to wit: CITY OF RICHMOND ) The foregoing instrument was acknowledged before me in my jurisdiction aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of MIDLAND ADVERTISING & DESIGN, INC., a Virginia corporation, on behalf of the corporation. [NOTARIAL SEAL] /s/ Denise D. Kein -------------------------------------- Notary Public My Commission Expires: June 30, 1999 ------------- EX-2 3 EXHIBIT 2 FIRST NATIONAL BANK OF NEW ENGLAND COMMERCIAL REVOLVING PROMISSORY NOTE $500,000 June 25, 1998 Richmond, Virginia [Insert Location of Execution] ON DEMAND, FOR VALUE RECEIVED, the undersigned, SMITH-MIDLAND CORPORATION, a Delaware corporation (individually and, if more than one, collectively, the "Borrower"), promises to pay (jointly and severally, if more than one) to the order of First National Bank of New England ("Lender"), at its office at One Commercial Plaza, Hartford, Connecticut or at such other place as the holder hereof (including Lender, hereinafter referred to as "Holder"), may designate, the principal sum of Five Hundred Thousand Dollars ($500,000) or the aggregate unpaid principal amount of all advances made by the Holder to the Borrower under the terms hereinafter set forth, whichever is less, in lawful money of the United States and to pay interest on the unpaid balance of this Note beginning as of the date hereof, before or after maturity or judgment (but subject to the default rate of interest set forth below) at the per annum rate set forth in Paragraph 2 below, which interest rate shall be computed daily and payable monthly in arrears on the basis of a Three Hundred Sixty (360) day year and the actual days elapsed, together with all taxes levied or assessed on this Note or the debt evidenced hereby against the Holder, and together with all costs, expenses and attorneys' and other professionals' fees incurred in any action to collect and/or enforce this Note or to enforce, protect, preserve, defend, realize upon or foreclose any security agreement, mortgage or other agreement securing or relating to this Note, including without limitation, all costs and expenses incurred in inspecting or surveying mortgaged real estate, if any, or conducting environmental studies or tests, or to enforce, protect, preserve, defend or sustain the lien of said security agreement, mortgage or other agreement or in any litigation or controversy arising from or connected in any manner with said security agreement, mortgage or other agreement, or this Note. Borrower further agrees to pay all costs, expenses and attorneys' and other professionals' fees incurred by Holder in connection with any "workout" or default resolution negotiations involving legal counsel or other professionals and further in connection with any re-negotiation or restructuring of the indebtedness evidenced by this Note. Any such costs, expenses and/or fees remaining unpaid after demand therefor, may, at the discretion of the Holder, be added to the principal amount of the indebtedness evidenced by this Note. This Note has been executed and delivered subject to the following terms and conditions: 1. Advances. a) Definitions. As used in this Paragraph 1 and otherwise in this Note, the following terms shall have the following meanings: i) "Acceptable Accounts" means an account receivable or accounts receivable of Borrower due not more than ninety (90) days from the date set forth on the original invoice evidencing such account receivable, arising from the absolute sale of goods by Borrower in which Borrower had the sole and complete ownership or the performance of services by Borrower in the ordinary course of its business, which conforms to the warranties set forth in subparagraph 1(d) below, and which: A) is not an account receivable of a person or entity obligated to Borrower upon such account receivable (an "Account Debtor") which has suspended business, made a general assignment for the benefit of creditors, committed any act of insolvency, or filed or have had filed against it any petition under any bankruptcy law or any other law or laws for the relief of debtors; B) is not an account receivable which: (1) is subject to any setoff, counterclaim, defense, allowance or adjustment other than discounts for prompt payment shown on the invoice or to any dispute, objection or complaint by the Account Debtor concerning its liability on the account receivable and the goods, the sale of which gave rise to the account receivable, have not been returned, rejected, lost or damaged; (2) arises from a sale or sales to an affiliate, parent, or subsidiary of the Borrower; (3) is the obligation of a Account Debtor located in a foreign country; and (4) arises from a contract containing a prohibition against assigning or granting a security interest therein; and C) is not an account receivable which Holder, in its sole discretion, shall notify the Borrower as being ineligible for an advance. ii) "Acceptable Equipment" means all equipment and machinery of the Borrower which Holder, in its sole discretion, shall notify the Borrower as being eligible for an advance. iii) "Acceptable Inventory" means all inventory of the Borrower consisting of raw materials, work-in-progress and finished goods which are held by or on behalf of the Borrower for sale or lease and which is: (A) in first class condition and salable through normal trade channels; (B) new and unused; (C) owned by the Borrower and subject to no lien, security interest, charge or other encumbrance whatsoever, except those of Lender, if any; and (D) not of a class which Holder, in its sole discretion, shall notify the Borrower as being ineligible for an advance. iv) "Maximum Permitted Amount" means an amount equal to the lesser of: (A) $500,000, or (B) the sum of: (1) seventy-five percent (75%) of the net balance due on Acceptable Accounts; PLUS (B)(i) fifty percent (50%) of the lesser of the cost or market value of Acceptable Inventory consisting of finished goods, and (ii) fifty percent (50%) of the lesser of the cost or market value of Acceptable Inventory consisting of raw materials; LESS (C) a set aside of $1,175,000. v) "Termination Date" means May 1, 1999, as such date may be extended, in writing from time to time, in the Holder's sole and absolute discretion. b) Procedure for Advances, Payment. Within the limits of the Maximum Permitted Amount, so long as Borrower is in compliance with all of the terms and conditions of this Note and no Event of Default (as defined in Paragraph 8 hereof) has occurred and no condition exists which would constitute an Event of Default but for the giving of notice or passage of time, or both, and so long as Holder has not demanded payment of any outstanding advances made hereunder, Borrower may request, and Lender may make, in its sole discretion, advances hereunder from time to time until the Termination Date in the aggregate principal amount not exceeding at any one time outstanding the Maximum Permitted Amount; provided that in the third quarter of each calendar year during the term of this Note, there shall be no borrowings or reborrowings and no outstanding principal under this Note for at least thirty (30) consecutive days. Whenever Borrower desires an advance, Borrower shall notify the Lender (which notice shall be irrevocable) by telex, telecopy or telephone of the proposed borrowing. Such notice (each, a "Notice of Borrowing") shall specify the date of the proposed borrowing and the amount to be borrowed. Each Notice of Borrowing must be received by Lender no later than 11:00 a.m., Hartford, Connecticut time on the day such borrowing is requested. Each Notice of Borrowing shall be immediately followed by a written confirmation thereof by the Borrower and, if requested by Holder, a written certificate in form, scope and substance satisfactory to Holder and signed by the chief financial officer and president of the Borrower which shall set forth in sufficient detail Borrower's calculation of the Maximum Permitted Amount as described in subparagraph 1(a)(iv)(B) above, if applicable, provided that if such written confirmation differs in any respect from the action taken by the Lender, the records of the Lender shall control absent manifest error. Advances and payments on this Note may be evidenced by borrowing certificates, a grid (if any) attached to this Note or similar certificates or documents, or by an internal ledger account of Holder. The Borrower agrees that the amount shown on said borrowing certificates, grid or similar certificate or internal ledger account of Holder as outstanding from time to time shall, in the absence of manifest error, be conclusive of the amount owing to the Holder pursuant to this Note. ALL ADVANCES HEREUNDER, TOGETHER WITH ACCRUED AND UNPAID INTEREST AND ANY OTHER AMOUNTS DUE HEREUNDER, SHALL BE DUE AND PAYABLE ON DEMAND, AND IF DEMAND IS NOT SOONER MADE, ON THE TERMINATION DATE, at which time Borrower shall have no ability to request, and option, debit principal, interest, fees, costs and expenses due and payable hereunder to any of Borrower's accounts maintained with Holder on each date any such amount is due and payable. c) Holder Discretion. Nothing herein shall be construed to require Holder to make advances hereunder and nothing herein shall prohibit Holder from lending in excess of the Maximum Permitted Amount or from raising or lowering the percentages of advances against Acceptable Accounts, Acceptable Inventory and/or Acceptable Equipment, it being agreed and understood by Borrower that all advances hereunder shall be at Holder's sole discretion and shall not establish a pattern or custom binding upon Holder. d) Accounts Receivable Warranties. Borrower represents and warrants to Holder that: (i) each Acceptable Account is or, at the time it comes into existence will be, a true and correct statement of: (A) the bona fide indebtedness of the applicable Account Debtor; and (B) the amount of the account for merchandise sold and delivered to, or for services performed for and accepted by, such Account Debtor, net of any charges, adjustments, discounts or other reductions whatsoever; and (ii) at the time of each borrowing hereunder, there are and, to the best of the Borrower's knowledge after due investigation, will be no defenses, counterclaims, discounts or setoffs that may be asserted against Acceptable Accounts. 2. Interest. Interest on each advance made hereunder shall accrue as follows (SELECT ONE AND COMPLETE): [ ] at a fixed rate of percent ( ) per annum. [x] at a variable rate per annum of one (1.00) percentage points in excess of the Prime Rate, with the term "Prime Rate" meaning the "Prime Rate" as published from time to time in the "Money Rates" section of The Wall Street Journal in the most recent edition preceding the time of any interest rate determination, or in the event that such rate is no longer published in The Wall Street Journal, a comparable index or reference rate selected by Holder, in its sole discretion. The Prime Rate may not necessarily be the Lender's lowest or best rate. Any change in the interest rate because of a change in the Prime Rate shall become effective immediately, without notice or demand, on the date any change in the Prime Rate occurs. If not sooner demanded, interest shall be due and payable monthly in arrears beginning on July 1, 1998 and continuing on the first day of each and every month thereafter until the entire indebtedness evidenced by this Note has been fully and finally paid. Upon demand for payment of any advance made hereunder or the occurrence of an Event of Default, without in any way affecting the Holder's right to accelerate this Note, this Note shall bear interest at a rate equal to the rate otherwise in effect hereunder. 3. Lawful Interest. Notwithstanding any provisions of this Note, it is the understanding and agreement of the Borrower and Holder that the maximum rate of interest to be paid by Borrower to the Holder shall not exceed the highest or the maximum rate of interest permissible to be charged by a commercial lender such as Lender to a commercial borrower such as Borrower under the laws of the Commonwealth of Virginia. Any amounts paid in excess of such rate shall be considered to have been payments in reduction of principal. 4. Additional Payments. If Holder shall deem applicable to this Note (including, in each case, any borrowed and any unused portion thereof) or any advance made hereunder, any requirement of any law of the United States of America, any regulation, order, interpretation, ruling, official directive or guideline (whether or not having the force of law) of the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation or any other board or governmental or administrative agency of the United States of America which shall impose, increase, modify or make applicable to this Note or any advance made hereunder, or cause this Note or any advance made hereunder to be included in any reserve, special deposit, calculation used in the computation of regulatory capital standards, assessment or other requirement which imposes on Holder any cost that is attributable to the maintenance thereof, then, and in each such event, Borrower shall promptly pay Holder, upon its demand, such amount as will compensate Holder for any such cost, which determination may be based upon the Holder's reasonable allocation of the aggregate of such costs resulting from any such events. In the event any such cost is a continuing cost, a fee payable to Holder may be imposed upon Borrower periodically for so long as any such cost is deemed applicable by Holder, in an amount determined by Holder to be necessary to compensate Holder for any such cost, which determination may be based upon the Holder's reasonable allocation of the aggregate of such costs resulting from any such events. The determination by Holder of the existence and amount of any such cost shall, in the absence of manifest error, be conclusive. 5. Late Charge. In the event Borrower fails to pay any installment interest when it is due and payable, without in any way affecting the Holder's right to make demand for payment of or otherwise accelerate this Note, a late charge equal to the late payment plus interest thereon at the rate otherwise in effect hereunder shall, at the option of Holder, be assessed against Borrower. 6. Mandatory and Optional Prepayments. a) The Borrower shall immediately, without notice or demand, make a prepayment on account of the advances made hereunder on any date on which the aggregate principal amount outstanding of all advances made hereunder exceeds the Maximum Permitted Amount in an amount equal to the amount of such excess, together with accrued interest to the date of such prepayment on the advance or advances, or any portion thereof, being prepaid. b) The Borrower may prepay the unpaid principal balance of this Note, in whole or in part, at any time without penalty or premium. Any and all such prepayments shall be applied first to interest accrued to the date of prepayment and then to the principal balance. 7. Financial Information. Promptly upon Holder's request, Borrower shall deliver to Holder such documentation and information about the Borrower's financial condition, business and/or operations as Holder may, at any time and from time to time, request, including without limitation, business and/or personal financial statements, copies of federal and state income tax returns and all schedules thereto, aging reports of Borrower's accounts receivable and accounts payable and a listing of Borrower's inventory and equipment, all of which shall be in form, scope and content satisfactory to Holder, in its sole discretion. 8. Events of Default. Notwithstanding the demand nature of the indebtedness evidenced by this Note, which shall at all times be payable on demand, the Borrower agrees that each of the following shall constitute an "Event of Default" hereunder: a) Failure of Borrower to pay or perform any of Borrower's liabilities or obligations to Holder (whether under this Note or otherwise and whether now existing or hereafter incurred), including without limitation, any installment of interest or any other sum due hereunder, when due to be paid or performed; or b) Failure of Borrower to pay any advance hereunder on demand; or c) Failure of Borrower to observe, perform or comply with any covenant, agreement or duty contained in this Note; or d) If Borrower or any guarantor of any obligation of the Borrower to Holder shall be in default under any security agreement or other agreement governing, securing or relating to this Note; or e) If any representation or warranty made by the Borrower or any guarantor of any obligation of the Borrower to Holder, including without limitation, any representation or warranty contained herein, or any statement, certificate or other data furnished by any of them in connection herewith, proves at any time to be incorrect or untrue in any material respect; or f) Institution of or consent to proceedings, or the taking of any action in furtherance of, or the entry of any order or decree of a court of competent jurisdiction with respect to any of the following: i) Bankruptcy, insolvency or reorganization, readjustment, arrangement, composition or similar relief as to Borrower or any guarantor of any obligation of the Borrower to Holder under federal or state bankruptcy or insolvency statutes or related laws, ii) Appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency as to Borrower or any guarantor of any obligation of the Borrower to Holder or a substantial part of their respective properties, or iii) Assignment of the Borrower or any guarantor of any obligation of the Borrower to Holder for the benefit of creditors, the winding up or liquidation of the affairs of the Borrower or such guarantor, or the admission of Borrower or such guarantor in writing of its inability to pay its debts; or g) The death, dissolution, liquidation, insolvency (the term "insolvency" shall mean either a negative tangible net worth or an inability to pay its debts as they mature) or termination of legal existence of Borrower or any guarantor of any obligation of the Borrower to Holder; or h) The service of any process upon the Holder seeking to attach or garnish by mesne or trustee process any funds of Borrower or of any guarantor of any obligation of the Borrower to Holder which are on deposit with the Holder; or i) The failure by Borrower or any guarantor of any obligation of the Borrower to Holder to pay or perform any indebtedness or obligation owed to any third party, or if any such other indebtedness or obligation shall be accelerated; or j) If there shall be any material adverse change in the assets, liabilities, condition (financial, operating or otherwise) or business of the Borrower or any guarantor of any obligation of the Borrower to Holder; or k) If, at any time, the Holder believes in good faith that the prospect of payment of any obligation or the performance of any agreement of the Borrower or any guarantor of any obligation of the Borrower to Holder is impaired, or there is such a change in the assets, liabilities, condition (financial, operating or otherwise) or business of the Borrower or any such guarantor as the Holder believes in good faith increases its risk of non-collection. Upon the occurrence of any Event of Default, all advances outstanding hereunder, together with accrued interest thereon and any other sums due under this Note, shall, at the option of the Holder, become immediately due and payable, and any obligation of the Holder to make advances hereunder shall terminate, at the option of the Bank, all of the foregoing without presentment or demand for payment, notice of non-payment, protest or any other notice or demand of any kind, all of which are expressly waived by the Borrower. Failure to exercise such option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default. 9. Lien and Right of Setoff. The Borrower hereby grants the Holder a lien and right of setoff for all Borrower's liabilities upon and against all the deposits, credits, collateral and property of the Borrower, now or hereafter in the possession or control of the Holder or in transit to it. Holder may, at any time, apply or set off the same, or any part thereof, to any liability of the Borrower whether or not matured or demanded. 10. No Waiver. No delay or omission by Holder in exercising any rights hereunder, nor failure by the Holder to insist upon the strict performance by Borrower of any terms and provisions herein shall operate as or be deemed to be a waiver of such right, any other right hereunder, or any terms and provisions herein, and the Holder shall retain the right thereafter to insist upon strict performance by the Borrower of any and all terms and provisions of this Note or any document securing the repayment of this Note. No waiver of any right shall be effective unless in writing and signed by Holder, nor shall a waiver on one occasion be constituted as a bar to, or waiver of, any such right on any future occasion. 11. Prejudgment Remedy and Other Waivers. BORROWER HEREBY REPRESENTS AND WARRANTS TO LENDER THAT THE LOAN IS A COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE COMMONWEALTH OF VIRGINIA, NEGOTIATED BY LENDER AND BORROWER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH. BORROWER WARRANTS AND REPRESENTS THAT BORROWER IS A BUSINESS OR COMMERCIAL ORGANIZATION AND THAT THE LOAN EVIDENCED HEREBY WAS MADE AND TRANSACTED SOLELY FOR BUSINESS OR INVESTMENT PURPOSES AND/OR THAT THE AMOUNTS ADVANCED OR TO BE ADVANCED UNDER THIS NOTE AND EVIDENCED HEREBY ARE BEING MADE TO AND RECEIVED BY THE BORROWER FOR THE PURPOSE OF ACQUIRING OR CARRYING ON BUSINESS, PROFESSIONAL OR COMMERCIAL ACTIVITY OR INVESTMENT AS AN OWNER, AND THAT SUCH AMOUNTS ARE IN EXCESS OF FIVE THOUSAND AND NO/100THS DOLLARS ($5,000). TO THE EXTENT PERMITTED BY LAW, BORROWER WAIVES ANY RIGHTS IT MAY HAVE TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH HOLDER MAY DESIRE TO USE, AND FURTHER WAIVES ALL RIGHTS TO REQUEST THAT HOLDER POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGEMENT REMEDY SOUGHT OR OBTAINED BY HOLDER. Borrower waives diligence, demand, presentment for payment, notice of nonpayment, protest and notice of protest, and notice of any renewals or extensions of this Note, and all rights under any statute of limitations. THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THESE WAIVERS KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. 12. Jury Waiver. TO THE EXTENT PERMITTED BY LAW, THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT OF ANY OF THEIR RESPECTIVE RIGHTS AND REMEDIES, INCLUDING WITHOUT LIMITATION, TORT CLAIMS. THE BORROWER AND THE LENDER EACH MAKE THIS WAIVER KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. 13. Joint and Several Liability. References in this Note to the Borrower in the singular shall include the plural, and if Borrower consists of more than one person, the liability of each Borrower shall be joint and several. 14. Acknowledgment of Copy, Use of Proceeds. The Borrower acknowledges receipt of a copy of this Note and attests that the proceeds of this Note are to be used for general commercial purposes and that no part of such proceeds will be used, in whole or in part, for the purpose of purchasing or carrying any "margin security" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System. 15. Miscellaneous. The provisions of this Note shall be binding upon the heirs, executors, administrators, successors and assigns and shall inure to the benefit of Holder, its successors and assigns. If any provision of this Note shall, to any extent, be held invalid or unenforceable, then only such provision shall be deemed ineffective and the remainder of this Note shall not be affected. Borrower acknowledges and agrees that Holder shall have the right to report any delinquencies, defaults and/or losses incurred by Holder hereunder to any credit agency, bureau or service. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia (but not its conflicts of law provisions). [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its President, thereunto duly authorized, in its name, under its seal, and on its behalf the day and year first written above. WITNESS/ATTEST: SMITH-MIDLAND CORPORATION, a Delaware corporation /s/ Wesley A. Taylor By: /s/ Rodney I. Smith [SEAL] - -------------------------------- -------------------------------- Name: Wesley A. Taylor Name: Rodney I. Smith Title: Secretary Title: President PROMISSORY NOTE $4,000,000 June 25, 1998 Richmond, Virginia FOR VALUE RECEIVED, SMITH-MIDLAND CORPORATION, a Delaware corporation (the "Maker"), promises to pay to the order of FIRST NATIONAL BANK OF NEW ENGLAND, (or its successors and assigns) (collectively, the "Lender"), the principal sum of FOUR MILLION AND 00/100 DOLLARS ($4,000,000) plus all accrued but unpaid interest thereon, at the rate(s) hereinafter set forth, on the unpaid principal balance hereof from time to time, from the date of this Promissory Note (the "Note") until the date the entire principal sum hereof has been paid in full. Said interest and principal shall be payable as set forth as follows: 1. Repayment Terms. (a) The undersigned will pay principal and interest by making payments in the initial amount of Thirty Seven Thousand Eighty Seven and 27/100 Dollars ($37,087.27) on the first day of each month beginning on August 1, 1998. The undersigned will make these payments until they have paid in full all principal and interest and any other sums due hereunder. Notwithstanding the foregoing, the entire indebtedness evidenced by this Note, including, but not limited to, all outstanding principal and accrued and unpaid interest, shall be due and payable in full on the twenty-third (23rd) anniversary date of this Note. (b) The undersigned's initial monthly payments shall be calculated in accordance with the full amortization of the loan evidenced by this Note by level monthly payments of principal and interest over a twenty-three (23) year period at the interest rate applicable on the date hereof. On each Adjustment Date (as herein defined), the amount of the monthly payments will be adjusted so as to provide for the full amortization of the then outstanding principal at the interest rate established at each Adjustment Date in level monthly payments of principal and interest over the remaining term of the original twenty-three (23) year amortization period. (c) Interest shall accrue on the outstanding principal amount of this Note at a per annum rate of one and one-half (1.50%) percentage points above the Prime Rate on a floating basis. The initial interest rate hereunder is ten (10.0%) percent. On October 1, 1998 and on the first day of each, January, April, July, and October thereafter until all sums due hereunder are paid in full (each being referred to as an "Adjustment Date"), the interest rate on the unpaid principal balance hereunder shall be adjusted, without notice or demand, to a per annum rate of one and one-half (1.50) percentage points above the Prime Rate in effect on the applicable Adjustment Date (or the following business day in the event that such Adjustment Date falls on a Saturday, Sunday or holiday), which such rate shall remain in effect until the succeeding Adjustment Date. Interest hereunder shall be computed on a daily basis and on the basis of a Three Hundred Sixty (360) day year and a thirty (30) day month. The undersigned further agrees to pay all taxes levied or assessed on this Note or the debt evidenced hereby against the holder of this Note, and further agrees to pay all costs, expenses and attorneys' fees incurred in any action to collect this Note or to defend, protect, preserve or realize upon or foreclose any mortgage or security agreement securing this Note or to protect, defend, preserve, foreclose or sustain the lien of said mortgage or security agreement or in any litigation or controversy arising from or connected with said mortgage, security agreement, or this Note. As used herein, "Prime Rate" shall mean the lowest New York prime rate as set forth in the money rate section of the Wall Street Journal (or in any successor publication). (d) In the event of prepayment, the Maker will pay a penalty of five percent (5%) of the prepayment amount in year one (1), four percent (4%) in year two (2), three percent (3%) in year three (3), two percent (2%) in year four (4), and one percent (1%) in year five (5). The Maker may prepay the loan in part or in full in years six (6) through twenty-three (23) without penalty, provided three (3) weeks prior written notice is given to Lender. (e) Lender shall give written notice to the undersigned of each increase or decrease in the interest (and change in installment amount, if applicable) within thirty days after the effective date of each rate adjustment; however, the fluctuation of the interest rate is not contingent on whether the notice is given. (f) If the undersigned shall be in default in payment due on the indebtedness herein and the United States Department of Agriculture Rural Business - Cooperative Service (f/k/a/ Farmers Home Administration) ("Agency") purchases its guaranteed portion of said indebtedness, the rate of interest on both the guaranteed and unguaranteed portions herein shall become fixed at the rate in effect as of the date of default. If the undersigned shall not be in default in payment when Agency purchases its guaranteed portion, the rate of interest on both the guaranteed and unguaranteed portions herein shall be fixed at the rate in effect as of the date of purchase by Agency. (g) All payments received by the Lender, at the option of the Lender, shall be applied first to any outstanding charges and expenses incurred by the Lender in connection with this Note or any documents executed in connection with this Note, then to any unpaid and accrued interest and finally to the outstanding principal due under this Note. The undersigned agrees that the interest shall accrue at the foregoing rate on unpaid balance before and after maturity, by acceleration or otherwise. (h) The Maker hereby grants to the Lender and any holder of this Note a lien and right of set-off for all of the Maker's liabilities to Lender or holder upon and against all of the Maker's deposits, credits, and other property now owned or hereafter in the possession or control of Lender or holder or in transit to. The Lender or holder may at any time apply the same or any part thereof to any of the Maker's liabilities to Lender or holder, whether or not matured at the time of such application, at any time after the occurrence of an "Event of Default" under the loan documents executed in connection herewith. (i) Maker agrees to pay a late charge equal to five percent (5%) of the payment amount due if such payment is not received within ten (10) days of the due date. Funds received from the Maker will be applied first to interest to the date of receipt, then to principal and then to the late fee. (j) The Maker agrees that, in addition to other events of default stated in this Note or related loan documents, each of the following shall constitute an "event of default" under this Note: 1) Failure of Maker or any guarantor to pay or perform any of Maker's or guarantor's liabilities or obligations to Lender. 2) If Maker or any guarantor of any obligation of Maker to Lender or holder shall be in default under any security agreement, mortgage or other agreement governing, securing or relating to this Loan. 2. Security for Note. This Note is secured by (a) Security Agreement of even date herewith executed and delivered by Maker in favor of Lender (the "Maker's Security Agreement"), (b) unlimited guarantee of Smith-Midland Corporation, a Virginia corporation, secured by two (2) Deeds of Trust with respect to certain real properties situate in Midland, Virginia, as more particularly described in said Deeds of Trust; (c) unlimited guarantee of Smith-Carolina Corporation, a North Carolina corporation, secured by a Deed of Trust with respect to certain real property situate in Reidsville, North Carolina, as more particularly described in said Deed of Trust; (d) unlimited guarantee of Easi-Set Industries, Inc., secured by a Security Agreement of even date herewith; (e) unlimited guarantee of Concrete Safety Systems, Inc., secured by a Security Agreement of even date herewith; (f) unlimited guarantee of Midland Advertising & Design, Inc., secured by a Security Agreement of even date herewith; and (g) any other instrument now or hereafter executed by Maker (singly or jointly with another person or persons) in favor of Lender which in any manner constitutes additional security for this Note (all of the foregoing documents and/or instruments, including this Note, the Maker's Security Agreement, the Deeds of Trust and are herein collectively referred to as the "Loan Documents"). All of the terms, covenants, conditions and provisions of the other Loan Documents are hereby incorporated in and made a part of this Note to the same extent as if herein set forth in full. 3. Obligations. As used herein, "Obligations" means all obligations, indebtedness, liabilities, guaranties, covenants and duties owing by Maker to Lender, under the Loan Documents, other Security Agreements or the loan documents of even date herewith in connection with that certain $500,000 loan by Lender to Maker, and any renewals, extensions and modifications thereof, together with any now or hereafter existing indebtedness of the Maker to the Lender whatsoever. "Obligor" means the Maker and all endorsers, guarantors and sureties of any Obligation. As security for the full and timely repayment of the Obligations, in addition to any collateral under the Maker's Security Agreement or under any note, assignment or other document now existing or hereafter executed by the Maker and/or any other person with respect to any of the Obligations, the Maker, subject to the terms of the Maker's Security Agreement, hereby grants to the Lender a security interest in all monies, bank deposits or credits held by the Lender for or owed by the Lender to the Maker, and, in the event of default hereunder beyond any applicable notice and cure periods, such monies, deposits or credits may be set off and applied to the payment of any Obligations. 4. Default. The Maker shall be in default hereunder on the occurrence of any of the following: (a) non-payment of any portion of any Obligation when due and payable; (b) any material warranty, representation or statement made or furnished to the Lender by or on behalf of the Maker proving to have been incorrect when made or furnished; (c) the existence of any event of default under the terms of any of the Loan Documents, or any note, guaranty or other document now existing or hereafter executed by the Maker (singly or jointly with another person or persons) and (or in favor of) the Lender; (d) the existence of any event of default under the terms of any instrument or writing evidencing a debt of the Maker to someone other than the Lender which remains uncured beyond any applicable notice and cure periods; (e) loss, theft, substantial damage, destruction or transfer or encumbrance without fair value in return of any of the Maker's assets; (f) any Obligor (i) admitting in writing its insolvency or its inability to pay its debts generally as they mature, (ii) making a general assignment for the benefit of creditors, (iii) commencing a case under or otherwise seeking to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law, statute or proceeding, (iv) by any act indicating its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for it or a substantial part of its property, or, in the absence of any such consent, approval or acquiescence, suffering any such receivership, trusteeship or proceeding to continue undismissed for a period of thirty (30) days in the case of any such appointment, and sixty (60) days in the case of any such other proceeding, after such appointment or institution of such other proceeding, as the case may be, or (v) becoming a voluntary debtor in any case under any chapter of the United States Bankruptcy Code; (g) any Obligor defaulting (beyond any applicable notice and cure periods) under the terms of the guarantee, security or other agreement executed, or which may hereafter be executed, in connection with the Obligation(s); (h) judgment against, or attachment of property of any Obligor; (i) dissolution, merger, consolidation, liquidation or reorganization of any Obligor; or (j) failure of Lender to realize upon proceeds of Assignment of Life Insurance Policy as Collateral on the life of Rodney I. Smith executed in connection with this Note. 5. Remedies Upon Default. Upon the occurrence of any event of default, the Lender, at its option, may declare any or all Obligations immediately due and payable without further notice, presentation, demand of payment or protest, which are hereby expressly waived by every Obligor. The Lender's rights and remedies hereunder and under any security or other agreements by and between the Maker and the Lender are cumulative, and recourse to one shall not constitute a waiver of others. 6. Address for Payments. All payments made hereunder shall be paid in lawful money of the United States of America at the office of Lender at One Commercial Plaza, Hartford, Connecticut 06103, or at such other place as the Lender or any other holder of this Note may at any time or from time to time designate in writing to the Maker. 7. Severability. If any part of this Note is declared invalid or unenforceable, such invalidity or unenforceability shall not affect the remainder of this Note, which shall continue in full force and effect. Any provision that is invalid or unenforceable in any application shall remain in full force and effect as to valid applications. In this Note, the term "person" shall include an individual, a corporation, an association, a partnership, a trust and any other legal entity. 8. Notices. All notices which are required or permitted hereunder shall be given in the same manner as specified in the Security Agreement. 9. Governing Law. This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the Commonwealth of Virginia or the laws of the United States of America, when and where applicable, as Lender may elect. 10. Time of Essence. Time is of the essence of this Note. 11. Authority. The party executing this Note for and on behalf of Maker warrants and represents that he/she is the President of Maker and has full power and authority to bind Maker for the uses and purposes as in this Note contained. 12. Compliance with Laws. Maker and Lender mutually agree that nothing herein contained, nor any transaction related thereto, shall be construed or shall so operate either presently or prospectively to require Maker to make any payment or do any act contrary to law, but if any clause and provision herein contained shall otherwise so operate to invalidate this Note, in whole or in part, then such clauses and provisions only shall be held for naught as though not herein contained and this clause shall override and control, it being the intention of Maker and Lender that this Note and all documents evidencing or securing the indebtedness evidenced hereby shall in all ways comply with applicable law, and proper adjustment shall automatically be made accordingly. 13. Maximum Rate of Interest. Notwithstanding anything herein or in the other Loan Documents to the contrary, it is not the intention of Lender to charge or collect any interest which would result in a rate of interest being charged which is in excess of the maximum rate, if any, now permitted by law for this transaction to be charged; and in the event that any sum in excess of such maximum rate of interest is paid or charged, the same shall be deemed to have been a prepayment of principal when paid, without premium or penalty, and all payments made thereafter shall be appropriately applied to interest and principal to give effect to such maximum rate, and after such application, any excess shall be immediately refunded to Maker. If, during the term of this Note, the maximum rate of interest, if any, now permitted by law for this transaction to be charged should be increased, then for so long as such increase is in effect, the applicable maximum rate permitted to be charged as referred to in the immediately preceding sentence shall be deemed to be such increased rate. If such maximum rate of interest, if any, now permitted by law to be charged for this transaction should be eliminated so that there would be no such maximum rate, then, for purposes of this loan, there shall thereafter be no maximum rate limiting the amount that can be charged. 14. Waivers. (a) Maker hereby waives and renounces, for itself and all its successors and assigns, all right to the benefit of any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now provided or which hereafter may be provided by the Constitution and laws of the United States of America and of any state thereof, as to itself and in and to all of its property, real and personal, against the enforcement and collection of the Obligations evidenced by this Note. (b) Presentment for payment, demand, protest and notice of demand, notice of dishonor and notice of nonpayment and all other notices are hereby waived by Maker. 15. Joint and Several Liability. Maker, all endorsers hereof and all others who may become liable for all or any part of the Obligations agree hereby to be jointly and severally bound, and they jointly and severally waive and renounce, to the extent permitted by law, any and all exemption rights and the benefit of all valuation and appraisement privileges as against this debt or any renewal or replacement thereof. Maker expressly consents to any extension of time, release of any party liable for the Obligations, release of any of the security of this Note, acceptance of other security therefor or any other indulgence or forbearance whatsoever. Any such extension, release, indulgence or forbearance may be made without notice to said party and without in any way affecting the personal liability of such party. 16. No Novation. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past-due installment or indulgence granted from time to time shall be construed (a) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (b) to prevent the exercise of any such right of acceleration or any other right granted hereunder or by the laws of the Commonwealth of Virginia. Maker hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of time for the payment of this Note or any installment due hereunder, made by agreement with any person now or hereafter liable for the payment of this Note, shall operate to release, discharge, modify, change or affect the original liability of Maker under this Note, either in whole or in part, unless Lender agrees otherwise in writing. This Note may not be modified orally, but only by an agreement in writing signed by the party against whom enforcement of such waiver, change, modification or discharge is sought. 17. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY LAW MAKER AND LENDER EACH HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS NOTE AND/OR ANY OF THE OTHER DOCUMENTS EVIDENCING OR SECURING THE DEBT TRANSACTION EVIDENCED HEREBY. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY MAKER AND LENDER, AND MAKER AND LENDER HEREBY REPRESENT TO EACH OTHER THAT NO ORAL OR WRITTEN STATEMENTS HAVE BEEN MADE BY ANY PARTY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS STATED EFFECT. MAKER FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED BY INDEPENDENT COUNSEL, SELECTED OF ITS OWN FREE WILL, IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH SUCH COUNSEL. 18. Acknowledgments by Maker. Maker hereby acknowledges that (a) Maker and its shareholders are knowledgeable borrowers of commercial funds, (b) they and their attorneys fully understand the effect of the above provisions, (c) Lender would not make the loan evidenced hereby without such provisions and (d) such loan is negotiated by Lender and Maker and their respective attorneys at arms length. The foregoing representations and warranties are made with the intent that the Lender and any subsequent holder of this Note may rely thereon. 19. Business or Commercial Organization. MAKER HEREBY REPRESENTS AND WARRANTS TO LENDER THAT THE LOAN IS A COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE COMMONWEALTH OF VIRGINIA, NEGOTIATED BY LENDER AND MAKER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH. MAKER WARRANTS AND REPRESENTS THAT MAKER IS A BUSINESS OR COMMERCIAL ORGANIZATION AND THAT THE LOAN EVIDENCED HEREBY WAS MADE AND TRANSACTED SOLELY FOR BUSINESS OR INVESTMENT PURPOSES AND/OR THAT THE AMOUNTS ADVANCED OR TO BE ADVANCED UNDER THIS NOTE AND EVIDENCED HEREBY ARE BEING MADE TO AND RECEIVED BY THE MAKER FOR THE PURPOSE OF ACQUIRING OR CARRYING ON BUSINESS, PROFESSIONAL OR COMMERCIAL ACTIVITY OR INVESTMENT AS AN OWNER, AND THAT SUCH AMOUNTS ARE IN EXCESS OF FIVE THOUSAND AND NO/100THS DOLLARS ($5,000). [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its President, thereunto duly authorized, in its name, under its seal, and on its behalf the day and year first written above. WITNESS/ATTEST: SMITH-MIDLAND CORPORATION, a Delaware corporation /s/ Wesley A. Taylor By: /s/ Rodney I. Smith __________________________ ---------------------- Name: Wesley A. Taylor Name: Rodney I. Smith Title: Secretary Title: President [CORPORATE SEAL] CERTIFICATION THIS IS TO CERTIFY that this is the Promissory Note described in and secured by that certain Security Agreement, bearing even date herewith, from the Maker of this Note to David M. Baroody, Trustee, conveying certain property (described in said Security Agreement) situate in the Commonwealth of Virginia, said Security Agreement and this Promissory Note having been executed in my presence. /s/ Barbara H. Medlin ---------------------------- Notary Public My Commission Expires: 6-30-2000 __________ [NOTARIAL SEAL] EX-27 4 EXHIBIT 27
5 0000924719 SMITH MIDLAND CORPORATION DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 0.0001 276,096 0 3,402,736 433,822 1,659,801 6,052,179 1,660,802 79,714 9,601,503 3,247,836 0 0 0 30,857 2,196,315 9,601,503 6,428,072 6,521,420 4,858,896 6,116,685 0 0 230,229 174,506 0 174,506 0 0 0 174,506 .06 .06
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