SMITH MIDLAND CORP
10QSB, 1996-11-13
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK
Previous: SECURITY CAPITAL ATLANTIC INC, 10-Q, 1996-11-13
Next: ROCK BOTTOM RESTAURANTS INC, 10-Q, 1996-11-13


                       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 quarterly period ended                           Commission File Number
     September  30, 1996                                       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 November 12, 1996, the Company had outstanding  3,085,718  shares
of Common Stock, $.01 par value per share.





<TABLE>
<CAPTION>
                            SMITH-MIDLAND CORPORATION
                                      INDEX

PART I.  FINANCIAL INFORMATION                                         PAGE NUMBER
         <S>               <C>                                                          <C>
         Item 1.  Financial Statements

                           Consolidated Balance Sheets;                                  1
                           September 30, 1996 (Unaudited)
                           and December 31, 1995 (Unaudited)

                           Consolidated Statements of                                    2
                           Operations (Unaudited); Three
                           months ended September 30, 1996 and 1995

                           Consolidated Statements of                                    3
                           Operations (Unaudited); Nine
                           months ended September 30, 1996 and 1995

                           Consolidated Statements of Cash Flows                         4
                           (Unaudited); Nine  months ended
                           September 30, 1996 and 1995

                           Notes to Consolidated Financial Statements (Unaudited)        5

         Item 2. Management's Discussion and Analysis of Financial                       8
                  Condition and Results of Operations

PART II.  OTHER INFORMATION

         Item 1.  Legal Proceedings                                                     14

         Item 2.  Changes in Securities                                                 14

         Item 3.  Defaults Upon Senior Securities                                       14

         Item 4.  Submission of Matters to a Vote of Security Holders                   14

         Item 5.  Other Information                                                     14

         Item 6.  Exhibits and Reports on Form 8-K                                      14

         Signatures                                                                     15
</TABLE>


<PAGE>
                                      


                         PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                                                                SEPTEMBER 30,     DECEMBER 31,
         ASSETS                                                                     1996             1995
         ------                                                                     ----             ----
<S>                                                                             <C>                  <C>
Current assets:
   Cash and cash equivalents                                                      $  778,140          $  938,089
   Accounts receivable:
     Trade -- billed, less allowances for doubtful accounts of
       $225,987 and $231,367                                                       2,754,931           2,559,796
     Trade -- unbilled                                                               253,112             101,873
   Inventories:
     Raw materials                                                                   463,244             482,939            
     Finished goods                                                                  626,157             743,205
   Prepaid expenses and other assets                                                  31,742             159,490
                                                                                  ----------          ----------
     Total current assets                                                          4,907,326           4,985,392
                                                                                  ----------          ----------

Property and equipment, net                                                        1,468,819           1,430,286
                                                                                  ----------          ----------

Other assets:
   Officer note receivable and accrued interest receivable, net                      687,398             665,474
   Other                                                                              84,086              76,103
                                                                                  ----------          ----------
     Total other assets                                                              771,484             741,577
                                                                                  ----------          ----------
       TOTAL ASSETS                                                               $7,147,629          $7,157,255
                                                                                  ==========          ==========


         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of notes payable                                            $2,244,113          $1,274,544
   Accounts payable -- trade                                                       1,312,822           1,603,325
   Accrued expenses and other liabilities                                            638,874             597,480
   Customer deposits                                                                 262,920              51,132
                                                                                  ----------          ----------
     Total current liabilities                                                     4,458,729           3,526,481
Notes payable -- less current maturities                                             801,557           1,720,726
Notes payable -- related parties                                                     116,753             116,753
                                                                                  ----------          ----------
     TOTAL LIABILITIES                                                             5,377,039           5,363,960
                                                                                  ----------          ----------

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 3,085,718 and 2,935,718                                   30,857              29,357
   Additional capital                                                              3,450,085           3,055,252
   Retained earnings (deficit)                                                    (1,710,352)         (1,291,314)
                                                                                  ----------          ----------
     TOTAL STOCKHOLDERS' EQUITY                                                    1,770,590           1,793,295
                                                                                  ----------          ----------
       TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY                                $7,147,629          $7,157,255
                                                                                  ==========          ==========


               The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>

                                       1


<TABLE>
<CAPTION>
                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                                                   THREE MONTHS ENDED
                                                                                      SEPTEMBER 30,
                                                                                    1996           1995
                                                                                ------------     --------
<S>                                                                             <C>              <C>
Revenue:
     Net sales                                                                  $2,914,155        $2,590,069
     Shipping and installation income                                              387,301           305,787
                                                                                ----------        ----------

         Total revenue                                                           3,301,456         2,895,856
                                                                                ----------        ----------

Cost of goods sold:
     Cost of goods sold -- sales                                                 2,057,194         1,743,453
     Shipping and installation expense                                             303,262           290,073
                                                                                ----------        ----------

         Total cost of goods sold                                                2,360,456         2,033,526
                                                                                ----------        ----------

Gross profit                                                                       941,000           862,330
                                                                                ----------        ----------

Operating expenses:
     General and administrative expenses                                           538,143           496,054
     Selling expenses                                                              181,606           146,178
                                                                                ----------        ----------

     Total operating expenses                                                      719,749           642,232
                                                                                ----------        ----------

Operating income                                                                   221,251           220,098
                                                                                ----------        ----------

Other income (expense):
     Royalties                                                                      79,927            27,748
     Interest expense                                                             (114,365)         (132,255)
     Interest income                                                                16,446            13,203
     Other                                                                           8,753           (54,728)
                                                                                ----------        ----------

         Total other income (expense)                                                9,239)         (146,032)

Income  before income taxes                                                         12,012            74,066
Income tax expense (benefit)                                                             --               --
                                                                                -----------       ----------

         Net income                                                             $  212,012        $   74,066
                                                                                ==========        ==========

Net income per share                                                            $      .07        $      .04
                                                                                ==========        ==========

Weighted average common shares outstanding                                       3,085,718         1,821,119
                                                                                ==========        ==========


 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>


                                       2


                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                     NINE MONTHS ENDED
                                                                                        SEPTEMBER 30,
                                                                                    1996             1995
                                                                                ------------     -----------
<S>                                                                             <C>              <C>
Revenue:
     Net sales                                                                  $7,625,417        $7,491,932
     Shipping and installation income                                              946,820         1,221,946
                                                                                ----------        ----------
         Total revenue                                                           8,572,237         8,713,878
                                                                                ----------        ----------
Cost of goods sold:
     Cost of goods sold -- sales                                                 5,994,103         5,693,485
Shipping and installation expense                                                  789,306           939,114
                                                                                ----------        ----------
         Total cost of goods sold                                                6,783,409         6,632,599
                                                                                ----------        ----------
Gross profit                                                                     1,788,828         2,081,279
                                                                                ----------        ----------
Operating expenses:
     General and administrative expenses                                         1,608,670         1,329,273
Selling expenses                                                                   513,290           387,029
                                                                                ----------        ----------

         Total operating expenses                                                2,121,960         1,716,302
                                                                                ----------        ----------
Operating income (loss)                                                           (333,132)          364,977
                                                                                -----------       ----------
Other income (expense):
     Royalties                                                                     211,572           143,033
     Interest expense                                                             (357,807)         (357,049)  
     Interest income                                                                53,005            35,569
     Other                                                                           7,324          (104,955)
                                                                                ----------        -----------
         Total other income (expense)                                              (85,906)         (283,402)
                                                                                ----------        -----------

Income (loss) before income taxes                                                 (419,038)           81,575
Income tax expense (benefit)                                                          --                 --
                                                                                ----------        ----------

         Net income (loss)                                                      $ (419,038)       $   81,575
                                                                                ===========       ==========

Net income (loss) per share                                                     $     (.14)       $      .05
                                                                                ===========       ==========

Weighted average common shares outstanding                                       3,076,411         1,802,382
                                                                                ==========        ==========


 The accompanying notes are an integral part of these consolidated financial statements.


</TABLE>

                                       3

<TABLE>
<CAPTION>

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                                        NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                                       1996           1995
                                                                                    -----------      --------
<S>                                                                             <C>               <C>
Cash flows from operating activities:
     Cash received from customers                                               $ 8,649,223       $ 7,997,851
     Cash paid to suppliers and employees                                        (8,696,514)       (7,856,839)
     Interest paid                                                                 (357,807)         (357,049)
     Other                                                                           32,931            53,011
                                                                                -----------       -----------

       Net cash absorbed by operating activities                                   (372,167)         (163,026)
                                                                                -----------       -----------

Cash flows from investing activities:
     Purchases of property and equipment                                           (239,989)          (97,761)
     Payments (borrowings) against officer note receivable                            5,474           (48,827)
                                                                                -----------       -----------
       Net cash absorbed by investing activities                                   (234,515)         (146,588)
                                                                                -----------       -----------

Cash flows from financing activities:
     Proceeds from bank borrowings                                                1,104,442           685,870
     Repayments of bank borrowings                                               (1,054,042)         (332,622)
     Proceeds from issuance of common stock                                         396,333                --
     Proceeds (repayments) on borrowings -- related parties, net                         --            (2,979)
                                                                                -----------       -----------

       Net cash provided by financing activities                                    446,733           350,269
                                                                                -----------       -----------

Net increase (decrease) in cash                                                    (159,949)           40,655

Cash at beginning of period                                                         938,089           110,114
                                                                                -----------       -----------

Cash at end of period                                                           $   778,140       $   150,769
                                                                                ===========       ===========

Reconciliation  of  net  income   (loss)  to  net  cash  provided  by  operating
          activities:

Net income (loss)                                                               $  (419,038)       $   81,575
Adjustments to reconcile net income (loss) to net cash
     provided  (absorbed) by operating activities:
       Depreciation and amortization                                                201,456           279,083
       Decrease (increase) in other assets                                          (35,381)         (106,272)
       Decrease (increase) in:
         Accounts receivable -- billed                                             (195,135)         (572,339)
         Accounts receivable -- unbilled                                           (151,239)         (179,274)
         Inventories                                                                136,743          (217,635)
         Prepaid expenses and other assets                                          127,748            10,813
       Increase (decrease) in:
         Accounts payable -- trade                                                 (290,503)          484,613
         Accrued expenses and other liabilities                                      41,394           106,279
         Customer deposits                                                          211,788           (49,869)
                                                                                -----------        ----------
Net cash absorbed by operating activities                                       $  (372,167)       $ (163,026)
                                                                                ===========        ==========

 The accompanying notes are an integral part of these consolidated financial statements.



                                       4


</TABLE>

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1996

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  Company's  Annual Report on Form
10-KSB, for the year ended December 31, 1995.

     In the opinion of management  of 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 months and nine months ended September 30, 1996 and September 30, 1995.

     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 accompanying  consolidated financial statements include the accounts of
Smith-Midland  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  intercompany  accounts  and
transactions have been eliminated in consolidation.

INVENTORIES

     Inventories are stated at the lower of cost, using the first-in,  first-out
(FIFO) method, or market.

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.



                                       5


                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


     Depreciation is computed using the straight-line  method over the following
estimated useful lives:

<TABLE>
<CAPTION>

                                                                                          Years
                                                                                          -----
       <S>                                                                                <C>
       Buildings........................................................................  10-33
       Trucks and automotive equipment..................................................   3-10
       Shop machinery and equipment.....................................................   3-10
       Land improvements................................................................  10-30
       Office equipment.................................................................   3-10

</TABLE>

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-month  and  nine-month
periods  ended  September  30, 1996 and 1995 as the  Company  does not expect to
incur  income  tax  expense  for fiscal  year 1996 and did not incur  income tax
expense in fiscal year 1995.

REVENUE RECOGNITION

     The  Company  primarily  recognizes  revenue  on the  sale  of its  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 sound wall 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.


                                       6


                   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.

INCOME PER SHARE

     Income  (loss) per share is  calculated  based on net income (loss) and the
weighted average number of shares of common stock outstanding during the period.

COMMON STOCK OFFERING

     In December 1995, the Company  completed an initial public offering ("IPO")
of  1,000,000  shares of common  stock,  $.01 par value per share  (the  "Common
Stock"),   and  1,000,000   Redeemable   Common  Stock  Purchase  Warrants  (the
"Warrants"),  at a purchase price of $3.60 per share of Common Stock and Warrant
sold together.  The Company  realized net proceeds from the IPO of approximately
$2,618,000.  In January  1996,  the Company  completed  an  overallotment  of an
additional  150,000 shares of Common Stock and 150,000 Warrants for net proceeds
of approximately $396,000.


                                       7



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
Slenderwall(TM),  a patent-pending,  lightweight,  energy efficient concrete and
steel  exterior  wall  panel for use in  building  construction;  J-J  Hooks(TM)
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 food  troughs,  and custom order
precast concrete products with various architectural surfaces.

     The  results  for  the  nine  months  ended  September  30,  1996  are  not
necessarily  indicative of the results of the Company's  operations  that may be
expected for the year ending December 31, 1996.

RESULTS OF OPERATIONS

     THREE MONTHS ENDED  SEPTEMBER  30, 1996  COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995

     For the three  months  ended  September  30,  1996,  the  Company had total
revenue of approximately  $3,301,000  compared to total revenue of approximately
$2,896,000  for the three  months  ended  September  30,  1995,  an  increase of
approximately   $405,000,   or  14%.  Total  product  sales  were  approximately
$2,914,000 for the three months ended  September 30, 1996, a $324,000  increase,
or approximately 13%, from approximately $2,590,000 for the same period in 1995.
Shipping and installation revenue increased from approximately  $306,000 for the
three months ended  September  30, 1995 to  approximately  $387,000 for the same
period in 1996,  representing an increase of approximately  $81,000, or 26%. The
increase in total revenue resulted  primarily from increased  product sales and,
to a lesser extent,  from increased  shipping  revenues  during the three months
ended September 30, 1996.

     Total cost of goods sold for the three  months  ended  September  30,  1996
increased  by   approximately   $326,000  to   approximately   $2,360,000   from
approximately  $2,034,000  for  the  three  months  ended  September  30,  1995,
representing  a 16%  increase.  The increase in cost of goods sold was primarily
attributed to the 13% increase in product sales and, to a lesser extent,  to the
26% increase in shipping and installation  revenue during the three months ended
September  30, 1996 as compared to the same period in 1995.  Total cost of goods
sold, as a percentage of total revenue,  increased  slightly from  approximately
70% for the three months ended September 30, 1995 to  approximately  71% for the
three months ended  September 30, 1996.  Varying  product mix and individual job
profitability affect the cost of goods sold as a percentage of revenue.


                                       8


     For the three months ended  September 30, 1996,  the Company's  general and
administrative   expenses  increased  by  approximately   $42,000,   or  8%,  to
approximately $538,000, or 16% of total revenue, from approximately $496,000, or
17% of total  revenue,  for the three  months  ended  September  30,  1995.  The
increase  in  expense  was  primarily  the  result of  increased  executive  and
administrative  compensation  expense,  increased  legal,  accounting  and other
professional  fees,  increased  bad debt expense,  and increased  administrative
costs  associated  with being a public  reporting  company.  The  decrease  as a
percentage of total  revenue was  primarily  attributed to the increase in total
revenue.

     Selling expenses for the three months ended September 30, 1996 increased to
approximately  $182,000 from  approximately  $146,000 for the three months ended
September 30, 1995, an increase of approximately  $36,000,  or 25%. The increase
in selling  expenses was primarily  attributed to an increase in advertising and
promotion expense primarily  related to the sale of  Slenderwall(TM)  wall panel
product.

     The  Company's  operating  income for the three months ended  September 30,
1996 was  approximately  $221,000  compared to operating income of approximately
$220,000,  for the three  months  ended  September  30,  1995,  an  increase  of
approximately $1,000. This increase in operating income was primarily attributed
to  increased  gross  profit on sales,  offset  somewhat  by  increased  selling
expenses  and  increased  general and  administrative  expenses  during the 1996
period.

     Royalty  income  increased  by  approximately  $52,000  from  approximately
$28,000 for the three months ended September 30, 1995 to  approximately  $80,000
for the same period in 1996.  This  increase was primarily due to an increase in
new  licensee  fees  recognized  by the Company  during the three  months  ended
September 30, 1996 when compared to the same period in 1995.

     Interest  expense was  approximately  $114,000  for the three  months ended
September  30,  1996,  compared to  approximately  $132,000 for the three months
ended September 30, 1995. This decrease of  approximately  $18,000,  or 14%, was
primarily due to a decreased level of debt outstanding during the 1996 period.

     Interest  income  of  approximately  $16,000  for the  three  months  ended
September 30, 1996 represented an increase of approximately  $3,000, or 23% over
interest income of  approximately  $13,000 for the 1995 period.  The increase in
interest  income  was due  primarily  to  higher  levels of cash  available  for
investment during the 1996 period.

     The Company  earned other income (net of other  expenses) of  approximately
$9,000 for the three  months  ended  September  30, 1996,  which  represented  a
positive  change of  approximately  $64,000  from  other  expense  (net of other
income) of approximately  $55,000 for the three months ended September 30, 1995.
The increase in other income was primarily  attributed to a significant decrease
in federal and state tax penalties  that were incurred by the Company during the
three months ended September 30, 1995, as compared to the 1996 period.


                                       9


     The Company earned net income for the three months ended September 30, 1996
of approximately  $212,000  compared to net income of approximately  $74,000 for
the same period in 1995.  The increase in net income of  approximately  $138,000
was  primarily  attributed  to  increased  revenue  and  gross  profit  thereon,
increased  royalty  income,  decreased  interest  expense  and  decreased  other
expense,  offset partially by increased  selling expenses and increased  general
and administrative  expenses. The increase in net income per share from $.04 for
the three  months ended  September  30, 1995 to $.07 for the same period in 1996
reflected the Company's  increased  net income,  offset  somewhat by the greater
number  of  shares  of Common  Stock  outstanding  as a result of the  Company's
initial public offering in December 1995.

     NINE MONTHS  ENDED  SEPTEMBER  30, 1996  COMPARED TO THE NINE MONTHS  ENDED
SEPTEMBER 30, 1995

     For the nine months  ended  September  30, 1996,  the Company  earned total
revenue of approximately  $8,572,000  compared to total revenue of approximately
$8,714,000  for the  nine  months  ended  September  30,  1995,  a  decrease  of
approximately  $142,000, or 2%. Total product sales increased from approximately
$7,492,000   to   approximately   $7,625,000,   representing   an   increase  of
approximately  $133,000, or 2%. Shipping and installation revenue decreased from
approximately  $1,222,000  for the  nine  months  ended  September  30,  1995 to
$947,000 for the same period in 1996,  representing a decrease of  approximately
$275,000,  or 23%. The decreased shipping and installation revenue was primarily
a result of significantly  reduced installation services provided by the Company
and the  presence  of a major  sound  barrier  installation  job which  provided
significant  installation  revenue  during the nine months ended  September  30,
1995.  The  decrease in total  revenue was  partially  attributed  to the severe
winter  weather  experienced  in the  Mid-Atlantic  region  during the first two
months of 1996 which  delivered  record  snowfall  and  affected  the  Company's
production  during the first quarter of 1996 (see  "Seasonality and Inflation").
In  addition,  total  revenue for the nine months ended  September  30, 1996 was
reduced by lost  production  time due to  approximately  $210,000 in repairs and
product  remakes during the nine months ended September 30, 1996 in an effort to
resolve  several  related  contract  disputes,  collectively  referred to as the
"Maryland   Claims"   (see   "Part  II  "Other   Information",   Item  1  "Legal
Proceedings").

     Total cost of goods sold was  approximately  $6,783,000 for the nine months
ended  September  30, 1996,  or  approximately  79% as a percentage  of revenue,
compared  to   approximately   $6,633,000  for  the  same  period  in  1995,  or
approximately  76% as a  percentage  of  revenue,  representing  an  increase of
approximately  $150,000, or 2%. The increase in the Company's cost of goods sold
was due primarily to increased sales of product, which along with a 2% reduction
in net sales, was principally responsible for the increased cost as a percentage
of revenue. In addition,  cost of goods sold for the nine months ended September
30, 1996 included  approximately  $210,000 in direct and indirect  expenses as a
result of repair work and product remakes in an effort by the Company to resolve
the Maryland Claims.  Varying product mix and individual job profitability  also
affect the Company's cost of goods sold.


                                       10


For the nine  months  ended  September  30,  1996,  the  Company's  general  and
administrative  expenses  totaled  approximately  $1,609,000,  or 19%  of  total
revenue,  compared to approximately $1,329,000, or 15% of total revenue, for the
same period in 1995, representing an increase of approximately $280,000, or 21%.
The  increase in expense was  primarily  the result of increased  executive  and
administrative  compensation  expense,  increased  legal,  accounting  and other
professional  fees,  increased  bad debt expense,  and increased  administrative
costs associated with being a public reporting company.

         Selling expenses for the nine months ended September 30, 1996 increased
to approximately  $513,000 from approximately $387,000 for the nine months ended
September 30, 1995,  representing an increase of approximately $126,000, or 33%,
which  resulted   primarily  from  an  increase  in  compensation   expense  for
salespersons and increased  advertising and promotion  expense primarily related
to the sale of Slenderwall(TM) wall panel product.

     The  Company  experienced  an  operating  loss  for the nine  months  ended
September 30, 1996 totaling approximately $333,000, compared to operating income
of  approximately  $365,000,  for the nine months  ended  September  30, 1995, a
decrease  of  approximately  $698,000.  This  decrease in  operating  income was
primarily attributed to decreased total revenue, increased cost of goods sold as
a percentage of total revenue,  increased selling expenses and increased general
and administrative expenses.

     Royalty  income   increased  by   approximately   $69,000,   or  48%,  from
approximately  $143,000  for  the  nine  months  ended  September  30,  1995  to
approximately $212,000 for the same period in 1996. The increase was a result of
an increased number of licensees generating increased sales,  primarily from the
sale by licensees of J-J Hooks(TM) Barriers.

     Interest expense totaled  approximately  $358,000 for the nine months ended
September 30, 1996, compared to approximately $357,000 for the nine months ended
September 30, 1995. This increase of approximately $1,000 was primarily due to a
decreased level of debt outstanding during the 1996 period,  more than offset by
approximately $37,000 in loan fees incurred during the 1996 period.

     Interest  income  of  approximately  $53,000  for  the  nine  months  ended
September 30, 1996 represented a $17,000 increase,  or 47%, over interest income
of  approximately  $36,000 for the same period in 1995. The increase in interest
income was due primarily to the investment, during the first quarter of 1996, of
the net proceeds from the  Company's  initial  public  offering in December 1995
(see "Liquidity and Capital Resources").

     The  Company  earned  total  other  income  (net  of  other   expenses)  of
approximately  $7,000 for the nine months ended September 30, 1996,  compared to
other  expenses  (net of other  income) of  approximately  $105,000 for the nine
months ended  September 30, 1995, a positive change of  approximately  $112,000.
The increase in other income was primarily  attributed to a significant decrease
in federal and state tax penalties  incurred in the nine months ended  September
30, 1995, as compared to the 1996 period.


                                       11


     The Company  experienced a net loss for the nine months ended September 30,
1996 of approximately $419,000,  compared to net income of approximately $82,000
for the same period in 1995. The decreased net income of approximately  $501,000
was primarily  attributed to lower total revenues,  increased cost of goods sold
as a percentage of revenues,  increased  selling expenses and increased  general
and administrative expenses. The change from net income per share of $.05 during
the nine months ended  September  30, 1995,  to a net loss per share of $.14 for
the same period in 1996, reflected the Company's net loss during the 1996 period
and the greater number of shares of Common Stock  outstanding as a result of the
Company's initial public offering in December 1995.

LIQUIDITY AND CAPITAL RESOURCES

     In December 1995, the Company  completed an initial public offering ("IPO")
of  1,000,000  shares of common  stock,  $.01 par value per share  (the  "Common
Stock"),   and  1,000,000   Redeemable   Common  Stock  Purchase  Warrants  (the
"Redeemable  Warrants"),  at a purchase price of $3.60 per share of Common Stock
and Redeemable Warrant sold together. The Company realized net proceeds from the
IPO of  approximately  $2,618,000.  In January  1996,  the Company  completed an
overallotment  of an  additional  150,000  shares  of Common  Stock and  150,000
Redeemable Warrants for net proceeds of approximately $396,000.

     The Company has financed its capital expenditures,  operating  requirements
and growth to date primarily through the IPO, bank and other borrowings, and the
sale of stock to and loans from its principal stockholders.

     In connection with the Maryland  Claims,  several  parties  involved in the
related  contracts  have made informal  claims to the Company for charges due to
contract  job delays and have  withheld  payments on a portion of the  Company's
billings totaling approximately  $754,000.  This increase in accounts receivable
has  adversely  affected  the  Company's  cash flow and its  ability  to pay its
suppliers on a timely basis.

     For the  nine  months  ended  September  30,  1996,  cash of  approximately
$372,000 was  absorbed by  operating  activities.  The  substantial  use of cash
during  this  period  was from an  increase  of  billed  and  unbilled  accounts
receivable  totaling  approximately  of  $346,000.  The  Company  used  cash  of
approximately  $235,000  during  the first  nine  months  of 1996 for  investing
activities,  primarily as a result of the purchase of and  additions to property
and equipment. During the first nine months of 1996, cash totaling approximately
$447,000 was provided by financing activities,  primarily as a result of the net
proceeds of the IPO of approximately $396,000, and by a net increase in borrowed
money of approximately $50,000.


                                       12


     In July 1996,  the Company  entered into a loan  agreement with Riggs Bank,
N.A.  ("Riggs") to establish a $600,000 line of credit (the "Riggs  Line").  The
Riggs Line was subsequently increased to $800,000 in September 1996. Interest on
the Riggs  Line  currently  accrues  interest  at Riggs'  prime  rate  (9.75% at
September  30,  1996)  plus 1.5% per  annum.  The Riggs  Line is  secured by the
Company's  accounts  receivable.  As of  September  30,  1996,  the  Company had
borrowed all of the funds  available under the Riggs Line. Of the total proceeds
of the Riggs  Line,  approximately  $660,000  was used by the Company to pay off
other debt,  and the remaining  proceeds of  approximately  $140,000 was used in
working capital.

     As of November 12, 1996,  the  Company's  plant in Virginia had  production
backorders that totaled approximately $1,100,000.  Unless successful efforts are
made to increase the Virginia plant's production backorder, management estimates
that it will be unable to keep the plant in full operating production during the
next three  months.  In general,  the lack of adequate  backlog can  potentially
result in the  inefficient  use of the plant facility and reduced revenue levels
which can adversely impact the Company's financial performance.

     The Company had  approximately  $2,244,000 of indebtedness at September 30,
1996, due during the next 12 months.  This  indebtedness is generally secured by
the assets of the Company and, in many cases, is personally guaranteed by Rodney
I.  Smith,  the  Company's  President.  In  the  context  of  a  forward-looking
statement,  management  intends to extend or  refinance  this debt as it becomes
due.  However,  no assurance can be given that the Company will be successful in
its efforts to extend or refinance  its current  indebtedness,  or that if it is
successful in those efforts, that such extension or refinancing will be on terms
favorable to the Company.  If the Company is not able to extend or refinance the
indebtedness, the Company may be subject to having its assets foreclosed upon by
certain lenders.

     As a result of the  Company's  substantial  debt  burden,  the  Company  is
especially  sensitive to changes in the prevailing interest rates.  Fluctuations
in such interest rates may materially and adversely affect the Company's ability
to finance its operations either by increasing the Company's cost to service its
current  debt,  or by creating a more  burdensome  refinancing  environment,  if
interest rates should increase.

SEASONALITY AND INFLATION

     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 severely  reducing the Company's  production  capacity.  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  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.


                                       13


                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     In late 1995,  the Company filed four  separate  informal  claims  totaling
approximately   $592,000  for  damages  and  costs   incurred  as  a  result  of
specification, policy and operating changes to contracts primarily instituted by
the State of Maryland  (the  "Maryland  Claims").  During 1996,  the Company has
continued to revise the Maryland  Claims to reflect claims for additional  costs
incurred  during 1996.  Several parties  involved in the related  contracts have
made  informal  claims to the Company for charges due to contract job delays and
back-charges.

     On September 24, 1996, JTE Constructors,  Inc. ("JTE"),  one of the parties
involved in the Maryland Claims, filed a motion for judgment against the Company
with the Circuit Court of Fairfax County, Virginia,  claiming damages estimated,
but not to exceed  $500,000 and related  legal fees.  On October 25,  1996,  the
Company filed a counterclaim  against JTE for damages of approximately  $580,000
for breach of contract.

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.  On October 10, 1996,  Scott Friberg,  the Company's
Chief Financial Officer,  tendered his resignation,  effective November 1, 1996,
in order to pursue  another  opportunity.  Mr.  Friberg has agreed to serve as a
consultant  to the Company in  connection  with the  transition of his duties as
principal financial officer to Annette M. Somerford, the Company's Controller.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

The following Exhibits are filed herewith:

<TABLE>
<CAPTION>

         Exhibit No.                        Title
         -----------                        -----
            <C>                    <S>
            10a                    Riggs Bank Loan Agreement
            10b                    Riggs Bank Promissory Note
            10c                    Amended and Restated Promissory Note
            10d                    Rodney I. Smith Promissory Note
            27                     Financial Data Schedule

</TABLE>

During the period covered by this report,  the Company filed a Current Report on
Form 8-K dated July 2, 1996, disclosing the resolution of arbitration proceeding
related to the termination of the Company's Chief Financial Officer.


                                       14


                                   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: November 11, 1996                   By:/s/ Rodney I. Smith
                                          ----------------------
                                          Rodney I. Smith
                                          Chairman of the Board,
                                          Chief Executive Officer and President
                                          (principal executive officer)


Date: November 11, 1996                   By:/s/ Annette M. Somerford
                                          Annette M. Somerford
                                          Controller
                                          (principal financial officer)






                                       15


                                  EXHIBIT INDEX


         Exhibit No.                        Title

            10a                     Riggs Bank Loan Agreement

            10b                     Riggs Bank Promissory Note

            10c                     Amended and Restated Promissory Note

            10d                     Rodney I. Smith Promissory Note

            27                      Financial Data Schedule









                                       16



                                   EXHIBIT 10A

                            RIGGS BANK LOAN AGREEMENT


Borrower:    Smith-Midland Corporation, a Virginia corporation 
             (TIN: 54-1727060); ET. AL.
             Route 28, P.O. Box 300
             Midland, VA  22728

Lender:      Riggs Bank N.A.
             6805 Old Dominion Drive
             McLean, VA  22101


==============================================

THIS LOAN AGREEMENT between  Smith-Midland  Corporation,  a Virginia corporation
Smith-Midland Corporation, a Delaware 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 (referred to in this Agreement individually
and  collectively  as  "Borrower")  and  Riggs  Bank N.A.  (referred  to in this
Agreement as "Lender") is made on the following terms and  conditions.  Borrower
has received prior  commercial  loans from Lender or has applied to Lender for a
commercial  loan or loans and other  financial  accommodations,  including those
which may be  described on any exhibit or schedule  attached to this  Agreement.
All such loans and financial accommodations,  together with all future loans and
financial  accommodations  from  Lender to  Borrower,  are  referred  to in this
Agreement  individually as the "Loan" and collectively as the "Loans."  Borrower
understands and agrees that: (a) in granting,  renewing,  or extending any Loan,
Lender is relying upon Borrower's  representations,  warranties, and agreements,
as set forth in this Agreement; (b) the granting,  renewing, or extending of any
Loan by Lender at all times  shall be  subject to  Lender's  sole  judgment  and
discretion;  and (c) all such  Loans  shall be and shall  remain  subject to the
following terms and conditions of this Agreement.

TERM.  This Agreement shall be effective as of July 22, 1996, and shall continue
thereafter  until all  Indebtedness  of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.

DEFINITIONS.  The following words shall have the following meanings when used in
this  Agreement.  Terms not otherwise  defined in this Agreement  shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar  amounts  shall mean amounts in lawful  money of the United  States of
America.

     Agreement.  The word  "Agreement"  means this Loan Agreement,  as this Loan
     Agreement may be amended or modified  from time to time,  together with all
     exhibits and schedules attached to this Loan Agreement from time to time.

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

     Account  Debtor.  The  words  "Account  Debtor"  mean the  person or entity
     obligated upon an Account.

     Advance.  The word "Advance"  means a disbursement of Loan funds under this
     Agreement.

     Borrower.   The  word  "Borrower"   means   individually  and  collectively
     Smith-Midland   Corporation,   a   Virginia   corporation,    Smith-Midland
     Corporation, a Delaware 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  and all other persons
     and entities signing Borrowers' Note.

     Borrowing  Base. The words  "Borrowing  Base" mean, as determined by Lender
     from time to time,  the lesser of (a)  $600,000.00;  or (b)  80.000% of the
     aggregate  amount of Eligible  Accounts.  In determining  the amount of the
     Borrowing Base, all Eligible Accounts of all Borrowers shall be included.

     CERCLA. The word "CERCLA" means the Comprehensive  Environmental  Response,
     Compensation, and Liability Act of 1980, as amended.

     Collateral. The word "Collateral" means and includes without limitation all
     property and assets granted as collateral security for a Loan, whether real
     or personal  property,  whether  granted  directly or  indirectly,  whether
     granted now or in the future, and whether granted in the form of a security
     interest,  mortgage, deed of trust,  assignment,  pledge, chattel mortgage,
     chattel trust,  factor's lien,  equipment  trust,  conditional  sale, trust
     receipt,  lien,  charge,  lien  or  title  retention  contract,   lease  or
     consignment  intended as a security  device,  or any other security or lien
     interest whatsoever,  whether created by law, contract,  or otherwise.  The
     word  "Collateral"  includes  without  limitation all collateral  described
     below in the section titled "COLLATERAL."

     Eligible Accounts.  The words "Eligible Accounts" mean, at any time, all of
     Borrower's Accounts which contain selling terms and conditions acceptable


                                       17


     to Lender.  The net amount of any Eligible  Account  against which Borrower
     may borrow shall exclude all returns,  discounts,  credits,  and offsets of
     any  nature.  Unless  otherwise  agreed to by Lender in  writing,  Eligible
     Accounts do not include:

          (a) Accounts  with respect to which the Account  Debtor is an officer,
          an employee or agent of Borrower.

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

LOAN AGREEMENT    Page 2
(Continued)

==============================================

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

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

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

          (f)  Accounts  with  respect  to  which  the  services  have  not been
          rendered, to the Account Debtor.

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

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

          (i) Accounts  with  respect to which the Account  Debtor is the United
          States government or any department or agency of the United States.

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

     ERISA. The word "ERISA" means the Employee  Retirement  Income Security Act
     of 1974, as amended.

     Event of Default.  The words  "Event of Default"  mean and include  without
     limitation  any of the Events of  Default  set forth  below in the  section
     titled "EVENTS OF DEFAULT."

     Expiration Date. The words  "Expiration  Date" mean the date of termination
     of Lender's commitment to lend under this Agreement.

     Grantor.  The word "Grantor" means and includes without limitation each and
     all  of the  persons  or  entities  granting  a  Security  Interest  in any
     Collateral  for  the  Indebtedness,  and  their  personal  representatives,
     successors and assigns.

     Guarantor.  The word "Guarantor" means and includes without limitation each
     and  all  of  the  guarantors,   sureties,  and  accommodation  parties  in
     connection  with  any  Indebtedness  and  their  personal  representatives,
     successors and assigns.

     Indebtedness. The word "Indebtedness" means and includes without limitation
     all Loans,  including  all  principal,  interest and other fees,  costs and
     charges, if any, together with all other present and future liabilities and
     obligations  of Borrower,  or any one or more of them,  to Lender,  whether
     direct  or  indirect,   matured  or  unmatured,  and  whether  absolute  or
     contingent,  joint,  several,  or joint and several,  and no matter how the
     same may be evidenced or shall arise.

     Lender.  The word  "Lender"  means  Riggs Bank  N.A.,  its  successors  and
     assigns.

     Line of  Credit.  The  words  "Line of  Credit"  mean the  credit  facility
     described in the Section titled "LINE OF CREDIT" below.

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

     Note.  The word "Note" means and  includes  without  limitation  Borrower's
     promissory note or notes, if any, evidencing Borrower's Loan obligations in
     favor of Lender, as well as any substitute, replacement or refinancing note
     or notes therefor.

     Permitted Liens.  The words "Permitted  Liens" mean: (a) liens and security
     interests securing Indebtedness owed by Borrower to Lender; (b) liens for

                                       18

     taxes,  assessments,  or  similar  charges  either  not  yet  due or  being
     contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
     or carriers, or other like liens arising in the ordinary course of business
     and securing  obligations which are not yet delinquent;  (d) purchase money
     liens or purchase money security interests upon or in any property acquired
     or  held  by  Borrower  in  the  ordinary  course  of  business  to  secure
     indebtedness  outstanding  on the date of this Agreement or permitted to be
     incurred under the paragraph of this  Agreement  titled  "Indebtedness  and
     Liens";  (e) liens and  security  interests  which,  as of the date of this
     Agreement,  have been  disclosed  to the Lender in  writing;  and (f) those
     liens  and  security  interests  which  in  the  aggregate   constitute  an
     immaterial and insignificant  monetary amount with respect to the net value
     of Borrower's assets.

     Related Documents.  The words "Related  Documents" mean and include without
     limitation  all  promissory  notes,  credit  agreements,  loan  agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments,  agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.




LOAN AGREEMENT    Page 3
(Continued)

==============================================

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

     Security Interest.  The words "Security  Interest" mean and include without
     limitation any and all types of liens and encumbrances,  whether created by
     law, contract, or otherwise.

     SARA. The word "SARA" means the Superfund  Amendments  and  Reauthorization
     Act of 1986 as now or hereafter amended.

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

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

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

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

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

          (d) All  guaranties  required  by Lender for the Line of Credit  shall
          have been executed by each Guarantor,  delivered to Lender,  and be in
          full force and effect.

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

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

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

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

     Mandatory Loan Repayments. If at any time the aggregate principal amount of
     the  outstanding  Advances  shall  exceed the  applicable  Borrowing  Base,

                                       19


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

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


COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans,  obligations and duties owed by Borrower to Lender, Borrower (and others,
if  required)  shall grant to Lender  Security  Interests  in such  property and
assets as Lender may require (the  "Collateral"),  including without  limitation
Borrower's  present and future Accounts and general  intangibles except patents,
trademarks  and licenses of the  Borrower.  Lender's  Security  Interests in the
Collateral shall be continuing liens and shall include the proceeds and products
of the Collateral,  including without  limitation the proceeds of any insurance.
With respect to the  Collateral,  Borrower agrees and represents and warrants to
Lender:

     Perfection of Security Interests. Borrower agrees to execute such financing
     statements  and to take  whatever  other actions are requested by Lender to
     perfect and continue  Lender's Security  Interests in the Collateral.  Upon
     request  of  Lender,  Borrower  will  deliver  to Lender any and all of the
     documents evidencing or constituting the Collateral, and Borrower will note
     Lender's interest upon any and all chattel paper if not delivered to Lender
     for  possession  by  Lender.  Contemporaneous  with the  execution  of this
     Agreement,  Borrower will execute one or more UCC financing  statements and
     any similar  statements as may be required by applicable law, and will file
     such  financing   statements  and  all  such  similar   statements  in  the
     appropriate  location or locations.  Borrower hereby appoints Lender as its
     irrevocable  attorney-in-fact  for the purpose of executing  any  documents
     necessary to perfect or to continue any  Security  Interest.  Lender may at
     any time, and without further

LOAN AGREEMENT    Page 4
(Continued)

==============================================

     authorization from Borrower, file a carbon, photograph, facsimile, or other
     reproduction of any financing  statement for use as a financing  statement.
     Borrower  will  reimburse  Lender  for all  expenses  for  the  perfection,
     termination,  and the  continuation of the perfection of Lender's  security
     interest in the  Collateral.  Borrower  promptly  will notify Lender of any
     change in  Borrower's  name  including  any change to the assumed  business
     names of Borrower.  Borrower also promptly will notify Lender of any change
     in Borrower's  Social  Security Number or Employer  Identification  Number.
     Borrower  further agrees to notify Lender in writing prior to any change in
     address or location of  Borrower's  principal  governance  office or should
     Borrower merge or consolidate with any other entity.

     Collateral  Records.  Borrower does now, and at all times hereafter  shall,
     keep correct and accurate  records of the Collateral,  all of which records
     shall be  available  to Lender or Lender's  representative  upon demand for
     inspection  and  copying  at  any  reasonable  time.  With  respect  to the
     Accounts,  Borrower  agrees to keep and maintain such records as Lender may
     require,  including  without  limitation  information  concerning  Eligible
     Accounts and Account balances and agings.

     Collateral Schedules.  Concurrently with the execution and delivery of this
     Agreement,  Borrower  shall  execute  and  deliver to Lender a schedule  of
     Accounts and Eligible Accounts,  in form and substance  satisfactory to the
     Lender.  Thereafter and at such frequency as Lender shall require, Borrower
     shall execute and deliver to Lender such supplemental schedules of Eligible
     Accounts  and such other  matters and  information  relating to  Borrower's
     Accounts as Lender may request.

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

MULTIPLE  BORROWERS.  This Agreement has been exectuted by multiple obligors who
are  referred  to  herein  individually,  collectively  and  interchangeably  as
"Borrower." Unless specifically  stated to the contrary,  the word "Borrower" as
used  in this  Agreement,  including  without  limitation  all  representations,
warranties and covenants, shall include all Borrowers.  Borrower understands and
agrees that, with or without notice to Borrower,  Lender may with respect to any
other  Borrower (a) make one or more  additional  secured or unsecured  loans or
otherwise  extend  additional  credit;  (b) alter,  compromise,  renew,  extend,
accelerate,  or otherwise change one or more times the time for payment or other
terms  any  indebtedness,  including  increases  and  decreases  of the  rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or
decide  not  to  perfect,  and  release  any  security,   with  or  without  the
substitution of new collateral;  (d) release,  substitute,  agree not to sue, or
deal with any one or more of Borrower's sureties, endorsers, or other guarantors
on any terms or in any manner  Lender may choose;  (e)  determine  how, when and
what application of payments and credits shall be made on any indebtedness;  (f)
apply such  security and direct the order or manner of sale  thereof,  including
without  limitation,  any  nonjudicial  sale  permitted  by  the  terms  of  the
controlling security agreement or deed of trust, as Lender in its discretion may
determine;  (g) sell,  transfer,  assign, or grant  participations in all or any
part of the  indebtedness;  (h) exercise or refrain from  exercising  any rights
against Borrower or others, or otherwise act or refrain from acting;  (i) settle
or compromise any  indebtedness;  and (j)  subordinate the payment of all or any
part of any indebtedness of Borrower to Lender to the payment of any liabilities
which may be due Lender or others.

                                       20


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

     Organization.   Borrower  is  comprised  of  corporations  which  are  duly
     organized,  validly existing,  and in good standing under the laws of their
     respective  states of  incorporation  and each such  corporation is validly
     existing and in good  standing in all states in which such  corporation  is
     doing  business.  Borrower  has the full  power  and  authority  to own its
     properties and to transact the businesses in which it is presently  engaged
     or  presently  proposes to engage.  Borrower  also is duly  qualified  as a
     foreign  corporation  and is in good  standing  in all  states in which the
     failure  to so  qualify  would  have  a  material  adverse  effect  on  its
     businesses or financial condition.

     Authorization.  The execution,  delivery, and performance of this Agreement
     and all  Related  Documents  by  Borrower,  to the  extent to be  executed,
     delivered  or  performed  by  Borrower,  have been duly  authorized  by all
     necessary action by Borrower; do not require the consent or approval of any
     other  person,  regulatory  authority  or  governmental  body;  and  do not
     conflict with,  result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization,  or bylaws,
     or any agreement or other instrument  binding upon Borrower or (b) any law,
     governmental regulation, court decree, or order applicable to Borrower.

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

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

     Properties.  All of Borrower's  owned  properties  are titled in Borrower's
     legal name,  and  Borrower  has not used,  or filed a  financing  statement
     under, any other name for at least the last three (3) years.

     Hazardous Substances.  The terms "hazardous waste," "hazardous  substance,"
     "disposal," "release," and "threatened release," as used in this Agreement,
     shall have the same  meanings  as set forth in the  "CERCLA,"  "SARA,"  the
     Hazardous Materials Transportation Act, 49 U.S.C.


LOAN AGREEMENT    Page 5
(Continued)

==============================================

     Section  1801,  et seq.,  the Resource  Conservation  and Recovery  Act, 42
     U.S.C.  Section 6901, et seq., or other  applicable  state or Federal laws,
     rules, or regulations  adopted pursuant to any of the foregoing.  Except as
     disclosed to and acknowledged by Lender in writing, Borrower represents and
     warrants  that:  (a)  During  the  period of  Borrower's  ownership  of the
     properties,  there  has  been no  use,  generation,  manufacture,  storage,
     treatment,  disposal,  release or threatened release of any hazardous waste
     or substance by any person on, under,  about or from any of the properties.
     (b) Borrower has no knowledge  of, or reason to believe that there has been
     (i)  any  use,  generation,   manufacture,  storage,  treatment,  disposal,
     release,  or  threatened  release of any  hazardous  waste or substance on,
     under, about or from the properties by any prior owners or occupants of any
     of the properties, or (ii) any actual or threatened litigation or claims of
     any kind by any person relating to such matters.  (c) Neither  Borrower nor
     any  tenant,  contractor,  agent  or  other  authorized  user of any of the
     properties shall use, generate,  manufacture,  store, treat, dispose of, or
     release any hazardous  waste or substance  on, under,  about or from any of
     the properties; and any such activity shall be conducted in compliance with
     all applicable federal, state, and local laws, regulations, and ordinances,
     including  without  limitation  those  laws,   regulations  and  ordinances
     described above.  Borrower  authorizes  Lender and its agents to enter upon
     the  properties  to make such  inspections  and  tests as  Lender  may deem
     appropriate to determine  compliance of the properties with this section of
     the  Agreement.  Any  inspections  or  tests  made by  Lender  shall  be at
     Borrower's  reasonable expense and for Lender's purposes only and shall not
     be  construed  to create any  responsibility  or  liability  on the part of
     Lender  to  Borrower  or to  any  other  person.  The  representations  and
     warranties  contained  herein  are based on  Borrower's  due  diligence  in
     investigating the properties for hazardous waste and hazardous  substances.
     Borrower  hereby (a) releases and waives any future claims  against  Lender
     for indemnity or  contribution  in the event  Borrower  becomes  liable for
     cleanup or other costs under any such laws, and (b) agrees to indemnify and
     hold  harmless  Lender  against  any and all claims,  losses,  liabilities,
     damages,  penalties,  and expenses  which Lender may directly or indirectly
     sustain or suffer  resulting from a breach of this section of the Agreement
     or as a consequence of any use, generation, manufacture, storage, disposal,
     release or threatened  release  occurring prior to Borrower's  ownership or
     interest in the properties, whether or not the same was or should have been
     known  to  Borrower.  The  provisions  of this  section  of the  Agreement,
     including the  obligation  to  indemnify,  shall survive the payment of the
     Indebtedness  and the termination or expiration of this Agreement and shall
     not be  affected  by  Lender's  acquisition  of any  interest in any of the
     properties, whether by foreclosure or otherwise.

     Litigation and Claims.  Except as disclosed in the Borrower's quarterly and
     annual and current reports on Form 8-K, and as futher disclosed in schedule
     A,  no  litigation,  claim,  investigation,  administrative  proceeding  or
     similar  action  (including  those for unpaid  taxes)  against  Borrower is
     pending or threatened, and no other event has occurred which may materially
     adversely affect Borrower's  financial condition or properties,  other than
     litigation,  claims,  or other events,  if any, that have been disclosed to
     and acknowledged by Lender in writing.

     Taxes. To the best of Borrower's knowledge,  all tax returns and reports of
     Borrower  that are or were required to be filed,  have been filed,  and all
     taxes,  assessments and other governmental  charges have been paid in full,
     except those  presently  being or to be contested by Borrower in good faith
     in the ordinary  course of business and for which  adequate  reserves  have
     been provided. (1994 and 1995 Federal and State income tax filings have not
     been

                                       21

     made as of the date of this  agreement.)

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

     Binding Effect. This Agreement,  the Note, all Security Agreements directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related  Documents  are binding  upon  Borrower as well as upon  Borrower's
     successors,  representatives  and assigns,  and are legally  enforceable in
     accordance with their respective terms.

     Commercial  Purposes.  Borrower intends to use the Loan proceeds solely for
     business or commercial related purposes.

     Employee Benefit Plans. Each employee benefit plan as to which Borrower may
     have any liability  complies in all material  respects with all  applicable
     requirements  of law and  regulations,  and  (i) no  Reportable  Event  nor
     Prohibited  Transaction  (as defined in ERISA) has occurred with respect to
     any such  plan,  (ii)  Borrower  has not  withdrawn  from any such  plan or
     initiated  steps to do so, (iii) no steps have been taken to terminate  any
     such plan,  and (iv)  there are no  unfunded  liabilities  other than those
     previously disclosed to Lender in writing.

     Location of Borrower's  Offices and Records.  Borrower's place of business,
     or Borrower's Chief executive  office,  if Borrower has more than one place
     of  business,  is located at Route 28,  P.O.  Box 300,  Midland,  VA 22728.
     Unless  Borrower has designated  otherwise in writing this location is also
     the office or offices  where  Borrower  keeps its  records  concerning  the
     Collateral.

     Information.  All  information  heretofore  or  contemporaneously  herewith
     furnished by Borrower to Lender for the purposes of or in  connection  with
     this  Agreement  or  any  transaction   contemplated  hereby  is,  and  all
     information  hereafter furnished by or on behalf of Borrower to Lender will
     be,  true and  accurate in every  material  respect on the date as of which
     such information is dated or certified;  and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

     Survival of Representations and Warranties. Borrower understands and agrees
     that Lender, without independent  investigation,  is relying upon the above
     representations  and  warranties  in extending  Loan  Advances to Borrower.
     Borrower further agrees that the foregoing  representations  and warranties
     shall be  continuing  in nature  and shall  remain in full force and effect
     until such time as Borrower's  Indebtedness shall be paid in full, or until
     this Agreement shall be terminated in the manner provided above,  whichever
     is the last to occur.

AFFIRMATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that,  while
this Agreement is in effect, Borrower will:

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


LOAN AGREEMENT    Page 6
(Continued)

==============================================

     Financial  Records.  Maintain  its books and  records  in  accordance  with
     generally accepted  accounting  principles,  applied on a consistent basis,
     and permit Lender to examine and audit  Borrower's books and records at all
     reasonable times and upon reasonable notice.

     Financial Statements.  Furnish Lender with, as soon as available, but in no
     event later than one hundred twenty (120) days after the end of each fiscal
     year,  Borrower's  balance  sheet and income  statement for the year ended,
     reviewed  by  BDO  Seidman  or a  certified  public  accountant  reasonably
     satisfactory to Lender. All financial reports required to be provided under
     this  Agreement  shall be prepared in accordance  with  generally  accepted
     accounting  principles,  applied on a consistent  basis,  and  certified by
     Borrower as being true and correct.

     Additional Information. Furnish such additional information and statements,
     lists of assets  and  liabilities,  agings  of  receivables  and  payables,
     inventory  schedules,  budgets,  forecasts,  tax returns, and other reports
     with respect to Borrower's  financial  condition and business operations as
     Lender may reasonably request from time to time.

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

     Insurance Reports.  Furnish to Lender,  upon request of Lender,  reports on
     each  existing  insurance  policy  showing such  information  as Lender may
     reasonably  request,  including without  limitation the following:  (a) the
     name of the insurer;  (b) the risks insured;  (c) the amount of the policy;
     (d) the

                                       22


     properties  insured;  (e) the then current  property values on the basis of
     which  insurance has been  obtained,  and the manner of  determining  those
     values;  and (f) the  expiration  date of the  policy.  In  addition,  upon
     request of Lender  (however not more often than  annually),  Borrower  will
     have an independent appraiser reasonably  satisfactory to Lender determine,
     as applicable, the actual cash value or replacement cost of any Collateral.
     The cost of such appraisal shall be paid by Borrower.

     Guaranties.  Prior to disbursement of any Loan proceeds,  furnish  executed
     guaranties of the Loans in favor of Lender,  on Lender's forms,  and in the
     amount and by the guarantor named below:

                  Guarantor                                   Amount
                  ---------                                   ------
                  Rodney I. Smith                             Unlimited

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

                  Name of Creditor                            Amount
                  ----------------                            ------
        John W. Myers Trust, Elizabeth A. Myers Trust,       $600,000
        Frances M. Myers Trust, and Bernard M. Myers Trust


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

     Loan  Proceeds.  Use all  Loan  proceeds  solely  for  Borrower's  business
     operations,  unless  specifically  consented  to the  contrary by Lender in
     writing.

     Taxes,   Charges  and  Liens.  Pay  and  discharge  when  due  all  of  its
     indebtedness and obligations, including without limitation all assessments,
     taxes,  governmental  charges,  levies and liens, of every kind and nature,
     imposed upon Borrower or its properties,  income, or profits,  prior to the
     date on which  penalties  would  attach,  and all lawful  claims  that,  if
     unpaid,  might become a lien or charge upon any of  Borrower's  properties,
     income, or profits.  Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the  legality  of the  same  shall  be  contested  in good  faith by
     appropriate  proceedings,  and (b) Borrower  shall have  established on its
     books  adequate  reserves with respect to such contested  assessment,  tax,
     charge,  levy,  lien,  or  claim  in  accordance  with  generally  accepted
     accounting  practices.  Borrower,  upon demand of Lender,  will  furnish to
     Lender  evidence of payment of the  assessments,  taxes,  charges,  levies,
     liens and claims and will authorize the appropriate  governmental  official
     to deliver to Lender at any time a written  statement  of any  assessments,
     taxes,  charges,  levies,  liens and claims against Borrower's  properties,
     income, or profits.

     Performance.  Perform and comply with all terms, conditions, and provisions
     set  forth  in this  Agreement  and in the  Related  Documents  in a timely
     manner,  and promptly notify Lender if Borrower learns of the occurrence of
     any event which  constitutes  an Event of Default  under this  Agreement or
     under any of the Related Documents.

     Operations.  Maintain executive and management personnel with substantially
     the  same  qualifications  and  experience  as the  present  executive  and
     management  personnel;  provide  written  notice to Lender of any change in
     executive  and  management  personnel;  conduct its  business  affairs in a
     reasonable  and prudent  manner and in compliance in all material  respects
     with all applicable federal, state and municipal laws,


LOAN AGREEMENT    Page 7
(Continued)

==============================================

     ordinances,  rules and  regulations  respecting its  properties,  charters,
     businesses and operations,  including without  limitation,  compliance with
     the Americans With  Disabilities Act and with all minimum funding standards
     and other  requirements  of ERISA and other laws  applicable  to Borrower's
     employee benefit plans.

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

     Compliance Certificate.  Unless waived in writing by Lender, provide Lender
     at least  annually and at the time of each  disbursement  of Loan  proceeds


                                       23


     with a certificate executed by Borrower's chief financial officer, or other
     officer or person acceptable to Lender, certifying that the representations
     and  warranties  set forth in this Agreement are true and correct as of the
     date of the certificate and further  certifying that, as of the date of the
     certificate, no Event of Default exists under this Agreement.

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

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

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

     Indebtedness  and Liens.  (a) Except for trade debt  incurred in the normal
     course of  business,  individual  borrowings  or capital  leases  less than
     $25,000.00  and  indebtedness  to Lender  contemplated  by this  Agreement,
     create, incur or assume indebtedness for borrowed money,  including capital
     leases, in which event Lender's consent will not be unreasonably  withheld,
     (b)  except as allowed  as a  Permitted  Lien,  sell,  transfer,  mortgage,
     assign,  pledge,  lease,  grant a security  interest in, or encumber any of
     Borrower's  assets,  or (c) sell with recourse any of Borrower's  accounts,
     except to Lender.

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

     Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
     assets,  (b)  purchase,  create  or  acquire  any  interest  in  any  other
     enterprise  or  entity,  in which  event,  Lender's  consent  shall  not be
     unreasonably  withheld,  or (c) incur any obligation as surety or guarantor
     other than in the ordinary course of business.

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

RIGHT OF SETOFF.  Borrower  grants to Lender a contractual  possessory  security
interest in, and hereby assigns,  conveys,  delivers,  pledges, and transfers to
Lender all Borrower's right,  title and interest in and to, Borrower's  accounts
with  Lender  (whether  checking,  savings,  or some other  account),  including
without  limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future,  excluding  however all IRA and Keogh accounts,
and all trust  accounts  for which the  grant of a  security  interest  would be
prohibited  by law.  Borrower  authorizes  Lender,  to the extent  permitted  by
applicable law, to charge or setoff all sums owing on the  Indebtedness  against
any and all such accounts.

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


                                       24



LOAN AGREEMENT   Page 8
(Continued)

==============================================

     Default on  Indebtedness.  Failure of Borrower to make any payment when due
     on the Indebtedness.

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

     Default in Favor of Third Parties.  Should  Borrower or any Grantor default
     under any loan, extension of credit, security agreement,  purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's  property or Borrower's or any
     Grantor's   ability  to  repay  the  Loans  or  perform  their   respective
     obligations under this Agreement or any of the Related Documents.

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

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect  (including  failure of any  Security
     Agreement to create a valid and  perfected  Security  Interest) at any time
     and for any reason.

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

     Creditor  or  Forfeiture   Proceedings.   Commencement  of  foreclosure  or
     forfeiture   proceedings,   whether  by  judicial  proceeding,   self-help,
     repossession or any other method, by any creditor of Borrower, any creditor
     of any Grantor against any collateral securing the Indebtedness,  or by any
     governmental agency. This includes a garnishment, attachment, or levy on or
     of any of Borrower's deposit accounts with Lender.  However,  this Event of
     Default  shall not apply if there is a good faith  dispute by  Borrower  or
     Grantor,  as the case may be, as to the validity or  reasonableness  of the
     claim which is the basis of the creditor or forfeiture  proceeding,  and if
     Borrower  or  Grantor  gives  Lender  written  notice  of the  creditor  or
     forfeiture  proceeding  and  furnishes  reserves  or a surety  bond for the
     creditor or forfeiture proceeding satisfactory to Lender.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any  Guarantor  of any of the  Indebtedness  or any  Guarantor  dies  or
     becomes  incompetent,  or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness.  Lender,  at its option,  may, but
     shall  not  be  required  to,  permit  the  Guarantor's  estate  to  assume
     unconditionally  the  obligations  arising  under the  guaranty in a manner
     satisfactory to Lender, and, in doing so, cure the Event of Default.

     Events  Affecting  Co-Borrowers.  Any of the  preceding  events occurs with
     respect to any  co-borrower of any of the  Indebtedness  or any co-borrower
     dies or becomes  incompetent,  or revokes or disputes  the  validity of, or
     liability under, any of the Indebtedness.  Lender, at its option,  may, but
     shall  not be  required  to,  permit  the  co-borrower's  estate  to assume
     unconditionally   the   obligations  on  the   Indebtedness   in  a  manner
     satisfactory to Lender, and, in doing so, cure the Event of Default.

     Adverse Change.  A material  adverse change occurs in Borrower's  financial
     condition,  or Lender  reasonably  believes  the  prospect  of  payment  or
     performance of the Indebtedness is impaired.

     Insecurity. Lender, in good faith, deems itself insecure.

     Right to Cure.  If any default,  other than a Default on  Indebtedness,  is
     curable and if Borrower or Grantor,  as the case may be, has not been given
     a notice of a similar default within the preceding  twelve (12) months,  it
     may be cured (and no Event of Default  will have  occurred)  if Borrower or
     Grantor,  as the case may be, after  receiving  written  notice from Lender
     demanding  cure of such default:  (a) cures the default within fifteen (15)
     days; or (b) if the cure requires more than fifteen (15) days,  immediately
     initiates  steps which  Lender  deems in  Lender's  sole  discretion  to be
     sufficient to cure the default and  thereafter  continues and completes all
     reasonable and necessary steps sufficient to produce  compliance as soon as
     reasonably practical.

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

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

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


                                       25


LOAN AGREEMENT    Page 9
(Continued)

==============================================

     Applicable Law. This Agreement shall be governed by, construed and enforced
     in accordance with the laws of the Commonwealth of Virginia.

     Lender and Borrower hereby waive the right to any jury trial in any action,
     proceeding,  or  counterclaim  brought by either  party  against the other.
     (Initial Here ______RS______ )

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

     Multiple Parties;  Corporate  Authority.  All obligations of Borrower under
     this Agreement  shall be joint and several,  and all references to Borrower
     shall mean each and every  Borrower.  This means that each of the Borrowers
     signing below is responsible for all obligations in this Agreement.

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

     Costs and  Expenses.  Borrower  agrees to pay upon  demand all of  Lender's
     reasonable   out-of-pocket   expenses  incurred  in  connection  with  this
     Agreement or in connection  with the Loans made pursuant to this Agreement.
     Subject to any limits under  applicable law, if Lender hires an attorney to
     help enforce this Agreement or to collect any Indebtedness, Borrower agrees
     to pay  Lender's  reasonable  attorneys'  fees,  and all of Lender's  other
     reasonable  collection  expenses,  whether  or not there is a  lawsuit  and
     including reasonable legal expenses for bankruptcy proceedings.

     Notices.  All notices  required to be given under this  Agreement  shall be
     given in writing,  may be sent by  telefacsimilie,  and shall be  effective
     when  actually  delivered if hand  delivered or when  actually  received if
     deposited with a nationally  recognized  overnight courier or when actually
     received if deposited as certified or registered  mail in the United States
     mail,  first  class,  postage  prepaid,  addressed to the party to whom the
     notice is to be given at the address shown above.  Any party may change its
     address for notices under this Agreement by giving formal written notice to
     the other parties,  specifying  that the purpose of the notice is to change
     the party's address. To the extent permitted by applicable law, if there is
     more than one Borrower,  notice to any Borrower will  constitute  notice to
     all Borrowers.  For notice purposes,  Borrower will keep Lender informed at
     all times of Borrower's current address(es).

     Severability.  If a court of competent  jurisdiction finds any provision of
     this  Agreement  to be  invalid  or  unenforceable  as  to  any  person  or
     circumstance,  such  finding  shall not render  that  provision  invalid or
     unenforceable as to any other persons or  circumstances.  If feasible,  any
     such  offending  provision  shall be deemed to be modified to be within the
     limits of enforceability or validity;  however,  if the offending provision
     cannot be so  modified,  it shall be stricken and all other  provisions  of
     this Agreement in all other respects shall remain valid and enforceable.

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

     Survival.  All warranties,  representations,  and agreements of Borrower in
     this Agreement  shall survive the making of the Loan or Loans  contemplated
     hereby, and shall be deemed made and redated by Borrower at the time of the
     making of each disbursement of Loan proceeds.

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

     Waiver.  Indulgence  by  Lender  with  respect  to  any of  the  terms  and
     conditions  of this  Agreement  or the failure of Lender to exercise any of
     its rights under this Agreement shall not constitute a waiver thereof,  and
     Borrower  shall remain liable for the strict  performance of such terms and
     conditions  until this Agreement shall be terminated.  No provision of this
     Agreement  may be  waived  or  modified  orally,  but all such  waivers  or
     modifications  shall be in  writing.  Whenever  the  consent  of  Lender is
     required  under this  Agreement,  the granting of such consent by Lender in
     one instance shall not constitute Lender's continuing consent in subsequent
     instances,  and in all cases such consent may be granted or withheld in the
     sole discretion of Lender.


                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       26


LOAN AGREEMENT    Page 10
(Continued)

==============================================


THIS LOAN AGREEMENT IS SIGNED, SEALED AND DELIVERED EFFECTIVE IN ALL RESPECTS AS
OF ___July 22, 1996____.

BORROWER:

Smith-Midland Corporation, a Virginia corporation

X  /s/ Rodney I Smith                 (SEAL)
   --------------------------
    Authorized Officer President      ATTEST: /s/  Wesley  A.   Taylor
                                              ---------------------------------
                                              Secretary or Assistant Secretary


Smith-Midland Corporation, a Delaware corporation, Co-Borrower

By: /s/ Rodney I. Smith               (SEAL)
    -------------------------
    Authorized Officer                ATTEST: /s/     Rodney I. Smith 
                                              -------------------------------
                                              Secretary or Assistant Secretary


Easi-Set Industries,Inc., a Virginia  corporation, Co-Borrower

By:  Ashley B. Smith                  (SEAL)
     ------------------------
    Authorized Officer               ATTEST: /s/     Wesley A. Taylor
                                             --------------------------------
                                              Secretary or Assistant Secretary


Smith-Carolina Corporation, a North Carolina corporation, Co-Borrower

By: /s/ Rodney I Smith                (SEAL)
    -------------------------
    Authorized Officer               ATTEST: s/    Wesley A.Taylor
                                             ---------------------------------
                                              Secretary or Assistant Secretary


Concrete Safety Systems, Inc., a Virginia corporation, Co-Borrower

By: /s/ Rodney I Smith                (SEAL)
    -------------------------
    Authorized Officer               ATTEST: s/     Wesley A. Taylor
                                             ---------------------------------
                                              Secreatry or Assistant Secretary


Midland Advertising & Design, Inc., a Virginia corporation, Co-Borrower

By: /s/ Rodney I Smith                (SEAL)
    -------------------------
    Authorized Officer               ATTEST: /s/      Rodney I Smith
                                             ---------------------------------
                                             Secretary or Assistant Secretary




LENDER:
Riggs Bank N.A.

By:/s/ Riggs Bank N.A.
   --------------------------
     Authorized Officer



LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.21 (c) 1996 CFI ProServices,  Inc.
All rights reserved. [VA-C40 MID796.LN C8.OVL]



                                       27


                                   EXHIBIT 10B


                           RIGGS BANK PROMISSORY NOTE

Borrower:         Smith-Midland Corporation, a Virginia corporation
                  (TIN:  54-1727060); ET. AL.
                  Route 28, P.O. Box 300
                  Midland, VA  22728

Lender:  Riggs Bank N.A.
         6805 Old Dominion Drive
         McLean, VA  22101

==============================================

Principal Amount:  $600,000.00   Initial Rate:  9.750%   Date of Note:  ________

PROMISE TO PAY. Smith-Midland Corporation, a Virginia corporation, Smith-Midland
Corporation,  a  Delaware  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  (referred  to in  this  Note  individually  and
collectively as "Borrower")  jointly and severally  promise to pay to Riggs Bank
N.A. ("Lender"),  or order, in lawful money of the United States of America, the
principal amount of Nine Hundred  Thousand & 00/100 Dollars  ($600,000.00) or so
much as may be  outstanding,  together with  interest on the unpaid  outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until  repayment of each advance.  PAYMENT.  Borrower will pay this
loan in one  payment  of all  outstanding  principal  plus  all  accrued  unpaid
interest  on July 8,  1997.  In  addition,  Borrower  will pay  regular  monthly
payments of accrued unpaid interest beginning August 8, 1996, and all subsequent
interest payments are due on the same day of each month after that.  Interest on
this Note is computed on a 365/365 simple interest  basis;  that is, by applying
the  ratio  of the  annual  interest  rate  over the  number  of days in a year,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the  principal  balance  is  outstanding.  Borrower  will pay  Lender at
Lender's  address  shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest,  then to principal,  and any remaining
amount to any unpaid collection costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index  which is the Prime Rate as  Published
in The Wall Street Journal (the  "Index").  The term "Prime Rate" shall mean the
rate reported in The Wall Street  Journal  newspaper in its "Money Rates" column
as the Prime Rate and, if more than one rate or a range of rates are reported as
the Prime Rate, then the highest such rate, changing as and when such rate shall
change (the "Wall Street Journal Prime Rate").  If The Wall Street Journal shall
cease to publish a Prime Rate,  then "Prime Rate" shall mean that rate announced
from time to time by Riggs Bank N.A.  ("Riggs")  as its prime rate of  interest,
which rate may or may not change  from time to time in Riggs'  sole  discretion,
Riggs having no  obligation to reset the rate at any time or for any reason (the
"Riggs Prime Rate").  The "Prime Rate," as determined by either  method,  is not
necessarily the lowest rate charged by the Lender on loans. The Borrower further
acknowledges  that with respect to all matters  relevant  hereto,  a certificate
signed by an  officer  of Lender  setting  forth the Prime Rate in effect on any
applicable  date  shall  be  conclusive  and  binding.  The  Borrower  expressly
acknowledges  and agrees  that (i) the Wall  Street  Journal  Prime Rate and the
Riggs Prime Rate are independent  reference rates which may or may not change at
the same time, with the same frequency,  or in the same amounts,  and (ii) there
is no guaranty  that by using the Wall Street  Journal Prime Rate as a reference
rate the interest  charged on the Promissory  Note will always or at any time be
less than if the Riggs Prime Rate was used as the  reference  rate.  Lender will
tell  Borrower  the  current  Index  rate  upon  Borrower's  request.   Borrower
understands  that  Lender  may make  loans  based on  other  rates as well.  The
interest  rate  change  will not occur  more  often  than  each  day.  The Index
currently  is 8.250% per annum.  The  interest  rate to be applied to the unpaid
principal balance of this Note will be at a rate of 1.500 percentage points over
the Index,  resulting in an initial rate of 9.750% per annum.  NOTICE:  Under no
circumstances  will the interest rate on this Note be more than the maximum rate
allowed by applicable law.

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early  payments will not,  unless agreed to by Lender in
writing,  relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.

LATE  CHARGE.  If a payment  is 10 days or more late,  Borrower  will be charged
5.000% of the unpaid portion of the regularly scheduled payment.

DEFAULT.  Borrower  will be in  default  if any of the  following  happens:  (a)
Borrower  fails to make any payment when due.  (b)  Borrower  breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement  related to this Note, or in any other  agreement or loan Borrower
has with Lender.  (c)  Borrower  defaults  under any loan,  extension of credit,
security  agreement,  purchase or sales agreement,  or any other  agreement,  in
favor of any  other  creditor  or  person  that  may  materially  affect  any of
Borrower's  property  or  Borrower's  ability  to  repay  this  Note or  perform
Borrower's  obligations  under  this Note or any of the  Related  Documents  (as
defined in the loan agreement  related to this Note). (d) Any  representation or
statement  made or  furnished to Lender by Borrower or on  Borrower's  behalf is
false or  misleading in any material  respect  either now or at the time made or
furnished.  (e) Borrower becomes insolvent, a receiver is appointed for any part
of  Borrower's  property,  Borrower  makes  an  assignment  for the  benefit  of
creditors, or any proceeding is commenced either by Borrower or against Borrower
under  any  bankruptcy  or  insolvency  laws and in the  case of an  involuntary
bankruptcy proceeding,  such proceeding is not dismissed within 60 days. (f) Any
creditor  tries to take any of  Borrower's  property on or in which Lender has a
lien or security  interest.  This  includes a  garnishment  of

<PAGE>


any of  Borrower's  accounts with Lender.  (g) Any guarantor  dies or any of the
other  events  described  in this  default  section  occurs with  respect to any
guarantor  of this Note.  (h) A material  adverse  change  occurs in  Borrower's
financial  condition,  or Lender reasonably  believes the prospect of payment or
performance  of the  Indebtedness  is  impaired.  (i) Lender in good faith deems
itself insecure. If any default, other than a default in payment, is curable and
if  Borrower  has not been given a notice of a breach of the same  provision  of
this Note within the preceding twelve (12) months, it may be cured (and no event
of default will have occurred) if Borrower,  after receiving written notice from
Lender demanding cure of such default: (a) cures the default within fifteen (15)
days;  or (b) if the cure  requires  more than  fifteen  (15) days,  immediately
initiates  steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and  thereafter  continues and completes all  reasonable and
necessary  steps  sufficient  to  produce   compliance  as  soon  as  reasonably
practical.

PROMISSORY NOTE   Page 2
(Continued)

==============================================

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this Note and all accrued  unpaid  interest,  together with all other
applicable fees, costs and charges, if any, immediately due and payable, without
notice,  and then  Borrower  will pay that amount.  Furthermore,  subject to any
limits under applicable law, upon default,  Borrower also agrees to pay Lender's
reasonable  attorneys'  fees,  and all of Lender's other  reasonable  collection
expenses,  whether or not there is a lawsuit and  including  without  limitation
legal  expenses  for  bankruptcy  proceedings.  This Note shall be governed  by,
construed  and  enforced  in  accordance  with the laws of the  Commonwealth  of
Virginia.  Lender and  Borrower  hereby waive the right to any jury trial in any
action,  proceeding,  or counterclaim brought by either party against the other.
(Initial Here ______________ )

RIGHT OF SETOFF.  Borrower  grants to Lender a contractual  possessory  security
interest in, and hereby assigns,  conveys,  delivers,  pledges, and transfers to
Lender all Borrower's right,  title and interest in and to, Borrower's  accounts
with  Lender  (whether  checking,  savings,  or some other  account),  including
without  limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future,  excluding  however all IRA and Keogh accounts,
and all trust  accounts  for which the  grant of a  security  interest  would be
prohibited  by law.  Borrower  authorizes  Lender,  to the extent  permitted  by
applicable  law, to charge or setoff all sums owing on this Note against any and
all such  accounts.  LINE OF CREDIT.  This Note  evidences a  revolving  line of
credit.  Advances  under this  Note,  as well as  directions  for  payment  from
Borrower's accounts,  may be requested orally or in writing by Borrower or by an
authorized  person.  Lender may, but need not, require that all oral requests be
confirmed in writing.  The following  party or parties are authorized to request
advances  under  the line of credit  until  Lender  receives  from  Borrower  at
Lender's  address shown above written  notice of revocation of their  authority:
Rodney I. Smith, President/CEO; and Scott J. Friberg, CFO. Borrower agrees to be
liable for all sums either:  (a) advanced in accordance with the instructions of
an authorized person or (b) credited to any of Borrower's  accounts with Lender.
The unpaid principal  balance owing on this Note at any time may be evidenced by
endorsements  on this Note or by  Lender's  internal  records,  including  daily
computer print-outs.  Lender will have no obligation to advance funds under this
Note if: (a)  Borrower or any  guarantor  is in default  under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender,  including
any agreement made in connection  with the signing of this Note; (b) Borrower or
any guarantor  ceases doing business or is insolvent;  (c) any guarantor  seeks,
claims or  otherwise  attempts  to limit,  modify  or  revoke  such  guarantor's
guarantee of this Note or any other loan with  Lender;  (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or any
other agreement between Lender and Borrower.

GENERAL  PROVISIONS.  Lender may delay or forgo  enforcing  any of its rights or
remedies  under this Note without  losing them.  Each Borrower  understands  and
agrees that, with or without notice to Borrower,  Lender may with respect to any
other  Borrower (a) make one or more  additional  secured or unsecured  loans or
otherwise  extend  additional  credit;  (b) alter,  compromise,  renew,  extend,
accelerate,  or otherwise change one or more times the time for payment or other
terms  any  indebtedness,  including  increases  and  decreases  of the  rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or
decide  not  to  perfect,  and  release  any  security,   with  or  without  the
substitution of new collateral;  (d) apply such security and direct the order or
manner of sale thereof,  including  without  limitation,  any  nonjudicial  sale
permitted by the terms of the controlling security agreements,  as Lender in its
discretion may  determine;  (e) release,  substitute,  agree not to sue, or deal
with any one or more of Borrower's sureties,  endorsers,  or other guarantors on
any terms or in any manner Lender may choose;  and (f)  determine  how, when and
what application of payments and credits shall be made on any other indebtedness
owing  by  such  other  borrower.  Borrower  and any  other  person  who  signs,
guarantees  or  endorses  this  Note,  to  the  extent  allowed  by  law,  waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise  expressly stated in writing, no
party who signs this Note, whether as maker,  guarantor,  accommodation maker or
endorser,  shall be released from liability.  All such parties agree that Lender
may renew or  extend  (repeatedly  and for any  length of time)  this  loan,  or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral;  and take any other action
deemed necessary by Lender without the consent of or notice to anyone.  All such
parties  also agree that Lender may modify  this loan  without the consent of or
notice to anyone  other than the party with whom the  modification  is made.  If
"Borrower"  consists of more than one party, the word "Borrower" as used in this
Note shall refer to any one or more of the parties  comprising  "Borrower,"  and
each of such  parties  shall be jointly and  severally  liable  pursuant to this
Note.


PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE,  INCLUDING THE VARIABLE  INTEREST RATE  PROVISIONS.  EACH BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES  RECEIPT OF A COMPLETED COPY OF
THE NOTE.

BORROWER:

Smith-Midland Corporation, a Virginia corporation

X
  -------------------------------------(SEAL)
    Authorized Officer


Smith-Midland Corporation, a Delaware corporation, Co-Borrower

By:
   ----------------------------------(SEAL)
    Authorized Officer                  ATTEST:
                                               --------------------------------
                                               Secretary or Assistant Secretary

Easi-Set Industries,Inc., a Virginia corporation, Co-Borrower

By:
   ----------------------------------(SEAL)
    Authorized Officer                  ATTEST:
                                               ------------------------------
                                               Secretary or Assistant Secretary

<PAGE>

PROMISSORY NOTE   Page 3
(Continued)

==============================================


Smith-Carolina Corporation, a North Carolina corporation, Co-Borrower

By:
   --------------------------------(SEAL)
    Authorized Officer                 ATTEST: 
                                               ------------------------------
                                               Secretary or Assistant Secretary


Concrete Safety Systems, Inc., a Virginia corporation, Co-Borrower

By:
   --------------------------------(SEAL)
    Authorized  Officer               ATTEST:
                                              --------------------------------
                                              Secreatry or Assistant Secretary


Midland Advertising & Design, Inc., a Virginia corporation, Co-Borrower


By:
    --------------------------------(SEAL)
    Authorized  Officer                ATTEST:
                                               --------------------------------
                                               Secretary or Assistant Secretary


ATTEST:

- ------------------------------------- ( Corporate Seal )
  Secretary or Assistant Secretary

==============================================

Variable Rate. Line of Credit.  LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.21
(c) 1996 CFI ProServices, Inc. All rights reserved. [VA-D20 MID796.LN C8.OVL]




                                   EXHIBIT 10C

                      AMENDED AND RESTATED PROMISSORY NOTE


     This Amendment to Promissory Note (this "Amendment"),  is dated September ,
1996, by and between Smith-Midland Corporation, a Virginia corporation;  ET. AL.
(the "Borrower"), and RIGGS BANK N.A. ("Lender").

                                 R E C I T A L S

     This Amendment is made with reference to the following facts:

     A. The Borrower is indebted to Lender,  which  indebtedness is evidenced by
that  certain  Promissory  Note dated July 22,  1996 in the  original  principal
amount of Six Hundred  Thousand  and No/100  Dollars  ($600,000)  (the  "Loan"),
executed by Borrower, as maker, and payable to the order of Lender (the "Note");
and

     B. The  indebtedness  represented  by the Note is secured  by,  among other
things,  all that collateral as more fully described in that certain  Commercial
Security  Agreement by and between  Borrower and Lender dated July 22, 1996 (the
"Security Agreement"); and

     C.  Advances  of  monies  under  the Loan are  governed  by the  terms  and
conditions of that certain Business Loan Agreement (the "Loan Agreement),  dated
July 22, 1996, between Borrower and Lender.

     NOW,  THEREFORE,  in  consideration  of the foregoing,  Borrower and Lender
hereby agree as follows:

     1. The principal sum  available  under the Note is hereby  increased by Two
Hundred  Thousand  Dollars  ($200,000) from the current  principal amount of Six
Hundred Thousand Dollars ($600,000) to Eight Hundred Thousand Dollars and No/100
($800,000).

     2. An executed copy of this Amendment  shall be affixed to the Note in such
a manner so as to become an integral part thereof.

     3. All of the terms, covenants and conditions of the Note shall continue in
full force and effect as modified herein and are lawful and binding  obligations
of the Borrower. This Amendment is not intended to be, and shall not constitute,
a substitution or novation of the Note or of any of the instruments securing the
repayment  of  the  Note,  including  the  Security  Agreement  and  the  Pledge
Agreements.  The  Borrower  expressly  acknowledges  that the Note,  as  amended
hereby, shall continue to be secured by the Security Agreement and by the Pledge
Agreements.

     4. Borrower  hereby  reaffirms the Note as amended hereby and agree that in
all respects  except as explicitly  modified by the terms of this Amendment that
the Note shall remain in full force and effect. Borrower hereby acknowledges and
agrees that as of the date hereof, the outstanding principal balance of the Note
is $600,000.00 and that Borrower is indebted to Lender for such amount under the
Note, together with interest accrued and accruing thereon,  plus costs, fees and
expenses,  as provided in the Note.  Borrower  hereby  renews its  covenant  and
agreement to pay the


<PAGE>


indebtedness  evidenced by the Note in accordance  with the terms and provisions
thereof, as modified by this Amendment. Borrower further renews its covenant and
agreement  to  perform,  comply with and be bound by each and every of the other
terms and provisions of the Note, as modified by this Amendment.

     5.  In  consideration  of  the  amendments   contained   herein,   Borrower
represents,  warrants  and  agrees  that (i) there are no  claims,  defenses  or
set-offs with respect to the Note, as amended by the terms of this Amendment, or
with  respect  to  the  Security  Agreement,  or  with  respect  to  the  Pledge
Agreements,  or with respect to the indebtedness evidenced or secured thereby or
with respect to the collection or enforcement of any of them, (and to the extent
any  claim,  set-off  or  defense  exists,  they  are  each  hereby  waived  and
relinquished  in their  entirety),  (ii) no Event of Default,  as defined in the
Note, the Security  Agreement,  the Loan Agreement or any other document related
to either of them or the loan  evidenced  thereby,  and no event  which with the
lapse of time or the giving of notice or both would  constitute such an Event of
Default, has occurred;  (iii) Lender has made no representations or commitments,
oral or written, or undertaken any obligations other than as expressly set forth
in this Amendment; and (iv) the making, delivery and performance by the Borrower
of  this   Amendment  and  all   instruments,   documents  and  notes   executed
contemporaneously  herewith,  have been duly authorized by all necessary action,
and this amendment  constitutes the valid and binding obligation of the Borrower
enforceable in accordance with its terms.

     6. Each and every of the terms and  provisions of this  Amendment  shall be
binding  upon and shall  inure to the  benefit of the  parties  hereto and their
respective heirs, successors, personal representatives and assigns.

     BORROWER  EXPRESSLY  REPRESENTS  AND  WARRANTS TO THE BANK THAT IT (A) READ
EACH AND EVERY PROVISION OF THIS INSTRUMENT;  (B) HAS BEEN GIVEN THE OPPORTUNITY
TO HAVE THIS INSTRUMENT REVIEWED BY COMPETENT LEGAL COUNSEL OF ITS OWN CHOOSING;
AND (C) UNDERSTANDS, AGREES TO AND ACCEPTS THE PROVISIONS HEREOF.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


<PAGE>



     IN WITNESS  WHEREOF,  THIS  AMENDMENT HAS BEEN EXECUTED AS OF THE DAY FIRST
ABOVE WRITTEN.



BORROWER:


SMITH-MIDLAND CORPORATION, A VIRGINIA CORPORATION

X
  ---------------------------------(SEAL)
   AUTHORIZED OFFICER                   ATTEST:
                                               ---------------------------------
                                                SECRETARY OR ASSISTANT SECRETARY




SMITH-MIDLAND CORPORATION, A DELAWARE CORPORATION, CO-BORROWER


By:
  ---------------------------------(SEAL)
   AUTHORIZED OFFICER                   ATTEST:
                                               ---------------------------------
                                                SECRETARY OR ASSISTANT SECRETARY




EASI-SET INDUSTRIES,INC., A VIRGINIA CORPORATION, CO-BORROWER


By:
  ---------------------------------(SEAL)
   AUTHORIZED OFFICER                   ATTEST:
                                               ---------------------------------
                                                SECRETARY OR ASSISTANT SECRETARY





SMITH-CAROLINA CORPORATION, A NORTH CAROLINA CORPORATION, CO-BORROWER


By:
  ---------------------------------(SEAL)
   AUTHORIZED OFFICER                   ATTEST:
                                               ---------------------------------
                                                SECRETARY OR ASSISTANT SECRETARY




CONCRETE SAFETY SYSTEMS, INC., A VIRGINIA CORPORATION, CO-BORROWER


By:
  ---------------------------------(SEAL)
   AUTHORIZED OFFICER                   ATTEST:
                                               ---------------------------------
                                                SECRETARY OR ASSISTANT SECRETARY




MIDLAND ADVERTISING & DESIGN, INC., A VIRGINIA CORPORATION, CO-BORROWER


By:
  ---------------------------------(SEAL)
   AUTHORIZED OFFICER                   ATTEST:
                                               ---------------------------------
                                                SECRETARY OR ASSISTANT SECRETARY





                                   EXHIBIT 10D

                         RODNEY I. SMITH PROMISSORY NOTE


                                 PROMISSORY NOTE

$ 720,000.00                                                January 2, 1996
- -------------                                               ---------------

     FOR VALUE RECEIVED,  the undersigned (the "Maker"),  promises to pay to the
order of Smith-Midland Corporation,  ("the Corporation"), a Delaware corporation
with its principal place of business at Route 28, P.O. Box 300 Midland, Virginia
("Payee") on or before April 1, 2003 (the "Payment Date"),  the principal sum of
Seven Hundred Twenty Thousand  Dollars  ($720,000.00)  together with interest at
the rate of 6% simple interest per annum, which interest shall be paid quarterly
beginning on June 30,1996, and thereafter on the last business day of September,
December,  March,  and June, and which principal sum shall be paid,  annually in
accordance with Schedule 1 annexed hereto.

     1. PAYMENTS OF PRINCIPAL AND INTEREST.  Subject to the provisions contained
and  referred  to herein,  the Maker  shall pay the  principal  and  interest in
accordance  with  Schedule  1 on or before the  Payment  Date.  Payments  may be
accepted in the formof  Smith-Midland  Corporation Common Stock,  valued at fair
market value.

     2. ALLOCATION OF PAYMENTS. All payments shall be first allocated to payment
of interest and then to payment of principal.

     3. DEFAULT IN PAYMENT.  For the purpose of this Note, a default  shall,  at
the option of the Board of Directors of the Corporation (the "Board"), be deemed
to exist if the Maker shall fail to make payment on the Payment  Date  described
herein for more than thirty (30) days after written notice from the Corporation.
In the event of any  default  described  above,  the Board may,  at its  option,
demand  payment of any amount then due and payable  under the terms of this Note
from the Maker as follows:  Upon the occurrence and  continuation  past the cure
periods specified hereof of any default,  the Board, at its option, upon written
notice to the Maker,  may  declare  the  unpaid  principal  hereof  and  accrued
interest thereon to be immediately due and payable without presentment,  demand,
protest or further notice, all of which are hereby expressly waived, and enforce
its rights as a secured  party.  No course of dealing or conduct and no delay on
the part of the Payee in  exercising  any right  hereunder  shall  operate  as a
waiver  thereof and no consent or waiver in any instance shall operate as waiver
in any other instance. To be effective, any waiver must be in writing and signed
by the Board.

     4.  PREPAYING.  The Maker may  prepay  all or part of this Note at any time
without further interest or penalty.

     5.  SUCCESSORS  AND  ASSIGNS.  This Note shall  inure to the benefit of the
successors and assigns of the  Corporation and be binding upon the Maker and his
heirs, executors,  administrators,  successors and assigns,  provided that Payee
may not assign or transfer  this Note without the prior  written  consent of the
Maker.

     6. CONSTRUCTION. This Note shall be governed by and construed in accordance
with, the laws of the State of Virginia  (without  regard to the conflict of law
principles thereof).

     7. WAIVERS.  No waiver of any right hereunder by any party shall operate as
a waiver of any other right or of the same right with respect to any  subsequent
occasion for its exercise, or of any right to damages. No waiver by any party of
any breach of the Maker's  obligations  hereunder  shall be held to constitute a
waiver of any other breach or a  continuation  of the same breach.  All remedies
provided  by this Note are in addition  to all other  remedies  provided by law.
This  Agreement  may not be amended  except in a writing  signed by the  parties
hereto.


<PAGE>


     8.  UNENFORCEABILITY.  If any provision of this Note shall be declared void
or unenforceable by any judicial or  administrative  authority,  the validity of
any other provisions and of the entire Note shall not be affected thereby.

     9.  COUNTERPARTS.  This Note may be executed  in two or more  counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

     10. ENTIRE  AGREEMENT.  This Note represents the complete  agreement of the
parties with respect to the transactions  contemplated hereby and supersedes all
prior agreements and  understandings,  including but not limited to all previous
promissory notes issued by the Maker to the Payee.

     Signed as of the date first written above.



                             By:   s/s Rodney I. Smith
                                ---------------------------
                                Rodney I. Smith, Maker

Agreed and Acknowledged


SMITH-MIDLAND CORPORATION

BY:  /s/ Scott J. Friberg
   ------------------------
           Payee



<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS  SCHEDULE  CONTAINS  SUMMARY  FINANCIAL   INFORMATION  EXTRACTED  FROM  THE
FINANCIAL  STATEMENTS  INCLUDED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                              DEC-31-1996
<PERIOD-END>                                   JUL-01-1996  
<CASH>                                         778,140   
<SECURITIES>                                   0         
<RECEIVABLES>                                  3,008,043     
<ALLOWANCES>                                   225,987       
<INVENTORY>                                    1,089,401     
<CURRENT-ASSETS>                               4,907,326     
<PP&E>                                         1,468,819     
<DEPRECIATION>                                 201,456       
<TOTAL-ASSETS>                                 7,147,629     
<CURRENT-LIABILITIES>                          4,458,729     
<BONDS>                                        0             
                          0             
                                    0             
<COMMON>                                       30,857        
<OTHER-SE>                                     1,739,733     
<TOTAL-LIABILITY-AND-EQUITY>                   7,147,629     
<SALES>                                        2,914,155     
<TOTAL-REVENUES>                               3,406,582     
<CGS>                                          2,057,194     
<TOTAL-COSTS>                                  2,360,456     
<OTHER-EXPENSES>                               719,749       
<LOSS-PROVISION>                               0             
<INTEREST-EXPENSE>                             114,365       
<INCOME-PRETAX>                                212,012       
<INCOME-TAX>                                   0             
<INCOME-CONTINUING>                            212,012       
<DISCONTINUED>                                 0             
<EXTRAORDINARY>                                0             
<CHANGES>                                      0             
<NET-INCOME>                                   212,012       
<EPS-PRIMARY>                                  .07           
<EPS-DILUTED>                                  0             
                                                   
                                                   

</TABLE>



© 2019 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission