SMITH MIDLAND CORP
10QSB, 1998-08-19
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK
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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10-QSB


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



For the quarter year ended                       Commission File Number
        June 30, 1998                                    1-13752



                           SMITH-MIDLAND CORPORATION
                            (Name of Small Business
                      Issuer As Specified In Its Charter)



           Delaware                                           54-1727060
- -------------------------------                        ----------------------
(State or Other Jurisdiction of                           (I.R.S. Employer
 Incorporation or Organization)                        Identification Number)

                Route 28, P.O. Box 300, Midland, Virginia 22728
               --------------------------------------------------
               (Address of Principal Executive Offices, Zip Code)

                                 (540) 439-3266
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)



         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                  Yes   X                                     No ____
                     -------

         As of August 15, 1998, the Company had  outstanding  3,044,798  shares
of Common Stock,  $.01 par value per share.

<PAGE>

                           SMITH-MIDLAND CORPORATION
                                     INDEX

PART I.  FINANCIAL INFORMATION                                       PAGE NUMBER

         Item 1.  Financial Statements

                       Consolidated Balance Sheets;                            2
                       June 30, 1998 (Unaudited);
                       and December 31, 1997 (Unaudited)

                       Consolidated Statements of Operations                   3
                       (Unaudited); Three months ended
                       June 30, 1998  and 1997


                       Consolidated Statements of Operations                   4
                       (Unaudited); Six months ended
                       June 30, 1998  and 1997


                       Consolidated Statements of Cash Flows                   5
                       (Unaudited); Three months ended
                       June 30, 1998 and 1997

                       Notes to Consolidated Financial Statements (Unaudited)  6

         Item 2. Management's Discussion and Analysis of Financial             9
                  Condition and Results of Operations

PART II.  OTHER INFORMATION

         Item 1.  Legal Proceedings                                           15

         Item 2.  Changes in Securities                                       15

         Item 3.  Defaults Upon Senior Securities                             15

         Item 4.  Submission of Matters to a Vote of Security Holders         15

         Item 5. Other Information                                            15

         Item 6.  Exhibits and Reports on Form 8-K                            15

         Signatures                                                           16


<PAGE>

                                         PART I - Financial Information
Item 1.  Financial Statements

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                          Consolidated Balance Sheets
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                 June 30,           December 31,
         Assets                                                                   1998                 1997
                                                                                 -------            --------
<S>   <C>
Current assets:
   Cash and cash equivalents                                                        $276,096         $  288,310
   Accounts receivable:
     Trade - billed, less allowances for doubtful accounts of
       $247,878 and $231,304                                                       3,402,736          3,254,993
     Trade - unbilled                                                                433,822            410,158
   Inventories:
     Raw materials                                                                   518,979            486,583
     Finished goods                                                                1,140,822            942,427
   Prepaid expenses and other assets                                                 279,724             69,801
        Total current assets                                                       6,052,179          5,452,272

Property and equipment, net                                                        1,660,802          1,531,062
                                                                                 -----------        -----------

Other assets:
   Cash - restricted                                                               1,066,762            196,977
   Note receivable, officer                                                          648,446            632,472
   Other                                                                             173,314             79,443
                                                                              --------------       -------------

Total other
  assets                                                                           1,888,522            908,892
- ---------                                                                     --------------       -------------
       Total Assets                                                               $9,601,503          $7,892,226
                                                                                  ==========          ==========

         Liabilities and Stockholders' Equity
Current liabilities:
   Current maturities of notes payable                                         $      50,280          $2,199,228
   Accounts payable -- trade                                                       2,102,146           1,744,127
   Accrued expenses and other liabilities                                            645,498             570,693
   Customer deposits                                                                 449,912             450,474
                                                                                 ------------       ------------
     Total current liabilities                                                     3,247,836           4,964,522
Notes payable -- less current maturities                                           4,017,147             759,440
Notes payable -- related parties                                                     109,348             115,598
                                                                                 ------------         ------------
     Total Liabilities                                                             7,374,331           5,839,560

Stockholders' equity:
   Preferred stock, $.01 par value, authorized 1,000,000 shares,
     none outstanding                                                                    --                  --
   Common stock, $.01 par value, authorized 8,000,000 shares,
     issued and outstanding 3,044,798 and 3,044,798                                   30,857              30,857
   Additional capital                                                              3,450,085           3,450,085
   Treasury Stock                                                                   (102,300)           (102,300)
    Retained earnings (deficit)                                                   (1,151,470)         (1,325,976)
                                                                                 -----------        ------------
     Total Stockholders' Equity                                                    2,227,172           2,052,666
                                                                                 -----------        ------------
       Total Liabilities and Stockholders'  Equity                                $9,601,503          $7,892,226
                                                                                  ==========          ==========
</TABLE>

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

                                       2

<PAGE>

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Operations
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                          June 30,
                                                                                     1998            1997
                                                                                ------------     -----------
<S>   <C>
Revenue                                                                         $3,401,412        $3,537,513

Cost of goods sold                                                                2,643,833        2,596,299
                                                                                 ----------        ---------

Gross profit                                                                       757,579           941,214
                                                                               -----------        ----------

Operating expenses:
     General and administrative expenses                                           368,696           577,409
     Selling expenses                                                              171,866           116,306
                                                                               -----------      ------------

     Total operating expenses                                                      540,562           693,715
                                                                               -----------       -------------

Operating income                                                                   217,017           247,499
                                                                               -----------        ------------

Other income (expense):
     Royalties                                                                      23,994            44,525
     Interest expense                                                             (136,172)          (93,219)
     Interest income                                                                15,825            24,811
     Other                                                                          (9,078)          (19,306)
                                                                                ----------        ----------
         Total other income (expense)                                             (105,431)          (43,189)

Income (loss) before income taxes                                                  111,586           204,310
Income tax expense (benefit)                                                            --                --
                                                                                -----------       -----------

         Net income (loss)                                                      $  111,586       $   204,310
                                                                                  ==========      ===========

Net income (loss) per share                                                  $         .04        $      .07
                                                                             =============        ===========

Weighted average common shares outstanding                                       3,044,798         3,044,798
                                                                               ===========        ==========
</TABLE>

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

                                       3

<PAGE>

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Operations
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                                          June 30,
                                                                                     1998            1997
                                                                                ------------     -----------
<S>   <C>
Revenue                                                                         $ 6,428,072       $5,618,303

Cost of goods sold                                                                4,858,896        4,149,837
                                                                                 ----------        ---------

Gross profit                                                                      1,569,176        1,468,466
                                                                              -------------      -----------

Operating expenses:
     General and administrative expenses                                            936,507        1,054,087
     Selling expenses                                                               321,282          291,872
                                                                                -----------      ------------

     Total operating expenses                                                     1,257,789        1,345,959
                                                                                 ----------      ------------

Operating income                                                                    311,387          122,507
                                                                                -----------      ------------

Other income (expense):
     Royalties                                                                       62,445           80,164
     Interest expense                                                              (230,229)        (197,233)
     Interest income                                                                 26,998           26,453
     Other                                                                            3,905           11,144
                                                                                -----------      -----------
         Total other income (expense)                                              (136,881)         (79,472)

Income before income taxes                                                          174,506           43,035
Income tax expense (benefit)                                                             --               --
                                                                                ------------     ------------

         Net income                                                             $   174,506      $    43,035
                                                                                ============     ============

Net income (loss) per share                                                     $       .06      $       .01
                                                                               =============     ============


Weighted average common shares outstanding                                        3,044,798        3,044,798
                                                                                ===========      ===========
</TABLE>

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

                                       4

<PAGE>

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                          Six Months Ended
                                                                                              June 30,
                                                                                        1998             1997
                                                                                    -----------      ----------
<S>   <C>
Cash flows from operating activities:
     Cash received from customers                                                 $ 6,318,548        $4,929,504
     Cash paid to suppliers and employees                                          (6,058,687)       (4,632,418)
     Interest paid                                                                   (230,229)         (197,233)

     Other                                                                             14,929            15,437
                                                                                --------------    --------------
       Net cash provided (absorbed) by operating activities                            44,561           115,290
                                                                                --------------    --------------
Cash flows from investing activities:
     Purchases of property and equipment                                            (289,499)         (275,620)
     Decrease (increase) in officer note receivable                                       --             2,000
        Decrease (increase) in related party Receivables                              (6,250)               --
       Decrease (increase) in restricted
cash                                                                                (869,785)               --
     Net cash absorbed by investing activities                                    (1,165,534)         (273,620)

Cash flows from financing activities:
     Proceeds from bank borrowings                                                 4,037,167           166,700
     Repayments of bank borrowings                                                (2,928,408)         (329,011)
       Net cash provided (absorbed) by financing activities                        1,108,759          (162,311)
                                                                                  -----------       ------------

Net increase (decrease) in cash and cash equivalents                                 (12,214)         (320,641)

Cash and cash equivalents at beginning of period                                     288,310           438,079
                                                                                  ------------        ----------

Cash and cash equivalents at end of period                                        $  276,096       $   117,438
                                                                                  ============        ===========

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

Net income (loss)                                                                 $  174,506       $    43,035
Adjustments to reconcile net income (loss) to net cash
     provided  (absorbed) by operating activities:
       Depreciation and amortization                                                 159,759           216,074
       Decrease (increase) in other assets                                           (93,871)          (19,013)
       Decrease (increase) in:
         Accounts receivable - billed                                               (147,743)         (780,301)
         Accounts receivable - unbilled                                              (23,664)         (326,995)
         Inventories                                                                (230,791)           19,703
         Prepaid expenses and other assets                                           (225,897)          57,731
       Increase (decrease) in:
         Accounts payable - trade                                                     358,019          378,001
         Accrued expenses and other liabilities                                        74,805          188,722
         Customer deposits                                                               (562)         338,333
                                                                                   ----------       -----------
Net cash provided (absorbed) by operating activities                             $     44,561        $ 115,290
                                                                                 =============       =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statement

                                       5

<PAGE>



                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                  (Unaudited)

                                 June 30, 1998

Basis of Presentation

     As permitted by the rules of the  Securities and Exchange  Commission  (the
"Commission")  applicable to quarterly  reports on Form 10-QSB,  these notes are
condensed  and do not contain all  disclosures  required by  generally  accepted
accounting  principles.  Reference should be made to the consolidated  financial
statements and related notes included in the Smith-Midland  Corporation's Annual
Report on Form 10-KSB, for the year ended December 31, 1997.

     In the opinion of management of Smith-Midland  Corporation (the "Company"),
the accompanying  financial  statements  reflect all adjustments which were of a
normal  recurring  nature  necessary  for a fair  presentation  of the Company's
results of operations  for the three- and six-month  periods ended June 30, 1998
and 1997.

     The results disclosed in the consolidated  statements of operations are not
necessarily indicative of the results to be expected for any future periods.

Principles of Consolidation

     The Company's  accompanying  consolidated  financial statements include the
accounts of  Smith-Midland  Corporation,  a Delaware  corporation and its wholly
owned subsidiaries:  Smith-Midland Corporation, a Virginia corporation; Easi-Set
Industries,  Inc., a Virginia corporation;  Smith-Carolina  Corporation, a North
Carolina corporation; Concrete Safety Systems, Inc., a Virginia corporation; and
Midland  Advertising & Design,  Inc., a Virginia  corporation.  All  significant
inter-company accounts and transactions have been eliminated in consolidation.

Reclassifications

       Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 1998 presentation.

Inventories

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

                                       6
<PAGE>



Property and Equipment

     Property and equipment, net is stated at depreciated cost. Expenditures for
ordinary  maintenance  and repairs are charged to income as  incurred.  Costs of
betterments,  renewals,  and major  replacements  are  capitalized.  At the time
properties are retired or otherwise  disposed of, the related cost and allowance
for  depreciation  are  eliminated  from  the  accounts  and any gain or loss on
disposition is reflected in income.

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

                                                               Years

       Buildings.............................................  10-33
       Trucks and automotive equipment.......................   3-10
       Shop machinery and equipment..........................   3-10
       Land improvements.....................................  10-30
       Office equipment......................................   3-10

Income Taxes

     The  provision  for  income  taxes  is based on  earnings  reported  in the
financial statements.  A deferred income tax asset or liability is determined by
applying  currently  enacted tax laws and rates to the expected  reversal of the
cumulative  temporary  differences  between  the  carrying  value of assets  and
liabilities for financial statement and income tax purposes. Deferred income tax
expense is measured by the change in the deferred  income tax asset or liability
during the year.

     Effective  January 1, 1993, the Company  adopted SFAS 109  "Accounting  for
Income  Taxes." The  adoption of SFAS 109 did not have a material  effect on the
consolidated  financial  statements  as the  deferred  tax asset  related to the
Company's net operating loss carry forward has been reserved in its entirety. No
provision  for income taxes has been made for the three- and  six-month  periods
ended June 30, 1998 and 1997, as the Company does not expect to incur income tax
expense for fiscal year 1998 and did not incur income tax expense in fiscal year
1997.

Revenue Recognition

     The  Company  primarily  recognizes  revenue  on the  sale of its  standard
precast concrete  products at shipment date,  including revenue derived from any
projects to be completed under short-term  contracts.  Installation services for
precast  concrete  products,  leasing and royalties are recognized as revenue as
they are earned on an accrual basis.  Licensing  fees are  recognized  under the
accrual  method  unless  collectibility  is in doubt,  in which event revenue is
recognized as cash is received.  Certain  sales of soundwall  and  SlenderwallTM
concrete products are recognized upon completion of production and customer site
inspections. Provisions for estimated losses on contracts are made in the period
in which such losses are determined.

                                       7
<PAGE>

                   SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                  (Unaudited)


Estimates

     The preparation of these financial  statements  requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.

Net Income (Loss) Per Share

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

                                       8


<PAGE>

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

General

     The  Company  generates  revenues   primarily  from  the  sale,   shipping,
licensing,  leasing  and  installation  of  precast  concrete  products  for the
construction,  utility and farming industries.  The Company's operating strategy
has  involved   producing   innovative  and  proprietary   products,   including
SlenderwallTM,  a  patent-pending,  lightweight,  energy efficient  concrete and
steel exterior wall panel for use in building construction;  J-J HooksTM Highway
Safety Barrier, a patented,  positive-connected  highway safety barrier;  Sierra
Wall, a sound barrier  primarily for roadside  use; and  transportable  concrete
buildings.  In addition, the Company produces utility vaults, farm products such
as cattleguards,  and water and feed troughs,  and custom order precast concrete
products with various architectural surfaces.

     This Form 10-QSB contains  forward-looking  statements  which involve risks
and  uncertainties.  The Company's actual results may differ  significantly from
the results discussed in the forward-looking  statements and the results for the
three and six months ended June 30, 1998 are not  necessarily  indicative of the
results for the  Company's  operations  for the year ending  December  31, 1998.
Factors  that might  cause such a  difference  include,  but are not limited to,
product  demand,  the impact of competitive  products and pricing,  capacity and
supply  constraints or difficulties,  general business and economic  conditions,
the effect of the Companies  accounting policies and other risks detailed in the
Company's  Annual Report,  Form 10-KSB and other filings with the Securities and
Exchange Commission.


Results of Operations

Three  months  ended June 30, 1998  compared to the three months ended June 30,
1997

     For the three months ended June 30, 1998,  the Company had total revenue of
$3,401,412  compared to total revenue of  $3,537,513  for the three months ended
June 30, 1997, a decrease of $136,101 or 4%. Total product sales were $2,986,406
for the three months  ended June 30, 1998  compared to  $3,163,570  for the same
period in 1997,  a decrease of $177,164 or 6%. The  decrease  resulted  from the
unusually high volume in soundwall sales enjoyed in 1997 during the same period.
Soundwall sales in the second quarter of 1997 were approximately $1,694,300. vs.
$1,482,400 for the same period this year. Shipping and installation  revenue was
$535,153  for the three  months  ended June 30, 1998 and  $373,943  for the same
period in 1997, an increase of $161,210,  or 43%. The increase was  attributable
to  the  high  shipping   volume  of  stored   materials   primarily   soundwall
manufactured, invoiced, and paid for in prior periods.

                                       9
<PAGE>

     Total  cost of goods  sold for the three  months  ended  June 30,  1998 was
$2,643,833,  an increase of $47,534,  or 2% from $2,596,299 for the three months
ended June 30, 1997. The increase was primarily the result of the learning curve
associated with the shift to  manufacturing  our  Slenderwall(TM)  product.  The
production of this architectural precast panel product has placed new demands on
our production and engineering  departments calling for tighter controls and the
development of new innovative techniques and production processes. This is an on
going  necessary  investment in our future and we are meeting  these  challenges
daily  while  trying to  contain  the  costs.  Total  cost of goods  sold,  as a
percentage  of total  revenue,  increased to 78% for the three months ended June
30, 1998, from 73% for the three months ended June 30, 1997 primarily due to the
same reason just stated.  Management anticipates that these increased costs will
continue for the balance of the year.  The  construction  of, and move into,  an
additional   manufacturing  facility  at  the  Midland,   Virginia,  plant  will
perpetuate some of these costs.  When this facility is up and operational  there
should be new economies and  efficiencies  that will help to offset the costs of
this current learning curve.

     For the three  months  ended  June 30,  1998,  the  Company's  general  and
administrative  expenses decreased $208,713 to $368,696 from $577,409 during the
same period in 1997.  The 36% decrease was  attributed  in part, to a vacancy in
the  controller  position  since April  resulting in reduced  salary and related
expenses and in part to reduced legal,  professional,  and consulting  fees this
year vs. last year  during  this  period.  The  Company is  searching  for a new
controller so those expenses will soon return.

     Selling expenses for the three months ended June 30, 1998 increased $55,560
to $171,866  from  $116,306 for the three months ended June 30, 1997,  resulting
from increased cost of marketing the Slenderwall(TM)  product,  and increases in
wage and commission expense.

     The Company's operating income for the three months ended June 30, 1998 was
$217,017,  compared to  operating  income of $247,499 for the three months ended
June 30,  1997, a decrease of $30,482.  The reduced  operating  income  resulted
primarily from the decreased  revenue and increased cost of goods sold explained
above.

     Royalty  income  totaled  $23,994 for the three months ended June 30, 1998,
compared to $44,525 for the same three months in 1997.  The decrease of $20,531,
or 46%, was mostly due to a credit given reversing previously invoiced royalties
of approximately $15,500.00.

     Interest  expense was  $136,172  for the three  months ended June 30, 1998,
compared to $93,219 for the three months  ended June 30,  1997.  The increase of
$42,953,  or 46%, was  primarily due to the pay off of leases as a result of our
debt  restructuring  which is discussed in the "Liquidity and Capital Resources"
section of this report. (See page 13)

     Net income was $111,586  for the three  months ended June 30, 1998,
compared to net income of $204,310 for the same  period in 1997.  Net income per
share for the  current  three  month  period was $.04  compared to net income
per share of $.07 for the three months ended June 30, 1997.

                                       10

<PAGE>

Six months ended June 30, 1998 compared to the six months ended June 30, 1997

     For the six months  ended June 30, 1998,  the Company had total  revenue of
$6,428,072 compared to total revenue of $5,618,303 for the six months ended June
30, 1997, an increase of $809,769 or 14%.  Total  product sales were  $5,554,378
for the six months  ended June 30,  1998  compared  to  $4,950,903  for the same
period in 1997,  an  increase of $603,475 or 12%.  The  increase  resulted  from
management's  effort  to keep the sales  backlog  at a level  that  will  insure
consistent factory  utilization and profitability.  This effort,  coupled with a
good first quarter revenue resulted in an improved six month benchmark. Shipping
and installation revenue was $873,694 for the six months ended June 30, 1998 and
$667,400  for the same  period in 1997,  an increase of  $206,294,  or 31%.  The
increase  is  attributable  to strong  shipping  activity  in both the first and
second quarters of this year and the increase in 1998 sales volume over 1997.

     Total  cost of  goods  sold for the six  months  ended  June  30,  1998 was
$4,858,896,  an increase of $709,059,  or 17% from $4,149,837 for the six months
ended June 30, 1997. The increase was primarily the result of increased  revenue
and increased cost of goods sold as a percentage of revenue. Total cost of goods
sold,  as a  percentage  of total  revenue,  increased to 76% for the six months
ended June 30, 1998,  from 74% for the six months ended June 30, 1997  primarily
due  to the  increased  cost  experienced  this  quarter,  as  explained  in the
quarterly results section of this report above.

     For the  six  months  ended  June  30,  1998,  the  Company's  general  and
administrative  expenses decreased $117,580 to $936,507,  from $1,054,087 during
the same period in 1997.  The decrease was  attributed to the  decreased  second
quarter expenses  explained  above,  offset slightly by increases in general and
administrative expenses in the first quarter of this year.

     Selling  expenses for the six months ended June 30, 1998 increased  $29,410
to $321,282 from $291,872 for the six months ended June 30, 1997, resulting from
increased  wage  and  commissions  expense  and  increases  in  advertising  and
marketing expenses.

     The Company's  operating  income for the six months ended June 30, 1998 was
$311,387, compared to operating income of $122,507 for the six months ended June
30,  1997,  an increase of $188,880,  or 154%.  The  improved  operating  income
resulted  primarily from a 3.1% positive first quarter in 1998 vs. a loss in the
first quarter of 1997, coupled with a 6.4% positive second quarter.

     Royalty  income  totaled  $62,445 for the six months  ended June 30,  1998,
compared to $80,164 for the same six months in 1997. The decrease of $17,719, is
largely due to a credit given for previously invoiced royalties of approximately
$15,500.

       Interest  expense was  $230,229  for the six months  ended June 30, 1998,
compared to $197,233  for the six months  ended June 30,  1997.  The increase of
$32,996,  or 17%, was primarily due to the pay off of leases as part of our debt

                                       11

<PAGE>

restructuring  detailed in the "Liquidity and Capital Resources" section of this
report. (See page 13)

     Net income was $174,506 for the six months ended June 30, 1998, compared to
net income of $43,035 for the same period in 1997.  Net income per share for the
current six month  period was $.06  compared to net income per share of $.01 for
the six months ended June 30, 1997.

                                       12

<PAGE>

     Liquidity and Capital Resources

     The Company has financed its capital expenditures,  operating  requirements
and growth to date  primarily  with  proceeds from its initial  public  offering
("IPO") and subsequent  over-allotment,  bank and other borrowings, and the sale
of stock to and loans from its principal stockholders.

     The Company had  $4,176,775  of  indebtedness  at June 30,  1998,  of which
$50,280  was  scheduled  to  mature  within  twelve  months.   The  Company  has
successfully  restructured  all of its debt with the exception of one small auto
loan,  into one note with The First National Bank of New England,  headquartered
in Hartford,  Connecticut. The Company closed on this loan on June 25, 1998. The
Company  obtained  a twenty  three  year term at 1.5%  above  prime on this note
secured by equipment and real estate. The term of the note dramatically improved
our current debt ratios with current debt decreasing from $2,330,091 to $50,280,
and the term improves our cash flow. In addition to paying off all existing debt
of approximately  $3,000,000,  we received approximately  $1,000,000,  for plant
expansion  and new  equipment.  The  loan  is  guaranteed  in  part by the  U.S.
Department of Agriculture Rural  Business-Cooperative  Service's loan guarantee.
The  Company  was also  granted a  $500,000,  operating  line of credit by First
National  Bank of New  England.  This  line  will be used to  assist  day to day
operating needs.


     Other Comments

     The Company has formed a team to address the effect of the year 2000 on the
Company's data processing systems and operations.  The Company has not completed
its  assessment,  but expects that the costs incurred in the preparation for the
year  2000 will not have a  significant  impact  on the  Company's  cash flow or
results of operations.  The Company is currently planning to send questionnaires
to its  suppliers  and customers to ensure that they are taking steps to be year
2000 compliant.  However,  if the Company and third parties upon which it relies
are  unable to  address  this  issue in a timely  manner,  it could  result in a
material financial risk to the Company.  In order to assure this does not occur,
the Company  plans to devote all resources  required to resolve any  significant
year 2000 issues in a timely manner.

                                       13
<PAGE>

     The Company performs a portion of its concrete pouring and curing processes
on uncovered,  outdoor  manufacturing  areas.  During the winter months, cold or
adverse  weather  causes a slowdown or  cessation  of these  outdoor  production
activities,  thereby reducing the Company's  production  capacity.  However, The
Company is in the process of building an  additional  manufacturing  facility at
its Midland, Virginia,  location that will bring these operations inside and out
of the weather  correcting this problem.  In addition,  the Company services the
construction industry primarily in areas of the United States where construction
activity is inhibited by adverse  weather  during the winter.  As a result,  the
Company  traditionally  experiences reduced revenues from December through March
and realizes the substantial part of its revenues during the other months of the
year. The Company  typically  experiences lower profits,  or losses,  during the
winter months,  and must have sufficient  working capital to fund its operations
at a reduced level until the spring construction season. However, as of the date
of this  filing,  the  Company's  backlog  is  approximately  $6.1  million,  of
approximately  which $2.2 million represents firm contracts for  Slenderwall(TM)
and  architectural  pre-cast  concrete  products.  The  majority of the projects
relating to this backlog are contracted to be constructed in 1998.

     Management believes that the Company's  operations have not been materially
affected by inflation.

                                       14

<PAGE>

                          PART II - Other Information


Item 1.  Legal Proceedings.  None


Item 2.  Changes in Securities.  None.


Item 3.  Defaults Upon Senior Securities.  None


Item 4.  Submission of Matters to a Vote of Security Holders.   None


Item 5.  Other Information.  None.


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

               A. The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
                   Exhibit No.                        Title
<S>   <C>
                      1                 First National Bank of New England Loan Agreement
                      2                 First National Bank of New England Loan Note
                     27                 Financial Data Schedule
</TABLE>
               B. Report on Form 8-K. None.

                                       15
<PAGE>

                                   SIGNATURES


     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                           SMITH-MIDLAND CORPORATION


Date: August 15, 1998                   By: /s/ Rodney I. Smith
                                        -----------------------
                                        Rodney I. Smith
                                        Chairman of the Board,
                                        Chief Executive Officer and President
                                        (principal executive officer)


Date: August 15, 1998                   By: /s/ Robert V. McElhinney
                                        ----------------------------
                                        Robert V. McElhinney
                                        Vice President of Finance,
                                        Chief Financial Officer
                                        (principal financial officer)

                                       16



                                 LOAN AGREEMENT

                                    (LENDER)
                       FIRST NATIONAL BANK OF NEW ENGLAND
                      12020 Sunrise Valley Drive, Suite 270
                                Reston, VA 20191

                                       AND

                                   (BORROWER)
                            SMITH-MIDLAND CORPORATION
                                5119 Catlett Road
                                Midland, VA 22728

                                       AND
                                  (GUARANTORS)
              Smith-Midland Corporation, a Virginia corporation
              Easi-Set Industries, Inc., a Virginia corporation
           Smith-Carolina Corporation, a North Carolina corporation
            Concrete Safety Systems, Inc., a Virginia corporation
          Midland Advertising & Design, Inc., a Virginia corporation

Your request for First National Bank of New England ("LENDER") to extend a loan
in the amount of $4,000,000 with a United States Department of Agriculture Rural
Business-Cooperative Service (f/k/a Farmers Home Administration, hereafter
referred to as "Agency") 80.00% Guarantee has been approved subject to the
following provisions:

1.    Requirements:
      (a)   The Borrower shall pay a guaranty fee of 2% of the amount guaranteed
            prior to the disbursement of the loan.

      (b)   The Borrower shall execute all instruments and agreements as Lender
            may require in order to document the loan, including:
      1.    Promissory Note;
      2.    Commercial Loan Financial Condition Affidavits;
      3.    Mortgage Deed;
      4.    Guarantee Agreement;
      5.    Assignment of Lease with Right to Reassignment of Lease;
      6.    Lessors Agreement;
      7.    Environmental Indemnity Agreement;
      8.    Security Agreements;
      9.    UCC-1 financing statements;

<PAGE>
      10.   Any such other instruments and agreements as Lender or Lender's
            counsel may require in connection herewith.
2.    This Authorization is subject to:

(a)         Receipt by Lender of evidence that there has been no unremedied
            adverse change since the date of application, or since any of the
            preceding disbursements, in the financial or any other condition of
            Borrower or Guarantors, which would warrant withholding or not
            making any such disbursement or any further disbursement.

(b)         The representations made by Borrower in its loan application, the
            requirements or conditions set forth in Lender's application form,
            including the supporting documents thereto, the conditions set forth
            herein and any future conditions imposed by Lender (with prior
            Agency approval).

3.    Terms of Loan:

(a)   Repayment term, interest rate(s) and maturity.

      NOTE  PAYABLE:  The  undersigned  will pay  principal  and  interest  by
            making  payments in the initial  amount of $37,087.27 on the first
            day of each month  beginning  on August 1, 1998.  The  undersigned
            will  make  these  payments  until  they  have  paid in  full  all
            principal   and  interest  and  any  other  sums  due   hereunder.
            Notwithstanding the foregoing,  the entire indebtedness  evidenced
            by this Note,  including,  but not  limited  to,  all  outstanding
            principal  and  accrued  and  unpaid  interest,  shall  be due and
            payable in full on the  twenty-third  (23th)  anniversary  date of
            this Note.

      The  undersigned's  initial  monthly  payments  shall be  calculated  in
            accordance  with the full  amortization  of the loan  evidenced by
            this Note by level  monthly  payments of  principal  and  interest
            over  a  twenty-three  (23)  year  period  at  the  interest  rate
            applicable  on the  date  hereof.  On  each  Adjustment  Date  (as
            herein  defined),  the  amount  of the  monthly  payments  will be
            adjusted  so as to provide for the full  amortization  of the then
            outstanding  principal at the interest  rate  established  at each
            Adjustment  Date  in  level  monthly  payments  of  principal  and
            interest  over the  remaining  term of the original  twenty-three
            (23) year amortization period.



      Interest Rate

<PAGE>

      Interest shall accrue on the outstanding principal amount of this Note at
            a per annum rate of one and one-half (1.50%) percentage points above
            the Prime Rate on a floating basis. The initial interest rate
            hereunder is ten (10.0%) percent. On October 1, 1998 and on the
            first day of each, January, April, July, and October thereafter
            until all sums due hereunder are paid in full (each being referred
            to as an "Adjustment Date"), the interest rate on the unpaid
            principal balance hereunder shall be adjusted, without notice or
            demand, to a per annum rate of one and one-half percentage points
            above the Prime Rate in effect on the applicable Adjustment Date (or
            the following business day in the event that such Adjustment Date
            falls on a Saturday, Sunday or holiday), which such rate shall
            remain in effect until the succeeding Adjustment Date. Interest
            hereunder shall be computed on a daily basis and on the basis of a
            Three Hundred Sixty (360) day year and a thirty (30) day month. The
            undersigned further agrees to pay all taxes levied or assessed on
            this Note or the debt evidenced hereby against the holder of this
            Note, and further agrees to pay all costs, expenses and attorneys'
            fees incurred in any action to collect this Note or to defend,
            protect, preserve, or realize upon or foreclose any mortgage or
            security agreement securing this Note or to protect, defend,
            preserve, foreclose or sustain the lien of said mortgage or security
            agreement or in any litigation or controversy arising from or
            connected with said mortgage, security agreement, or this Note. As
            used herein, "Prime Rate" shall mean the lowest New York prime rate
            as set forth in the money rate section of the Wall Street Journal
            (or in any successor publication).

      In the event of prepayment, the Borrower will pay a penalty of 5% of
            the prepayment amount in year 1, 4% in year 2, 3% in year 3, 2%
            inyear 2, and 1% in year 5. The Borrower may prepay the loan in part
            or in full in years 6-23 without penalty, provided three weeks prior
            written notice is given to Lender.

      Holder should give written notice to the undersigned of each increase or
            decrease in the interest (and change in installment amount, if
            applicable) within thirty days after the effective date of each rate
            adjustment; however, the fluctuation of the interest rate is not
            contingent on whether the notice is given.

      If  the  undersigned   shall  be  in  default  in  payment  due  on  the
            indebtedness  herein  and  the  Agency  purchases  its  guaranteed
            portion of said  indebtedness,  the rate of  interest  on both the
            guaranteed and unguaranteed  portions herein shall become fixed at
            the rate in effect as of the date of default.  If the  undersigned
            shall not be in default  in  payment  when  Agency  purchases  its
            guaranteed  portion,  the rate of interest on both the  guaranteed
            and  unguaranteed  portions  herein  shall be fixed at the rate in
            effect as of the date of purchase by Agency.
      All payments received by the Lender, at the option of the Lender, shall
            be applied first to any outstanding charges and expenses incurred by
            the Lender in connection with this Note or any documents executed in
            connection with this Note, then to any unpaid and accrued interest
            and finally to the outstanding principal due under the Note. The

<PAGE>

            undersigned agrees that the interest shall accrue at the foregoing
            rate on unpaid balance before and after maturity, by acceleration or
            otherwise.

      The Borrower hereby grants to the Lender and Holder hereof a lien and
            right of set-off for all of the Borrower's liabilities to Lender or
            Holder upon and against all of the Borrower's deposits, credits, and
            other property now owned or hereafter in the possession or control
            of Lender or Holder or in transit to. The Lender or Holder may at
            any time may apply the same or any part thereof to any of the
            Borrower's liabilities to Lender or Holder, whether or not matured
            at the time of such application, at any time after the occurrence of
            an "Event of Default" under the loan documents executed in
            connection herewith.

      Borrower agrees to pay a late charge equal to 5% of the payment amount due
            if such payment is not received within ten days of the due date.
            Funds received from the borrower will be applied first to interest
            to the date of receipt, then to principal and then to the late fee.

      The Borrower agrees that, in addition to other events of default stated
            in the Note or related loan documents, each of the following shall
            constitute an "event of default" under the Note:

            1.    Failure of Borrower or any Guarantor to pay or perform any of
                  Borrower's or Guarantor's liabilities or obligations to
                  Lender.

            2.    If Borrower or any Guarantor of any obligation of Borrower to
                  Lender or Holder shall be in default under any security
                  agreement, mortgage or other agreement governing, securing or
                  relating to this Loan.

      (b)   Use of Proceeds of Loan as follows (show specific uses for which
            loan is authorized):

            1.    Approximately  $2,895,376  for debt  refinance  to various
                  creditors as identified in Schedule A
            2.    Approximately $500,000 for building improvements
            3.    Approximately $409,000 for equipment
            4.    Approximately $195,624 for working capital and closing costs.
            5.    Balance, if any, to pay closing costs and working capital.

NOTE: DISBURSEMENT OF LOAN PROCEEDS SHALL BE BY TWO PARTY CHECKS (PAYABLE TO
      BORROWER AND VENDOR, OR TO BORROWER AND CREDITOR), TO ASSURE THAT USE OF
      PROCEEDS COMPLIES WITH THIS LOAN AUTHORIZATION.

<PAGE>

(c)   Collateral:

      1.          First mortgage on land and buildings located at 5119 Catlett
                  Drive, Midland VA.

      2.          First mortgage on 19.1 acres of raw land located at south Side
                  of Route 28, Midland VA.

      3.          First mortgage on land and buildings located at 1088 NC 65,
                  Reidsville, N.C.

      4.          Title Insurance in the amount of the loan and in form and
                  content satisfactory to Lender shall be obtained for all
                  mortgages and shall not contain any mechanics' lien or survey
                  exceptions.

      5.          A first  security  interest in all  machinery and  equipment,
                  including power  driven  machinery  and  equipment  (including
                  titled motor  vehicles),  furniture  and  fixtures, leasehold
                  improvements,  and  general  intangibles  now  owned,  to be
                  acquired with loan proceeds or hereafter  acquired  together
                  with   all    replacements    thereof,    all   attachments,
                  accessories,  parts and tools  belonging  thereto or for use
                  in  connection  therewith  and  proceeds  of the same.
                  UCC SEARCH BEFORE AND AFTER RECORDING REQUIRED.
                  ----------------------------------------------

       6.         A second security interest in all accounts  receivable and
                  inventory now owned,  to be  acquired  with  loan  proceeds
                  or  hereafter acquired  together  with  all  replacements
                  thereof,   all attachments,  accessories, parts and tools
                  belonging thereto or for use in connection  therewith and
                  proceeds of the same subject  only to a first  security
                  interest  held by  First National Bank of New England having
                  an  approximate  unpaid balance of $500,000
                  UCC SEARCH  BEFORE AND AFTER  RECORDING REQUIRED
                  ------------------------------------------------




        7.        The  unlimited  corporate  gurantees  of  Smith-Midland
                  Corporation,  a Virginia corporation;  Easi-Set Industries,
                  Inc., a Virginia corporation;  Smith-Carolina  Corporation,
                  a North Carolina corporation;  Concrete  Safety  Systems,
                  Inc.,  a  Virginia corporation;  and  Midland  Advertising
                  & Design,  Inc.,  a Virginia  corporation secured by first
                  security interests in all  machinery  and   equipment,
                  including   power  driven machinery and equipment  (excluding
                  titled motor vehicles), furniture and fixtures, leasehold
                  improvements,  and general intangibles  now owned, to be
                  acquired with loan proceeds or hereafter  acquired together
                  with all replacements  thereof, all  attachments,
                  accessories,  parts and  tools  belonging thereto or for use
                  in  connection  therewith and proceeds of the same  and
                  second  security  interests  in all  accounts receivable
                  and  inventory  now owned,  to be acquired  with loan
                  proceeds  or  hereafter  acquired  together  with  all
                  replacements  thereof, all attachments,  accessories,  parts
                  and  tools  belonging  thereto  or  for  use  in  connection
                  therewith  and  proceeds of the same subject only to a first
                  security  interest  held  by  First  National  Bank  of  New
                  England  having an  approximate  unpaid  balance of $500,000
                  UCC SEARCH BEFORE AND AFTER RECORDING REQUIRED
                  ----------------------------------------------

<PAGE>


            8.    Assignment  of life  insurance  with  acknowledgment  of home
                  office on Rodney  Smith in the  amount of  $1,000,000  which
                  shall be decreasing  term  or  existing   permanent  type
                  insurance. Original  policy to be  retained  by Lender.  No
                  additional life  insurance is to be purchased  from business
                  income or assets  without prior written  approval of Agency.
                  Proceeds from life  insurance  policies  shall be applied at
                  the time of death to repay the outstanding  balance for the
                  following loans: (a) $4,000,000  Agency term loan; (b)
                  $500,000 Lender line of credit.

            Note:  Assignment  of  life  insurance  shall  be by  an  absolute
                  assignment   properly   acknowledged   by  home   office  of
                  insurer.  Lender  shall not be named as  beneficiary  of the
                  policy.

            9.    Monthly tax escrow to be collected for all mortgaged
                  properties equal to 1/12th of the annual real estate tax
                  obligation.

4.    To further induce Lender to make and Agency to guarantee this Loan, Lender
      and Agency impose the following conditions:

      (a) Execution of all documents required in Item 1 above.

      (b) Reimbursable Expenses - Borrower will, on demand, reimburse Lender
          for any and all expenses incurred, or which may be hereafter
          incurred, by Lender from time to time in connection with or by
          reason of Borrower's application for and the making and
          administration of the Loan.

      (c) Books,  Records, and Reports - Corporate Borrower will at all times
          keep proper books of account in a manner  satisfactory to Lender
          and/or Agency.  Corporate  Borrower hereby authorizes Lender or Agency
          to make or cause to be made, at Corporate  Borrower's  expense and in
          such  manner and at such  times as Lender or Agency  may  require, (a)
          inspections  and audits of any books,  records  and papers in the
          custody or control of Corporate  Borrower or others,  relating

<PAGE>

          to  Corporate   Borrower's   financial  or  business   conditions,
          including  the making of copies  thereof and  extracts  therefrom,
          and (b) inspections and appraisals of any of Corporate  Borrower's
          assets.  At a minimum,  Lender will require an annual  examination
          to  be  conducted  at  Corporate  Borrowers   headquarters.   Such
          examination  will  inspect the books and records of the  Corporate
          Borrower  and the  collateral  of the Lender.  Corporate  Borrower
          will  furnish  to Lender  and  AGENCY  for the  twelve  (12) month
          period ending December 31, 1998 and annually  thereafter (no later
          than 3 months  following the expiration of any such period) and at
          such  other  times  and in such  form  as  Lender  may  prescribe,
          Corporate  Borrower's   independent   CPA-prepared   audit-quality
          consolidated  financial statements including Balance Sheet, Profit
          and  Loss  Statement,   Cash  Flow  Statement,   and  supplemental
          schedules   of  Cost  of  Goods  Sold  and   Operating   Expenses.
          Corporate  Borrower  will  submit  to  Lender  quarterly  prepared
          financial  statements  prepared by management.  Corporate Borrower
          hereby  authorizes all Federal,  State, and municipal  authorities
          to  furnish   reports   of   examinations,   records,   and  other
          information  from  reports,  returns,  files and  records  of such
          authorities upon request therefor by Lender or Agency.

     (d)  Borrower shall not execute any contracts for management consulting
          services without prior approval of Lender and Agency.

     (e)  Distributions  and  Compensation - Borrower will not,  without the
          prior written  consent  of  Lender  or  Agency  (a)  if  Borrower  is
          a corporation,  declare or pay any dividend or make any distribution
          upon its capital  stock,  or purchase or retire any of its capital
          stock,  or consolidate  or merge with any other  company,  or give any
          preferential  treatment,   make  any  advance,   directly  or
          indirectly,  by way of loan,  gift,  bonus,  or otherwise,  to any
          company directly or indirectly,  controlling or affiliated with or
          controlled by Borrower,  or any other company,  or to any officer,
          director or employee of Borrower,  or of any such company,  (b) if
          Borrower is a partnership or individual  make any  distribution of
          assets  of  the  business  of  Borrower,   other  than  reasonable
          compensation  for services,  or give any  preferential  treatment,
          make any advance,  directly or indirectly,  by way of loan,  gift,
          bonus,  or otherwise,  to any partner or any of its employees,  or to
          any company  directly or indirectly  controlling  or affiliated with
          or controlled by Borrower, or any other company.

     (f)  Other Provisions:

          1.  Corporate Borrower shall not in any way alter its form of
              business organization without the prior written consent of
              Lender.

          2.  Prior to the first disbursement Lender shall be in receipt of
              satisfactory evidence that all applicable taxes have been paid
              and all zoning regulations and all licensing regulations have
              been complied with.

<PAGE>

INSURANCE PROVISIONS

          3.  Borrower shall provide and maintain hazard insurance on all
              Real Estate mortgaged to lender in such amounts and for such
              coverage as shall be satisfactory in all respects to Lender.
              Said insurance shall be maintained for the life of the loan.

              Policy coverage on real property shall designate Lender as
              mortgagee under a standard or New York mortgage clause and shall
              provide a minimum to ten (10) days written notice to Lender of
              cancellation.

          4.  Prior to first  disbursement,  the lender must be in receipt of
              evidence of  the   kind   described   below   from   an
              independent authoritative  source which is sufficient to indicate
              to the lender that the  properties  are not in special flood
              hazard areas (SFHA).  Property is defined as the asset(s) financed
              as a part of the AGENCY  financial  assistance  and/or other
              collateral  deemed  necessary by the field  office.  If such
              evidence is not provided to the lender,  the  borrower  must
              obtain,  and maintain,  a Standard  Flood  Insurance  Policy
              (SFIP) or other  appropriate  special flood hazard insurance in
              amounts  and  coverages  equal to the  lesser of (1) the insurable
              value of the  property or (2) the maximum  amount of  coverage
              available.  Borrower  can  show  that  special flood hazard
              insurance  has been  acquired by  submitting a copy of the policy
              or providing  evidence of premium payment for  the  appropriate
              coverage  to  a  licensed  insurance agent.  Borrower  will not be
              eligible for either any future disaster  assistance or AGENCY
              business loan  assistance if the special  flood  hazard  insurance
              is not  maintained  as stipulated herein throughout the entire
              term of this loan.

              As evidence that the properties are not located within a special
              flood hazard area subject to flooding, mudslides or erosions, the
              lender may rely on a determination of special flood hazard area
              status by the borrower's property & casualty insurance company,
              real estate appraiser, title insurance company, a local government
              Agency or other authoritative source acceptable to Agency which
              would ordinarily have knowledge of the special flood hazard area
              status for the properties.

        5.    Borrower and Gurantors  shall provide and maintain  hazard
              insurance on all business  personal property in such amounts and
              for such coverage  as  shall  be  satisfactory  in  all  respects
              to lender.  Said insurance  shall be maintained for the life of
              the  loan.   Policy  coverage  on  personal  property  shall
              designate  Lender as loss payee  under a  standard  lender's loss
              payable  clause and shall  provide a minimum of 10 days written
              notice to lender prior to cancellation.


<PAGE>
STANDBY PROVISIONS

        6.     Standby Agreement of Smith-Midland Corporation, covering the
               total amount of Borrower's indebtedness to related parties in
               the amount of $116,000

REAL ESTATE PROVISIONS

        7.     Prior to first disbursement on this loan, Lender to have
               satisfactory evidence that all real estate taxes have been
               paid.


CORPORATION PROVISIONS

        8.     Corporate Requirements of SMITH-MIDLAND CORPORATION, :

        Prior to first disbursement on this loan, SMITH-MIDLAND CORPORATION,
               to provide Lender with:

               a) Resolution of Board of Directors
               b) Certificate of Good Standing from the Secretary of State's
                  Office.
               c) Affidavit of Secretary of Corporation listing names
                  of Stockholders and numbers of shares owned by each to be the
                  same as set forth in the loan application.

         Borrower agrees that it will not authorize nor issue additional
                  shares of its capital stock, nor sell, transfer, or redeem any
                  of its outstanding shares of corporate stock without the prior
                  written consent of Lender.


<PAGE>
            9.    Corporate Requirements of Smith-Midland Corporation, a
                  Virginia corporation.:

            Prior to first disbursement on this loan, Smith-Midland Corporation,
                  a Virginia corporation to provide Lender with:

                  a)    Resolution of Board of Directors
                  b)    Certificate of Good Standing from the Secretary of
                        State's Office.
                  c)    Affidavit of Secretary of Corporation listing names of
                        Stockholders and numbers of shares owned by each to be
                        the same as set forth in the loan application.

            Guarantor agrees that it will not authorize nor issue additional
                  shares of its capital stock, nor sell, transfer, or redeem any
                  of its outstanding shares of corporate stock without the prior
                  written consent of Lender.


        10.       Corporate Requirements Easi-Set Industries, Inc., a Virginia
                  corporation.:

            Prior to first  disbursement  on this loan,  Easi-Set  Industries,
                  Inc., a Virginia corporation. to provide Lender with:

                  a)    Resolution of Board of Directors
                  b)    Certificate of Good Standing from the Secretary of
                        State's Office.
                  c)    Affidavit of Secretary of Corporation listing names of
                        Stockholders and numbers of shares owned by each to be
                        the same as set forth in the loan application.

            Guarantor agrees that it will not authorize nor issue additional
                  shares of its capital stock, nor sell, transfer, or redeem any
                  of its outstanding shares of corporate stock without the prior
                  written consent of Lender.

         11.      Corporate Requirements Smith-Carolina Corporation, a North
                  Carolina corporation:

<PAGE>

            Prior to first disbursement on this loan Smith-Carolina Corporation,
                  a North Carolina corporation to provide Lender with:

                  a) Resolution of Board of Directors
                  b) Certificate of Good Standing from the Secretary of State's
                     Office.
                  c) Affidavit of Secretary of Corporation listing names of
                     Stockholders and numbers of shares owned by each to be the
                     same as set forth in the loan application.

            Guarantor agrees that it will not authorize nor issue additional
                  shares of its capital stock, nor sell, transfer, or redeem any
                  of its outstanding shares of corporate stock without the prior
                  written consent of Lender.

12.   Corporate Requirements Concrete Safety Systems, Inc., a
      Virginia corporation:

            Prior to first disbursement on this loan Concrete Safety Systems,
                  Inc., a Virginia corporation to provide Lender with:

                  a) Resolution of Board of Directors
                  b) Certificate of Good Standing from the Secretary of State's
                     Office.
                  c) Affidavit of Secretary of Corporation listing names of
                     Stockholders and numbers of shares owned by each to be the
                     same as set forth in the loan application.

            Guarantor agrees that it will not authorize nor issue additional
                  shares of its capital stock, nor sell, transfer, or redeem any
                  of its outstanding shares of corporate stock without the prior
                  written consent of Lender.

13.   Corporate Requirements Midland Advertising & Design, Inc., a
                  Virginia corporation:

<PAGE>

            Prior to first disbursement on this loan Midland Advertising &
                  Design, Inc., a Virginia corporation to provide Lender with:

                  a) Resolution of Board of Directors
                  b) Certificate of Good Standing from the Secretary of State's
                     Office.
                  c) Affidavit of Secretary of Corporation listing names of
                     Stockholders and numbers of shares owned by each to be the
                     same as set forth in the loan application.

            Guarantor agrees that it will not authorize nor issue additional
                  shares of its capital stock, nor sell, transfer, or redeem any
                  of its outstanding shares of corporate stock without the prior
                  written consent of Lender.

14.   Borrower  agrees  to  comply  with all  existing  and  future  state and
                  federal regulations governing the handling,  storage and use
                  of any and all  hazardous,  toxic,  or otherwise  regulated,
                  substances or materials;  and further covenants that he will
                  permit no such  materials or  substances  or by-products or
                  wastes  thereof,  to be permanently  stored at the facility,
                  and  that  borrower  will  operate  the  facility  in such a
                  manner  that  the site  will  remain  free of  contaminating
                  materials, wastes, by products or substances.

15.    Borrower agrees to comply with all existing and future state and federal
                  regulations governing the maintenance and emplacement of
                  underground storage tanks and further covenants that borrower
                  will permit no petroleum base waste or hazardous waste to be
                  stored at the site, and that he will operate the business in
                  such a manner that the site will remain free of such
                  contamination waste.

MISCELLANEOUS PROVISIONS

16.    Unfinanced fixed asset expenditures are limited to $300,000 per annum for
                  a five year period.

17.    Tangible net worth of Borrower shall be at least 10% of tangible assets
                  upon closing the $4,000,000 loan and shall be evidenced by a
                  proforma balance sheet prepared by a CPA.

18.    Corporate Borrower's debt to net worth ratio, as defined under generally
                  accepted accounting principles, shall not exceed 4.00x at
                  12/31/97, 3.75x at 12/31/98, and 3.50x at 12/31/99 and
                  annually thereafter, measured annually based on the Borrower's
                  12/31 fiscal year end CPA-audited financial statements.

19.    Corporate Borrower shall maintain minimum working capital, as defined
                  under generally accepted accounting principles, of at least $1
                  (i.e. positive working capital), measured annually based on
                  the Borrower's 12/31 fiscal year end CPA-audited financial
                  statements.

<PAGE>

20.    Corporate Borrower's current ratio, as defined under generally accepted
                  accounting principles, shall be at least 1.0x, measured
                  annually based on the Borrower's 12/31 fiscal year end
                  CPA-audited financial statements.

21.    Borrower  will  not,  prior  to  payment  in  full  of the  indebtedness
                  evidenced by the Note,  without prior written consent of the
                  holder of the Note,  pledge,  mortgage or otherwise cause or
                  permit to be  encumbered  in any  manner  whatsoever  any of
                  Borrower's  property  or  assets,   whether  then  owned  or
                  thereafter  acquired.  However,  the holder of the Note will
                  permit  Chattel  Mortgages  on  purchased  equipment  not to
                  exceed  $200,000 on an annual  basis so long as the Borrower
                  is not in default of any of its obligations.



22.     Total Annual salaries or drawings by Rodney Smith including bonuses,
                  commissions or other compensation, shall be limited to
                  $350,000, with annual increases not to exceed 20%, provided
                  that Smith-Midland Corporation reports a net profit.

23.      During the term of the Loan, the Borrower shall not assume or agree to
                  pay any debt, liability, or obligation of others.

24.      Opinion Letter of Borrower's Counsel.

5.    Parties Affected - This Agreement shall be binding upon Borrower and
      Borrower's successors and assigns. No provision stated herein shall be
      waived without the prior written consent of Agency. The Loan shall be
      administered as provided in the Guaranty Agreement. The terms and
      conditions of this Authorization and Loan Agreement shall survive the Loan
      Closing and shall not be merged into the Loan Documentation
      notwithstanding any provisions to the contrary contained herein.

FIRST NATIONAL BANK OF NEW ENGLAND


- ------------------------------------------------------------------------------
By    Mark Korman,  Vice President                    Date

Borrower hereby agrees to the conditions imposed herein and further agrees that
the terms and conditions herein are for the benefit of, and may be enforced by,
Lender and Agency. This Authorization and Loan Agreement and amendments
constitute the Loan Agreement between Lender and Borrower.

<PAGE>

- ------------------------------------------------------------------------------
SMITH-MIDLAND CORPORATION,                            Title            Date

- ------------------------------------------------------------------------------
Smith-Midland Corporation, a Virginia corporation     Title            Date

- ------------------------------------------------------------------------------
Easi-Set Industries, Inc., a Virginia corporation     Title            Date

- ------------------------------------------------------------------------------
Smith-Carolina Corporation, a North Carolina
corporation.                                          Title            Date

- ------------------------------------------------------------------------------
Concrete Safety Systems, Inc., a Virginia corporation Title            Date
- ------------------------------------------------------------------------------
Midland Advertising & Design, Inc., a Virginia
corporation                                           Title            Date

NOTE: Corporate applicants must execute Authorization in corporate name, by duly
authorized officer, and seal must be affixed and duly attested; partnership
applicants must execute in firm name, together with signature of a General
Partner.

<PAGE>

- ------------------------------------------------------------------------------
INSTRUCTIONS:  INDICATE THE PARAGRAPHS BEING CERTIFIED AND AGREED TO BY
HAVING THE OBLIGOR INITIAL NEXT TO THE APPROPRIATE PARAGRAPHS, PRIOR TO
SIGNING.
- ------------------------------------------------------------------------------


                        CERTIFICATION AND LOAN AGREEMENT

      The United States Department of Agriculture Rural Business Cooperative
Service (f/k/a/ Farmers Home Administration) ("Agency") in order to induce FIRST
NATIONAL BANK OF NEW ENGLAND ("Lender") to make a guaranteed Loan ("Loan") to
SMITH-MIDLAND CORPORATION, a Delaware corporation ("Borrower"), and in
consideration therefor, Borrower and (if applicable)___________N/A
________________ ("Operating Company"), SMITH-MIDLAND CORPORATION,
a Virginia corporation, SMITH-CAROLINA CORPORATION, a North Carolina
corporation, EASI-SET INDUSTRIES, INC., a Virginia corporation, CONCRETE SAFETY
SYSTEMS, INC., a Virginia corporation, and MIDLAND ADVERTISING & DESIGN, INC., a
Virginia corporation, the guarantors of the Loan (collectively, the
"Guarantors") (the Borrower, Operating Company, if applicable and the Guarantors
are singularly or collectively, "Obligor") hereby certifies to, and agrees and
covenants with, the Lender and the Agency and their respective successors and
assigns, as follows:

I.  CERTIFICATIONS

The Obligor hereby certifies:

____a.   Adverse Change - That there has been no material adverse change in
         Obligor's financial condition, organization, operations or fixed assets
         or mortgaged real estate since the date the Loan application was
         signed.

____b.   [INTENTIONALLY DELETED]

____c.   Current Taxes - That Obligor is current on all federal, state and local
         taxes, including, but not limited to, income taxes, payroll taxes, real
         estate taxes and sales taxes.

____d.   Environmental - that:

         1) At the time Obligor submitted the Loan application, Obligor was in
            material compliance with all local, state and federal environmental
            laws and regulations pertaining to environmental contamination;
         2) Obligor has complied, and will continue to comply, with these laws
            and regulations;
         3) Obligor has no knowledge of any environmental contamination of any
            real or personal property pledged as collateral of the Loan which
            violates any such laws and regulations (other than what was
            disclosed in connection with the Environmental Investigation of the
            Virginia and North Carolina properties performed by EMG, dated
            March 18 and March 26, 1998);
         4) Obligor assumes full responsibility for all costs incurred in any
            clean-up of environmental contamination and agrees to indemnify and
            hold harmless Lender and the Agency against payment of any such
            costs (Lender or Agency may require Obligor to execute a separate
            indemnification agreement);
         5) Until full repayment of Loan, Obligor will promptly notify Lender
            and the Agency if it knows, suspects or believes there may be any
            environmental contamination in or around the real property securing
            the Loan, or if Obligor and/or such property are subject to any
            investigation or enforcement action by any Governmental agency
            pertaining to any environmental contamination of the property.

____e.   Bankruptcy - That no petition in bankruptcy has been filed by, or to
         the undersigneds' knowledge, against the Obligor or any Guarantor of
         the Loan as of the date hereof.

____f.   Liens - That within the preceding thirty (30) days, neither the Obligor
         nor any Guarantor of the Loan has granted a security interest in any of
         the collateral given as security for the Loan, nor has the Obligor or
         any such Guarantor suffered the imposition of any involuntary and/or
         judicial liens or encumbrances upon the loan collateral.

____g.   Legal Proceedings - That there are no pending, or to the undersigneds'
         knowledge, threatened legal proceedings to which the Obligor or any
         Guarantor is a party, or to which the loan collateral or mortgaged real
         estate are subject, nor any contingent liabilities of the Obligor or
         any Guarantor which will adversely affect the transactions contemplated
         in connection with the Loan, except as may be disclosed in the Loan
         application or in an addendum hereto.

____h.   Obligations - That the financial obligations of the Obligor and each
         Guarantor of the Loan are current and not in material default. Obligor
         and any such Guarantor are not in material default under any current
         agreement or obligations binding upon Obligor or any such Guarantor,
         and the Loan will not violate or be in conflict with or constitute a
         default under any guaranty, obligation or agreement to which Obligor or
         any Guarantor are bound.

____i.   No Breach - That  neither  the  execution  and  delivery  of the Loan
         agreements,   the  consummation  of  the  transactions   contemplated
         thereby,  nor the  fulfillment  of or  compliance  with the terms and
         conditions  of such  agreements  is  prevented  by,  limited  by,  or
         conflicts  with or results in a breach of the  terms,  conditions  or
         provisions  of any  restriction  or  any  evidence  of  indebtedness,
         agreement or  instrument  of whatever  nature to which Obligor or any
         Guarantor  are now a party or by which  Obligor or any  Guarantor are
         bound, or constitutes a default under any of the foregoing.

____j.   Mechanics  Liens - That within the last  ninety (90) days,  including
         the date hereof,  no person,  firm or  corporation  has furnished any
         labor,  services or materials in connection with the  construction or
         repair of any buildings or  improvements on any of the mortgaged real
         estate,  or  on  any  adjoining   property  of  the  mortgagor,   the
         obligations  for which have not been paid,  and that no person,  firm
         or corporation  is entitled to any mechanic's  lien on said mortgaged
         real estate.

___k.    Execution - That all parties to the Loan agreements have executed the
         documents freely and voluntarily, after due examination and study of
         the terms and conditions thereof, for good and fair consideration
         received by them as of the date of execution.

____l.   Capacity - That no party to the Loan agreements is presently under
         legal, physical, mental or contractual disability, so as to be
         prohibited from, or incapable of, consummating the Loan transaction
         and/or performing their obligations and duties in accordance with the
         terms and provisions of the Loan agreements.

____m.   Mortgaged Premises - That the mortgagor of any mortgaged real estate
         has good and indefeasible right, title and interest in fee simple in
         and to the premises, and that all necessary governmental permits and
         approvals for the present use thereof, including, without limitation,
         subdivision and occupancy approval, have been obtained.

____n.   Legal Representation - That at the time of the closing, the undersigned
         was not represented by the Law Firm of Updike, Kelly & Spellacy, P.C.
         or Tydings & Rosenberg LLP nor any agent or representative thereof, nor
         did they pay any fee or compensation to the Law Firm of Updike, Kelly &
         Spellacy, P.C. or Tydings & Rosenberg LLP for personal representation
         in this transaction.

____o.   [INTENTIONALLY DELETED].

____p.   Taxpayer   Identification   Numbers  -  That  the  correct   taxpayer
         identification numbers for the undersigned are as follows:

                  NAME                          TAXPAYER I.D. NO.

            Smith-Midland Corporation, a              54-0881620
               Virginia corporation
            Smith-Carolina Corporation, a             56-1173767
               North Carolina corporation
            Concrete Safety Systems, Inc., a          54-1043335
               Virginia corporation

            Easi-Set Industries, Inc., a              54-1086270
               Virginia corporation
            Midland Advertising & Design, Inc.        54-1396603
               A Virginia corporation

____q.   Commercial Transaction - That the Loan is a commercial transaction, and
         the documents delivered to the Lender in connection with the Loan,
         including, without limitation, the Note, the Deed(s) of Trust and
         Security Agreement, are executed and delivered as part of a commercial
         transaction.

____r.   ERISA - That the Obligor and each Subsidiary or Affiliate of Obligor is
         in compliance in all material respects with all applicable provisions
         of the Employee Retirement Income Security Act of 1974 ("ERISA"), as it
         may be amended from time to time.

____s.   Organization - That Smith-Midland  Corporation,  Easi-Set Industries,
         Inc.,  Concrete  Safety  Systems,  Inc.  and  Midland  Advertising  &
         Design,  Inc. are  corporations  duly organized under the laws of the
         Commonwealth  of Virginia with a principal  place of business at 5119
         Catlett   Road,   Midland,   Virginia   20728;   that   Smith-Midland
         Corporation,  the Borrower, is a corporation organized under the laws
         of the State of Delaware  with a principal  place of business at 5119
         Catlett  Road,  Midland,  Virginia  20728;  and  that  Smith-Carolina
         Corporation  is a corporation  duly  organized  under the laws of the
         State of North  Carolina  with a principal  place of business at 1088
         Highway 85, Reidsville, North Carolina  27320.

         That _______N/A___________ is a partnership duly organized under the
         laws of the State of ______N/A__________ with a principal place of
         business _________N/A_____________.

         That _______N/A___________ is a limited liability company duly
         organized under the laws of the State of ______N/A__________ with a
         principal place of business at __________N/A_______________.

____t.   Other
         ----------------------------------------------------------------------

         ----------------------------------------------------------------------

         ----------------------------------------------------------------------

II.   AFFIRMATIVE COVENANTS

      The Obligor shall, and hereby agrees and covenants to:

____a.   Reimbursable  Expenses - Reimburse  Lender for  expenses  incurred in
         the making and administration of the Loan.

____b.   Books, Records and Reports -

             (i) Keep proper books of account in a manner satisfactory to
                 Lender;
            (ii) Furnish year-end statements to Lender within ________ (__) days
                 (if not filled in then one hundred twenty (120) days) of fiscal
                 year end;
           (iii) Furnish additional financial statements or reports whenever
                 Lender requests them;
            (iv) Allow Lender and/or the Agency to:
                 (A) Inspect and audit books, records and papers relating to
                     Obligor's financial or business condition; and
                 (B) Inspect and appraise any of Obligor's assets; and 
                 (C) Allow all government authorities to furnish reports of
                     examinations, or any records pertaining to Obligor, upon
                     request by Lender or the Agency.

____c.   [INTENTIONALLY DELETED]

____d.   American-Made Products - To the extent feasible, purchase only
         American-made equipment and products with the proceeds of the Loan.

____e.   Taxes - Pay all federal, state and local taxes, including, without
         limitation, income, payroll, real estate and sales taxes of the
         Obligor's business when they come due.

____f.   Occupancy - Occupy, at all times during the term of the Loan, at least
         51% of the total square footage and 100% of the renovated square
         footage of rentable property. Obligor certifies that it will not use
         Loan proceeds to improve or renovate any of the space leased to third
         parties.

____g.   Other Documents - Provide Lender with all additional certifications,
         documents or other information Lender is required to obtain from
         Obligor or any third party pursuant to the Authorization issued by the
         Agency to Lender in connection with the Loan (the "Authorization");

____h.   Execution - Execute a note and any other documents required by
         Lender;

____i.   Compliance with Authorization - Do everything necessary for Lender
         to comply with the terms and conditions of the Authorization,
         including, without limitation, acquire and maintain for the term of
         the Loan all insurance required by the Lender for such amounts and
         in such forms as the Lender may require, including, without
         limitation, real estate hazard insurance, personal property hazard
         insurance, flood insurance, life insurance and liability insurance.
         Any and all such policies shall contain all endorsements or special
         clauses as may be required by the Authorization.

____j.   Other -
         ___________________________NONE______________________________________

         _____________________________________________________________________

         _____________________________________________________________________

         _____________________________________________________________________

III.  NEGATIVE COVENANTS

      The Obligor shall not, without Lender's prior written consent:

_____a.  Distributions - Make any distribution of company assets that will
         adversely affect the financial condition of the Obligor.

_____b.  Ownership Changes - Change the ownership structure or interests in
         the Obligor during the term of the Loan.

_____c.  Transfer of Assets - Sell, lease, pledge, encumber (except by purchase
         money liens on property acquired after the date of the Note), or
         otherwise dispose of any of Obligor's property or assets, except in the
         ordinary course of business.

_____d.  Fixed Asset Limitation - Acquire by purchase or lease agreement any
         fixed assets totaling more than $500,000 in any year with no more than
         $300,000 for unfinanced expenditures for a five year period, and
         $200,000 for financed expenditures.

_____e.  Location Limitation - Acquire by purchase or by lease any additional
         locations.

 _____f. Limitation on Compensation - Give annual increases to compensation of
         corporate officers in excess of five percent (5%). No increases may be
         made unless a profit was earned in the most recent fiscal year and
         Borrower is in compliance with the terms and conditions of this
         Agreement.

_____g.  Other
         --------------------------------------------------------------------

         --------------------------------------------------------------------


         --------------------------------------------------------------------


         --------------------------------------------------------------------

IV.  MISCELLANEOUS

_____a.  The terms and conditions hereof shall be binding upon each and every
         Obligor and shall inure to the benefit of the Lender and its successors
         and assigns.

_____b.  The terms and conditions hereof shall survive the closing of the Loan.

_____c.  If any Obligor fails to abide by any of the agreements and/or
         covenants contained herein or in the Authorization (as it applies to
         any such Obligor), and/or if any of the certifications made herein
         proves at any time to be incorrect or untrue, it shall constitute an
         event of default under the documents evidencing, securing and/or
         governing the Loan, immediately entitling the Lender to any and all
         rights and remedies it may have thereunder, including without
         limitation, the right to accelerate all sums due under the Loan.



      This Certification and Loan Agreement is executed under seal this 25
day of June, 1998.




WITNESS/ATTEST:                         BORROWER:


                                        SMITH-MIDLAND CORPORATION, a Delaware
                                        corporation

/s/ Wesley A. Taylor                    By: /s/ Rodney I. Smith [SEAL]
- -----------------------------           ------------------------------------
Name: Wesley A. Taylor                  Name: Rodney I. Smith

                                        Title: President


WITNESS/ATTEST:                           GUARANTOR:


                                          SMITH-MIDLAND CORPORATION,
                                          a Virginia corporation


                                          By: /s/ Rodney I. Smith  [SEAL]
                                          ----------------------------
                                          Name: Rodney I. Smith
                                          Title: President


                                          EASI-SET INDUSTRIES, INC.,
                                          a Virginia corporation


                                          By:  /s/ Rodney I. Smith [SEAL]
                                          ----------------------------
                                          Name: Rodney I. Smith
                                          Title: Chairman of the Board


<PAGE>



                                          SMITH-CAROLINA CORPORATION,
                                          a North Carolina corporation


                                          By: /s/ Rodney I. Smith [SEAL]
                                          ----------------------------
                                          Name: Rodney I. Smith
                                          Title: President


                                          CONCRETE SAFETY SYSTEMS, INC.,
                                          a Virginia corporation


                                          By: /s/ Rodney I. Smith [SEAL]
                                          ----------------------------
                                          Name: Rodney I. Smith
                                          Title: President


                                          MIDLAND ADVERTISING & DESIGN,  INC.,
                                          a Virginia corporation




                                          By: /s/ Rodney I. Smith [SEAL]
                                         ----------------------------
                                          Name: Rodney I. Smith
                                          Title: President



<PAGE>



COMMONWEALTH OF VIRGINIA      )
                              )     to wit:
CITY OF RICHMOND              )
        --------

      The foregoing instrument was acknowledged before me in my jurisdiction
aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of
SMITH-MIDLAND CORPORATION, a Delaware corporation, on behalf of the corporation.


[NOTARIAL SEAL]                              /s/ Denise K. Kein
                                        --------------------------
                                                Notary Public
My Commission Expires: June 30, 1999
                      ---------------


                                    * * *
COMMONWEALTH OF VIRGINIA          )
                                  )     to wit:
CITY OF RICHMOND                  )
        --------

      The foregoing instrument was acknowledged before me in my jurisdiction
aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of
SMITH-MIDLAND CORPORATION, a Virginia corporation, on behalf of the corporation.


[NOTARIAL SEAL]                                /s/ Denise D. Kein
                                        -----------------------------
                                                Notary Public
My Commission Expires: June 30, 1999
                     ----------------



<PAGE>



COMMONWEALTH OF VIRGINIA      )
                              )     to wit:
CITY OF RICHMOND              )
        --------

      The foregoing instrument was acknowledged before me in my jurisdiction
aforesaid, this 25th day of June, 1998 by Rodney I. Smith, Chairman of the Board
of EASI-SET INDUSTRIES, INC., a Virginia corporation, on behalf of the
corporation.


[NOTARIAL SEAL]                                Denise D. Kein
                                        -------------------------
                                                Notary Public
My Commission Expires: June 30, 1999
                       -------------


                                    * * *
COMMONWEALTH OF VIRGINIA      )
                              )     to wit:
CITY OF RICHMOND              )

      I, a Notary Public of the County and State aforesaid, certify that Wesley
A. Taylor personally appeared before me this day and acknowledged that he is
Secretary of Smith-Carolina Corporation, a North Carolina corporation, and that
by authority duly given and as an act of the corporation, the foregoing
instrument was signed in its name by its President, sealed with its corporate
seal and attested by him as its Secretary.

      Witness my hand and official stamp or seal, this 25th day of June, 1998.


[NOTARIAL SEAL]                             /s/ Denise D. Kein
                                        ------------------------
                                                Notary Public
My Commission Expires: June 30, 1999
                      ---------------



<PAGE>




COMMONWEALTH OF VIRGINIA            )
                                    )     to wit:
CITY OF RICHMOND                    )

      The foregoing instrument was acknowledged before me in my jurisdiction
aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of CONCRETE
SAFETY SYSTEMS, INC., a Virginia corporation, on behalf of the corporation.


[NOTARIAL SEAL]                            /s/ Denise D. Kein
                                         --------------------------
                                                Notary Public
My Commission Expires: June 30, 1999
                       -------------


                                    * * *

COMMONWEALTH OF VIRGINIA      )
                              )     to wit:
CITY OF RICHMOND              )

      The foregoing instrument was acknowledged before me in my jurisdiction
aforesaid, this 25th day of June, 1998 by Rodney I. Smith, President of MIDLAND
ADVERTISING & DESIGN, INC., a Virginia corporation, on behalf of the
corporation.


[NOTARIAL SEAL]                              /s/ Denise D. Kein
                                --------------------------------------
                                                Notary Public
My Commission Expires: June 30, 1999
                       -------------




                       FIRST NATIONAL BANK OF NEW ENGLAND

                      COMMERCIAL REVOLVING PROMISSORY NOTE



$500,000                                                         June 25, 1998
                                                            Richmond, Virginia
                                                [Insert Location of Execution]

      ON DEMAND, FOR VALUE RECEIVED, the undersigned, SMITH-MIDLAND CORPORATION,
a Delaware corporation (individually and, if more than one, collectively, the
"Borrower"), promises to pay (jointly and severally, if more than one) to the
order of First National Bank of New England ("Lender"), at its office at One
Commercial Plaza, Hartford, Connecticut or at such other place as the holder
hereof (including Lender, hereinafter referred to as "Holder"), may designate,
the principal sum of Five Hundred Thousand Dollars ($500,000) or the aggregate
unpaid principal amount of all advances made by the Holder to the Borrower under
the terms hereinafter set forth, whichever is less, in lawful money of the
United States and to pay interest on the unpaid balance of this Note beginning
as of the date hereof, before or after maturity or judgment (but subject to the
default rate of interest set forth below) at the per annum rate set forth in
Paragraph 2 below, which interest rate shall be computed daily and payable
monthly in arrears on the basis of a Three Hundred Sixty (360) day year and the
actual days elapsed, together with all taxes levied or assessed on this Note or
the debt evidenced hereby against the Holder, and together with all costs,
expenses and attorneys' and other professionals' fees incurred in any action to
collect and/or enforce this Note or to enforce, protect, preserve, defend,
realize upon or foreclose any security agreement, mortgage or other agreement
securing or relating to this Note, including without limitation, all costs and
expenses incurred in inspecting or surveying mortgaged real estate, if any, or
conducting environmental studies or tests, or to enforce, protect, preserve,
defend or sustain the lien of said security agreement, mortgage or other
agreement or in any litigation or controversy arising from or connected in any
manner with said security agreement, mortgage or other agreement, or this Note.
Borrower further agrees to pay all costs, expenses and attorneys' and other
professionals' fees incurred by Holder in connection with any "workout" or
default resolution negotiations involving legal counsel or other professionals
and further in connection with any re-negotiation or restructuring of the
indebtedness evidenced by this Note. Any such costs, expenses and/or fees
remaining unpaid after demand therefor, may, at the discretion of the Holder, be
added to the principal amount of the indebtedness evidenced by this Note.

      This Note has been executed and delivered subject to the following terms
and conditions:

1.    Advances.

      a)    Definitions.      As used in this  Paragraph 1 and otherwise in this
            Note, the following terms shall have the following meanings:

           i)    "Acceptable  Accounts" means an account  receivable or accounts
                  receivable of Borrower  due not more  than  ninety  (90)  days
                  from the date set forth on the original invoice evidencing
                  such account  receivable, arising  from the  absolute  sale of
                  goods  by  Borrower  in which Borrower  had the sole and
                  complete  ownership or the  performance of services by
                  Borrower in the  ordinary  course of its  business, which
                  conforms to the warranties  set forth in  subparagraph  1(d)
                  below, and which:

                  A)    is not an account receivable of a person or entity
                        obligated to Borrower upon such account receivable (an
                        "Account Debtor") which has suspended business, made a
                        general assignment for the benefit of creditors,
                        committed any act of insolvency, or filed or have had
                        filed against it any petition under any bankruptcy law
                        or any other law or laws for the relief of debtors;

                  B)    is  not  an  account   receivable   which:   (1) is
                        subject  to  any  setoff, counterclaim,  defense,
                        allowance or adjustment  other than discounts for prompt
                        payment shown on the invoice or to any dispute,
                        objection  or  complaint  by  the  Account  Debtor
                        concerning  its liability on the account  receivable and
                        the goods,   the  sale  of  which  gave  rise  to  the
                        account receivable,  have  not  been  returned,
                        rejected,  lost  or damaged;  (2) arises  from a sale or

<PAGE>

                        sales to an  affiliate, parent,   or  subsidiary   of
                        the   Borrower;   (3) is  the obligation  of  a  Account
                        Debtor  located  in  a  foreign country;  and  (4)
                        arises  from  a  contract  containing  a prohibition
                        against   assigning  or  granting  a  security interest
                        therein; and

                  C)    is not an account receivable which Holder, in its sole
                        discretion, shall notify the Borrower as being
                        ineligible for an advance.

         ii)      "Acceptable Equipment" means all equipment and machinery of
                  the Borrower which Holder, in its sole discretion, shall
                  notify the Borrower as being eligible for an advance.

        iii)      "Acceptable  Inventory" means all inventory of the Borrower
                  consisting of raw materials,  work-in-progress  and finished
                  goods which are held by or on behalf of the  Borrower  for
                  sale or lease and which is: (A) in  first  class   condition
                  and  salable  through  normal  trade channels;  (B) new and
                  unused;  (C)  owned  by the  Borrower  and subject   to  no
                  lien,   security   interest,   charge  or  other encumbrance
                  whatsoever,  except  those  of  Lender,  if any;  and (D) not
                  of a class which  Holder,  in its sole  discretion,  shall
                  notify the Borrower as being ineligible for an advance.

          iv)     "Maximum  Permitted  Amount"  means an  amount  equal to the
                  lesser  of:  (A) $500,000,  or (B) the sum of: (1)
                  seventy-five  percent  (75%) of the net  balance due on
                  Acceptable  Accounts;  PLUS (B)(i)  fifty percent  (50%)  of
                  the  lesser  of the  cost or  market  value  of Acceptable
                  Inventory  consisting  of  finished  goods,  and  (ii) fifty
                  percent  (50%) of the lesser of the cost or market value of
                  Acceptable Inventory  consisting of raw materials;  LESS (C) a
                  set aside of $1,175,000.

            v)    "Termination Date" means May 1, 1999, as such date may be
                  extended, in writing from time to time, in the Holder's sole
                  and absolute discretion.

    b)      Procedure for Advances, Payment.    Within   the   limits   of   the
            Maximum Permitted  Amount,  so long as Borrower is in compliance
            with all of the terms and  conditions  of this Note and no Event of
            Default  (as defined in Paragraph 8 hereof) has occurred and no
            condition  exists which would constitute  an Event of Default  but
            for the giving of notice or passage of time, or both, and so long as
            Holder has not demanded  payment of any outstanding  advances made
            hereunder,  Borrower may request,  and Lender may make, in its sole
            discretion,  advances  hereunder from time to time until  the
            Termination  Date  in the  aggregate  principal  amount  not
            exceeding  at any one time  outstanding  the Maximum  Permitted
            Amount; provided  that in the third  quarter of each  calendar  year
            during the term of this Note,  there shall be no borrowings or
            reborrowings  and no outstanding   principal  under  this  Note  for
            at  least  thirty  (30) consecutive days.  Whenever Borrower desires
            an advance,  Borrower shall notify  the  Lender  (which  notice
            shall  be  irrevocable)  by  telex, telecopy or telephone of the
            proposed  borrowing.  Such notice (each,  a "Notice of Borrowing")
            shall specify the date of the proposed  borrowing and  the  amount
            to be  borrowed.  Each  Notice  of  Borrowing  must be received by
            Lender no later than 11:00 a.m., Hartford,  Connecticut time on the
            day such borrowing is requested.  Each Notice of Borrowing  shall be
            immediately  followed  by a  written  confirmation  thereof  by  the
            Borrower  and, if requested by Holder,  a written  certificate  in
            form, scope  and  substance  satisfactory  to Holder  and  signed by
            the chief financial  officer and  president of the Borrower  which
            shall set forth in sufficient  detail  Borrower's  calculation of
            the Maximum  Permitted Amount as described in  subparagraph
            1(a)(iv)(B)  above, if applicable, provided that if such written
            confirmation  differs in any respect from the action taken by the
            Lender,  the records of the Lender shall control absent  manifest
            error.  Advances  and  payments  on this  Note  may be evidenced by
            borrowing  certificates,  a grid (if any)  attached to this Note or
            similar  certificates  or  documents,  or by an internal  ledger
            account of Holder.  The  Borrower  agrees that the amount  shown on
            said borrowing  certificates,  grid or similar certificate or
            internal ledger account  of  Holder  as  outstanding  from  time to
            time  shall,  in the absence of manifest  error,  be  conclusive  of
            the amount  owing to the Holder  pursuant to this Note.  ALL
            ADVANCES  HEREUNDER,  TOGETHER  WITH ACCRUED AND UNPAID  INTEREST
            AND ANY OTHER AMOUNTS DUE HEREUNDER,  SHALL BE DUE AND PAYABLE ON
            DEMAND,  AND IF DEMAND IS NOT SOONER MADE,  ON THE TERMINATION DATE,
            at which  time  Borrower  shall  have no  ability to request,  and

<PAGE>

            option,  debit  principal,   interest,  fees,  costs  and expenses
            due  and  payable  hereunder  to  any of  Borrower's  accounts
            maintained with Holder on each date any such amount is due and
            payable.

      c)    Holder Discretion.      Nothing  herein shall be  construed to
            require  Holder to make advances  hereunder  and nothing  herein
            shall  prohibit  Holder from lending in excess of the Maximum
            Permitted  Amount or from raising or lowering the  percentages of
            advances  against  Acceptable  Accounts, Acceptable  Inventory
            and/or Acceptable  Equipment,  it being agreed and understood by
            Borrower that all advances  hereunder shall be at Holder's sole
            discretion  and shall not  establish  a pattern or custom  binding
            upon Holder.

      d)    Accounts Receivable Warranties.     Borrower   represents   and
            warrants  to Holder  that:  (i) each  Acceptable  Account is or, at
            the time it comes into  existence  will be, a true and correct
            statement of: (A) the bona fide indebtedness of the applicable
            Account Debtor;  and (B) the amount of the account for  merchandise
            sold and  delivered to, or for services performed for and accepted
            by, such Account Debtor,  net of any charges, adjustments, discounts
            or other reductions whatsoever;  and (ii) at the time of each
            borrowing  hereunder,  there  are and,  to the best of the
            Borrower's  knowledge  after  due  investigation,  will be no
            defenses, counterclaims,  discounts  or  setoffs  that  may  be
            asserted  against Acceptable Accounts.

2.    Interest. Interest on each advance made hereunder shall accrue as follows
      (SELECT ONE AND COMPLETE):

[ ]   at a fixed rate of   percent (   )  per annum.

[x]   at a variable rate per annum of one (1.00) percentage points in excess of
      the Prime Rate, with the term "Prime Rate" meaning the "Prime Rate" as
      published from time to time in the "Money Rates" section of The Wall
      Street Journal in the most recent edition preceding the time of any
      interest rate determination, or in the event that such rate is no longer
      published in The Wall Street Journal, a comparable index or reference rate
      selected by Holder, in its sole discretion. The Prime Rate may not
      necessarily be the Lender's lowest or best rate. Any change in the
      interest rate because of a change in the Prime Rate shall become effective
      immediately, without notice or demand, on the date any change in the Prime
      Rate occurs.

      If not sooner demanded, interest shall be due and payable monthly in
      arrears beginning on July 1, 1998 and continuing on the first day of each
      and every month thereafter until the entire indebtedness evidenced by this
      Note has been fully and finally paid. Upon demand for payment of any
      advance made hereunder or the occurrence of an Event of Default, without
      in any way affecting the Holder's right to accelerate this Note, this Note
      shall bear interest at a rate equal to the rate otherwise in effect
      hereunder.

3.    Lawful Interest. Notwithstanding any provisions of this Note, it is the
      understanding and agreement of the Borrower and Holder that the maximum
      rate of interest to be paid by Borrower to the Holder shall not exceed the
      highest or the maximum rate of interest permissible to be charged by a
      commercial lender such as Lender to a commercial borrower such as Borrower
      under the laws of the Commonwealth of Virginia. Any amounts paid in excess
      of such rate shall be considered to have been payments in reduction of
      principal.

4.    Additional   Payments.   If  Holder  shall  deem   applicable   to  this
      Note (including,  in each case, any borrowed and any unused portion
      thereof) or any advance made  hereunder,  any  requirement  of any law of
      the United States of America, any regulation, order, interpretation,
      ruling, official directive or guideline  (whether or not having the force
      of law) of the Board of  Governors of the Federal  Reserve System,  the
      Comptroller of the Currency,  the Federal Deposit   Insurance Corporation
      or  any  other  board  or  governmental  or administrative  agency of the
      United  States of America  which  shall  impose, increase,  modify  or
      make  applicable  to  this  Note  or any  advance  made hereunder,  or
      cause this Note or any advance made hereunder to be included in any
      reserve,  special  deposit,   calculation  used  in  the  computation  of
      regulatory  capital  standards,  assessment or other requirement which
      imposes on Holder any cost that is attributable to the maintenance
      thereof,  then, and in each such event,  Borrower shall promptly pay
      Holder, upon its demand, such amount as will compensate  Holder for any
      such cost, which  determination  may be based upon the  Holder's
      reasonable  allocation  of the  aggregate of such costs  resulting  from
      any  such  events.  In the  event  any  such  cost is a continuing  cost,
      a fee  payable  to  Holder  may be  imposed  upon  Borrower periodically
      for so long as any such cost is deemed  applicable by Holder,  in an
      amount  determined by Holder to be necessary to  compensate  Holder for
      any such  cost,  which  determination  may be based upon the  Holder's
      reasonable allocation of the aggregate of such costs resulting from any
      such events.  The determination  by Holder of the  existence  and amount
      of any such cost shall, in the absence of manifest error, be conclusive.

5.    Late Charge. In the event Borrower fails to pay any installment interest
      when it is due and payable, without in any way affecting the Holder's
      right to make demand for payment of or otherwise accelerate this Note, a
      late charge equal to the late payment plus interest thereon at the rate
      otherwise in effect hereunder shall, at the option of Holder, be assessed
      against Borrower.

6.    Mandatory and Optional Prepayments.

      a)    The Borrower shall immediately, without notice or demand, make a
            prepayment on account of the advances made hereunder on any date on
            which the aggregate principal amount outstanding of all advances
            made hereunder exceeds the Maximum Permitted Amount in an amount
            equal to the amount of such excess, together with accrued interest
            to the date of such prepayment on the advance or advances, or any
            portion thereof, being prepaid.

      b)    The Borrower may prepay the unpaid principal balance of this Note,
            in whole or in part, at any time without penalty or premium. Any and
            all such prepayments shall be applied first to interest accrued to
            the date of prepayment and then to the principal balance.

7.    Financial  Information.   Promptly  upon  Holder's  request,   Borrower
      shall deliver to Holder such  documentation  and  information  about the
      Borrower's financial  condition,  business  and/or  operations as Holder
      may, at any time and from time to time, request, including without
      limitation,  business and/or personal financial statements,  copies of
      federal and state income tax returns and all schedules  thereto,  aging
      reports of Borrower's  accounts  receivable and accounts payable and a
      listing of Borrower's inventory and equipment,  all of which shall be in
      form,  scope and content  satisfactory to Holder,  in its sole discretion.

8.    Events of Default. Notwithstanding the demand nature of the indebtedness
      evidenced by this Note, which shall at all times be payable on demand, the
      Borrower agrees that each of the following shall constitute an "Event of
      Default" hereunder:

      a)    Failure of Borrower to pay or perform any of Borrower's liabilities
            or obligations to Holder (whether under this Note or otherwise and
            whether now existing or hereafter incurred), including without
            limitation, any installment of interest or any other sum due
            hereunder, when due to be paid or performed; or

      b)    Failure of Borrower to pay any advance hereunder on demand; or

      c)    Failure of Borrower to observe, perform or comply with any covenant,
            agreement or duty contained in this Note; or

<PAGE>

      d)    If Borrower or any guarantor of any obligation of the Borrower to
            Holder shall be in default under any security agreement or other
            agreement governing, securing or relating to this Note; or

      e)    If any representation or warranty made by the Borrower or any
            guarantor of any obligation of the Borrower to Holder, including
            without limitation, any representation or warranty contained herein,
            or any statement, certificate or other data furnished by any of them
            in connection herewith, proves at any time to be incorrect or untrue
            in any material respect; or

      f)    Institution of or consent to proceedings, or the taking of any
            action in furtherance of, or the entry of any order or decree of a
            court of competent jurisdiction with respect to any of the
            following:

            i)    Bankruptcy, insolvency or reorganization, readjustment,
                  arrangement, composition or similar relief as to Borrower or
                  any guarantor of any obligation of the Borrower to Holder
                  under federal or state bankruptcy or insolvency statutes or
                  related laws,

           ii)    Appointment of a receiver, liquidator, trustee or assignee in
                  bankruptcy or insolvency as to Borrower or any guarantor of
                  any obligation of the Borrower to Holder or a substantial part
                  of their respective properties, or

          iii)    Assignment of the Borrower or any guarantor of any obligation
                  of the Borrower to Holder for the benefit of creditors, the
                  winding up or liquidation of the affairs of the Borrower or
                  such guarantor, or the admission of Borrower or such guarantor
                  in writing of its inability to pay its debts; or

        g)  The death, dissolution, liquidation, insolvency (the term
            "insolvency" shall mean either a negative tangible net worth or an
            inability to pay its debts as they mature) or termination of legal
            existence of Borrower or any guarantor of any obligation of the
            Borrower to Holder; or

        h)  The service of any process upon the Holder seeking to attach or
            garnish by mesne or trustee process any funds of Borrower or of any
            guarantor of any obligation of the Borrower to Holder which are on
            deposit with the Holder; or

        i)  The failure by Borrower or any guarantor of any obligation of the
            Borrower to Holder to pay or perform any indebtedness or obligation
            owed to any third party, or if any such other indebtedness or
            obligation shall be accelerated; or

        j)  If there shall be any material adverse change in the assets,
            liabilities, condition (financial, operating or otherwise) or
            business of the Borrower or any guarantor of any obligation of the
            Borrower to Holder; or

        k)  If, at any time, the Holder believes in good faith that the prospect
            of payment of any obligation or the performance of any agreement of
            the Borrower or any guarantor of any obligation of the Borrower to
            Holder is impaired, or there is such a change in the assets,
            liabilities, condition (financial, operating or otherwise) or
            business of the Borrower or any such guarantor as the Holder
            believes in good faith increases its risk of non-collection.

<PAGE>

      Upon the occurrence of any Event of Default, all advances outstanding
      hereunder, together with accrued interest thereon and any other sums due
      under this Note, shall, at the option of the Holder, become immediately
      due and payable, and any obligation of the Holder to make advances
      hereunder shall terminate, at the option of the Bank, all of the foregoing
      without presentment or demand for payment, notice of non-payment, protest
      or any other notice or demand of any kind, all of which are expressly
      waived by the Borrower. Failure to exercise such option shall not
      constitute a waiver of the right to exercise the same in the event of any
      subsequent default.

9.    Lien and Right of Setoff. The Borrower hereby grants the Holder a lien and
      right of setoff for all Borrower's liabilities upon and against all the
      deposits, credits, collateral and property of the Borrower, now or
      hereafter in the possession or control of the Holder or in transit to it.
      Holder may, at any time, apply or set off the same, or any part thereof,
      to any liability of the Borrower whether or not matured or demanded.

10.   No  Waiver.   No  delay  or  omission  by  Holder  in  exercising  any
      rights hereunder,  nor failure by the Holder to insist upon the strict
      performance by Borrower of any terms and  provisions  herein shall operate
      as or be deemed to be a waiver  of such  right,  any  other  right
      hereunder,  or any  terms and provisions  herein, and the Holder shall
      retain the right thereafter to insist upon strict  performance  by the
      Borrower of any and all terms and  provisions of this Note or any document
      securing the  repayment of this Note.  No waiver of any right shall be
      effective  unless in writing and signed by Holder,  nor shall a waiver on
      one occasion be  constituted  as a bar to, or waiver of, any such right on
      any future occasion.

11.   Prejudgment   Remedy  and  Other  Waivers.   BORROWER  HEREBY  REPRESENTS
      AND WARRANTS TO LENDER THAT THE LOAN IS A  COMMERCIAL  OR BUSINESS  LOAN
      UNDER THE LAWS OF THE  COMMONWEALTH  OF VIRGINIA,  NEGOTIATED BY LENDER
      AND BORROWER AND THEIR RESPECTIVE  ATTORNEYS AT ARMS LENGTH.  BORROWER
      WARRANTS AND REPRESENTS THAT  BORROWER  IS A BUSINESS  OR  COMMERCIAL
      ORGANIZATION  AND THAT THE LOAN EVIDENCED  HEREBY WAS MADE AND  TRANSACTED
      SOLELY FOR BUSINESS OR  INVESTMENT PURPOSES  AND/OR THAT THE AMOUNTS
      ADVANCED OR TO BE ADVANCED  UNDER THIS NOTE AND  EVIDENCED  HEREBY ARE
      BEING MADE TO AND  RECEIVED BY THE BORROWER FOR THE PURPOSE OF  ACQUIRING
      OR CARRYING ON  BUSINESS,  PROFESSIONAL  OR  COMMERCIAL ACTIVITY OR
      INVESTMENT  AS AN OWNER,  AND THAT SUCH  AMOUNTS ARE IN EXCESS OF FIVE
      THOUSAND AND NO/100THS DOLLARS ($5,000).  TO THE EXTENT PERMITTED BY LAW,
      BORROWER  WAIVES ANY RIGHTS IT MAY HAVE TO NOTICE AND HEARING  WITH
      RESPECT TO ANY PREJUDGMENT  REMEDY WHICH HOLDER MAY DESIRE TO USE, AND
      FURTHER WAIVES ALL RIGHTS TO REQUEST THAT HOLDER POST A BOND, WITH OR
      WITHOUT SURETY,  TO PROTECT BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY
      ANY PREJUDGEMENT  REMEDY SOUGHT OR OBTAINED BY HOLDER.  Borrower  waives
      diligence,  demand,  presentment for payment,  notice of nonpayment,
      protest and notice of protest,  and notice of any renewals or extensions

<PAGE>

      of this Note,  and all rights under any statute of limitations.  THE
      BORROWER  ACKNOWLEDGES  THAT  BORROWER  MAKES THESE  WAIVERS KNOWINGLY AND
      VOLUNTARILY,   WITHOUT   DURESS  AND  ONLY  AFTER   EXTENSIVE
      CONSIDERATION  OF THE  RAMIFICATIONS  OF THIS  WAIVER.  THE  BORROWER
      FURTHER ACKNOWLEDGES  THAT THE LENDER HAS NOT AGREED WITH OR  REPRESENTED
      TO BORROWER OR ANY OTHER PARTY HERETO THAT THE  PROVISIONS OF THIS
      PARAGRAPH  WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

12.   Jury  Waiver.  TO THE EXTENT  PERMITTED  BY LAW,  THE  BORROWER AND THE
      LENDER HEREBY WAIVE TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,  ACTION OR
      PROCEEDING ON ANY  MATTER  ARISING  IN  CONNECTION  WITH  OR IN ANY  WAY
      RELATED  TO THE FINANCING  TRANSACTIONS OF WHICH THIS NOTE IS A PART
      AND/OR THE ENFORCEMENT OF ANY OF THEIR RESPECTIVE  RIGHTS AND REMEDIES,
      INCLUDING  WITHOUT  LIMITATION, TORT CLAIMS.  THE BORROWER AND THE LENDER
      EACH MAKE THIS WAIVER  KNOWINGLY AND VOLUNTARILY,  WITHOUT  DURESS AND
      ONLY AFTER  EXTENSIVE  CONSIDERATION  OF THE RAMIFICATIONS  OF THIS
      WAIVER.  THE  BORROWER  FURTHER  ACKNOWLEDGES  THAT THE LENDER HAS NOT
      AGREED  WITH OR  REPRESENTED  TO  BORROWER  OR ANY OTHER  PARTY HERETO
      THAT THE  PROVISIONS OF THIS  PARAGRAPH  WILL NOT BE FULLY  ENFORCED IN
      ALL INSTANCES.

13.   Joint and Several Liability. References in this Note to the Borrower in
      the singular shall include the plural, and if Borrower consists of more
      than one person, the liability of each Borrower shall be joint and
      several.

14.   Acknowledgment of Copy, Use of Proceeds. The Borrower acknowledges receipt
      of a copy of this Note and attests that the proceeds of this Note are to
      be used for general commercial purposes and that no part of such proceeds
      will be used, in whole or in part, for the purpose of purchasing or
      carrying any "margin security" as such term is defined in Regulation U of
      the Board of Governors of the Federal Reserve System.

15.   Miscellaneous.  The provisions of this Note shall be binding upon the
      heirs, executors, administrators, successors and assigns and shall inure
      to the benefit of Holder, its successors and assigns. If any provision of
      this Note shall, to any extent, be held invalid or unenforceable, then
      only such provision shall be deemed ineffective and the remainder of this
      Note shall not be affected. Borrower acknowledges and agrees that Holder
      shall have the right to report any delinquencies, defaults and/or losses
      incurred by Holder hereunder to any credit agency, bureau or service. This
      Note shall be governed by and construed in accordance with the laws of the
      Commonwealth of Virginia (but not its conflicts of law provisions).



                            [SIGNATURE PAGE FOLLOWS]


<PAGE>



      IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by
its President, thereunto duly authorized, in its name, under its seal, and on
its behalf the day and year first written above.


WITNESS/ATTEST:                                 SMITH-MIDLAND CORPORATION, a
                                                Delaware corporation



/s/ Wesley A. Taylor                            By: /s/ Rodney I. Smith [SEAL]
- --------------------------------                --------------------------------
Name: Wesley A. Taylor                          Name: Rodney I. Smith
Title: Secretary                                Title: President

<PAGE>




                                 PROMISSORY NOTE


$4,000,000                                                    June 25, 1998
                                                              Richmond, Virginia

      FOR VALUE RECEIVED, SMITH-MIDLAND CORPORATION, a Delaware corporation (the
"Maker"), promises to pay to the order of FIRST NATIONAL BANK OF NEW ENGLAND,
(or its successors and assigns) (collectively, the "Lender"), the principal sum
of FOUR MILLION AND 00/100 DOLLARS ($4,000,000) plus all accrued but unpaid
interest thereon, at the rate(s) hereinafter set forth, on the unpaid principal
balance hereof from time to time, from the date of this Promissory Note (the
"Note") until the date the entire principal sum hereof has been paid in full.
Said interest and principal shall be payable as set forth as follows:

      1.    Repayment Terms.

                  (a) The undersigned will pay principal and interest by making
payments in the initial amount of Thirty Seven Thousand Eighty Seven and 27/100
Dollars ($37,087.27) on the first day of each month beginning on August 1, 1998.
The undersigned will make these payments until they have paid in full all
principal and interest and any other sums due hereunder. Notwithstanding the
foregoing, the entire indebtedness evidenced by this Note, including, but not
limited to, all outstanding principal and accrued and unpaid interest, shall be
due and payable in full on the twenty-third (23rd) anniversary date of this
Note.

            (b) The undersigned's initial monthly payments shall be calculated
in accordance with the full amortization of the loan evidenced by this Note by
level monthly payments of principal and interest over a twenty-three (23) year
period at the interest rate applicable on the date hereof. On each Adjustment
Date (as herein defined), the amount of the monthly payments will be adjusted so
as to provide for the full amortization of the then outstanding principal at the
interest rate established at each Adjustment Date in level monthly payments of
principal and interest over the remaining term of the original twenty-three (23)
year amortization period.

            (c) Interest shall accrue on the outstanding principal amount of
this Note at a per annum rate of one and one-half (1.50%) percentage points
above the Prime Rate on a floating basis. The initial interest rate hereunder is
ten (10.0%) percent. On October 1, 1998 and on the first day of each, January,
April, July, and October thereafter until all sums due hereunder are paid in
full (each being referred to as an "Adjustment Date"), the interest rate on the
unpaid principal balance hereunder shall be adjusted, without notice or demand,
to a per annum rate of one and one-half (1.50) percentage points above the Prime
Rate in effect on the applicable Adjustment Date (or the following business day
in the event that such Adjustment Date falls on a Saturday, Sunday or holiday),
which such rate shall remain in effect until the succeeding Adjustment Date.
Interest hereunder shall be computed on a daily basis and on the basis of a
Three Hundred Sixty (360) day year and a thirty (30) day month. The undersigned
further agrees to pay all taxes levied or assessed on this Note or the debt
evidenced hereby against the holder of this Note, and further agrees to pay all
costs, expenses and attorneys' fees incurred in any action to collect this Note
or to defend, protect, preserve or realize upon or foreclose any mortgage or

<PAGE>


security agreement securing this Note or to protect, defend, preserve, foreclose
or sustain the lien of said mortgage or security agreement or in any litigation
or controversy arising from or connected with said mortgage, security agreement,
or this Note. As used herein, "Prime Rate" shall mean the lowest New York prime
rate as set forth in the money rate section of the Wall Street Journal (or in
any successor publication).

      (d) In the event of prepayment, the Maker will pay a penalty of five
percent (5%) of the prepayment amount in year one (1), four percent (4%) in year
two (2), three percent (3%) in year three (3), two percent (2%) in year four
(4), and one percent (1%) in year five (5). The Maker may prepay the loan in
part or in full in years six (6) through twenty-three (23) without penalty,
provided three (3) weeks prior written notice is given to Lender.

      (e) Lender shall give written notice to the undersigned of each increase
or decrease in the interest (and change in installment amount, if applicable)
within thirty days after the effective date of each rate adjustment; however,
the fluctuation of the interest rate is not contingent on whether the notice is
given.

      (f) If the undersigned shall be in default in payment due on the
indebtedness herein and the United States Department of Agriculture Rural
Business - Cooperative Service (f/k/a/ Farmers Home Administration) ("Agency")
purchases its guaranteed portion of said indebtedness, the rate of interest on
both the guaranteed and unguaranteed portions herein shall become fixed at the
rate in effect as of the date of default. If the undersigned shall not be in
default in payment when Agency purchases its guaranteed portion, the rate of
interest on both the guaranteed and unguaranteed portions herein shall be fixed
at the rate in effect as of the date of purchase by Agency.

      (g) All payments received by the Lender, at the option of the Lender,
shall be applied first to any outstanding charges and expenses incurred by the
Lender in connection with this Note or any documents executed in connection with
this Note, then to any unpaid and accrued interest and finally to the
outstanding principal due under this Note. The undersigned agrees that the
interest shall accrue at the foregoing rate on unpaid balance before and after
maturity, by acceleration or otherwise.

      (h) The Maker hereby grants to the Lender and any holder of this Note a
lien and right of set-off for all of the Maker's liabilities to Lender or holder
upon and against all of the Maker's deposits, credits, and other property now
owned or hereafter in the possession or control of Lender or holder or in
transit to. The Lender or holder may at any time apply the same or any part
thereof to any of the Maker's liabilities to Lender or holder, whether or not
matured at the time of such application, at any time after the occurrence of an
"Event of Default" under the loan documents executed in connection herewith.

      (i) Maker agrees to pay a late charge equal to five percent (5%) of the
payment amount due if such payment is not received within ten (10) days of the
due date. Funds received from the Maker will be applied first to interest to the
date of receipt, then to principal and then to the late fee.

      (j) The Maker agrees that, in addition to other events of default stated
in this Note or related loan documents, each of the following shall constitute
an "event of default" under this Note:

<PAGE>

            1) Failure of Maker or any guarantor to pay or perform any of
Maker's or guarantor's liabilities or obligations to Lender.

            2) If Maker or any guarantor of any obligation of Maker to Lender or
holder shall be in default under any security agreement, mortgage or other
agreement governing, securing or relating to this Loan.

      2. Security for Note. This Note is secured by (a) Security Agreement of
even date herewith executed and delivered by Maker in favor of Lender (the
"Maker's Security Agreement"), (b) unlimited guarantee of Smith-Midland
Corporation, a Virginia corporation, secured by two (2) Deeds of Trust with
respect to certain real properties situate in Midland, Virginia, as more
particularly described in said Deeds of Trust; (c) unlimited guarantee of
Smith-Carolina Corporation, a North Carolina corporation, secured by a Deed of
Trust with respect to certain real property situate in Reidsville, North
Carolina, as more particularly described in said Deed of Trust; (d) unlimited
guarantee of Easi-Set Industries, Inc., secured by a Security Agreement of even
date herewith; (e) unlimited guarantee of Concrete Safety Systems, Inc., secured
by a Security Agreement of even date herewith; (f) unlimited guarantee of
Midland Advertising & Design, Inc., secured by a Security Agreement of even date
herewith; and (g) any other instrument now or hereafter executed by Maker
(singly or jointly with another person or persons) in favor of Lender which in
any manner constitutes additional security for this Note (all of the foregoing
documents and/or instruments, including this Note, the Maker's Security
Agreement, the Deeds of Trust and are herein collectively referred to as the
"Loan Documents"). All of the terms, covenants, conditions and provisions of the
other Loan Documents are hereby incorporated in and made a part of this Note to
the same extent as if herein set forth in full.

      3. Obligations. As used herein, "Obligations" means all obligations,
indebtedness, liabilities, guaranties, covenants and duties owing by Maker to
Lender, under the Loan Documents, other Security Agreements or the loan
documents of even date herewith in connection with that certain $500,000 loan by
Lender to Maker, and any renewals, extensions and modifications thereof,
together with any now or hereafter existing indebtedness of the Maker to the
Lender whatsoever. "Obligor" means the Maker and all endorsers, guarantors and
sureties of any Obligation. As security for the full and timely repayment of the
Obligations, in addition to any collateral under the Maker's Security Agreement
or under any note, assignment or other document now existing or hereafter
executed by the Maker and/or any other person with respect to any of the
Obligations, the Maker, subject to the terms of the Maker's Security Agreement,
hereby grants to the Lender a security interest in all monies, bank deposits or
credits held by the Lender for or owed by the Lender to the Maker, and, in the
event of default hereunder beyond any applicable notice and cure periods, such
monies, deposits or credits may be set off and applied to the payment of any
Obligations.

      4. Default. The Maker shall be in default hereunder on the occurrence of
any of the following: (a) non-payment of any portion of any Obligation when due
and payable; (b) any material warranty, representation or statement made or
furnished to the Lender by or on behalf of the Maker proving to have been
incorrect when made or furnished; (c) the existence of any event of default
under the terms of any of the Loan Documents, or any note, guaranty or other
document now existing or hereafter executed by the Maker (singly or jointly with
another person or persons) and (or in favor of) the Lender; (d) the existence of

<PAGE>


any event of default under the terms of any instrument or writing evidencing a
debt of the Maker to someone other than the Lender which remains uncured beyond
any applicable notice and cure periods; (e) loss, theft, substantial damage,
destruction or transfer or encumbrance without fair value in return of any of
the Maker's assets; (f) any Obligor (i) admitting in writing its insolvency or
its inability to pay its debts generally as they mature, (ii) making a general
assignment for the benefit of creditors, (iii) commencing a case under or
otherwise seeking to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law, statute or
proceeding, (iv) by any act indicating its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for it or a substantial part of its property, or, in the absence of any
such consent, approval or acquiescence, suffering any such receivership,
trusteeship or proceeding to continue undismissed for a period of thirty (30)
days in the case of any such appointment, and sixty (60) days in the case of any
such other proceeding, after such appointment or institution of such other
proceeding, as the case may be, or (v) becoming a voluntary debtor in any case
under any chapter of the United States Bankruptcy Code; (g) any Obligor
defaulting (beyond any applicable notice and cure periods) under the terms of
the guarantee, security or other agreement executed, or which may hereafter be
executed, in connection with the Obligation(s); (h) judgment against, or
attachment of property of any Obligor; (i) dissolution, merger, consolidation,
liquidation or reorganization of any Obligor; or (j) failure of Lender to
realize upon proceeds of Assignment of Life Insurance Policy as Collateral on
the life of Rodney I. Smith executed in connection with this Note.

      5. Remedies Upon Default. Upon the occurrence of any event of default, the
Lender, at its option, may declare any or all Obligations immediately due and
payable without further notice, presentation, demand of payment or protest,
which are hereby expressly waived by every Obligor. The Lender's rights and
remedies hereunder and under any security or other agreements by and between the
Maker and the Lender are cumulative, and recourse to one shall not constitute a
waiver of others.

      6. Address for Payments. All payments made hereunder shall be paid in
lawful money of the United States of America at the office of Lender at One
Commercial Plaza, Hartford, Connecticut 06103, or at such other place as the
Lender or any other holder of this Note may at any time or from time to time
designate in writing to the Maker.

      7. Severability. If any part of this Note is declared invalid or
unenforceable, such invalidity or unenforceability shall not affect the
remainder of this Note, which shall continue in full force and effect. Any
provision that is invalid or unenforceable in any application shall remain in
full force and effect as to valid applications. In this Note, the term "person"
shall include an individual, a corporation, an association, a partnership, a
trust and any other legal entity.

      8. Notices. All notices which are required or permitted hereunder shall be
given in the same manner as specified in the Security Agreement.

      9. Governing Law. This Note is intended as a contract under and shall be
construed and enforced in accordance with the laws of the Commonwealth of
Virginia or the laws of the United States of America, when and where applicable,
as Lender may elect.

<PAGE>

      10. Time of Essence. Time is of the essence of this Note.

      11. Authority. The party executing this Note for and on behalf of Maker
warrants and represents that he/she is the President of Maker and has full power
and authority to bind Maker for the uses and purposes as in this Note contained.

      12. Compliance with Laws. Maker and Lender mutually agree that nothing
herein contained, nor any transaction related thereto, shall be construed or
shall so operate either presently or prospectively to require Maker to make any
payment or do any act contrary to law, but if any clause and provision herein
contained shall otherwise so operate to invalidate this Note, in whole or in
part, then such clauses and provisions only shall be held for naught as though
not herein contained and this clause shall override and control, it being the
intention of Maker and Lender that this Note and all documents evidencing or
securing the indebtedness evidenced hereby shall in all ways comply with
applicable law, and proper adjustment shall automatically be made accordingly.

      13. Maximum Rate of Interest. Notwithstanding anything herein or in the
other Loan Documents to the contrary, it is not the intention of Lender to
charge or collect any interest which would result in a rate of interest being
charged which is in excess of the maximum rate, if any, now permitted by law for
this transaction to be charged; and in the event that any sum in excess of such
maximum rate of interest is paid or charged, the same shall be deemed to have
been a prepayment of principal when paid, without premium or penalty, and all
payments made thereafter shall be appropriately applied to interest and
principal to give effect to such maximum rate, and after such application, any
excess shall be immediately refunded to Maker. If, during the term of this Note,
the maximum rate of interest, if any, now permitted by law for this transaction
to be charged should be increased, then for so long as such increase is in
effect, the applicable maximum rate permitted to be charged as referred to in
the immediately preceding sentence shall be deemed to be such increased rate. If
such maximum rate of interest, if any, now permitted by law to be charged for
this transaction should be eliminated so that there would be no such maximum
rate, then, for purposes of this loan, there shall thereafter be no maximum rate
limiting the amount that can be charged.

      14.   Waivers.

            (a) Maker hereby waives and renounces, for itself and all its
successors and assigns, all right to the benefit of any moratorium,
reinstatement, marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, exemption and homestead now provided or which hereafter may be
provided by the Constitution and laws of the United States of America and of any
state thereof, as to itself and in and to all of its property, real and
personal, against the enforcement and collection of the Obligations evidenced by
this Note.

            (b) Presentment for payment, demand, protest and notice of demand,
notice of dishonor and notice of nonpayment and all other notices are hereby
waived by Maker.

<PAGE>

      15. Joint and Several Liability. Maker, all endorsers hereof and all
others who may become liable for all or any part of the Obligations agree hereby
to be jointly and severally bound, and they jointly and severally waive and
renounce, to the extent permitted by law, any and all exemption rights and the
benefit of all valuation and appraisement privileges as against this debt or any
renewal or replacement thereof. Maker expressly consents to any extension of
time, release of any party liable for the Obligations, release of any of the
security of this Note, acceptance of other security therefor or any other
indulgence or forbearance whatsoever. Any such extension, release, indulgence or
forbearance may be made without notice to said party and without in any way
affecting the personal liability of such party.

      16. No Novation. No failure to accelerate the debt evidenced hereby by
reason of default hereunder, acceptance of a past-due installment or indulgence
granted from time to time shall be construed (a) as a novation of this Note or
as a reinstatement of the indebtedness evidenced hereby or as a waiver of such
right of acceleration or of the right of Lender thereafter to insist upon strict
compliance with the terms of this Note, or (b) to prevent the exercise of any
such right of acceleration or any other right granted hereunder or by the laws
of the Commonwealth of Virginia. Maker hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing. No extension of time for the payment of this Note or any installment
due hereunder, made by agreement with any person now or hereafter liable for the
payment of this Note, shall operate to release, discharge, modify, change or
affect the original liability of Maker under this Note, either in whole or in
part, unless Lender agrees otherwise in writing. This Note may not be modified
orally, but only by an agreement in writing signed by the party against whom
enforcement of such waiver, change, modification or discharge is sought.

      17. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY LAW MAKER AND
LENDER EACH HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR IN ANY WAY PERTAINING TO THIS NOTE AND/OR ANY OF THE OTHER DOCUMENTS
EVIDENCING OR SECURING THE DEBT TRANSACTION EVIDENCED HEREBY. THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY MAKER AND LENDER, AND MAKER AND
LENDER HEREBY REPRESENT TO EACH OTHER THAT NO ORAL OR WRITTEN STATEMENTS HAVE
BEEN MADE BY ANY PARTY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY
MODIFY OR NULLIFY ITS STATED EFFECT. MAKER FURTHER REPRESENTS THAT IT HAS BEEN
REPRESENTED BY INDEPENDENT COUNSEL, SELECTED OF ITS OWN FREE WILL, IN THE
SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER AND THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH SUCH COUNSEL.

      18. Acknowledgments by Maker. Maker hereby acknowledges that (a) Maker and
its shareholders are knowledgeable borrowers of commercial funds, (b) they and
their attorneys fully understand the effect of the above provisions, (c) Lender

<PAGE>

would not make the loan evidenced hereby without such provisions and (d) such
loan is negotiated by Lender and Maker and their respective attorneys at arms
length. The foregoing representations and warranties are made with the intent
that the Lender and any subsequent holder of this Note may rely thereon.

      19. Business or Commercial Organization. MAKER HEREBY REPRESENTS AND
WARRANTS TO LENDER THAT THE LOAN IS A COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS
OF THE COMMONWEALTH OF VIRGINIA, NEGOTIATED BY LENDER AND MAKER AND THEIR
RESPECTIVE ATTORNEYS AT ARMS LENGTH. MAKER WARRANTS AND REPRESENTS THAT MAKER IS
A BUSINESS OR COMMERCIAL ORGANIZATION AND THAT THE LOAN EVIDENCED HEREBY WAS
MADE AND TRANSACTED SOLELY FOR BUSINESS OR INVESTMENT PURPOSES AND/OR THAT THE
AMOUNTS ADVANCED OR TO BE ADVANCED UNDER THIS NOTE AND EVIDENCED HEREBY ARE
BEING MADE TO AND RECEIVED BY THE MAKER FOR THE PURPOSE OF ACQUIRING OR CARRYING
ON BUSINESS, PROFESSIONAL OR COMMERCIAL ACTIVITY OR INVESTMENT AS AN OWNER, AND
THAT SUCH AMOUNTS ARE IN EXCESS OF FIVE THOUSAND AND NO/100THS DOLLARS ($5,000).


                            [SIGNATURE PAGE FOLLOWS]


<PAGE>



      IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its
President, thereunto duly authorized, in its name, under its seal, and on its
behalf the day and year first written above.

WITNESS/ATTEST:                           SMITH-MIDLAND CORPORATION,
                                          a Delaware corporation



/s/   Wesley A. Taylor                   By: /s/   Rodney I. Smith
 __________________________                 ----------------------
Name: Wesley A. Taylor                      Name:  Rodney I. Smith
Title: Secretary                            Title:  President


[CORPORATE SEAL]


                                  CERTIFICATION

      THIS IS TO CERTIFY that this is the Promissory Note described in and
secured by that certain Security Agreement, bearing even date herewith, from the
Maker of this Note to David M. Baroody, Trustee, conveying certain property
(described in said Security Agreement) situate in the Commonwealth of Virginia,
said Security Agreement and this Promissory Note having been executed in my
presence.


                                          /s/ Barbara H. Medlin
                                          ----------------------------
                                                Notary Public

My Commission Expires:  6-30-2000
                        __________

[NOTARIAL SEAL]


<TABLE> <S> <C>


<ARTICLE> 5
<CIK> 0000924719
<NAME> SMITH MIDLAND CORPORATION
<CURRENCY> DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               JUN-30-1998
<EXCHANGE-RATE>                                 0.0001                           
<CASH>                                         276,096
<SECURITIES>                                         0
<RECEIVABLES>                                3,402,736
<ALLOWANCES>                                   433,822
<INVENTORY>                                  1,659,801
<CURRENT-ASSETS>                             6,052,179
<PP&E>                                       1,660,802
<DEPRECIATION>                                  79,714
<TOTAL-ASSETS>                               9,601,503
<CURRENT-LIABILITIES>                        3,247,836
<BONDS>                                              0
                                0
                                          0
<COMMON>                                        30,857
<OTHER-SE>                                   2,196,315
<TOTAL-LIABILITY-AND-EQUITY>                 9,601,503
<SALES>                                      6,428,072
<TOTAL-REVENUES>                             6,521,420
<CGS>                                        4,858,896
<TOTAL-COSTS>                                6,116,685
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             230,229
<INCOME-PRETAX>                                174,506
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                            174,506
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   174,506
<EPS-PRIMARY>                                      .06
<EPS-DILUTED>                                      .06
        



</TABLE>



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