Exhibit 10.13

 

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U.S. Small Business Administration

 

NOTE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Date

03/10/11

 

 

Loan Amount

$2,100,000.00

 

 

Interest Rate

Prime Rate plus 2.75%

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Operating Company

N/A

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

1.             PROMISE TO PAY:

In return for the Loan, Borrower promises to pay to the order of Lender the
amount of Two Million One Hundred Thousand Dollars,  interest on the unpaid
principal balance, and all other amounts required by this Note.

 

2.             DEFINITIONS:

“Collateral” means any property taken as security for payment of this Note or
any guarantee of this Note.

“Guarantor” means each person or entity that signs a guarantee of payment of
this Note.

“Loan” means the loan evidenced by this Note.

“Loan Documents” means the documents related to this loan signed by Borrower,
any Guarantor, or anyone who pledges collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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3.             PAYMENT TERMS:

 

Borrower must make all payments at the place Lender designates. The payment
terms for this Note are:

 

The interest rate on this Note will fluctuate.  The initial interest rate is
6.00% per year.  This initial rate is the Prime Rate in effect on the first
business day of the month in which SBA received the loan application, plus
2.75%.  The initial interest rate must remain in effect until the first change
period begins.

 

Borrower must pay a total of 3 payments of interest only on the disbursed
principal balance beginning one month from the month this Note is dated and
every month thereafter; payments must be made on the first calendar day in the
months they are due.

 

Borrower must pay principal and interest payments of $23,751.28 every month,
beginning four months from the month this Note is dated; payments must be made
on the first calendar day in the months they are due.

 

Lender will apply each installment payment first to pay interest accrued to the
day Lender receives the payment, then to bring principal current, then to pay
any late fees, and will apply any remaining balance to reduce principal.

 

The interest rate will be adjusted every calendar quarter (the “change period”).

 

The “Prime Rate” is the prime rate in effect on the first business day of the
month (as published in the Wall Street Journal) in which SBA received the
application, or any interest rate change occurs.  Base Rates will be rounded to
two decimal places with .004 being rounded down and .005 being rounded up.

 

The adjusted interest rate will be 2.75% above the Prime Rate.  Lender will
adjust the interest rate on the first calendar day of each change period.  The
change in interest rate is effective on that day whether or not Lender gives
Borrower notice of the change.

 

Lender must adjust the payment amount at least annually as needed to amortize
principal over the remaining term of the note.

 

If SBA purchases the guaranteed portion of the unpaid principal balance, the
interest rate becomes fixed at the rate in effect at the time of the earliest
uncured payment default.  If there is no uncured payment default, the rate
becomes fixed at the rate in effect at the time of purchase.

 

Loan Prepayment:

 

Notwithstanding any provision in this Note to the contrary:

 

Borrower may Prepay this Note.  Borrower may prepay 20%  or less of the unpaid
principal balance at any time without notice.  If Borrower prepays more than 20%
and the Loan has been sold on the secondary market, Borrower must:

 

a.             Give Lender written notice;

b.             Pay all accrued interest; and

c.             If the prepayment is received less than 21 days from the date
Lender receives the notice, pay an amount equal to 21 days’ interest from the
date lender receives the notice, less any interest accrued during the 21 days
and paid under subparagraph b., above.

 

If Borrower does not prepay within 30 days from the date Lender receives the
notice, Borrower must give Lender a new notice.

 

All remaining principal and accrued interest is due and payable 10 years from
date of Note.

 

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Late Charge:  If a payment on this Note is more than 10 days late, Lender may
charge Borrower a late fee of up to 5.00% of the unpaid portion of the regularly
scheduled payment.

 

4.             DEFAULT:

Borrower is in default under this Note if Borrower does not make a payment when
due under this Note, or if Borrower or Operating Company:

A.            Fails to do anything required by this Note and other Loan
Documents;

B.            Defaults on any other loan with Lender;

C.            Does not preserve, or account to Lender’s satisfaction for, any of
the Collateral or its proceeds;

D.            Does not disclose, or anyone acting on their behalf does not
disclose, any material fact to Lender or SBA;

E.             Makes, or anyone acting on their behalf makes, a materially false
or misleading representation to Lender or SBA;

F.             Defaults on any loan or agreement with another creditor, if
Lender believes the default may materially affect Borrower’s ability to pay this
Note;

G.            Fails to pay any taxes when due;

H.            Becomes the subject of a proceeding under any bankruptcy or
insolvency law;

I.              Has a receiver or liquidator appointed for any part of their
business or property;

J.             Makes an assignment for the benefit of creditors;

K.            Has any adverse change in financial condition or business
operation that Lender believes may materially affect Borrower’s ability to pay
this Note;

L.             Reorganizes, merges, consolidates, or otherwise changes ownership
or business structure without Lender’s prior written consent; or

M.           Becomes the subject of a civil or criminal action that Lender
believes may materially affect Borrower’s ability to pay this Note.

 

5.             LENDER’S RIGHTS IF THERE IS A DEFAULT:

Without notice or demand and without giving up any of its rights, Lender may:

A.            Require immediate payment of all amounts owing under this Note;

B.            Collect all amounts owing from any Borrower or Guarantor;

C.            File suit and obtain judgment;

D.            Take possession of any Collateral; or

E.             Sell, lease, or otherwise dispose of, any Collateral at public or
private sale, with or without advertisement.

 

6.             LENDER’S GENERAL POWERS:

Without notice and without Borrower’s consent, Lender may:

A.            Bid on or buy the Collateral at its sale or the sale of another
lienholder, at any price it chooses;

B.            Incur expenses to collect amounts due under this Note, enforce the
terms of this Note or any other Loan Document, and preserve or dispose of the
Collateral.  Among other things, the expenses may include payments for property
taxes, prior liens, insurance, appraisals, environmental remediation

 

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costs, and reasonable attorney’s fees and costs. If Lender incurs such expenses,
it may demand immediate repayment from Borrower or add the expenses to the
principal balance;

C.            Release anyone obligated to pay this Note;

D.            Compromise, release, renew, extend or substitute any of the
Collateral; and

E.             Take any action necessary to protect the Collateral or collect
amounts owing on this Note.

 

7.             WHEN FEDERAL LAW APPLIES:

When SBA is the holder, this Note will be interpreted and enforced under federal
law, including SBA regulations. Lender or SBA may use state or local procedures
for filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using such procedures, SBA does not waive any federal
immunity from state or local control, penalty, tax, or liability.  As to this
Note, Borrower may not claim or assert against SBA any local or state law to
deny any obligation, defeat any claim of SBA, or preempt federal law.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Note, Borrower and Operating Company include the successors of each,
and Lender includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            All individuals and entities signing this Note are jointly and
severally liable.

B.            Borrower waives all suretyship defenses.

C.            Borrower must sign all documents necessary at any time to comply
with the Loan Documents and to enable Lender to acquire, perfect, or maintain
Lender’s liens on Collateral.

D.            Lender may exercise any of its rights separately or together, as
many times and in any order it chooses. Lender may delay or forgo enforcing any
of its rights without giving up any of them.

E.             Borrower may not use an oral statement of Lender or SBA to
contradict or alter the written terms of this Note.

F.             If any part of this Note is unenforceable, all other parts remain
in effect.

G.            To the extent allowed by law, Borrower waives all demands and
notices in connection with this Note, including presentment, demand, protest,
and notice of dishonor. Borrower also waives any defenses based upon any claim
that Lender did not obtain any guarantee; did not obtain, perfect, or maintain a
lien upon Collateral; impaired Collateral; or did not obtain the fair market
value of Collateral at a sale.

 

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10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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11.           BORROWER’S NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated under this Note as
Borrower.

 

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Chief Manager

 

 

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U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Appliance Recycling Centers of America, Inc.

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Appliance Recycling Centers of America, Inc.

 

 

By:

/s/ Edward R. Cameron

 

 

 

Edward Cameron, President

 

 

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U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Safe Disposal Systems, Inc.

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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10.           STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Safe Disposal Systems, Inc.

 

 

 By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

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

 

Guarantor:

Safe Disposal Systems, Inc.

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date:

03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$2,100,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

Safe Disposal Systems, Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

Signed, acknowledged and delivered in the presence of:

 

 

/s/ Denise Cascio

 

Witness

 

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

 

[g93321kg03i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

4301 Operations, LLC

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

4301 Operations, LLC

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

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

 

Guarantor:

4301 Operations, LLC

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date:

03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$2,100,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

4301 Operations, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

Signed, acknowledged and delivered in the presence of:

 

 

/s/ Denise Cascio

 

Witness

 

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

 

[g93321kg05i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

S.D.S. Service Inc.

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

S.D.S. Service Inc.

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

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

 

Guarantor:

S.D.S. Service Inc.

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date:

03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$2,100,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

S.D.S. Service Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

Signed, acknowledged and delivered in the presence of:

 

 

/s/ Denise Cascio

 

Witness

 

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

 

[g93321kg05i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Scarabee Holdings, LLC

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Scarabee Holdings, LLC

 

 

 By:

/s/ James Ford

 

 

 

James Ford, Manager

 

 

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

 

[g93321kg07i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Brian Conners, a Pennsylvania state-chartered commercial banking corporation

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                      SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

 

/s/ Brian Conners

 

 

Brian Conners, individually

 

 

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

 

[g93321kg07i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44712650-04

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

James Ford

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$2,100,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of Two
Million One Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

 

/s/ James Ford

 

 

James Ford, individually

 

 

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

 

SECURITY AGREEMENT - COMMERCIAL

 

This Security Agreement - Commercial (“Security Agreement”) is executed, made
and delivered this 10th day of March, 2011 by ARCA Advanced Processing, LLC,
Safe Disposal Systems, Inc., 4301 Operations, LLC, S.D.S. Service Inc. and
Scarabee Holdings, LLC (herein the “Debtor”), whose address is 4301 N. Delaware
Avenue, Bldg. A, Philadelphia, PA 19137, for the benefit of Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation (the “Secured
Party”),  whose address is 159 E. High Street, Pottstown, PA  19464.

 

FOR VALUE RECEIVED, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Debtor grants to Secured Party the security interest (and the
pledges and assignments as applicable) hereinafter set forth and agrees with
Secured Party as follows:

 

A.            OBLIGATIONS SECURED.  The security interest and pledges and
assignments as applicable granted hereby are to secure punctual payment and
performance of the following (i) a certain promissory note from ARCA Advanced
Processing, LLC, the (“Borrower”) of even date herewith in the original
principal sum of Two Million One Hundred Thousand Dollars and No Cents
($2,100,000.00) and payable to the order of Secured Party (the “Note”), and any
and all extensions, renewals, modifications and rearrangements thereof; and
(ii) any and all other indebtedness, liabilities and obligations whatsoever of
Debtor to Secured Party whether direct or indirect, absolutely or contingent,
primary or secondary, due or to become due and whether now existing or hereafter
arising and howsoever evidenced or acquired, whether joint or several, or joint
and several (all of which are herein separately and collectively referred to as
the “Obligations”).  Debtor acknowledges that the security interest hereby
granted shall secure all future advances as well as any and all other
indebtedness, liabilities and obligations of Debtor to Secured Party whether now
in existence or hereafter arising.

 

B.            USE OF COLLATERAL.  Debtor represents, warrants and covenants that
the Collateral will be used by the Debtor primarily for business, commercial, or
other similar purposes.

 

C.            DESCRIPTION OF COLLATERAL.  Debtor hereby grants to Secured Party
a security interest in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge
and assignment of, as applicable), the following property:

 

All Accounts.  A security interest in all accounts now owned or existing as well
as any and all that may hereafter arise or be acquired by Debtor, and all the
proceeds and products thereof, including without limitation, all notes, drafts,
acceptances, instruments and chattel paper arising therefrom, and all returned
or repossessed goods arising from or relating to any which accounts, or other
proceeds of any sale or other disposition of inventory.

 

All Inventory.  A security interest in all of Debtor’s inventory, including all
goods, merchandise, raw materials, goods in process, finished goods and other
tangible personal property, wheresoever located, now owned or hereafter acquired
and held for sale or lease or furnished or to be furnished under contracts for
service or used or consumed in Debtor’s business, and all additions and
accessions thereto, and all leases and contracts with respect thereto, and all
documents of title evidencing. or representing any part thereof, and all
products and proceeds thereof, whether in the possession of the Debtor,
warehouseman, bailee, or any other person.

 

All Equipment, Furniture, Fixtures and other Tangible Property.  A security
interest in all equipment, furniture, fixtures and other tangible property of
every nature and description whatsoever, now owned or hereafter acquired by
Debtor, including all appurtenances and additions thereto, and substitutions
therefor and replacement thereof, wheresoever located, including all tools,
parts and accessories used in connection therewith and including but not limited
to the collateral listed on Exhibit A” attached hereto.

 

General Intangibles.  A security interest in all general intangibles and other
personal property now owned or hereafter acquired by Debtor other than goods,
accounts, chattel paper, documents

 

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

 

or instruments.

 

Chattel Paper.  A security interest in all of Debtor’s interest under chattel
paper, lease agreements and other instruments or documents, whether now existing
or owned by Debtor or hereafter arising or acquired by Debtor, evidencing both a
debt and security interest in or lease of specific goods.

 

Instruments.  A pledge and assignment of and security interest in all of
Debtor’s Instruments now owned or existing as well as hereafter acquired or
arising instruments and documents.

 

The term “Collateral” as used in this Agreement shall mean and include, and the
security interest (and pledge and assignment as applicable) shall cover, all of
the foregoing property, as well as any accessions, additions and attachments
thereto, and the proceeds and products thereof, including without limitation,
all cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all returned or repossessed
goods arising from or relating to any of the property described herein or other
proceeds of any sale or other disposition of such property.

 

As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured
Party a security interest in, and a pledge and assignment of, any and all money,
property, deposit accounts, accounts, securities, documents, chattel paper,
claims, demands, instruments, items or deposits of the Debtor, and each of them,
or to which any of them is a party, now held or hereafter coming within Secured
Party’s custody or control, including without limitation, all certificates of
deposit and other depository accounts, whether such have matured or the exercise
of Secured Party’s rights results in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon the Debtor, Secured Party may
exercise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party’s rights and remedies under
this paragraph shall be in addition to and cumulative of any other rights or
remedies at law and equity, including, without limitation, any rights of set-off
to which Secured Party may be entitled.

 

D.            REPRESENTATIONS. WARRANTIES AND COVENANTS OF DEBTOR.  Debtor
represents and warrants as follows:

 

1.             Ownership; No Encumbrances.  Except for the security interest
(and pledges and assignments as applicable) granted hereby, the Debtor is, and
as to any property acquired after the date hereof which is included within the
Collateral, Debtor will be, the owner of all such Collateral free and clear from
all charges, liens, security interests, adverse claims and encumbrances of any
and every nature whatsoever.

 

2.             No Financing Statements.  There is no financing statement or
similar filing now on file in any public office covering any part of the
Collateral except those already disclosed to Secured Party by the pre-closing
searches, and Debtor will not execute and there will not be on file in any
public office any financing statement or similar filing except the pari passu
financing statements filed or to be filed in favor of, or assigned or to be
assigned on the date hereof to, Secured Party.

 

3.             Accuracy of Information.  All information furnished to Secured
Party concerning Debtor, the Collateral and the Obligations, or otherwise for
the purpose of obtaining or maintaining credit, is or will be at the time the
same is furnished, accurate and complete in all material respects.

 

4.             Authority.  Debtor has full right and authority to execute and
perform this Agreement and to create the security interest (and pledges and
assignment as applicable) created by this Agreement. The making and performance
by Debtor of this Agreement will not violate any articles of incorporation,
bylaws or similar document respecting Debtor, any provision of law, any order of
court or governmental agency, or any indenture or other agreement to which
Debtor is a party, or by which Debtor

 

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or any of Debtor’s property is bound, or be in conflict with, result in a breach
of or constitute (with due notice and/or lapse of time) a default under any such
indenture or other agreement, or result in the creation or imposition of any
charge, lien, security interest, claim or encumbrance of any and every nature
whatsoever upon the Collateral, except as contemplated by this Agreement.

 

5.             Addresses.  The address of Debtor designated at the beginning of
this Agreement is Debtor’s place of business if Debtor has only one place of
business; Debtor’s chief executive office if Debtor has more than one place of
business; or Debtor’s residence if Debtor has no place of business. Debtor
agrees not to change such address without advance written notice to Secured
Party.

 

E.             GENERAL COVENANTS.  Debtor covenants and agrees as follows:

 

1.             Operation of Collateral.  Debtor agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper
manner, and in conformity with all applicable permits or licenses. Debtor shall
comply in all respects with all applicable statutes, laws, ordinances and
regulations. Debtor shall not use the Collateral in any unlawful manner or for
any unlawful purpose, or in any manner or for any purpose that would expose the
Collateral to unusual risk, or to penalty, forfeiture or capture, or that would
render inoperative any insurance in connection with the Collateral.

 

2.             Condition.  Debtor shall maintain, service and repair the
Collateral so as to keep it in good operating condition. Debtor shall replace
within a reasonable time all parts that may be worn out, lost, destroyed or to
otherwise rendered unfit for use, with appropriate replacement parts . Debtor
shall obtain and maintain in good standing at all times all applicable permits,
licenses, registrations and certificates respecting the Collateral.

 

3.             Assessments.  Debtor shall promptly pay when due all taxes,
assessments, license fees, and governmental charges levied or assessed against
Debtor or with respect to the Collateral or any part thereof.

 

4.             No Encumbrances.  Debtor agrees not to suffer or permit any
charge, lien, security interest, adverse claim or encumbrance of any and every
nature whatsoever against the Collateral or any part thereof.

 

5.             No Removal.  Except as otherwise provided in this Agreement,
Debtor shall not remove the Collateral from the County or counties designated at
the beginning of this Agreement without Secured Party’s written consent.

 

6.             No Transfer.  Except as otherwise provided in this Agreement with
respect to inventory,  Debtor shall not, without the prior written consent of
Secured Party, sell, assign, transfer, lease, charter, encumber, hypothecate or
dispose of the Collateral, or any part thereof, or interest therein or offer to
do any of the foregoing.

 

7.             Notices and Reports.  Debtor shall promptly notify Secured Party
in writing of any change in the name, identity or structure of Debtor, any
charge, lien, security interest, claim or encumbrance asserted against the
Collateral, any litigation against Debtor or the Collateral, any theft, loss,
injury or similar incident involving the Collateral, and any other material
matter adversely affecting Debtor or the Collateral. Debtor shall furnish such
other reports, information and data regarding Debtor’s financial condition and
operations, the Collateral and such other matters as Secured Party may request
from time to time.

 

8.             Landlord’s Waivers.  Debtor shall furnish to Secured Party, if
requested, a landlord’s waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord’s waivers to be in such form and upon such terms as are acceptable to
Secured Party.

 

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9.             Additional Filings.  Debtor agrees to execute and deliver such
financing statement or statements, or amendments thereof or supplements thereto,
or other documents as Secured Party may from time to time require in order to
comply with the Minnesota Uniform Commercial Code (or other applicable state
laws of the jurisdiction where any of the Collateral is located) and to preserve
and protect the Secured Party’s rights to the Collateral.

 

10.           Protection of Collateral.  Secured Party, at its option, whether
before or after default, but without any obligation whatsoever to do so, may
(a) discharge taxes, claims, charges, liens, security interests, assessments or
other encumbrances of any and every nature whatsoever at any time levied, placed
upon or asserted against the Collateral, (b) place and pay for insurance on the
Collateral, including insurance that only protects Secured Party’s interest,
(c) pay for the repair, improvement, testing, maintenance and preservation of
the Collateral, (d) pay any filing, recording, registration, licensing or
certificate fees or other fees and charges related to the Collateral, or
(e) take any other action to preserve and protect the Collateral and Secured
Party’s rights and remedies under this Agreement as Secured Party may deem
necessary or appropriate. Debtor agrees that Secured Party shall have no duty or
obligation whatsoever to take any of the foregoing action. Debtor agrees to
promptly reimburse Secured Party upon demand for any payment made or any expense
incurred by the Secured Party pursuant to this authorization. These payments and
expenditures, together with interest thereon from date incurred until paid by
Debtor at the maximum contract rate allowed under applicable laws, which Debtor
agrees to pay, shall constitute additional Obligations and shall be secured by
and entitled to the benefits of this Agreement.

 

11.           Inspection.  Debtor shall at all reasonable times allow Secured
Party by or through any of its officers, agents, attorneys or accountants, to
examine the Collateral, wherever located, and to examine and make copies of or
extracts from Debtor’s books and records.

 

12.           Further Assurances.  Debtor shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and
assurances as Secured Party may request from time to time to protect, assure and
enforce Secured Party’s rights and remedies.

 

13.           Insurance.  Debtor shall have and maintain insurance at all times
with respect to all tangible Collateral insuring against risks of fire
(including so-called extended coverage), theft and such other risks as Secured
Party may require, containing such terms, in such form and amounts and written
by such companies as may be satisfactory to Secured Party, all of such insurance
to contain loss payable clauses in favor of Secured Party as its interest may
appear. All policies of insurance shall provide for fifteen (15) days written
minimum cancellation notice to Secured Party and at the request of Secured Party
shall be delivered to and held by it. Secured Party is hereby authorized to act
as attorney for Debtor in obtaining, adjusting, settling and canceling such
insurance to the Obligations secured hereby whether or not such Obligations are
then due and payable. Debtor specifically authorizes Secured Party to disclose
from the policies of insurance to prospective insurers regarding the Collateral.

 

14.           Additional Collateral.  If Secured Party should at any time be of
the opinion that the Collateral is impaired or insufficient, or has declined or
may decline in value, or should Secured Party deem payment of the Obligations to
be insecure, then Secured Party may call for additional security satisfactory to
Secured Party, and Debtor promises to furnish such additional security
forthwith. The call for additional security may be oral, by messenger or
telefax, or United States mail addressed to Debtor, and shall not affect any
other subsequent right of Secured Party to exercise the same.

 

15.           Goods.  Notwithstanding anything to the contrary contained in this
agreement, if any Debtor is a “consumer” as defined Regulation AA of the Board
of Governors of the Federal Reserve System, 12 C.F.R. Part 227, or the Federal
Trade Commission Credit Practices Rule, 16 C.F.R. Part 444, as applicable, no
lien or security interest created or evidenced by this agreement shall extend to
or cover a non-possessory lien or security interest in “household goods,” other
than a purchase money lien or security interest, in accordance with such
regulations as applicable.

 

F.             ADDITIONAL PROVISIONS REGARDING ACCOUNTS.  The following
provisions shall apply to all accounts included within the Collateral:

 

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1.             Definitions.  The term “account”, as used in this Agreement,
shall have the same meaning as set forth in the Uniform Commercial Code of
Minnesota in effect as of the date of execution hereof, and as set forth in any
amendment to the Uniform Commercial Code of Minnesota to become effective after
the date of execution hereof, and also shall include all present and future
notes, instruments, documents, general intangibles, drafts, acceptances and
chattel paper of Debtor, and the proceeds thereof.

 

2.             Additional Warranties.  As of the time any account becomes
subject to the security interest (or pledge or assignment as applicable) granted
hereby, Debtor shall be deemed further to have warranted as to such and all of
such accounts as follows: (a) each account and all papers and documents relating
thereto are genuine and in all respects what they purport to be; (b) each
account is valid and subsisting and arises out of a bona fide sale or lease of
goods sold or leased and delivered to, or out of and for services therefore
actually rendered by the Debtor to, the account debtor named in the account;
(c) the amount of the account represented as owing is the correct amount
actually and unconditionally owning except for normal cash discounts and is not
subject to any set-offs, credits, defenses, deductions or countercharges; and
(d) Debtor is the owner thereof free and clear of any charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.

 

3.             Collection of Accounts.  Secured Party shall have the right in
its own name or in the name of the Debtor, whether before or after default, to
require Debtor forthwith to transmit all proceeds of collection of accounts
directly to Secured Party, to demand, collect, receive, receipt for, sue for,
compound and give acquittal for, any and all amounts due or to become due on the
accounts and to endorse the name of the Debtor on all Commercial paper given in
payment or part payment thereof, and in Secured Party’s discretion to file any
claim or take any other action or proceeding that Secured Party, may deem
necessary or appropriate to protect and preserve and realize upon the accounts
and related Collateral. Unless and until Secured Party elects to collect
accounts, and the privilege of Debtor to collect accounts is revoked by Secured
Party in writing, Debtor shall continue to collect accounts, account for same to
Secured Party, and shall not commingle the proceeds of collection of accounts
with any funds of the Debtor. In order to assure collection of accounts in which
Secured Party has a security interest (or which have been pledged or assigned to
Secured Party as applicable) hereunder, Secured Party may notify the post office
authorities to change the address for delivery of mail addressed to Debtor to
such address as Secured Party may designate, and to open and dispose of such
mail and receive the collections of accounts included herewith. Secured Party
shall have no duty or obligation whatsoever to collect any account, or to take
any other action to preserve or protect the Collateral; however, Debtor releases
Secured Party from any claim or claims for loss or damage arising from any act
or omission of Secured Party and its officers, directors, employees or agents,
should Secured Party elect to collect any account or take any possession of any
Collateral.

 

4.             Identification and Assignment of Accounts.  Upon Secured Party’s
request, whether before or after default, Debtor shall take such action and
execute and deliver such documents as Secured Party may request in order to
identify, confirm, mark, segregate and assign accounts and to evidence Secured
Party’s interest in same. Without limitation of the foregoing Debtor, upon
request, agrees to assign accounts to Secured Party, identify and mark accounts
as being subject to the security interest (or pledge or assignment as
applicable) granted hereby, mark Debtors books and records to reflect such
security interests, pledges and assignments, and forthwith to transmit to
Secured Party in the form received by Debtor any and all proceeds of collection
of such accounts.

 

5.             Account Reports.  Debtor will deliver to Secured Party, as Lender
may require, a written report in form and in content satisfactory to Secured
Party, showing a listing and aging of accounts and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of the assertion by any account debtor of any set-off, defense or
claim regarding an account or any other matter adversely affecting any account.

 

6.             Segregation of Returned Goods.  Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property. Debtor shall as often as requested by Secured Party, but not less

 

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often than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included in assignments or
identifications made pursuant hereto.

 

7.             Right of Off-Set.  Any deposit or other sums at any time credited
by or due from the holder of the Obligations to Debtor or any endorser,
guarantor or surety of any of the Obligations and any securities or other
property of Debtor or any endorser, guarantor or surety of any of the
Obligations in the possession of the holder of the Obligations may at all times
be held and treated as additional and cumulative collateral security for the
payment of the Obligations and Debtor grants Secured Party a security interest
and contractual right of off-set in all such deposits, sums, securities and
other properties as additional and cumulative security for payment of the
Obligations. The holder of the Obligations may apply to set-off such deposits or
other sums against the Obligations at any time in the case of Debtor,  but only
with respect to matured liabilities in case of the endorsers, guarantors, or
sureties of any of the Obligations.

 

G.            ADDITIONAL PROVISIONS REGARDING INVENTORY.  The following
provisions shall apply to all inventory included within the Collateral:

 

1.             Inventory Reports.  Debtor will deliver to Secured Party as
Secured Party may require, on such frequency as Secured Party may request, a
written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Debtors opening
inventory, inventory acquired, inventory sold, inventory leased, inventory
returned, inventory used in Debtor’s business, closing inventory, any other
inventory not within the preceding categories and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of any matter adversely affecting the inventory, including,
without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss of depreciation.

 

2.             Location of Inventory.  Debtor will promptly notify Secured Party
in writing of any addition to, change in or discontinuance of its place(s) of
business as shown in this Agreement, the places at which inventory is located as
shown herein, the location of its chief executive office and the location of the
office where it keeps its records as set forth herein. All Collateral will be
located at the places of business shown below, as modified by any written
notices given pursuant hereto.

 

3.             Uses of Inventory.  Except as set forth in the loan agreement,
unless and until the privilege of Debtor to use inventory in the ordinary course
of Debtor’s business is revoked by Secured Party in the event of default or if
Secured Party deems itself insecure, Debtor may use the inventory in any manner
not inconsistent with this Agreement, may lease or sell that part of the
Collateral consisting of inventory provided that all such leases and sales are
in the ordinary course of business, and use and consume any raw materials or
supplies that are necessary in order to carry on Debtor’s business. A sale in
the ordinary course of business does not include a transfer in partial or total
satisfaction of a debt.

 

4.             Accounts as Proceeds.  All accounts that are proceeds of the
inventory included within the Collateral shall be subject to all of the terms
and provisions hereof pertaining to accounts.

 

5.             Protection of Inventory.  Debtor shall take all action necessary
to protect and preserve the inventory.

 

6.             Assignment of Rents and Leases.  Debtor hereby assigns to Secured
Party all rents and other benefits derived or to be derived from leases
(“Leases”) of the inventory now or hereafter existing or entered into, together
with all guarantees, amendments, modifications, extensions and renewals thereof
(the “Rents”). Prior to a foreclosure by Secured Party of any lien or security
interest which Secured Party may now or hereafter hold covering the inventory,
this Assignment of Rents is not intended to, and shall not, constitute payment
to Secured Party, unless Secured Party terminates Debtor’s license to collect
the Rents, and then it shall constitute payment only to the extent that prior to
foreclosure the Rents are actually received by Secured Party as opposed to
constituting a portion of the voluntary payments of principal and interest on
the indebtedness evidenced and secured hereby, and are not used for the
operation, maintenance or repair of the inventory, or for the payment of costs
and expenses in connection therewith.

 

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Except as otherwise provided herein, Secured Party shall have the absolute
right, power and authority to take any and all actions which Secured Party deems
necessary or appropriate in connection with taking possession of the inventory,
leasing all or any part of the inventory, collecting all or any of the Rents and
enforcing the rights of the lessor under any of the leases, including without
limitation, bringing, prosecuting, defending or settling legal proceedings
against lessees of the inventory. Notwithstanding anything herein to the
contrary, Secured Party shall not be obligated to perform or discharge, and
Secured Party does not undertake to perform or discharge, any obligation, duty
or liability with respect to the Leases or the Rents under or by reason of this
Assignment. This Assignment shall not operate to place responsibility for the
control, care, maintenance or repair of the inventory upon Secured Party, or for
any dangerous or defective condition of the Inventory, or for any negligence in
the arrangement, upkeep, repair, or control of the inventory. Debtor shall
retain a revocable license to collect and receive the Rents as the agent of
Secured Party, and to retain, use and enjoy such Rents, provided that such
revocable license ipso facto terminate without further action by Secured Party
and without notice to Debtor upon the occurrence of any default or event of
default as defined in any note, deed of trust, security agreement, guaranty,
financing statement, fixture filing or other loan documents given to Secured
Party by Debtor or any other party in connection with any indebtedness or
obligation of Debtor to Secured Party.

 

7.             Leased Inventory.  Debtor shall (a) observe and perform
faithfully every obligation which Debtor is required to perform under the
Leases; (b) enforce or secure the performance of, at its sole cost and expense,
every obligation to be performed by the lessees under the Leases; (c) not
collect any Rents in advance of the time when the same shall be due, or
anticipate any payments under any of the Leases, except for bona fide security
deposits not in excess of an amount equal to two (2) months Rent; (d) at the
request of Secured Party, deliver copies of Leases to Secured Party; and (e)
appear and defend against, at Debtor’s sole cost and expense, any action or
proceeding arising under, and in any manner connected with the Leases, the Rents
or the obligations, duties or liabilities of the lessor, lessee or guarantors
thereunder.

 

H.            [INTENTIONALLY OMITTED]

 

I.              [INTENTIONALLY OMITTED]

 

J.             EVENTS OF DEFAULT.  Debtor shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal,
interest or other amount due on any Obligations; (ii) the occurrence of any
event which under the terms of any evidence of indebtedness, indenture, loan
agreement, security agreement or similar instrument permits the acceleration of
maturity of any of obligation of Debtor whether to Secured Party or to others;
(iii) any representation or warranty made by Debtor and/or others to Secured
Party in connection with this Agreement, the Collateral or the Obligations, or
in any statements or certificates, proves incorrect in any material respect as
of the date of the making or the issuance thereof; (iv) default occurs in the
observance or performance of or, if Debtor fails to furnish adequate evidence of
performance of, any provision of this Agreement or of any note, assignment,
transfer, other agreement, document or instrument delivered by Debtor to Secured
Party in connection with this Agreement, the Collateral or the Obligations; (v)
death, dissolution, liquidation, termination of existence, insolvency, business
failure or winding-up of Debtor, or any maker, endorser, guarantor, surety or
other party liable in any capacity for any of the Obligations; (vi) the filing
of a petition in bankruptcy by or against, or the application for appointment of
a receiver or any other legal custodian for any part of the property of, or the
assignment for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy, rearrangement, reorganization, insolvency or
similar laws for the relief of Debtors by or against, the Debtor, or any maker,
endorser, guarantor, surety or other party primarily or secondarily liable for
any of the Obligations; (vii) the Collateral becomes, in the judgment of Secured
Party, impaired, unsatisfactory or insufficient in character or value; (viii)
the filing of any levy, attachment, execution, garnishment or other process
against the Debtor, or any of the Collateral or any maker, endorser, guarantor,
surety, or other party liable in any capacity for any of the Obligations, or
(ix) the Secured Party in good faith believes that the prospect of repayment or
performance of the Obligations or any of the covenants, agreements or other

 

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duties under any writing executed in connection herewith is impaired.

 

K.            REMEDIES.  Upon the occurrence of an Event of Default, or if
Secured Party deems payment or performance of the Obligations to be insecure,
Secured Party, at its option, shall be entitled to exercise any one or more of
the following remedies (all of which are cumulative):

 

1.             Declare Obligations Due.  Secured Party, at its option, may
declare the Obligations or any part thereof immediately due and payable, without
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor, or any other notice
whatsoever, all of which are hereby waived by Debtor, the Borrower and any
maker, endorser, guarantor, surety or other party liable in any capacity for any
of the Obligations.

 

2.             Remedies.  Secured Party shall have all of the rights and
remedies provided for in this Agreement and any other agreements executed by
Debtor, the rights and remedies in the Uniform Commercial Code of  Minnesota,
and any and all rights and remedies at law or in equity, all of which shall be
deemed cumulative. Without limiting the foregoing, Debtor agrees that Secured
Party shall have the right to: (a) require Debtor to assemble the Collateral and
make it available to Secured Party at a place designated by Secured Party that
is reasonably convenient to both parties, which Debtor agrees to do; (b) take
possession of the Collateral with or without process of law, and, in this
connection, enter any premises where the Collateral is located to remove same,
to render it unusable, or to dispose of same on such premises; (c) sell, lease
or otherwise dispose of the Collateral, by public or private proceedings, for
cash or credit, without assumption of credit risks; and/or (d) whether before or
after default, collect and receipt for, compound, compromise, and settle, and
give releases, discharges and acquittances, with respect to, any and all amounts
owed by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of the
type customarily sold on a recognized market, Secured Party will send Debtor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or other disposition will be made. Any requirement of
reasonable notice to Debtor shall be met if such notice is mailed, postage
prepaid, to Debtor at the address of Debtor designated at the beginning of this
Agreement, at least five (5) days before the day of any public sale or at least
five (5) days before the time after which any private sale or other disposition
will be made.

 

3.             Expenses.  Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights and
remedies, in retaking, holding, testing, repairing, and proving, selling,
leasing or disposing of the Collateral, or like expenses, including, without
limitation, attorneys fees and legal expenses incurred by Secured Party. These
expenses, together with interest thereon from date incurred until paid by Debtor
at the maximum contract rate allowed under applicable laws, which Debtor agrees
to pay, shall constitute additional Obligations, and shall be secured and
entitled to the benefits of this Agreement.

 

4.             Proceeds; Surplus; Deficiencies.  Proceeds received by Secured
Party from disposition of the Collateral shall be applied toward Secured Party’s
expenses and other Obligations and in such order or manner as Secured Party may
elect. Debtor shall be entitled to any surplus if one results after lawful
application of the proceeds.

 

5.             Remedies Cumulative.  The rights and remedies of Secured Party
are cumulative and the exercise of any one or more of the rights of remedies
shall not be deemed an election of rights or remedies or a waiver of any other
right or remedy. Secured Party may remedy any default and may waive any default
without waiving the default remedy or without waiving any other prior or
subsequent default.

 

L.            RELINQUISHMENT OF CERTAIN DEFENSES.  Regarding the enforcement of
the security interests and covenants and agreements contained in this Agreement
to secure payment of the Obligations, the Debtor covenants and agrees as
follows:

 

1.             Secured Party’s right of recovery against the Collateral for the
Obligations shall be determined as if Debtor were a primary obligor for the
payment of the Obligations regardless of whether

 

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or not Debtor is in fact primarily liable for all or any part of the
Obligations. Debtor specifically agrees that it shall not be necessary or
required, in order to enforce the remedies under this Agreement, that the
Secured Party have made demand for payment upon the Borrower or any other person
or entity liable for any portion of the Obligations or have made protest thereof
or have given notice to the Borrower or any other party liable thereon of
maturity or nonpayment of the Obligations.

 

2.             The Debtor specifically waives any notice of acceptance of this
Agreement by the Secured Party and of the creation, advancement, existence,
extension, renewal, modification, consolidation, the rearrangement from time to
time of the Obligations, the increase from time to time in the principal amount
thereof, the increase or reduction from time to time of the rate of interest
thereon, or any indulgence from time to time with respect to the Obligations, or
any part thereof, and of nonpayment thereof or default thereon, and waives
grace, demand, protest, presentment and notice of demand, protest, and
presentment with respect to the Obligations, and waives notice of the amount of
the Obligations outstanding at any time, and agrees that the maturity of the
Obligations, or any part thereof, may be accelerated, extended, modified,
amended or renewed from time to time or any other indulgence may be granted with
respect thereto by the Secured Party at its will or as may be agreed by the
Borrower without notice to or further consent by the Debtor, at any time or
times.

 

3.             The Debtor agrees that: (i) no renewal, extension, modification,
consolidation, or rearrangement of or any other indulgence, forbearance or
compromise with respect to the Obligations, or any part thereof; (ii) no
increase in the principal amount of any of the Obligations; (iii) no increase or
reduction of the rate of interest thereon; (iv) no release, withdrawal,
substitution, surrender, subordination, exchange, deterioration, waste or other
impairment of any security or collateral or guaranty now or hereafter held by
the Secured Party for payment of the Obligations, or of any part thereof; (v) no
release of the Borrower, any guarantor, or of any other person primarily or
secondarily liable on the Obligations, or any part thereof; and (vi) no delay or
omission or lack of diligence or care in exercising any right or power with
respect to the Obligations or any security or collateral therefor or under this
Agreement shall in any manner impair, diminish or affect the rights of the
Secured Party or the liability of the Debtor hereunder. The Debtor specifically
agrees that it shall not be necessary or required, and that the Debtor shall not
be entitled to require, that the Secured Party mitigate damages, or file suit or
proceed to obtain or assert a claim for personal judgment against the Borrower
for the Obligations, or make any effort at collection of the Obligations from
the Borrower, or foreclose against or seek to realize upon any security or
collateral now or hereafter existing for the Obligations, or file suit or
proceed to obtain or assert a claim for personal judgment against any other
party (whether maker, guarantor, endorser or surety) liable for the Obligations,
or make any effort at collections of the Obligations from any such other party,
or exercise or assert any other right or remedy to which the Secured Party is or
may be entitled in connection with the Obligations or any security or collateral
or other Agreement therefor, or assert or file any claim against the assets or
estate of the Borrower or any guarantor or other person liable for the
Obligations, or any part thereof, before or as a condition of enforcing the
liability of the Debtor under this Agreement or requiring payment of the
Obligations by the Debtor hereunder, or at any time thereafter. The Debtor
expressly waives any right to the benefit of or to require or control
application of any security or collateral or the proceeds of any security or
collateral now existing or hereafter obtained by the Secured Party as security
for the Obligations, or any part thereof, and agrees that the Secured Party
shall have no duty insofar as the Debtor is concerned to apply upon any of the
Obligations any monies, payments or other property at any time received by or
paid to or in the possession of the Secured Party, except as the Secured Party
shall determine in its sole discretion. The Debtor specifically agrees that
Debtor shall not have any recourse or action against the Secured Party by reason
of any action the Secured Party may take or omit to take in connection with the
Obligations, the collection of any sums or amounts herein mentioned, or in
connection with any security or collateral or any Guaranty at any time existing
therefor.

 

4.             The Debtor agrees to the terms, provisions and conditions of the
Note and other instruments evidencing the Obligations and of any renewal,
modification, consolidation or rearrangement thereof or other agreements which
may have been or may hereafter be executed by the Borrower from time to time
evidencing or in connection with the Obligations or any part thereof, and agrees
that the Debtor’s liability hereunder shall in no manner be affected, reduced,
impaired or released by reason of any term, provision or condition of such Note
or other agreement or by the failure, refusal or omission of the Secured

 

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Party to enforce or observe any of same or any forbearance or compromise made by
the Secured Party or any action taken or omitted to be taken by the Secured
Party pursuant thereto or in connection therewith. The Debtor, by the execution
and delivery of this Agreement agrees, represents, warrants and acknowledges
that Debtor shall be bound by the provisions of any Agreement and Security
Agreement and any Environmental Certificate and Agreement of even date herewith,
from the Borrower to the Secured Party and which purport to be applicable to
Debtor to the same extent and with the same effect as if Debtor had executed and
delivered such document to the Secured Party. In that connection, the Debtor
agrees that the provisions of this Paragraph shall survive any exercise of the
power of sale granted in any instrument securing the Obligations, any
foreclosure of the liens created by any of the instruments securing the
Obligations, any conveyance in lieu of any such foreclosure, the repayment of
the Obligations, and the discharge and release of all liens, rights and
interests securing payment of the Obligations.

 

5.             The Debtor absolutely and unconditionally covenants and a agrees
that: (i) in the event that the Borrower does not or is unable to pay or perform
the Obligations for any reason including, without limitation, liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment or other
similar proceedings affecting the status, composition, identity, existence,
assets or Obligations of the Borrower, or the disaffirmance or termination of
any of the Obligations in or as a result of any such proceedings; and/or (ii) if
all or any part of the Obligations (or any instrument or agreement made or
executed in connection therewith) is for any reason found to be invalid,
illegal, unenforceable, uncollectible or legally impossible, for any reason
whatsoever (including, without limiting the generality of the foregoing, upon
the grounds that the payment and/or performance of the Obligations is ultra
vires or otherwise without authority, may violate applicable usury laws, is
subject to valid defenses, claims or offsets of the Borrower, or any instrument
evidencing any of the Obligations is forged or otherwise irregular), then in any
such case the Debtor shall pay and perform the Obligations as herein provided
and that no such occurrence shall in any way diminish or otherwise affect the
Debtor’s liabilities hereunder.

 

6.             Should the status, composition, structure or name of the Borrower
change, including, but not limited to, by reason of a merger, dissolution,
consolidation or reorganization, this Agreement shall continue and also cover
the Obligations and Obligations of the Borrower under the new status,
composition structure or name according to the terms hereof. If the Borrower is
a general or limited partnership, no termination of said partnership, nor
withdrawal therefrom or termination of any ownership interest therein owned, by
any general or limited partner of such partnership shall alter, limit,
terminate, excuse or modify the Debtor’s liabilities set forth in this
Agreement.

 

7.             In the event any payment from the Borrower to the Secured Party
is held to constitute a preference under the bankruptcy laws, or if for any
other reason the Secured Party is required to refund such payment or pay the
amount thereof to any other party, such payment by the Borrower to the Secured
Party shall not constitute a release of the Debtor from any liability hereunder,
and this Agreement shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments.

 

8.             At all times while any or all of the Obligations are now or
hereafter secured in whole or in part, the Debtor agrees that the Secured Party
may, from time to time, at its discretion, and with or without valuable
consideration, allow substitution, withdrawal, release, surrender, exchange,
subordination, deterioration, waste, loss or other impairment of all or any part
of such security or collateral, without notice to or consent by the Debtor, and
without in anywise impairing, diminishing or releasing the liability of the
Debtor hereunder.

9.             The Debtor waives marshalling of assets and liabilities, sale in
inverse order of alienation, and all defenses given to sureties or Debtors at
law or in equity other than actual payment of the Obligations and performance of
the actions constituting the Obligations, including, but not limited to, any
rights pursuant to the laws of  Minnesota. The failure by the Secured Party to
file or enforce a claim against the estate (either in administration, bankruptcy
or other proceeding) of the Borrower or any other person primarily or
secondarily liable for the Obligations or of any other or others shall not
affect the liability of Debtor hereunder.

 

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M.           OTHER AGREEMENTS.

 

1.             Savings Clause.  Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable usury
laws. If any such excessive interest is so provided for, then in such event (i)
the provisions of this paragraph shall govern and control, (ii) neither the
Debtor nor Debtor’s heirs, legal representatives, successors or assigns or any
other party liable for the payment thereof shall be obligated to pay the amount
of such interest to the extent that it is in excess of the maximum amount
permitted by law, (iii) any such excess interest that may have been collected
shall be, at the option of the holder of the instrument evidencing the
Obligations, either applied as a credit against the then unpaid principal amount
thereof or refunded to the maker thereof, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful rate under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction.

 

2.             Joint and Several Responsibility.  If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtors shall be
joint and several.

 

3.             Waivers.  Debtor and any maker, endorser, guarantor, surety or
other party liable in any capacity respecting the Obligations hereby waived
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor and any other notice
whatsoever.

 

4.             Severability.  Any provision hereof found to be invalid by courts
having jurisdiction shall be invalid only with respect to such provision (only
to the extent necessary to avoid such invalidity). The offending provision shall
be modified to the minimum extent possible to confer upon Secured Party the
benefits intended thereby. Such provision as modified and the remaining
provisions hereof shall be construed and enforced to the same extent as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.

 

5.             Use of Copies.  Any carbon, photographic or other reproduction of
any financing statement signed by Debtor is sufficient as a financing statement
for all purposes, including without limitation, filing in any state as may be
permitted by the provisions of the Uniform Commercial Code of such state.  All
rights and remedies of Secured Party in all such agreements are cumulative, but
in the event of actual conflict in terms and conditions, the terms and
conditions of the latest security agreement shall govern and control.

 

6.             Authorization to File Financing Statements.  The Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Debtor is an organization, the type of organization
and any organizational identification number issued to the Debtor and, (ii) in
the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates.  The Debtor agrees
to furnish any such information to the Secured Party promptly upon the Secured
Party’s request.  The Debtor also ratifies its authorization for the Secured
Party to have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.

 

7.             Notices.  Any notice or demand given by Secured Party to Debtor
in connection with this Agreement, the Collateral or the Obligations shall be
deemed given and effective upon deposit in the United States mail, postage
pre-paid, addressed to Debtor at the address of the Debtor designated at the

 

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beginning of this Agreement. Actual notice to Debtor shall always be effective
no matter how given or received.

 

8.             Headings and Gender.  Paragraph headings in this Agreement are
for convenience only and shall be given no meaning or significance in
interpreting this Agreement. All words used herein shall be construed to be or
such gender of number as the circumstances require.

 

9.             Amendments.  Neither this Agreement nor any of its provisions may
be changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification, waiver or discharge is sought.

 

10.           Binding Effect.  The provisions of this Security Agreement shall
be binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and the rights, powers and remedies of Secured
Party hereunder shall inure to the benefit of the successors and assigns of
Secured Party.

 

11.           Governing Law.  This Security Agreement shall be governed by the
law of Minnesota and applicable federal law.

 

12.           Statute of Frauds.  THIS COMMERCIAL SECURITY AGREEMENT, THE LOAN
AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED HEREIN OR IN THE LOAN
AGREEMENT, OR EXECUTED IN CONNECTION WITH OR ATTACHED TO THE LOAN AGREEMENT,
REPRESENT THE FINAL AGREEMENT BETWEEN DEBTOR AND SECURED PARTY, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN DEBTOR AND SECURED PARTY. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
DEBTOR AND SECURED PARTY.

 

13.          U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No Borrower or
Guarantor may claim or assert against SBA any local or state law to deny any
obligation of Borrower, or defeat any claim of SBA with respect to this Loan.

 

Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

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IN WITNESS WHEREOF, the undersigned has executed this Agreement effective as of
the date first written above.

 

 

 

DEBTOR

 

 

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

 

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

4301 Operations, LLC

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

 

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

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EXHIBIT A

 

See attached list of equipment

 

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Prepared by and return to:

Janet M. Dery, Esquire

Starfield & Smith, P.C.

1300 Virginia Drive, Suite 325

Fort Washington, PA 19034

 

Lot 5, Block 202.04 of the Township of Voorhees Tax Map

 

MORTGAGE

 

NOTICE: THIS DOCUMENT SECURES A VARIABLE INTEREST RATE NOTE AND CONTAINS
PROVISIONS FOR INCREASES UNDER CERTAIN CIRCUMSTANCES IN THE PRINCIPAL BALANCE OF
THE INDEBTEDNESS SECURED HEREBY

 

THIS MORTGAGE is made on 03/10/11, by and between Brian Todd Conners, with an
address of 8 Oak Hollow Drive, Voorhees, New Jersey 08043 (the “Mortgagor”), and
Susquehanna Bank, a Pennsylvania state-chartered commercial banking
corporation,  with an address of 159 E. High Street, Pottstown, Pennsylvania
19464 (the “Mortgagee”).

 

RECITALS

 

Mortgagee, has agreed, pursuant to a Loan Agreement of even date herewith (the
“Loan Agreement”), and subject to the terms set forth therein, to make a loan to
ARCA Advanced Processing, LLC (the “Borrower”) in an aggregate amount of Two
Million One Hundred Thousand Dollars and No Cents ($2,100,000.00) (the “Loan”)
which is being guaranteed by Mortgagor (the “Guarantee”), the Loan Agreement and
Guarantee constituting the consideration for this Mortgage.

 

Borrower has duly executed a promissory note of even date herewith (the “Note”)
to evidence the terms of repayment of the Loan with interest at the rate or
rates established from time to time in accordance with the terms set forth
therein, which Note has been delivered by Borrower to the Mortgagee (the
Mortgagee and any assignee or other lawful owner of the Note being hereinafter
sometimes called “Mortgagee”).  Mortgagor has duly executed the Guarantee to
support the obligations of the Borrower to repay the Loan.  All references
herein to the Note and the obligations arising thereunder shall be deemed to
include the Guarantee and all obligations arising under the Guarantee.

 

All things necessary to make the Note the valid, binding and legal obligation of
Mortgagor, and to make this Mortgage a valid, binding and legal instrument for
the security of the Note in accordance with its terms, have been duly performed,
and the execution and delivery of the Note and this Mortgage by Mortgagor have
been in all respects duly authorized.

 

It has been agreed that the repayment of the Loan with interest, according to
the terms of the Note and any alterations, modifications, substitutions,
extensions or renewals thereof, as well as the performance of the other
covenants, terms and conditions herein, should be secured by the execution of
this Mortgage, which also shall secure payment by Mortgagor of all costs and
expenses incurred in respect to the Loan, including reasonable attorney’s fees
as is hereinafter provided.

 

NOW, THEREFORE, WITNESSETH: in consideration of the premises and of other good
and valuable considerations, the receipt of which is hereby acknowledged,
Mortgagor mortgages, grants, assigns, conveys and transfers unto the Mortgagee,
its successor or successors and assigns, in fee simple, WITH MORTGAGE COVENANTS,
all that land situate in Camden County, New Jersey, being  commonly known as 8
Oak Hollow Drive, Voorhees, Lot 5, Block 202.04 of the Township of Voorhees Tax
Map and more particularly described in Exhibit A attached hereto and made a part
hereof (the “Land”) and the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repair,

 

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replacements and improvements now or hereafter located thereon (hereinafter
sometimes called the “Improvements”).

 

TOGETHER with all the walks, fences, shrubbery, driveways, fixtures, equipment,
machinery, apparatus, fittings, building materials and other articles of
personal property of every kind and nature whatsoever, now or hereafter ordered
for eventual delivery to the Land (whether or not delivered thereto), and all
such as are now or hereafter located in or upon any interest or estate in the
Land or any part thereof and used or usable in connection with any present or
future operation of the Land now owned or hereafter acquired by Mortgagor,
including, without limiting the generality of the foregoing, all heating,
lighting, laundry, clothes washing, clothes drying, incinerating and power
equipment, engines, pipes, tanks, motors, conduits, switchboards, plumbing,
lifting, cleaning, fire-prevention, fire-extinguishing, refrigerating,
ventilating, and communications apparatus, television sets, radio systems,
recording systems, computer equipment, air-cooling and air-conditioning
apparatus, elevators, escalators, shades, awnings, draperies, curtains, fans,
furniture, furnishings, carpeting, linoleum and other floor coverings, screens,
storm doors and windows, stoves, gas and electric ranges, refrigerators, garbage
disposals, sump pumps, dishwashers, washers, dryers, attached cabinets,
partitions, ducts and compressors, landscaping, swimming pools, lawn and garden
equipment, security systems and including all equipment installed or to be
installed or used or usable in the operation of the building or buildings or
appurtenant facilities erected or to be erected in or upon the Land; it being
understood that all of the aforesaid shall be deemed to be fixtures and part of
the Land, but whether or not of the nature of fixtures they shall be deemed and
shall constitute part of the security for the indebtedness herein mentioned and
shall be covered by this Mortgage excluding, however, only personal property
owned by any tenant actually occupying all or part of the premises.  Disposition
of any of the aforesaid or of any interest therein is prohibited; however, if
any disposition is made in violation hereof, the Mortgagee shall have a security
interest in the proceeds therefrom to the fullest extent permitted by the laws
of New Jersey; and

 

TOGETHER with all and singular the rights, alleys, ways, waters, easements,
tenements, privileges, advantages, accessions, hereditaments and appurtenances
belonging or in any way appertaining to the Land and other property described
herein, and the reversions and remainders, earnings, revenues, rents, issues and
profits thereof and including any right, title, interest or estate hereafter
acquired by Mortgagor in the Land and other property described herein; and

 

TOGETHER with all the right, title and interest (but not the obligations) of
Mortgagor, present and future, in and to all present and future accounts,
contract rights (including all fees and other obligations set forth in the
Mortgagee’s commitment to make the Loan), general intangibles, chattel paper,
documents and instruments including but not limited to licenses, construction
contracts, service contracts, utility contracts, options, permits, public works
agreements, bonds, deposits and payments thereunder, relating or appertaining to
the Land and other property described herein and its development, occupancy and
use; and

 

TOGETHER with any right to payment  or for services rendered, whether or not yet
earned by performance, arising from the operation of the improvements or any
other facility on the Land, including, without limitation, (1) all accounts
arising from the operation of the improvements and all proceeds thereof (whether
cash or non-cash, movable or immovable, tangible or intangible) received upon
the sale, exchange, transfer, collection or other disposition or substitution
thereof, and (2) all rights to payment from any consumer credit/charge card
organization or entity, including, without limitation, payments arising from the
use of the American Express Card, Visa Card, Carte Blanche Card, MasterCard,
Diner’s Club, or any other credit card, including those now existing or
hereinafter created or any substitution therefor and all proceeds thereof
(whether cash or non-cash, movable or immovable, tangible or intangible)
received upon the sale, exchange, transfer, collection or other disposition or
substitution thereof; and

 

TOGETHER with all of the rents, royalties, revenues, income, proceeds, profits
and other benefits paid or payable by parties to the leases for using, leasing,
licensing, possessing, occupying, operating from, residing in, selling or
otherwise enjoying the Land, the Improvements, and other property securing the
indebtedness, or any portion thereof.  As used in this Mortgage, the word
“leases” includes any and all leases, subleases, licenses, concessions,
reservations, accounts, permits, contracts, and other agreements (oral or
written, now or hereafter in effect) which grant a possessory interest or right
of occupancy in and

 

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to, or the right to use, or affect all or part of the Land, the improvements,
and other property securing the indebtedness, or any portion thereof; and

 

TOGETHER with all proceeds of and any unearned premiums on any insurance
policies covering the Property (hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Property or
any part thereof; and

 

TOGETHER with all proceeds derived from any taking by condemnation or eminent
domain proceedings or transfer in place or in anticipation thereof of all or any
part of the property described in these granting clauses;

 

TO HAVE AND TO HOLD the Land with Improvements thereupon and all the rights,
easements, profits and appurtenances and other property described above (all of
which is hereinafter sometimes called the “Property”) belonging unto and to the
use of the Mortgagee, and its successor or successors and assigns, in fee simple
forever;

 

BUT for and upon the uses, intents and purposes hereinafter mentioned, that is
to say for the benefit and security of Mortgagee and for the enforcement of the
payment of all sums secured hereby (hereinafter sometimes called the
“Indebtedness”) and the compliance with the terms, covenants and conditions, in
the Note, in the Loan Agreement and in this Mortgage, expressed or implied;

 

SUBJECT, HOWEVER, to the liens and rights of the holders of the contracts and
instruments secured by any instruments that may be described in Exhibit B to
this Mortgage (the “Permitted Encumbrances”);

 

PROVIDED, HOWEVER, that if Mortgagor shall pay or cause to be paid to Mortgagee
all sums secured hereby in the manner stipulated in the Note, the Loan Agreement
and this Mortgage, then and in such case, the estate, right, title and interest
of the Mortgagee in the Property shall cease, determine and become void, and
upon proof being given to the satisfaction of the Mortgagee that the Note has
been paid or satisfied, in accordance with its terms and upon payment of all
fees, costs, charges, expenses and liabilities chargeable or incurred or to be
incurred by the Mortgagee and of any other sums as in this Mortgage provided,
the Mortgagee shall at the expense of Mortgagor, release and discharge this
Mortgage of record, and shall transfer and deliver up to Mortgagor any property
at the time subject to this Mortgage which may be then in their possession,
provided the Mortgagee hereunder shall be entitled to a reasonable fee for the
release and reconveyance of the Property or any partial release and
reconveyance;

 

AND THIS MORTGAGE FURTHER WITNESSETH, that Mortgagor (jointly and severally if
more than one) has covenanted and agreed and does hereby covenant and agree with
the Mortgagee as follows:

 

ARTICLE 1. DEFINITIONS

 

1.1           Definitions.  All capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth or referred to in the Loan
Agreement.

 

ARTICLE 2. COVENANTS AND AGREEMENTS OF MORTGAGOR

 

2.1           Incorporation of Covenants, Conditions and Agreements.  All the
covenants, conditions and agreements contained in the Loan Agreement, the Note,
and the other Loan Documents are hereby made a part of this Mortgage to the same
extent and with the same force as if fully set forth herein.

 

2.2           Title to the Property.  Mortgagor covenants that at the time of
the execution and delivery of this Mortgage it has good title to all of the
property described in the granting clauses of this Mortgage as being presently
granted, assigned, conveyed and transferred hereunder, free and clear of all
liens and encumbrances except for the Permitted Encumbrances; Mortgagor hereby
does and will forever

 

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warrant generally and defend the title to the Property, and every part thereof,
whether now owned or hereafter acquired, unto the Mortgagee and its successor or
successors in the trust and assigns, against all claims and demands by any
person or entity whatsoever; Mortgagor covenants that Mortgagor shall comply
with all the terms, covenants and conditions of all agreements and instruments,
recorded and unrecorded, affecting the Property; Mortgagor covenants that it has
good right and lawful authority to mortgage, give, grant, pledge, assign and
convey the Property in the manner and form herein provided.

 

2.3           Further Assurances.  At any and all times Mortgagor shall furnish
and record all and every such further assurances as may be requisite or as the
Mortgagee shall reasonably require for the better assuring and confirming unto
the Mortgagee the estate and property hereby granted, assigned, conveyed or
transferred, or intended so to be whether now owned or hereafter acquired;
Mortgagor shall bear all expenses, charges and taxes in connection therewith.

 

2.4           Escrow for Taxes.  To better secure the covenant to pay taxes and
fees in the Loan Agreement, Mortgagor agrees that, if Holder so requests,
Mortgagor shall deposit with Holder on the day of each month on which a payment
of interest is due under the Note, beginning with the month following such
request, one-twelfth of the annual taxes next due as estimated by Holder, plus
one-twelfth of the annual fire, hazard and other insurance premiums as required
herein, such deposit to be held by Holder, without interest, to pay said taxes
and premiums.  If payments of interest are due under the Note other than
monthly, appropriate adjustment shall be made in the amount of the aforesaid
periodic deposits.

 

Any amounts deposited pursuant to the provisions of this Section shall not be,
nor be deemed to be, trust funds, nor shall they operate to curtail or reduce
the indebtedness secured hereby, and all such amounts may be commingled with the
general funds of the depositor and be deposited with Mortgagee or at an
institution designated by Mortgagee.  Mortgagee shall not be responsible for the
solvency of such institution, provided it is insured by the Federal Deposit
Insurance Corporation or other regulatory agency at the time of designation.  If
at any time Mortgagee shall determine that the amount then on deposit shall be
insufficient to pay an obligation in full, Mortgagor shall immediately after
demand deposit with Mortgagee the amount of the deficiency determined by
Mortgagee.  Nothing contained in this Section shall be deemed to affect any
right or remedy of Mortgagee under any provisions of this Mortgage or of any
statute or rule of law to pay any such amount and to add the amount so paid,
together with interest at the rate provided for in the Note, to the indebtedness
secured hereby.

 

2.5           Change in Tax Law.  In the event of the passage after date of this
Mortgage of any law changing in any way the laws for the taxation of deeds of
trust or debts secured by deeds of trust, or the manner of collection of any
such taxation so as to affect this Mortgage, Mortgagee may give thirty (30)
days’ written notice to Mortgagor requiring the payment of the indebtedness
secured hereby.  If such notice be given, the indebtedness secured hereby shall
become due and payable at the expiration of said thirty (30) days; provided,
however, that such requirement of payment shall be ineffective if Mortgagor is
permitted by law to pay the whole of such tax in addition to all other payments
required hereunder, without any penalty or charge thereby accruing to Mortgagee,
and if Mortgagor in fact pays such tax prior to the date upon which payment is
required by such notice.

 

2.6           Activities on the Property.  Mortgagor shall not suffer any act to
be done or any conditions to exist on the Property or any part thereof or any
thing or article to be brought thereon (i) which may cause structural injury to
the improvements on the Land; or (ii) which would cause the value or usefulness
of the Property or any part thereof to diminish (ordinary wear and tear
excepted); or (iii) which may be dangerous, unless safeguarded as required by
law; or (iv) which may in fact or in law, constitute a nuisance, public or
private; or (v) which may void or make voidable any insurance then in force or
required by the terms of this Mortgage, the Loan Agreement to be in force.

 

2.7           Additional Insurance.  If required by the Mortgagee, in addition
to the provisions of and to the extent not so provided by the Loan Agreement,
Mortgagor shall at all times maintain during the entire term of this Mortgage
the following insurance, in form and substance satisfactory to Mortgagee:

 

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(a)  Workers’ Compensation.  During any construction, repair, restoration or
replacement of improvements on the Land, Mortgagor shall cause all contractors
and subcontractors (including Mortgagor if it acts as a contractor) to obtain
and keep in effect workers’ compensation insurance to the full extent required
by applicable law and also which shall cover all employees of each contractor
and subcontractor; upon demand, Mortgagor shall provide evidence satisfactory to
Mortgagee that it is complying with this covenant.

 

All insurance for loss or damage shall provide that losses, if any, shall be
payable to Mortgagee, as its interest may appear.  Mortgagor will pay the
premiums for all insurance and deliver to Mortgagee the policies of insurance or
duplicates thereof, or other evidence satisfactory to Mortgagee of such
insurance coverage.  Each insurer shall agree, by endorsement upon the policy or
policies issued by it, or by independent instrument furnished to Mortgagee, that
(i) it will give Mortgagee thirty (30) days’ prior written notice of the
effective date of any material alteration or cancellation of such policy; and
(ii) the coverage of Mortgagee shall not be terminated, reduced or affected in
any manner regardless of any breach or violation by Mortgagor of any warranties,
declarations or conditions of such insurance policy or policies.  The proceeds
of such insurance shall be applied, at Mortgagee’s option, toward the
replacement, restoration or repair of the Property which may be lost, stolen or
destroyed or damaged or toward payment of any indebtedness of Mortgagor to
Mortgagee.

 

2.8           Additional Advances.  If Mortgagor shall fail to perform any of
the covenants or satisfy any of the conditions contained herein, Mortgagee may
make advances or payments towards performance or satisfaction of the same but
shall be under no obligation so to do; and all sums so advanced or paid shall be
at once repayable by Mortgagor and shall bear interest at the Default Rate from
the date the same shall become due and payable until the date paid, and all sums
so advanced or paid, with interest as aforesaid, shall become a part of the
indebtedness secured hereby; but no such advance or payment shall relieve
Mortgagor from any default hereunder.  If Mortgagor shall fail to perform any of
the covenants or satisfy any of the conditions contained herein, Mortgagee may
use any funds of Mortgagor towards performance or satisfaction of the same but
shall be under no obligation so to do; and no such use of funds shall relieve
Mortgagor from any default hereunder.

 

2.9           Condemnation Awards.  Should the grade of any street be altered or
all or any part of the Property be condemned or taken through eminent domain
proceedings, all or such part of any award or proceeds derived therefrom, as
Mortgagee in its sole discretion may determine in writing, shall be paid to
Mortgagee and applied to the payment of the indebtedness secured hereby (in such
manner or combination thereof, including inverse order of maturity of
installments of principal, if any, as Mortgagee may, in its sole discretion,
elect) and all such proceeds are hereby assigned to Mortgagee.

 

2.10         Costs of Defending and Enforcing the Lien.  Mortgagor shall pay all
costs, charges and expenses, including appraisals, title examinations, and
reasonable attorney’s fees, which Mortgagee may incur in defending or enforcing
the validity or priority of the legal operation and effect of this Mortgage, or
any term, covenant or condition hereof, or in collecting any sum secured hereby,
or in protecting the security of Mortgagee including without limitation being a
party in any condemnation, bankruptcy or administrative proceedings, or, if an
Event of Default shall occur, in administering and executing the trust hereby
created and performing their powers, privileges and duties hereunder.  Mortgagee
may make advances or payments for such purposes but all advances or payments
made by Mortgagee for such purposes shall be repayable immediately by Mortgagor
and shall bear interest at the Default Rate from the date the same shall become
due and payable until the date paid, and any such sum or sums with interest as
aforesaid shall become a part of the indebtedness secured hereby; but no such
advance or payment shall relieve Mortgagor from any default hereunder.

 

2.11         Modification of Terms; No Novation.  Mortgagee may at any time, and
from time to time, extend the time for payment of the indebtedness secured
hereby, or any part thereof, or interest thereon, and waive, modify or amend any
of the terms, covenants or conditions in the Note, in the Guarantee, in this
Mortgage or in any other Loan Document, in whole or in part, either at the
request of Mortgagor or of any person having an interest in the Property, accept
one or more notes in replacement or substitution of the Note, consent to the
release of all or any part of the Property from the legal operation

 

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and effect of this Mortgage, take or release other security, release any party
primarily or secondarily liable on the Note or hereunder or on such other
security, grant extensions, renewals or indulgences therein or herein, apply to
the payment of the principal and interest and premium, if any, of the
indebtedness secured hereby any part or all of the proceeds obtained by sale or
otherwise as provided herein, without resort or regard to other security, or
resort to any one or more of the securities or remedies which Mortgagee may have
and which in its absolute discretion it may pursue for the payment of all or any
part of the indebtedness secured hereby, in such order and in such manner as it
may determine, all without in any way releasing Mortgagor or any party
secondarily liable from any of the terms, covenants or conditions of the Note,
the Guarantee, this Mortgage, or any other Loan Document, or relieving the
unreleased Property from the legal operation and effect of this Mortgage for all
amounts owing under the Note, the Loan Agreement and this Mortgage.  Mortgagee
and Mortgagor recognize and agree that the provisions of this Mortgage, the
Note, the Guarantee, and any other Loan Document may be modified by them or
their successors or assigns at any time before or after default (which
modification may involve increasing the rate of interest in the Note, agreeing
that other charges should be paid, or modifying any other provision in any such
instruments).  Mortgagee may extend the time of payment, may agree to alter the
terms of payment of the indebtedness, and may grant partial releases of any
portion of the property included herein.  No such modification by Mortgagee and
Mortgagor nor any such action by Mortgagee or the Mortgagor referred to above
shall be a substitution or novation of the original indebtedness or instruments
evidencing or securing the same, but shall be considered a possible occurrence
within the original contemplation of the parties.

 

2.12         Governmental Action Affecting the Property.  Mortgagor agrees that
in the event of the enactment of any law or ordinance, the promulgation of any
zoning or other governmental regulation, or the rendition of any judicial decree
restricting or affecting the use of the Property or rezoning the area wherein
the same shall be situate which Mortgagee reasonably believes adversely affects
the Property, Mortgagee may, upon at least sixty (60) days written notice to
Mortgagor, require payment of the indebtedness secured hereby at such time as
may be stipulated in such notice, and the whole of the indebtedness secured
hereby, shall thereupon become due and payable.

 

ARTICLE 3. EVENTS OF DEFAULT

 

The occurrence of one or more of the following events (herein called an “Event
of Default”) shall constitute and be an Event of Default:

 

3.1           Default under Loan Documents.  The occurrence and continuance of
an Event of Default under the Loan Agreement, the Note or any other Loan
Document shall constitute an Event of Default hereunder.  In the event Mortgagee
consents to an encumbrance on the Property, a default under the terms of any
document creating such an encumbrance shall be a default hereunder.

 

3.2           Additional Insurance Obligations.  Mortgagor fails to promptly
perform or comply with any of the terms and conditions set forth in subsection
2.7 and such failure continues for ten (10) days after notice from Mortgagee to
Mortgagor.

 

3.3           Material Obligations.  Mortgagor fails to perform or observe any
of its material obligations under this Mortgage and such failure shall continue
for a period of thirty (30) days after Mortgagee gives Mortgagor written notice
thereof.

 

3.4           Judgment.  Unless adequately covered by insurance in the
reasonable opinion of Mortgagee, the entry of a final judgment for the payment
of money involving more than $10,000.00 against Mortgagor or any guarantor of
the Loan and the failure of Mortgagor or any guarantor of the Loan to cause the
same to be discharged or bonded off to the satisfaction of Mortgagee within
sixty (60) days from the date the order, decree or process under which or
pursuant to which such judgment was entered.

 

3.5           Transfer of the Property.  If all or any part of the Property or
any interest in the Property is sold, transferred, assigned, conveyed or
otherwise disposed of, either outright or as security for an indebtedness, or if
there is any change in the ownership of Mortgagor, without Mortgagee’s prior
written consent, Mortgagee may, at Mortgagee’s option, declare all the
indebtedness secured by this Mortgage to

 

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be immediately due and payable and Mortgagee may exercise any or all of the
remedies provided in Paragraph 4 hereunder.

 

ARTICLE 4. REMEDIES

 

4.1           Remedies-Acceleration.  If one or more of the Events of Default
shall occur, Mortgagee may, at its option, declare the entire unpaid principal
amount of the Note (if not already due and payable) to be due and payable
immediately, and upon any such declaration the same shall become and be
immediately due and payable, anything in the Note, in the Guarantee, in the Loan
Agreement or in this Mortgage to the contrary notwithstanding; and in the event
of any sale of all or any part of the Property, whether made under the power of
sale herein granted, assent to a decree or through judicial proceedings, such
unpaid principal amount shall automatically and without notice become so due and
payable.  If Mortgagee exercises Mortgagee’s option to declare the entire unpaid
principal amount of the Note to be due and payable, Mortgagor covenants to pay
immediately the full amount of the indebtedness secured hereby even though
foreclosure or other court proceedings to collect the indebtedness have not been
commenced.  Acceleration of maturity, once declared by Mortgagee, may at the
option of Mortgagee, be rescinded by written acknowledgment to that effect by
Mortgagee, but the tender and acceptance of partial payments alone shall not
rescind or affect in any way such acceleration of maturity.

 

4.2           Power of Sale; Assent to Decree and Other Remedies.  If one or
more of the Events of Default shall occur and whether or not Mortgagee shall
have accelerated the maturity of the indebtedness pursuant to Section 4.1
hereof, Mortgagee, at its option, may:

 

(a)           proceed by suit or suits at law or in equity or by any other
appropriate remedy to protect and enforce the rights of Mortgagee whether for
the specific performance of any covenant or agreement contained herein, or in
aid of the execution of any power herein granted, or to enforce payment of the
Note, of the Guarantee, or to foreclose this Mortgage, or to sell the Property
under the judgment or decree of a court or courts of competent jurisdiction, or
otherwise.  Mortgagor, in accordance with any general or local laws or rules or
regulations of New Jersey relating to mortgages including any amendments thereof
or supplements thereto which do not materially change or impair the remedy, does
hereby declare and assent to the passage of a decree to sell the Property by the
equity court having jurisdiction for the sale of the Property, subject to the
terms of the decree of court, the same authority and power to sell on the terms
and conditions herein set forth.  This assent to decree shall not be exhausted
in the event the proceeding is dismissed before the indebtedness secured hereby
is paid in full;

 

(b)           either with or without entering upon or taking possession of the
Property, demand, collect and receive any or all revenues arising out of or in
connection with the Property, including, without limitation, all rents;

 

(c)           take possession and assemble such items of the Property as may be
designated by Mortgagee and make them available to the Mortgagee at a place
reasonably convenient to both parties to be designated by Mortgagee or the
Mortgagee.  Upon a default under this Mortgage, Mortgagee shall have the right
to take possession of such items of the Property as Mortgagee may elect.  In
taking possession Mortgagee may proceed without judicial process if this can be
done without breach of the peace.  Mortgagee shall have the further right to
remove such items of the Property as it may choose to any location or locations
selected by Mortgagee, and Mortgagor shall pay the costs of such removal and for
the storage and protection of such items immediately upon demand therefor.  If
Mortgagee elects to proceed under the New Jersey Uniform Commercial Code to
dispose of some of the Property, the Mortgagee shall give Mortgagor notice by
certified mail, postage prepaid, return receipt requested, of the time and place
of any public sale of any of such property or of the time after which any
private sale or other intended disposition thereof is to be made by sending
notice to Mortgagor at least five (5) days before the time of the sale or other
disposition, which provisions for notice Mortgagor and the Mortgagee agree are
reasonable; provided, however, that nothing herein shall preclude Mortgagee from
proceeding as to all the Property in accordance with the rights and remedies of
Mortgagee in respect of the real property, as provided in the New Jersey Uniform
Commercial Code, as amended from time to time;

 

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(d)           either with or without taking possession of the property, sell,
lease or otherwise dispose of the Property in its then condition or following
such preparation as Mortgagee deems advisable;

 

(e)           either with or without entering upon or taking possession of the
Property and without assuming any obligations of Mortgagor, thereunder, exercise
the rights of Mortgagor under, use or benefit from, any of the contracts, leases
or intangible property;

 

(f)            may enter and take possession of the Property and may exclude
Mortgagor, its agents and servants, wholly therefrom, and having and holding the
same, may use, operate, manage and control the Property or any part thereof, and
upon every such entry Mortgagee, at the expense of Mortgagor and of the
Property, from time to time may make all necessary or proper repairs, renewals,
replacements and useful or required alterations, additions, betterments and
improvements to and upon the Property as to it may seem judicious and pay all
costs and expenses of so taking, holding and managing the same, including
reasonable compensation to its employees and other agents (including, without
limitation, attorney’s fees and management and rental commissions) and any
taxes, assessments and other charges prior to the legal operation and effect of
this Mortgage which Mortgagee may deem it wise or desirable to pay, and in such
case Mortgagee shall have the right to manage the Property and to carry on the
business and exercise all rights and powers of Mortgagor, either in the name of
Mortgagor, or otherwise, as Mortgagee shall deem advisable; and Mortgagee shall
be entitled to collect and receive all rents thereof and therefrom.  The taking
of possession and collection of rents by Mortgagee shall not be construed to be
an affirmation of any lease or acceptance of attornment with respect to any
lease of all or any portion of the Property.  After deducting the expenses of
operating the Property and of conducting the business thereof, and of all
repairs, maintenance, renewals, replacements, alterations, additions,
betterments, improvements and all payments which it may be required or may elect
to make for taxes or other proper charges on the Property, or any part thereof,
as well as just and reasonable compensation for all its employees and other
agents (including, without limitation, attorney’s fees and management and rental
commissions) engaged and employed, the moneys arising as aforesaid shall be
applied to the indebtedness secured hereby.  Whenever all that is due upon the
principal of and interest on the Note and under any of the terms of this
Mortgage shall have been paid and all defaults made good, Mortgagee shall
surrender possession to Mortgagor.  The same right of entry, however, shall
exist if any subsequent Event of Default shall occur. Mortgagee may,  in person,
by agent or by court-appointed receiver, enter upon, take possession of, and
maintain full control of the Property in order to perform all acts necessary or
appropriate to complete construction of the improvements and to maintain and
operate the Property, including, but not limited to, the execution, cancellation
or modification of leases, the making of repairs to the Property and the
execution or termination of contracts providing for the construction, management
or maintenance of the Property, all of such terms as Mortgagee, in its sole
discretion, deems proper or appropriate;

 

(g)           proceed by a suit or suits in law or in equity or by other
appropriate proceeding to enforce payment of the Note and/or the Guarantee, or
the performance of any term, covenant, condition or agreement of this Mortgage
and Security Agreement or any of the other Loan Documents, or any other right,
and to pursue any other remedy available to it, all as Mortgagee shall determine
most effectual for such purposes;

 

(h)           institute and maintain such suits and proceedings as Mortgagee may
deem expedient to prevent any impairment of the Property by any acts which may
be unlawful or in violation of this Mortgage and Security Agreement, to preserve
or protect its interest in the Property and the revenues arising out of or in
connection with the Property, and to restrain the enforcement of or compliance
with any legislation or other governmental enactment, rule or order that would
impair the security hereunder or be prejudicial to the interest of Mortgagee;

 

(i)            apply all or any portion of the Property, or the proceeds
thereof, towards (but not necessarily in complete satisfaction of) the
indebtedness;

 

(j)            foreclose any and all rights or Mortgagor in and to the Property,
whether by sale, entry or in any other manner provided for hereunder or under
the laws of New Jersey;

 

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(k)           in the case of any receivership, insolvency, bankruptcy,
reorganization, arrangement, adjustment, composition or other proceeding
affecting Mortgagor or the creditors or property of Mortgagor, Mortgagee, to the
extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of
Mortgagee allowed in such proceedings for the entire amount of the indebtedness
at the date of the institution of such proceedings and for any additional
portion of the indebtedness accruing after such date;

 

(l)            exercise of any right or remedy of mortgagee or secured party
under the laws of New Jersey.

 

4.3           Appointment of a Receiver. Until one or more of the Events of
Default shall occur (but not thereafter), Mortgagor shall have possession of the
Property and shall have the right to use and enjoy the same and to receive the
rents thereof and therefrom.  If one or more of the Events of Default shall
occur, and without the requirement of any other showing, Mortgagee shall be
entitled as a matter of right and to the extent permitted by law, without notice
to Mortgagor, and without regard to the adequacy of the security, to the
immediate appointment of a receiver of the Property and of the rents thereof and
therefrom, in an ex parte proceeding with all such other powers as the court or
courts making such appointment shall confer, and the rents thereof and therefrom
are hereby assigned to Mortgagee as additional security under this Mortgage. 
Mortgagor shall deliver to the receiver appointed pursuant to the provisions of
this Section, or to Mortgagee in the event of entry pursuant to the terms of the
preceding Section, all original records, books, bank accounts, leases,
agreements, security deposits of the tenants and all other materials relating to
the operation of the Property.

 

4.4           Foreclosure Sale.

 

(a)           If one or more of the Events of Default shall occur, the Mortgagee
shall sell and in the case of default of any purchaser or purchasers shall
resell all the Property as an entirety, or in such parcels and in such order as
Mortgagee shall in writing request, or, in the absence of such request, as the
Mortgagee may determine (Mortgagor hereby waiving for itself and for any person
claiming by or through it application of the doctrine of marshalling of assets),
at public auction at some convenient place or places in the jurisdiction in the
state where the Property is situate, or in such other place or places as may be
permitted by law, at such time, in such manner and upon such terms as the
Mortgagee may fix and briefly specify in each notice of sale, which notice of
sale shall state the time when, and the place where, the same is to be made,
shall contain a brief general description of the property to be sold, and shall
be sufficiently given if published as frequently and in such publication as may
be required by law, and Mortgagee may cause such further public advertisement to
be made as they may deem advisable, and any such sale may be adjourned by the
Mortgagee by announcement at the time and place appointed for such sale or for
such adjourned sale, and, without further notice or publication, such sale may
be made at the time and place to which the same shall be so adjourned.  If one
or more leases are entered into or recorded subsequent to the recording of this
Mortgage or are otherwise subordinate to this Mortgage, the Mortgagee shall
sell, subject to any one or more of such tenancies that are designated and
selected by Mortgagee.

 

(b)           Upon the completion of any sale and compliance with all the terms
thereof, the Mortgagee shall execute and deliver to the purchaser or purchasers
a good and sufficient deed of conveyance, assignment and transfer, lawfully
conveying, assigning and transferring the property sold.  Payment to the
Mortgagee of the entire purchase money shall be full and sufficient discharge of
any purchaser or purchasers of the property, sold as aforesaid, for the purchase
money; and no such purchaser, or his representatives, successors or assigns,
after paying such purchase money and receiving the deed shall be bound to see to
the application of such purchase money.

 

(c)           In the case of any sale of the Property or of any part thereof,
whether under the power of sale herein granted, assent to decree or through
other judicial proceedings, the purchase money, proceeds and avails thereof,
together with any other sums which may then be held as security hereunder or be
due under any of the provisions hereof as a part of the Property, shall be
applied as follows:

 

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FIRST, to pay all proper costs, charges, fees and expenses, including the fees
and costs herein provided for and to pay the costs of appraisals of the Property
and the costs of title examination; and to pay or repay to Mortgagee all moneys
advanced by them or either of them for taxes, insurance or otherwise, with
interest thereon as provided herein; and to pay all taxes due upon the Property
at the time of sale; and to pay any other lien or encumbrance prior to the legal
operation and effect of this Mortgage unless said sale is made subject to any
such taxes or other lien or encumbrance; and to pay a counsel fee of One
thousand Five hundred Dollars ($1,500.00) for conducting the proceedings if
without contest, but if legal services are rendered to Mortgagee in connection
with any contested matter in the proceedings, then such additional counsel fees
and expenses shall be allowed out of the proceeds of sale or sales as the court
may deem proper; and to pay additional reasonable counsel fees, if any, incurred
as a result of representing Mortgagee’s interest in any proceedings on behalf of
any Mortgagor before any United States Bankruptcy Court or similar State
insolvency proceedings; and also to pay a commission to the auctioneer or other
party making the sale equal to five percent (5%) of the gross sale price;

 

SECOND, to pay whatever may then remain unpaid under the Note and the interest
thereon to the date of payment, whether the same shall be due or not, it being
agreed that the Note shall, upon such sale being made before the maturity of the
Note, be and become immediately due and payable at the election of Mortgagee and
to pay all of the indebtedness secured hereby;

 

THIRD, to pay the remainder of said proceeds, if any, less the expense, if any,
of obtaining possession, to Mortgagor or other party lawfully entitled to
receive the same, upon the delivery and surrender of possession of the Property
sold and conveyed and delivery of all records, books, bank accounts, leases,
agreements, security deposits of the tenants and all other material relating to
the operation of the Property to the said purchaser or purchasers.

 

(d)           Immediately upon the filing or docketing of suit preliminary to a
foreclosure sale of the Property, or any part thereof under this Mortgage, there
shall be and become due and owing by Mortgagor, an auctioneer’s commission on
the total amount of the indebtedness secured hereby equal to two and one-half
percent (2 ½%), and Mortgagee shall not be required to receive the principal and
interest in satisfaction of the indebtedness secured hereby, but said sale may
be proceeded with unless, prior to the day appointed therefor, tender is made of
said principal, interest, commissions and all expenses and costs incident to
such sale and all other sums that are part of the indebtedness secured hereby.

 

(e)           Mortgagee may bid and become the purchaser at any sale under this
Mortgage.  If Mortgagee is the purchaser at any such sale, Mortgagee may apply
the outstanding indebtedness against all or any portion of the purchase price,
including the deposit.

 

4.5           Collection of Revenues.  In connection with the exercise by
Mortgagee of the rights and remedies provided for in subsection 4.2(b) hereof:

 

(a)           Mortgagee may notify any tenant, lessee or licensee of the
Property, either in the name of the Mortgagee or Mortgagor, to make payment of
Revenues directly to Mortgagee or Mortgagor’s agents, may advise any person of
Mortgagee’s interest in and to the revenues arising out of or in connection with
the Property and may collect directly from such tenants, lessees and licensees
all amounts due on account of such revenues;

 

(b)           At Mortgagee’s request, Mortgagor will provide written
notification to any or all tenants, lessees and licensees of the property
concerning Mortgagee’s interest in the revenues arising out of or in connection
with the Property and will request that such tenants, lessees and licensees
forward payment thereof directly to Lender;

 

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(c)           Mortgagor shall hold any proceeds and collections of any of the
revenues arising out of or in connection with the Property in trust for
Mortgagee and shall not commingle such proceeds or collections with any other
funds of Mortgagor; and

 

(d)           Mortgagor shall deliver all such proceeds to Mortgagee immediately
upon the receipt thereof by Mortgagor in the identical form received, but duly
endorsed or assigned on behalf of Mortgagor to Mortgagee.

 

4.6           Use and Occupation of Property.  In connection with the exercise
of Mortgagee’s rights under subsection 4.2(f), Mortgagee may enter upon, occupy,
and use all or any part of the Property and may exclude Mortgagor from the Land
and the Improvements thereon or portion thereof as may have been so entered
upon, occupied, or used.  Mortgagee shall not be required to remove any personal
Property from the Land and the Improvements upon Mortgagee’s taking possession
thereof, and may render any personal Property unusable to Mortgagor.  In the
event Mortgagor manages the Land and the improvements thereon in accordance with
subsection 4.2(f) herein, Mortgagor shall pay to Mortgagee on demand a
reasonable fee for the management thereof in addition to the indebtedness. 
Further, Mortgagee may construct such improvements on the Land or make such
alterations, renovations, repairs, and replacements to the Improvements, as
Mortgagee, in its sole discretion, deems proper or appropriate.  The obligation
of Mortgagor to pay such amounts and all expenses incurred by Mortgagee in the
exercise of its rights hereunder shall be included in the indebtedness and shall
accrue interest at the default rate of interest stated in the Note.

 

4.7           Partial Sales.  Mortgagor agrees that in case Mortgagee, in the
exercise of the power of sale contained herein or in the exercise of any other
rights hereunder given, elects to sell in parts or parcels, said sales may be
held from time to time and that the power shall not be exhausted until all of
the Property not previously sold shall have been sold, notwithstanding that the
proceeds of such sales exceed, or may exceed, the indebtedness.

 

4.8           Assembly of Property.  Upon the occurrence of any Event of
Default, Mortgagee may require Mortgagor to assemble the Property and make it
available to Mortgagee, at Mortgagor’s sole risk and expense, at a place or
places to be designated by Mortgagee which are reasonably convenient to both
Mortgagee and Mortgagor.

 

4.9           Power of Attorney.  Upon the occurrence of any Event of Default,
Mortgagor hereby irrevocably constitutes and appoints Mortgagee as Mortgagor’s
true and lawful attorney in fact to take any action with respect to the Property
to preserve, protect, or realize upon Mortgagee’s interest therein, each at the
sole risk, cost and expense of Mortgagor, but for the sole benefit of
Mortgagee.  The rights and powers granted Mortgagee by the within appointment
include, but are not limited to, the right and power to: (a) prosecute, defend,
compromise, settle, or release any action relating to the Property; (b) endorse
the name of Mortgagor in favor of Mortgagee upon any and all checks or other
items constituting revenues arising out of or in connection with the Property;
(c) sign and endorse the name of Mortgagor on, and to receive as secured party,
any of the Property; (d) sign and file or record on behalf of Mortgagor any
financing or other statement in order to perfect or protect Mortgagee’s security
interest; (e) enter into any contracts or agreements relative to, and to take
all action deemed necessary in connection with, the construction of any
improvements on the Land; (g) manage, operate, maintain or repair the Land and
the improvements; and (h) exercise the rights of Mortgagor under any contracts,
leases or intangible personal property.  Mortgagee shall not be obligated to
perform any of such acts or to exercise any of such powers, but if Mortgagee
elects so to perform or exercise, Mortgagee shall not be accountable for more
than it actually receives as a result of such exercise of power, and shall not
be responsible to Mortgagor except for Mortgagee’s willful misconduct or gross
negligence.  All powers conferred upon Mortgagee by this Mortgage and Security
Agreement, being coupled with an interest, shall be irrevocable until terminated
by a written instrument executed by a duly authorized officer of the Mortgagee.

 

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ARTICLE 5. MISCELLANEOUS

 

5.1           Mortgagee.  The Mortgagee shall be protected in acting upon any
notice, request, consent, demand, statement, note or other paper or document
believed by them to be genuine and to have been signed by the party or parties
purporting to sign the same.  The Mortgagee shall not be liable for any error of
judgment, nor for any act done or step taken or omitted, nor for any mistake of
law or fact, nor for anything which they may do or refrain from doing in good
faith nor generally shall a Mortgagee have any accountability hereunder except
for his own individual willful default.

 

5.2           Estoppel Certificates.  Mortgagor, upon request, made either
personally or by mail, shall, within six (6) days in case the request is made
personally, or within ten (10) days after the mailing of such request in case
the request is made by mail, certify, by a writing duly acknowledged, to
Mortgagee or to any proposed assignee of the Note, the amount of principal and
interest then owing on the Note and whether any offsets or defenses exist
against the indebtedness secured hereby.  At the request of Mortgagee, such
certificate shall also contain a statement that Mortgagor knows of no Event of
Default nor of any other default which, after notice or lapse of time or both,
would constitute an Event of Default, which has occurred and remains uncured as
of the date of such certificate, or, if any such Event of Default or other
default has occurred and remains uncured as of the date of such certificate,
then such certificate shall contain a statement specifying the nature thereof,
the time for which the same has continued and the action which Mortgagor has
taken or proposes to take with respect thereto.

 

5.3           Subrogation.  This Mortgage and the Mortgagee, as additional
security, are hereby subrogated to the lien or liens and to the rights of the
owners and holders thereof of each and every mortgage, lien or other encumbrance
on the Property, or any part thereof, or any claim or demand which is paid or
satisfied, in whole or in part, out of the proceeds of the indebtedness secured
hereby and the respective liens of said mortgages, liens and other encumbrances
and claims and demands shall pass to and be held by the Mortgagee as additional
security for the indebtedness to Mortgagee to the same extent that they would
have been preserved and would have been passed to and been held by Mortgagee had
they each been duly and regularly assigned, transferred, set over and delivered
to Mortgagee by separate deed of assignment, notwithstanding the fact the same
may be or may have been satisfied and cancelled of record, it being the
intention of the parties hereto that the same will be satisfied and cancelled of
record at or about the time they are paid or satisfied out of the proceeds of
the Loan.

 

5.4           Notices.  Unless specifically provided otherwise in this Mortgage
or by law, any notice required or permitted by or in connection with this
Mortgage shall be in writing and shall be made by facsimile or by hand delivery,
by overnight delivery service, or by certified mail, unrestricted delivery,
return receipt requested, postage prepaid, addressed to Mortgagee or Mortgagor
at the appropriate address set forth above or to such other address as may be
hereafter specified by written notice by Mortgagee or Mortgagor.  Notice shall
be considered given as of the date of the facsimile or the hand delivery, one
(1) calendar day after delivery to the overnight delivery service, or three
(3) calendar days after the date of mailing, independent of the date of actual
delivery or whether delivery is ever in fact made, as the case may be, provided
the giver of notice can establish that notice was given as provided herein.

 

5.5           Legal Construction.  This Mortgage shall be construed according to
the laws of New Jersey (excluding New Jersey conflict of laws) and any court of
competent jurisdiction of New Jersey shall have jurisdiction in any proceeding
instituted to enforce this Mortgage and any objections to venue are hereby
waived.

 

5.6           Usury Limitations.  No provision of this Mortgage shall require
the payment or permit the collection of interest or other sum in excess of the
maximum permitted by applicable law, including a judicial determination.  If any
excess of interest or other sum in such respect is herein provided for, or shall
be adjudicated to be so provided for herein, neither Mortgagor nor its
successors or assigns shall be obligated to pay such interest or other sum in
excess of the amount permitted by applicable law, including a judicial
determination, and the right to demand the payment of any such excess shall be
and hereby is waived.  The provisions of this Section shall control all other
provisions of this Mortgage.

 

5.7           Recording.  Mortgagor covenants and agrees to promptly cause all
documents required by Mortgagee to be properly recorded or filed, including this
Mortgage, and to pay all fees, taxes and

 

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expenses incident thereto.  Mortgagor shall hold harmless and indemnify
Mortgagee against any liability incurred by reason of the imposition of any fee,
tax or charge on the making and recording of this Mortgage.

 

5.8           Rights of Mortgagee.

 

(a)           Rights Not Limited.  The rights, powers, privileges and
discretions (hereinafter collectively called the “rights”) specifically granted
to the Mortgagee and those specifically granted to Mortgagee under this Mortgage
are not in limitation of but in addition to those to which they are entitled
under any general or local law relating to and mortgages in New Jersey, now or
hereafter existing.

 

(b)           Benefit to Successors and Assigns.  The rights to which Mortgagee
may be entitled shall inure to the benefit of its successors and assigns.

 

(c)           Rights Cumulative.  All the rights of Mortgagee are cumulative and
not alternative and may be enforced successively or concurrently.

 

5.9           No Waiver.  Failure of Mortgagee to exercise any of their rights
shall not impair any of their rights nor be deemed a waiver thereof, and no
waiver of any of their rights shall be deemed to apply to any other such rights,
nor shall it be effective unless in writing and signed by the party waiving the
right.  The acceptance by Mortgagee of any partial payment after default or an
Event of Default, with or without knowledge of the default or Event of Default,
shall not be a waiver of the default or Event of Default unless Mortgagee shall
specifically state in writing that the acceptance waives the default or Event of
Default or states further conditions which must be satisfied to constitute such
a waiver.  The failure of Mortgagee to exercise the option for acceleration of
maturity, foreclosure, or either, following an Event of Default or to exercise
any other option or privilege granted to Mortgagee hereunder in any one or more
instances, shall not constitute a waiver of any such default, but such option or
privilege shall remain continuously in force.

 

5.10         Mutual Waiver of Jury Trial.  Mortgagor and Mortgagee (by
acceptance of this Mortgage) each, on behalf of itself and its successors and
assigns, WAIVES to the fullest extent permitted by law all right to TRIAL BY
JURY of any and all claims between them arising under this Mortgage, the Note,
the Loan Agreement, or any other Loan Documents, and any and all claims arising
under common law or under any statute of any state or the United States of
America, whether any such claims be now existing or hereafter arising, now known
or unknown.  In making this waiver Mortgagee and Mortgagor acknowledge and agree
that any and all claims made by Mortgagee and all claims made against Mortgagee
shall be heard by a judge of a court of proper jurisdiction, and shall not be
heard by a jury.  Mortgagee and Mortgagor acknowledge and agree that THIS WAIVER
OF TRIAL BY JURY IS A MATERIAL ELEMENT OF THE CONSIDERATION FOR THIS
TRANSACTION.  Mortgagee and Mortgagor, with advice of counsel, each acknowledges
that it is knowingly and voluntarily waiving a legal right by agreeing to this
waiver provision.

 

5.11         Waiver by Mortgagor.  Mortgagor waives, on behalf of itself and all
persons now or hereafter interested in the Property, all rights under all
appraisement, homestead, moratorium, valuation, redemption, exemption, stay,
extension and marshalling statutes, laws or equities now or hereafter existing
and agrees that no defense based on any thereof will be asserted in any action
enforcing this Mortgage.

 

5.12         Secondary Market Cooperation.  Mortgagor acknowledges that
Mortgagee may (a) sell this Mortgage, the Note and the other Loan Documents to
one or more investors as a whole loan, (b) participate the Loan to one or more
investors, (c) deposit this Mortgage, the Note, the Guarantee and the other Loan
Documents with a trust, which trust may sell certificates to investors
evidencing an ownership interest in the trust assets or (d) otherwise sell the
Loan or interest therein to investors (the transactions referred to in clauses
(a) through (d) are hereinafter referred to as “Secondary Market
Transactions”).  Mortgagor shall cooperate in good faith with Mortgagee in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements imposed by any rating agency involved in any
Secondary Market Transaction including, without limitation, all structural or
other changes to the Loan, modifications to any documents evidencing or securing
the Loan, delivery of opinions of

 

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counsel acceptable to the rating agency and addressing such matters as the
rating agency may require; provided, however, Mortgagor shall not be required to
modify any documents evidencing or securing the Loan which would modify (i) the
interest rate payable under the Note, (ii) the stated maturity of the Note,
(iii) the amortization of principal of the Note, or (iv) any other material
economic term of the Loan.  Mortgagor shall provide such information and
documents relating to Mortgagor, any guarantor of Mortgagor, the Property and
any tenant of the Property as Mortgagee may reasonably request in connection
with a Secondary Market Transaction.  Mortgagee shall have the right to provide
to prospective investors any information in its possession, including, without
limitation, financial statements relating to Mortgagor, any guarantor of
Mortgagor, the Property and any tenant of the Property.  Mortgagor acknowledges
that certain information regarding the Loan and the parties thereto and the
Property may be included in a private placement memorandum, prospectus or other
disclosure documents.

 

5.13         Indemnification.  Mortgagee shall not be obligated to perform or
discharge any obligation or duty to be performed or discharged by Mortgagor
under any lease. Mortgagor shall indemnify the Mortgagee for and save them
harmless from any and all liability arising from any lease or assignment of a
lease as security under this Mortgage. Mortgagee shall not have any
responsibility for the control, care, management or repair of the Property or be
liable for any negligence in the management, operation, upkeep, repair or
control of the Property resulting in loss or injury or death to any lessee or
any other person or entity.  The obligations and liabilities of Mortgagor under
this paragraph shall survive any termination, satisfaction or assignment of this
Mortgage and the exercise by Mortgagee of any of its rights or remedies
hereunder including, without limitation, the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.

 

5.14         Binding Effect.  The terms and conditions agreed to by Mortgagor
and the covenants of Mortgagor shall be binding upon the personal
representatives, successors and assigns of Mortgagor and of each of them, but
this provision does not waive any prohibition of assignment or any requirement
of consent to an assignment under the other provisions of this Mortgage; any
consent to an assignment shall not be consent to any further assignment, each of
which must be specifically obtained in writing.

 

5.15         Recitals.  The recitals of this Mortgage are incorporated herein
and made a part hereof.

 

5.16         Number and Gender.  Wherever used herein the singular shall include
the plural and the plural the singular, and the use of any gender shall include
all genders.

 

5.17         Time of Essence.  Time is of the essence of the obligations of
Mortgagor in this Mortgage and each and every term, covenant and condition made
herein by or applicable to Mortgagor.

 

5.18         Captions.  The captions of the Sections of this Mortgage are for
the purpose of convenience only and are not intended to be a part of this
Mortgage and shall not be deemed to modify, explain, enlarge, or restrict any of
the provisions hereof.

 

5.19.        Severability.  If any provision of this Mortgage or the application
thereof to any person or circumstance shall be invalid, inoperative or
unenforceable to any extent, the remainder of this Mortgage and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be valid, operative and enforceable to the greatest extent
permitted by law.

 

5.20.        Execution of Counterparts.  This Mortgage may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same Mortgage.

 

5.21.        Security Agreement.  Mortgagor has executed this instrument as a
Debtor under the Uniform Commercial Code of the state in which the Property is
located.  This Mortgage shall constitute and be a security agreement and
financing statement under the laws of such state.

 

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ARTICLE 6. ADDITIONAL COVENANTS

 

6.1           Leases of the Property.

 

6.1.1        Compliance with Leases.  Mortgagor shall carry out all of its
agreements and covenants as landlord contained in any leases (which word when
used in this Mortgage shall include, without limitation, all agreements,
licenses, contracts, reservations, accounts, and permits affecting all or any
part of the Property) and not permit a lien or other encumbrance superior to
such leases other than this Mortgage.  No lease shall include any space, or
grant to any tenant any right or interest in any area outside of the limits of
the Property.  Upon demand of Mortgagee, Mortgagor shall furnish Mortgagee an
executed copy of each lease immediately upon its execution.  All future leases
shall be written on the standard form accepted by Mortgagee, with only such
changes as Mortgagee shall have approved in writing or on a lease agreement
approved by Mortgagee.

 

6.1.2        Assignment of Leases.  Mortgagor hereby grants, conveys, assigns,
and transfers unto the Mortgagee, for the benefit of Mortgagee, all the right,
title, interest and privileges which Mortgagor has or may hereafter have in any
and all of said leases now existing or hereafter made affecting all or a part of
the Property, as said leases may have been or may from time to time be hereafter
modified, extended or renewed with all the rents (which word when used in this
Mortgage shall include, without limitation, all income and profits) due and
becoming due therefrom and including without limitation the right of Mortgagee
to inspect the leased areas and books and records of tenants.  Mortgagor shall,
upon written request by Mortgagee, execute assignments (in any form customarily
used by Mortgagee) of any present or future leases, together with the rents due
and becoming due therefrom, which affect in any way all or any part of the
Property.  No such assignment made or required hereby shall be construed as a
consent by Mortgagee to any lease or to impose on Mortgagee any obligation with
respect thereto.  Mortgagor shall not make any other assignment, hypothecation
or pledge of any rents under any lease of part or all of the Property. 
Mortgagor shall not, without the prior written approval of Mortgagee, cancel any
of the leases, nor terminate or accept a surrender thereof, nor reduce the
payment of rent thereunder, nor modify any of said leases, nor accept any
prepayment of rent other than the usual prepayment as would result from the
acceptance by landlord more than fifteen (15) days before the first day of each
month for the ensuing month under leases approved by Mortgagee according to the
terms of such leases.  The covenants and restrictions of this subsection shall
be deemed covenants and restrictions running with the land.

 

6.1.3        Limitation on Subordinate Lienors.  Mortgagor covenants that
Mortgagee of any subordinate lien shall have no right, and shall acquire no
right, to terminate or modify any lease affecting the Property whether or not
such lease is subordinate to the legal operation and effect of this Mortgage.

 

6.1.4        Deposit of Rents.  All payments, including security deposits, under
any lease received by Mortgagor shall be deemed held by Mortgagor in trust for
the payment of the indebtedness secured hereby.  Mortgagor shall deposit in a
non-interest bearing account or accounts with Mortgagee all payments (except
security deposits made under residential leases, if any) made under all leases,
which sums, subject to the rights of the tenants therein, may be used by
Mortgagor in the ordinary course of Mortgagor’s business to the extent permitted
by law, until one or more of the Events of Default shall occur, but not
thereafter.

 

6.1.5        Assignment of Bankruptcy Awards.  Mortgagor hereby assigns to the
Mortgagee any award made hereafter to it in any court procedure involving any of
the tenants in any bankruptcy, insolvency or reorganization proceeding in any
state or federal court and any and all payments by any tenant in lieu of rent.

 

6.1.6        Limitation of Liability under Leases.  The Mortgagee shall not be
obligated to perform or discharge any obligation or duty to be performed or
discharged by Mortgagor under any lease; and Mortgagor hereby agrees to
indemnify the Mortgagee for and to save them harmless from, any and all
liability arising from any lease, or this assignment thereof and this assignment
shall not place the responsibility for the control, care, management or repair
of the Property upon the Mortgagee, nor make said Mortgagee liable for any
negligence in the management, operation, upkeep, repair or control of the
Property resulting in loss or injury or death to any tenant, agent, guest, or
stranger.

 

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6.1.7        Security Deposits.  Mortgagor shall deposit in an account or
accounts with Mortgagee or its designee, under the depository’s standard program
for such accounts, all security deposits made under residential leases which
sums, subject to the rights of the tenants therein, may be used by Mortgagor in
the ordinary course of Mortgagor’s business to the extent permitted by law,
until one or more of the Events of Default shall occur, but not thereafter.  All
such deposits shall be the continuing responsibility of Mortgagor, and Mortgagor
shall comply with all applicable requirements of state and local law where the
Property is located.

 

6.2           Environmental Covenants.

 

6.2.1        No Substances Present.  Mortgagor hereby represents and warrants to
Mortgagee that, after a due and diligent investigation, to the best of its
knowledge, there are not now and have never been any materials or substances
located on or near the Property that, under federal, state, or local law,
statute, ordinance, or regulation, or administrative or court order or decree,
or private agreement (collectively, the “Environmental Laws”), are regulated as
to use, generation, collection, storage, treatment, or disposal (such materials
or substances are hereinafter collectively referred to as “Substances”).  The
term “Substances” includes any materials or substances whose release or
threatened release may pose a risk to human health or the environment or
impairment of property values and shall also include without limitation (i)
asbestos in any form, (ii) urea formaldehyde foam insulation, (iii) paint
containing lead, (iv) transformers or other equipment which contains dielectric
fluid containing levels of polychlorinated biphenyls of 50 parts per million or
more, and (v) petroleum in any form. Mortgagor further represents and warrants
to Mortgagee that the Property is not now being used nor has it ever been used
in the past for any activities involving the use, generation, collection,
storage, treatment, or disposal of any Substances.  Mortgagor will not place or
permit to be placed any Substances on or near the Property except for those
Substances that are typically used in the operation of Mortgagor’s business
provided the same are in appropriately small quantities and are stored, used,
and disposed of properly; or Substances that are approved in writing by
Mortgagee.

 

6.2.2        Acting Upon Presence of Substances.  Mortgagor hereby covenants and
agrees that, if at any time (i) Substances are spilled, emitted, disposed, or
leaked in any amount; or (ii) it is determined that there are Substances located
on, in, or under the Property other than those of which Mortgagee has approved
in writing or which are permitted to be used on the Property without Mortgagee’s
written approval pursuant to subsection 6.2.1 of this Section, Mortgagor shall
immediately notify Mortgagee and any authorities required by law to be notified,
and shall, within thirty (30) days thereafter or sooner if required by Mortgagee
or any governmental authority, take or cause to be taken, at Mortgagor’s sole
expense, such action as may be required by Mortgagee or any governmental
authority.  If Mortgagor shall fail to take such action, Mortgagee may make
advances or payments towards performance or satisfaction of the same but shall
be under no obligation so to do; and all sums so advanced or paid, including all
sums advanced or paid in connection with any investigation or judicial or
administrative proceeding relating thereto, including, without limitation,
reasonable attorneys’ fees, expert fees, fines, or other penalty payments, shall
be at once repayable by Mortgagor and shall bear interest at the Default Rate,
from the date advanced or paid by Mortgagee until the date paid by Mortgagor to
Mortgagee, and all sums so advanced or paid, with interest as aforesaid, shall
become a part of the indebtedness secured hereby.

 

6.2.3        Environmental Audits.  Mortgagor, promptly upon the written request
of Mortgagee from time to time, shall provide Mortgagee, at Mortgagor’s expense,
from time to time with an environmental site assessment or environmental audit
report, or an update of such an assessment or report, all in scope, form, and
content satisfactory to Mortgagee.

 

6.2.4        Environmental Notices.  Mortgagor shall furnish to Mortgagee
duplicate copies of all correspondence, notices, or reports it receives from any
federal, state, or local agency or any other person regarding environmental
matters or Substances at or near the Property, immediately upon Mortgagor’s
receipt thereof.

 

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6.2.5        Condition of Property.  Mortgagor hereby represents and warrants
that there are no wells or septic tanks on the Property serving any other
property; no wells or septic tanks on other property serving the Property; no
burial grounds, archeological sites, or habitats of endangered or threatened
species on the Property; and that no part of the Property is subject to tidal
waters; has been designated as wetlands by any federal, state, or local law or
governmental agency; or is located in a special flood hazard area.

 

6.2.6        Environmental Indemnity.

 

6.2.6.1     Mortgagor shall at all times indemnify and hold harmless Mortgagee
against and from any and all claims, suits, actions, debts, damages, costs,
losses, obligations, judgments, charges, and expenses, of any nature whatsoever
suffered or incurred by Mortgagee, whether as beneficiary of this Mortgage, as
mortgagee in possession, or as successor-in-interest to Mortgagor by foreclosure
deed or deed in lieu of foreclosure, under or on account of the Environmental
Laws or any similar laws or regulations, including the assertion of any lien
thereunder, with respect to:

 

(a)           any discharge of Substances, the threat of a discharge of any
Substances, or the presence of any Substances affecting the Property whether or
not the same originates or emanates from the Property or any contiguous real
estate including any loss of value of the Property as a result of any of the
foregoing;

 

(b)           any costs of removal or remedial action incurred by the United
States Government or any costs incurred by any other person or damages from
injury to, destruction of, or loss of natural resources, including reasonable
costs of assessing such injury, destruction or loss incurred pursuant to any
Environmental Laws;

 

(c)           liability for personal injury or property damage arising under any
statutory or common law tort theory, including, without limitation, damages
assessed for the maintenance of a public or private nuisance or for the carrying
on of an abnormally dangerous activity at or near the Property; and/or

 

(d)           any other environmental matter affecting the Property within the
jurisdiction of the Environmental Protection Agency, any other federal agency,
or any state or local environmental agency.

 

Mortgagor’s obligations under this Agreement shall arise upon the discovery of
the presence of any Substance, whether or not the Environmental Protection
Agency, any other federal agency or any state or local environmental agency has
taken or threatened any action in connection with the presence of any
Substances.

 

7.             U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No Borrower or
Guarantor may claim or assert against SBA any local or state law to deny any
obligation of Borrower, or defeat any claim of SBA with respect to this Loan.

 

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Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

 

IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed on
its behalf and its seal to be hereunto affixed as of the date first above
written.

 

 

/s/ Brian Conners

 

Brian Todd Conners, individually

 

 

State/Commonwealth of New Jersey

 

County of Burlington

 

On this, the 10th day of March, 2011, before me Lisa Viscusi, the undersigned
officer, personally appeared Brian Todd Conners known to me (or satisfactorily
proven) to be the person(s)  whose name(s) is/are subscribed to the within
instrument, and acknowledged that he/she/they executed the same for the purposes
therein contained.

 

In witness whereof, I hereunto set my hand and official seal.

 

 

/s/ Denise Cascio

 

Notary Public

 

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EXHIBIT A

 

PROPERTY DESCRIPTION

 

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EXHIBIT B

 

PERMITTED ENCUMBRANCES

 

First mortgage in favor of ING Bank in the original amount of $339,920.00 dated
6/26/03 and recorded 7/19/03 in book 7122 page 5

 

Second mortgage in favor of Quicken Loans Inc. in the original amount of
$90,000.00 dated 6/15/04 and recorded 7/6/04 in book 7504 page 1634 (currently
serviced by E*TRADE Bank)

 

Pari passu mortgages in favor of Susquehanna Bank dated of even date herewith in
the original amounts of $1,400,000.00 and $1,250,000.00

 

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SECURITY AGREEMENT - COMMERCIAL

 

This Security Agreement - Commercial (“Security Agreement”) is executed, made
and delivered this 10th day of March, 2011 by , Appliance Recycling Centers of
America, Inc. (herein the “Debtor”), whose address is 7400 Excelsior Boulevard,
Minneapolis, MN 33426, for the benefit of Susquehanna Bank, a Pennsylvania
state-chartered commercial banking corporation (the “Secured Party”),  whose
address is 159 E. High Street, Pottstown, PA 19464.

 

FOR VALUE RECEIVED, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Debtor grants to Secured Party the security interest (and the
pledges and assignments as applicable) hereinafter set forth and agrees with
Secured Party as follows:

 

A.            OBLIGATIONS SECURED.  The security interest and pledges and
assignments as applicable granted hereby are to secure punctual payment and
performance of the following (i) a certain promissory note from ARCA Advanced
Processing, LLC, the (“Borrower”) of even date herewith in the original
principal sum of Two Million One Hundred Thousand Dollars and No Cents
($2,100,000.00) and payable to the order of Secured Party (the “Note”), and any
and all extensions, renewals, modifications and rearrangements thereof; and (ii)
any and all other indebtedness, liabilities and obligations whatsoever of Debtor
to Secured Party whether direct or indirect, absolutely or contingent, primary
or secondary, due or to become due and whether now existing or hereafter arising
and howsoever evidenced or acquired, whether joint or several, or joint and
several (all of which are herein separately and collectively referred to as the
“Obligations”).  Debtor acknowledges that the security interest hereby granted
shall secure all future advances as well as any and all other indebtedness,
liabilities and obligations of Debtor to Secured Party whether now in existence
or hereafter arising.

 

B.            USE OF COLLATERAL.  Debtor represents, warrants and covenants that
the Collateral will be used by the Debtor primarily for business, commercial, or
other similar purposes.

 

C.            DESCRIPTION OF COLLATERAL.  Debtor hereby grants to Secured Party
a security interest in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge
and assignment of, as applicable), the following property:

 

All Equipment.  A security interest in all equipment, now owned or hereafter
acquired by Debtor, including all appurtenances and additions thereto, and
substitutions therefor and replacement thereof, wheresoever located, including
all tools, parts and accessories used in connection therewith and including but
not limited to the collateral listed on Exhibit A” attached hereto.

 

The term “Collateral” as used in this Agreement shall mean and include, and the
security interest (and pledge and assignment as applicable) shall cover, all of
the foregoing property, as well as any accessions, additions and attachments
thereto, and the proceeds and products thereof, including without limitation,
all cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all returned or repossessed
goods arising from or relating to any of the property described herein or other
proceeds of any sale or other disposition of such property.

 

As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured
Party a security interest in, and a pledge and assignment of, any and all money,
property, deposit accounts, accounts, securities, documents, chattel paper,
claims, demands, instruments, items or deposits of the Debtor, and each of them,
or to which any of them is a party, now held or hereafter coming within Secured
Party’s custody or control, including without limitation, all certificates of
deposit and other depository accounts, whether such have matured or the exercise
of Secured Party’s rights results in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon the Debtor, Secured Party may
exercise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party’s rights and remedies under
this paragraph shall be in addition to and cumulative of any other rights or
remedies at law and equity, including, without limitation, any rights of set-off
to which Secured Party may be entitled.

 

D.            REPRESENTATIONS. WARRANTIES AND COVENANTS OF DEBTOR.  Debtor
represents and warrants as follows:

 

1.             Ownership; No Encumbrances.  Except for the security interest
(and pledges and assignments as applicable) granted hereby, the Debtor is, and
as to any property acquired after the date hereof which is included within the
Collateral, Debtor will be, the owner of all such Collateral free and clear from
all charges, liens, security interests, adverse claims and encumbrances of any
and every nature whatsoever.

 

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2.             No Financing Statements.  There is no financing statement or
similar filing now on file in any public office covering any part of the
Collateral except those already disclosed to Secured Party by the pre-closing
searches, and Debtor will not execute and there will not be on file in any
public office any financing statement or similar filing except the pari passu
financing statements filed or to be filed in favor of, or assigned or to be
assigned on the date hereof to, Secured Party.

 

3.             Accuracy of Information.  All information furnished to Secured
Party concerning Debtor, the Collateral and the Obligations, or otherwise for
the purpose of obtaining or maintaining credit, is or will be at the time the
same is furnished, accurate and complete in all material respects.

 

4.             Authority.  Debtor has full right and authority to execute and
perform this Agreement and to create the security interest (and pledges and
assignment as applicable) created by this Agreement. The making and performance
by Debtor of this Agreement will not violate any articles of incorporation,
bylaws or similar document respecting Debtor, any provision of law, any order of
court or governmental agency, or any indenture or other agreement to which
Debtor is a party, or by which Debtor or any of Debtor’s property is bound, or
be in conflict with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture or other agreement, or result
in the creation or imposition of any charge, lien, security interest, claim or
encumbrance of any and every nature whatsoever upon the Collateral, except as
contemplated by this Agreement.

 

5.             Addresses.  The address of Debtor designated at the beginning of
this Agreement is Debtor’s place of business if Debtor has only one place of
business; Debtor’s chief executive office if Debtor has more than one place of
business; or Debtor’s residence if Debtor has no place of business. Debtor
agrees not to change such address without advance written notice to Secured
Party.

 

E.             GENERAL COVENANTS.  Debtor covenants and agrees as follows:

 

1.             Operation of Collateral.  Debtor agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper
manner, and in conformity with all applicable permits or licenses. Debtor shall
comply in all respects with all applicable statutes, laws, ordinances and
regulations. Debtor shall not use the Collateral in any unlawful manner or for
any unlawful purpose, or in any manner or for any purpose that would expose the
Collateral to unusual risk, or to penalty, forfeiture or capture, or that would
render inoperative any insurance in connection with the Collateral.

 

2.             Condition.  Debtor shall maintain, service and repair the
Collateral so as to keep it in good operating condition. Debtor shall replace
within a reasonable time all parts that may be worn out, lost, destroyed or to
otherwise rendered unfit for use, with appropriate replacement parts . Debtor
shall obtain and maintain in good standing at all times all applicable permits,
licenses, registrations and certificates respecting the Collateral.

 

3.             Assessments.  Debtor shall promptly pay when due all taxes,
assessments, license fees, and governmental charges levied or assessed against
Debtor or with respect to the Collateral or any part thereof.

 

4.             No Encumbrances.  Debtor agrees not to suffer or permit any
charge, lien, security interest, adverse claim or encumbrance of any and every
nature whatsoever against the Collateral or any part thereof.

 

5.             No Removal.  Except as otherwise provided in this Agreement,
Debtor shall not remove the Collateral from the County or counties designated at
the beginning of this Agreement without Secured Party’s written consent.

 

6.             No Transfer.  Except as otherwise provided in this Agreement with
respect to inventory,  Debtor shall not, without the prior written consent of
Secured Party, sell, assign, transfer, lease, charter, encumber, hypothecate or
dispose of the Collateral, or any part thereof, or interest therein or offer to
do any of the foregoing.

 

7.             Notices and Reports.  Debtor shall promptly notify Secured Party
in writing of any change in the name, identity or structure of Debtor, any
charge, lien, security interest, claim or encumbrance asserted against the
Collateral, any litigation against Debtor or the Collateral, any theft, loss,
injury or similar incident involving the Collateral, and any other material
matter adversely affecting Debtor or the Collateral. Debtor shall furnish such
other reports, information and data regarding Debtor’s financial condition and
operations, the Collateral and such other matters as Secured Party may request
from time to time.

 

8.             Landlord’s Waivers.  Debtor shall furnish to Secured Party, if
requested, a landlord’s waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord’s waivers to be in such form and upon such terms as are acceptable to
Secured Party.

 

9.             Additional Filings.  Debtor agrees to execute and deliver such
financing statement or statements, or

 

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amendments thereof or supplements thereto, or other documents as Secured Party
may from time to time require in order to comply with the Minnesota Uniform
Commercial Code (or other applicable state laws of the jurisdiction where any of
the Collateral is located) and to preserve and protect the Secured Party’s
rights to the Collateral.

 

10.           Protection of Collateral.  Secured Party, at its option, whether
before or after default, but without any obligation whatsoever to do so, may (a)
discharge taxes, claims, charges, liens, security interests, assessments or
other encumbrances of any and every nature whatsoever at any time levied, placed
upon or asserted against the Collateral, (b) place and pay for insurance on the
Collateral, including insurance that only protects Secured Party’s interest, (c)
pay for the repair, improvement, testing, maintenance and preservation of the
Collateral, (d) pay any filing, recording, registration, licensing or
certificate fees or other fees and charges related to the Collateral, or (e)
take any other action to preserve and protect the Collateral and Secured Party’s
rights and remedies under this Agreement as Secured Party may deem necessary or
appropriate. Debtor agrees that Secured Party shall have no duty or obligation
whatsoever to take any of the foregoing action. Debtor agrees to promptly
reimburse Secured Party upon demand for any payment made or any expense incurred
by the Secured Party pursuant to this authorization. These payments and
expenditures, together with interest thereon from date incurred until paid by
Debtor at the maximum contract rate allowed under applicable laws, which Debtor
agrees to pay, shall constitute additional Obligations and shall be secured by
and entitled to the benefits of this Agreement.

 

11.           Inspection.  Debtor shall at all reasonable times allow Secured
Party by or through any of its officers, agents, attorneys or accountants, to
examine the Collateral, wherever located, and to examine and make copies of or
extracts from Debtor’s books and records.

 

12.           Further Assurances.  Debtor shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and
assurances as Secured Party may request from time to time to protect, assure and
enforce Secured Party’s rights and remedies.

 

13.           Insurance.  Debtor shall have and maintain insurance at all times
with respect to all tangible Collateral insuring against risks of fire
(including so-called extended coverage), theft and such other risks as Secured
Party may require, containing such terms, in such form and amounts and written
by such companies as may be satisfactory to Secured Party, all of such insurance
to contain loss payable clauses in favor of Secured Party as its interest may
appear. All policies of insurance shall provide for fifteen (15) days written
minimum cancellation notice to Secured Party and at the request of Secured Party
shall be delivered to and held by it. Secured Party is hereby authorized to act
as attorney for Debtor in obtaining, adjusting, settling and canceling such
insurance to the Obligations secured hereby whether or not such Obligations are
then due and payable. Debtor specifically authorizes Secured Party to disclose
from the policies of insurance to prospective insurers regarding the Collateral.

 

14.           Additional Collateral.  If Secured Party should at any time be of
the opinion that the Collateral is impaired or insufficient, or has declined or
may decline in value, or should Secured Party deem payment of the Obligations to
be insecure, then Secured Party may call for additional security satisfactory to
Secured Party, and Debtor promises to furnish such additional security
forthwith. The call for additional security may be oral, by messenger or
telefax, or United States mail addressed to Debtor, and shall not affect any
other subsequent right of Secured Party to exercise the same.

 

15.           Goods.  Notwithstanding anything to the contrary contained in this
agreement, if any Debtor is a “consumer” as defined Regulation AA of the Board
of Governors of the Federal Reserve System, 12 C.F.R. Part 227, or the Federal
Trade Commission Credit Practices Rule, 16 C.F.R. Part 444, as applicable, no
lien or security interest created or evidenced by this agreement shall extend to
or cover a non-possessory lien or security interest in “household goods,” other
than a purchase money lien or security interest, in accordance with such
regulations as applicable.

 

F.             ADDITIONAL PROVISIONS REGARDING ACCOUNTS.  The following
provisions shall apply to all accounts included within the Collateral:

 

1.             Definitions.  The term “account”, as used in this Agreement,
shall have the same meaning as set forth in the Uniform Commercial Code of
Minnesota in effect as of the date of execution hereof, and as set forth in any
amendment to the Uniform Commercial Code of Minnesota to become effective after
the date of execution hereof, and also shall include all present and future
notes, instruments, documents, general intangibles, drafts, acceptances and
chattel paper of Debtor, and the proceeds thereof.

 

2.             Additional Warranties.  As of the time any account becomes
subject to the security interest (or pledge or assignment as applicable) granted
hereby, Debtor shall be deemed further to have warranted as to such and all of
such accounts as follows: (a) each account and all papers and documents relating
thereto are genuine and in all respects what they purport to be; (b) each
account is valid and subsisting and arises out of a bona fide sale or lease of
goods sold or leased and delivered to, or out of and for services therefore
actually rendered by the Debtor to, the account debtor named in the account; (c)
the amount of the account

 

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represented as owing is the correct amount actually and unconditionally owning
except for normal cash discounts and is not subject to any set-offs, credits,
defenses, deductions or countercharges; and (d) Debtor is the owner thereof free
and clear of any charges, liens, security interests, adverse claims and
encumbrances of any and every nature whatsoever.

 

3.             Collection of Accounts.  Secured Party shall have the right in
its own name or in the name of the Debtor, whether before or after default, to
require Debtor forthwith to transmit all proceeds of collection of accounts
directly to Secured Party, to demand, collect, receive, receipt for, sue for,
compound and give acquittal for, any and all amounts due or to become due on the
accounts and to endorse the name of the Debtor on all Commercial paper given in
payment or part payment thereof, and in Secured Party’s discretion to file any
claim or take any other action or proceeding that Secured Party, may deem
necessary or appropriate to protect and preserve and realize upon the accounts
and related Collateral. Unless and until Secured Party elects to collect
accounts, and the privilege of Debtor to collect accounts is revoked by Secured
Party in writing, Debtor shall continue to collect accounts, account for same to
Secured Party, and shall not commingle the proceeds of collection of accounts
with any funds of the Debtor. In order to assure collection of accounts in which
Secured Party has a security interest (or which have been pledged or assigned to
Secured Party as applicable) hereunder, Secured Party may notify the post office
authorities to change the address for delivery of mail addressed to Debtor to
such address as Secured Party may designate, and to open and dispose of such
mail and receive the collections of accounts included herewith. Secured Party
shall have no duty or obligation whatsoever to collect any account, or to take
any other action to preserve or protect the Collateral; however, Debtor releases
Secured Party from any claim or claims for loss or damage arising from any act
or omission of Secured Party and its officers, directors, employees or agents,
should Secured Party elect to collect any account or take any possession of any
Collateral.

 

4.             Identification and Assignment of Accounts.  Upon Secured Party’s
request, whether before or after default, Debtor shall take such action and
execute and deliver such documents as Secured Party may request in order to
identify, confirm, mark, segregate and assign accounts and to evidence Secured
Party’s interest in same. Without limitation of the foregoing Debtor, upon
request, agrees to assign accounts to Secured Party, identify and mark accounts
as being subject to the security interest (or pledge or assignment as
applicable) granted hereby, mark Debtors books and records to reflect such
security interests, pledges and assignments, and forthwith to transmit to
Secured Party in the form received by Debtor any and all proceeds of collection
of such accounts.

 

5.             Account Reports.  Debtor will deliver to Secured Party, as Lender
may require, a written report in form and in content satisfactory to Secured
Party, showing a listing and aging of accounts and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of the assertion by any account debtor of any set-off, defense or
claim regarding an account or any other matter adversely affecting any account.

 

6.             Segregation of Returned Goods.  Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property. Debtor shall as often as requested by Secured Party, but not less
often than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included in assignments or
identifications made pursuant hereto.

 

7.             Right of Off-Set.  Any deposit or other sums at any time credited
by or due from the holder of the Obligations to Debtor or any endorser,
guarantor or surety of any of the Obligations and any securities or other
property of Debtor or any endorser, guarantor or surety of any of the
Obligations in the possession of the holder of the Obligations may at all times
be held and treated as additional and cumulative collateral security for the
payment of the Obligations and Debtor grants Secured Party a security interest
and contractual right of off-set in all such deposits, sums, securities and
other properties as additional and cumulative security for payment of the
Obligations. The holder of the Obligations may apply to set-off such deposits or
other sums against the Obligations at any time in the case of Debtor,  but only
with respect to matured liabilities in case of the endorsers, guarantors, or
sureties of any of the Obligations.

 

G.            ADDITIONAL PROVISIONS REGARDING INVENTORY.  The following
provisions shall apply to all inventory included within the Collateral:

 

1.             Inventory Reports.  Debtor will deliver to Secured Party as
Secured Party may require, on such frequency as Secured Party may request, a
written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Debtors opening
inventory, inventory acquired, inventory sold, inventory leased, inventory
returned, inventory used in Debtor’s business, closing inventory, any other
inventory not within the preceding categories and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of any matter adversely affecting the inventory, including,
without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss of depreciation.

 

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2.             Location of Inventory.  Debtor will promptly notify Secured Party
in writing of any addition to, change in or discontinuance of its place(s) of
business as shown in this Agreement, the places at which inventory is located as
shown herein, the location of its chief executive office and the location of the
office where it keeps its records as set forth herein. All Collateral will be
located at the places of business shown below, as modified by any written
notices given pursuant hereto.

 

3.             Uses of Inventory.  Except as set forth in the loan agreement,
unless and until the privilege of Debtor to use inventory in the ordinary course
of Debtor’s business is revoked by Secured Party in the event of default or if
Secured Party deems itself insecure, Debtor may use the inventory in any manner
not inconsistent with this Agreement, may lease or sell that part of the
Collateral consisting of inventory provided that all such leases and sales are
in the ordinary course of business, and use and consume any raw materials or
supplies that are necessary in order to carry on Debtor’s business. A sale in
the ordinary course of business does not include a transfer in partial or total
satisfaction of a debt.

 

4.             Accounts as Proceeds.  All accounts that are proceeds of the
inventory included within the Collateral shall be subject to all of the terms
and provisions hereof pertaining to accounts.

 

5.             Protection of Inventory.  Debtor shall take all action necessary
to protect and preserve the inventory.

 

6.             Assignment of Rents and Leases.  Debtor hereby assigns to Secured
Party all rents and other benefits derived or to be derived from leases
(“Leases”) of the inventory now or hereafter existing or entered into, together
with all guarantees, amendments, modifications, extensions and renewals thereof
(the “Rents”). Prior to a foreclosure by Secured Party of any lien or security
interest which Secured Party may now or hereafter hold covering the inventory,
this Assignment of Rents is not intended to, and shall not, constitute payment
to Secured Party, unless Secured Party terminates Debtor’s license to collect
the Rents, and then it shall constitute payment only to the extent that prior to
foreclosure the Rents are actually received by Secured Party as opposed to
constituting a portion of the voluntary payments of principal and interest on
the indebtedness evidenced and secured hereby, and are not used for the
operation, maintenance or repair of the inventory, or for the payment of costs
and expenses in connection therewith. Except as otherwise provided herein,
Secured Party shall have the absolute right, power and authority to take any and
all actions which Secured Party deems necessary or appropriate in connection
with taking possession of the inventory, leasing all or any part of the
inventory, collecting all or any of the Rents and enforcing the rights of the
lessor under any of the leases, including without limitation, bringing,
prosecuting, defending or settling legal proceedings against lessees of the
inventory. Notwithstanding anything herein to the contrary, Secured Party shall
not be obligated to perform or discharge, and Secured Party does not undertake
to perform or discharge, any obligation, duty or liability with respect to the
Leases or the Rents under or by reason of this Assignment. This Assignment shall
not operate to place responsibility for the control, care, maintenance or repair
of the inventory upon Secured Party, or for any dangerous or defective condition
of the Inventory, or for any negligence in the arrangement, upkeep, repair, or
control of the inventory. Debtor shall retain a revocable license to collect and
receive the Rents as the agent of Secured Party, and to retain, use and enjoy
such Rents, provided that such revocable license ipso facto terminate without
further action by Secured Party and without notice to Debtor upon the occurrence
of any default or event of default as defined in any note, deed of trust,
security agreement, guaranty, financing statement, fixture filing or other loan
documents given to Secured Party by Debtor or any other party in connection with
any indebtedness or obligation of Debtor to Secured Party.

 

7.             Leased Inventory.  Debtor shall (a) observe and perform
faithfully every obligation which Debtor is required to perform under the
Leases; (b) enforce or secure the performance of, at its sole cost and expense,
every obligation to be performed by the lessees under the Leases; (c) not
collect any Rents in advance of the time when the same shall be due, or
anticipate any payments under any of the Leases, except for bona fide security
deposits not in excess of an amount equal to two (2) months Rent; (d) at the
request of Secured Party, deliver copies of Leases to Secured Party; and (e)
appear and defend against, at Debtor’s sole cost and expense, any action or
proceeding arising under, and in any manner connected with the Leases, the Rents
or the obligations, duties or liabilities of the lessor, lessee or guarantors
thereunder.

 

H.            [INTENTIONALLY OMITTED]

 

I.              [INTENTIONALLY OMITTED]

 

J.             EVENTS OF DEFAULT.  Debtor shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal,
interest or other amount due on any Obligations; (ii) the occurrence of any
event which under the terms of any evidence of indebtedness, indenture, loan
agreement, security agreement or similar instrument permits the acceleration of
maturity of any of obligation of Debtor whether to Secured Party or to others;
(iii) any representation or warranty made by Debtor and/or others to Secured
Party in connection with this Agreement, the Collateral or the Obligations, or
in any statements or certificates, proves incorrect in any material

 

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respect as of the date of the making or the issuance thereof; (iv) default
occurs in the observance or performance of or, if Debtor fails to furnish
adequate evidence of performance of, any provision of this Agreement or of any
note, assignment, transfer, other agreement, document or instrument delivered by
Debtor to Secured Party in connection with this Agreement, the Collateral or the
Obligations; (v) death, dissolution, liquidation, termination of existence,
insolvency, business failure or winding-up of Debtor, or any maker, endorser,
guarantor, surety or other party liable in any capacity for any of the
Obligations; (vi) the filing of a petition in bankruptcy by or against, or the
application for appointment of a receiver or any other legal custodian for any
part of the property of, or the assignment for the benefit of creditors by, or
the commencement of any proceeding under any bankruptcy, rearrangement,
reorganization, insolvency or similar laws for the relief of Debtors by or
against, the Debtor, or any maker, endorser, guarantor, surety or other party
primarily or secondarily liable for any of the Obligations; (vii) the Collateral
becomes, in the judgment of Secured Party, impaired, unsatisfactory or
insufficient in character or value; (viii) the filing of any levy, attachment,
execution, garnishment or other process against the Debtor, or any of the
Collateral or any maker, endorser, guarantor, surety, or other party liable in
any capacity for any of the Obligations, or (ix) the Secured Party in good faith
believes that the prospect of repayment or performance of the Obligations or any
of the covenants, agreements or other duties under any writing executed in
connection herewith is impaired.

 

K.            REMEDIES.  Upon the occurrence of an Event of Default, or if
Secured Party deems payment or performance of the Obligations to be insecure,
Secured Party, at its option, shall be entitled to exercise any one or more of
the following remedies (all of which are cumulative):

 

1.             Declare Obligations Due.  Secured Party, at its option, may
declare the Obligations or any part thereof immediately due and payable, without
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor, or any other notice
whatsoever, all of which are hereby waived by Debtor, the Borrower and any
maker, endorser, guarantor, surety or other party liable in any capacity for any
of the Obligations.

 

2.             Remedies.  Secured Party shall have all of the rights and
remedies provided for in this Agreement and any other agreements executed by
Debtor, the rights and remedies in the Uniform Commercial Code of Minnesota, and
any and all rights and remedies at law or in equity, all of which shall be
deemed cumulative. Without limiting the foregoing, Debtor agrees that Secured
Party shall have the right to: (a) require Debtor to assemble the Collateral and
make it available to Secured Party at a place designated by Secured Party that
is reasonably convenient to both parties, which Debtor agrees to do; (b) take
possession of the Collateral with or without process of law, and, in this
connection, enter any premises where the Collateral is located to remove same,
to render it unusable, or to dispose of same on such premises; (c) sell, lease
or otherwise dispose of the Collateral, by public or private proceedings, for
cash or credit, without assumption of credit risks; and/or (d) whether before or
after default, collect and receipt for, compound, compromise, and settle, and
give releases, discharges and acquittances, with respect to, any and all amounts
owed by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of the
type customarily sold on a recognized market, Secured Party will send Debtor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or other disposition will be made. Any requirement of
reasonable notice to Debtor shall be met if such notice is mailed, postage
prepaid, to Debtor at the address of Debtor designated at the beginning of this
Agreement, at least five (5) days before the day of any public sale or at least
five (5) days before the time after which any private sale or other disposition
will be made.

 

3.             Expenses.  Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights and
remedies, in retaking, holding, testing, repairing, and proving, selling,
leasing or disposing of the Collateral, or like expenses, including, without
limitation, attorneys fees and legal expenses incurred by Secured Party. These
expenses, together with interest thereon from date incurred until paid by Debtor
at the maximum contract rate allowed under applicable laws, which Debtor agrees
to pay, shall constitute additional Obligations, and shall be secured and
entitled to the benefits of this Agreement.

 

4.             Proceeds; Surplus; Deficiencies.  Proceeds received by Secured
Party from disposition of the Collateral shall be applied toward Secured Party’s
expenses and other Obligations and in such order or manner as Secured Party may
elect. Debtor shall be entitled to any surplus if one results after lawful
application of the proceeds.

 

5.             Remedies Cumulative.  The rights and remedies of Secured Party
are cumulative and the exercise of any one or more of the rights of remedies
shall not be deemed an election of rights or remedies or a waiver of any other
right or remedy. Secured Party may remedy any default and may waive any default
without waiving the default remedy or without waiving any other prior or
subsequent default.

 

L.            RELINQUISHMENT OF CERTAIN DEFENSES.  Regarding the enforcement of
the security interests and covenants and agreements contained in this Agreement
to secure payment of the Obligations, the Debtor covenants and agrees as
follows:

 

1.             Secured Party’s right of recovery against the Collateral for the
Obligations shall be determined as if Debtor

 

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were a primary obligor for the payment of the Obligations regardless of whether
or not Debtor is in fact primarily liable for all or any part of the
Obligations. Debtor specifically agrees that it shall not be necessary or
required, in order to enforce the remedies under this Agreement, that the
Secured Party have made demand for payment upon the Borrower or any other person
or entity liable for any portion of the Obligations or have made protest thereof
or have given notice to the Borrower or any other party liable thereon of
maturity or nonpayment of the Obligations.

 

2.             The Debtor specifically waives any notice of acceptance of this
Agreement by the Secured Party and of the creation, advancement, existence,
extension, renewal, modification, consolidation, the rearrangement from time to
time of the Obligations, the increase from time to time in the principal amount
thereof, the increase or reduction from time to time of the rate of interest
thereon, or any indulgence from time to time with respect to the Obligations, or
any part thereof, and of nonpayment thereof or default thereon, and waives
grace, demand, protest, presentment and notice of demand, protest, and
presentment with respect to the Obligations, and waives notice of the amount of
the Obligations outstanding at any time, and agrees that the maturity of the
Obligations, or any part thereof, may be accelerated, extended, modified,
amended or renewed from time to time or any other indulgence may be granted with
respect thereto by the Secured Party at its will or as may be agreed by the
Borrower without notice to or further consent by the Debtor, at any time or
times.

 

3.             The Debtor agrees that: (i) no renewal, extension, modification,
consolidation, or rearrangement of or any other indulgence, forbearance or
compromise with respect to the Obligations, or any part thereof; (ii) no
increase in the principal amount of any of the Obligations; (iii) no increase or
reduction of the rate of interest thereon; (iv) no release, withdrawal,
substitution, surrender, subordination, exchange, deterioration, waste or other
impairment of any security or collateral or guaranty now or hereafter held by
the Secured Party for payment of the Obligations, or of any part thereof; (v) no
release of the Borrower, any guarantor, or of any other person primarily or
secondarily liable on the Obligations, or any part thereof; and (vi) no delay or
omission or lack of diligence or care in exercising any right or power with
respect to the Obligations or any security or collateral therefor or under this
Agreement shall in any manner impair, diminish or affect the rights of the
Secured Party or the liability of the Debtor hereunder. The Debtor specifically
agrees that it shall not be necessary or required, and that the Debtor shall not
be entitled to require, that the Secured Party mitigate damages, or file suit or
proceed to obtain or assert a claim for personal judgment against the Borrower
for the Obligations, or make any effort at collection of the Obligations from
the Borrower, or foreclose against or seek to realize upon any security or
collateral now or hereafter existing for the Obligations, or file suit or
proceed to obtain or assert a claim for personal judgment against any other
party (whether maker, guarantor, endorser or surety) liable for the Obligations,
or make any effort at collections of the Obligations from any such other party,
or exercise or assert any other right or remedy to which the Secured Party is or
may be entitled in connection with the Obligations or any security or collateral
or other Agreement therefor, or assert or file any claim against the assets or
estate of the Borrower or any guarantor or other person liable for the
Obligations, or any part thereof, before or as a condition of enforcing the
liability of the Debtor under this Agreement or requiring payment of the
Obligations by the Debtor hereunder, or at any time thereafter. The Debtor
expressly waives any right to the benefit of or to require or control
application of any security or collateral or the proceeds of any security or
collateral now existing or hereafter obtained by the Secured Party as security
for the Obligations, or any part thereof, and agrees that the Secured Party
shall have no duty insofar as the Debtor is concerned to apply upon any of the
Obligations any monies, payments or other property at any time received by or
paid to or in the possession of the Secured Party, except as the Secured Party
shall determine in its sole discretion. The Debtor specifically agrees that
Debtor shall not have any recourse or action against the Secured Party by reason
of any action the Secured Party may take or omit to take in connection with the
Obligations, the collection of any sums or amounts herein mentioned, or in
connection with any security or collateral or any Guaranty at any time existing
therefor.

 

4.             The Debtor agrees to the terms, provisions and conditions of the
Note and other instruments evidencing the Obligations and of any renewal,
modification, consolidation or rearrangement thereof or other agreements which
may have been or may hereafter be executed by the Borrower from time to time
evidencing or in connection with the Obligations or any part thereof, and agrees
that the Debtor’s liability hereunder shall in no manner be affected, reduced,
impaired or released by reason of any term, provision or condition of such Note
or other agreement or by the failure, refusal or omission of the Secured Party
to enforce or observe any of same or any forbearance or compromise made by the
Secured Party or any action taken or omitted to be taken by the Secured Party
pursuant thereto or in connection therewith. The Debtor, by the execution and
delivery of this Agreement agrees, represents, warrants and acknowledges that
Debtor shall be bound by the provisions of any Agreement and Security Agreement
and any Environmental Certificate and Agreement of even date herewith, from the
Borrower to the Secured Party and which purport to be applicable to Debtor to
the same extent and with the same effect as if Debtor had executed and delivered
such document to the Secured Party. In that connection, the Debtor agrees that
the provisions of this Paragraph shall survive any exercise of the power of sale
granted in any instrument securing the Obligations, any foreclosure of the liens
created by any of the instruments securing the Obligations, any conveyance in
lieu of any such foreclosure, the repayment of the Obligations, and the
discharge and release of all liens, rights and interests securing payment of the
Obligations.

 

5.             The Debtor absolutely and unconditionally covenants and a agrees
that: (i) in the event that the Borrower does not or is unable to pay or perform
the Obligations for any reason including, without limitation, liquidation,
dissolution,

 

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

 

receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment or other similar
proceedings affecting the status, composition, identity, existence, assets or
Obligations of the Borrower, or the disaffirmance or termination of any of the
Obligations in or as a result of any such proceedings; and/or (ii) if all or any
part of the Obligations (or any instrument or agreement made or executed in
connection therewith) is for any reason found to be invalid, illegal,
unenforceable, uncollectible or legally impossible, for any reason whatsoever
(including, without limiting the generality of the foregoing, upon the grounds
that the payment and/or performance of the Obligations is ultra vires or
otherwise without authority, may violate applicable usury laws, is subject to
valid defenses, claims or offsets of the Borrower, or any instrument evidencing
any of the Obligations is forged or otherwise irregular), then in any such case
the Debtor shall pay and perform the Obligations as herein provided and that no
such occurrence shall in any way diminish or otherwise affect the Debtor’s
liabilities hereunder.

 

6.             Should the status, composition, structure or name of the Borrower
change, including, but not limited to, by reason of a merger, dissolution,
consolidation or reorganization, this Agreement shall continue and also cover
the Obligations and Obligations of the Borrower under the new status,
composition structure or name according to the terms hereof. If the Borrower is
a general or limited partnership, no termination of said partnership, nor
withdrawal therefrom or termination of any ownership interest therein owned, by
any general or limited partner of such partnership shall alter, limit,
terminate, excuse or modify the Debtor’s liabilities set forth in this
Agreement.

 

7.             In the event any payment from the Borrower to the Secured Party
is held to constitute a preference under the bankruptcy laws, or if for any
other reason the Secured Party is required to refund such payment or pay the
amount thereof to any other party, such payment by the Borrower to the Secured
Party shall not constitute a release of the Debtor from any liability hereunder,
and this Agreement shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments.

 

8.             At all times while any or all of the Obligations are now or
hereafter secured in whole or in part, the Debtor agrees that the Secured Party
may, from time to time, at its discretion, and with or without valuable
consideration, allow substitution, withdrawal, release, surrender, exchange,
subordination, deterioration, waste, loss or other impairment of all or any part
of such security or collateral, without notice to or consent by the Debtor, and
without in anywise impairing, diminishing or releasing the liability of the
Debtor hereunder.

 

9.             The Debtor waives marshalling of assets and liabilities, sale in
inverse order of alienation, and all defenses given to sureties or Debtors at
law or in equity other than actual payment of the Obligations and performance of
the actions constituting the Obligations, including, but not limited to, any
rights pursuant to the laws of Minnesota. The failure by the Secured Party to
file or enforce a claim against the estate (either in administration, bankruptcy
or other proceeding) of the Borrower or any other person primarily or
secondarily liable for the Obligations or of any other or others shall not
affect the liability of Debtor hereunder.

 

M.           OTHER AGREEMENTS.

 

1.             Savings Clause.  Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable usury
laws. If any such excessive interest is so provided for, then in such event (i)
the provisions of this paragraph shall govern and control, (ii) neither the
Debtor nor Debtor’s heirs, legal representatives, successors or assigns or any
other party liable for the payment thereof shall be obligated to pay the amount
of such interest to the extent that it is in excess of the maximum amount
permitted by law, (iii) any such excess interest that may have been collected
shall be, at the option of the holder of the instrument evidencing the
Obligations, either applied as a credit against the then unpaid principal amount
thereof or refunded to the maker thereof, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful rate under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction.

 

2.             Joint and Several Responsibility.  If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtors shall be
joint and several.

 

3.             Waivers.  Debtor and any maker, endorser, guarantor, surety or
other party liable in any capacity respecting the Obligations hereby waived
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor and any other notice
whatsoever.

 

4.             Severability.  Any provision hereof found to be invalid by courts
having jurisdiction shall be invalid only with respect to such provision (only
to the extent necessary to avoid such invalidity). The offending provision shall
be modified to the minimum extent possible to confer upon Secured Party the
benefits intended thereby. Such provision as modified and the remaining
provisions hereof shall be construed and enforced to the same extent as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.

 

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

 

5.             Use of Copies.  Any carbon, photographic or other reproduction of
any financing statement signed by Debtor is sufficient as a financing statement
for all purposes, including without limitation, filing in any state as may be
permitted by the provisions of the Uniform Commercial Code of such state.  All
rights and remedies of Secured Party in all such agreements are cumulative, but
in the event of actual conflict in terms and conditions, the terms and
conditions of the latest security agreement shall govern and control.

 

6.             Authorization to File Financing Statements.  The Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Debtor is an organization, the type of organization
and any organizational identification number issued to the Debtor and, (ii) in
the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates.  The Debtor agrees
to furnish any such information to the Secured Party promptly upon the Secured
Party’s request.  The Debtor also ratifies its authorization for the Secured
Party to have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.

 

7.             Notices.  Any notice or demand given by Secured Party to Debtor
in connection with this Agreement, the Collateral or the Obligations shall be
deemed given and effective upon deposit in the United States mail, postage
pre-paid, addressed to Debtor at the address of the Debtor designated at the
beginning of this Agreement. Actual notice to Debtor shall always be effective
no matter how given or received.

 

8.             Headings and Gender.  Paragraph headings in this Agreement are
for convenience only and shall be given no meaning or significance in
interpreting this Agreement. All words used herein shall be construed to be or
such gender of number as the circumstances require.

 

9.             Amendments.  Neither this Agreement nor any of its provisions may
be changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification, waiver or discharge is sought.

 

10.           Binding Effect.  The provisions of this Security Agreement shall
be binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and the rights, powers and remedies of Secured
Party hereunder shall inure to the benefit of the successors and assigns of
Secured Party.

 

11.           Governing Law.  This Security Agreement shall be governed by the
law of Minnesota and applicable federal law.

 

13.           Statute of Frauds.  THIS COMMERCIAL SECURITY AGREEMENT, THE LOAN
AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED HEREIN OR IN THE LOAN
AGREEMENT, OR EXECUTED IN CONNECTION WITH OR ATTACHED TO THE LOAN AGREEMENT,
REPRESENT THE FINAL AGREEMENT BETWEEN DEBTOR AND SECURED PARTY, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN DEBTOR AND SECURED PARTY. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
DEBTOR AND SECURED PARTY.

 

13.          U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No

 

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

 

Borrower or Guarantor may claim or assert against SBA any local or state law to
deny any obligation of Borrower, or defeat any claim of SBA with respect to this
Loan.

 

Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Agreement effective as of
the date first written above.

 

 

DEBTOR

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

Edward Cameron, President

 

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

 

EXHIBIT A

 

See attached list of equipment

 

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

Appliance Recycling Centers of America, Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
Appliance Recycling Centers of America, Inc. (“Corporation”). The Corporation is
a corporation for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws of the
State of Minnesota. The Corporation is duly authorized to transact business in
all other states in which the Corporation is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
the Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 7400
Excelsior Boulevard, Minneapolis, MN 53426. Unless the Corporation has
designated otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The Corporation will notify Lender
prior to any change in the location of the Corporation’s state of organization
or any change in the Corporation’s name. The Corporation shall do all things
necessary to

 

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

 

preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and the Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                              , at which a quorum was present and voting, or by
other duly authorized action in lieu of a meeting, the resolutions set forth in
this Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of Appliance
Recycling Centers of America, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Edward Cameron

 

President

 

Y

 

/s/ Edward R. Cameron

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized
person(s) is/are authorized, empowered, and directed to do the following for and
on behalf of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

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

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

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

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                         .  THIS RESOLUTION IS GIVEN
UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND
HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Edward R. Cameron

 

Edward Cameron, President

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

Safe Disposal Systems, Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
Safe Disposal Systems, Inc. (“Corporation”). The Corporation is a corporation
for profit which is, and at all times shall be, duly organized, validly
existing, and in good standing under and by virtue of the laws of the
Commonwealth of Pennsylvania. The Corporation is duly authorized to transact
business in all other states in which the Corporation is doing business, having
obtained all necessary filings, governmental licenses and approvals for each
state in which the Corporation is doing business. Specifically, the Corporation
is, and at all times shall be, duly qualified as a foreign corporation in all
states in which the failure to so qualify would have a material adverse effect
on its business or financial condition. The Corporation has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. The Corporation maintains an
office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the
Corporation has designated otherwise in writing, the principal office is the
office at which the Corporation keeps its books and records. The Corporation
will notify Lender prior to any change in the location of the Corporation’s
state of organization or any change in the Corporation’s name. The Corporation
shall do all things necessary to

 

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

 

preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and the Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                         , at which a quorum was present and voting, or by other
duly authorized action in lieu of a meeting, the resolutions set forth in this
Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of Safe Disposal
Systems, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

President/Secretary

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized
person(s) is/are authorized, empowered, and directed to do the following for and
on behalf of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

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

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

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

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                                   .  THIS RESOLUTION
IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Brian Conners

 

Brian Conners, Secretary

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

AFFIDAVIT

 

RE:  $2,100,000.00 LIFE INSURANCE

 

I, Brian Conners, have life insurance in the amount of $2,100,000.00, as
evidenced by Policy No. Guardian Life Insurance Company Policy No. 6417978. 
Within sixty (60) days from today’s date, I shall provide to Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation (“Lender”) if not
already provided, the actual original life insurance policy(ies) and/or recorded
collateral assignment(s).  I recognize that my failure to provide the original
life insurance policy(ies) and recorded collateral assignment(s) will constitute
a default under the loan documents unless I take all reasonable steps to obtain
comparable coverage.

 

I further certify, as an additional inducement for Susquehanna Bank to make the
loan, that the policy referenced herein is in full force and effect, is current
on its premium payments, has not been assigned to any other creditor(s) and that
there are no other liens of any type whatsoever against the policy except the
pari passu liens of Susquehanna Bank.

 

I understand that Susquehanna Bank is relying on the representations set forth
in this Affidavit in the making of the loan and that any false statements
contained herein or any failure to comply with the undertakings set forth above
shall entitle the Lender to pursue any and all remedies to which it is entitled
under the loan documents or applicable law, including, but not limited to
acceleration of the indebtedness.

 

 

 

/s/ Brian Conners

 

Brian Conners

 

 

Sworn to and subscribed

before me this 10th day

of March, 2011.

 

 

/s/ Denise Cascio

 

Notary Public

 

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

S.D.S. Service Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
S.D.S. Service Inc. (“Corporation”). The Corporation is a corporation for profit
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the Commonwealth of
Pennsylvania. The Corporation is duly authorized to transact business in all
other states in which the Corporation is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
the Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 4301 N.
Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the Corporation has
designated

 

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

 

otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The Corporation will notify Lender
prior to any change in the location of the Corporation’s state of organization
or any change in the Corporation’s name. The Corporation shall do all things
necessary to preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or court applicable to the Corporation and the Corporation’s business
activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                         , at which a quorum was present and voting, or by other
duly authorized action in lieu of a meeting, the resolutions set forth in this
Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of S.D.S. Service,
Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

President/Secretary

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized person(s)
is/are authorized, empowered, and directed to do the following for and on behalf
of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

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

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

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

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                               .  THIS RESOLUTION IS
GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE
AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Brian Conners

 

Brian Conners, Secretary

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

ARCA Advanced Processing, LLC

 

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is ARCA
Advanced Processing, LLC (“Company”). The Company is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Minnesota. The
Company is duly authorized to transact business in all other states in which the
Company is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which

 

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

 

it is presently engaged or presently proposes to engage. The Company maintains
an office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless
the Company has designated otherwise in writing, the principal office is the
office at which the Company keeps its books and records. The Company will notify
Lender prior to any change in the location of the Company’s state of
organization or any change in the Company’s name. The Company shall do all
things necessary to preserve and to keep in full force and effect its existence,
rights and privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or court applicable to the Company and the Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                  at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of ARCA Advanced Processing,
LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

Chief Manager

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

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

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to Lender and receipt acknowledged by Lender in writing at
Lender’s address shown above (or such addresses as Lender may designate from
time to time). Any such notice shall not affect any of the Company’s agreements
or commitments in effect at the time notice is given.

 

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

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated                          . THIS
RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

/s/ Brian Conners

 

Brian Conners, Chief Manager

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

4301 Operations, LLC

 

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is 4301
Operations, LLC (“Company”). The Company is a limited liability company which
is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Delaware. The Company
is duly authorized to transact business in all other states in which the Company
is doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which it is

 

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

 

presently engaged or presently proposes to engage. The Company maintains an
office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the
Company has designated otherwise in writing, the principal office is the office
at which the Company keeps its books and records. The Company will notify Lender
prior to any change in the location of the Company’s state of organization or
any change in the Company’s name. The Company shall do all things necessary to
preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Company and the Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                 at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of 4301 Operations, LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

Director

 

Y

 

/s/ Brian Conners

 

 

 

 

 

 

 

James Ford

 

Director

 

Y

 

/s/ James Ford

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account

 

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

 

with Lender, or to cause such other disposition of the proceeds derived
therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full

 

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

 

force and effect and Lender may rely on it until written notice of its
revocation shall have been delivered to Lender and receipt acknowledged by
Lender in writing at Lender’s address shown above (or such addresses as Lender
may designate from time to time). Any such notice shall not affect any of the
Company’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated                          . THIS
RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

/s/ Brian Conners

 

Brian Conners, Director

 

 

 

/s/ James Ford

 

James Ford, Director

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

Scarabee Holdings, LLC

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is
Scarabee Holdings, LLC (“Company”). The Company is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of New York. The
Company is duly authorized to transact business in all other states in which the
Company is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a

 

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

 

foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which it is presently engaged or presently
proposes to engage. The Company maintains an office at 51 Willard Avenue,
Pocantino Hills, NY 10591. Unless the Company has designated otherwise in
writing, the principal office is the office at which the Company keeps its books
and records. The Company will notify Lender prior to any change in the location
of the Company’s state of organization or any change in the Company’s name. The
Company shall do all things necessary to preserve and to keep in full force and
effect its existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any governmental
or quasi-governmental authority or court applicable to the Company and the
Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                           at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

MEMBERS. The following named persons are members of Scarabee Holdings, LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

James Ford

 

Manager

 

Y

 

/s/ James Ford

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

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

 

Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness

 

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

 

of the Company to the Lender arising out of a Swap Transaction, however the same
may be evidenced. Such property may be mortgaged, pledged, transferred,
endorsed, hypothecated or encumbered at the time the Swap Transaction is entered
into, or at any other time or times, and may be either in addition to or in lieu
of any property theretofore mortgaged, Pledged, transferred, endorsed,
hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to Lender and receipt acknowledged by Lender in writing at
Lender’s address shown above (or such addresses as Lender may designate from
time to time). Any such notice shall not affect any of the Company’s agreements
or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated                           .
THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS
AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO
LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

/s/ James Ford

 

James Ford, Manager

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

ASSIGNMENT OF LEASE

(Tenant’s Interest)

 

THIS ASSIGNMENT OF LEASE (“Assignment”) is made on 03/10/11 by ARCA Advanced
Processing, LLC (“Assignor”) whose address is 4301 N. Delaware Avenue, Bldg. A,
Philadelphia, PA 19137 to Susquehanna Bank, a Pennsylvania state-chartered
banking corporation (“Assignee”) whose address is 159 E. High Street, Pottstown,
PA 19464.

 

1.             Definitions.

 

“Lease”:  Lease agreement, including all modifications, extensions and renewals,
dated June 18, 2010 by and between Assignor as tenant and Delaware Ave, LLC
(“Landlord”) of the Property.

 

“Loan Agreement”:  The Small Business Administration Authorization dated
December 23, 2010 between The United States Small Business Administration and
Assignee and the Loan Agreement dated of even date herewith between Assignor and
Assignee.

 

“Loan Documents”:  The Note, the Loan Agreement and any loan documents relating
to or securing the Note.

 

“Note”:  The promissory note dated of even date herewith in the original
principal amount of $2,100,000.00 delivered to Assignee by Assignor.

 

“Property”:  The leasehold interest in the real estate commonly known as 4301 N.
Delaware Avenue, Bldg. A, Philadelphia, PA 19137 .

 

“Indebtedness”: All amounts outstanding at any time under the Note and Loan
Documents.

 

All other capitalized terms used herein, unless otherwise specified, shall have
the same meaning ascribed to them in the Loan Agreement.

 

2.             Assignment.  Assignor, for good and valuable consideration, the
receipt of which is hereby acknowledged, does hereby assign, convey, and deliver
unto Assignee all of Assignor’s right, title and interest in the Lease.  To have
and to hold the same unto Assignee, its successors and assigns, until
termination of this Assignment as hereinafter provided.

 

3.             Collateral Assignment.  The parties intend that this Assignment
shall be a collateral assignment of the Lease.  Assignee shall not exercise its
rights under this Assignment until the occurrence of an Event of Default (as
defined in Paragraph 10).  Such assignment and grant shall continue in effect
until the Indebtedness is paid in full.

 

4.             Consideration.  This Assignment is made for and in consideration
of the loan made by Assignee to Assignor as set forth in the Loan Documents and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged.

 

5.             Indemnity.  Assignor agrees to pay and protect, and indemnify and
hold Assignee harmless from and against any and all claims, demands,
liabilities, losses, lawsuits, judgments and costs and expenses (including,
without limitation, reasonable attorneys’ fees) to which Assignee may become
exposed, or which Assignee may incur, in connection with the Lease or in
exercising its rights under this Assignment.

 

6.             Performance of Lease Covenants.  Upon the occurrence of a default
by Assignor under the Lease, Assignee may, at its option, perform any Lease
covenant for and on behalf of Assignor, and all monies expended in so doing
shall be chargeable to Assignor and added to the outstanding principal balance
of the Loan and shall be immediately due and payable.

 

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

 

7.             Representations and Warranties.  Assignor represents and
warrants:

 

(a)   The Lease is in full force and effect and has not been modified;

 

(b)   There are no defaults, defenses or setoffs of either landlord or Assignor
under the Lease nor, to the best of Assignor’s knowledge, is there any fact
which, with the giving of notice or lapse of time or both, would constitute a
default under the Lease;

 

(c)   The sole ownership of the entire tenant’s interest in the Lease is vested
in Assignor and the Lease has not been otherwise assigned or pledged; and

 

(d)   All rents due to date have been paid.

 

8.             Covenants and Agreements.  Assignor hereby covenants and agrees
as follows:

 

(a)  Assignor shall comply with and perform in a complete and timely manner all
of its obligations as tenant under the Lease.  Assignor shall give notice to
Assignee of any default by Assignor under the Lease in such time to afford
Assignee an opportunity to cure any such default prior to the landlord having
any right to terminate the Lease.  Assignor shall also provide Assignee with
notice of the commencement of an action of ejectment or any summary proceedings
for dispossession of the Assignor under the Lease;

 

(b)  Assignor shall furnish promptly to Assignee a certified copy of the Lease.
Assignee shall have the right to notify landlord at any time and from time to
time of any provision of the Loan Documents;

 

(c)  Assignor shall not permit the Lease to be modified, terminated, extended or
renewed without the prior written consent of Assignee, which consent shall not
be unreasonably withheld or delayed;

 

(d)  Assignor shall not without the prior written consent of Assignee:
(i) perform any act or execute any other instrument which might interfere with
the exercise of Assignee’s rights hereunder; or (ii) execute any assignment,
pledge or other encumbrance of the Lease; and

 

(e)  Assignee may assign its right, title and interest in the Lease and any
subsequent assignee shall have all of the rights and powers provided to Assignee
by this Assignment.

 

9.             No Obligation.  This Assignment shall not be deemed to impose
upon Assignee any of the obligations or duties of the Assignor provided in any
Lease.  Assignor hereby acknowledges and agrees: (i) Assignor is and will remain
liable under the Lease to the same extent as though this Assignment had not been
made; and (ii) Assignee has not by this Assignment assumed any of the
obligations of Assignor under the Lease, except as to such obligations which
arise after such time as Assignee shall have exercised its rights under this
Assignment and assumed Assignee’s obligations under the Lease.  This Assignment
shall not make Assignee responsible for the care or repair of the Property or
any personal property or for the carrying out of any of the terms of the Lease. 
Assignee shall not be liable in any way for any injury or damage to person or
property sustained by any person or persons, firm, or corporation in or about
the Property.

 

10.           Events of Default.  The occurrence of any one or more of the
following events shall constitute an “Event of Default” under this Assignment:

 

(a)  failure of Assignor to pay when due any of the Indebtedness, including any
payment due under the Note; or

 

(b)  failure of Assignor to strictly comply with Sections 8(a) and (c) of this
Assignment; or

 

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

 

(c)  breach of any covenant (other than those covenants set forth in subsections
(a) and (b) above), representation or warranty set forth in this Assignment
which is not cured within ten (10) days after notice; provided, however, if such
breach cannot by its nature be cured within ten (10) days, and Assignor
immediately initiates steps which Lender deems in Lender’s sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical; or

 

(d)  the occurrence of an Event of Default under any other Loan Documents.

 

11.           Remedies.  Upon the occurrence of an Event of Default, then,
without notice to, or the consent of, Assignor, Assignee shall be entitled to
exercise all of the rights and remedies contained in this Assignment or in any
other Loan Document or otherwise available at law or in equity.  The rights and
remedies of Assignee under this Assignment are cumulative and are not in lieu
of, but are in addition to, any other rights or remedies which Assignee may have
under the Loan Documents, at law or otherwise.

 

12.           Power of Attorney.  Upon the occurrence of an Event of Default,
Assignee shall have the right (and Assignor hereby irrevocably constitutes and
appoints Assignee as its attorney-in-fact, which power is coupled with an
interest, to do so) to demand, receive and enforce Assignor’s rights with
respect to the Lease, and to do any and all acts in the name of Assignor or in
the name of Assignee with the same force and effect as Assignor could do if this
Assignment had not been made.

 

13.           Defense.  Assignor shall at all times diligently enforce its
rights in, under and to the Lease, unless otherwise directed by Assignee in
writing, and shall, at Assignor’s sole cost and expense, appear in and defend
Assignee in any action or proceeding in any way connected with the Lease or this
Assignment, and shall pay all reasonable costs and expenses, including, without
limitation, attorneys’ fees, which Assignee may incur in connection with
Assignee’s appearance, voluntarily or otherwise, in any such action or
proceeding.

 

14.           No Waiver.  The exercise of any rights under this Assignment by
Assignee shall not cure or waive any Event of Default hereunder or under any of
the other Loan Documents.  Failure of Assignee to avail itself of any of the
terms of this Assignment for any period of time or for any reason shall not
constitute a waiver of the Assignment.

 

15.           Notices.  Any notice or other communication required or permitted
to be given shall be in writing addressed to the respective party as first set
forth above and shall be effective (i) when actually delivered, (ii) when
deposited with a nationally recognized overnight courier or (iii) when deposited
in the United States Mail, first class, certified or registered, postage
prepaid.  Any party may change its address for notices under this Assignment by
giving written notice to the other party as set forth above.

 

16.           Applicable Law.  This Assignment shall be governed by and shall be
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to conflicts of law principles.  This Assignment
shall be binding upon the parties hereto and their respective heirs, successors
and assigns, and may not be modified, amended or altered except by writing
signed by each of the parties hereto.

 

[signature page to follow]

 

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

 

IN WITNESS WHEREOF, Assignor has executed this Assignment or has caused the same
to be executed by its duly authorized representatives as of the date first set
forth above.

 

 

ASSIGNOR:

 

 

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

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

 

ENVIRONMENTAL INDEMNITY AGREEMENT

 

This Agreement is made on 03/10/11, by and between Susquehanna Bank,. a
Pennsylvania state-chartered commercial banking corporation (“Lender”) and ARCA
Advanced Processing, LLC (“Borrower”) and Appliance Recycling Centers of
America, Inc., Safe Disposal Systems, Inc., 4301 Operations, LLC, S.D.S. Service
Inc., Scarabee Holdings, LLC, Brian Conners and James Ford (“Guarantor”)
(hereinafter individually and/or collectively the “Indemnitor”).

 

RECITALS

 

A.            Borrower desires to obtain a loan from Lender in the principal sum
of $2,100,000.00 (the “Loan”) as evidenced by that certain Promissory Note dated
03/10/11, a Loan Agreement, and other supporting collateral documents (the “Loan
Documents”).

 

B.            Indemnitor is or will be the owner and/or operator of certain real
property commonly known as 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA
19137 and 8 Oak Hollow Drive, Voorhees, New Jersey 08043 (the “Subject
Property”).  Indemnitor agrees that the Subject Property does not contain any
contamination caused by any Hazardous Substance(s) (as defined within this
Agreement) above action levels defined in any Environmental Laws.

 

C.            In order to induce Lender to make the Loan to Borrower, the
Subject Property is offered as security for the Loan.

 

D.            In order for Lender to accept the Subject Property as security for
the Loan, Lender requires that Indemnitor provide assurances the Subject
Property is, and will remain, clear of hazardous levels of toxic contaminants,
including but not limited to asbestos, PCB’s, chlorinated hydrocarbons,
petroleum products, pesticides and heavy metals (“Hazardous Substances”) as
defined by the Comprehensive Environmental Response Compensation and Liability
Act (“CERCLA”) or any federal, state or local environmental laws, rules or
regulations (collectively referred to as “Environmental Laws”).

 

Therefore, in consideration of the mutual covenants and promises contained
herein and in the Loan Documents, the Indemnitor hereby agrees to the following:

 

1.             Borrower agrees, prior to disbursement of the Loan, to submit to
Lender if required, a copy of a recent report prepared by a qualified, impartial
consultant, satisfactory to Lender, verifying that the Subject Property offered
as collateral has been tested and found clear of Hazardous Substances above
action levels defined in any Environmental Laws.

 

2.             Indemnitor represents that the Subject Property does not contain
and will not be used to generate, manufacture, refine, transport, treat, store,
handle or dispose of Hazardous Substances or other toxic materials unless said
actions are conducted pursuant to and in compliance with Environmental Laws
and/or the conditions of a permit issued by the appropriate federal or state
governmental authorities.  At the time Borrower submitted its application for
the Loan, Borrower was and shall continue to be in compliance with all
Environmental Laws.

 

3.             Indemnitor warrants that after due and diligent inquiry, to the
best of Indemnitor’s knowledge, the following statements are true and correct:

 

a.  There has not been any summons, citation, directive, letter or other
communication, written or oral, from any agency or department of any municipal,
county, state or the U.S. Government (collectively “Governmental Agency”)
concerning any intentional or unintentional action or omission on the part of
Borrower or any previous owner or operator of the Subject Property, which has
resulted in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping (“Discharge”) of any Hazardous Substances into the air, land
or waters above acceptable levels as established by any Governmental Agency.

 

b.  As a result of the past or present use of the Subject Property, there is no
unremedied damage known to have occurred to the air, lands, waters, fish,
shellfish, wildlife, biota or any other resource owned, managed, held in trust,
or otherwise controlled by the state in which Subject Property is located.

 

4.             Indemnitor agrees not to cause or permit to exist, as a result of
an intentional or unintentional act or omission on its part, a Discharge of any
Hazardous Substances into the air, waters, or lands within, under or outside the
Subject Property, where damage may result to the air, lands, water, fish,
shellfish, wildlife, biota and other resources unless

 

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

 

Discharge is pursuant to and in compliance with the conditions of a permit
issued by the appropriate Governmental Agency.

 

5.             Borrower agrees to submit to Lender, should Lender in its
discretion deem such is required, not more than once a year, an updated report
prepared by a qualified impartial consultant, satisfactory to Lender, verifying
that the Subject Property remains clear of hazardous levels of contaminants.  If
Borrower fails to provide such a report within thirty (30) days of request by
Lender, Lender has the right, but is not required, to order such a report at
Borrower’s expense.

 

6.             In the event that said report indicates that the Subject Property
is not clear of hazardous levels of toxic contaminants, Lender will provide
written notice to Indemnitor requiring correction of the condition within 30
days, or such reasonable additional time period as Lender may determine in its
sole discretion.

 

7.             In the event that Indemnitor fails to correct the condition to
the satisfaction of Lender within the period of time stated in the notice,
Lender may, with the concurrence of the U.S. Small Business Administration,
declare a default of the loan under the terms and conditions contained in the
Loan Documents.

 

8.             At all times Indemnitor agrees to immediately notify Lender
should Indemnitor become aware of (i) any toxic contaminants or other
environmental problem or liability with respect to the Subject Property, or
(ii) any lien, action or notice from any Governmental Agency concerning
Hazardous Substances on the Subject Property.  Indemnitor shall, at its own cost
and expense, take all actions as shall be necessary or advisable for the
clean-up of the Subject Property, including all remedial actions in accordance
with all applicable Environmental Laws (and in all events in a manner
satisfactory to Lender).  Indemnitor shall further pay or cause to be paid, at
no expense to Lender, all clean-up, administrative, and enforcement costs which
may be asserted against the Subject Property or the owner or operator thereof by
any Governmental Agency.

 

9.             Borrower acknowledges that Lender is relying on this Agreement in
making the Loan, and Borrower, Indemnitor and its principals as individuals
agree to indemnify and hold harmless Lender, its agents, and assigns from and
against any damages, cost, liability or expense, including attorney and other
professional fees, directly or indirectly attributable to the presence of
Hazardous Substances, on or under the Subject Property or adjoining real
property and based upon claims assertable by any Governmental Agency or other
third parties against Lender or its assigns.

 

10.           This indemnification will specifically survive, and is entirely
independent of the Borrower’s contractual obligation to repay the primary
obligation held by Lender as amended, extended or renewed by Lender and release
of Lender liens on Indemnitor’s real or personal property by payment,
foreclosure or other action including Lender’s discretionary abandonment of
lien.

 

11.           Those liabilities, losses, claims, damages and expenses for which
Lender is indemnified shall be reimbursable to Lender as Lender’s obligations to
make payments with respect thereto are incurred, notwithstanding any litigation,
claim or other proceeding.  Indemnitor shall pay such liability, losses, claims,
damages and expenses to Lender as incurred within thirty (30) days after notice
from Lender itemizing the amounts incurred to the date of such notice.  In
addition to any remedy available for failure to periodically pay such amounts,
such amounts shall thereafter bear interest at the maximum rate permitted by
law.

 

12.           Indemnitor waives any execution of this Environmental Indemnity
Agreement by Lender.  The failure of Lender to enforce any right or remedy
hereunder, or to promptly enforce any such right or remedy, shall not constitute
a waiver thereof nor give rise to any estoppel against Lender, nor excuse
Indemnitor from its obligations hereunder.  Any waiver of such right or remedy
must be in writing and signed by Lender.  Any waiver of any provision herein by
Lender shall not be deemed a continuing waiver thereof.  Any waiver of any part
or provision herein shall not be deemed a waiver of any other part or provision
herein whereas said other parts and provisions of the within Agreement shall
remain in full force and effect.  This Agreement is subject to enforcement at
law and/or equity, including actions for damages and/or specific performance.

 

[signature page to follow]

 

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

 

LENDER:

 

INDEMNITOR:

Susquehanna Bank

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Lisa Viscusi

 

By:

/s/ Brian Conners

 

                                          ,
                                           

 

 

Brian Conners, Chief Manager

 

 

 

 

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

 

Edward Cameron, President

 

 

 

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

 

4301 Operations, LLC

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

 

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Manager

 

 

 

 

 

 

 

 

/s/ Brian Conners

 

 

Brian Conners, individually

 

 

 

 

 

 

 

 

/s/ James Ford

 

 

James Ford, individually

 

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

 

CLOSING CERTIFICATION

POST_CLOSING COMPLIANCE AND DOCUMENT CORRECTION AGREEMENT

AND

LIMITED POWER OF ATTORNEY

 

In consideration of the loan made by Susquehanna Bank, a Pennsylvania
state-chartered banking corporation (the “Lender”) to ARCA Advanced Processing,
LLC (the “Borrower”) in the amount of $2,100,000.00 (the “Loan”) and to induce
the Lender to make the Loan, the undersigned do(es) hereby represent, certify,
covenant, and agree as follows:

 

1.             If any properties pledged as collateral are designated by the
Federal Government as falling within the boundaries of a special flood hazard
area and Federal Flood Insurance becomes available, the undersigned will
purchase and maintain such insurance in the amounts and coverage equal to the
lesser of (a) the insurable value of the property, or (b) the maximum limit of
coverage available at subsidized rates during the life of the Loan. 
Borrower(s) and/or Guarantor(s) will not be eligible for any future flood
disaster assistance if this flood insurance is not maintained.

 

2.             No life insurance in addition to the amount specified in the Loan
documents is to be purchased by the Borrower(s) and/or Guarantor(s) for this
Loan and no current policy collaterally assigned or to be collaterally assigned
to Lender will be converted until the Loan is fully paid without prior written
approval of the Lender.  In addition, the undersigned agree(s) to provide any
and all insurance forms and financial statements requested by Lender, including,
without limitation: (a) business financial statements for Borrower, along with
annual tax returns; (b) annual personal financial statements and tax returns for
Guarantor(s); (c) annual property tax receipts; and (d) hazard insurance
policy/ies covering collateral pledged to Susquehanna Bank.

 

3.             As of this date, there have been no unremedied adverse changes in
the Borrower(s) or Guarantor(s) financial condition, organization, operations or
fixed assets and there are no outstanding tax liabilities owed as of this date,
including, but not limited to the following:  Federal, State & Local income and
other taxes, since the loan application was submitted to Lender.

 

4.             F.I.C.A. and Withheld Income Tax of the Borrower are currently
being deposited on a regular basis.  All other payroll taxes are paid or
deposited quarterly.  The undersigned hereby certifies that Borrower is current
on all Federal and State taxes, including, but not limited to, income taxes,
payroll taxes, real estate taxes, and sales taxes, and that all future taxes
will be paid when due.

 

5.             All insurance, licenses, permits and/or other approvals necessary
to lawfully operate the Borrower’s/s’ business have been obtained or have been
applied for and will be obtained.  To the extent that it may later be determined
that any additional insurance, licenses, permits and/or other approvals may be
required, the undersigned will immediately secure them and forward copies to
Lender once they have been obtained.

 

6.             (a)           In consideration of Lender disbursing funds for the
closing of the Loan secured by the Property being encumbered, and regardless of
the reason for any loss, misplacement, or inaccuracy in any loan documentation,
the undersigned agree(s) as follows:  If any document is lost, misplaced,
misstated or inaccurately reflects the true and correct terms and conditions of
the Loan, upon request of the Lender, the undersigned will comply with Lender’s
request to execute, acknowledge, initial and deliver to Lender any documentation
Lender deems necessary to replace

 

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

 

or correct the lost, misplaced, misstated or inaccurate documents.  All
documents Lender requests of Borrower(s) and/or Guarantor(s) shall be referred
to as “Replacement Documents.”  The undersigned agree(s) to deliver the
Replacement Documents within ten (10) days after receipt by the undersigned of a
written request for such replacement.  The undersigned also agree(s) that upon
request the undersigned will supply additional amounts and/or pay to Lender any
additional sum previously disclosed to Borrower(s) and/or Guarantor(s) for any
cost or fee associated with the Loan, which for whatever reason it was not
collected at closing (“Additional Fees”).

 

(b)           Any request under this Agreement may be made by the Lender
(including assignees and persons acting on behalf of the Lender) and shall be
prima facie evidence of the necessity for same.  A written statement addressed
to the undersigned, or any of them at the address indicated in the Loan
documentation shall be considered conclusive evidence of the necessity for
Replacement Documents.

 

(c)           Failure or refusal by the undersigned to comply with the terms of
the correction request shall constitute a default under the note and/or
mortgage/deed of trust, and shall give Lender the option of declaring all sums
secured by the Loan documents immediately due and payable.

 

(d)           If Failure or refusal by the undersigned to execute, acknowledge,
initial and deliver the Replacement Documents or provide the Replacement
Documents or Additional Fees to Lender more than ten (10) days after being
requested to do so by Lender and understanding that Lender is relying on these
representations, Borrower(s) agrees to be liable for any and all loss or damage
which Lender reasonably sustains thereby, including, but not limited to all
reasonable attorney’s fees and costs incurred by Lender.

 

7.             LIMITED POWER OF ATTORNEY.  Notwithstanding the foregoing
paragraph, the undersigned, for and in consideration of the approval, closing
and funding of the Loan, hereby grant(s) to Lender a LIMITED POWER OF ATTORNEY
to correct and/or re-execute or initial documents containing typographical or
clerical errors discovered in any or all of the closing documentation required
to be executed by the undersigned at settlement or during the Loan approval
process, including, but not limited to:

 

(a)           Errors with the Borrower(s)’ or Guarantor(s)’ name(s) including,
but not limited to wrong or misspelled names;

 

(b)           Errors with the property address including, but not limited to,
wrong or misspelled street, city or town names, incorrect house or street
numbers or zip codes;

 

(c)           Errors in the legal description for the property;

 

(d)           Errors with the applicable county name, including wrong or
misspelled county names; and

 

(e)           Errors related to the date of documents, including wrong or
incomplete dates.

 

In the event the Limited Power of Attorney granted pursuant to this section is
exercised, Lender will notify the undersigned and will provide a copy of the
document(s) executed, initialed and/or corrected on their behalf.  The Power of
Attorney granted herein is limited to the rights set forth herein and may not be
used to increase the interest rate of the Loan, alter the term of the Loan,
increase the outstanding principal balance of the Loan or increase the monthly
principal

 

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

 

and interest payment under the Loan.  The undersigned acknowledge(s) that the
grant of the Limited Power of Attorney set forth herein is in exchange for good
and valuable consideration and is intended to be coupled with an interest, and
the undersigned do(es) hereby make and declare this Limited Power of Attorney to
be irrevocable by the undersigned, or otherwise, renouncing all right to revoke
this power or to appoint any other person to perform any of the acts enumerated
herein.

 

8.             The undersigned have read all of the Loan documents relating to
the Loan and understand(s) the meaning and content of said Loan documents.

 

9.             The undersigned understand that the Loan documents constitute the
entire agreement between Borrower(s) and Lender and that no agent or
representative of Lender has made any statement, agreement or representation,
either oral or written, in connection with the Loan that would modify, add to or
change the terms and conditions set forth in the various documents executed in
conjunction with this transaction. It is the intention of both the Lender and
the undersigned that the following Disclaimer be incorporated by reference into
each of the Loan Documents so executed for this transaction.

 

“THIS WRITTEN LOAN AGREEMENT

REPRESENTS THE FINAL AGREEMENT

BETWEEN THE PARTIES

AND SHALL NOT BE CONTRADICTED BY

EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR

SUBSEQUENT ORAL AGREEMENTS

OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL

AGREEMENTS BETWEEN THE PARTIES.”

 

10.           The undersigned understand and acknowledge that the
representations made herein are material to Lender’s decision to close and fund
the Loan and that Lender is relying upon these representations in connection
with the making of the Loan.  The undersigned further acknowledge and understand
that the obligations enumerated herein shall survive closing and that any
failure to comply with the obligations as set forth herein shall constitute a
default under the Loan documents, entitling Lender to pursue any and all
remedies set forth in the Loan documents, including, but in no way limited to
acceleration of the indebtedness.

 

11.           Any documents required to be delivered to Lender shall be
delivered to the offices of Susquehanna Bank, 159 E. High Street, Pottstown,
Pennsylvania 19464, Attn: Loan Servicing.

 

12.           This agreement will survive the closing of the Loan, and inure to
the benefit of Lender’s successors and assigns and binding upon the heirs,
successors and assigns of Borrower(s).

 

[Signatures on following page]

 

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

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed to
be executed as of the date set forth herein.

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

By:

/s/ Edward R. Cameron

 

 

Edward Cameron, President

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

4301 Operations, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

 

 

 

 

/s/ Brian Conners

 

Brian Conners, individually

 

 

 

 

 

/s/ James Ford

 

James Ford, individually

 

 

 

 

 

Date: 03/10/11

 

 

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U.S. Small Business Administration

 

NOTE

 

SBA Loan #

44714350-07

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Date

03/10/11

 

 

Loan Amount

$1,400,000.00

 

 

Interest Rate

Prime Rate plus 2.75%

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Operating Company

N/A

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

1.                                       PROMISE TO PAY:

In return for the Loan, Borrower promises to pay to the order of Lender the
amount of One Million Four Hundred Thousand Dollars, interest on the unpaid
principal balance, and all other amounts required by this Note.

 

2.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of this Note or
any guarantee of this Note.

“Guarantor” means each person or entity that signs a guarantee of payment of
this Note.

“Loan” means the loan evidenced by this Note.

“Loan Documents” means the documents related to this loan signed by Borrower,
any Guarantor, or anyone who pledges collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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3.                                       PAYMENT TERMS:

Borrower must make all payments at the place Lender designates. The payment
terms for this Note are:

 

The interest rate on this Note will fluctuate.  The initial interest rate is
6.00% per year.  This initial rate is the Prime Rate in effect on the first
business day of the month in which SBA received the loan application, plus
2.75%.  The initial interest rate must remain in effect until the first change
period begins.

 

Borrower must pay a total of 3 payments of interest only on the disbursed
principal balance beginning one month from the month this Note is dated and
every month thereafter; payments must be made on the first calendar day in the
months they are due.

 

Borrower must pay principal and interest payments of $15,834.18 every month,
beginning four months from the month this Note is dated; payments must be made
on the first calendar day in the months they are due.

 

Lender will apply each installment payment first to pay interest accrued to the
day Lender receives the payment, then to bring principal current, then to pay
any late fees, and will apply any remaining balance to reduce principal.

 

The interest rate will be adjusted every calendar quarter (the “change period”).

 

The “Prime Rate” is the prime rate in effect on the first business day of the
month (as published in the Wall Street Journal) in which SBA received the
application, or any interest rate change occurs.  Base Rates will be rounded to
two decimal places with .004 being rounded down and .005 being rounded up.

 

The adjusted interest rate will be 2.75% above the Prime Rate.  Lender will
adjust the interest rate on the first calendar day of each change period.  The
change in interest rate is effective on that day whether or not Lender gives
Borrower notice of the change.

 

Lender must adjust the payment amount at least annually as needed to amortize
principal over the remaining term of the note.

 

If SBA purchases the guaranteed portion of the unpaid principal balance, the
interest rate becomes fixed at the rate in effect at the time of the earliest
uncured payment default.  If there is no uncured payment default, the rate
becomes fixed at the rate in effect at the time of purchase.

 

Loan Prepayment:

 

Notwithstanding any provision in this Note to the contrary:

 

Borrower may Prepay this Note.  Borrower may prepay 20% or less of the unpaid
principal balance at any time without notice.  If Borrower prepays more than 20%
and the Loan has been sold on the secondary market, Borrower must:

 

a.             Give Lender written notice;

b.             Pay all accrued interest; and

c.             If the prepayment is received less than 21 days from the date
Lender receives the notice, pay an amount equal to 21 days’ interest from the
date lender receives the notice, less any interest accrued during the 21 days
and paid under subparagraph b., above.

 

If Borrower does not prepay within 30 days from the date Lender receives the
notice, Borrower must give Lender a new notice.

 

All remaining principal and accrued interest is due and payable 10 years from
date of Note.

 

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Late Charge:  If a payment on this Note is more than 10 days late, Lender may
charge Borrower a late fee of up to 5.00% of the unpaid portion of the regularly
scheduled payment.

 

4.                                       DEFAULT:

Borrower is in default under this Note if Borrower does not make a payment when
due under this Note, or if Borrower or Operating Company:

A.                                   Fails to do anything required by this Note
and other Loan Documents;

B.                                     Defaults on any other loan with Lender;

C.                                     Does not preserve, or account to Lender’s
satisfaction for, any of the Collateral or its proceeds;

D.                                    Does not disclose, or anyone acting on
their behalf does not disclose, any material fact to Lender or SBA;

E.                                      Makes, or anyone acting on their behalf
makes, a materially false or misleading representation to Lender or SBA;

F.                                      Defaults on any loan or agreement with
another creditor, if Lender believes the default may materially affect
Borrower’s ability to pay this Note;

G.                                     Fails to pay any taxes when due;

H.                                    Becomes the subject of a proceeding under
any bankruptcy or insolvency law;

I.                                         Has a receiver or liquidator
appointed for any part of their business or property;

J.                                        Makes an assignment for the benefit of
creditors;

K.                                    Has any adverse change in financial
condition or business operation that Lender believes may materially affect
Borrower’s ability to pay this Note;

L.                                      Reorganizes, merges, consolidates, or
otherwise changes ownership or business structure without Lender’s prior written
consent; or

M.                                 Becomes the subject of a civil or criminal
action that Lender believes may materially affect Borrower’s ability to pay this
Note.

 

5.                                       LENDER’S RIGHTS IF THERE IS A DEFAULT:

Without notice or demand and without giving up any of its rights, Lender may:

A.            Require immediate payment of all amounts owing under this Note;

B.                                     Collect all amounts owing from any
Borrower or Guarantor;

C.                                     File suit and obtain judgment;

D.                                    Take possession of any Collateral; or

E.                                      Sell, lease, or otherwise dispose of,
any Collateral at public or private sale, with or without advertisement.

 

6.                                       LENDER’S GENERAL POWERS:

Without notice and without Borrower’s consent, Lender may:

A.                                   Bid on or buy the Collateral at its sale or
the sale of another lienholder, at any price it chooses;

B.                                     Incur expenses to collect amounts due
under this Note, enforce the terms of this Note or any other

 

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Loan Document, and preserve or dispose of the Collateral.  Among other things,
the expenses may include payments for property taxes, prior liens, insurance,
appraisals, environmental remediation costs, and reasonable attorney’s fees and
costs. If Lender incurs such expenses, it may demand immediate repayment from
Borrower or add the expenses to the principal balance;

C.                                     Release anyone obligated to pay this
Note;

D.                                    Compromise, release, renew, extend or
substitute any of the Collateral; and

E.                                      Take any action necessary to protect the
Collateral or collect amounts owing on this Note.

 

7.                                       WHEN FEDERAL LAW APPLIES:

When SBA is the holder, this Note will be interpreted and enforced under federal
law, including SBA regulations. Lender or SBA may use state or local procedures
for filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using such procedures, SBA does not waive any federal
immunity from state or local control, penalty, tax, or liability.  As to this
Note, Borrower may not claim or assert against SBA any local or state law to
deny any obligation, defeat any claim of SBA, or preempt federal law.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Note, Borrower and Operating Company include the successors of each,
and Lender includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   All individuals and entities signing this
Note are jointly and severally liable.

B.                                     Borrower waives all suretyship defenses.

C.                                     Borrower must sign all documents
necessary at any time to comply with the Loan Documents and to enable Lender to
acquire, perfect, or maintain Lender’s liens on Collateral.

D.                                    Lender may exercise any of its rights
separately or together, as many times and in any order it chooses. Lender may
delay or forgo enforcing any of its rights without giving up any of them.

E.                                      Borrower may not use an oral statement
of Lender or SBA to contradict or alter the written terms of this Note.

F.                                      If any part of this Note is
unenforceable, all other parts remain in effect.

G.                                     To the extent allowed by law, Borrower
waives all demands and notices in connection with this Note, including
presentment, demand, protest, and notice of dishonor. Borrower also waives any
defenses based upon any claim that Lender did not obtain any guarantee; did not
obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did
not obtain the fair market value of Collateral at a sale.

 

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10.                                 STATE-SPECIFIC PROVISIONS:

 

NONE

 

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11.                                 BORROWER’S NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated under this Note as
Borrower.

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

 

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U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714350-07

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Appliance Recycling Centers of America, Inc.

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,400,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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10.                                 STATE-SPECIFIC PROVISIONS:

 

NONE

 

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11.                                 GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                                 GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Appliance Recycling Centers of America, Inc.

 

 

 

By:

/s/ Edward R. Cameron

 

 

Edward Cameron, President

 

 

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[g93321kg27i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714350-07

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Safe Disposal Systems, Inc.

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,400,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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10.                                 STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.                                 GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                                 GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Safe Disposal Systems, Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

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

 

Guarantor:

 

Safe Disposal Systems, Inc.

 

 

 

Lender:

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date:

 

03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$1,400,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

Signed, acknowledged and delivered in the presence of:

 

 

 

 

 

 

 

 

/s/ Denise Cascio

 

 

Witness

 

 

 

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

 

[g93321kg29i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714350-07

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

4301 Operations, LLC

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,400,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.                                 STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.                                 GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                                 GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

4301 Operations, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

 

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

 

Guarantor:

 

4301 Operations, LLC

 

 

 

Lender:

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date:

 

03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$1,400,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

 

4301 Operations, LLC

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

 

 

 

 

Signed, acknowledged and delivered in the presence of:

 

 

 

 

 

 

 

 

/s/ Denise Cascio

 

 

Witness

 

 

 

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

 

[g93321kg31i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714350-07

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

S.D.S. Service Inc.

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,400,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.                                 STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.                                 GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                                 GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

S.D.S. Service Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

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

 

Guarantor:

 

S.D.S. Service Inc.

 

 

 

Lender:

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date:

 

03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$1,400,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

 

S.D.S. Service Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

Signed, acknowledged and delivered in the presence of:

 

 

 

 

 

 

 

 

/s/ Denise Cascio

 

 

Witness

 

 

 

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

 

[g93321kg31i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714350-07

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Scarabee Holdings, LLC

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,400,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.                                 STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Scarabee Holdings, LLC

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

 

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

 

[g93321kg33i001.jpg]

 

U.S. Small Business Administration

UNCONDITIONAL GUARANTEE

 

 

 

SBA Loan #

 

44714350-07

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Guarantor

 

Brian Conners

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date

 

 

 

 

 

Note Amount

 

$1,400,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

/s/ Brian Conners

 

Brian Conners, individually

 

 

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

 

[g93321kg33i001.jpg]

 

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

 

 

SBA Loan #

 

44714350-07

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Guarantor

 

James Ford

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date

 

 

 

 

 

Note Amount

 

$1,400,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Four Hundred Thousand Dollars from Borrower to Lender.  It includes any
assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

/s/ James Ford

 

James Ford, individually

 

 

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

 

SECURITY AGREEMENT - COMMERCIAL

 

This Security Agreement - Commercial (“Security Agreement”) is executed, made
and delivered this 10th day of March, 2011 by ARCA Advanced Processing, LLC,
Safe Disposal Systems, Inc., 4301 Operations, LLC, S.D.S. Service Inc. and
Scarabee Holdings, LLC (herein the “Debtor”), whose address is 4301 N. Delaware
Avenue, Bldg. A, Philadelphia, PA 19137, for the benefit of Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation (the “Secured
Party”),  whose address is 159 E. High Street, Pottstown, PA  19464.

 

FOR VALUE RECEIVED, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Debtor grants to Secured Party the security interest (and the
pledges and assignments as applicable) hereinafter set forth and agrees with
Secured Party as follows:

 

A.            OBLIGATIONS SECURED.  The security interest and pledges and
assignments as applicable granted hereby are to secure punctual payment and
performance of the following (i) a certain promissory note from ARCA Advanced
Processing, LLC, the (“Borrower”) of even date herewith in the original
principal sum of One Million Four Hundred Thousand Dollars and No Cents
($1,400,000.00) and payable to the order of Secured Party (the “Note”), and any
and all extensions, renewals, modifications and rearrangements thereof; and
(ii) any and all other indebtedness, liabilities and obligations whatsoever of
Debtor to Secured Party whether direct or indirect, absolutely or contingent,
primary or secondary, due or to become due and whether now existing or hereafter
arising and howsoever evidenced or acquired, whether joint or several, or joint
and several (all of which are herein separately and collectively referred to as
the “Obligations”).  Debtor acknowledges that the security interest hereby
granted shall secure all future advances as well as any and all other
indebtedness, liabilities and obligations of Debtor to Secured Party whether now
in existence or hereafter arising.

 

B.            USE OF COLLATERAL.  Debtor represents, warrants and covenants that
the Collateral will be used by the Debtor primarily for business, commercial, or
other similar purposes.

 

C.            DESCRIPTION OF COLLATERAL.  Debtor hereby grants to Secured Party
a security interest in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge
and assignment of, as applicable), the following property:

 

All Accounts.  A security interest in all accounts now owned or existing as well
as any and all that may hereafter arise or be acquired by Debtor, and all the
proceeds and products thereof, including without limitation, all notes, drafts,
acceptances, instruments and chattel paper arising therefrom, and all returned
or repossessed goods arising from or relating to any which accounts, or other
proceeds of any sale or other disposition of inventory.

 

All Inventory.  A security interest in all of Debtor’s inventory, including all
goods, merchandise, raw materials, goods in process, finished goods and other
tangible personal property, wheresoever located, now owned or hereafter acquired
and held for sale or lease or furnished or to be furnished under contracts for
service or used or consumed in Debtor’s business, and all additions and
accessions thereto, and all leases and contracts with respect thereto, and all
documents of title evidencing. or representing any part thereof, and all
products and proceeds thereof, whether in the possession of the Debtor,
warehouseman, bailee, or any other person.

 

All Equipment, Furniture, Fixtures and other Tangible Property.  A security
interest in all equipment, furniture, fixtures and other tangible property of
every nature and description whatsoever, now owned or hereafter acquired by
Debtor, including all appurtenances and additions thereto, and substitutions
therefor and replacement thereof, wheresoever located, including all tools,
parts and accessories used in connection therewith and including but not limited
to the collateral listed on Exhibit A” attached hereto.

 

General Intangibles.  A security interest in all general intangibles and other
personal property now owned or hereafter acquired by Debtor other than goods,
accounts, chattel paper, documents or instruments.

 

Chattel Paper.  A security interest in all of Debtor’s interest under chattel
paper, lease agreements and

 

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other instruments or documents, whether now existing or owned by Debtor or
hereafter arising or acquired by Debtor, evidencing both a debt and security
interest in or lease of specific goods.

 

Instruments.  A pledge and assignment of and security interest in all of
Debtor’s Instruments now owned or existing as well as hereafter acquired or
arising instruments and documents.

 

The term “Collateral” as used in this Agreement shall mean and include, and the
security interest (and pledge and assignment as applicable) shall cover, all of
the foregoing property, as well as any accessions, additions and attachments
thereto, and the proceeds and products thereof, including without limitation,
all cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all returned or repossessed
goods arising from or relating to any of the property described herein or other
proceeds of any sale or other disposition of such property.

 

As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured
Party a security interest in, and a pledge and assignment of, any and all money,
property, deposit accounts, accounts, securities, documents, chattel paper,
claims, demands, instruments, items or deposits of the Debtor, and each of them,
or to which any of them is a party, now held or hereafter coming within Secured
Party’s custody or control, including without limitation, all certificates of
deposit and other depository accounts, whether such have matured or the exercise
of Secured Party’s rights results in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon the Debtor, Secured Party may
exercise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party’s rights and remedies under
this paragraph shall be in addition to and cumulative of any other rights or
remedies at law and equity, including, without limitation, any rights of set-off
to which Secured Party may be entitled.

 

D.            REPRESENTATIONS. WARRANTIES AND COVENANTS OF DEBTOR.  Debtor
represents and warrants as follows:

 

1.             Ownership; No Encumbrances.  Except for the security interest
(and pledges and assignments as applicable) granted hereby, the Debtor is, and
as to any property acquired after the date hereof which is included within the
Collateral, Debtor will be, the owner of all such Collateral free and clear from
all charges, liens, security interests, adverse claims and encumbrances of any
and every nature whatsoever.

 

2.             No Financing Statements.  There is no financing statement or
similar filing now on file in any public office covering any part of the
Collateral, except those already disclosed to Secured Party by the pre-closing
searches, and Debtor will not execute and there will not be on file in any
public office any financing statement or similar filing except the pari passu
financing statements filed or to be filed in favor of, or assigned or to be
assigned on the date hereof to, Secured Party.

 

3.             Accuracy of Information.  All information furnished to Secured
Party concerning Debtor, the Collateral and the Obligations, or otherwise for
the purpose of obtaining or maintaining credit, is or will be at the time the
same is furnished, accurate and complete in all material respects.

 

4.             Authority.  Debtor has full right and authority to execute and
perform this Agreement and to create the security interest (and pledges and
assignment as applicable) created by this Agreement. The making and performance
by Debtor of this Agreement will not violate any articles of incorporation,
bylaws or similar document respecting Debtor, any provision of law, any order of
court or governmental agency, or any indenture or other agreement to which
Debtor is a party, or by which Debtor or any of Debtor’s property is bound, or
be in conflict with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture or other agreement, or result
in the creation or imposition of any charge, lien, security interest, claim or
encumbrance of any and every nature whatsoever upon the Collateral, except as
contemplated by this Agreement.

 

5.             Addresses.  The address of Debtor designated at the beginning of
this Agreement is Debtor’s place of business if Debtor has only one place of
business; Debtor’s chief executive office if Debtor has more than one place of
business; or Debtor’s residence if Debtor has no place of business. Debtor
agrees not to

 

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change such address without advance written notice to Secured Party.

 

E.             GENERAL COVENANTS.  Debtor covenants and agrees as follows:

 

1.             Operation of Collateral.  Debtor agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper
manner, and in conformity with all applicable permits or licenses. Debtor shall
comply in all respects with all applicable statutes, laws, ordinances and
regulations. Debtor shall not use the Collateral in any unlawful manner or for
any unlawful purpose, or in any manner or for any purpose that would expose the
Collateral to unusual risk, or to penalty, forfeiture or capture, or that would
render inoperative any insurance in connection with the Collateral.

 

2.             Condition.  Debtor shall maintain, service and repair the
Collateral so as to keep it in good operating condition. Debtor shall replace
within a reasonable time all parts that may be worn out, lost, destroyed or to
otherwise rendered unfit for use, with appropriate replacement parts . Debtor
shall obtain and maintain in good standing at all times all applicable permits,
licenses, registrations and certificates respecting the Collateral.

 

3.             Assessments.  Debtor shall promptly pay when due all taxes,
assessments, license fees, and governmental charges levied or assessed against
Debtor or with respect to the Collateral or any part thereof.

 

4.             No Encumbrances.  Debtor agrees not to suffer or permit any
charge, lien, security interest, adverse claim or encumbrance of any and every
nature whatsoever against the Collateral or any part thereof.

 

5.             No Removal.  Except as otherwise provided in this Agreement,
Debtor shall not remove the Collateral from the County or counties designated at
the beginning of this Agreement without Secured Party’s written consent.

 

6.             No Transfer.  Except as otherwise provided in this Agreement with
respect to inventory,  Debtor shall not, without the prior written consent of
Secured Party, sell, assign, transfer, lease, charter, encumber, hypothecate or
dispose of the Collateral, or any part thereof, or interest therein or offer to
do any of the foregoing.

 

7.             Notices and Reports.  Debtor shall promptly notify Secured Party
in writing of any change in the name, identity or structure of Debtor, any
charge, lien, security interest, claim or encumbrance asserted against the
Collateral, any litigation against Debtor or the Collateral, any theft, loss,
injury or similar incident involving the Collateral, and any other material
matter adversely affecting Debtor or the Collateral. Debtor shall furnish such
other reports, information and data regarding Debtor’s financial condition and
operations, the Collateral and such other matters as Secured Party may request
from time to time.

 

8.             Landlord’s Waivers.  Debtor shall furnish to Secured Party, if
requested, a landlord’s waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord’s waivers to be in such form and upon such terms as are acceptable to
Secured Party.

 

9.             Additional Filings.  Debtor agrees to execute and deliver such
financing statement or statements, or amendments thereof or supplements thereto,
or other documents as Secured Party may from time to time require in order to
comply with the Minnesota Uniform Commercial Code (or other applicable state
laws of the jurisdiction where any of the Collateral is located) and to preserve
and protect the Secured Party’s rights to the Collateral.

 

10.           Protection of Collateral.  Secured Party, at its option, whether
before or after default, but without any obligation whatsoever to do so, may
(a) discharge taxes, claims, charges, liens,

 

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security interests, assessments or other encumbrances of any and every nature
whatsoever at any time levied, placed upon or asserted against the Collateral,
(b) place and pay for insurance on the Collateral, including insurance that only
protects Secured Party’s interest, (c) pay for the repair, improvement, testing,
maintenance and preservation of the Collateral, (d) pay any filing, recording,
registration, licensing or certificate fees or other fees and charges related to
the Collateral, or (e) take any other action to preserve and protect the
Collateral and Secured Party’s rights and remedies under this Agreement as
Secured Party may deem necessary or appropriate. Debtor agrees that Secured
Party shall have no duty or obligation whatsoever to take any of the foregoing
action. Debtor agrees to promptly reimburse Secured Party upon demand for any
payment made or any expense incurred by the Secured Party pursuant to this
authorization. These payments and expenditures, together with interest thereon
from date incurred until paid by Debtor at the maximum contract rate allowed
under applicable laws, which Debtor agrees to pay, shall constitute additional
Obligations and shall be secured by and entitled to the benefits of this
Agreement.

 

11.           Inspection.  Debtor shall at all reasonable times allow Secured
Party by or through any of its officers, agents, attorneys or accountants, to
examine the Collateral, wherever located, and to examine and make copies of or
extracts from Debtor’s books and records.

 

12.           Further Assurances.  Debtor shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and
assurances as Secured Party may request from time to time to protect, assure and
enforce Secured Party’s rights and remedies.

 

13.           Insurance.  Debtor shall have and maintain insurance at all times
with respect to all tangible Collateral insuring against risks of fire
(including so-called extended coverage), theft and such other risks as Secured
Party may require, containing such terms, in such form and amounts and written
by such companies as may be satisfactory to Secured Party, all of such insurance
to contain loss payable clauses in favor of Secured Party as its interest may
appear. All policies of insurance shall provide for fifteen (15) days written
minimum cancellation notice to Secured Party and at the request of Secured Party
shall be delivered to and held by it. Secured Party is hereby authorized to act
as attorney for Debtor in obtaining, adjusting, settling and canceling such
insurance to the Obligations secured hereby whether or not such Obligations are
then due and payable. Debtor specifically authorizes Secured Party to disclose
from the policies of insurance to prospective insurers regarding the Collateral.

 

14.           Additional Collateral.  If Secured Party should at any time be of
the opinion that the Collateral is impaired or insufficient, or has declined or
may decline in value, or should Secured Party deem payment of the Obligations to
be insecure, then Secured Party may call for additional security satisfactory to
Secured Party, and Debtor promises to furnish such additional security
forthwith. The call for additional security may be oral, by messenger or
telefax, or United States mail addressed to Debtor, and shall not affect any
other subsequent right of Secured Party to exercise the same.

 

15.           Goods.  Notwithstanding anything to the contrary contained in this
agreement, if any Debtor is a “consumer” as defined Regulation AA of the Board
of Governors of the Federal Reserve System, 12 C.F.R. Part 227, or the Federal
Trade Commission Credit Practices Rule, 16 C.F.R. Part 444, as applicable, no
lien or security interest created or evidenced by this agreement shall extend to
or cover a non-possessory lien or security interest in “household goods,” other
than a purchase money lien or security interest, in accordance with such
regulations as applicable.

 

F.             ADDITIONAL PROVISIONS REGARDING ACCOUNTS.  The following
provisions shall apply to all accounts included within the Collateral:

 

1.             Definitions.  The term “account”, as used in this Agreement,
shall have the same meaning as set forth in the Uniform Commercial Code of
Minnesota in effect as of the date of execution hereof, and as set forth in any
amendment to the Uniform Commercial Code of Minnesota to become effective after
the date of execution hereof, and also shall include all present and future
notes, instruments, documents, general intangibles, drafts, acceptances and
chattel paper of Debtor, and the proceeds thereof.

 

2.             Additional Warranties.  As of the time any account becomes
subject to the

 

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security interest (or pledge or assignment as applicable) granted hereby, Debtor
shall be deemed further to have warranted as to such and all of such accounts as
follows: (a) each account and all papers and documents relating thereto are
genuine and in all respects what they purport to be; (b) each account is valid
and subsisting and arises out of a bona fide sale or lease of goods sold or
leased and delivered to, or out of and for services therefore actually rendered
by the Debtor to, the account debtor named in the account; (c) the amount of the
account represented as owing is the correct amount actually and unconditionally
owning except for normal cash discounts and is not subject to any set-offs,
credits, defenses, deductions or countercharges; and (d) Debtor is the owner
thereof free and clear of any charges, liens, security interests, adverse claims
and encumbrances of any and every nature whatsoever.

 

3.             Collection of Accounts.  Secured Party shall have the right in
its own name or in the name of the Debtor, whether before or after default, to
require Debtor forthwith to transmit all proceeds of collection of accounts
directly to Secured Party, to demand, collect, receive, receipt for, sue for,
compound and give acquittal for, any and all amounts due or to become due on the
accounts and to endorse the name of the Debtor on all Commercial paper given in
payment or part payment thereof, and in Secured Party’s discretion to file any
claim or take any other action or proceeding that Secured Party, may deem
necessary or appropriate to protect and preserve and realize upon the accounts
and related Collateral. Unless and until Secured Party elects to collect
accounts, and the privilege of Debtor to collect accounts is revoked by Secured
Party in writing, Debtor shall continue to collect accounts, account for same to
Secured Party, and shall not commingle the proceeds of collection of accounts
with any funds of the Debtor. In order to assure collection of accounts in which
Secured Party has a security interest (or which have been pledged or assigned to
Secured Party as applicable) hereunder, Secured Party may notify the post office
authorities to change the address for delivery of mail addressed to Debtor to
such address as Secured Party may designate, and to open and dispose of such
mail and receive the collections of accounts included herewith. Secured Party
shall have no duty or obligation whatsoever to collect any account, or to take
any other action to preserve or protect the Collateral; however, Debtor releases
Secured Party from any claim or claims for loss or damage arising from any act
or omission of Secured Party and its officers, directors, employees or agents,
should Secured Party elect to collect any account or take any possession of any
Collateral.

 

4.             Identification and Assignment of Accounts.  Upon Secured Party’s
request, whether before or after default, Debtor shall take such action and
execute and deliver such documents as Secured Party may request in order to
identify, confirm, mark, segregate and assign accounts and to evidence Secured
Party’s interest in same. Without limitation of the foregoing Debtor, upon
request, agrees to assign accounts to Secured Party, identify and mark accounts
as being subject to the security interest (or pledge or assignment as
applicable) granted hereby, mark Debtors books and records to reflect such
security interests, pledges and assignments, and forthwith to transmit to
Secured Party in the form received by Debtor any and all proceeds of collection
of such accounts.

 

5.             Account Reports.  Debtor will deliver to Secured Party, as Lender
may require, a written report in form and in content satisfactory to Secured
Party, showing a listing and aging of accounts and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of the assertion by any account debtor of any set-off, defense or
claim regarding an account or any other matter adversely affecting any account.

 

6.             Segregation of Returned Goods.  Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property. Debtor shall as often as requested by Secured Party, but not less
often than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included in assignments or
identifications made pursuant hereto.

 

7.             Right of Off-Set.  Any deposit or other sums at any time credited
by or due from the holder of the Obligations to Debtor or any endorser,
guarantor or surety of any of the Obligations and any securities or other
property of Debtor or any endorser, guarantor or surety of any of the
Obligations in the possession of the holder of the Obligations may at all times
be held and treated as additional and

 

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cumulative collateral security for the payment of the Obligations and Debtor
grants Secured Party a security interest and contractual right of off-set in all
such deposits, sums, securities and other properties as additional and
cumulative security for payment of the Obligations. The holder of the
Obligations may apply to set-off such deposits or other sums against the
Obligations at any time in the case of Debtor,  but only with respect to matured
liabilities in case of the endorsers, guarantors, or sureties of any of the
Obligations.

 

G.            ADDITIONAL PROVISIONS REGARDING INVENTORY.  The following
provisions shall apply to all inventory included within the Collateral:

 

1.             Inventory Reports.  Debtor will deliver to Secured Party as
Secured Party may require, on such frequency as Secured Party may request, a
written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Debtors opening
inventory, inventory acquired, inventory sold, inventory leased, inventory
returned, inventory used in Debtor’s business, closing inventory, any other
inventory not within the preceding categories and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of any matter adversely affecting the inventory, including,
without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss of depreciation.

 

2.             Location of Inventory.  Debtor will promptly notify Secured Party
in writing of any addition to, change in or discontinuance of its place(s) of
business as shown in this Agreement, the places at which inventory is located as
shown herein, the location of its chief executive office and the location of the
office where it keeps its records as set forth herein. All Collateral will be
located at the places of business shown below, as modified by any written
notices given pursuant hereto.

 

3.             Uses of Inventory.  Except as set forth in the loan agreement,
unless and until the privilege of Debtor to use inventory in the ordinary course
of Debtor’s business is revoked by Secured Party in the event of default or if
Secured Party deems itself insecure, Debtor may use the inventory in any manner
not inconsistent with this Agreement, may lease or sell that part of the
Collateral consisting of inventory provided that all such leases and sales are
in the ordinary course of business, and use and consume any raw materials or
supplies that are necessary in order to carry on Debtor’s business. A sale in
the ordinary course of business does not include a transfer in partial or total
satisfaction of a debt.

 

4.             Accounts as Proceeds.  All accounts that are proceeds of the
inventory included within the Collateral shall be subject to all of the terms
and provisions hereof pertaining to accounts.

 

5.             Protection of Inventory.  Debtor shall take all action necessary
to protect and preserve the inventory.

 

6.             Assignment of Rents and Leases.  Debtor hereby assigns to Secured
Party all rents and other benefits derived or to be derived from leases
(“Leases”) of the inventory now or hereafter existing or entered into, together
with all guarantees, amendments, modifications, extensions and renewals thereof
(the “Rents”). Prior to a foreclosure by Secured Party of any lien or security
interest which Secured Party may now or hereafter hold covering the inventory,
this Assignment of Rents is not intended to, and shall not, constitute payment
to Secured Party, unless Secured Party terminates Debtor’s license to collect
the Rents, and then it shall constitute payment only to the extent that prior to
foreclosure the Rents are actually received by Secured Party as opposed to
constituting a portion of the voluntary payments of principal and interest on
the indebtedness evidenced and secured hereby, and are not used for the
operation, maintenance or repair of the inventory, or for the payment of costs
and expenses in connection therewith. Except as otherwise provided herein,
Secured Party shall have the absolute right, power and authority to take any and
all actions which Secured Party deems necessary or appropriate in connection
with taking possession of the inventory, leasing all or any part of the
inventory, collecting all or any of the Rents and enforcing the rights of the
lessor under any of the leases, including without limitation, bringing,
prosecuting, defending or settling legal proceedings against lessees of the
inventory. Notwithstanding anything herein to the contrary, Secured Party shall
not be obligated to perform or discharge, and Secured Party does not undertake
to perform or discharge, any obligation, duty or liability with respect to the
Leases or the Rents under or by reason of this Assignment. This Assignment shall
not operate to place

 

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responsibility for the control, care, maintenance or repair of the inventory
upon Secured Party, or for any dangerous or defective condition of the
Inventory, or for any negligence in the arrangement, upkeep, repair, or control
of the inventory. Debtor shall retain a revocable license to collect and receive
the Rents as the agent of Secured Party, and to retain, use and enjoy such
Rents, provided that such revocable license ipso facto terminate without further
action by Secured Party and without notice to Debtor upon the occurrence of any
default or event of default as defined in any note, deed of trust, security
agreement, guaranty, financing statement, fixture filing or other loan documents
given to Secured Party by Debtor or any other party in connection with any
indebtedness or obligation of Debtor to Secured Party.

 

7.             Leased Inventory.  Debtor shall (a) observe and perform
faithfully every obligation which Debtor is required to perform under the
Leases; (b) enforce or secure the performance of, at its sole cost and expense,
every obligation to be performed by the lessees under the Leases; (c) not
collect any Rents in advance of the time when the same shall be due, or
anticipate any payments under any of the Leases, except for bona fide security
deposits not in excess of an amount equal to two (2) months Rent; (d) at the
request of Secured Party, deliver copies of Leases to Secured Party; and
(e) appear and defend against, at Debtor’s sole cost and expense, any action or
proceeding arising under, and in any manner connected with the Leases, the Rents
or the obligations, duties or liabilities of the lessor, lessee or guarantors
thereunder.

 

H.            [INTENTIONALLY OMITTED]

 

I.              [INTENTIONALLY OMITTED]

 

J.             EVENTS OF DEFAULT.  Debtor shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal,
interest or other amount due on any Obligations; (ii) the occurrence of any
event which under the terms of any evidence of indebtedness, indenture, loan
agreement, security agreement or similar instrument permits the acceleration of
maturity of any of obligation of Debtor whether to Secured Party or to others;
(iii) any representation or warranty made by Debtor and/or others to Secured
Party in connection with this Agreement, the Collateral or the Obligations, or
in any statements or certificates, proves incorrect in any material respect as
of the date of the making or the issuance thereof; (iv) default occurs in the
observance or performance of or, if Debtor fails to furnish adequate evidence of
performance of, any provision of this Agreement or of any note, assignment,
transfer, other agreement, document or instrument delivered by Debtor to Secured
Party in connection with this Agreement, the Collateral or the Obligations;
(v) death, dissolution, liquidation, termination of existence, insolvency,
business failure or winding-up of Debtor, or any maker, endorser, guarantor,
surety or other party liable in any capacity for any of the Obligations;
(vi) the filing of a petition in bankruptcy by or against, or the application
for appointment of a receiver or any other legal custodian for any part of the
property of, or the assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy, rearrangement,
reorganization, insolvency or similar laws for the relief of Debtors by or
against, the Debtor, or any maker, endorser, guarantor, surety or other party
primarily or secondarily liable for any of the Obligations; (vii) the Collateral
becomes, in the judgment of Secured Party, impaired, unsatisfactory or
insufficient in character or value; (viii) the filing of any levy, attachment,
execution, garnishment or other process against the Debtor, or any of the
Collateral or any maker, endorser, guarantor, surety, or other party liable in
any capacity for any of the Obligations, or (ix) the Secured Party in good faith
believes that the prospect of repayment or performance of the Obligations or any
of the covenants, agreements or other duties under any writing executed in
connection herewith is impaired.

 

K.            REMEDIES.  Upon the occurrence of an Event of Default, or if
Secured Party deems payment or performance of the Obligations to be insecure,
Secured Party, at its option, shall be entitled to exercise any one or more of
the following remedies (all of which are cumulative):

 

1.             Declare Obligations Due.  Secured Party, at its option, may
declare the Obligations or any part thereof immediately due and payable, without
demand, notice of intention to

 

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accelerate, notice of acceleration, notice of non-payment, presentment, protest,
notice of dishonor, or any other notice whatsoever, all of which are hereby
waived by Debtor, the Borrower and any maker, endorser, guarantor, surety or
other party liable in any capacity for any of the Obligations.

 

2.             Remedies.  Secured Party shall have all of the rights and
remedies provided for in this Agreement and any other agreements executed by
Debtor, the rights and remedies in the Uniform Commercial Code of  Minnesota,
and any and all rights and remedies at law or in equity, all of which shall be
deemed cumulative. Without limiting the foregoing, Debtor agrees that Secured
Party shall have the right to: (a) require Debtor to assemble the Collateral and
make it available to Secured Party at a place designated by Secured Party that
is reasonably convenient to both parties, which Debtor agrees to do; (b) take
possession of the Collateral with or without process of law, and, in this
connection, enter any premises where the Collateral is located to remove same,
to render it unusable, or to dispose of same on such premises; (c) sell, lease
or otherwise dispose of the Collateral, by public or private proceedings, for
cash or credit, without assumption of credit risks; and/or (d) whether before or
after default, collect and receipt for, compound, compromise, and settle, and
give releases, discharges and acquittances, with respect to, any and all amounts
owed by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of the
type customarily sold on a recognized market, Secured Party will send Debtor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or other disposition will be made. Any requirement of
reasonable notice to Debtor shall be met if such notice is mailed, postage
prepaid, to Debtor at the address of Debtor designated at the beginning of this
Agreement, at least five (5) days before the day of any public sale or at least
five (5) days before the time after which any private sale or other disposition
will be made.

 

3.             Expenses.  Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights and
remedies, in retaking, holding, testing, repairing, and proving, selling,
leasing or disposing of the Collateral, or like expenses, including, without
limitation, attorneys fees and legal expenses incurred by Secured Party. These
expenses, together with interest thereon from date incurred until paid by Debtor
at the maximum contract rate allowed under applicable laws, which Debtor agrees
to pay, shall constitute additional Obligations, and shall be secured and
entitled to the benefits of this Agreement.

 

4.             Proceeds; Surplus; Deficiencies.  Proceeds received by Secured
Party from disposition of the Collateral shall be applied toward Secured Party’s
expenses and other Obligations and in such order or manner as Secured Party may
elect. Debtor shall be entitled to any surplus if one results after lawful
application of the proceeds.

 

5.             Remedies Cumulative.  The rights and remedies of Secured Party
are cumulative and the exercise of any one or more of the rights of remedies
shall not be deemed an election of rights or remedies or a waiver of any other
right or remedy. Secured Party may remedy any default and may waive any default
without waiving the default remedy or without waiving any other prior or
subsequent default.

 

L.            RELINQUISHMENT OF CERTAIN DEFENSES.  Regarding the enforcement of
the security interests and covenants and agreements contained in this Agreement
to secure payment of the Obligations, the Debtor covenants and agrees as
follows:

 

1.             Secured Party’s right of recovery against the Collateral for the
Obligations shall be determined as if Debtor were a primary obligor for the
payment of the Obligations regardless of whether or not Debtor is in fact
primarily liable for all or any part of the Obligations. Debtor specifically
agrees that it shall not be necessary or required, in order to enforce the
remedies under this Agreement, that the Secured Party have made demand for
payment upon the Borrower or any other person or entity liable for any portion
of the Obligations or have made protest thereof or have given notice to the
Borrower or any other party liable thereon of maturity or nonpayment of the
Obligations.

 

2.             The Debtor specifically waives any notice of acceptance of this
Agreement by the Secured Party and of the creation, advancement, existence,
extension, renewal, modification,

 

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consolidation, the rearrangement from time to time of the Obligations, the
increase from time to time in the principal amount thereof, the increase or
reduction from time to time of the rate of interest thereon, or any indulgence
from time to time with respect to the Obligations, or any part thereof, and of
nonpayment thereof or default thereon, and waives grace, demand, protest,
presentment and notice of demand, protest, and presentment with respect to the
Obligations, and waives notice of the amount of the Obligations outstanding at
any time, and agrees that the maturity of the Obligations, or any part thereof,
may be accelerated, extended, modified, amended or renewed from time to time or
any other indulgence may be granted with respect thereto by the Secured Party at
its will or as may be agreed by the Borrower without notice to or further
consent by the Debtor, at any time or times.

 

3.             The Debtor agrees that: (i) no renewal, extension, modification,
consolidation, or rearrangement of or any other indulgence, forbearance or
compromise with respect to the Obligations, or any part thereof; (ii) no
increase in the principal amount of any of the Obligations; (iii) no increase or
reduction of the rate of interest thereon; (iv) no release, withdrawal,
substitution, surrender, subordination, exchange, deterioration, waste or other
impairment of any security or collateral or guaranty now or hereafter held by
the Secured Party for payment of the Obligations, or of any part thereof; (v) no
release of the Borrower, any guarantor, or of any other person primarily or
secondarily liable on the Obligations, or any part thereof; and (vi) no delay or
omission or lack of diligence or care in exercising any right or power with
respect to the Obligations or any security or collateral therefor or under this
Agreement shall in any manner impair, diminish or affect the rights of the
Secured Party or the liability of the Debtor hereunder. The Debtor specifically
agrees that it shall not be necessary or required, and that the Debtor shall not
be entitled to require, that the Secured Party mitigate damages, or file suit or
proceed to obtain or assert a claim for personal judgment against the Borrower
for the Obligations, or make any effort at collection of the Obligations from
the Borrower, or foreclose against or seek to realize upon any security or
collateral now or hereafter existing for the Obligations, or file suit or
proceed to obtain or assert a claim for personal judgment against any other
party (whether maker, guarantor, endorser or surety) liable for the Obligations,
or make any effort at collections of the Obligations from any such other party,
or exercise or assert any other right or remedy to which the Secured Party is or
may be entitled in connection with the Obligations or any security or collateral
or other Agreement therefor, or assert or file any claim against the assets or
estate of the Borrower or any guarantor or other person liable for the
Obligations, or any part thereof, before or as a condition of enforcing the
liability of the Debtor under this Agreement or requiring payment of the
Obligations by the Debtor hereunder, or at any time thereafter. The Debtor
expressly waives any right to the benefit of or to require or control
application of any security or collateral or the proceeds of any security or
collateral now existing or hereafter obtained by the Secured Party as security
for the Obligations, or any part thereof, and agrees that the Secured Party
shall have no duty insofar as the Debtor is concerned to apply upon any of the
Obligations any monies, payments or other property at any time received by or
paid to or in the possession of the Secured Party, except as the Secured Party
shall determine in its sole discretion. The Debtor specifically agrees that
Debtor shall not have any recourse or action against the Secured Party by reason
of any action the Secured Party may take or omit to take in connection with the
Obligations, the collection of any sums or amounts herein mentioned, or in
connection with any security or collateral or any Guaranty at any time existing
therefor.

 

4.             The Debtor agrees to the terms, provisions and conditions of the
Note and other instruments evidencing the Obligations and of any renewal,
modification, consolidation or rearrangement thereof or other agreements which
may have been or may hereafter be executed by the Borrower from time to time
evidencing or in connection with the Obligations or any part thereof, and agrees
that the Debtor’s liability hereunder shall in no manner be affected, reduced,
impaired or released by reason of any term, provision or condition of such Note
or other agreement or by the failure, refusal or omission of the Secured Party
to enforce or observe any of same or any forbearance or compromise made by the
Secured Party or any action taken or omitted to be taken by the Secured Party
pursuant thereto or in connection therewith. The Debtor, by the execution and
delivery of this Agreement agrees, represents, warrants and acknowledges that
Debtor shall be bound by the provisions of any Agreement and Security Agreement
and any Environmental Certificate and Agreement of even date herewith, from the
Borrower to the Secured Party and which purport to be applicable to Debtor to
the same extent and with the same effect as if Debtor had executed and delivered
such document to the Secured Party. In that connection, the Debtor agrees that
the provisions of this Paragraph shall survive any exercise of the power of sale
granted in any instrument

 

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securing the Obligations, any foreclosure of the liens created by any of the
instruments securing the Obligations, any conveyance in lieu of any such
foreclosure, the repayment of the Obligations, and the discharge and release of
all liens, rights and interests securing payment of the Obligations.

 

5.             The Debtor absolutely and unconditionally covenants and a agrees
that: (i) in the event that the Borrower does not or is unable to pay or perform
the Obligations for any reason including, without limitation, liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment or other
similar proceedings affecting the status, composition, identity, existence,
assets or Obligations of the Borrower, or the disaffirmance or termination of
any of the Obligations in or as a result of any such proceedings; and/or (ii) if
all or any part of the Obligations (or any instrument or agreement made or
executed in connection therewith) is for any reason found to be invalid,
illegal, unenforceable, uncollectible or legally impossible, for any reason
whatsoever (including, without limiting the generality of the foregoing, upon
the grounds that the payment and/or performance of the Obligations is ultra
vires or otherwise without authority, may violate applicable usury laws, is
subject to valid defenses, claims or offsets of the Borrower, or any instrument
evidencing any of the Obligations is forged or otherwise irregular), then in any
such case the Debtor shall pay and perform the Obligations as herein provided
and that no such occurrence shall in any way diminish or otherwise affect the
Debtor’s liabilities hereunder.

 

6.             Should the status, composition, structure or name of the Borrower
change, including, but not limited to, by reason of a merger, dissolution,
consolidation or reorganization, this Agreement shall continue and also cover
the Obligations and Obligations of the Borrower under the new status,
composition structure or name according to the terms hereof. If the Borrower is
a general or limited partnership, no termination of said partnership, nor
withdrawal therefrom or termination of any ownership interest therein owned, by
any general or limited partner of such partnership shall alter, limit,
terminate, excuse or modify the Debtor’s liabilities set forth in this
Agreement.

 

7.             In the event any payment from the Borrower to the Secured Party
is held to constitute a preference under the bankruptcy laws, or if for any
other reason the Secured Party is required to refund such payment or pay the
amount thereof to any other party, such payment by the Borrower to the Secured
Party shall not constitute a release of the Debtor from any liability hereunder,
and this Agreement shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments.

 

8.             At all times while any or all of the Obligations are now or
hereafter secured in whole or in part, the Debtor agrees that the Secured Party
may, from time to time, at its discretion, and with or without valuable
consideration, allow substitution, withdrawal, release, surrender, exchange,
subordination, deterioration, waste, loss or other impairment of all or any part
of such security or collateral, without notice to or consent by the Debtor, and
without in anywise impairing, diminishing or releasing the liability of the
Debtor hereunder.

 

9.             The Debtor waives marshalling of assets and liabilities, sale in
inverse order of alienation, and all defenses given to sureties or Debtors at
law or in equity other than actual payment of the Obligations and performance of
the actions constituting the Obligations, including, but not limited to, any
rights pursuant to the laws of  Minnesota. The failure by the Secured Party to
file or enforce a claim against the estate (either in administration, bankruptcy
or other proceeding) of the Borrower or any other person primarily or
secondarily liable for the Obligations or of any other or others shall not
affect the liability of Debtor hereunder.

 

M.           OTHER AGREEMENTS.

 

1.             Savings Clause.  Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable usury
laws. If any such excessive interest is so provided for, then in such event
(i) the provisions of this paragraph shall govern and control, (ii) neither the
Debtor nor Debtor’s heirs, legal representatives, successors or assigns or any
other party liable for the payment thereof shall be obligated to pay the amount

 

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of such interest to the extent that it is in excess of the maximum amount
permitted by law, (iii) any such excess interest that may have been collected
shall be, at the option of the holder of the instrument evidencing the
Obligations, either applied as a credit against the then unpaid principal amount
thereof or refunded to the maker thereof, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful rate under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction.

 

2.             Joint and Several Responsibility.  If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtors shall be
joint and several.

 

3.             Waivers.  Debtor and any maker, endorser, guarantor, surety or
other party liable in any capacity respecting the Obligations hereby waived
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor and any other notice
whatsoever.

 

4.             Severability.  Any provision hereof found to be invalid by courts
having jurisdiction shall be invalid only with respect to such provision (only
to the extent necessary to avoid such invalidity). The offending provision shall
be modified to the minimum extent possible to confer upon Secured Party the
benefits intended thereby. Such provision as modified and the remaining
provisions hereof shall be construed and enforced to the same extent as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.

 

5.             Use of Copies.  Any carbon, photographic or other reproduction of
any financing statement signed by Debtor is sufficient as a financing statement
for all purposes, including without limitation, filing in any state as may be
permitted by the provisions of the Uniform Commercial Code of such state.  All
rights and remedies of Secured Party in all such agreements are cumulative, but
in the event of actual conflict in terms and conditions, the terms and
conditions of the latest security agreement shall govern and control.

 

6.             Authorization to File Financing Statements.  The Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Debtor is an organization, the type of organization
and any organizational identification number issued to the Debtor and, (ii) in
the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates.  The Debtor agrees
to furnish any such information to the Secured Party promptly upon the Secured
Party’s request.  The Debtor also ratifies its authorization for the Secured
Party to have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.

 

7.             Notices.  Any notice or demand given by Secured Party to Debtor
in connection with this Agreement, the Collateral or the Obligations shall be
deemed given and effective upon deposit in the United States mail, postage
pre-paid, addressed to Debtor at the address of the Debtor designated at the
beginning of this Agreement. Actual notice to Debtor shall always be effective
no matter how given or received.

 

8.             Headings and Gender.  Paragraph headings in this Agreement are
for convenience only and shall be given no meaning or significance in
interpreting this Agreement. All words used herein shall be construed to be or
such gender of number as the circumstances require.

 

9.             Amendments.  Neither this Agreement nor any of its provisions may
be

 

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changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification, waiver or discharge is sought.

 

10.           Binding Effect.  The provisions of this Security Agreement shall
be binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and the rights, powers and remedies of Secured
Party hereunder shall inure to the benefit of the successors and assigns of
Secured Party.

 

11.           Governing Law.  This Security Agreement shall be governed by the
law of Minnesota and applicable federal law.

 

14.           Statute of Frauds.  THIS COMMERCIAL SECURITY AGREEMENT, THE LOAN
AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED HEREIN OR IN THE LOAN
AGREEMENT, OR EXECUTED IN CONNECTION WITH OR ATTACHED TO THE LOAN AGREEMENT,
REPRESENT THE FINAL AGREEMENT BETWEEN DEBTOR AND SECURED PARTY, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN DEBTOR AND SECURED PARTY. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
DEBTOR AND SECURED PARTY.

 

13.          U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No Borrower or
Guarantor may claim or assert against SBA any local or state law to deny any
obligation of Borrower, or defeat any claim of SBA with respect to this Loan.

 

Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

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IN WITNESS WHEREOF, the undersigned has executed this Agreement effective as of
the date first written above.

 

 

 

DEBTOR

 

 

 

 

 

ARCA Advanced Processing, LLC

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Chief Manager

 

 

 

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

 

4301 Operations, LLC

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

 

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Manager

 

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EXHIBIT A

 

See attached list of equipment

 

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Prepared by and return to:

Janet M. Dery, Esquire

Starfield & Smith, P.C.

1300 Virginia Drive, Suite 325

Fort Washington, PA 19034

 

Lot 5, Block 202.04 of the Township of Voorhees Tax Map

 

MORTGAGE

 

NOTICE: THIS DOCUMENT SECURES A VARIABLE INTEREST RATE NOTE AND CONTAINS
PROVISIONS FOR INCREASES UNDER CERTAIN CIRCUMSTANCES IN THE PRINCIPAL BALANCE OF
THE INDEBTEDNESS SECURED HEREBY

 

THIS MORTGAGE is made on 03/10/11, by and between Brian Todd Conners, with an
address of 8 Oak Hollow Drive, Voorhees, New Jersey 08043 (the “Mortgagor”), and
Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation,
with an address of 159 E. High Street, Pottstown, Pennsylvania 19464 (the
“Mortgagee”).

 

RECITALS

 

Mortgagee, has agreed, pursuant to a Loan Agreement of even date herewith (the
“Loan Agreement”), and subject to the terms set forth therein, to make a loan to
ARCA Advanced Processing, LLC (the “Borrower”) in an aggregate amount of One
Million Four Hundred Thousand Dollars and No Cents ($1,400,000.00) (the “Loan”)
which is being guaranteed by Mortgagor (the “Guarantee”), the Loan Agreement and
Guarantee constituting the consideration for this Mortgage.

 

Borrower has duly executed a promissory note of even date herewith (the “Note”)
to evidence the terms of repayment of the Loan with interest at the rate or
rates established from time to time in accordance with the terms set forth
therein, which Note has been delivered by Borrower to the Mortgagee (the
Mortgagee and any assignee or other lawful owner of the Note being hereinafter
sometimes called “Mortgagee”).  Mortgagor has duly executed the Guarantee to
support the obligations of the Borrower to repay the Loan.  All references
herein to the Note and the obligations arising thereunder shall be deemed to
include the Guarantee and all obligations arising under the Guarantee.

 

All things necessary to make the Note the valid, binding and legal obligation of
Mortgagor, and to make this Mortgage a valid, binding and legal instrument for
the security of the Note in accordance with its terms, have been duly performed,
and the execution and delivery of the Note and this Mortgage by Mortgagor have
been in all respects duly authorized.

 

It has been agreed that the repayment of the Loan with interest, according to
the terms of the Note and any alterations, modifications, substitutions,
extensions or renewals thereof, as well as the performance of the other
covenants, terms and conditions herein, should be secured by the execution of
this Mortgage, which also shall secure payment by Mortgagor of all costs and
expenses incurred in respect to the Loan, including reasonable attorney’s fees
as is hereinafter provided.

 

NOW, THEREFORE, WITNESSETH: in consideration of the premises and of other good
and valuable considerations, the receipt of which is hereby acknowledged,
Mortgagor mortgages, grants, assigns, conveys and transfers unto the Mortgagee,
its successor or successors and assigns, in fee simple, WITH MORTGAGE COVENANTS,
all that land situate in Camden County, New Jersey, being  commonly known as 8
Oak Hollow Drive, Voorhees, Lot 5 Block 202.04 of the Township of Voorhees Tax
Map and more particularly described in Exhibit A attached hereto and made a part
hereof (the

 

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“Land”) and the buildings, structures, fixtures, additions, enlargements,
extensions, modifications, repair, replacements and improvements now or
hereafter located thereon (hereinafter sometimes called the “Improvements”).

 

TOGETHER with all the walks, fences, shrubbery, driveways, fixtures, equipment,
machinery, apparatus, fittings, building materials and other articles of
personal property of every kind and nature whatsoever, now or hereafter ordered
for eventual delivery to the Land (whether or not delivered thereto), and all
such as are now or hereafter located in or upon any interest or estate in the
Land or any part thereof and used or usable in connection with any present or
future operation of the Land now owned or hereafter acquired by Mortgagor,
including, without limiting the generality of the foregoing, all heating,
lighting, laundry, clothes washing, clothes drying, incinerating and power
equipment, engines, pipes, tanks, motors, conduits, switchboards, plumbing,
lifting, cleaning, fire-prevention, fire-extinguishing, refrigerating,
ventilating, and communications apparatus, television sets, radio systems,
recording systems, computer equipment, air-cooling and air-conditioning
apparatus, elevators, escalators, shades, awnings, draperies, curtains, fans,
furniture, furnishings, carpeting, linoleum and other floor coverings, screens,
storm doors and windows, stoves, gas and electric ranges, refrigerators, garbage
disposals, sump pumps, dishwashers, washers, dryers, attached cabinets,
partitions, ducts and compressors, landscaping, swimming pools, lawn and garden
equipment, security systems and including all equipment installed or to be
installed or used or usable in the operation of the building or buildings or
appurtenant facilities erected or to be erected in or upon the Land; it being
understood that all of the aforesaid shall be deemed to be fixtures and part of
the Land, but whether or not of the nature of fixtures they shall be deemed and
shall constitute part of the security for the indebtedness herein mentioned and
shall be covered by this Mortgage excluding, however, only personal property
owned by any tenant actually occupying all or part of the premises.  Disposition
of any of the aforesaid or of any interest therein is prohibited; however, if
any disposition is made in violation hereof, the Mortgagee shall have a security
interest in the proceeds therefrom to the fullest extent permitted by the laws
of New Jersey; and

 

TOGETHER with all and singular the rights, alleys, ways, waters, easements,
tenements, privileges, advantages, accessions, hereditaments and appurtenances
belonging or in any way appertaining to the Land and other property described
herein, and the reversions and remainders, earnings, revenues, rents, issues and
profits thereof and including any right, title, interest or estate hereafter
acquired by Mortgagor in the Land and other property described herein; and

 

TOGETHER with all the right, title and interest (but not the obligations) of
Mortgagor, present and future, in and to all present and future accounts,
contract rights (including all fees and other obligations set forth in the
Mortgagee’s commitment to make the Loan), general intangibles, chattel paper,
documents and instruments including but not limited to licenses, construction
contracts, service contracts, utility contracts, options, permits, public works
agreements, bonds, deposits and payments thereunder, relating or appertaining to
the Land and other property described herein and its development, occupancy and
use; and

 

TOGETHER with any right to payment  or for services rendered, whether or not yet
earned by performance, arising from the operation of the improvements or any
other facility on the Land, including, without limitation, (1) all accounts
arising from the operation of the improvements and all proceeds thereof (whether
cash or non-cash, movable or immovable, tangible or intangible) received upon
the sale, exchange, transfer, collection or other disposition or substitution
thereof, and (2) all rights to payment from any consumer credit/charge card
organization or entity, including, without limitation, payments arising from the
use of the American Express Card, Visa Card, Carte Blanche Card, MasterCard,
Diner’s Club, or any other credit card, including those now existing or
hereinafter created or any substitution therefor and all proceeds thereof
(whether cash or non-cash, movable or immovable, tangible or intangible)
received upon the sale, exchange, transfer, collection or other disposition or
substitution thereof; and

 

TOGETHER with all of the rents, royalties, revenues, income, proceeds, profits
and other benefits paid or payable by parties to the leases for using, leasing,
licensing, possessing, occupying, operating from, residing in, selling or
otherwise enjoying the Land, the Improvements, and other property securing the
indebtedness, or any portion thereof.  As used in this Mortgage, the word
“leases” includes any and all leases, subleases, licenses, concessions,
reservations, accounts, permits, contracts, and other agreements

 

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(oral or written, now or hereafter in effect) which grant a possessory interest
or right of occupancy in and to, or the right to use, or affect all or part of
the Land, the improvements, and other property securing the indebtedness, or any
portion thereof; and

 

TOGETHER with all proceeds of and any unearned premiums on any insurance
policies covering the Property (hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Property or
any part thereof; and

 

TOGETHER with all proceeds derived from any taking by condemnation or eminent
domain proceedings or transfer in place or in anticipation thereof of all or any
part of the property described in these granting clauses;

 

TO HAVE AND TO HOLD the Land with Improvements thereupon and all the rights,
easements, profits and appurtenances and other property described above (all of
which is hereinafter sometimes called the “Property”) belonging unto and to the
use of the Mortgagee, and its successor or successors and assigns, in fee simple
forever;

 

BUT for and upon the uses, intents and purposes hereinafter mentioned, that is
to say for the benefit and security of Mortgagee and for the enforcement of the
payment of all sums secured hereby (hereinafter sometimes called the
“Indebtedness”) and the compliance with the terms, covenants and conditions, in
the Note, in the Loan Agreement and in this Mortgage, expressed or implied;

 

SUBJECT, HOWEVER, to the liens and rights of the holders of the contracts and
instruments secured by any instruments that may be described in Exhibit B to
this Mortgage (the “Permitted Encumbrances”);

 

PROVIDED, HOWEVER, that if Mortgagor shall pay or cause to be paid to Mortgagee
all sums secured hereby in the manner stipulated in the Note, the Loan Agreement
and this Mortgage, then and in such case, the estate, right, title and interest
of the Mortgagee in the Property shall cease, determine and become void, and
upon proof being given to the satisfaction of the Mortgagee that the Note has
been paid or satisfied, in accordance with its terms and upon payment of all
fees, costs, charges, expenses and liabilities chargeable or incurred or to be
incurred by the Mortgagee and of any other sums as in this Mortgage provided,
the Mortgagee shall at the expense of Mortgagor, release and discharge this
Mortgage of record, and shall transfer and deliver up to Mortgagor any property
at the time subject to this Mortgage which may be then in their possession,
provided the Mortgagee hereunder shall be entitled to a reasonable fee for the
release and reconveyance of the Property or any partial release and
reconveyance;

 

AND THIS MORTGAGE FURTHER WITNESSETH, that Mortgagor (jointly and severally if
more than one) has covenanted and agreed and does hereby covenant and agree with
the Mortgagee as follows:

 

ARTICLE 1. DEFINITIONS

 

1.1           Definitions.  All capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth or referred to in the Loan
Agreement.

 

ARTICLE 2. COVENANTS AND AGREEMENTS OF MORTGAGOR

 

2.1           Incorporation of Covenants, Conditions and Agreements.  All the
covenants, conditions and agreements contained in the Loan Agreement, the Note,
and the other Loan Documents are hereby made a part of this Mortgage to the same
extent and with the same force as if fully set forth herein.

 

2.2           Title to the Property.  Mortgagor covenants that at the time of
the execution and delivery of this Mortgage it has good title to all of the
property described in the granting clauses of this Mortgage as being presently
granted, assigned, conveyed and transferred hereunder, free and clear of all

 

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liens and encumbrances except for the Permitted Encumbrances; Mortgagor hereby
does and will forever warrant generally and defend the title to the Property,
and every part thereof, whether now owned or hereafter acquired, unto the
Mortgagee and its successor or successors in the trust and assigns, against all
claims and demands by any person or entity whatsoever; Mortgagor covenants that
Mortgagor shall comply with all the terms, covenants and conditions of all
agreements and instruments, recorded and unrecorded, affecting the Property;
Mortgagor covenants that it has good right and lawful authority to mortgage,
give, grant, pledge, assign and convey the Property in the manner and form
herein provided.

 

2.3           Further Assurances.  At any and all times Mortgagor shall furnish
and record all and every such further assurances as may be requisite or as the
Mortgagee shall reasonably require for the better assuring and confirming unto
the Mortgagee the estate and property hereby granted, assigned, conveyed or
transferred, or intended so to be whether now owned or hereafter acquired;
Mortgagor shall bear all expenses, charges and taxes in connection therewith.

 

2.4           Escrow for Taxes.  To better secure the covenant to pay taxes and
fees in the Loan Agreement, Mortgagor agrees that, if Holder so requests,
Mortgagor shall deposit with Holder on the day of each month on which a payment
of interest is due under the Note, beginning with the month following such
request, one-twelfth of the annual taxes next due as estimated by Holder, plus
one-twelfth of the annual fire, hazard and other insurance premiums as required
herein, such deposit to be held by Holder, without interest, to pay said taxes
and premiums.  If payments of interest are due under the Note other than
monthly, appropriate adjustment shall be made in the amount of the aforesaid
periodic deposits.

 

Any amounts deposited pursuant to the provisions of this Section shall not be,
nor be deemed to be, trust funds, nor shall they operate to curtail or reduce
the indebtedness secured hereby, and all such amounts may be commingled with the
general funds of the depositor and be deposited with Mortgagee or at an
institution designated by Mortgagee.  Mortgagee shall not be responsible for the
solvency of such institution, provided it is insured by the Federal Deposit
Insurance Corporation or other regulatory agency at the time of designation.  If
at any time Mortgagee shall determine that the amount then on deposit shall be
insufficient to pay an obligation in full, Mortgagor shall immediately after
demand deposit with Mortgagee the amount of the deficiency determined by
Mortgagee.  Nothing contained in this Section shall be deemed to affect any
right or remedy of Mortgagee under any provisions of this Mortgage or of any
statute or rule of law to pay any such amount and to add the amount so paid,
together with interest at the rate provided for in the Note, to the indebtedness
secured hereby.

 

2.5           Change in Tax Law.  In the event of the passage after date of this
Mortgage of any law changing in any way the laws for the taxation of deeds of
trust or debts secured by deeds of trust, or the manner of collection of any
such taxation so as to affect this Mortgage, Mortgagee may give thirty (30)
days’ written notice to Mortgagor requiring the payment of the indebtedness
secured hereby.  If such notice be given, the indebtedness secured hereby shall
become due and payable at the expiration of said thirty (30) days; provided,
however, that such requirement of payment shall be ineffective if Mortgagor is
permitted by law to pay the whole of such tax in addition to all other payments
required hereunder, without any penalty or charge thereby accruing to Mortgagee,
and if Mortgagor in fact pays such tax prior to the date upon which payment is
required by such notice.

 

2.6           Activities on the Property.  Mortgagor shall not suffer any act to
be done or any conditions to exist on the Property or any part thereof or any
thing or article to be brought thereon (i) which may cause structural injury to
the improvements on the Land; or (ii) which would cause the value or usefulness
of the Property or any part thereof to diminish (ordinary wear and tear
excepted); or (iii) which may be dangerous, unless safeguarded as required by
law; or (iv) which may in fact or in law, constitute a nuisance, public or
private; or (v) which may void or make voidable any insurance then in force or
required by the terms of this Mortgage, the Loan Agreement to be in force.

 

2.7           Additional Insurance.  If required by the Mortgagee, in addition
to the provisions of and to the extent not so provided by the Loan Agreement,
Mortgagor shall at all times maintain during the entire term of this Mortgage
the following insurance, in form and substance satisfactory to Mortgagee:

 

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(a)  Workers’ Compensation.  During any construction, repair, restoration or
replacement of improvements on the Land, Mortgagor shall cause all contractors
and subcontractors (including Mortgagor if it acts as a contractor) to obtain
and keep in effect workers’ compensation insurance to the full extent required
by applicable law and also which shall cover all employees of each contractor
and subcontractor; upon demand, Mortgagor shall provide evidence satisfactory to
Mortgagee that it is complying with this covenant.

 

All insurance for loss or damage shall provide that losses, if any, shall be
payable to Mortgagee, as its interest may appear.  Mortgagor will pay the
premiums for all insurance and deliver to Mortgagee the policies of insurance or
duplicates thereof, or other evidence satisfactory to Mortgagee of such
insurance coverage.  Each insurer shall agree, by endorsement upon the policy or
policies issued by it, or by independent instrument furnished to Mortgagee, that
(i) it will give Mortgagee thirty (30) days’ prior written notice of the
effective date of any material alteration or cancellation of such policy; and
(ii) the coverage of Mortgagee shall not be terminated, reduced or affected in
any manner regardless of any breach or violation by Mortgagor of any warranties,
declarations or conditions of such insurance policy or policies.  The proceeds
of such insurance shall be applied, at Mortgagee’s option, toward the
replacement, restoration or repair of the Property which may be lost, stolen or
destroyed or damaged or toward payment of any indebtedness of Mortgagor to
Mortgagee.

 

2.8           Additional Advances.  If Mortgagor shall fail to perform any of
the covenants or satisfy any of the conditions contained herein, Mortgagee may
make advances or payments towards performance or satisfaction of the same but
shall be under no obligation so to do; and all sums so advanced or paid shall be
at once repayable by Mortgagor and shall bear interest at the Default Rate from
the date the same shall become due and payable until the date paid, and all sums
so advanced or paid, with interest as aforesaid, shall become a part of the
indebtedness secured hereby; but no such advance or payment shall relieve
Mortgagor from any default hereunder.  If Mortgagor shall fail to perform any of
the covenants or satisfy any of the conditions contained herein, Mortgagee may
use any funds of Mortgagor towards performance or satisfaction of the same but
shall be under no obligation so to do; and no such use of funds shall relieve
Mortgagor from any default hereunder.

 

2.9           Condemnation Awards.  Should the grade of any street be altered or
all or any part of the Property be condemned or taken through eminent domain
proceedings, all or such part of any award or proceeds derived therefrom, as
Mortgagee in its sole discretion may determine in writing, shall be paid to
Mortgagee and applied to the payment of the indebtedness secured hereby (in such
manner or combination thereof, including inverse order of maturity of
installments of principal, if any, as Mortgagee may, in its sole discretion,
elect) and all such proceeds are hereby assigned to Mortgagee.

 

2.10         Costs of Defending and Enforcing the Lien.  Mortgagor shall pay all
costs, charges and expenses, including appraisals, title examinations, and
reasonable attorney’s fees, which Mortgagee may incur in defending or enforcing
the validity or priority of the legal operation and effect of this Mortgage, or
any term, covenant or condition hereof, or in collecting any sum secured hereby,
or in protecting the security of Mortgagee including without limitation being a
party in any condemnation, bankruptcy or administrative proceedings, or, if an
Event of Default shall occur, in administering and executing the trust hereby
created and performing their powers, privileges and duties hereunder.  Mortgagee
may make advances or payments for such purposes but all advances or payments
made by Mortgagee for such purposes shall be repayable immediately by Mortgagor
and shall bear interest at the Default Rate from the date the same shall become
due and payable until the date paid, and any such sum or sums with interest as
aforesaid shall become a part of the indebtedness secured hereby; but no such
advance or payment shall relieve Mortgagor from any default hereunder.

 

2.11         Modification of Terms; No Novation.  Mortgagee may at any time, and
from time to time, extend the time for payment of the indebtedness secured
hereby, or any part thereof, or interest thereon, and waive, modify or amend any
of the terms, covenants or conditions in the Note, in the Guarantee, in this
Mortgage or in any other Loan Document, in whole or in part, either at the
request of Mortgagor or of any person having an interest in the Property, accept
one or more notes in replacement or substitution of the Note, consent to the
release of all or any part of the Property from the legal operation

 

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and effect of this Mortgage, take or release other security, release any party
primarily or secondarily liable on the Note or hereunder or on such other
security, grant extensions, renewals or indulgences therein or herein, apply to
the payment of the principal and interest and premium, if any, of the
indebtedness secured hereby any part or all of the proceeds obtained by sale or
otherwise as provided herein, without resort or regard to other security, or
resort to any one or more of the securities or remedies which Mortgagee may have
and which in its absolute discretion it may pursue for the payment of all or any
part of the indebtedness secured hereby, in such order and in such manner as it
may determine, all without in any way releasing Mortgagor or any party
secondarily liable from any of the terms, covenants or conditions of the Note,
the Guarantee, this Mortgage, or any other Loan Document, or relieving the
unreleased Property from the legal operation and effect of this Mortgage for all
amounts owing under the Note, the Loan Agreement and this Mortgage.  Mortgagee
and Mortgagor recognize and agree that the provisions of this Mortgage, the
Note, the Guarantee, and any other Loan Document may be modified by them or
their successors or assigns at any time before or after default (which
modification may involve increasing the rate of interest in the Note, agreeing
that other charges should be paid, or modifying any other provision in any such
instruments).  Mortgagee may extend the time of payment, may agree to alter the
terms of payment of the indebtedness, and may grant partial releases of any
portion of the property included herein.  No such modification by Mortgagee and
Mortgagor nor any such action by Mortgagee or the Mortgagor referred to above
shall be a substitution or novation of the original indebtedness or instruments
evidencing or securing the same, but shall be considered a possible occurrence
within the original contemplation of the parties.

 

2.12         Governmental Action Affecting the Property.  Mortgagor agrees that
in the event of the enactment of any law or ordinance, the promulgation of any
zoning or other governmental regulation, or the rendition of any judicial decree
restricting or affecting the use of the Property or rezoning the area wherein
the same shall be situate which Mortgagee reasonably believes adversely affects
the Property, Mortgagee may, upon at least sixty (60) days written notice to
Mortgagor, require payment of the indebtedness secured hereby at such time as
may be stipulated in such notice, and the whole of the indebtedness secured
hereby, shall thereupon become due and payable.

 

ARTICLE 3. EVENTS OF DEFAULT

 

The occurrence of one or more of the following events (herein called an “Event
of Default”) shall constitute and be an Event of Default:

 

3.1           Default under Loan Documents.  The occurrence and continuance of
an Event of Default under the Loan Agreement, the Note or any other Loan
Document shall constitute an Event of Default hereunder.  In the event Mortgagee
consents to an encumbrance on the Property, a default under the terms of any
document creating such an encumbrance shall be a default hereunder.

 

3.2           Additional Insurance Obligations.  Mortgagor fails to promptly
perform or comply with any of the terms and conditions set forth in subsection
2.7 and such failure continues for ten (10) days after notice from Mortgagee to
Mortgagor.

 

3.3           Material Obligations.  Mortgagor fails to perform or observe any
of its material obligations under this Mortgage and such failure shall continue
for a period of thirty (30) days after Mortgagee gives Mortgagor written notice
thereof.

 

3.4           Judgment.  Unless adequately covered by insurance in the
reasonable opinion of Mortgagee, the entry of a final judgment for the payment
of money involving more than $10,000.00 against Mortgagor or any guarantor of
the Loan and the failure of Mortgagor or any guarantor of the Loan to cause the
same to be discharged or bonded off to the satisfaction of Mortgagee within
sixty (60) days from the date the order, decree or process under which or
pursuant to which such judgment was entered.

 

3.5           Transfer of the Property.  If all or any part of the Property or
any interest in the Property is sold, transferred, assigned, conveyed or
otherwise disposed of, either outright or as security for an indebtedness, or if
there is any change in the ownership of Mortgagor, without Mortgagee’s prior
written consent, Mortgagee may, at Mortgagee’s option, declare all the
indebtedness secured by this Mortgage to

 

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be immediately due and payable and Mortgagee may exercise any or all of the
remedies provided in Paragraph 4 hereunder.

 

ARTICLE 4. REMEDIES

 

4.1           Remedies-Acceleration.  If one or more of the Events of Default
shall occur, Mortgagee may, at its option, declare the entire unpaid principal
amount of the Note (if not already due and payable) to be due and payable
immediately, and upon any such declaration the same shall become and be
immediately due and payable, anything in the Note, in the Guarantee, in the Loan
Agreement or in this Mortgage to the contrary notwithstanding; and in the event
of any sale of all or any part of the Property, whether made under the power of
sale herein granted, assent to a decree or through judicial proceedings, such
unpaid principal amount shall automatically and without notice become so due and
payable.  If Mortgagee exercises Mortgagee’s option to declare the entire unpaid
principal amount of the Note to be due and payable, Mortgagor covenants to pay
immediately the full amount of the indebtedness secured hereby even though
foreclosure or other court proceedings to collect the indebtedness have not been
commenced.  Acceleration of maturity, once declared by Mortgagee, may at the
option of Mortgagee, be rescinded by written acknowledgment to that effect by
Mortgagee, but the tender and acceptance of partial payments alone shall not
rescind or affect in any way such acceleration of maturity.

 

4.2           Power of Sale; Assent to Decree and Other Remedies.  If one or
more of the Events of Default shall occur and whether or not Mortgagee shall
have accelerated the maturity of the indebtedness pursuant to Section 4.1
hereof, Mortgagee, at its option, may:

 

(a)           proceed by suit or suits at law or in equity or by any other
appropriate remedy to protect and enforce the rights of Mortgagee whether for
the specific performance of any covenant or agreement contained herein, or in
aid of the execution of any power herein granted, or to enforce payment of the
Note, of the Guarantee, or to foreclose this Mortgage, or to sell the Property
under the judgment or decree of a court or courts of competent jurisdiction, or
otherwise.  Mortgagor, in accordance with any general or local laws or rules or
regulations of New Jersey relating to mortgages including any amendments thereof
or supplements thereto which do not materially change or impair the remedy, does
hereby declare and assent to the passage of a decree to sell the Property by the
equity court having jurisdiction for the sale of the Property, subject to the
terms of the decree of court, the same authority and power to sell on the terms
and conditions herein set forth.  This assent to decree shall not be exhausted
in the event the proceeding is dismissed before the indebtedness secured hereby
is paid in full;

 

(b)           either with or without entering upon or taking possession of the
Property, demand, collect and receive any or all revenues arising out of or in
connection with the Property, including, without limitation, all rents;

 

(c)           take possession and assemble such items of the Property as may be
designated by Mortgagee and make them available to the Mortgagee at a place
reasonably convenient to both parties to be designated by Mortgagee or the
Mortgagee.  Upon a default under this Mortgage, Mortgagee shall have the right
to take possession of such items of the Property as Mortgagee may elect.  In
taking possession Mortgagee may proceed without judicial process if this can be
done without breach of the peace.  Mortgagee shall have the further right to
remove such items of the Property as it may choose to any location or locations
selected by Mortgagee, and Mortgagor shall pay the costs of such removal and for
the storage and protection of such items immediately upon demand therefor.  If
Mortgagee elects to proceed under the New Jersey Uniform Commercial Code to
dispose of some of the Property, the Mortgagee shall give Mortgagor notice by
certified mail, postage prepaid, return receipt requested, of the time and place
of any public sale of any of such property or of the time after which any
private sale or other intended disposition thereof is to be made by sending
notice to Mortgagor at least five (5) days before the time of the sale or other
disposition, which provisions for notice Mortgagor and the Mortgagee agree are
reasonable; provided, however, that nothing herein shall preclude Mortgagee from
proceeding as to all the Property in accordance with the rights and remedies of
Mortgagee in respect of the real property, as provided in the New Jersey Uniform
Commercial Code, as amended from time to time;

 

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(d)           either with or without taking possession of the property, sell,
lease or otherwise dispose of the Property in its then condition or following
such preparation as Mortgagee deems advisable;

 

(e)           either with or without entering upon or taking possession of the
Property and without assuming any obligations of Mortgagor, thereunder, exercise
the rights of Mortgagor under, use or benefit from, any of the contracts, leases
or intangible property;

 

(f)            may enter and take possession of the Property and may exclude
Mortgagor, its agents and servants, wholly therefrom, and having and holding the
same, may use, operate, manage and control the Property or any part thereof, and
upon every such entry Mortgagee, at the expense of Mortgagor and of the
Property, from time to time may make all necessary or proper repairs, renewals,
replacements and useful or required alterations, additions, betterments and
improvements to and upon the Property as to it may seem judicious and pay all
costs and expenses of so taking, holding and managing the same, including
reasonable compensation to its employees and other agents (including, without
limitation, attorney’s fees and management and rental commissions) and any
taxes, assessments and other charges prior to the legal operation and effect of
this Mortgage which Mortgagee may deem it wise or desirable to pay, and in such
case Mortgagee shall have the right to manage the Property and to carry on the
business and exercise all rights and powers of Mortgagor, either in the name of
Mortgagor, or otherwise, as Mortgagee shall deem advisable; and Mortgagee shall
be entitled to collect and receive all rents thereof and therefrom.  The taking
of possession and collection of rents by Mortgagee shall not be construed to be
an affirmation of any lease or acceptance of attornment with respect to any
lease of all or any portion of the Property.  After deducting the expenses of
operating the Property and of conducting the business thereof, and of all
repairs, maintenance, renewals, replacements, alterations, additions,
betterments, improvements and all payments which it may be required or may elect
to make for taxes or other proper charges on the Property, or any part thereof,
as well as just and reasonable compensation for all its employees and other
agents (including, without limitation, attorney’s fees and management and rental
commissions) engaged and employed, the moneys arising as aforesaid shall be
applied to the indebtedness secured hereby.  Whenever all that is due upon the
principal of and interest on the Note and under any of the terms of this
Mortgage shall have been paid and all defaults made good, Mortgagee shall
surrender possession to Mortgagor.  The same right of entry, however, shall
exist if any subsequent Event of Default shall occur. Mortgagee may,  in person,
by agent or by court-appointed receiver, enter upon, take possession of, and
maintain full control of the Property in order to perform all acts necessary or
appropriate to complete construction of the improvements and to maintain and
operate the Property, including, but not limited to, the execution, cancellation
or modification of leases, the making of repairs to the Property and the
execution or termination of contracts providing for the construction, management
or maintenance of the Property, all of such terms as Mortgagee, in its sole
discretion, deems proper or appropriate;

 

(g)           proceed by a suit or suits in law or in equity or by other
appropriate proceeding to enforce payment of the Note and/or the Guarantee, or
the performance of any term, covenant, condition or agreement of this Mortgage
and Security Agreement or any of the other Loan Documents, or any other right,
and to pursue any other remedy available to it, all as Mortgagee shall determine
most effectual for such purposes;

 

(h)           institute and maintain such suits and proceedings as Mortgagee may
deem expedient to prevent any impairment of the Property by any acts which may
be unlawful or in violation of this Mortgage and Security Agreement, to preserve
or protect its interest in the Property and the revenues arising out of or in
connection with the Property, and to restrain the enforcement of or compliance
with any legislation or other governmental enactment, rule or order that would
impair the security hereunder or be prejudicial to the interest of Mortgagee;

 

(i)            apply all or any portion of the Property, or the proceeds
thereof, towards (but not necessarily in complete satisfaction of) the
indebtedness;

 

(j)            foreclose any and all rights or Mortgagor in and to the Property,
whether by sale, entry or in any other manner provided for hereunder or under
the laws of New Jersey;

 

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(k)           in the case of any receivership, insolvency, bankruptcy,
reorganization, arrangement, adjustment, composition or other proceeding
affecting Mortgagor or the creditors or property of Mortgagor, Mortgagee, to the
extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of
Mortgagee allowed in such proceedings for the entire amount of the indebtedness
at the date of the institution of such proceedings and for any additional
portion of the indebtedness accruing after such date;

 

(l)            exercise of any right or remedy of mortgagee or secured party
under the laws of New Jersey.

 

4.3           Appointment of a Receiver. Until one or more of the Events of
Default shall occur (but not thereafter), Mortgagor shall have possession of the
Property and shall have the right to use and enjoy the same and to receive the
rents thereof and therefrom.  If one or more of the Events of Default shall
occur, and without the requirement of any other showing, Mortgagee shall be
entitled as a matter of right and to the extent permitted by law, without notice
to Mortgagor, and without regard to the adequacy of the security, to the
immediate appointment of a receiver of the Property and of the rents thereof and
therefrom, in an ex parte proceeding with all such other powers as the court or
courts making such appointment shall confer, and the rents thereof and therefrom
are hereby assigned to Mortgagee as additional security under this Mortgage. 
Mortgagor shall deliver to the receiver appointed pursuant to the provisions of
this Section, or to Mortgagee in the event of entry pursuant to the terms of the
preceding Section, all original records, books, bank accounts, leases,
agreements, security deposits of the tenants and all other materials relating to
the operation of the Property.

 

4.4           Foreclosure Sale.

 

(a)           If one or more of the Events of Default shall occur, the Mortgagee
shall sell and in the case of default of any purchaser or purchasers shall
resell all the Property as an entirety, or in such parcels and in such order as
Mortgagee shall in writing request, or, in the absence of such request, as the
Mortgagee may determine (Mortgagor hereby waiving for itself and for any person
claiming by or through it application of the doctrine of marshalling of assets),
at public auction at some convenient place or places in the jurisdiction in the
state where the Property is situate, or in such other place or places as may be
permitted by law, at such time, in such manner and upon such terms as the
Mortgagee may fix and briefly specify in each notice of sale, which notice of
sale shall state the time when, and the place where, the same is to be made,
shall contain a brief general description of the property to be sold, and shall
be sufficiently given if published as frequently and in such publication as may
be required by law, and Mortgagee may cause such further public advertisement to
be made as they may deem advisable, and any such sale may be adjourned by the
Mortgagee by announcement at the time and place appointed for such sale or for
such adjourned sale, and, without further notice or publication, such sale may
be made at the time and place to which the same shall be so adjourned.  If one
or more leases are entered into or recorded subsequent to the recording of this
Mortgage or are otherwise subordinate to this Mortgage, the Mortgagee shall
sell, subject to any one or more of such tenancies that are designated and
selected by Mortgagee.

 

(b)           Upon the completion of any sale and compliance with all the terms
thereof, the Mortgagee shall execute and deliver to the purchaser or purchasers
a good and sufficient deed of conveyance, assignment and transfer, lawfully
conveying, assigning and transferring the property sold.  Payment to the
Mortgagee of the entire purchase money shall be full and sufficient discharge of
any purchaser or purchasers of the property, sold as aforesaid, for the purchase
money; and no such purchaser, or his representatives, successors or assigns,
after paying such purchase money and receiving the deed shall be bound to see to
the application of such purchase money.

 

(c)           In the case of any sale of the Property or of any part thereof,
whether under the power of sale herein granted, assent to decree or through
other judicial proceedings, the purchase money, proceeds and avails thereof,
together with any other sums which may then be held as security hereunder or be
due under any of the provisions hereof as a part of the Property, shall be
applied as follows:

 

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FIRST, to pay all proper costs, charges, fees and expenses, including the fees
and costs herein provided for and to pay the costs of appraisals of the Property
and the costs of title examination; and to pay or repay to Mortgagee  all moneys
advanced by them or either of them for taxes, insurance or otherwise, with
interest thereon as provided herein; and to pay all taxes due upon the Property
at the time of sale; and to pay any other lien or encumbrance prior to the legal
operation and effect of this Mortgage unless said sale is made subject to any
such taxes or other lien or encumbrance; and to pay a counsel fee of One
thousand Five hundred Dollars ($1,500.00) for conducting the proceedings if
without contest, but if legal services are rendered to Mortgagee in connection
with any contested matter in the proceedings, then such additional counsel fees
and expenses shall be allowed out of the proceeds of sale or sales as the court
may deem proper; and to pay additional reasonable counsel fees, if any, incurred
as a result of representing Mortgagee’s interest in any proceedings on behalf of
any Mortgagor before any United States Bankruptcy Court or similar State
insolvency proceedings; and also to pay a commission to the auctioneer or other
party making the sale equal to five percent (5%) of the gross sale price;

 

SECOND, to pay whatever may then remain unpaid under the Note and the interest
thereon to the date of payment, whether the same shall be due or not, it being
agreed that the Note shall, upon such sale being made before the maturity of the
Note, be and become immediately due and payable at the election of Mortgagee and
to pay all of the indebtedness secured hereby;

 

THIRD, to pay the remainder of said proceeds, if any, less the expense, if any,
of obtaining possession, to Mortgagor or other party lawfully entitled to
receive the same, upon the delivery and surrender of possession of the Property
sold and conveyed and delivery of all records, books, bank accounts, leases,
agreements, security deposits of the tenants and all other material relating to
the operation of the Property to the said purchaser or purchasers.

 

(d)           Immediately upon the filing or docketing of suit preliminary to a
foreclosure sale of the Property, or any part thereof under this Mortgage, there
shall be and become due and owing by Mortgagor, an auctioneer’s commission on
the total amount of the indebtedness secured hereby equal to two and one-half
percent (2 ½%), and Mortgagee shall not be required to receive the principal and
interest in satisfaction of the indebtedness secured hereby, but said sale may
be proceeded with unless, prior to the day appointed therefor, tender is made of
said principal, interest, commissions and all expenses and costs incident to
such sale and all other sums that are part of the indebtedness secured hereby.

 

(e)           Mortgagee may bid and become the purchaser at any sale under this
Mortgage.  If Mortgagee is the purchaser at any such sale, Mortgagee may apply
the outstanding indebtedness against all or any portion of the purchase price,
including the deposit.

 

4.5           Collection of Revenues.  In connection with the exercise by
Mortgagee of the rights and remedies provided for in subsection 4.2(b) hereof:

 

(a)           Mortgagee may notify any tenant, lessee or licensee of the
Property, either in the name of the Mortgagee or Mortgagor, to make payment of
Revenues directly to Mortgagee or Mortgagor’s agents, may advise any person of
Mortgagee’s interest in and to the revenues arising out of or in connection with
the Property and may collect directly from such tenants, lessees and licensees
all amounts due on account of such revenues;

 

(b)           At Mortgagee’s request, Mortgagor will provide written
notification to any or all tenants, lessees and licensees of the property
concerning Mortgagee’s interest in the revenues arising out of or in connection
with the Property and will request that such tenants, lessees and licensees
forward payment thereof directly to Lender;

 

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(c)           Mortgagor shall hold any proceeds and collections of any of the
revenues arising out of or in connection with the Property in trust for
Mortgagee and shall not commingle such proceeds or collections with any other
funds of Mortgagor; and

 

(d)           Mortgagor shall deliver all such proceeds to Mortgagee immediately
upon the receipt thereof by Mortgagor in the identical form received, but duly
endorsed or assigned on behalf of Mortgagor to Mortgagee.

 

4.6           Use and Occupation of Property.  In connection with the exercise
of Mortgagee’s rights under subsection 4.2(f), Mortgagee may enter upon, occupy,
and use all or any part of the Property and may exclude Mortgagor from the Land
and the Improvements thereon or portion thereof as may have been so entered
upon, occupied, or used.  Mortgagee shall not be required to remove any personal
Property from the Land and the Improvements upon Mortgagee’s taking possession
thereof, and may render any personal Property unusable to Mortgagor.  In the
event Mortgagor manages the Land and the improvements thereon in accordance with
subsection 4.2(f) herein, Mortgagor shall pay to Mortgagee on demand a
reasonable fee for the management thereof in addition to the indebtedness. 
Further, Mortgagee may construct such improvements on the Land or make such
alterations, renovations, repairs, and replacements to the Improvements, as
Mortgagee, in its sole discretion, deems proper or appropriate.  The obligation
of Mortgagor to pay such amounts and all expenses incurred by Mortgagee in the
exercise of its rights hereunder shall be included in the indebtedness and shall
accrue interest at the default rate of interest stated in the Note.

 

4.7           Partial Sales.  Mortgagor agrees that in case Mortgagee, in the
exercise of the power of sale contained herein or in the exercise of any other
rights hereunder given, elects to sell in parts or parcels, said sales may be
held from time to time and that the power shall not be exhausted until all of
the Property not previously sold shall have been sold, notwithstanding that the
proceeds of such sales exceed, or may exceed, the indebtedness.

 

4.8           Assembly of Property.  Upon the occurrence of any Event of
Default, Mortgagee may require Mortgagor to assemble the Property and make it
available to Mortgagee, at Mortgagor’s sole risk and expense, at a place or
places to be designated by Mortgagee which are reasonably convenient to both
Mortgagee and Mortgagor.

 

4.9           Power of Attorney.  Upon the occurrence of any Event of Default,
Mortgagor hereby irrevocably constitutes and appoints Mortgagee as Mortgagor’s
true and lawful attorney in fact to take any action with respect to the Property
to preserve, protect, or realize upon Mortgagee’s interest therein, each at the
sole risk, cost and expense of Mortgagor, but for the sole benefit of
Mortgagee.  The rights and powers granted Mortgagee by the within appointment
include, but are not limited to, the right and power to: (a) prosecute, defend,
compromise, settle, or release any action relating to the Property; (b) endorse
the name of Mortgagor in favor of Mortgagee upon any and all checks or other
items constituting revenues arising out of or in connection with the Property;
(c) sign and endorse the name of Mortgagor on, and to receive as secured party,
any of the Property; (d) sign and file or record on behalf of Mortgagor any
financing or other statement in order to perfect or protect Mortgagee’s security
interest; (e) enter into any contracts or agreements relative to, and to take
all action deemed necessary in connection with, the construction of any
improvements on the Land; (g) manage, operate, maintain or repair the Land and
the improvements; and (h) exercise the rights of Mortgagor under any contracts,
leases or intangible personal property.  Mortgagee shall not be obligated to
perform any of such acts or to exercise any of such powers, but if Mortgagee
elects so to perform or exercise, Mortgagee shall not be accountable for more
than it actually receives as a result of such exercise of power, and shall not
be responsible to Mortgagor except for Mortgagee’s willful misconduct or gross
negligence.  All powers conferred upon Mortgagee by this Mortgage and Security
Agreement, being coupled with an interest, shall be irrevocable until terminated
by a written instrument executed by a duly authorized officer of the Mortgagee.

 

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ARTICLE 5. MISCELLANEOUS

 

5.1           Mortgagee.  The Mortgagee shall be protected in acting upon any
notice, request, consent, demand, statement, note or other paper or document
believed by them to be genuine and to have been signed by the party or parties
purporting to sign the same.  The Mortgagee shall not be liable for any error of
judgment, nor for any act done or step taken or omitted, nor for any mistake of
law or fact, nor for anything which they may do or refrain from doing in good
faith nor generally shall a Mortgagee have any accountability hereunder except
for his own individual willful default.

 

5.2           Estoppel Certificates.  Mortgagor, upon request, made either
personally or by mail, shall, within six (6) days in case the request is made
personally, or within ten (10) days after the mailing of such request in case
the request is made by mail, certify, by a writing duly acknowledged, to
Mortgagee or to any proposed assignee of the Note, the amount of principal and
interest then owing on the Note and whether any offsets or defenses exist
against the indebtedness secured hereby.  At the request of Mortgagee, such
certificate shall also contain a statement that Mortgagor knows of no Event of
Default nor of any other default which, after notice or lapse of time or both,
would constitute an Event of Default, which has occurred and remains uncured as
of the date of such certificate, or, if any such Event of Default or other
default has occurred and remains uncured as of the date of such certificate,
then such certificate shall contain a statement specifying the nature thereof,
the time for which the same has continued and the action which Mortgagor has
taken or proposes to take with respect thereto.

 

5.3           Subrogation.  This Mortgage and the Mortgagee, as additional
security, are hereby subrogated to the lien or liens and to the rights of the
owners and holders thereof of each and every mortgage, lien or other encumbrance
on the Property, or any part thereof, or any claim or demand which is paid or
satisfied, in whole or in part, out of the proceeds of the indebtedness secured
hereby and the respective liens of said mortgages, liens and other encumbrances
and claims and demands shall pass to and be held by the Mortgagee as additional
security for the indebtedness to Mortgagee to the same extent that they would
have been preserved and would have been passed to and been held by Mortgagee had
they each been duly and regularly assigned, transferred, set over and delivered
to Mortgagee by separate deed of assignment, notwithstanding the fact the same
may be or may have been satisfied and cancelled of record, it being the
intention of the parties hereto that the same will be satisfied and cancelled of
record at or about the time they are paid or satisfied out of the proceeds of
the Loan.

 

5.4           Notices.  Unless specifically provided otherwise in this Mortgage
or by law, any notice required or permitted by or in connection with this
Mortgage shall be in writing and shall be made by facsimile or by hand delivery,
by overnight delivery service, or by certified mail, unrestricted delivery,
return receipt requested, postage prepaid, addressed to Mortgagee or Mortgagor
at the appropriate address set forth above or to such other address as may be
hereafter specified by written notice by Mortgagee or Mortgagor.  Notice shall
be considered given as of the date of the facsimile or the hand delivery, one
(1) calendar day after delivery to the overnight delivery service, or three
(3) calendar days after the date of mailing, independent of the date of actual
delivery or whether delivery is ever in fact made, as the case may be, provided
the giver of notice can establish that notice was given as provided herein.

 

5.5           Legal Construction.  This Mortgage shall be construed according to
the laws of New Jersey (excluding New Jersey conflict of laws) and any court of
competent jurisdiction of New Jersey shall have jurisdiction in any proceeding
instituted to enforce this Mortgage and any objections to venue are hereby
waived.

 

5.6           Usury Limitations.  No provision of this Mortgage shall require
the payment or permit the collection of interest or other sum in excess of the
maximum permitted by applicable law, including a judicial determination.  If any
excess of interest or other sum in such respect is herein provided for, or shall
be adjudicated to be so provided for herein, neither Mortgagor nor its
successors or assigns shall be obligated to pay such interest or other sum in
excess of the amount permitted by applicable law, including a judicial
determination, and the right to demand the payment of any such excess shall be
and hereby is waived.  The provisions of this Section shall control all other
provisions of this Mortgage.

 

5.7           Recording.  Mortgagor covenants and agrees to promptly cause all
documents required by Mortgagee to be properly recorded or filed, including this
Mortgage, and to pay all fees, taxes and

 

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expenses incident thereto.  Mortgagor shall hold harmless and indemnify
Mortgagee against any liability incurred by reason of the imposition of any fee,
tax or charge on the making and recording of this Mortgage.

 

5.8           Rights of Mortgagee.

 

(a)           Rights Not Limited.  The rights, powers, privileges and
discretions (hereinafter collectively called the “rights”) specifically granted
to the Mortgagee and those specifically granted to Mortgagee under this Mortgage
are not in limitation of but in addition to those to which they are entitled
under any general or local law relating to and mortgages in New Jersey, now or
hereafter existing.

 

(b)           Benefit to Successors and Assigns.  The rights to which Mortgagee
may be entitled shall inure to the benefit of its successors and assigns.

 

(c)           Rights Cumulative.  All the rights of Mortgagee are cumulative and
not alternative and may be enforced successively or concurrently.

 

5.9           No Waiver.  Failure of Mortgagee to exercise any of their rights
shall not impair any of their rights nor be deemed a waiver thereof, and no
waiver of any of their rights shall be deemed to apply to any other such rights,
nor shall it be effective unless in writing and signed by the party waiving the
right.  The acceptance by Mortgagee of any partial payment after default or an
Event of Default, with or without knowledge of the default or Event of Default,
shall not be a waiver of the default or Event of Default unless Mortgagee shall
specifically state in writing that the acceptance waives the default or Event of
Default or states further conditions which must be satisfied to constitute such
a waiver.  The failure of Mortgagee to exercise the option for acceleration of
maturity, foreclosure, or either, following an Event of Default or to exercise
any other option or privilege granted to Mortgagee hereunder in any one or more
instances, shall not constitute a waiver of any such default, but such option or
privilege shall remain continuously in force.

 

5.10         Mutual Waiver of Jury Trial.  Mortgagor and Mortgagee (by
acceptance of this Mortgage) each, on behalf of itself and its successors and
assigns, WAIVES to the fullest extent permitted by law all right to TRIAL BY
JURY of any and all claims between them arising under this Mortgage, the Note,
the Loan Agreement, or any other Loan Documents, and any and all claims arising
under common law or under any statute of any state or the United States of
America, whether any such claims be now existing or hereafter arising, now known
or unknown.  In making this waiver Mortgagee and Mortgagor acknowledge and agree
that any and all claims made by Mortgagee and all claims made against Mortgagee
shall be heard by a judge of a court of proper jurisdiction, and shall not be
heard by a jury.  Mortgagee and Mortgagor acknowledge and agree that THIS WAIVER
OF TRIAL BY JURY IS A MATERIAL ELEMENT OF THE CONSIDERATION FOR THIS
TRANSACTION.  Mortgagee and Mortgagor, with advice of counsel, each acknowledges
that it is knowingly and voluntarily waiving a legal right by agreeing to this
waiver provision.

 

5.11         Waiver by Mortgagor.  Mortgagor waives, on behalf of itself and all
persons now or hereafter interested in the Property, all rights under all
appraisement, homestead, moratorium, valuation, redemption, exemption, stay,
extension and marshalling statutes, laws or equities now or hereafter existing
and agrees that no defense based on any thereof will be asserted in any action
enforcing this Mortgage.

 

5.12         Secondary Market Cooperation.  Mortgagor acknowledges that
Mortgagee may (a) sell this Mortgage, the Note and the other Loan Documents to
one or more investors as a whole loan, (b) participate the Loan to one or more
investors, (c) deposit this Mortgage, the Note, the Guarantee and the other Loan
Documents with a  trust, which trust may sell certificates to investors
evidencing an ownership interest in the trust assets or (d) otherwise sell the
Loan or interest therein to investors (the transactions referred to in clauses
(a) through (d) are hereinafter referred to as “Secondary Market
Transactions”).  Mortgagor shall cooperate in good faith with Mortgagee in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements imposed by any rating agency involved in any
Secondary Market Transaction including, without limitation, all structural or
other changes to the Loan, modifications to any documents evidencing or securing
the Loan, delivery of opinions of

 

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counsel acceptable to the rating agency and addressing such matters as the
rating agency may require; provided, however, Mortgagor shall not be required to
modify any documents evidencing or securing the Loan which would modify (i) the
interest rate payable under the Note, (ii) the stated maturity of the Note,
(iii) the amortization of principal of the Note, or (iv) any other material
economic term of the Loan.  Mortgagor shall provide such information and
documents relating to Mortgagor, any guarantor of Mortgagor, the Property and
any tenant of the Property as Mortgagee may reasonably request in connection
with a Secondary Market Transaction.  Mortgagee shall have the right to provide
to prospective investors any information in its possession, including, without
limitation, financial statements relating to Mortgagor, any guarantor of
Mortgagor, the Property and any tenant of the Property.  Mortgagor acknowledges
that certain information regarding the Loan and the parties thereto and the
Property may be included in a private placement memorandum, prospectus or other
disclosure documents.

 

5.13         Indemnification.  Mortgagee shall not be obligated to perform or
discharge any obligation or duty to be performed or discharged by Mortgagor
under any lease. Mortgagor shall indemnify the Mortgagee for and save them
harmless from any and all liability arising from any lease or assignment of a
lease as security under this Mortgage. Mortgagee shall not have any
responsibility for the control, care, management or repair of the Property or be
liable for any negligence in the management, operation, upkeep, repair or
control of the Property resulting in loss or injury or death to any lessee or
any other person or entity.  The obligations and liabilities of Mortgagor under
this paragraph shall survive any termination, satisfaction or assignment of this
Mortgage and the exercise by Mortgagee of any of its rights or remedies
hereunder including, without limitation, the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.

 

5.14         Binding Effect.  The terms and conditions agreed to by Mortgagor
and the covenants of Mortgagor shall be binding upon the personal
representatives, successors and assigns of Mortgagor and of each of them, but
this provision does not waive any prohibition of assignment or any requirement
of consent to an assignment under the other provisions of this Mortgage; any
consent to an assignment shall not be consent to any further assignment, each of
which must be specifically obtained in writing.

 

5.15         Recitals.  The recitals of this Mortgage are incorporated herein
and made a part hereof.

 

5.16         Number and Gender.  Wherever used herein the singular shall include
the plural and the plural the singular, and the use of any gender shall include
all genders.

 

5.17         Time of Essence.  Time is of the essence of the obligations of
Mortgagor in this Mortgage and each and every term, covenant and condition made
herein by or applicable to Mortgagor.

 

5.18         Captions.  The captions of the Sections of this Mortgage are for
the purpose of convenience only and are not intended to be a part of this
Mortgage and shall not be deemed to modify, explain, enlarge, or restrict any of
the provisions hereof.

 

5.19.        Severability.  If any provision of this Mortgage or the application
thereof to any person or circumstance shall be invalid, inoperative or
unenforceable to any extent, the remainder of this Mortgage and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be valid, operative and enforceable to the greatest extent
permitted by law.

 

5.20.        Execution of Counterparts.  This Mortgage may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same Mortgage.

 

5.21.        Security Agreement.  Mortgagor has executed this instrument as a
Debtor under the Uniform Commercial Code of the state in which the Property is
located.  This Mortgage shall constitute and be a security agreement and
financing statement under the laws of such state.

 

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ARTICLE 6. ADDITIONAL COVENANTS

 

6.1           Leases of the Property.

 

6.1.1        Compliance with Leases.  Mortgagor shall carry out all of its
agreements and covenants as landlord contained in any leases (which word when
used in this Mortgage shall include, without limitation, all agreements,
licenses, contracts, reservations, accounts, and permits affecting all or any
part of the Property) and not permit a lien or other encumbrance superior to
such leases other than this Mortgage.  No lease shall include any space, or
grant to any tenant any right or interest in any area outside of the limits of
the Property.  Upon demand of Mortgagee, Mortgagor shall furnish Mortgagee an
executed copy of each lease immediately upon its execution.  All future leases
shall be written on the standard form accepted by Mortgagee, with only such
changes as Mortgagee shall have approved in writing or on a lease agreement
approved by Mortgagee.

 

6.1.2        Assignment of Leases.  Mortgagor hereby grants, conveys, assigns,
and transfers unto the Mortgagee, for the benefit of Mortgagee, all the right,
title, interest and privileges which Mortgagor has or may hereafter have in any
and all of said leases now existing or hereafter made affecting all or a part of
the Property, as said leases may have been or may from time to time be hereafter
modified, extended or renewed with all the rents (which word when used in this
Mortgage shall include, without limitation, all income and profits) due and
becoming due therefrom and including without limitation the right of Mortgagee
to inspect the leased areas and books and records of tenants.  Mortgagor shall,
upon written request by Mortgagee, execute assignments (in any form customarily
used by Mortgagee) of any present or future leases, together with the rents due
and becoming due therefrom, which affect in any way all or any part of the
Property.  No such assignment made or required hereby shall be construed as a
consent by Mortgagee  to any lease or to impose on Mortgagee any obligation with
respect thereto.  Mortgagor shall not make any other assignment, hypothecation
or pledge of any rents under any lease of part or all of the Property. 
Mortgagor shall not, without the prior written approval of Mortgagee, cancel any
of the leases, nor terminate or accept a surrender thereof, nor reduce the
payment of rent thereunder, nor modify any of said leases, nor accept any
prepayment of rent other than the usual prepayment as would result from the
acceptance by landlord more than fifteen (15) days before the first day of each
month for the ensuing month under leases approved by Mortgagee according to the
terms of such leases.  The covenants and restrictions of this subsection shall
be deemed covenants and restrictions running with the land.

 

6.1.3        Limitation on Subordinate Lienors.  Mortgagor covenants that
Mortgagee of any subordinate lien shall have no right, and shall acquire no
right, to terminate or modify any lease affecting the Property whether or not
such lease is subordinate to the legal operation and effect of this Mortgage.

 

6.1.4        Deposit of Rents.  All payments, including security deposits, under
any lease received by Mortgagor shall be deemed held by Mortgagor in trust for
the payment of the indebtedness secured hereby.  Mortgagor shall deposit in a
non-interest bearing account or accounts with Mortgagee all payments (except
security deposits made under residential leases, if any) made under all leases,
which sums, subject to the rights of the tenants therein, may be used by
Mortgagor in the ordinary course of Mortgagor’s business to the extent permitted
by law, until one or more of the Events of Default shall occur, but not
thereafter.

 

6.1.5        Assignment of Bankruptcy Awards.  Mortgagor hereby assigns to the
Mortgagee  any award made hereafter to it in any court procedure involving any
of the tenants in any bankruptcy, insolvency or reorganization proceeding in any
state or federal court and any and all payments by any tenant in lieu of rent.

 

6.1.6        Limitation of Liability under Leases.  The Mortgagee shall not be
obligated to perform or discharge any obligation or duty to be performed or
discharged by Mortgagor under any lease; and Mortgagor hereby agrees to
indemnify the Mortgagee for and to save them harmless from, any and all
liability arising from any lease, or this assignment thereof and this assignment
shall not place the responsibility for the control, care, management or repair
of the Property upon the Mortgagee, nor make said Mortgagee liable for any
negligence in the management, operation, upkeep, repair or control of the
Property resulting in loss or injury or death to any tenant, agent, guest, or
stranger.

 

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6.1.7        Security Deposits.  Mortgagor shall deposit in an account or
accounts with Mortgagee or its designee, under the depository’s standard program
for such accounts, all security deposits made under residential leases which
sums, subject to the rights of the tenants therein, may be used by Mortgagor in
the ordinary course of Mortgagor’s business to the extent permitted by law,
until one or more of the Events of Default shall occur, but not thereafter.  All
such deposits shall be the continuing responsibility of Mortgagor, and Mortgagor
shall comply with all applicable requirements of state and local law where the
Property is located.

 

6.2           Environmental Covenants.

 

6.2.1        No Substances Present.  Mortgagor hereby represents and warrants to
Mortgagee that, after a due and diligent investigation, to the best of its
knowledge, there are not now and have never been any materials or substances
located on or near the Property that, under federal, state, or local law,
statute, ordinance, or regulation, or administrative or court order or decree,
or private agreement (collectively, the “Environmental Laws”), are regulated as
to use, generation, collection, storage, treatment, or disposal (such materials
or substances are hereinafter collectively referred to as “Substances”).  The
term “Substances” includes any materials or substances whose release or
threatened release may pose a risk to human health or the environment or
impairment of property values and shall also include without limitation
(i) asbestos in any form, (ii) urea formaldehyde foam insulation, (iii) paint
containing lead, (iv) transformers or other equipment which contains dielectric
fluid containing levels of polychlorinated biphenyls of 50 parts per million or
more, and (v) petroleum in any form. Mortgagor further represents and warrants
to Mortgagee that the Property is not now being used nor has it ever been used
in the past for any activities involving the use, generation, collection,
storage, treatment, or disposal of any Substances.  Mortgagor will not place or
permit to be placed any Substances on or near the Property except for those
Substances that are typically used in the operation of Mortgagor’s business
provided the same are in appropriately small quantities and are stored, used,
and disposed of properly; or Substances that are approved in writing by
Mortgagee.

 

6.2.2        Acting Upon Presence of Substances.  Mortgagor hereby covenants and
agrees that, if at any time (i) Substances are spilled, emitted, disposed, or
leaked in any amount; or (ii) it is determined that there are Substances located
on, in, or under the Property other than those of which Mortgagee has approved
in writing or which are permitted to be used on the Property without Mortgagee’s
written approval pursuant to subsection 6.2.1 of this Section, Mortgagor shall
immediately notify Mortgagee and any authorities required by law to be notified,
and shall, within thirty (30) days thereafter or sooner if required by Mortgagee
or any governmental authority, take or cause to be taken, at Mortgagor’s sole
expense, such action as may be required by Mortgagee or any governmental
authority.  If Mortgagor shall fail to take such action, Mortgagee may make
advances or payments towards performance or satisfaction of the same but shall
be under no obligation so to do; and all sums so advanced or paid, including all
sums advanced or paid in connection with any investigation or judicial or
administrative proceeding relating thereto, including, without limitation,
reasonable attorneys’ fees, expert fees, fines, or other penalty payments, shall
be at once repayable by Mortgagor and shall bear interest at the Default Rate,
from the date advanced or paid by Mortgagee until the date paid by Mortgagor to
Mortgagee, and all sums so advanced or paid, with interest as aforesaid, shall
become a part of the indebtedness secured hereby.

 

6.2.3        Environmental Audits.  Mortgagor, promptly upon the written request
of Mortgagee from time to time, shall provide Mortgagee, at Mortgagor’s expense,
from time to time with an environmental site assessment or environmental audit
report, or an update of such an assessment or report, all in scope, form, and
content satisfactory to Mortgagee.

 

6.2.4        Environmental Notices.  Mortgagor shall furnish to Mortgagee
duplicate copies of all correspondence, notices, or reports it receives from any
federal, state, or local agency or any other person regarding environmental
matters or Substances at or near the Property, immediately upon Mortgagor’s
receipt thereof.

 

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6.2.5        Condition of Property.  Mortgagor hereby represents and warrants
that there are no wells or septic tanks on the Property serving any other
property; no wells or septic tanks on other property serving the Property; no
burial grounds, archeological sites, or habitats of endangered or threatened
species on the Property; and that no part of the Property is subject to tidal
waters; has been designated as wetlands by any federal, state, or local law or
governmental agency; or is located in a special flood hazard area.

 

6.2.6        Environmental Indemnity.

 

6.2.6.1     Mortgagor shall at all times indemnify and hold harmless Mortgagee
against and from any and all claims, suits, actions, debts, damages, costs,
losses, obligations, judgments, charges, and expenses, of any nature whatsoever
suffered or incurred by Mortgagee, whether as beneficiary of this Mortgage, as
mortgagee in possession, or as successor-in-interest to Mortgagor by foreclosure
deed or deed in lieu of foreclosure, under or on account of the Environmental
Laws or any similar laws or regulations, including the assertion of any lien
thereunder, with respect to:

 

(a)           any discharge of Substances, the threat of a discharge of any
Substances, or the presence of any Substances affecting the Property whether or
not the same originates or emanates from the Property or any contiguous real
estate including any loss of value of the Property as a result of any of the
foregoing;

 

(b)           any costs of removal or remedial action incurred by the United
States Government or any costs incurred by any other person or damages from
injury to, destruction of, or loss of natural resources, including reasonable
costs of assessing such injury, destruction or loss incurred pursuant to any
Environmental Laws;

 

(c)           liability for personal injury or property damage arising under any
statutory or common law tort theory, including, without limitation, damages
assessed for the maintenance of a public or private nuisance or for the carrying
on of an abnormally dangerous activity at or near the Property; and/or

 

(d)           any other environmental matter affecting the Property within the
jurisdiction of the Environmental Protection Agency, any other federal agency,
or any state or local environmental agency.

 

Mortgagor’s obligations under this Agreement shall arise upon the discovery of
the presence of any Substance, whether or not the Environmental Protection
Agency, any other federal agency or any state or local environmental agency has
taken or threatened any action in connection with the presence of any
Substances.

 

7.             U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No Borrower or
Guarantor may claim or assert against SBA any local or state law to deny any
obligation of Borrower, or defeat any claim of SBA with respect to this Loan.

 

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Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

 

IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed on
its behalf and its seal to be hereunto affixed as of the date first above
written.

 

 

/s/ Brian Conners

 

Brian Todd Conners, individually

 

 

 

State/Commonwealth of New Jersey

 

County of Burlington

 

On this, the 10th day of March, 2011, before me Lisa Viscusi, the undersigned
officer, personally appeared Brian Todd Conners known to me (or satisfactorily
proven) to be the person(s) whose name(s) is/are subscribed to the within
instrument, and acknowledged that he/she/they executed the same for the purposes
therein contained.

 

 

In witness whereof, I hereunto set my hand and official seal.

 

 

/s/ Denise Cascio

 

Notary Public

 

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EXHIBIT A

 

PROPERTY DESCRIPTION

 

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EXHIBIT B

 

PERMITTED ENCUMBRANCES

 

First mortgage in favor of ING Bank in the original amount of $339,920.00 dated
6/26/03 and recorded 7/19/03 in book 7122 page 5

 

Second mortgage in favor of Quicken Loans Inc. in the original amount of
$90,000.00 dated 6/15/04 and recorded 7/6/04 in book 7504 page 1634 (currently
serviced by E-Trade Bank)

 

Pari passu mortgages in favor of Susquehanna Bank dated of even date herewith in
the original amounts of $2,100,000.00 and $1,250,000.00.

 

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SECURITY AGREEMENT - COMMERCIAL

 

This Security Agreement - Commercial (“Security Agreement”) is executed, made
and delivered this 10th day of March, 2011 by Appliance Recycling Centers of
America, Inc. (herein the “Debtor”), whose address is 7400 Excelsior Boulevard,
Minneapolis, MN 55426, for the benefit of Susquehanna Bank, a Pennsylvania
state-chartered commercial banking corporation (the “Secured Party”),  whose
address is 159 E. High Street, Pottstown, PA  19464.

 

FOR VALUE RECEIVED, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Debtor grants to Secured Party the security interest (and the
pledges and assignments as applicable) hereinafter set forth and agrees with
Secured Party as follows:

 

A.            OBLIGATIONS SECURED.  The security interest and pledges and
assignments as applicable granted hereby are to secure punctual payment and
performance of the following (i) a certain promissory note from ARCA Advanced
Processing, LLC, the (“Borrower”) of even date herewith in the original
principal sum of One Million Four Hundred Thousand Dollars and No Cents
($1,400,000.00) and payable to the order of Secured Party (the “Note”), and any
and all extensions, renewals, modifications and rearrangements thereof; and
(ii) any and all other indebtedness, liabilities and obligations whatsoever of
Debtor to Secured Party whether direct or indirect, absolutely or contingent,
primary or secondary, due or to become due and whether now existing or hereafter
arising and howsoever evidenced or acquired, whether joint or several, or joint
and several (all of which are herein separately and collectively referred to as
the “Obligations”).  Debtor acknowledges that the security interest hereby
granted shall secure all future advances as well as any and all other
indebtedness, liabilities and obligations of Debtor to Secured Party whether now
in existence or hereafter arising.

 

B.            USE OF COLLATERAL.  Debtor represents, warrants and covenants that
the Collateral will be used by the Debtor primarily for business, commercial, or
other similar purposes.

 

C.            DESCRIPTION OF COLLATERAL.  Debtor hereby grants to Secured Party
a security interest in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge
and assignment of, as applicable), the following property:

 

All Equipment.  A security interest in all equipment, now owned or hereafter
acquired by Debtor, including all appurtenances and additions thereto, and
substitutions therefor and replacement thereof, wheresoever located, including
all tools, parts and accessories used in connection therewith and including but
not limited to the collateral listed on Exhibit A” attached hereto.

 

The term “Collateral” as used in this Agreement shall mean and include, and the
security interest (and pledge and assignment as applicable) shall cover, all of
the foregoing property, as well as any accessions, additions and attachments
thereto, and the proceeds and products thereof, including without limitation,
all cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all returned or repossessed
goods arising from or relating to any of the property described herein or other
proceeds of any sale or other disposition of such property.

 

As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured
Party a security interest in, and a pledge and assignment of, any and all money,
property, deposit accounts, accounts, securities, documents, chattel paper,
claims, demands, instruments, items or deposits of the Debtor, and each of them,
or to which any of them is a party, now held or hereafter coming within Secured
Party’s custody or control, including without limitation, all certificates of
deposit and other depository accounts, whether such have matured or the exercise
of Secured Party’s rights results in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon the Debtor, Secured Party may
exercise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party’s rights and remedies under
this paragraph shall be in addition to and cumulative of any other rights or
remedies at law and equity, including, without limitation, any rights of set-off
to which Secured Party may be entitled.

 

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D.            REPRESENTATIONS. WARRANTIES AND COVENANTS OF DEBTOR.  Debtor
represents and warrants as follows:

 

1.             Ownership; No Encumbrances.  Except for the security interest
(and pledges and assignments as applicable) granted hereby, the Debtor is, and
as to any property acquired after the date hereof which is included within the
Collateral, Debtor will be, the owner of all such Collateral free and clear from
all charges, liens, security interests, adverse claims and encumbrances of any
and every nature whatsoever.

 

2.             No Financing Statements.  There is no financing statement or
similar filing now on file in any public office covering any part of the
Collateral except those already disclosed to Security Party by the pre-closing
searches, and Debtor will not execute and there will not be on file in any
public office any financing statement or similar filing except the pari passu
financing statements filed or to be filed in favor of, or assigned or to be
assigned on the date hereof to, Secured Party.

 

3.             Accuracy of Information.  All information furnished to Secured
Party concerning Debtor, the Collateral and the Obligations, or otherwise for
the purpose of obtaining or maintaining credit, is or will be at the time the
same is furnished, accurate and complete in all material respects.

 

4.             Authority.  Debtor has full right and authority to execute and
perform this Agreement and to create the security interest (and pledges and
assignment as applicable) created by this Agreement. The making and performance
by Debtor of this Agreement will not violate any articles of incorporation,
bylaws or similar document respecting Debtor, any provision of law, any order of
court or governmental agency, or any indenture or other agreement to which
Debtor is a party, or by which Debtor or any of Debtor’s property is bound, or
be in conflict with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture or other agreement, or result
in the creation or imposition of any charge, lien, security interest, claim or
encumbrance of any and every nature whatsoever upon the Collateral, except as
contemplated by this Agreement.

 

5.             Addresses.  The address of Debtor designated at the beginning of
this Agreement is Debtor’s place of business if Debtor has only one place of
business; Debtor’s chief executive office if Debtor has more than one place of
business; or Debtor’s residence if Debtor has no place of business. Debtor
agrees not to change such address without advance written notice to Secured
Party.

 

E.             GENERAL COVENANTS.  Debtor covenants and agrees as follows:

 

1.             Operation of Collateral.  Debtor agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper
manner, and in conformity with all applicable permits or licenses. Debtor shall
comply in all respects with all applicable statutes, laws, ordinances and
regulations. Debtor shall not use the Collateral in any unlawful manner or for
any unlawful purpose, or in any manner or for any purpose that would expose the
Collateral to unusual risk, or to penalty, forfeiture or capture, or that would
render inoperative any insurance in connection with the Collateral.

 

2.             Condition.  Debtor shall maintain, service and repair the
Collateral so as to keep it in good operating condition. Debtor shall replace
within a reasonable time all parts that may be worn out, lost, destroyed or to
otherwise rendered unfit for use, with appropriate replacement parts . Debtor
shall obtain and maintain in good standing at all times all applicable permits,
licenses, registrations and certificates respecting the Collateral.

 

3.             Assessments.  Debtor shall promptly pay when due all taxes,
assessments, license fees, and governmental charges levied or assessed against
Debtor or with respect to the Collateral or any part thereof.

 

4.             No Encumbrances.  Debtor agrees not to suffer or permit any
charge, lien, security interest, adverse claim or encumbrance of any and every
nature whatsoever against the Collateral or any part thereof.

 

5.             No Removal.  Except as otherwise provided in this Agreement,
Debtor shall not remove the Collateral from the County or counties designated at
the beginning of this Agreement without Secured Party’s written consent.

 

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6.             No Transfer.  Except as otherwise provided in this Agreement with
respect to inventory,  Debtor shall not, without the prior written consent of
Secured Party, sell, assign, transfer, lease, charter, encumber, hypothecate or
dispose of the Collateral, or any part thereof, or interest therein or offer to
do any of the foregoing.

 

7.             Notices and Reports.  Debtor shall promptly notify Secured Party
in writing of any change in the name, identity or structure of Debtor, any
charge, lien, security interest, claim or encumbrance asserted against the
Collateral, any litigation against Debtor or the Collateral, any theft, loss,
injury or similar incident involving the Collateral, and any other material
matter adversely affecting Debtor or the Collateral. Debtor shall furnish such
other reports, information and data regarding Debtor’s financial condition and
operations, the Collateral and such other matters as Secured Party may request
from time to time.

 

8.             Landlord’s Waivers.  Debtor shall furnish to Secured Party, if
requested, a landlord’s waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord’s waivers to be in such form and upon such terms as are acceptable to
Secured Party.

 

9.             Additional Filings.  Debtor agrees to execute and deliver such
financing statement or statements, or amendments thereof or supplements thereto,
or other documents as Secured Party may from time to time require in order to
comply with the Minnesota Uniform Commercial Code (or other applicable state
laws of the jurisdiction where any of the Collateral is located) and to preserve
and protect the Secured Party’s rights to the Collateral.

 

10.           Protection of Collateral.  Secured Party, at its option, whether
before or after default, but without any obligation whatsoever to do so, may
(a) discharge taxes, claims, charges, liens, security interests, assessments or
other encumbrances of any and every nature whatsoever at any time levied, placed
upon or asserted against the Collateral, (b) place and pay for insurance on the
Collateral, including insurance that only protects Secured Party’s interest,
(c) pay for the repair, improvement, testing, maintenance and preservation of
the Collateral, (d) pay any filing, recording, registration, licensing or
certificate fees or other fees and charges related to the Collateral, or
(e) take any other action to preserve and protect the Collateral and Secured
Party’s rights and remedies under this Agreement as Secured Party may deem
necessary or appropriate. Debtor agrees that Secured Party shall have no duty or
obligation whatsoever to take any of the foregoing action. Debtor agrees to
promptly reimburse Secured Party upon demand for any payment made or any expense
incurred by the Secured Party pursuant to this authorization. These payments and
expenditures, together with interest thereon from date incurred until paid by
Debtor at the maximum contract rate allowed under applicable laws, which Debtor
agrees to pay, shall constitute additional Obligations and shall be secured by
and entitled to the benefits of this Agreement.

 

11.           Inspection.  Debtor shall at all reasonable times allow Secured
Party by or through any of its officers, agents, attorneys or accountants, to
examine the Collateral, wherever located, and to examine and make copies of or
extracts from Debtor’s books and records.

 

12.           Further Assurances.  Debtor shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and
assurances as Secured Party may request from time to time to protect, assure and
enforce Secured Party’s rights and remedies.

 

13.           Insurance.  Debtor shall have and maintain insurance at all times
with respect to all tangible Collateral insuring against risks of fire
(including so-called extended coverage), theft and such other risks as Secured
Party may require, containing such terms, in such form and amounts and written
by such companies as may be satisfactory to Secured Party, all of such insurance
to contain loss payable clauses in favor of Secured Party as its interest may
appear. All policies of insurance shall provide for fifteen (15) days written
minimum cancellation notice to Secured Party and at the request of Secured Party
shall be delivered to and held by it. Secured Party is hereby authorized to act
as attorney for Debtor in obtaining, adjusting, settling and canceling such
insurance to the Obligations secured hereby whether or not such Obligations are
then due and payable. Debtor specifically authorizes Secured Party to disclose
from the policies of insurance to prospective insurers regarding the Collateral.

 

14.           Additional Collateral.  If Secured Party should at any time be of
the opinion that the Collateral is impaired or insufficient, or has declined or
may decline in value, or should Secured Party deem payment of the Obligations to
be insecure, then Secured Party may call for additional security satisfactory to
Secured Party, and Debtor promises to furnish such additional security
forthwith. The call for additional security may be oral, by messenger or
telefax, or United States mail addressed to Debtor, and shall not affect any
other subsequent right of Secured Party to exercise the same.

 

15.           Goods.  Notwithstanding anything to the contrary contained in this
agreement, if any Debtor is a “consumer” as defined Regulation AA of the Board
of Governors of the Federal Reserve System, 12 C.F.R. Part 227, or the Federal
Trade Commission Credit Practices Rule, 16 C.F.R. Part 444, as applicable, no
lien or security interest created or evidenced by this agreement shall extend to
or cover a non-possessory lien or security interest in “household goods,” other
than a purchase money lien

 

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or security interest, in accordance with such regulations as applicable.

 

F.             ADDITIONAL PROVISIONS REGARDING ACCOUNTS.  The following
provisions shall apply to all accounts included within the Collateral:

 

1.             Definitions.  The term “account”, as used in this Agreement,
shall have the same meaning as set forth in the Uniform Commercial Code of
Minnesota in effect as of the date of execution hereof, and as set forth in any
amendment to the Uniform Commercial Code of Minnesota to become effective after
the date of execution hereof, and also shall include all present and future
notes, instruments, documents, general intangibles, drafts, acceptances and
chattel paper of Debtor, and the proceeds thereof.

 

2.             Additional Warranties.  As of the time any account becomes
subject to the security interest (or pledge or assignment as applicable) granted
hereby, Debtor shall be deemed further to have warranted as to such and all of
such accounts as follows: (a) each account and all papers and documents relating
thereto are genuine and in all respects what they purport to be; (b) each
account is valid and subsisting and arises out of a bona fide sale or lease of
goods sold or leased and delivered to, or out of and for services therefore
actually rendered by the Debtor to, the account debtor named in the account;
(c) the amount of the account represented as owing is the correct amount
actually and unconditionally owning except for normal cash discounts and is not
subject to any set-offs, credits, defenses, deductions or countercharges; and
(d) Debtor is the owner thereof free and clear of any charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.

 

3.             Collection of Accounts.  Secured Party shall have the right in
its own name or in the name of the Debtor, whether before or after default, to
require Debtor forthwith to transmit all proceeds of collection of accounts
directly to Secured Party, to demand, collect, receive, receipt for, sue for,
compound and give acquittal for, any and all amounts due or to become due on the
accounts and to endorse the name of the Debtor on all Commercial paper given in
payment or part payment thereof, and in Secured Party’s discretion to file any
claim or take any other action or proceeding that Secured Party, may deem
necessary or appropriate to protect and preserve and realize upon the accounts
and related Collateral. Unless and until Secured Party elects to collect
accounts, and the privilege of Debtor to collect accounts is revoked by Secured
Party in writing, Debtor shall continue to collect accounts, account for same to
Secured Party, and shall not commingle the proceeds of collection of accounts
with any funds of the Debtor. In order to assure collection of accounts in which
Secured Party has a security interest (or which have been pledged or assigned to
Secured Party as applicable) hereunder, Secured Party may notify the post office
authorities to change the address for delivery of mail addressed to Debtor to
such address as Secured Party may designate, and to open and dispose of such
mail and receive the collections of accounts included herewith. Secured Party
shall have no duty or obligation whatsoever to collect any account, or to take
any other action to preserve or protect the Collateral; however, Debtor releases
Secured Party from any claim or claims for loss or damage arising from any act
or omission of Secured Party and its officers, directors, employees or agents,
should Secured Party elect to collect any account or take any possession of any
Collateral.

 

4.             Identification and Assignment of Accounts.  Upon Secured Party’s
request, whether before or after default, Debtor shall take such action and
execute and deliver such documents as Secured Party may request in order to
identify, confirm, mark, segregate and assign accounts and to evidence Secured
Party’s interest in same. Without limitation of the foregoing Debtor, upon
request, agrees to assign accounts to Secured Party, identify and mark accounts
as being subject to the security interest (or pledge or assignment as
applicable) granted hereby, mark Debtors books and records to reflect such
security interests, pledges and assignments, and forthwith to transmit to
Secured Party in the form received by Debtor any and all proceeds of collection
of such accounts.

 

5.             Account Reports.  Debtor will deliver to Secured Party, as Lender
may require, a written report in form and in content satisfactory to Secured
Party, showing a listing and aging of accounts and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of the assertion by any account debtor of any set-off, defense or
claim regarding an account or any other matter adversely affecting any account.

 

6.             Segregation of Returned Goods.  Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property. Debtor shall as often as requested by Secured Party, but not less
often than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included in assignments or
identifications made pursuant hereto.

 

7.             Right of Off-Set.  Any deposit or other sums at any time credited
by or due from the holder of the Obligations to Debtor or any endorser,
guarantor or surety of any of the Obligations and any securities or other
property of Debtor or any endorser, guarantor or surety of any of the
Obligations in the possession of the holder of the Obligations may at all times
be held and treated as additional and cumulative collateral security for the
payment of the Obligations and Debtor grants Secured Party a security interest
and contractual right of off-set in all such deposits, sums, securities and
other properties as additional and cumulative

 

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security for payment of the Obligations. The holder of the Obligations may apply
to set-off such deposits or other sums against the Obligations at any time in
the case of Debtor,  but only with respect to matured liabilities in case of the
endorsers, guarantors, or sureties of any of the Obligations.

 

G.            ADDITIONAL PROVISIONS REGARDING INVENTORY.  The following
provisions shall apply to all inventory included within the Collateral:

 

1.             Inventory Reports.  Debtor will deliver to Secured Party as
Secured Party may require, on such frequency as Secured Party may request, a
written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Debtors opening
inventory, inventory acquired, inventory sold, inventory leased, inventory
returned, inventory used in Debtor’s business, closing inventory, any other
inventory not within the preceding categories and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of any matter adversely affecting the inventory, including,
without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss of depreciation.

 

2.             Location of Inventory.  Debtor will promptly notify Secured Party
in writing of any addition to, change in or discontinuance of its place(s) of
business as shown in this Agreement, the places at which inventory is located as
shown herein, the location of its chief executive office and the location of the
office where it keeps its records as set forth herein. All Collateral will be
located at the places of business shown below, as modified by any written
notices given pursuant hereto.

 

3.             Uses of Inventory.  Except as set forth in the loan agreement,
unless and until the privilege of Debtor to use inventory in the ordinary course
of Debtor’s business is revoked by Secured Party in the event of default or if
Secured Party deems itself insecure, Debtor may use the inventory in any manner
not inconsistent with this Agreement, may lease or sell that part of the
Collateral consisting of inventory provided that all such leases and sales are
in the ordinary course of business, and use and consume any raw materials or
supplies that are necessary in order to carry on Debtor’s business. A sale in
the ordinary course of business does not include a transfer in partial or total
satisfaction of a debt.

 

4.             Accounts as Proceeds.  All accounts that are proceeds of the
inventory included within the Collateral shall be subject to all of the terms
and provisions hereof pertaining to accounts.

 

5.             Protection of Inventory.  Debtor shall take all action necessary
to protect and preserve the inventory.

 

6.             Assignment of Rents and Leases.  Debtor hereby assigns to Secured
Party all rents and other benefits derived or to be derived from leases
(“Leases”) of the inventory now or hereafter existing or entered into, together
with all guarantees, amendments, modifications, extensions and renewals thereof
(the “Rents”). Prior to a foreclosure by Secured Party of any lien or security
interest which Secured Party may now or hereafter hold covering the inventory,
this Assignment of Rents is not intended to, and shall not, constitute payment
to Secured Party, unless Secured Party terminates Debtor’s license to collect
the Rents, and then it shall constitute payment only to the extent that prior to
foreclosure the Rents are actually received by Secured Party as opposed to
constituting a portion of the voluntary payments of principal and interest on
the indebtedness evidenced and secured hereby, and are not used for the
operation, maintenance or repair of the inventory, or for the payment of costs
and expenses in connection therewith. Except as otherwise provided herein,
Secured Party shall have the absolute right, power and authority to take any and
all actions which Secured Party deems necessary or appropriate in connection
with taking possession of the inventory, leasing all or any part of the
inventory, collecting all or any of the Rents and enforcing the rights of the
lessor under any of the leases, including without limitation, bringing,
prosecuting, defending or settling legal proceedings against lessees of the
inventory. Notwithstanding anything herein to the contrary, Secured Party shall
not be obligated to perform or discharge, and Secured Party does not undertake
to perform or discharge, any obligation, duty or liability with respect to the
Leases or the Rents under or by reason of this Assignment. This Assignment shall
not operate to place responsibility for the control, care, maintenance or repair
of the inventory upon Secured Party, or for any dangerous or defective condition
of the Inventory, or for any negligence in the arrangement, upkeep, repair, or
control of the inventory. Debtor shall retain a revocable license to collect and
receive the Rents as the agent of Secured Party, and to retain, use and enjoy
such Rents, provided that such revocable license ipso facto terminate without
further action by Secured Party and without notice to Debtor upon the occurrence
of any default or event of default as defined in any note, deed of trust,
security agreement, guaranty, financing statement, fixture filing or other loan
documents given to Secured Party by Debtor or any other party in connection with
any indebtedness or obligation of Debtor to Secured Party.

 

7.             Leased Inventory.  Debtor shall (a) observe and perform
faithfully every obligation which Debtor is required to perform under the
Leases; (b) enforce or secure the performance of, at its sole cost and expense,
every obligation to be performed by the lessees under the Leases; (c) not
collect any Rents in advance of the time when the same shall be due, or
anticipate any payments under any of the Leases, except for bona fide security
deposits not in excess of an amount equal to two (2) months Rent; (d) at the
request of Secured Party, deliver copies of Leases to Secured Party; and
(e) appear and defend against, at Debtor’s sole cost

 

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and expense, any action or proceeding arising under, and in any manner connected
with the Leases, the Rents or the obligations, duties or liabilities of the
lessor, lessee or guarantors thereunder.

 

H.            [INTENTIONALLY OMITTED]

 

I.              [INTENTIONALLY OMITTED]

 

J.             EVENTS OF DEFAULT.  Debtor shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal,
interest or other amount due on any Obligations; (ii) the occurrence of any
event which under the terms of any evidence of indebtedness, indenture, loan
agreement, security agreement or similar instrument permits the acceleration of
maturity of any of obligation of Debtor whether to Secured Party or to others;
(iii) any representation or warranty made by Debtor and/or others to Secured
Party in connection with this Agreement, the Collateral or the Obligations, or
in any statements or certificates, proves incorrect in any material respect as
of the date of the making or the issuance thereof; (iv) default occurs in the
observance or performance of or, if Debtor fails to furnish adequate evidence of
performance of, any provision of this Agreement or of any note, assignment,
transfer, other agreement, document or instrument delivered by Debtor to Secured
Party in connection with this Agreement, the Collateral or the Obligations;
(v) death, dissolution, liquidation, termination of existence, insolvency,
business failure or winding-up of Debtor, or any maker, endorser, guarantor,
surety or other party liable in any capacity for any of the Obligations;
(vi) the filing of a petition in bankruptcy by or against, or the application
for appointment of a receiver or any other legal custodian for any part of the
property of, or the assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy, rearrangement,
reorganization, insolvency or similar laws for the relief of Debtors by or
against, the Debtor, or any maker, endorser, guarantor, surety or other party
primarily or secondarily liable for any of the Obligations; (vii) the Collateral
becomes, in the judgment of Secured Party, impaired, unsatisfactory or
insufficient in character or value; (viii) the filing of any levy, attachment,
execution, garnishment or other process against the Debtor, or any of the
Collateral or any maker, endorser, guarantor, surety, or other party liable in
any capacity for any of the Obligations, or (ix) the Secured Party in good faith
believes that the prospect of repayment or performance of the Obligations or any
of the covenants, agreements or other duties under any writing executed in
connection herewith is impaired.

 

K.            REMEDIES.  Upon the occurrence of an Event of Default, or if
Secured Party deems payment or performance of the Obligations to be insecure,
Secured Party, at its option, shall be entitled to exercise any one or more of
the following remedies (all of which are cumulative):

 

1.             Declare Obligations Due.  Secured Party, at its option, may
declare the Obligations or any part thereof immediately due and payable, without
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor, or any other notice
whatsoever, all of which are hereby waived by Debtor, the Borrower and any
maker, endorser, guarantor, surety or other party liable in any capacity for any
of the Obligations.

 

2.             Remedies.  Secured Party shall have all of the rights and
remedies provided for in this Agreement and any other agreements executed by
Debtor, the rights and remedies in the Uniform Commercial Code of  Minnesota,
and any and all rights and remedies at law or in equity, all of which shall be
deemed cumulative. Without limiting the foregoing, Debtor agrees that Secured
Party shall have the right to: (a) require Debtor to assemble the Collateral and
make it available to Secured Party at a place designated by Secured Party that
is reasonably convenient to both parties, which Debtor agrees to do; (b) take
possession of the Collateral with or without process of law, and, in this
connection, enter any premises where the Collateral is located to remove same,
to render it unusable, or to dispose of same on such premises; (c) sell, lease
or otherwise dispose of the Collateral, by public or private proceedings, for
cash or credit, without assumption of credit risks; and/or (d) whether before or
after default, collect and receipt for, compound, compromise, and settle, and
give releases, discharges and acquittances, with respect to, any and all amounts
owed by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of the
type customarily sold on a recognized market, Secured Party will send Debtor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or other disposition will be made. Any requirement of
reasonable notice to Debtor shall be met if such notice is mailed, postage
prepaid, to Debtor at the address of Debtor designated at the beginning of this
Agreement, at least five (5) days before the day of any public sale or at least
five (5) days before the time after which any private sale or other disposition
will be made.

 

3.             Expenses.  Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights and
remedies, in retaking, holding, testing, repairing, and proving, selling,
leasing or disposing of the Collateral, or like expenses, including, without
limitation, attorneys fees and legal expenses incurred by Secured Party. These
expenses, together with interest thereon from date incurred until paid by Debtor
at the maximum contract rate allowed under applicable laws, which Debtor agrees
to pay, shall constitute additional Obligations, and shall be secured and
entitled to the benefits of this Agreement.

 

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4.             Proceeds; Surplus; Deficiencies.  Proceeds received by Secured
Party from disposition of the Collateral shall be applied toward Secured Party’s
expenses and other Obligations and in such order or manner as Secured Party may
elect. Debtor shall be entitled to any surplus if one results after lawful
application of the proceeds.

 

5.             Remedies Cumulative.  The rights and remedies of Secured Party
are cumulative and the exercise of any one or more of the rights of remedies
shall not be deemed an election of rights or remedies or a waiver of any other
right or remedy. Secured Party may remedy any default and may waive any default
without waiving the default remedy or without waiving any other prior or
subsequent default.

 

L.            RELINQUISHMENT OF CERTAIN DEFENSES.  Regarding the enforcement of
the security interests and covenants and agreements contained in this Agreement
to secure payment of the Obligations, the Debtor covenants and agrees as
follows:

 

1.             Secured Party’s right of recovery against the Collateral for the
Obligations shall be determined as if Debtor were a primary obligor for the
payment of the Obligations regardless of whether or not Debtor is in fact
primarily liable for all or any part of the Obligations. Debtor specifically
agrees that it shall not be necessary or required, in order to enforce the
remedies under this Agreement, that the Secured Party have made demand for
payment upon the Borrower or any other person or entity liable for any portion
of the Obligations or have made protest thereof or have given notice to the
Borrower or any other party liable thereon of maturity or nonpayment of the
Obligations.

 

2.             The Debtor specifically waives any notice of acceptance of this
Agreement by the Secured Party and of the creation, advancement, existence,
extension, renewal, modification, consolidation, the rearrangement from time to
time of the Obligations, the increase from time to time in the principal amount
thereof, the increase or reduction from time to time of the rate of interest
thereon, or any indulgence from time to time with respect to the Obligations, or
any part thereof, and of nonpayment thereof or default thereon, and waives
grace, demand, protest, presentment and notice of demand, protest, and
presentment with respect to the Obligations, and waives notice of the amount of
the Obligations outstanding at any time, and agrees that the maturity of the
Obligations, or any part thereof, may be accelerated, extended, modified,
amended or renewed from time to time or any other indulgence may be granted with
respect thereto by the Secured Party at its will or as may be agreed by the
Borrower without notice to or further consent by the Debtor, at any time or
times.

 

3.             The Debtor agrees that: (i) no renewal, extension, modification,
consolidation, or rearrangement of or any other indulgence, forbearance or
compromise with respect to the Obligations, or any part thereof; (ii) no
increase in the principal amount of any of the Obligations; (iii) no increase or
reduction of the rate of interest thereon; (iv) no release, withdrawal,
substitution, surrender, subordination, exchange, deterioration, waste or other
impairment of any security or collateral or guaranty now or hereafter held by
the Secured Party for payment of the Obligations, or of any part thereof; (v) no
release of the Borrower, any guarantor, or of any other person primarily or
secondarily liable on the Obligations, or any part thereof; and (vi) no delay or
omission or lack of diligence or care in exercising any right or power with
respect to the Obligations or any security or collateral therefor or under this
Agreement shall in any manner impair, diminish or affect the rights of the
Secured Party or the liability of the Debtor hereunder. The Debtor specifically
agrees that it shall not be necessary or required, and that the Debtor shall not
be entitled to require, that the Secured Party mitigate damages, or file suit or
proceed to obtain or assert a claim for personal judgment against the Borrower
for the Obligations, or make any effort at collection of the Obligations from
the Borrower, or foreclose against or seek to realize upon any security or
collateral now or hereafter existing for the Obligations, or file suit or
proceed to obtain or assert a claim for personal judgment against any other
party (whether maker, guarantor, endorser or surety) liable for the Obligations,
or make any effort at collections of the Obligations from any such other party,
or exercise or assert any other right or remedy to which the Secured Party is or
may be entitled in connection with the Obligations or any security or collateral
or other Agreement therefor, or assert or file any claim against the assets or
estate of the Borrower or any guarantor or other person liable for the
Obligations, or any part thereof, before or as a condition of enforcing the
liability of the Debtor under this Agreement or requiring payment of the
Obligations by the Debtor hereunder, or at any time thereafter. The Debtor
expressly waives any right to the benefit of or to require or control
application of any security or collateral or the proceeds of any security or
collateral now existing or hereafter obtained by the Secured Party as security
for the Obligations, or any part thereof, and agrees that the Secured Party
shall have no duty insofar as the Debtor is concerned to apply upon any of the
Obligations any monies, payments or other property at any time received by or
paid to or in the possession of the Secured Party, except as the Secured Party
shall determine in its sole discretion. The Debtor specifically agrees that
Debtor shall not have any recourse or action against the Secured Party by reason
of any action the Secured Party may take or omit to take in connection with the
Obligations, the collection of any sums or amounts herein mentioned, or in
connection with any security or collateral or any Guaranty at any time existing
therefor.

 

4.             The Debtor agrees to the terms, provisions and conditions of the
Note and other instruments evidencing the Obligations and of any renewal,
modification, consolidation or rearrangement thereof or other agreements which
may have been or

 

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

 

may hereafter be executed by the Borrower from time to time evidencing or in
connection with the Obligations or any part thereof, and agrees that the
Debtor’s liability hereunder shall in no manner be affected, reduced, impaired
or released by reason of any term, provision or condition of such Note or other
agreement or by the failure, refusal or omission of the Secured Party to enforce
or observe any of same or any forbearance or compromise made by the Secured
Party or any action taken or omitted to be taken by the Secured Party pursuant
thereto or in connection therewith. The Debtor, by the execution and delivery of
this Agreement agrees, represents, warrants and acknowledges that Debtor shall
be bound by the provisions of any Agreement and Security Agreement and any
Environmental Certificate and Agreement of even date herewith, from the Borrower
to the Secured Party and which purport to be applicable to Debtor to the same
extent and with the same effect as if Debtor had executed and delivered such
document to the Secured Party. In that connection, the Debtor agrees that the
provisions of this Paragraph shall survive any exercise of the power of sale
granted in any instrument securing the Obligations, any foreclosure of the liens
created by any of the instruments securing the Obligations, any conveyance in
lieu of any such foreclosure, the repayment of the Obligations, and the
discharge and release of all liens, rights and interests securing payment of the
Obligations.

 

5.             The Debtor absolutely and unconditionally covenants and a agrees
that: (i) in the event that the Borrower does not or is unable to pay or perform
the Obligations for any reason including, without limitation, liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment or other
similar proceedings affecting the status, composition, identity, existence,
assets or Obligations of the Borrower, or the disaffirmance or termination of
any of the Obligations in or as a result of any such proceedings; and/or (ii) if
all or any part of the Obligations (or any instrument or agreement made or
executed in connection therewith) is for any reason found to be invalid,
illegal, unenforceable, uncollectible or legally impossible, for any reason
whatsoever (including, without limiting the generality of the foregoing, upon
the grounds that the payment and/or performance of the Obligations is ultra
vires or otherwise without authority, may violate applicable usury laws, is
subject to valid defenses, claims or offsets of the Borrower, or any instrument
evidencing any of the Obligations is forged or otherwise irregular), then in any
such case the Debtor shall pay and perform the Obligations as herein provided
and that no such occurrence shall in any way diminish or otherwise affect the
Debtor’s liabilities hereunder.

 

6.             Should the status, composition, structure or name of the Borrower
change, including, but not limited to, by reason of a merger, dissolution,
consolidation or reorganization, this Agreement shall continue and also cover
the Obligations and Obligations of the Borrower under the new status,
composition structure or name according to the terms hereof. If the Borrower is
a general or limited partnership, no termination of said partnership, nor
withdrawal therefrom or termination of any ownership interest therein owned, by
any general or limited partner of such partnership shall alter, limit,
terminate, excuse or modify the Debtor’s liabilities set forth in this
Agreement.

 

7.             In the event any payment from the Borrower to the Secured Party
is held to constitute a preference under the bankruptcy laws, or if for any
other reason the Secured Party is required to refund such payment or pay the
amount thereof to any other party, such payment by the Borrower to the Secured
Party shall not constitute a release of the Debtor from any liability hereunder,
and this Agreement shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments.

 

8.             At all times while any or all of the Obligations are now or
hereafter secured in whole or in part, the Debtor agrees that the Secured Party
may, from time to time, at its discretion, and with or without valuable
consideration, allow substitution, withdrawal, release, surrender, exchange,
subordination, deterioration, waste, loss or other impairment of all or any part
of such security or collateral, without notice to or consent by the Debtor, and
without in anywise impairing, diminishing or releasing the liability of the
Debtor hereunder.

9.             The Debtor waives marshalling of assets and liabilities, sale in
inverse order of alienation, and all defenses given to sureties or Debtors at
law or in equity other than actual payment of the Obligations and performance of
the actions constituting the Obligations, including, but not limited to, any
rights pursuant to the laws of  Minnesota. The failure by the Secured Party to
file or enforce a claim against the estate (either in administration, bankruptcy
or other proceeding) of the Borrower or any other person primarily or
secondarily liable for the Obligations or of any other or others shall not
affect the liability of Debtor hereunder.

 

M.           OTHER AGREEMENTS.

 

1.             Savings Clause.  Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable usury
laws. If any such excessive interest is so provided for, then in such event
(i) the provisions of this paragraph shall govern and control, (ii) neither the
Debtor nor Debtor’s heirs, legal representatives, successors or assigns or any
other party liable for the payment thereof shall be obligated to pay the amount
of such interest to the extent that it is in excess of the maximum amount
permitted by law, (iii) any such excess interest that may have been collected
shall be, at the option of the holder of the instrument evidencing the
Obligations, either applied as a credit against the then unpaid principal

 

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

 

amount thereof or refunded to the maker thereof, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful rate under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction.

 

2.             Joint and Several Responsibility.  If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtors shall be
joint and several.

 

3.             Waivers.  Debtor and any maker, endorser, guarantor, surety or
other party liable in any capacity respecting the Obligations hereby waived
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor and any other notice
whatsoever.

 

4.             Severability.  Any provision hereof found to be invalid by courts
having jurisdiction shall be invalid only with respect to such provision (only
to the extent necessary to avoid such invalidity). The offending provision shall
be modified to the minimum extent possible to confer upon Secured Party the
benefits intended thereby. Such provision as modified and the remaining
provisions hereof shall be construed and enforced to the same extent as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.

 

5.             Use of Copies.  Any carbon, photographic or other reproduction of
any financing statement signed by Debtor is sufficient as a financing statement
for all purposes, including without limitation, filing in any state as may be
permitted by the provisions of the Uniform Commercial Code of such state.  All
rights and remedies of Secured Party in all such agreements are cumulative, but
in the event of actual conflict in terms and conditions, the terms and
conditions of the latest security agreement shall govern and control.

 

6.             Authorization to File Financing Statements.  The Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Debtor is an organization, the type of organization
and any organizational identification number issued to the Debtor and, (ii) in
the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates.  The Debtor agrees
to furnish any such information to the Secured Party promptly upon the Secured
Party’s request.  The Debtor also ratifies its authorization for the Secured
Party to have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.

 

7.             Notices.  Any notice or demand given by Secured Party to Debtor
in connection with this Agreement, the Collateral or the Obligations shall be
deemed given and effective upon deposit in the United States mail, postage
pre-paid, addressed to Debtor at the address of the Debtor designated at the
beginning of this Agreement. Actual notice to Debtor shall always be effective
no matter how given or received.

 

8.             Headings and Gender.  Paragraph headings in this Agreement are
for convenience only and shall be given no meaning or significance in
interpreting this Agreement. All words used herein shall be construed to be or
such gender of number as the circumstances require.

 

9.             Amendments.  Neither this Agreement nor any of its provisions may
be changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification, waiver or discharge is sought.

 

10.           Binding Effect.  The provisions of this Security Agreement shall
be binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and the rights, powers and remedies of Secured
Party hereunder shall inure to the benefit of the successors and assigns of
Secured Party.

 

11.           Governing Law.  This Security Agreement shall be governed by the
law of Minnesota and applicable federal law.

 

15.           Statute of Frauds.  THIS COMMERCIAL SECURITY AGREEMENT, THE LOAN
AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED HEREIN OR IN THE LOAN
AGREEMENT, OR EXECUTED IN CONNECTION WITH OR ATTACHED TO THE LOAN AGREEMENT,
REPRESENT THE FINAL AGREEMENT BETWEEN DEBTOR AND SECURED PARTY, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR,

 

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

 

CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN DEBTOR AND SECURED PARTY.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN DEBTOR AND SECURED PARTY.

 

13.          U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No Borrower or
Guarantor may claim or assert against SBA any local or state law to deny any
obligation of Borrower, or defeat any claim of SBA with respect to this Loan.

 

Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

IN WITNESS WHEREOF, the undersigned has executed this Agreement effective as of
the date first written above.

 

 

DEBTOR

 

Appliance Recycling Centers of America, Inc.

 

By:

/s/ Edward R. Cameron

 

Edward Cameron, President

 

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EXHIBIT A

 

See attached list of equipment

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

Appliance Recycling Centers of America, Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.

7400 Excelsior Boulevard

Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

4301 Operations, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

S.D.S. Service Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

Scarabee Holdings, LLC

51 Willard Avenue

Pocantino Hills, NY 10591

 

Brian Conners

8 Oak Hollow Drive

Voorhees, NJ 08043

 

James Ford

51 Willard Avenue

Pocantino Hills, NY 10591

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
Appliance Recycling Centers of America, Inc. (“Corporation”). The Corporation is
a corporation for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws of the
State of Minnesota. The Corporation is duly authorized to transact business in
all other states in which the Corporation is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
the Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 7400
Excelsior Boulevard, Minneapolis, MN 53426. Unless the Corporation has
designated otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The Corporation will notify Lender
prior to any change in the location of the Corporation’s state of organization
or any change in the Corporation’s name. The Corporation shall do all things
necessary to

 

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

 

preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and the Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                                  , at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of Appliance
Recycling Centers of America, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Edward Cameron

 

President

 

Y

 

/s/ Edward R. Cameron

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized
person(s) is/are authorized, empowered, and directed to do the following for and
on behalf of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

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

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

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

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                                   .  THIS RESOLUTION
IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Edward R. Cameron

 

Edward Cameron, President

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

Safe Disposal Systems, Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.

7400 Excelsior Boulevard

Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

4301 Operations, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

S.D.S. Service Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

Scarabee Holdings, LLC

51 Willard Avenue

Pocantino Hills, NY 10591

 

Brian Conners

8 Oak Hollow Drive

Voorhees, NJ 08043

 

James Ford

51 Willard Avenue

Pocantino Hills, NY 10591

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
Safe Disposal Systems, Inc. (“Corporation”). The Corporation is a corporation
for profit which is, and at all times shall be, duly organized, validly
existing, and in good standing under and by virtue of the laws of the
Commonwealth of Pennsylvania. The Corporation is duly authorized to transact
business in all other states in which the Corporation is doing business, having
obtained all necessary filings, governmental licenses and approvals for each
state in which the Corporation is doing business. Specifically, the Corporation
is, and at all times shall be, duly qualified as a foreign corporation in all
states in which the failure to so qualify would have a material adverse effect
on its business or financial condition. The Corporation has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. The Corporation maintains an
office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the
Corporation has designated otherwise in writing, the principal office is the
office at which the Corporation keeps its books and records. The Corporation
will notify Lender prior to any change in the location of the Corporation’s
state of organization or any change in the Corporation’s name. The Corporation
shall do all things necessary to

 

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preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and the Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                                  , at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of Safe Disposal
Systems, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

President/Secretary

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized
person(s) is/are authorized, empowered, and directed to do the following for and
on behalf of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

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ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

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

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                                   .  THIS RESOLUTION
IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Brian Conners

 

Brian Conners, Secretary

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

AFFIDAVIT

 

RE:  $1,400,000.00 LIFE INSURANCE

 

I, Brian Conners, have life insurance in the amount of $1,400,000.00, as
evidenced by Policy No. Guardian Life Insurance Company Policy No. 6417978. 
Within sixty (60) days from today’s date, I shall provide to Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation  (“Lender”) if not
already provided, the actual original life insurance policy(ies) and/or recorded
collateral assignment(s).  I recognize that my failure to provide the original
life insurance policy(ies) and recorded collateral assignment(s) will constitute
a default under the loan documents unless I take all reasonable steps to obtain
comparable coverage.

 

I further certify, as an additional inducement for Susquehanna Bank to make the
loan, that the policy referenced herein is in full force and effect, is current
on its premium payments, has not been assigned to any other creditor(s) and that
there are no other liens of any type whatsoever against the policy except the
pari passu liens of Susquehanna Bank.

 

I understand that Susquehanna Bank is relying on the representations set forth
in this Affidavit in the making of the loan and that any false statements
contained herein or any failure to comply with the undertakings set forth above
shall entitle the Lender to pursue any and all remedies to which it is entitled
under the loan documents or applicable law, including, but not limited to
acceleration of the indebtedness.

 

 

 

/s/ Brian Conners

 

Brian Conners

 

 

Sworn to and subscribed before me this 10th day of March, 2011.

 

 

 

 

 

/s/ Denise Cascio

 

Notary Public

 

 

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CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

S.D.S. Service Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.

7400 Excelsior Boulevard

Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

4301 Operations, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

S.D.S. Service Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

Scarabee Holdings, LLC

51 Willard Avenue

Pocantino Hills, NY 10591

 

Brian Conners

8 Oak Hollow Drive

Voorhees, NJ 08043

 

James Ford

51 Willard Avenue

Pocantino Hills, NY 10591

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
S.D.S. Service Inc. (“Corporation”). The Corporation is a corporation for profit
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the Commonwealth of
Pennsylvania. The Corporation is duly authorized to transact business in all
other states in which the Corporation is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
the Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 4301 N.
Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the Corporation has
designated

 

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

 

otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The Corporation will notify Lender
prior to any change in the location of the Corporation’s state of organization
or any change in the Corporation’s name. The Corporation shall do all things
necessary to preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or court applicable to the Corporation and the Corporation’s business
activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                                  , at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of S.D.S. Service
Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

President/Secretary

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized
person(s) is/are authorized, empowered, and directed to do the following for and
on behalf of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he

 

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

 

or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

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CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                                   .  THIS RESOLUTION
IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Brian Conners

 

Brian Conners, Secretary

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

ARCA Advanced Processing, LLC

 

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.

7400 Excelsior Boulevard

Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

4301 Operations, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

S.D.S. Service Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

Scarabee Holdings, LLC

51 Willard Avenue

Pocantino Hills, NY 10591

 

Brian Conners

8 Oak Hollow Drive

Voorhees, NJ 08043

 

James Ford

51 Willard Avenue

Pocantino Hills, NY 10591

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is ARCA
Advanced Processing, LLC (“Company”). The Company is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Minnesota. The
Company is duly authorized to transact business in all other states in which the
Company is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which

 

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

 

it is presently engaged or presently proposes to engage. The Company maintains
an office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless
the Company has designated otherwise in writing, the principal office is the
office at which the Company keeps its books and records. The Company will notify
Lender prior to any change in the location of the Company’s state of
organization or any change in the Company’s name. The Company shall do all
things necessary to preserve and to keep in full force and effect its existence,
rights and privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or court applicable to the Company and the Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                    at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of ARCA Advanced Processing,
LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

Chief Manager

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

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

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to Lender and receipt acknowledged by Lender in writing at
Lender’s address shown above (or such addresses as Lender may

 

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

 

designate from time to time). Any such notice shall not affect any of the
Company’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated
                                  . THIS RESOLUTION IS GIVEN UNDER SEAL AND IT
IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF
A SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

 

 

/s/ Brian Conners

 

Brian Conners, Chief Manager

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

4301 Operations, LLC

 

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.

7400 Excelsior Boulevard

Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

4301 Operations, LLC

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

S.D.S. Service Inc.

4301 N. Delaware Avenue, Bldg. A

Philadelphia, PA 19137

 

Scarabee Holdings, LLC

51 Willard Avenue

Pocantino Hills, NY 10591

 

Brian Conners

8 Oak Hollow Drive

Voorhees, NJ 08043

 

James Ford

51 Willard Avenue

Pocantino Hills, NY 10591

 

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is 4301
Operations, LLC (“Company”). The Company is a limited liability company which
is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Delaware. The Company
is duly authorized to transact business in all other states in which the Company
is doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which it is

 

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

 

presently engaged or presently proposes to engage. The Company maintains an
office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the
Company has designated otherwise in writing, the principal office is the office
at which the Company keeps its books and records. The Company will notify Lender
prior to any change in the location of the Company’s state of organization or
any change in the Company’s name. The Company shall do all things necessary to
preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Company and the Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                    at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of 4301 Operations, LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

Director

 

Y

 

/s/ Brian Conners

 

 

 

 

 

 

 

James Ford

 

Director

 

Y

 

/s/ James Ford

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account

 

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

 

with Lender, or to cause such other disposition of the proceeds derived
therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full

 

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

 

force and effect and Lender may rely on it until written notice of its
revocation shall have been delivered to Lender and receipt acknowledged by
Lender in writing at Lender’s address shown above (or such addresses as Lender
may designate from time to time). Any such notice shall not affect any of the
Company’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated
                                  . THIS RESOLUTION IS GIVEN UNDER SEAL AND IT
IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF
A SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

 

 

/s/ Brian Conners

 

Brian Conners, Director

 

 

 

/s/ James Ford

 

James Ford, Director

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

Scarabee Holdings, LLC

 

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is
Scarabee Holdings, LLC (“Company”). The Company is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of New York. The
Company is duly authorized to transact business in all other states in which the
Company is doing business, having obtained all

 

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

 

necessary filings, governmental licenses and approvals for each state in which
the Company is doing business. Specifically, the Company is, and at all times
shall be, duly qualified as a foreign limited liability company in all states in
which the failure to so qualify would have a material adverse effect on its
business or financial condition. The Company has the full power and authority to
own its properties and to transact the business in which it is presently engaged
or presently proposes to engage. The Company maintains an office at 51 Willard
Avenue, Pocantino Hills, NY 10591. Unless the Company has designated otherwise
in writing, the principal office is the office at which the Company keeps its
books and records. The Company will notify Lender prior to any change in the
location of the Company’s state of organization or any change in the Company’s
name. The Company shall do all things necessary to preserve and to keep in full
force and effect its existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any governmental
or quasi-governmental authority or court applicable to the Company and the
Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                    at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of Scarabee Holdings, LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

James Ford

 

Manager

 

Y

 

/s/ James Ford

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in

 

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

 

connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap

 

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

 

Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to Lender and receipt acknowledged by Lender in writing at
Lender’s address shown above (or such addresses as Lender may designate from
time to time). Any such notice shall not affect any of the Company’s agreements
or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated
                                  . THIS RESOLUTION IS GIVEN UNDER SEAL AND IT
IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF
A SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

 

 

/s/ James Ford

 

James Ford, Manager

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

ASSIGNMENT OF LEASE

 

(Tenant’s Interest)

 

THIS ASSIGNMENT OF LEASE (“Assignment”) is made on 03/10/11 by ARCA Advanced
Processing, LLC (“Assignor”) whose address is 4301 N. Delaware Avenue, Bldg. A,
Philadelphia, PA 19137  to Susquehanna Bank, a Pennsylvania state-chartered
commercial banking corporation (“Assignee”) whose address is 159 E. High Street,
Pottstown, PA  19464.

 

1.             Definitions.

 

“Lease”:   Lease agreement, including all modifications, extensions and
renewals, dated June 18, 2010 by and between Assignor as tenant and Delaware
Ave, LLC (“Landlord”) of the Property.

 

“Loan Agreement”:  The Small Business Administration Authorization dated
December 23, 2010 between The United States Small Business Administration and
Assignee and the Loan Agreement dated of even date herewith between Assignor and
Assignee.

 

“Loan Documents”:  The Note, the Loan Agreement and any loan documents relating
to or securing the Note.

 

“Note”:  The promissory note dated of even date herewith in the original
principal amount of $1,400,000.00 delivered to Assignee by Assignor.

 

“Property”:  The leasehold interest in the real estate commonly known as 4301 N.
Delaware Avenue, Bldg. A, Philadelphia, PA 19137 .

 

“Indebtedness”: All amounts outstanding at any time under the Note and Loan
Documents.

 

All other capitalized terms used herein, unless otherwise specified, shall have
the same meaning ascribed to them in the Loan Agreement.

 

2.             Assignment.  Assignor, for good and valuable consideration, the
receipt of which is hereby acknowledged, does hereby assign, convey, and deliver
unto Assignee all of Assignor’s right, title and interest in the Lease.  To have
and to hold the same unto Assignee, its successors and assigns, until
termination of this Assignment as hereinafter provided.

 

3.             Collateral Assignment.  The parties intend that this Assignment
shall be a collateral assignment of the Lease.  Assignee shall not exercise its
rights under this Assignment until the occurrence of an Event of Default (as
defined in Paragraph 10).  Such assignment and grant shall continue in effect
until the Indebtedness is paid in full.

 

4.             Consideration.  This Assignment is made for and in consideration
of the loan made by Assignee to Assignor as set forth in the Loan Documents and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged.

 

5.             Indemnity.  Assignor agrees to pay and protect, and indemnify and
hold Assignee harmless from and against any and all claims, demands,
liabilities, losses, lawsuits, judgments and costs and expenses (including,
without limitation, reasonable attorneys’ fees) to which Assignee may become
exposed, or which Assignee may incur, in connection with the Lease or in
exercising its rights under this Assignment.

 

6.             Performance of Lease Covenants.  Upon the occurrence of a default
by Assignor under the Lease, Assignee may, at its option, perform any Lease
covenant for and on behalf of Assignor, and all monies expended in so doing
shall be chargeable to Assignor and added to the outstanding principal balance
of the Loan and shall be immediately due and payable.

 

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

 

7.             Representations and Warranties.  Assignor represents and
warrants:

 

(a)  The Lease is in full force and effect and has not been modified;

 

(b)  There are no defaults, defenses or setoffs of either landlord or Assignor
under the Lease nor, to the best of Assignor’s knowledge, is there any fact
which, with the giving of notice or lapse of time or both, would constitute a
default under the Lease;

 

(c)  The sole ownership of the entire tenant’s interest in the Lease is vested
in Assignor and the Lease has not been otherwise assigned or pledged; and

 

(d)   All rents due to date have been paid.

 

8.             Covenants and Agreements.  Assignor hereby covenants and agrees
as follows:

 

(a)  Assignor shall comply with and perform in a complete and timely manner all
of its obligations as tenant under the Lease.  Assignor shall give notice to
Assignee of any default by Assignor under the Lease in such time to afford
Assignee an opportunity to cure any such default prior to the landlord having
any right to terminate the Lease.  Assignor shall also provide Assignee with
notice of the commencement of an action of ejectment or any summary proceedings
for dispossession of the Assignor under the Lease;

 

(b)  Assignor shall furnish promptly to Assignee a certified copy of the Lease.
Assignee shall have the right to notify landlord at any time and from time to
time of any provision of the Loan Documents;

 

(c)  Assignor shall not permit the Lease to be modified, terminated, extended or
renewed without the prior written consent of Assignee, which consent shall not
be unreasonably withheld or delayed;

 

(d)  Assignor shall not without the prior written consent of Assignee: (i)
perform any act or execute any other instrument which might interfere with the
exercise of Assignee’s rights hereunder; or (ii) execute any assignment, pledge
or other encumbrance of the Lease; and

 

(e)  Assignee may assign its right, title and interest in the Lease and any
subsequent assignee shall have all of the rights and powers provided to Assignee
by this Assignment.

 

9.             No Obligation.  This Assignment shall not be deemed to impose
upon Assignee any of the obligations or duties of the Assignor provided in any
Lease.  Assignor hereby acknowledges and agrees: (i) Assignor is and will remain
liable under the Lease to the same extent as though this Assignment had not been
made; and (ii) Assignee has not by this Assignment assumed any of the
obligations of Assignor under the Lease, except as to such obligations which
arise after such time as Assignee shall have exercised its rights under this
Assignment and assumed Assignee’s obligations under the Lease.  This Assignment
shall not make Assignee responsible for the care or repair of the Property or
any personal property or for the carrying out of any of the terms of the Lease. 
Assignee shall not be liable in any way for any injury or damage to person or
property sustained by any person or persons, firm, or corporation in or about
the Property.

 

10.           Events of Default.  The occurrence of any one or more of the
following events shall constitute an “Event of Default” under this Assignment:

 

(a)  failure of Assignor to pay when due any of the Indebtedness, including any
payment due under the Note; or

 

(b)  failure of Assignor to strictly comply with Sections 8(a) and (c) of this
Assignment; or

 

     (c)  breach of any covenant (other than those covenants set forth in
subsections  (a) and (b) above), representation or warranty set forth in this
Assignment which is not cured within ten (10) days

 

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

 

after notice; provided, however, if such breach cannot by its nature be cured
within ten (10) days, and Assignor immediately initiates steps which Lender
deems in Lender’s sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical; or

 

(d)  the occurrence of an Event of Default under any other Loan Documents.

 

11.           Remedies.  Upon the occurrence of an Event of Default, then,
without notice to, or the consent of, Assignor,  Assignee shall be entitled to
exercise all of  the rights and remedies contained in this Assignment or in any
other Loan Document or otherwise available at law or in equity.  The rights and
remedies of Assignee under this Assignment are cumulative and are not in lieu
of, but are in addition to, any other rights or remedies which Assignee may have
under the Loan Documents, at law or otherwise.

 

12.           Power of Attorney.  Upon the occurrence of an Event of Default,
Assignee shall have the right (and Assignor hereby irrevocably constitutes and
appoints Assignee as its attorney-in-fact, which power is coupled with an
interest, to do so) to demand, receive and enforce Assignor’s rights with
respect to the Lease, and to do any and all acts in the name of Assignor or in
the name of Assignee with the same force and effect as Assignor could do if this
Assignment had not been made.

 

13.           Defense.  Assignor shall at all times diligently enforce its
rights in, under and to the Lease, unless otherwise directed by Assignee in
writing, and shall, at Assignor’s sole cost and expense, appear in and defend
Assignee in any action or proceeding in any way connected with the Lease or this
Assignment, and shall pay all reasonable costs and expenses, including, without
limitation, attorneys’ fees, which Assignee may incur in connection with
Assignee’s appearance, voluntarily or otherwise, in any such action or
proceeding.

 

14.           No Waiver.  The exercise of any rights under this Assignment by
Assignee shall not cure or waive any Event of Default hereunder or under any of
the other Loan Documents.  Failure of Assignee to avail itself of any of the
terms of this Assignment for any period of time or for any reason shall not
constitute a waiver of the Assignment.

 

15.           Notices.  Any notice or other communication required or permitted
to be given shall be in writing addressed to the respective party as first set
forth above and shall be effective (i) when actually delivered, (ii) when
deposited with a nationally recognized overnight courier or (iii) when deposited
in the United States Mail, first class, certified or registered, postage
prepaid.  Any party may change its address for notices under this Assignment by
giving written notice to the other party as set forth above.

 

16.           Applicable Law.  This Assignment shall be governed by and shall be
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without  regard to conflicts of law principles.  This Assignment
shall be binding upon the parties hereto and their respective heirs, successors
and assigns, and may not be modified, amended or altered except by writing
signed by each of the parties hereto.

 

[signature page to follow]

 

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

 

IN WITNESS WHEREOF, Assignor has executed this Assignment or has caused the same
to be executed by its duly authorized representatives as of the date first set
forth above.

 

 

ASSIGNOR:

 

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

 

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

 

ENVIRONMENTAL INDEMNITY AGREEMENT

 

This Agreement is made on 03/10/11, by and between Susquehanna Bank,  a
Pennsylvania state-chartered commercial banking corporation (“Lender”) and ARCA
Advanced Processing, LLC (“Borrower”) and Appliance Recycling Centers of
America, Inc., Safe Disposal Systems, Inc., 4301 Operations, LLC, S.D.S. Service
Inc., Scarabee Holdings, LLC, Brian Conners and James Ford (“Guarantor”)
(hereinafter individually and/or collectively the “Indemnitor”).

 

RECITALS

 

A.            Borrower desires to obtain a loan from Lender in the principal sum
of $1,400,000.00 (the “Loan”) as evidenced by that certain Promissory Note dated
03/10/11, a Loan Agreement, and other supporting collateral documents (the “Loan
Documents”).

 

B.            Indemnitor is or will be the owner and/or operator of certain real
property commonly known as  4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA
19137 and 8 Oak Hollow Drive, Voorhees, New Jersey 08043 (the “Subject
Property”).  Indemnitor agrees that the Subject Property does not contain any
contamination caused by any Hazardous Substance(s) (as defined within this
Agreement) above action levels defined in any Environmental Laws.

 

C.            In order to induce Lender to make the Loan to Borrower, the
Subject Property is offered as security for the Loan.

 

D.            In order for Lender to accept the Subject Property as security for
the Loan, Lender requires that Indemnitor provide assurances the Subject
Property is, and will remain, clear of hazardous levels of toxic contaminants,
including but not limited to asbestos, PCB’s, chlorinated hydrocarbons,
petroleum products, pesticides and heavy metals (“Hazardous Substances”) as
defined by the Comprehensive Environmental Response Compensation and Liability
Act (“CERCLA”) or any federal, state or local environmental laws, rules or
regulations (collectively referred to as “Environmental Laws”).

 

Therefore, in consideration of the mutual covenants and promises contained
herein and in the Loan Documents, the Indemnitor hereby agrees to the following:

 

1.             Borrower agrees, prior to disbursement of the Loan, to submit to
Lender if required, a copy of a recent report prepared by a qualified, impartial
consultant, satisfactory to Lender, verifying that the Subject Property offered
as collateral has been tested and found clear of Hazardous Substances above
action levels defined in any Environmental Laws.

 

2.             Indemnitor represents that the Subject Property does not contain
and will not be used to generate, manufacture, refine, transport, treat, store,
handle or dispose of Hazardous Substances or other toxic materials unless said
actions are conducted pursuant to and in compliance with Environmental Laws
and/or the conditions of a permit issued by the appropriate federal or state
governmental authorities.  At the time Borrower submitted its application for
the Loan, Borrower was and shall continue to be in compliance with all
Environmental Laws.

 

3.             Indemnitor warrants that after due and diligent inquiry, to the
best of Indemnitor’s knowledge, the following statements are true and correct:

 

a.  There has not been any summons, citation, directive, letter or other
communication, written or oral, from any agency or department of any municipal,
county, state or the U.S. Government (collectively “Governmental Agency”)
concerning any intentional or unintentional action or omission on the part of
Borrower or any previous owner or operator of the Subject Property, which has
resulted in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping (“Discharge”) of any Hazardous Substances into the air, land
or waters above acceptable levels as established by any Governmental Agency.

 

b.   As a result of the past or present use of the Subject Property, there is no
unremedied damage known to have occurred to the air, lands, waters, fish,
shellfish, wildlife, biota or any other resource owned, managed, held in trust,
or otherwise controlled by the state in which Subject Property is located.

 

4.             Indemnitor agrees not to cause or permit to exist, as a result of
an intentional or unintentional act or omission on its part, a Discharge of any
Hazardous Substances into the air, waters, or lands within, under or outside the
Subject Property, where damage may result to the air, lands, water, fish,
shellfish, wildlife, biota and other resources unless

 

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

 

Discharge is pursuant to and in compliance with the conditions of a permit
issued by the appropriate Governmental Agency.

 

5.             Borrower agrees to submit to Lender, should Lender in its
discretion deem such is required, not more than once a year, an updated report
prepared by a qualified impartial consultant, satisfactory to Lender, verifying
that the Subject Property remains clear of hazardous levels of contaminants.  If
Borrower fails to provide such a report within thirty (30) days of request by
Lender, Lender has the right, but is not required, to order such a report at
Borrower’s expense.

 

6.             In the event that said report indicates that the Subject Property
is not clear of hazardous levels of toxic contaminants, Lender will provide
written notice to Indemnitor requiring correction of the condition within 30
days, or such reasonable additional time period as Lender may determine in its
sole discretion.

 

7.             In the event that Indemnitor fails to correct the condition to
the satisfaction of Lender within the period of time stated in the notice,
Lender may, with the concurrence of the U.S. Small Business Administration,
declare a default of the loan under the terms and conditions contained in the
Loan Documents.

 

8.             At all times Indemnitor agrees to immediately notify Lender
should Indemnitor become aware of (i) any toxic contaminants or other
environmental problem or liability with respect to the Subject Property, or (ii)
any lien, action or notice from any Governmental Agency concerning Hazardous
Substances on the Subject Property.  Indemnitor shall, at its own cost and
expense, take all actions as shall be necessary or advisable for the clean-up of
the Subject Property, including all remedial actions in accordance with all
applicable Environmental Laws (and in all events in a manner satisfactory to
Lender).  Indemnitor shall further pay or cause to be paid, at no expense to
Lender, all clean-up, administrative, and enforcement costs which may be
asserted against the Subject Property or the owner or operator thereof by any
Governmental Agency.

 

9.             Borrower acknowledges that Lender is relying on this Agreement in
making the Loan, and Borrower, Indemnitor and its principals as individuals
agree to indemnify and hold harmless Lender, its agents, and assigns from and
against any damages, cost, liability or expense, including attorney and other
professional fees, directly or indirectly attributable to the presence of
Hazardous Substances, on or under the Subject Property or adjoining real
property and based upon claims assertable by any Governmental Agency or other
third parties against Lender or its assigns.

 

10.           This indemnification will specifically survive, and is entirely
independent of the Borrower’s contractual obligation to repay the primary
obligation held by Lender as amended, extended or renewed by Lender and release
of Lender liens on Indemnitor’s real or personal property by payment,
foreclosure or other action including Lender’s discretionary abandonment of
lien.

 

11.           Those liabilities, losses, claims, damages and expenses for which
Lender is indemnified shall be reimbursable to Lender as Lender’s obligations to
make payments with respect thereto are incurred, notwithstanding any litigation,
claim or other proceeding.  Indemnitor shall pay such liability, losses, claims,
damages and expenses to Lender as incurred within thirty (30) days after notice
from Lender itemizing the amounts incurred to the date of such notice.  In
addition to any remedy available for failure to periodically pay such amounts,
such amounts shall thereafter bear interest at the maximum rate permitted by
law.

 

12.           Indemnitor waives any execution of this Environmental Indemnity
Agreement by Lender.  The failure of Lender to enforce any right or remedy
hereunder, or to promptly enforce any such right or remedy, shall not constitute
a waiver thereof nor give rise to any estoppel against Lender, nor excuse
Indemnitor from its obligations hereunder.  Any waiver of such right or remedy
must be in writing and signed by Lender.  Any waiver of any provision herein by
Lender shall not be deemed a continuing waiver thereof.  Any waiver of any part
or provision herein shall not be deemed a waiver of any other part or provision
herein whereas said other parts and provisions of the within Agreement shall
remain in full force and effect.  This Agreement is subject to enforcement at
law and/or equity, including actions for damages and/or specific performance.

 

[signature page to follow]

 

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

 

 

LENDER:

 

INDEMNITOR:

Susquehanna Bank

 

ARCA Advanced Processing, LLC

 

 

 

BY:

/s/ Lisa Viscusi

 

By:

/s/ Brian Conners

 

                                   ,

 

 

Brian Conners, Chief Manager

 

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

 

Edward Cameron, President

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

 

4301 Operations, LLC

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Manager

 

 

 

 

 

 

 

 

/s/ Brian Conners

 

 

Brian Conners, individually

 

 

 

 

 

 

 

 

/s/ James Ford

 

 

James Ford, individually

 

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

 

CLOSING CERTIFICATION

POST  CLOSING COMPLIANCE AND DOCUMENT CORRECTION AGREEMENT

AND

LIMITED POWER OF ATTORNEY

 

In consideration of the loan made by Susquehanna Bank, a Pennsylvania
state-chartered commercial banking corporation (the “Lender”) to ARCA Advanced
Processing, LLC (the “Borrower”) in the amount of $1,400,000.00 (the “Loan”) and
to induce the Lender to make the Loan, the undersigned do(es) hereby represent,
certify, covenant, and agree as follows:

 

1.             If any properties pledged as collateral are designated by the
Federal Government as falling within the boundaries of a special flood hazard
area and Federal Flood Insurance becomes available, the undersigned will
purchase and maintain such insurance in the amounts and coverage equal to the
lesser of (a) the insurable value of the property, or (b) the maximum limit of
coverage available at subsidized rates during the life of the Loan.  Borrower(s)
and/or Guarantor(s) will not be eligible for any future flood disaster
assistance if this flood insurance is not maintained.

 

2.             No life insurance in addition to the amount specified in the Loan
documents is to be purchased by the Borrower(s) and/or Guarantor(s) for this
Loan and no current policy collaterally assigned or to be collaterally assigned
to Lender will be converted until the Loan is fully paid without prior written
approval of the Lender.  In addition, the undersigned agree(s) to provide any
and all insurance forms and financial statements requested by Lender, including,
without limitation: (a) business financial statements for Borrower, along with
annual tax returns; (b) annual personal financial statements and tax returns for
Guarantor(s); (c) annual property tax receipts; and (d) hazard insurance
policy/ies covering collateral pledged to Susquehanna Bank.

 

3.             As of this date, there have been no unremedied adverse changes in
the Borrower(s) or Guarantor(s) financial condition, organization, operations or
fixed assets and there are no outstanding tax liabilities owed as of this date,
including, but not limited to the following:  Federal, State & Local income and
other taxes, since the loan application was submitted to Lender.

 

4.             F.I.C.A. and Withheld Income Tax of the Borrower are currently
being deposited on a regular basis.  All other payroll taxes are paid or
deposited quarterly.  The undersigned hereby certifies that Borrower is current
on all Federal and State taxes, including, but not limited to, income taxes,
payroll taxes, real estate taxes, and sales taxes, and that all future taxes
will be paid when due.

 

5.             All insurance, licenses, permits and/or other approvals necessary
to lawfully operate the Borrower’s/s’ business have been obtained or have been
applied for and will be obtained.  To the extent that it may later be determined
that any additional insurance, licenses, permits and/or other approvals may be
required, the undersigned will immediately secure them and forward copies to
Lender once they have been obtained.

 

6.             (a)           In consideration of Lender disbursing funds for the
closing of the Loan secured by the Property being encumbered, and regardless of
the reason for any loss, misplacement, or inaccuracy in any loan documentation,
the undersigned agree(s) as follows:  If any document is lost, misplaced,
misstated or inaccurately reflects the true and correct terms and conditions of
the Loan, upon request of the Lender, the undersigned will comply with Lender’s
request to execute, acknowledge, initial and deliver to Lender any documentation
Lender deems necessary to replace

 

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

 

or correct the lost, misplaced, misstated or inaccurate documents.  All
documents Lender requests of Borrower(s) and/or Guarantor(s) shall be referred
to as “Replacement Documents.”  The undersigned agree(s) to deliver the
Replacement Documents within ten (10) days after receipt by the undersigned of a
written request for such replacement.  The undersigned also agree(s) that upon
request the undersigned will supply additional amounts and/or pay to Lender any
additional sum previously disclosed to Borrower(s) and/or Guarantor(s) for any
cost or fee associated with the Loan, which for whatever reason it was not
collected at closing (“Additional Fees”).

 

(b)           Any request under this Agreement may be made by the Lender
(including assignees and persons acting on behalf of the Lender) and shall be
prima facie evidence of the necessity for same.  A written statement addressed
to the undersigned, or any of them at the address indicated in the Loan
documentation shall be considered conclusive evidence of the necessity for
Replacement Documents.

 

(c)           Failure or refusal by the undersigned to comply with the terms of
the correction request shall constitute a default under the note and/or
mortgage/deed of trust, and shall give Lender the option of declaring all sums
secured by the Loan documents immediately due and payable.

 

(d)           If Failure or refusal by the undersigned to execute, acknowledge,
initial and deliver the Replacement Documents or provide the Replacement
Documents or Additional Fees to Lender more than ten (10) days after being
requested to do so by Lender and understanding that Lender is relying on these
representations, Borrower(s) agrees to be liable for any and all loss or damage
which Lender reasonably sustains thereby, including, but not limited to all
reasonable attorney’s fees and costs incurred by Lender.

 

7.             LIMITED POWER OF ATTORNEY.  Notwithstanding the foregoing
paragraph, the undersigned, for and in consideration of the approval, closing
and funding of the Loan, hereby grant(s) to Lender a LIMITED POWER OF ATTORNEY
to correct and/or re-execute or initial documents containing typographical or
clerical errors discovered in any or all of the closing documentation required
to be executed by the undersigned at settlement or during the Loan approval
process, including, but not limited to:

 

(a)           Errors with the Borrower(s)’ or Guarantor(s)’ name(s) including,
but not limited to wrong or misspelled names;

 

(b)           Errors with the property address including, but not limited to,
wrong or misspelled street, city or town names, incorrect house or street
numbers or zip codes;

 

(c)           Errors in the legal description for the property;

 

(d)           Errors with the applicable county name, including wrong or
misspelled county names; and

 

(e)           Errors related to the date of documents, including wrong or
incomplete dates.

 

In the event the Limited Power of Attorney granted pursuant to this section is
exercised, Lender will notify the undersigned and will provide a copy of the
document(s) executed, initialed and/or corrected on their behalf.  The Power of
Attorney granted herein is limited to the rights set forth herein and may not be
used to increase the interest rate of the Loan, alter the term of the Loan,
increase the outstanding principal balance of the Loan or increase the monthly
principal

 

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

 

and interest payment under the Loan.  The undersigned acknowledge(s) that the
grant of the Limited Power of Attorney set forth herein is in exchange for good
and valuable consideration and is intended to be coupled with an interest, and
the undersigned do(es) hereby make and declare this Limited Power of Attorney to
be irrevocable by the undersigned, or otherwise, renouncing all right to revoke
this power or to appoint any other person to perform any of the acts enumerated
herein.

 

8.             The undersigned have read all of the Loan documents relating to
the Loan and understand(s) the meaning and content of said Loan documents.

 

9.             The undersigned understand that the Loan documents constitute the
entire agreement between Borrower(s) and Lender and that no agent or
representative of Lender has made any statement, agreement or representation,
either oral or written, in connection with the Loan that would modify, add to or
change the terms and conditions set forth in the various documents executed in
conjunction with this transaction. It is the intention of both the Lender and
the undersigned  that the following Disclaimer be incorporated by reference into
each of the Loan Documents so executed for this transaction.

 

“THIS WRITTEN LOAN AGREEMENT

REPRESENTS THE FINAL AGREEMENT

BETWEEN THE PARTIES

AND SHALL NOT BE CONTRADICTED BY

EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR

SUBSEQUENT ORAL AGREEMENTS

OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL

AGREEMENTS BETWEEN THE PARTIES.”

 

10.           The undersigned understand and acknowledge that the
representations made herein are material to Lender’s decision to close and fund
the Loan and that Lender is relying upon these representations in connection
with the making of the Loan.  The undersigned further acknowledge and understand
that the obligations enumerated herein shall survive closing and that any
failure to comply with the obligations as set forth herein shall constitute a
default under the Loan documents, entitling Lender to pursue any and all
remedies set forth in the Loan documents, including, but in no way limited to
acceleration of the indebtedness.

 

11.           Any documents required to be delivered to Lender shall be
delivered to the offices of Susquehanna Bank, 159 E. High Street, Pottstown,
Pennsylvania 19464, Attn: Loan Servicing.

 

12.           This agreement will survive the closing of the Loan, and inure to
the benefit of Lender’s successors and assigns and binding upon the heirs,
successors and assigns of Borrower(s).

 

[Signatures on following page]

 

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

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed to
be executed as of the date set forth herein.

 

ARCA Advanced Processing, LLC

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Chief Manager

 

 

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

 

Edward Cameron, President

 

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

 

 

 

4301 Operations, LLC

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Manager

 

 

 

 

 

 

 

 

 

 

/s/ Brian Conners

 

 

Brian Conners, individually

 

 

 

 

 

 

 

 

 

 

/s/ James Ford

 

 

James Ford, individually

 

 

 

 

Date: 03/10/11

 

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

 

[g93321kg51i001.jpg]

 

U.S. Small Business Administration

 

NOTE

 

 

SBA Loan #

 

44714950-03

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Date

 

03/10/11

 

 

 

Loan Amount

 

$1,250,000.00

 

 

 

Interest Rate

 

Prime Rate plus 2.75%

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Operating Company

 

N/A

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

1.             PROMISE TO PAY:

In return for the Loan, Borrower promises to pay to the order of Lender the
amount of One Million Two Hundred Fifty Thousand Dollars,  interest on the
unpaid principal balance, and all other amounts required by this Note.

 

2.             DEFINITIONS:

“Collateral” means any property taken as security for payment of this Note or
any guarantee of this Note.

“Guarantor” means each person or  entity that signs a guarantee of payment of
this Note.

“Loan” means the loan evidenced by this Note.

“Loan Documents” means the documents related to this loan signed by Borrower,
any Guarantor, or anyone who pledges collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

3.             PAYMENT TERMS:

Borrower must make all payments at the place Lender designates. The payment
terms for this Note are:

 

The interest rate on this Note will fluctuate.  The initial interest rate is
6.00% per year.  This initial rate is the Prime Rate in effect on the first
business day of the month  in which SBA received the loan application, plus
2.75%.  The initial interest rate must remain in effect until the first change
period begins.

 

Borrower must pay a total of 3 payments of interest only on the disbursed
principal balance beginning one month from the month this Note is dated and
every month thereafter; payments must be made on the first calendar day in the
months they are due.

 

Borrower must pay principal and interest payments of $14,137.67 every month,
beginning four months from the month this Note is dated; payments must be made
on the first calendar day in the months they are due.

 

Lender will apply each installment payment first to pay interest accrued to the
day Lender receives the payment, then to bring principal current, then to pay
any late fees, and will apply any remaining balance to reduce principal.

 

The interest rate will be adjusted every calendar quarter (the “change period”).

 

The “Prime Rate” is the prime rate in effect on the first business day of the
month (as published in the Wall Street Journal) in which SBA received the
application, or any interest rate change occurs.  Base Rates will be rounded to
two decimal places with .004 being rounded down and .005 being rounded up.

 

The adjusted interest rate will be 2.75% above the Prime Rate.  Lender will
adjust the interest rate on the first calendar day of each change period.  The
change in interest rate is effective on that day whether or not Lender gives
Borrower notice of the change.

 

Lender must adjust the payment amount at least annually as needed to amortize
principal over the remaining term of the note.

 

If SBA purchases the guaranteed portion of the unpaid principal balance, the
interest rate becomes fixed at the rate in effect at the time of the earliest
uncured payment default.  If there is no uncured payment default, the rate
becomes fixed at the rate in effect at the time of purchase.

 

Loan Prepayment:

 

Notwithstanding any provision in this Note to the contrary:

 

Borrower may Prepay this Note.  Borrower may prepay 20%  or less of the unpaid
principal balance at any time without notice.  If Borrower prepays more than 20%
and the Loan has been sold on the secondary market, Borrower must:

 

a.             Give Lender written notice;

b.             Pay all accrued interest; and

c.             If the prepayment is received less than 21 days from the date
Lender receives the notice, pay an amount equal to 21 days’ interest from the
date lender receives the notice, less any interest accrued during the 21 days
and paid under subparagraph b., above.

 

If Borrower does not prepay within 30 days from the date Lender receives the
notice, Borrower must give Lender a new notice.

 

All remaining principal and accrued interest is due and payable 10 years from
date of Note.

 

Late Charge:  If a payment on this Note is more than 10 days late, Lender may
charge Borrower a late fee of up to 5.00% of the unpaid portion of the regularly
scheduled payment.

 

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

 

4.             DEFAULT:

Borrower is in default under this Note if Borrower does not make a payment when
due under this Note, or if Borrower or Operating Company:

A.            Fails to do anything required by this Note and other Loan
Documents;

B.            Defaults on any other loan with Lender;

C.            Does not preserve, or account to Lender’s satisfaction for, any of
the Collateral or its proceeds;

D.            Does not disclose, or anyone acting on their behalf does not
disclose, any material fact to Lender or SBA;

E.             Makes, or anyone acting on their behalf makes, a materially false
or misleading representation to Lender or SBA;

F.             Defaults on any loan or agreement with another creditor, if
Lender believes the default may materially affect Borrower’s ability to pay this
Note;

G.            Fails to pay any taxes when due;

H.            Becomes the subject of a proceeding under any bankruptcy or
insolvency law;

I.              Has a receiver or liquidator appointed for any part of their
business or property;

J.             Makes an assignment for the benefit of creditors;

K.            Has any adverse change in financial condition or business
operation that Lender believes may materially affect Borrower’s ability to pay
this Note;

L.             Reorganizes, merges, consolidates, or otherwise changes ownership
or business structure without Lender’s prior written consent; or

M.           Becomes the subject of a civil or criminal action that Lender
believes may materially affect Borrower’s ability to pay this Note.

 

5.             LENDER’S RIGHTS IF THERE IS A DEFAULT:

Without notice or demand and without giving up any of its rights, Lender may:

A.            Require immediate payment of all amounts owing under this Note;

B.            Collect all amounts owing from any Borrower or Guarantor;

C.            File suit and obtain judgment;

D.            Take possession of any Collateral; or

E.             Sell, lease, or otherwise dispose of, any Collateral at public or
private sale, with or without advertisement.

 

6.             LENDER’S GENERAL POWERS:

Without notice and without Borrower’s consent, Lender may:

A.            Bid on or buy the Collateral at its sale or the sale of another
lienholder, at any price it chooses;

B.            Incur expenses to collect amounts due under this Note, enforce the
terms of this Note or any other Loan Document, and preserve or dispose of the
Collateral.  Among other things, the expenses may include payments for property
taxes, prior liens, insurance, appraisals, environmental remediation costs, and
reasonable attorney’s fees and costs. If Lender incurs such expenses, it may
demand immediate repayment from Borrower or add the expenses to the principal
balance;

C.            Release anyone obligated to pay this Note;

D.            Compromise, release, renew, extend or substitute any of the
Collateral; and

E.             Take any action necessary to protect the Collateral or collect
amounts owing on this Note.

 

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

 

7.             WHEN FEDERAL LAW APPLIES:

When SBA is the holder, this Note will be interpreted and enforced under federal
law, including SBA regulations. Lender or SBA may use state or local procedures
for filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using such procedures, SBA does not waive any federal
immunity from state or local control, penalty, tax, or liability.  As to this
Note, Borrower may not claim or assert against SBA any local or state law to
deny any obligation, defeat any claim of SBA, or preempt federal law.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Note, Borrower and Operating Company include the successors of each,
and Lender includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            All individuals and entities signing this Note are jointly and
severally liable.

B.            Borrower waives all suretyship defenses.

C.            Borrower must sign all documents necessary at any time to comply
with the Loan Documents and to enable Lender to acquire, perfect, or maintain
Lender’s liens on Collateral.

D.            Lender may exercise any of its rights separately or together, as
many times and in any order it chooses. Lender may delay or forgo enforcing any
of its rights without giving up any of them.

E.             Borrower may not use an oral statement of Lender or SBA to
contradict or alter the written terms of this Note.

F.             If any part of this Note is unenforceable, all other parts remain
in effect.

G.            To the extent allowed by law, Borrower waives all demands and
notices in connection with this Note, including presentment, demand, protest,
and notice of dishonor. Borrower also waives any defenses based upon any claim
that Lender did not obtain any guarantee; did not obtain, perfect, or maintain a
lien upon Collateral; impaired Collateral; or did not obtain the fair market
value of Collateral at a sale.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           BORROWER’S NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated under this Note as
Borrower.

 

ARCA Advanced Processing, LLC

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Chief Manager

 

 

 

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

 

[g93321kg51i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

 

SBA Loan #

 

44714950-03

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Guarantor

 

Appliance Recycling Centers of America, Inc.

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date

 

 

 

 

 

Note Amount

 

$1,250,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

 

Edward Cameron, President

 

 

 

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

 

[g93321kg53i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

 

SBA Loan #

 

44714950-03

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Guarantor

 

Safe Disposal Systems, Inc.

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date

 

 

 

 

 

Note Amount

 

$1,250,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Safe Disposal Systems, Inc.

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

 

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

 

Guarantor:             Safe Disposal Systems, Inc.

 

Lender:                   Susquehanna Bank, a Pennsylvania state-chartered
commercial banking corporation

 

Date:                       03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$1,250,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, President/Secretary

 

 

Signed, acknowledged and delivered in the presence of:

 

 

 

 

 

 

 

 

/s/ Denise Cascio

 

 

Witness

 

 

 

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

 

[g93321kg55i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

 

SBA Loan #

 

44714950-03

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Guarantor

 

4301 Operations, LLC

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date

 

 

 

 

 

Note Amount

 

$1,250,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.           GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.           GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

4301 Operations, LLC

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

 

 

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

 

Guarantor:             4301 Operations, LLC

 

Lender:                   Susquehanna Bank, a Pennsylvania state-chartered
commercial banking corporation

 

Date:                       03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$1,250,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

 

4301 Operations, LLC

 

 

 

 

 

 

By:

/s/ Brian Conners

 

 

 

Brian Conners, Director

 

 

 

 

 

 

By:

/s/ James Ford

 

 

 

James Ford, Director

 

Signed, acknowledged and delivered in the presence of:

 

 

 

 

 

 

 

 

/s/ Denise Cascio

 

 

Witness

 

 

 

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

 

[g93321kg55i001.jpg]

 

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

 

SBA Loan #

 

44714950-03

 

 

 

SBA Loan Name

 

ARCA Advanced Processing, LLC

 

 

 

Guarantor

 

S.D.S. Service Inc.

 

 

 

Borrower

 

ARCA Advanced Processing, LLC

 

 

 

Lender

 

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

 

Date

 

 

 

 

 

Note Amount

 

$1,250,000.00

 

1.             GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.             NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.             DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.             LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.            Modify the terms of the Note or any other Loan Document except to
increase the amounts due under the Note;

B.            Refrain from taking any action on the Note, the Collateral, or any
guarantee;

C.            Release any Borrower or any guarantor of the Note;

D.            Compromise or settle with the Borrower or any guarantor of the
Note;

E.             Substitute or release any of the Collateral, whether or not
Lender receives anything in return;

F.             Foreclose upon or otherwise obtain, and dispose of, any
Collateral at public or private sale, with or without advertisement;

G.            Bid or buy at any sale of Collateral by Lender or any other
lienholder, at any price Lender chooses; and

H.            Exercise any rights it has, including those in the Note and other
Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.             FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.             RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:

To the extent permitted by law,

A.            Guarantor waives all rights to:

1)             Require presentment, protest, or demand upon Borrower;

2)             Redeem any Collateral before or after Lender disposes of it;

3)             Have any disposition of Collateral advertised; and

4)             Require a valuation of Collateral before or after Lender disposes
of it.

B.            Guarantor waives any notice of:

1)             Any default under the Note;

2)             Presentment, dishonor, protest, or demand;

3)             Execution of the Note;

4)             Any action or inaction on the Note or Collateral, such as
disbursements, payment, nonpayment, acceleration, intent to accelerate,
assignment, collection activity, and incurring enforcement expenses;

5)             Any change in the financial condition or business operations of
Borrower or any guarantor;

6)             Any changes in the terms of the Note or other Loan Documents,
except increases in the amounts due under the Note; and

7)             The time or place of any sale or other disposition of Collateral.

C.            Guarantor waives defenses based upon any claim that:

1)             Lender failed to obtain any guarantee;

2)             Lender failed to obtain, perfect, or maintain a security interest
in any property offered or taken as Collateral;

3)             Lender or others improperly valued or inspected the Collateral;

4)             The Collateral changed in value, or was neglected, lost,
destroyed, or underinsured;

 

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

 

5)             Lender impaired the Collateral;

6)             Lender did not dispose of any of the Collateral;

7)             Lender did not conduct a commercially reasonable sale;

8)             Lender did not obtain the fair market value of the Collateral;

9)             Lender did not make or perfect a claim upon the death or
disability of Borrower or any guarantor of the Note;

10)           The financial condition of Borrower or any guarantor was
overstated or has adversely changed;

11)           Lender made errors or omissions in Loan Documents or
administration of the Loan;

12)           Lender did not seek payment from the Borrower, any other
guarantors, or any Collateral before demanding payment from Guarantor;

13)           Lender impaired Guarantor’s suretyship rights;

14)           Lender modified the Note terms, other than to increase amounts due
under the Note.  If Lender modifies the Note to increase the amounts due under
the Note without Guarantor’s consent, Guarantor will not be liable for the
increased amounts and related interest and expenses, but remains liable for all
other amounts;

15)           Borrower has avoided liability on the Note; or

16)           Lender has taken an action allowed under the Note, this Guarantee,
or other Loan Documents.

 

7.             DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.             SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.             GENERAL PROVISIONS:

A.            ENFORCEMENT EXPENSES.  Guarantor promises to pay all expenses
Lender incurs to enforce this Guarantee, including, but not limited to,
attorney’s fees and costs.

B.            SBA NOT A CO-GUARANTOR.  Guarantor’s liability will continue even
if SBA pays Lender.  SBA is not a co-guarantor with Guarantor.  Guarantor has no
right of contribution from SBA.

C.            SUBROGATION RIGHTS.  Guarantor has no subrogation rights as to the
Note or the Collateral until the Note is paid in full.

D.            JOINT AND SEVERAL LIABILITY.  All individuals and entities signing
as Guarantor are jointly and severally liable.

E.             DOCUMENT SIGNING.  Guarantor must sign all documents necessary at
any time to comply with the Loan Documents and to enable Lender to acquire,
perfect, or maintain Lender’s liens on Collateral.

F.             FINANCIAL STATEMENTS.  Guarantor must give Lender financial
statements as Lender requires.

G.            LENDER’S RIGHTS CUMULATIVE, NOT WAIVED.  Lender may exercise any
of its rights separately or together, as many times as it chooses.  Lender may
delay or forgo enforcing any of its rights without losing or impairing any of
them.

H.            ORAL STATEMENTS NOT BINDING.  Guarantor may not use an oral
statement to contradict or alter the written terms of the Note or this
Guarantee, or to raise a defense to this Guarantee.

I.              SEVERABILITY.  If any part of this Guarantee is found to be
unenforceable, all other parts will remain in effect.

J.             CONSIDERATION.  The consideration for this Guarantee is the Loan
or any accommodation by Lender as to the Loan.

 

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

 

10.           STATE-SPECIFIC PROVISIONS:

 

CONFESSION OF JUDGMENT.  THE UNDERSIGNED HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS
JUDGMENT AGAINST THE UNDERSIGNED FOR THE UNPAID AMOUNT OF THE NOTE AS EVIDENCED
BY AN AFFIDAVIT SIGNED BY AN OFFICER OF LENDER SETTING FORTH THE AMOUNT THEN
DUE, TOGETHER WITH ALL INDEBTEDNESS PROVIDED FOR THEREIN (WITH OR WITHOUT
ACCELERATION OF MATURITY), PLUS ATTORNEYS’ FEES OF TEN PERCENT (10%) OF THE
TOTAL INDEBTEDNESS OR FIVE THOUSAND DOLLARS ($5,000.00), WHICHEVER IS THE LARGER
AMOUNT FOR THE COLLECTION, WHICH BORROWER AND LENDER AGREE IS REASONABLE, PLUS
COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL.  THE
UNDERSIGNED EXPRESSLY RELEASES ALL ERRORS, WAIVES ALL STAY OF EXECUTION, RIGHTS
OF INQUISITION AND EXTENSION UPON ANY LEVY UPON REAL ESTATE AND ALL EXEMPTION OF
PROPERTY FROM LEVY AND SALE UPON ANY EXECUTION HEREON; AND THE UNDERSIGNED
EXPRESSLY AGREES TO CONDEMNATION AND EXPRESSLY RELINQUISHES ALL RIGHTS TO
BENEFITS OR EXEMPTIONS UNDER ANY AND ALL EXEMPTION LAWS NOW IN FORCE OR WHICH
MAY HEREAFTER BE ENACTED.  NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER
TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH
EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID; BUT THE
POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL. 
THE UNDERSIGNED HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH THE UNDERSIGNED MIGHT HAVE AGAINST ANY ATTORNEY ACTING UNDER THE
TERMS OF AUTHORITY WHICH THE UNDERSIGNED HAS GRANTED HEREIN ARISING OUT OF OR
CONNECTED WITH THE CONFESSION OF JUDGMENT HEREUNDER.

 

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

 

11.                               GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                               GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

S.D.S. Service Inc.

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

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

 

Guarantor:                                        S.D.S. Service Inc.

 

Lender:                                                        Susquehanna Bank,
a Pennsylvania state-chartered commercial banking corporation

 

Date:                                                                  03/10/11

 

DISCLOSURE FOR CONFESSION OF JUDGMENT

 

I have executed a guarantee (the “Guarantee”) in the original amount of
$1,250,000.00 obligating me to repay that amount.

 

Initials:

/s/ BC

 

 

I understand that the Guarantee contains wording that would permit Susquehanna
Bank to enter judgment against me in Court, without advance notice to me and
without offering me an opportunity to defend against the entry of judgment, and
that the judgment may be collected immediately by any legal means.

 

Initials:

/s/ BC

 

 

In executing the Guarantee, I am knowingly, understandingly and voluntarily
waiving my rights to resist the entry of judgment against me at the courthouse,
including any right to advance notice of the entry of, or execution upon, said
judgment, and I am consenting to the confession of judgment.

 

Initials:

/s/ BC

 

 

I certify that my annual income exceeds $10,000; that the blanks in this
disclosure were filled in when I initialed and signed it; and that I received a
copy at the time of signing.

 

 

S.D.S. Service Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

Signed, acknowledged and delivered in the presence of:

 

 

/s/ Denise Cascio

 

Witness

 

 

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

 

[g93321kg57i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714950-03

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Scarabee Holdings, LLC

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,250,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.                               STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.                               GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                               GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

Scarabee Holdings, LLC

 

 

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

 

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

 

[g93321kg57i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

SBA Loan #

44714950-03

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

Brian Conners

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,250,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                      SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.                               STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.                               GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                               GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

/s/ Brian Conners

 

Brian Conners, individually

 

 

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

 

[g93321kg59i001.jpg]

U.S. Small Business Administration

 

UNCONDITIONAL GUARANTEE

 

 

SBA Loan #

44714950-03

 

 

SBA Loan Name

ARCA Advanced Processing, LLC

 

 

Guarantor

James Ford

 

 

Borrower

ARCA Advanced Processing, LLC

 

 

Lender

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

 

 

Date

 

 

 

Note Amount

$1,250,000.00

 

1.                                       GUARANTEE:

Guarantor unconditionally guarantees payment to Lender of all amounts owing
under the Note.  This Guarantee remains in effect until the Note is paid in
full.  Guarantor must pay all amounts due under the Note when Lender makes
written demand upon Guarantor.  Lender is not required to seek payment from any
other source before demanding payment from Guarantor.

 

2.                                       NOTE:

The “Note” is the promissory note dated 03/10/11 in the principal amount of One
Million Two Hundred Fifty Thousand Dollars from Borrower to Lender.  It includes
any assumption, renewal, substitution, or replacement of the Note, and multiple
notes under a line of credit.

 

3.                                       DEFINITIONS:

“Collateral” means any property taken as security for payment of the Note or any
guarantee of the Note.

“Loan” means the loan evidenced by the Note.

“Loan Documents” means the documents related to the Loan signed by Borrower,
Guarantor or any other guarantor, or anyone who pledges Collateral.

“SBA” means the Small Business Administration, an Agency of the United States of
America.

 

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

 

4.                                       LENDER’S GENERAL POWERS:

Lender may take any of the following actions at any time, without notice,
without Guarantor’s consent, and without making demand upon Guarantor:

A.                                   Modify the terms of the Note or any other
Loan Document except to increase the amounts due under the Note;

B.                                     Refrain from taking any action on the
Note, the Collateral, or any guarantee;

C.                                     Release any Borrower or any guarantor of
the Note;

D.                                    Compromise or settle with the Borrower or
any guarantor of the Note;

E.                                      Substitute or release any of the
Collateral, whether or not Lender receives anything in return;

F.                                      Foreclose upon or otherwise obtain, and
dispose of, any Collateral at public or private sale, with or without
advertisement;

G.                                     Bid or buy at any sale of Collateral by
Lender or any other lienholder, at any price Lender chooses; and

H.                                    Exercise any rights it has, including
those in the Note and other Loan Documents.

These actions will not release or reduce the obligations of Guarantor or create
any rights or claims against Lender.

 

5.                                       FEDERAL LAW:

When SBA is the holder, the Note and this Guarantee will be construed and
enforced under federal law, including SBA regulations.  Lender or SBA may use
state or local procedures for filing papers, recording documents, giving notice,
foreclosing liens, and other purposes.  By using such procedures, SBA does not
waive any federal immunity from state or local control, penalty, tax, or
liability.  As to this Guarantee, Guarantor may not claim or assert any local or
state law against SBA to deny any obligation, defeat any claim of SBA, or
preempt federal law.

 

6.                                       RIGHTS, NOTICES, AND DEFENSES THAT
GUARANTOR WAIVES:

To the extent permitted by law,

A.                                   Guarantor waives all rights to:

1)                                      Require presentment, protest, or demand
upon Borrower;

2)                                      Redeem any Collateral before or after
Lender disposes of it;

3)                                      Have any disposition of Collateral
advertised; and

4)                                      Require a valuation of Collateral before
or after Lender disposes of it.

B.                                     Guarantor waives any notice of:

1)                                      Any default under the Note;

2)                                      Presentment, dishonor, protest, or
demand;

3)                                      Execution of the Note;

4)                                      Any action or inaction on the Note or
Collateral, such as disbursements, payment, nonpayment, acceleration, intent to
accelerate, assignment, collection activity, and incurring enforcement expenses;

5)                                      Any change in the financial condition or
business operations of Borrower or any guarantor;

6)                                      Any changes in the terms of the Note or
other Loan Documents, except increases in the amounts due under the Note; and

7)                                      The time or place of any sale or other
disposition of Collateral.

C.                                     Guarantor waives defenses based upon any
claim that:

1)                                      Lender failed to obtain any guarantee;

2)                                      Lender failed to obtain, perfect, or
maintain a security interest in any property offered or taken as Collateral;

3)                                      Lender or others improperly valued or
inspected the Collateral;

4)                                      The Collateral changed in value, or was
neglected, lost, destroyed, or underinsured;

 

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

 

5)                                      Lender impaired the Collateral;

6)                                      Lender did not dispose of any of the
Collateral;

7)                                      Lender did not conduct a commercially
reasonable sale;

8)                                      Lender did not obtain the fair market
value of the Collateral;

9)                                      Lender did not make or perfect a claim
upon the death or disability of Borrower or any guarantor of the Note;

10)                                The financial condition of Borrower or any
guarantor was overstated or has adversely changed;

11)                                Lender made errors or omissions in Loan
Documents or administration of the Loan;

12)                                Lender did not seek payment from the
Borrower, any other guarantors, or any Collateral before demanding payment from
Guarantor;

13)                                Lender impaired Guarantor’s suretyship
rights;

14)                                Lender modified the Note terms, other than to
increase amounts due under the Note.  If Lender modifies the Note to increase
the amounts due under the Note without Guarantor’s consent, Guarantor will not
be liable for the increased amounts and related interest and expenses, but
remains liable for all other amounts;

15)                                Borrower has avoided liability on the Note;
or

16)                                Lender has taken an action allowed under the
Note, this Guarantee, or other Loan Documents.

 

7.                                       DUTIES AS TO COLLATERAL:

Guarantor will preserve the Collateral pledged by Guarantor to secure this
Guarantee.  Lender has no duty to preserve or dispose of any Collateral.

 

8.                                       SUCCESSORS AND ASSIGNS:

Under this Guarantee, Guarantor includes heirs and successors, and Lender
includes its successors and assigns.

 

9.                                       GENERAL PROVISIONS:

A.                                   ENFORCEMENT EXPENSES.  Guarantor promises
to pay all expenses Lender incurs to enforce this Guarantee, including, but not
limited to, attorney’s fees and costs.

B.                                     SBA NOT A CO-GUARANTOR.  Guarantor’s
liability will continue even if SBA pays Lender.  SBA is not a co-guarantor with
Guarantor.  Guarantor has no right of contribution from SBA.

C.                                     SUBROGATION RIGHTS.  Guarantor has no
subrogation rights as to the Note or the Collateral until the Note is paid in
full.

D.                                    JOINT AND SEVERAL LIABILITY.  All
individuals and entities signing as Guarantor are jointly and severally liable.

E.                                      DOCUMENT SIGNING.  Guarantor must sign
all documents necessary at any time to comply with the Loan Documents and to
enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

F.                                      FINANCIAL STATEMENTS.  Guarantor must
give Lender financial statements as Lender requires.

G.                                     LENDER’S RIGHTS CUMULATIVE, NOT WAIVED. 
Lender may exercise any of its rights separately or together, as many times as
it chooses.  Lender may delay or forgo enforcing any of its rights without
losing or impairing any of them.

H.                                    ORAL STATEMENTS NOT BINDING.  Guarantor
may not use an oral statement to contradict or alter the written terms of the
Note or this Guarantee, or to raise a defense to this Guarantee.

I.                                         SEVERABILITY.  If any part of this
Guarantee is found to be unenforceable, all other parts will remain in effect.

J.                                        CONSIDERATION.  The consideration for
this Guarantee is the Loan or any accommodation by Lender as to the Loan.

 

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

 

10.                               STATE-SPECIFIC PROVISIONS:

 

NONE

 

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

 

11.                               GUARANTOR ACKNOWLEDGMENT OF TERMS:

Guarantor acknowledges that Guarantor has read and understands the significance
of all terms of the Note and this Guarantee, including all waivers.

 

12.                               GUARANTOR NAME(S) AND SIGNATURE(S):

By signing below, each individual or entity becomes obligated as Guarantor under
this Guarantee.

 

 

/s/ James Ford

 

James Ford, individually

 

 

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

 

SECURITY AGREEMENT - COMMERCIAL

 

This Security Agreement - Commercial (“Security Agreement”) is executed, made
and delivered this 10th day of March, 2011 by ARCA Advanced Processing, LLC,
Safe Disposal Systems, Inc., 4301 Operations, LLC, S.D.S. Service Inc. and
Scarabee Holdings, LLC (herein the “Debtor”), whose address is 4301 N. Delaware
Avenue, Bldg. A, Philadelphia, PA 19137, for the benefit of Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation (the “Secured
Party”),  whose address is 159 E. High Street, Pottstown, PA  19464.

 

FOR VALUE RECEIVED, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Debtor grants to Secured Party the security interest (and the
pledges and assignments as applicable) hereinafter set forth and agrees with
Secured Party as follows:

 

A.                                    OBLIGATIONS SECURED.  The security
interest and pledges and assignments as applicable granted hereby are to secure
punctual payment and performance of the following (i) a certain promissory note
from ARCA Advanced Processing, LLC, the (“Borrower”) of even date herewith in
the original principal sum of One Million Two Hundred Fifty Thousand Dollars and
No Cents ($1,250,000.00) and payable to the order of Secured Party (the “Note”),
and any and all extensions, renewals, modifications and rearrangements thereof;
and (ii) any and all other indebtedness, liabilities and obligations whatsoever
of Debtor to Secured Party whether direct or indirect, absolutely or contingent,
primary or secondary, due or to become due and whether now existing or hereafter
arising and howsoever evidenced or acquired, whether joint or several, or joint
and several (all of which are herein separately and collectively referred to as
the “Obligations”).  Debtor acknowledges that the security interest hereby
granted shall secure all future advances as well as any and all other
indebtedness, liabilities and obligations of Debtor to Secured Party whether now
in existence or hereafter arising.

 

B.                                    USE OF COLLATERAL.  Debtor represents,
warrants and covenants that the Collateral will be used by the Debtor primarily
for business, commercial, or other similar purposes.

 

C.                                    DESCRIPTION OF COLLATERAL.  Debtor hereby
grants to Secured Party a security interest in (and hereby pledges and assigns
as applicable) and agrees that Secured Party shall continue to have a security
interest in (and a pledge and assignment of, as applicable), the following
property:

 

All Accounts.  A security interest in all accounts now owned or existing as well
as any and all that may hereafter arise or be acquired by Debtor, and all the
proceeds and products thereof, including without limitation, all notes, drafts,
acceptances, instruments and chattel paper arising therefrom, and all returned
or repossessed goods arising from or relating to any which accounts, or other
proceeds of any sale or other disposition of inventory.

 

All Inventory.  A security interest in all of Debtor’s inventory, including all
goods, merchandise, raw materials, goods in process, finished goods and other
tangible personal property, wheresoever located, now owned or hereafter acquired
and held for sale or lease or furnished or to be furnished under contracts for
service or used or consumed in Debtor’s business, and all additions and
accessions thereto, and all leases and contracts with respect thereto, and all
documents of title evidencing. or representing any part thereof, and all
products and proceeds thereof, whether in the possession of the Debtor,
warehouseman, bailee, or any other person.

 

All Equipment, Furniture, Fixtures and other Tangible Property.  A security
interest in all equipment, furniture, fixtures and other tangible property of
every nature and description whatsoever, now owned or hereafter acquired by
Debtor, including all appurtenances and additions thereto, and substitutions
therefor and replacement thereof, wheresoever located, including all tools,
parts and accessories used in connection therewith and including but not limited
to the collateral listed on Exhibit A” attached hereto.

 

General Intangibles.  A security interest in all general intangibles and other
personal property now owned or hereafter acquired by Debtor other than goods,
accounts, chattel paper, documents or instruments.

 

Chattel Paper.  A security interest in all of Debtor’s interest under chattel
paper, lease agreements and

 

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other instruments or documents, whether now existing or owned by Debtor or
hereafter arising or acquired by Debtor, evidencing both a debt and security
interest in or lease of specific goods.

 

Instruments.  A pledge and assignment of and security interest in all of
Debtor’s Instruments now owned or existing as well as hereafter acquired or
arising instruments and documents.

 

The term “Collateral” as used in this Agreement shall mean and include, and the
security interest (and pledge and assignment as applicable) shall cover, all of
the foregoing property, as well as any accessions, additions and attachments
thereto, and the proceeds and products thereof, including without limitation,
all cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all returned or repossessed
goods arising from or relating to any of the property described herein or other
proceeds of any sale or other disposition of such property.

 

As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured
Party a security interest in, and a pledge and assignment of, any and all money,
property, deposit accounts, accounts, securities, documents, chattel paper,
claims, demands, instruments, items or deposits of the Debtor, and each of them,
or to which any of them is a party, now held or hereafter coming within Secured
Party’s custody or control, including without limitation, all certificates of
deposit and other depository accounts, whether such have matured or the exercise
of Secured Party’s rights results in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon the Debtor, Secured Party may
exercise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party’s rights and remedies under
this paragraph shall be in addition to and cumulative of any other rights or
remedies at law and equity, including, without limitation, any rights of set-off
to which Secured Party may be entitled.

 

D.                                    REPRESENTATIONS. WARRANTIES AND COVENANTS
OF DEBTOR.  Debtor represents and warrants as follows:

 

1.                                       Ownership; No Encumbrances.  Except for
the security interest (and pledges and assignments as applicable) granted
hereby, the Debtor is, and as to any property acquired after the date hereof
which is included within the Collateral, Debtor will be, the owner of all such
Collateral free and clear from all charges, liens, security interests, adverse
claims and encumbrances of any and every nature whatsoever.

 

2.                                       No Financing Statements.  There is no
financing statement or similar filing now on file in any public office covering
any part of the Collateral except those already disclosed to Secured Party by
the pre-closing searches, and Debtor will not execute and there will not be on
file in any public office any financing statement or similar filing except the
pari passu financing statements filed or to be filed in favor of, or assigned or
to be assigned on the date hereof to, Secured Party.

 

3.                                       Accuracy of Information.  All
information furnished to Secured Party concerning Debtor, the Collateral and the
Obligations, or otherwise for the purpose of obtaining or maintaining credit, is
or will be at the time the same is furnished, accurate and complete in all
material respects.

 

4.                                       Authority.  Debtor has full right and
authority to execute and perform this Agreement and to create the security
interest (and pledges and assignment as applicable) created by this Agreement.
The making and performance by Debtor of this Agreement will not violate any
articles of incorporation, bylaws or similar document respecting Debtor, any
provision of law, any order of court or governmental agency, or any indenture or
other agreement to which Debtor is a party, or by which Debtor or any of
Debtor’s property is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture or other agreement, or result in the creation or imposition of any
charge, lien, security interest, claim or encumbrance of any and every nature
whatsoever upon the Collateral, except as contemplated by this Agreement.

 

5.                                       Addresses.  The address of Debtor
designated at the beginning of this Agreement is Debtor’s place of business if
Debtor has only one place of business; Debtor’s chief executive office if Debtor
has more than one place of business; or Debtor’s residence if Debtor has no
place of business. Debtor agrees not to

 

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change such address without advance written notice to Secured Party.

 

E.                                      GENERAL COVENANTS.  Debtor covenants and
agrees as follows:

 

1.                                       Operation of Collateral.  Debtor agrees
to maintain and use the Collateral solely in the conduct of its own business, in
a careful and proper manner, and in conformity with all applicable permits or
licenses. Debtor shall comply in all respects with all applicable statutes,
laws, ordinances and regulations. Debtor shall not use the Collateral in any
unlawful manner or for any unlawful purpose, or in any manner or for any purpose
that would expose the Collateral to unusual risk, or to penalty, forfeiture or
capture, or that would render inoperative any insurance in connection with the
Collateral.

 

2.                                       Condition.  Debtor shall maintain,
service and repair the Collateral so as to keep it in good operating condition.
Debtor shall replace within a reasonable time all parts that may be worn out,
lost, destroyed or to otherwise rendered unfit for use, with appropriate
replacement parts . Debtor shall obtain and maintain in good standing at all
times all applicable permits, licenses, registrations and certificates
respecting the Collateral.

 

3.                                       Assessments.  Debtor shall promptly pay
when due all taxes, assessments, license fees, and governmental charges levied
or assessed against Debtor or with respect to the Collateral or any part
thereof.

 

4.                                       No Encumbrances.  Debtor agrees not to
suffer or permit any charge, lien, security interest, adverse claim or
encumbrance of any and every nature whatsoever against the Collateral or any
part thereof.

 

5.                                       No Removal.  Except as otherwise
provided in this Agreement, Debtor shall not remove the Collateral from the
County or counties designated at the beginning of this Agreement without Secured
Party’s written consent.

 

6.                                       No Transfer.  Except as otherwise
provided in this Agreement with respect to inventory,  Debtor shall not, without
the prior written consent of Secured Party, sell, assign, transfer, lease,
charter, encumber, hypothecate or dispose of the Collateral, or any part
thereof, or interest therein or offer to do any of the foregoing.

 

7.                                       Notices and Reports.  Debtor shall
promptly notify Secured Party in writing of any change in the name, identity or
structure of Debtor, any charge, lien, security interest, claim or encumbrance
asserted against the Collateral, any litigation against Debtor or the
Collateral, any theft, loss, injury or similar incident involving the
Collateral, and any other material matter adversely affecting Debtor or the
Collateral. Debtor shall furnish such other reports, information and data
regarding Debtor’s financial condition and operations, the Collateral and such
other matters as Secured Party may request from time to time.

 

8.                                       Landlord’s Waivers.  Debtor shall
furnish to Secured Party, if requested, a landlord’s waiver of all liens with
respect to any Collateral covered by this Agreement that is or may be located
upon leased premises, such landlord’s waivers to be in such form and upon such
terms as are acceptable to Secured Party.

 

9.                                       Additional Filings.  Debtor agrees to
execute and deliver such financing statement or statements, or amendments
thereof or supplements thereto, or other documents as Secured Party may from
time to time require in order to comply with the Minnesota Uniform Commercial
Code (or other applicable state laws of the jurisdiction where any of the
Collateral is located) and to preserve and protect the Secured Party’s rights to
the Collateral.

 

10.                                 Protection of Collateral.  Secured Party, at
its option, whether before or after default, but without any obligation
whatsoever to do so, may (a) discharge taxes, claims, charges, liens,

 

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security interests, assessments or other encumbrances of any and every nature
whatsoever at any time levied, placed upon or asserted against the Collateral,
(b) place and pay for insurance on the Collateral, including insurance that only
protects Secured Party’s interest, (c) pay for the repair, improvement, testing,
maintenance and preservation of the Collateral, (d) pay any filing, recording,
registration, licensing or certificate fees or other fees and charges related to
the Collateral, or (e) take any other action to preserve and protect the
Collateral and Secured Party’s rights and remedies under this Agreement as
Secured Party may deem necessary or appropriate. Debtor agrees that Secured
Party shall have no duty or obligation whatsoever to take any of the foregoing
action. Debtor agrees to promptly reimburse Secured Party upon demand for any
payment made or any expense incurred by the Secured Party pursuant to this
authorization. These payments and expenditures, together with interest thereon
from date incurred until paid by Debtor at the maximum contract rate allowed
under applicable laws, which Debtor agrees to pay, shall constitute additional
Obligations and shall be secured by and entitled to the benefits of this
Agreement.

 

11.                            Inspection.  Debtor shall at all reasonable times
allow Secured Party by or through any of its officers, agents, attorneys or
accountants, to examine the Collateral, wherever located, and to examine and
make copies of or extracts from Debtor’s books and records.

 

12.                            Further Assurances.  Debtor shall do, make,
procure, execute and deliver all such additional and further acts, things,
deeds, interests and assurances as Secured Party may request from time to time
to protect, assure and enforce Secured Party’s rights and remedies.

 

13.                            Insurance.  Debtor shall have and maintain
insurance at all times with respect to all tangible Collateral insuring against
risks of fire (including so-called extended coverage), theft and such other
risks as Secured Party may require, containing such terms, in such form and
amounts and written by such companies as may be satisfactory to Secured Party,
all of such insurance to contain loss payable clauses in favor of Secured Party
as its interest may appear. All policies of insurance shall provide for fifteen
(15) days written minimum cancellation notice to Secured Party and at the
request of Secured Party shall be delivered to and held by it. Secured Party is
hereby authorized to act as attorney for Debtor in obtaining, adjusting,
settling and canceling such insurance to the Obligations secured hereby whether
or not such Obligations are then due and payable. Debtor specifically authorizes
Secured Party to disclose from the policies of insurance to prospective insurers
regarding the Collateral.

 

14.                            Additional Collateral.  If Secured Party should
at any time be of the opinion that the Collateral is impaired or insufficient,
or has declined or may decline in value, or should Secured Party deem payment of
the Obligations to be insecure, then Secured Party may call for additional
security satisfactory to Secured Party, and Debtor promises to furnish such
additional security forthwith. The call for additional security may be oral, by
messenger or telefax, or United States mail addressed to Debtor, and shall not
affect any other subsequent right of Secured Party to exercise the same.

 

15.                            Goods.  Notwithstanding anything to the contrary
contained in this agreement, if any Debtor is a “consumer” as defined Regulation
AA of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 227,
or the Federal Trade Commission Credit Practices Rule, 16 C.F.R. Part 444, as
applicable, no lien or security interest created or evidenced by this agreement
shall extend to or cover a non-possessory lien or security interest in
“household goods,” other than a purchase money lien or security interest, in
accordance with such regulations as applicable.

 

F.                                      ADDITIONAL PROVISIONS REGARDING
ACCOUNTS.  The following provisions shall apply to all accounts included within
the Collateral:

 

1.                                       Definitions.  The term “account”, as
used in this Agreement, shall have the same meaning as set forth in the Uniform
Commercial Code of Minnesota in effect as of the date of execution hereof, and
as set forth in any amendment to the Uniform Commercial Code of Minnesota to
become effective after the date of execution hereof, and also shall include all
present and future notes, instruments, documents, general intangibles, drafts,
acceptances and chattel paper of Debtor, and the proceeds thereof.

 

2.                                       Additional Warranties.  As of the time
any account becomes subject to the

 

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security interest (or pledge or assignment as applicable) granted hereby, Debtor
shall be deemed further to have warranted as to such and all of such accounts as
follows: (a) each account and all papers and documents relating thereto are
genuine and in all respects what they purport to be; (b) each account is valid
and subsisting and arises out of a bona fide sale or lease of goods sold or
leased and delivered to, or out of and for services therefore actually rendered
by the Debtor to, the account debtor named in the account; (c) the amount of the
account represented as owing is the correct amount actually and unconditionally
owning except for normal cash discounts and is not subject to any set-offs,
credits, defenses, deductions or countercharges; and (d) Debtor is the owner
thereof free and clear of any charges, liens, security interests, adverse claims
and encumbrances of any and every nature whatsoever.

 

3.                                       Collection of Accounts.  Secured Party
shall have the right in its own name or in the name of the Debtor, whether
before or after default, to require Debtor forthwith to transmit all proceeds of
collection of accounts directly to Secured Party, to demand, collect, receive,
receipt for, sue for, compound and give acquittal for, any and all amounts due
or to become due on the accounts and to endorse the name of the Debtor on all
Commercial paper given in payment or part payment thereof, and in Secured
Party’s discretion to file any claim or take any other action or proceeding that
Secured Party, may deem necessary or appropriate to protect and preserve and
realize upon the accounts and related Collateral. Unless and until Secured Party
elects to collect accounts, and the privilege of Debtor to collect accounts is
revoked by Secured Party in writing, Debtor shall continue to collect accounts,
account for same to Secured Party, and shall not commingle the proceeds of
collection of accounts with any funds of the Debtor. In order to assure
collection of accounts in which Secured Party has a security interest (or which
have been pledged or assigned to Secured Party as applicable) hereunder, Secured
Party may notify the post office authorities to change the address for delivery
of mail addressed to Debtor to such address as Secured Party may designate, and
to open and dispose of such mail and receive the collections of accounts
included herewith. Secured Party shall have no duty or obligation whatsoever to
collect any account, or to take any other action to preserve or protect the
Collateral; however, Debtor releases Secured Party from any claim or claims for
loss or damage arising from any act or omission of Secured Party and its
officers, directors, employees or agents, should Secured Party elect to collect
any account or take any possession of any Collateral.

 

4.                                       Identification and Assignment of
Accounts.  Upon Secured Party’s request, whether before or after default, Debtor
shall take such action and execute and deliver such documents as Secured Party
may request in order to identify, confirm, mark, segregate and assign accounts
and to evidence Secured Party’s interest in same. Without limitation of the
foregoing Debtor, upon request, agrees to assign accounts to Secured Party,
identify and mark accounts as being subject to the security interest (or pledge
or assignment as applicable) granted hereby, mark Debtors books and records to
reflect such security interests, pledges and assignments, and forthwith to
transmit to Secured Party in the form received by Debtor any and all proceeds of
collection of such accounts.

 

5.                                       Account Reports.  Debtor will deliver
to Secured Party, as Lender may require, a written report in form and in content
satisfactory to Secured Party, showing a listing and aging of accounts and such
other information as Secured Party may request from time to time. Debtor shall
immediately notify Secured Party of the assertion by any account debtor of any
set-off, defense or claim regarding an account or any other matter adversely
affecting any account.

 

6.                                       Segregation of Returned Goods. 
Returned or repossessed goods arising from or relating to any accounts included
within the Collateral shall, if requested by Secured Party, be held separate and
apart from any other property. Debtor shall as often as requested by Secured
Party, but not less often than weekly, even though no special request has been
made, report to Secured Party the appropriate identifying information with
respect to any such returned or repossessed goods relating to accounts included
in assignments or identifications made pursuant hereto.

 

7.                                       Right of Off-Set.  Any deposit or other
sums at any time credited by or due from the holder of the Obligations to Debtor
or any endorser, guarantor or surety of any of the Obligations and any
securities or other property of Debtor or any endorser, guarantor or surety of
any of the Obligations in the possession of the holder of the Obligations may at
all times be held and treated as additional and

 

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cumulative collateral security for the payment of the Obligations and Debtor
grants Secured Party a security interest and contractual right of off-set in all
such deposits, sums, securities and other properties as additional and
cumulative security for payment of the Obligations. The holder of the
Obligations may apply to set-off such deposits or other sums against the
Obligations at any time in the case of Debtor,  but only with respect to matured
liabilities in case of the endorsers, guarantors, or sureties of any of the
Obligations.

 

G.                                    ADDITIONAL PROVISIONS REGARDING
INVENTORY.  The following provisions shall apply to all inventory included
within the Collateral:

 

1.                                       Inventory Reports.  Debtor will deliver
to Secured Party as Secured Party may require, on such frequency as Secured
Party may request, a written report in form and content satisfactory to Secured
Party, with respect to the preceding month or other applicable period, showing
Debtors opening inventory, inventory acquired, inventory sold, inventory leased,
inventory returned, inventory used in Debtor’s business, closing inventory, any
other inventory not within the preceding categories and such other information
as Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of any matter adversely affecting the inventory, including,
without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss of depreciation.

 

2.                                       Location of Inventory.  Debtor will
promptly notify Secured Party in writing of any addition to, change in or
discontinuance of its place(s) of business as shown in this Agreement, the
places at which inventory is located as shown herein, the location of its chief
executive office and the location of the office where it keeps its records as
set forth herein. All Collateral will be located at the places of business shown
below, as modified by any written notices given pursuant hereto.

 

3.                                       Uses of Inventory.  Except as set forth
in the loan agreement, unless and until the privilege of Debtor to use inventory
in the ordinary course of Debtor’s business is revoked by Secured Party in the
event of default or if Secured Party deems itself insecure, Debtor may use the
inventory in any manner not inconsistent with this Agreement, may lease or sell
that part of the Collateral consisting of inventory provided that all such
leases and sales are in the ordinary course of business, and use and consume any
raw materials or supplies that are necessary in order to carry on Debtor’s
business. A sale in the ordinary course of business does not include a transfer
in partial or total satisfaction of a debt.

 

4.                                       Accounts as Proceeds.  All accounts
that are proceeds of the inventory included within the Collateral shall be
subject to all of the terms and provisions hereof pertaining to accounts.

 

5.                                       Protection of Inventory.  Debtor shall
take all action necessary to protect and preserve the inventory.

 

6.                                       Assignment of Rents and Leases.  Debtor
hereby assigns to Secured Party all rents and other benefits derived or to be
derived from leases (“Leases”) of the inventory now or hereafter existing or
entered into, together with all guarantees, amendments, modifications,
extensions and renewals thereof (the “Rents”). Prior to a foreclosure by Secured
Party of any lien or security interest which Secured Party may now or hereafter
hold covering the inventory, this Assignment of Rents is not intended to, and
shall not, constitute payment to Secured Party, unless Secured Party terminates
Debtor’s license to collect the Rents, and then it shall constitute payment only
to the extent that prior to foreclosure the Rents are actually received by
Secured Party as opposed to constituting a portion of the voluntary payments of
principal and interest on the indebtedness evidenced and secured hereby, and are
not used for the operation, maintenance or repair of the inventory, or for the
payment of costs and expenses in connection therewith. Except as otherwise
provided herein, Secured Party shall have the absolute right, power and
authority to take any and all actions which Secured Party deems necessary or
appropriate in connection with taking possession of the inventory, leasing all
or any part of the inventory, collecting all or any of the Rents and enforcing
the rights of the lessor under any of the leases, including without limitation,
bringing, prosecuting, defending or settling legal proceedings against lessees
of the inventory. Notwithstanding anything herein to the contrary, Secured Party
shall not be obligated to perform or discharge, and Secured Party does not
undertake to perform or discharge, any obligation, duty or liability with
respect to the Leases or the Rents under or by reason of this Assignment. This
Assignment shall not operate to place

 

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responsibility for the control, care, maintenance or repair of the inventory
upon Secured Party, or for any dangerous or defective condition of the
Inventory, or for any negligence in the arrangement, upkeep, repair, or control
of the inventory. Debtor shall retain a revocable license to collect and receive
the Rents as the agent of Secured Party, and to retain, use and enjoy such
Rents, provided that such revocable license ipso facto terminate without further
action by Secured Party and without notice to Debtor upon the occurrence of any
default or event of default as defined in any note, deed of trust, security
agreement, guaranty, financing statement, fixture filing or other loan documents
given to Secured Party by Debtor or any other party in connection with any
indebtedness or obligation of Debtor to Secured Party.

 

7.                                       Leased Inventory.  Debtor shall
(a) observe and perform faithfully every obligation which Debtor is required to
perform under the Leases; (b) enforce or secure the performance of, at its sole
cost and expense, every obligation to be performed by the lessees under the
Leases; (c) not collect any Rents in advance of the time when the same shall be
due, or anticipate any payments under any of the Leases, except for bona fide
security deposits not in excess of an amount equal to two (2) months Rent;
(d) at the request of Secured Party, deliver copies of Leases to Secured Party;
and (e) appear and defend against, at Debtor’s sole cost and expense, any action
or proceeding arising under, and in any manner connected with the Leases, the
Rents or the obligations, duties or liabilities of the lessor, lessee or
guarantors thereunder.

 

H.                                    [INTENTIONALLY OMITTED]

 

I.                                         [INTENTIONALLY OMITTED]

 

J.                                      EVENTS OF DEFAULT.  Debtor shall be in
default hereunder upon the happening of any of the following events or
conditions: (i) non-payment when due (whether by acceleration of maturity or
otherwise) of any payment of principal, interest or other amount due on any
Obligations; (ii) the occurrence of any event which under the terms of any
evidence of indebtedness, indenture, loan agreement, security agreement or
similar instrument permits the acceleration of maturity of any of obligation of
Debtor whether to Secured Party or to others; (iii) any representation or
warranty made by Debtor and/or others to Secured Party in connection with this
Agreement, the Collateral or the Obligations, or in any statements or
certificates, proves incorrect in any material respect as of the date of the
making or the issuance thereof; (iv) default occurs in the observance or
performance of or, if Debtor fails to furnish adequate evidence of performance
of, any provision of this Agreement or of any note, assignment, transfer, other
agreement, document or instrument delivered by Debtor to Secured Party in
connection with this Agreement, the Collateral or the Obligations; (v) death,
dissolution, liquidation, termination of existence, insolvency, business failure
or winding-up of Debtor, or any maker, endorser, guarantor, surety or other
party liable in any capacity for any of the Obligations; (vi) the filing of a
petition in bankruptcy by or against, or the application for appointment of a
receiver or any other legal custodian for any part of the property of, or the
assignment for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy, rearrangement, reorganization, insolvency or
similar laws for the relief of Debtors by or against, the Debtor, or any maker,
endorser, guarantor, surety or other party primarily or secondarily liable for
any of the Obligations; (vii) the Collateral becomes, in the judgment of Secured
Party, impaired, unsatisfactory or insufficient in character or value;
(viii) the filing of any levy, attachment, execution, garnishment or other
process against the Debtor, or any of the Collateral or any maker, endorser,
guarantor, surety, or other party liable in any capacity for any of the
Obligations, or (ix) the Secured Party in good faith believes that the prospect
of repayment or performance of the Obligations or any of the covenants,
agreements or other duties under any writing executed in connection herewith is
impaired.

 

K.                                    REMEDIES.  Upon the occurrence of an Event
of Default, or if Secured Party deems payment or performance of the Obligations
to be insecure, Secured Party, at its option, shall be entitled to exercise any
one or more of the following remedies (all of which are cumulative):

 

1.                                       Declare Obligations Due.  Secured
Party, at its option, may declare the Obligations or any part thereof
immediately due and payable, without demand, notice of intention to

 

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accelerate, notice of acceleration, notice of non-payment, presentment, protest,
notice of dishonor, or any other notice whatsoever, all of which are hereby
waived by Debtor, the Borrower and any maker, endorser, guarantor, surety or
other party liable in any capacity for any of the Obligations.

 

2.                                       Remedies.  Secured Party shall have all
of the rights and remedies provided for in this Agreement and any other
agreements executed by Debtor, the rights and remedies in the Uniform Commercial
Code of  Minnesota, and any and all rights and remedies at law or in equity, all
of which shall be deemed cumulative. Without limiting the foregoing, Debtor
agrees that Secured Party shall have the right to: (a) require Debtor to
assemble the Collateral and make it available to Secured Party at a place
designated by Secured Party that is reasonably convenient to both parties, which
Debtor agrees to do; (b) take possession of the Collateral with or without
process of law, and, in this connection, enter any premises where the Collateral
is located to remove same, to render it unusable, or to dispose of same on such
premises; (c) sell, lease or otherwise dispose of the Collateral, by public or
private proceedings, for cash or credit, without assumption of credit risks;
and/or (d) whether before or after default, collect and receipt for, compound,
compromise, and settle, and give releases, discharges and acquittances, with
respect to, any and all amounts owed by any person or entity with respect to the
Collateral. Unless the Collateral is perishable or threatens to decline speedily
in value or is of the type customarily sold on a recognized market, Secured
Party will send Debtor reasonable notice of the time and place of any public
sale or of the time after which any private sale or other disposition will be
made. Any requirement of reasonable notice to Debtor shall be met if such notice
is mailed, postage prepaid, to Debtor at the address of Debtor designated at the
beginning of this Agreement, at least five (5) days before the day of any public
sale or at least five (5) days before the time after which any private sale or
other disposition will be made.

 

3.                                       Expenses.  Debtor shall be liable for
and agrees to pay the reasonable expenses incurred by Secured Party in enforcing
its rights and remedies, in retaking, holding, testing, repairing, and proving,
selling, leasing or disposing of the Collateral, or like expenses, including,
without limitation, attorneys fees and legal expenses incurred by Secured Party.
These expenses, together with interest thereon from date incurred until paid by
Debtor at the maximum contract rate allowed under applicable laws, which Debtor
agrees to pay, shall constitute additional Obligations, and shall be secured and
entitled to the benefits of this Agreement.

 

4.                                       Proceeds; Surplus; Deficiencies. 
Proceeds received by Secured Party from disposition of the Collateral shall be
applied toward Secured Party’s expenses and other Obligations and in such order
or manner as Secured Party may elect. Debtor shall be entitled to any surplus if
one results after lawful application of the proceeds.

 

5.                                       Remedies Cumulative.  The rights and
remedies of Secured Party are cumulative and the exercise of any one or more of
the rights of remedies shall not be deemed an election of rights or remedies or
a waiver of any other right or remedy. Secured Party may remedy any default and
may waive any default without waiving the default remedy or without waiving any
other prior or subsequent default.

 

L.                                     RELINQUISHMENT OF CERTAIN DEFENSES. 
Regarding the enforcement of the security interests and covenants and agreements
contained in this Agreement to secure payment of the Obligations, the Debtor
covenants and agrees as follows:

 

1.                                       Secured Party’s right of recovery
against the Collateral for the Obligations shall be determined as if Debtor were
a primary obligor for the payment of the Obligations regardless of whether or
not Debtor is in fact primarily liable for all or any part of the Obligations.
Debtor specifically agrees that it shall not be necessary or required, in order
to enforce the remedies under this Agreement, that the Secured Party have made
demand for payment upon the Borrower or any other person or entity liable for
any portion of the Obligations or have made protest thereof or have given notice
to the Borrower or any other party liable thereon of maturity or nonpayment of
the Obligations.

 

2.                                       The Debtor specifically waives any
notice of acceptance of this Agreement by the Secured Party and of the creation,
advancement, existence, extension, renewal, modification,

 

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consolidation, the rearrangement from time to time of the Obligations, the
increase from time to time in the principal amount thereof, the increase or
reduction from time to time of the rate of interest thereon, or any indulgence
from time to time with respect to the Obligations, or any part thereof, and of
nonpayment thereof or default thereon, and waives grace, demand, protest,
presentment and notice of demand, protest, and presentment with respect to the
Obligations, and waives notice of the amount of the Obligations outstanding at
any time, and agrees that the maturity of the Obligations, or any part thereof,
may be accelerated, extended, modified, amended or renewed from time to time or
any other indulgence may be granted with respect thereto by the Secured Party at
its will or as may be agreed by the Borrower without notice to or further
consent by the Debtor, at any time or times.

 

3.                                       The Debtor agrees that: (i) no renewal,
extension, modification, consolidation, or rearrangement of or any other
indulgence, forbearance or compromise with respect to the Obligations, or any
part thereof; (ii) no increase in the principal amount of any of the
Obligations; (iii) no increase or reduction of the rate of interest thereon;
(iv) no release, withdrawal, substitution, surrender, subordination, exchange,
deterioration, waste or other impairment of any security or collateral or
guaranty now or hereafter held by the Secured Party for payment of the
Obligations, or of any part thereof; (v) no release of the Borrower, any
guarantor, or of any other person primarily or secondarily liable on the
Obligations, or any part thereof; and (vi) no delay or omission or lack of
diligence or care in exercising any right or power with respect to the
Obligations or any security or collateral therefor or under this Agreement shall
in any manner impair, diminish or affect the rights of the Secured Party or the
liability of the Debtor hereunder. The Debtor specifically agrees that it shall
not be necessary or required, and that the Debtor shall not be entitled to
require, that the Secured Party mitigate damages, or file suit or proceed to
obtain or assert a claim for personal judgment against the Borrower for the
Obligations, or make any effort at collection of the Obligations from the
Borrower, or foreclose against or seek to realize upon any security or
collateral now or hereafter existing for the Obligations, or file suit or
proceed to obtain or assert a claim for personal judgment against any other
party (whether maker, guarantor, endorser or surety) liable for the Obligations,
or make any effort at collections of the Obligations from any such other party,
or exercise or assert any other right or remedy to which the Secured Party is or
may be entitled in connection with the Obligations or any security or collateral
or other Agreement therefor, or assert or file any claim against the assets or
estate of the Borrower or any guarantor or other person liable for the
Obligations, or any part thereof, before or as a condition of enforcing the
liability of the Debtor under this Agreement or requiring payment of the
Obligations by the Debtor hereunder, or at any time thereafter. The Debtor
expressly waives any right to the benefit of or to require or control
application of any security or collateral or the proceeds of any security or
collateral now existing or hereafter obtained by the Secured Party as security
for the Obligations, or any part thereof, and agrees that the Secured Party
shall have no duty insofar as the Debtor is concerned to apply upon any of the
Obligations any monies, payments or other property at any time received by or
paid to or in the possession of the Secured Party, except as the Secured Party
shall determine in its sole discretion. The Debtor specifically agrees that
Debtor shall not have any recourse or action against the Secured Party by reason
of any action the Secured Party may take or omit to take in connection with the
Obligations, the collection of any sums or amounts herein mentioned, or in
connection with any security or collateral or any Guaranty at any time existing
therefor.

 

4.                                       The Debtor agrees to the terms,
provisions and conditions of the Note and other instruments evidencing the
Obligations and of any renewal, modification, consolidation or rearrangement
thereof or other agreements which may have been or may hereafter be executed by
the Borrower from time to time evidencing or in connection with the Obligations
or any part thereof, and agrees that the Debtor’s liability hereunder shall in
no manner be affected, reduced, impaired or released by reason of any term,
provision or condition of such Note or other agreement or by the failure,
refusal or omission of the Secured Party to enforce or observe any of same or
any forbearance or compromise made by the Secured Party or any action taken or
omitted to be taken by the Secured Party pursuant thereto or in connection
therewith. The Debtor, by the execution and delivery of this Agreement agrees,
represents, warrants and acknowledges that Debtor shall be bound by the
provisions of any Agreement and Security Agreement and any Environmental
Certificate and Agreement of even date herewith, from the Borrower to the
Secured Party and which purport to be applicable to Debtor to the same extent
and with the same effect as if Debtor had executed and delivered such document
to the Secured Party. In that connection, the Debtor agrees that the provisions
of this Paragraph shall survive any exercise of the power of sale granted in any
instrument

 

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securing the Obligations, any foreclosure of the liens created by any of the
instruments securing the Obligations, any conveyance in lieu of any such
foreclosure, the repayment of the Obligations, and the discharge and release of
all liens, rights and interests securing payment of the Obligations.

 

5.                                       The Debtor absolutely and
unconditionally covenants and a agrees that: (i) in the event that the Borrower
does not or is unable to pay or perform the Obligations for any reason
including, without limitation, liquidation, dissolution, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment or other similar proceedings affecting
the status, composition, identity, existence, assets or Obligations of the
Borrower, or the disaffirmance or termination of any of the Obligations in or as
a result of any such proceedings; and/or (ii) if all or any part of the
Obligations (or any instrument or agreement made or executed in connection
therewith) is for any reason found to be invalid, illegal, unenforceable,
uncollectible or legally impossible, for any reason whatsoever (including,
without limiting the generality of the foregoing, upon the grounds that the
payment and/or performance of the Obligations is ultra vires or otherwise
without authority, may violate applicable usury laws, is subject to valid
defenses, claims or offsets of the Borrower, or any instrument evidencing any of
the Obligations is forged or otherwise irregular), then in any such case the
Debtor shall pay and perform the Obligations as herein provided and that no such
occurrence shall in any way diminish or otherwise affect the Debtor’s
liabilities hereunder.

 

6.                                       Should the status, composition,
structure or name of the Borrower change, including, but not limited to, by
reason of a merger, dissolution, consolidation or reorganization, this Agreement
shall continue and also cover the Obligations and Obligations of the Borrower
under the new status, composition structure or name according to the terms
hereof. If the Borrower is a general or limited partnership, no termination of
said partnership, nor withdrawal therefrom or termination of any ownership
interest therein owned, by any general or limited partner of such partnership
shall alter, limit, terminate, excuse or modify the Debtor’s liabilities set
forth in this Agreement.

 

7.                                       In the event any payment from the
Borrower to the Secured Party is held to constitute a preference under the
bankruptcy laws, or if for any other reason the Secured Party is required to
refund such payment or pay the amount thereof to any other party, such payment
by the Borrower to the Secured Party shall not constitute a release of the
Debtor from any liability hereunder, and this Agreement shall continue to be
effective or shall be reinstated, as the case may be, to the extent of any such
payment or payments.

 

8.                                       At all times while any or all of the
Obligations are now or hereafter secured in whole or in part, the Debtor agrees
that the Secured Party may, from time to time, at its discretion, and with or
without valuable consideration, allow substitution, withdrawal, release,
surrender, exchange, subordination, deterioration, waste, loss or other
impairment of all or any part of such security or collateral, without notice to
or consent by the Debtor, and without in anywise impairing, diminishing or
releasing the liability of the Debtor hereunder.

 

9.                                       The Debtor waives marshalling of assets
and liabilities, sale in inverse order of alienation, and all defenses given to
sureties or Debtors at law or in equity other than actual payment of the
Obligations and performance of the actions constituting the Obligations,
including, but not limited to, any rights pursuant to the laws of  Minnesota.
The failure by the Secured Party to file or enforce a claim against the estate
(either in administration, bankruptcy or other proceeding) of the Borrower or
any other person primarily or secondarily liable for the Obligations or of any
other or others shall not affect the liability of Debtor hereunder.

 

M.                                  OTHER AGREEMENTS.

 

1.                                       Savings Clause.  Notwithstanding any
provision to the contrary herein, or in any of the documents evidencing the
Obligations or otherwise relating thereto, no such provision shall require the
payment or permit the collection of interest in excess of the maximum permitted
by applicable usury laws. If any such excessive interest is so provided for,
then in such event (i) the provisions of this paragraph shall govern and
control, (ii) neither the Debtor nor Debtor’s heirs, legal representatives,
successors or assigns or any other party liable for the payment thereof shall be
obligated to pay the amount

 

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

 

of such interest to the extent that it is in excess of the maximum amount
permitted by law, (iii) any such excess interest that may have been collected
shall be, at the option of the holder of the instrument evidencing the
Obligations, either applied as a credit against the then unpaid principal amount
thereof or refunded to the maker thereof, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful rate under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction.

 

2.                                       Joint and Several Responsibility.  If
this Security Agreement is executed by more than one Debtor, the obligations of
all such Debtors shall be joint and several.

 

3.                                       Waivers.  Debtor and any maker,
endorser, guarantor, surety or other party liable in any capacity respecting the
Obligations hereby waived demand, notice of intention to accelerate, notice of
acceleration, notice of non-payment, presentment, protest, notice of dishonor
and any other notice whatsoever.

 

4.                                       Severability.  Any provision hereof
found to be invalid by courts having jurisdiction shall be invalid only with
respect to such provision (only to the extent necessary to avoid such
invalidity). The offending provision shall be modified to the minimum extent
possible to confer upon Secured Party the benefits intended thereby. Such
provision as modified and the remaining provisions hereof shall be construed and
enforced to the same extent as if such offending provision (or portion thereof)
had not been contained herein, to the maximum extent possible.

 

5.                                       Use of Copies.  Any carbon,
photographic or other reproduction of any financing statement signed by Debtor
is sufficient as a financing statement for all purposes, including without
limitation, filing in any state as may be permitted by the provisions of the
Uniform Commercial Code of such state.  All rights and remedies of Secured Party
in all such agreements are cumulative, but in the event of actual conflict in
terms and conditions, the terms and conditions of the latest security agreement
shall govern and control.

 

6.                                       Authorization to File Financing
Statements.  The Debtor hereby irrevocably authorizes the Secured Party at any
time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the Collateral (i) as all assets of the Debtor or
words of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code of the State or such jurisdiction, or (ii) as being of an equal or lesser
scope or with greater detail, and (b) provide any other information required by
part 5 of Article 9 of the Uniform Commercial Code of the State or such other
jurisdiction, for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether the Debtor is an organization, the
type of organization and any organizational identification number issued to the
Debtor and, (ii) in the case of a financing statement filed as a fixture filing
or indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.  The
Debtor agrees to furnish any such information to the Secured Party promptly upon
the Secured Party’s request.  The Debtor also ratifies its authorization for the
Secured Party to have filed in any Uniform Commercial Code jurisdiction any like
initial financing statements or amendments thereto if filed prior to the date
hereof.

 

7.                                       Notices.  Any notice or demand given by
Secured Party to Debtor in connection with this Agreement, the Collateral or the
Obligations shall be deemed given and effective upon deposit in the United
States mail, postage pre-paid, addressed to Debtor at the address of the Debtor
designated at the beginning of this Agreement. Actual notice to Debtor shall
always be effective no matter how given or received.

 

8.                                       Headings and Gender.  Paragraph
headings in this Agreement are for convenience only and shall be given no
meaning or significance in interpreting this Agreement. All words used herein
shall be construed to be or such gender of number as the circumstances require.

 

9.                                       Amendments.  Neither this Agreement nor
any of its provisions may be

 

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changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification, waiver or discharge is sought.

 

10.                                 Binding Effect.  The provisions of this
Security Agreement shall be binding upon the heirs, executors, administrators,
personal representatives, successors and assigns of Debtor, and the rights,
powers and remedies of Secured Party hereunder shall inure to the benefit of the
successors and assigns of Secured Party.

 

11.                                 Governing Law.  This Security Agreement
shall be governed by the law of Minnesota and applicable federal law.

 

12.                                 Statute of Frauds.  THIS COMMERCIAL SECURITY
AGREEMENT, THE LOAN AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED
HEREIN OR IN THE LOAN AGREEMENT, OR EXECUTED IN CONNECTION WITH OR ATTACHED TO
THE LOAN AGREEMENT, REPRESENT THE FINAL AGREEMENT BETWEEN DEBTOR AND SECURED
PARTY, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN DEBTOR AND SECURED PARTY. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN DEBTOR AND SECURED PARTY.

 

13.                               U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)                                      When SBA is the holder of the Note, this
document and all documents evidencing or securing this Loan will be construed in
accordance with federal law.

 

b)                                      Lender or SBA may use local or state
procedures for purposes such as filing papers, recording documents, giving
notice, foreclosing liens, and other purposes.  By using these procedures, SBA
does not waive any federal immunity from local or state control, penalty, tax or
liability.  No Borrower or Guarantor may claim or assert against SBA any local
or state law to deny any obligation of Borrower, or defeat any claim of SBA with
respect to this Loan.

 

Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

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

 

IN WITNESS WHEREOF, the undersigned has executed this Agreement effective as of
the date first written above.

 

 

DEBTOR

 

 

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

4301 Operations, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

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EXHIBIT A

 

See attached list of equipment

 

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Prepared by and return to:

Janet M. Dery, Esquire

Starfield & Smith, P.C.

1300 Virginia Drive, Suite 325

Fort Washington, PA 19034

 

Lot 5, Block 202.04 of the Township of Voorhees Tax Map

 

MORTGAGE

 

NOTICE: THIS DOCUMENT SECURES A VARIABLE INTEREST RATE NOTE AND CONTAINS
PROVISIONS FOR INCREASES UNDER CERTAIN CIRCUMSTANCES IN THE PRINCIPAL BALANCE OF
THE INDEBTEDNESS SECURED HEREBY

 

THIS MORTGAGE is made on 03/10/11, by and between Brian Todd Conners, with an
address of 8 Oak Hollow Drive, Voorhees, New Jersey 08043 (the “Mortgagor”), and
Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation,
with an address of 159 E. High Street, Pottstown, Pennsylvania 19464 (the
“Mortgagee”).

 

RECITALS

 

Mortgagee, has agreed, pursuant to a Loan Agreement of even date herewith (the
“Loan Agreement”), and subject to the terms set forth therein, to make a loan to
ARCA Advanced Processing, LLC (the “Borrower”) in an aggregate amount of One
Million Two Hundred Fifty Thousand Dollars and No Cents ($1,250,000.00) (the
“Loan”) which is being guaranteed by Mortgagor (the “Guarantee”), the Loan
Agreement and Guarantee constituting the consideration for this Mortgage.

 

Borrower has duly executed a promissory note of even date herewith (the “Note”)
to evidence the terms of repayment of the Loan with interest at the rate or
rates established from time to time in accordance with the terms set forth
therein, which Note has been delivered by Borrower to the Mortgagee (the
Mortgagee and any assignee or other lawful owner of the Note being hereinafter
sometimes called “Mortgagee”).  Mortgagor has duly executed the Guarantee to
support the obligations of the Borrower to repay the Loan.  All references
herein to the Note and the obligations arising thereunder shall be deemed to
include the Guarantee and all obligations arising under the Guarantee.

 

All things necessary to make the Note the valid, binding and legal obligation of
Mortgagor, and to make this Mortgage a valid, binding and legal instrument for
the security of the Note in accordance with its terms, have been duly performed,
and the execution and delivery of the Note and this Mortgage by Mortgagor have
been in all respects duly authorized.

 

It has been agreed that the repayment of the Loan with interest, according to
the terms of the Note and any alterations, modifications, substitutions,
extensions or renewals thereof, as well as the performance of the other
covenants, terms and conditions herein, should be secured by the execution of
this Mortgage, which also shall secure payment by Mortgagor of all costs and
expenses incurred in respect to the Loan, including reasonable attorney’s fees
as is hereinafter provided.

 

NOW, THEREFORE, WITNESSETH: in consideration of the premises and of other good
and valuable considerations, the receipt of which is hereby acknowledged,
Mortgagor mortgages, grants, assigns, conveys and transfers unto the Mortgagee,
its successor or successors and assigns, in fee simple, WITH MORTGAGE COVENANTS,
all that land situate in Camden County, New Jersey, being  commonly known as 8
Oak Hollow Drive, Voorhees, Lot 5, Block 202.04 of the Township of Voorhees Tax
Map and more particularly described in Exhibit A attached hereto and made a part
hereof (the “Land”) and the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repair,

 

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

 

replacements and improvements now or hereafter located thereon (hereinafter
sometimes called the “Improvements”).

 

TOGETHER with all the walks, fences, shrubbery, driveways, fixtures, equipment,
machinery, apparatus, fittings, building materials and other articles of
personal property of every kind and nature whatsoever, now or hereafter ordered
for eventual delivery to the Land (whether or not delivered thereto), and all
such as are now or hereafter located in or upon any interest or estate in the
Land or any part thereof and used or usable in connection with any present or
future operation of the Land now owned or hereafter acquired by Mortgagor,
including, without limiting the generality of the foregoing, all heating,
lighting, laundry, clothes washing, clothes drying, incinerating and power
equipment, engines, pipes, tanks, motors, conduits, switchboards, plumbing,
lifting, cleaning, fire-prevention, fire-extinguishing, refrigerating,
ventilating, and communications apparatus, television sets, radio systems,
recording systems, computer equipment, air-cooling and air-conditioning
apparatus, elevators, escalators, shades, awnings, draperies, curtains, fans,
furniture, furnishings, carpeting, linoleum and other floor coverings, screens,
storm doors and windows, stoves, gas and electric ranges, refrigerators, garbage
disposals, sump pumps, dishwashers, washers, dryers, attached cabinets,
partitions, ducts and compressors, landscaping, swimming pools, lawn and garden
equipment, security systems and including all equipment installed or to be
installed or used or usable in the operation of the building or buildings or
appurtenant facilities erected or to be erected in or upon the Land; it being
understood that all of the aforesaid shall be deemed to be fixtures and part of
the Land, but whether or not of the nature of fixtures they shall be deemed and
shall constitute part of the security for the indebtedness herein mentioned and
shall be covered by this Mortgage excluding, however, only personal property
owned by any tenant actually occupying all or part of the premises.  Disposition
of any of the aforesaid or of any interest therein is prohibited; however, if
any disposition is made in violation hereof, the Mortgagee shall have a security
interest in the proceeds therefrom to the fullest extent permitted by the laws
of New Jersey; and

 

TOGETHER with all and singular the rights, alleys, ways, waters, easements,
tenements, privileges, advantages, accessions, hereditaments and appurtenances
belonging or in any way appertaining to the Land and other property described
herein, and the reversions and remainders, earnings, revenues, rents, issues and
profits thereof and including any right, title, interest or estate hereafter
acquired by Mortgagor in the Land and other property described herein; and

 

TOGETHER with all the right, title and interest (but not the obligations) of
Mortgagor, present and future, in and to all present and future accounts,
contract rights (including all fees and other obligations set forth in the
Mortgagee’s commitment to make the Loan), general intangibles, chattel paper,
documents and instruments including but not limited to licenses, construction
contracts, service contracts, utility contracts, options, permits, public works
agreements, bonds, deposits and payments thereunder, relating or appertaining to
the Land and other property described herein and its development, occupancy and
use; and

 

TOGETHER with any right to payment  or for services rendered, whether or not yet
earned by performance, arising from the operation of the improvements or any
other facility on the Land, including, without limitation, (1) all accounts
arising from the operation of the improvements and all proceeds thereof (whether
cash or non-cash, movable or immovable, tangible or intangible) received upon
the sale, exchange, transfer, collection or other disposition or substitution
thereof, and (2) all rights to payment from any consumer credit/charge card
organization or entity, including, without limitation, payments arising from the
use of the American Express Card, Visa Card, Carte Blanche Card, MasterCard,
Diner’s Club, or any other credit card, including those now existing or
hereinafter created or any substitution therefor and all proceeds thereof
(whether cash or non-cash, movable or immovable, tangible or intangible)
received upon the sale, exchange, transfer, collection or other disposition or
substitution thereof; and

 

TOGETHER with all of the rents, royalties, revenues, income, proceeds, profits
and other benefits paid or payable by parties to the leases for using, leasing,
licensing, possessing, occupying, operating from, residing in, selling or
otherwise enjoying the Land, the Improvements, and other property securing the
indebtedness, or any portion thereof.  As used in this Mortgage, the word
“leases” includes any and all leases, subleases, licenses, concessions,
reservations, accounts, permits, contracts, and other agreements (oral or
written, now or hereafter in effect) which grant a possessory interest or right
of occupancy in and

 

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

 

to, or the right to use, or affect all or part of the Land, the improvements,
and other property securing the indebtedness, or any portion thereof; and

 

TOGETHER with all proceeds of and any unearned premiums on any insurance
policies covering the Property (hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Property or
any part thereof; and

 

TOGETHER with all proceeds derived from any taking by condemnation or eminent
domain proceedings or transfer in place or in anticipation thereof of all or any
part of the property described in these granting clauses;

 

TO HAVE AND TO HOLD the Land with Improvements thereupon and all the rights,
easements, profits and appurtenances and other property described above (all of
which is hereinafter sometimes called the “Property”) belonging unto and to the
use of the Mortgagee, and its successor or successors and assigns, in fee simple
forever;

 

BUT for and upon the uses, intents and purposes hereinafter mentioned, that is
to say for the benefit and security of Mortgagee and for the enforcement of the
payment of all sums secured hereby (hereinafter sometimes called the
“Indebtedness”) and the compliance with the terms, covenants and conditions, in
the Note, in the Loan Agreement and in this Mortgage, expressed or implied;

 

SUBJECT, HOWEVER, to the liens and rights of the holders of the contracts and
instruments secured by any instruments that may be described in Exhibit B to
this Mortgage (the “Permitted Encumbrances”);

 

PROVIDED, HOWEVER, that if Mortgagor shall pay or cause to be paid to Mortgagee
all sums secured hereby in the manner stipulated in the Note, the Loan Agreement
and this Mortgage, then and in such case, the estate, right, title and interest
of the Mortgagee in the Property shall cease, determine and become void, and
upon proof being given to the satisfaction of the Mortgagee that the Note has
been paid or satisfied, in accordance with its terms and upon payment of all
fees, costs, charges, expenses and liabilities chargeable or incurred or to be
incurred by the Mortgagee and of any other sums as in this Mortgage provided,
the Mortgagee shall at the expense of Mortgagor, release and discharge this
Mortgage of record, and shall transfer and deliver up to Mortgagor any property
at the time subject to this Mortgage which may be then in their possession,
provided the Mortgagee hereunder shall be entitled to a reasonable fee for the
release and reconveyance of the Property or any partial release and
reconveyance;

 

AND THIS MORTGAGE FURTHER WITNESSETH, that Mortgagor (jointly and severally if
more than one) has covenanted and agreed and does hereby covenant and agree with
the Mortgagee as follows:

 

ARTICLE 1. DEFINITIONS

 

1.1                                 Definitions.  All capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth or
referred to in the Loan Agreement.

 

ARTICLE 2. COVENANTS AND AGREEMENTS OF MORTGAGOR

 

2.1                                 Incorporation of Covenants, Conditions and
Agreements.  All the covenants, conditions and agreements contained in the Loan
Agreement, the Note, and the other Loan Documents are hereby made a part of this
Mortgage to the same extent and with the same force as if fully set forth
herein.

 

2.2                                 Title to the Property.  Mortgagor covenants
that at the time of the execution and delivery of this Mortgage it has good
title to all of the property described in the granting clauses of this Mortgage
as being presently granted, assigned, conveyed and transferred hereunder, free
and clear of all liens and encumbrances except for the Permitted Encumbrances;
Mortgagor hereby does and will forever

 

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warrant generally and defend the title to the Property, and every part thereof,
whether now owned or hereafter acquired, unto the Mortgagee and its successor or
successors in the trust and assigns, against all claims and demands by any
person or entity whatsoever; Mortgagor covenants that Mortgagor shall comply
with all the terms, covenants and conditions of all agreements and instruments,
recorded and unrecorded, affecting the Property; Mortgagor covenants that it has
good right and lawful authority to mortgage, give, grant, pledge, assign and
convey the Property in the manner and form herein provided.

 

2.3                                 Further Assurances.  At any and all times
Mortgagor shall furnish and record all and every such further assurances as may
be requisite or as the Mortgagee shall reasonably require for the better
assuring and confirming unto the Mortgagee the estate and property hereby
granted, assigned, conveyed or transferred, or intended so to be whether now
owned or hereafter acquired; Mortgagor shall bear all expenses, charges and
taxes in connection therewith.

 

2.4                                 Escrow for Taxes.  To better secure the
covenant to pay taxes and fees in the Loan Agreement, Mortgagor agrees that, if
Holder so requests, Mortgagor shall deposit with Holder on the day of each month
on which a payment of interest is due under the Note, beginning with the month
following such request, one-twelfth of the annual taxes next due as estimated by
Holder, plus one-twelfth of the annual fire, hazard and other insurance premiums
as required herein, such deposit to be held by Holder, without interest, to pay
said taxes and premiums.  If payments of interest are due under the Note other
than monthly, appropriate adjustment shall be made in the amount of the
aforesaid periodic deposits.

 

Any amounts deposited pursuant to the provisions of this Section shall not be,
nor be deemed to be, trust funds, nor shall they operate to curtail or reduce
the indebtedness secured hereby, and all such amounts may be commingled with the
general funds of the depositor and be deposited with Mortgagee or at an
institution designated by Mortgagee.  Mortgagee shall not be responsible for the
solvency of such institution, provided it is insured by the Federal Deposit
Insurance Corporation or other regulatory agency at the time of designation.  If
at any time Mortgagee shall determine that the amount then on deposit shall be
insufficient to pay an obligation in full, Mortgagor shall immediately after
demand deposit with Mortgagee the amount of the deficiency determined by
Mortgagee.  Nothing contained in this Section shall be deemed to affect any
right or remedy of Mortgagee under any provisions of this Mortgage or of any
statute or rule of law to pay any such amount and to add the amount so paid,
together with interest at the rate provided for in the Note, to the indebtedness
secured hereby.

 

2.5                                 Change in Tax Law.  In the event of the
passage after date of this Mortgage of any law changing in any way the laws for
the taxation of deeds of trust or debts secured by deeds of trust, or the manner
of collection of any such taxation so as to affect this Mortgage, Mortgagee may
give thirty (30) days’ written notice to Mortgagor requiring the payment of the
indebtedness secured hereby.  If such notice be given, the indebtedness secured
hereby shall become due and payable at the expiration of said thirty (30) days;
provided, however, that such requirement of payment shall be ineffective if
Mortgagor is permitted by law to pay the whole of such tax in addition to all
other payments required hereunder, without any penalty or charge thereby
accruing to Mortgagee, and if Mortgagor in fact pays such tax prior to the date
upon which payment is required by such notice.

 

2.6                                 Activities on the Property.  Mortgagor shall
not suffer any act to be done or any conditions to exist on the Property or any
part thereof or any thing or article to be brought thereon (i) which may cause
structural injury to the improvements on the Land; or (ii) which would cause the
value or usefulness of the Property or any part thereof to diminish (ordinary
wear and tear excepted); or (iii) which may be dangerous, unless safeguarded as
required by law; or (iv) which may in fact or in law, constitute a nuisance,
public or private; or (v) which may void or make voidable any insurance then in
force or required by the terms of this Mortgage, the Loan Agreement to be in
force.

 

2.7                                 Additional Insurance.  If required by the
Mortgagee, in addition to the provisions of and to the extent not so provided by
the Loan Agreement, Mortgagor shall at all times maintain during the entire term
of this Mortgage the following insurance, in form and substance satisfactory to
Mortgagee:

 

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(a)  Workers’ Compensation.  During any construction, repair, restoration or
replacement of improvements on the Land, Mortgagor shall cause all contractors
and subcontractors (including Mortgagor if it acts as a contractor) to obtain
and keep in effect workers’ compensation insurance to the full extent required
by applicable law and also which shall cover all employees of each contractor
and subcontractor; upon demand, Mortgagor shall provide evidence satisfactory to
Mortgagee that it is complying with this covenant.

 

All insurance for loss or damage shall provide that losses, if any, shall be
payable to Mortgagee, as its interest may appear.  Mortgagor will pay the
premiums for all insurance and deliver to Mortgagee the policies of insurance or
duplicates thereof, or other evidence satisfactory to Mortgagee of such
insurance coverage.  Each insurer shall agree, by endorsement upon the policy or
policies issued by it, or by independent instrument furnished to Mortgagee, that
(i) it will give Mortgagee thirty (30) days’ prior written notice of the
effective date of any material alteration or cancellation of such policy; and
(ii) the coverage of Mortgagee shall not be terminated, reduced or affected in
any manner regardless of any breach or violation by Mortgagor of any warranties,
declarations or conditions of such insurance policy or policies.  The proceeds
of such insurance shall be applied, at Mortgagee’s option, toward the
replacement, restoration or repair of the Property which may be lost, stolen or
destroyed or damaged or toward payment of any indebtedness of Mortgagor to
Mortgagee.

 

2.8                                 Additional Advances.  If Mortgagor shall
fail to perform any of the covenants or satisfy any of the conditions contained
herein, Mortgagee may make advances or payments towards performance or
satisfaction of the same but shall be under no obligation so to do; and all sums
so advanced or paid shall be at once repayable by Mortgagor and shall bear
interest at the Default Rate from the date the same shall become due and payable
until the date paid, and all sums so advanced or paid, with interest as
aforesaid, shall become a part of the indebtedness secured hereby; but no such
advance or payment shall relieve Mortgagor from any default hereunder.  If
Mortgagor shall fail to perform any of the covenants or satisfy any of the
conditions contained herein, Mortgagee may use any funds of Mortgagor towards
performance or satisfaction of the same but shall be under no obligation so to
do; and no such use of funds shall relieve Mortgagor from any default hereunder.

 

2.9                                 Condemnation Awards.  Should the grade of
any street be altered or all or any part of the Property be condemned or taken
through eminent domain proceedings, all or such part of any award or proceeds
derived therefrom, as Mortgagee in its sole discretion may determine in writing,
shall be paid to Mortgagee and applied to the payment of the indebtedness
secured hereby (in such manner or combination thereof, including inverse order
of maturity of installments of principal, if any, as Mortgagee may, in its sole
discretion, elect) and all such proceeds are hereby assigned to Mortgagee.

 

2.10                           Costs of Defending and Enforcing the Lien. 
Mortgagor shall pay all costs, charges and expenses, including appraisals, title
examinations, and reasonable attorney’s fees, which Mortgagee may incur in
defending or enforcing the validity or priority of the legal operation and
effect of this Mortgage, or any term, covenant or condition hereof, or in
collecting any sum secured hereby, or in protecting the security of Mortgagee
including without limitation being a party in any condemnation, bankruptcy or
administrative proceedings, or, if an Event of Default shall occur, in
administering and executing the trust hereby created and performing their
powers, privileges and duties hereunder.  Mortgagee may make advances or
payments for such purposes but all advances or payments made by Mortgagee for
such purposes shall be repayable immediately by Mortgagor and shall bear
interest at the Default Rate from the date the same shall become due and payable
until the date paid, and any such sum or sums with interest as aforesaid shall
become a part of the indebtedness secured hereby; but no such advance or payment
shall relieve Mortgagor from any default hereunder.

 

2.11                           Modification of Terms; No Novation.  Mortgagee
may at any time, and from time to time, extend the time for payment of the
indebtedness secured hereby, or any part thereof, or interest thereon, and
waive, modify or amend any of the terms, covenants or conditions in the Note, in
the Guarantee, in this Mortgage or in any other Loan Document, in whole or in
part, either at the request of Mortgagor or of any person having an interest in
the Property, accept one or more notes in replacement or substitution of the
Note, consent to the release of all or any part of the Property from the legal
operation

 

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and effect of this Mortgage, take or release other security, release any party
primarily or secondarily liable on the Note or hereunder or on such other
security, grant extensions, renewals or indulgences therein or herein, apply to
the payment of the principal and interest and premium, if any, of the
indebtedness secured hereby any part or all of the proceeds obtained by sale or
otherwise as provided herein, without resort or regard to other security, or
resort to any one or more of the securities or remedies which Mortgagee may have
and which in its absolute discretion it may pursue for the payment of all or any
part of the indebtedness secured hereby, in such order and in such manner as it
may determine, all without in any way releasing Mortgagor or any party
secondarily liable from any of the terms, covenants or conditions of the Note,
the Guarantee, this Mortgage, or any other Loan Document, or relieving the
unreleased Property from the legal operation and effect of this Mortgage for all
amounts owing under the Note, the Loan Agreement and this Mortgage.  Mortgagee
and Mortgagor recognize and agree that the provisions of this Mortgage, the
Note, the Guarantee, and any other Loan Document may be modified by them or
their successors or assigns at any time before or after default (which
modification may involve increasing the rate of interest in the Note, agreeing
that other charges should be paid, or modifying any other provision in any such
instruments).  Mortgagee may extend the time of payment, may agree to alter the
terms of payment of the indebtedness, and may grant partial releases of any
portion of the property included herein.  No such modification by Mortgagee and
Mortgagor nor any such action by Mortgagee or the Mortgagor referred to above
shall be a substitution or novation of the original indebtedness or instruments
evidencing or securing the same, but shall be considered a possible occurrence
within the original contemplation of the parties.

 

2.12                           Governmental Action Affecting the Property. 
Mortgagor agrees that in the event of the enactment of any law or ordinance, the
promulgation of any zoning or other governmental regulation, or the rendition of
any judicial decree restricting or affecting the use of the Property or rezoning
the area wherein the same shall be situate which Mortgagee reasonably believes
adversely affects the Property, Mortgagee may, upon at least sixty (60) days
written notice to Mortgagor, require payment of the indebtedness secured hereby
at such time as may be stipulated in such notice, and the whole of the
indebtedness secured hereby, shall thereupon become due and payable.

 

ARTICLE 3. EVENTS OF DEFAULT

 

The occurrence of one or more of the following events (herein called an “Event
of Default”) shall constitute and be an Event of Default:

 

3.1                                 Default under Loan Documents.  The
occurrence and continuance of an Event of Default under the Loan Agreement, the
Note or any other Loan Document shall constitute an Event of Default hereunder. 
In the event Mortgagee consents to an encumbrance on the Property, a default
under the terms of any document creating such an encumbrance shall be a default
hereunder.

 

3.2                                 Additional Insurance Obligations.  Mortgagor
fails to promptly perform or comply with any of the terms and conditions set
forth in subsection 2.7 and such failure continues for ten (10) days after
notice from Mortgagee to Mortgagor.

 

3.3                                 Material Obligations.  Mortgagor fails to
perform or observe any of its material obligations under this Mortgage and such
failure shall continue for a period of thirty (30) days after Mortgagee gives
Mortgagor written notice thereof.

 

3.4                                 Judgment.  Unless adequately covered by
insurance in the reasonable opinion of Mortgagee, the entry of a final judgment
for the payment of money involving more than $10,000.00 against Mortgagor or any
guarantor of the Loan and the failure of Mortgagor or any guarantor of the Loan
to cause the same to be discharged or bonded off to the satisfaction of
Mortgagee within sixty (60) days from the date the order, decree or process
under which or pursuant to which such judgment was entered.

 

3.5                                 Transfer of the Property.  If all or any
part of the Property or any interest in the Property is sold, transferred,
assigned, conveyed or otherwise disposed of, either outright or as security for
an indebtedness, or if there is any change in the ownership of Mortgagor,
without Mortgagee’s prior written consent, Mortgagee may, at Mortgagee’s option,
declare all the indebtedness secured by this Mortgage to

 

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be immediately due and payable and Mortgagee may exercise any or all of the
remedies provided in Paragraph 4 hereunder.

 

ARTICLE 4. REMEDIES

 

4.1                               Remedies-Acceleration.  If one or more of the
Events of Default shall occur, Mortgagee may, at its option, declare the entire
unpaid principal amount of the Note (if not already due and payable) to be due
and payable immediately, and upon any such declaration the same shall become and
be immediately due and payable, anything in the Note, in the Guarantee, in the
Loan Agreement or in this Mortgage to the contrary notwithstanding; and in the
event of any sale of all or any part of the Property, whether made under the
power of sale herein granted, assent to a decree or through judicial
proceedings, such unpaid principal amount shall automatically and without notice
become so due and payable.  If Mortgagee exercises Mortgagee’s option to declare
the entire unpaid principal amount of the Note to be due and payable, Mortgagor
covenants to pay immediately the full amount of the indebtedness secured hereby
even though foreclosure or other court proceedings to collect the indebtedness
have not been commenced.  Acceleration of maturity, once declared by Mortgagee,
may at the option of Mortgagee, be rescinded by written acknowledgment to that
effect by Mortgagee, but the tender and acceptance of partial payments alone
shall not rescind or affect in any way such acceleration of maturity.

 

4.2                                 Power of Sale; Assent to Decree and Other
Remedies.  If one or more of the Events of Default shall occur and whether or
not Mortgagee shall have accelerated the maturity of the indebtedness pursuant
to Section 4.1 hereof, Mortgagee, at its option, may:

 

(a)                                  proceed by suit or suits at law or in
equity or by any other appropriate remedy to protect and enforce the rights of
Mortgagee whether for the specific performance of any covenant or agreement
contained herein, or in aid of the execution of any power herein granted, or to
enforce payment of the Note, of the Guarantee, or to foreclose this Mortgage, or
to sell the Property under the judgment or decree of a court or courts of
competent jurisdiction, or otherwise.  Mortgagor, in accordance with any general
or local laws or rules or regulations of New Jersey relating to mortgages
including any amendments thereof or supplements thereto which do not materially
change or impair the remedy, does hereby declare and assent to the passage of a
decree to sell the Property by the equity court having jurisdiction for the sale
of the Property, subject to the terms of the decree of court, the same authority
and power to sell on the terms and conditions herein set forth.  This assent to
decree shall not be exhausted in the event the proceeding is dismissed before
the indebtedness secured hereby is paid in full;

 

(b)                                 either with or without entering upon or
taking possession of the Property, demand, collect and receive any or all
revenues arising out of or in connection with the Property, including, without
limitation, all rents;

 

(c)                                  take possession and assemble such items of
the Property as may be designated by Mortgagee and make them available to the
Mortgagee at a place reasonably convenient to both parties to be designated by
Mortgagee or the Mortgagee.  Upon a default under this Mortgage, Mortgagee shall
have the right to take possession of such items of the Property as Mortgagee may
elect.  In taking possession Mortgagee may proceed without judicial process if
this can be done without breach of the peace.  Mortgagee shall have the further
right to remove such items of the Property as it may choose to any location or
locations selected by Mortgagee, and Mortgagor shall pay the costs of such
removal and for the storage and protection of such items immediately upon demand
therefor.  If Mortgagee elects to proceed under the New Jersey Uniform
Commercial Code to dispose of some of the Property, the Mortgagee shall give
Mortgagor notice by certified mail, postage prepaid, return receipt requested,
of the time and place of any public sale of any of such property or of the time
after which any private sale or other intended disposition thereof is to be made
by sending notice to Mortgagor at least five (5) days before the time of the
sale or other disposition, which provisions for notice Mortgagor and the
Mortgagee agree are reasonable; provided, however, that nothing herein shall
preclude Mortgagee from proceeding as to all the Property in accordance with the
rights and remedies of Mortgagee in respect of the real property, as provided in
the New Jersey Uniform Commercial Code, as amended from time to time;

 

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(d)                                 either with or without taking possession of
the property, sell, lease or otherwise dispose of the Property in its then
condition or following such preparation as Mortgagee deems advisable;

 

(e)                                  either with or without entering upon or
taking possession of the Property and without assuming any obligations of
Mortgagor, thereunder, exercise the rights of Mortgagor under, use or benefit
from, any of the contracts, leases or intangible property;

 

(f)                                    may enter and take possession of the
Property and may exclude Mortgagor, its agents and servants, wholly therefrom,
and having and holding the same, may use, operate, manage and control the
Property or any part thereof, and upon every such entry Mortgagee, at the
expense of Mortgagor and of the Property, from time to time may make all
necessary or proper repairs, renewals, replacements and useful or required
alterations, additions, betterments and improvements to and upon the Property as
to it may seem judicious and pay all costs and expenses of so taking, holding
and managing the same, including reasonable compensation to its employees and
other agents (including, without limitation, attorney’s fees and management and
rental commissions) and any taxes, assessments and other charges prior to the
legal operation and effect of this Mortgage which Mortgagee may deem it wise or
desirable to pay, and in such case Mortgagee shall have the right to manage the
Property and to carry on the business and exercise all rights and powers of
Mortgagor, either in the name of Mortgagor, or otherwise, as Mortgagee shall
deem advisable; and Mortgagee shall be entitled to collect and receive all rents
thereof and therefrom.  The taking of possession and collection of rents by
Mortgagee shall not be construed to be an affirmation of any lease or acceptance
of attornment with respect to any lease of all or any portion of the Property. 
After deducting the expenses of operating the Property and of conducting the
business thereof, and of all repairs, maintenance, renewals, replacements,
alterations, additions, betterments, improvements and all payments which it may
be required or may elect to make for taxes or other proper charges on the
Property, or any part thereof, as well as just and reasonable compensation for
all its employees and other agents (including, without limitation, attorney’s
fees and management and rental commissions) engaged and employed, the moneys
arising as aforesaid shall be applied to the indebtedness secured hereby. 
Whenever all that is due upon the principal of and interest on the Note and
under any of the terms of this Mortgage shall have been paid and all defaults
made good, Mortgagee shall surrender possession to Mortgagor.  The same right of
entry, however, shall exist if any subsequent Event of Default shall occur.
Mortgagee may,  in person, by agent or by court-appointed receiver, enter upon,
take possession of, and maintain full control of the Property in order to
perform all acts necessary or appropriate to complete construction of the
improvements and to maintain and operate the Property, including, but not
limited to, the execution, cancellation or modification of leases, the making of
repairs to the Property and the execution or termination of contracts providing
for the construction, management or maintenance of the Property, all of such
terms as Mortgagee, in its sole discretion, deems proper or appropriate;

 

(g)                                 proceed by a suit or suits in law or in
equity or by other appropriate proceeding to enforce payment of the Note and/or
the Guarantee, or the performance of any term, covenant, condition or agreement
of this Mortgage and Security Agreement or any of the other Loan Documents, or
any other right, and to pursue any other remedy available to it, all as
Mortgagee shall determine most effectual for such purposes;

 

(h)                                 institute and maintain such suits and
proceedings as Mortgagee may deem expedient to prevent any impairment of the
Property by any acts which may be unlawful or in violation of this Mortgage and
Security Agreement, to preserve or protect its interest in the Property and the
revenues arising out of or in connection with the Property, and to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that would impair the security hereunder or be
prejudicial to the interest of Mortgagee;

 

(i)                                     apply all or any portion of the
Property, or the proceeds thereof, towards (but not necessarily in complete
satisfaction of) the indebtedness;

 

(j)                                     foreclose any and all rights or
Mortgagor in and to the Property, whether by sale, entry or in any other manner
provided for hereunder or under the laws of New Jersey;

 

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(k)                                  in the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceeding affecting Mortgagor or the creditors or property of Mortgagor,
Mortgagee, to the extent permitted by law, shall be entitled to file such proofs
of claim and other documents as may be necessary or advisable in order to have
the claims of Mortgagee allowed in such proceedings for the entire amount of the
indebtedness at the date of the institution of such proceedings and for any
additional portion of the indebtedness accruing after such date;

 

(l)                                     exercise of any right or remedy of
mortgagee or secured party under the laws of New Jersey.

 

4.3                                 Appointment of a Receiver. Until one or more
of the Events of Default shall occur (but not thereafter), Mortgagor shall have
possession of the Property and shall have the right to use and enjoy the same
and to receive the rents thereof and therefrom.  If one or more of the Events of
Default shall occur, and without the requirement of any other showing, Mortgagee
shall be entitled as a matter of right and to the extent permitted by law,
without notice to Mortgagor, and without regard to the adequacy of the security,
to the immediate appointment of a receiver of the Property and of the rents
thereof and therefrom, in an ex parte proceeding with all such other powers as
the court or courts making such appointment shall confer, and the rents thereof
and therefrom are hereby assigned to Mortgagee as additional security under this
Mortgage.  Mortgagor shall deliver to the receiver appointed pursuant to the
provisions of this Section, or to Mortgagee in the event of entry pursuant to
the terms of the preceding Section, all original records, books, bank accounts,
leases, agreements, security deposits of the tenants and all other materials
relating to the operation of the Property.

 

4.4                                 Foreclosure Sale.

 

(a)                                  If one or more of the Events of Default
shall occur, the Mortgagee shall sell and in the case of default of any
purchaser or purchasers shall resell all the Property as an entirety, or in such
parcels and in such order as Mortgagee shall in writing request, or, in the
absence of such request, as the Mortgagee may determine (Mortgagor hereby
waiving for itself and for any person claiming by or through it application of
the doctrine of marshalling of assets), at public auction at some convenient
place or places in the jurisdiction in the state where the Property is situate,
or in such other place or places as may be permitted by law, at such time, in
such manner and upon such terms as the Mortgagee may fix and briefly specify in
each notice of sale, which notice of sale shall state the time when, and the
place where, the same is to be made, shall contain a brief general description
of the property to be sold, and shall be sufficiently given if published as
frequently and in such publication as may be required by law, and Mortgagee may
cause such further public advertisement to be made as they may deem advisable,
and any such sale may be adjourned by the Mortgagee by announcement at the time
and place appointed for such sale or for such adjourned sale, and, without
further notice or publication, such sale may be made at the time and place to
which the same shall be so adjourned.  If one or more leases are entered into or
recorded subsequent to the recording of this Mortgage or are otherwise
subordinate to this Mortgage, the Mortgagee shall sell, subject to any one or
more of such tenancies that are designated and selected by Mortgagee.

 

(b)                                 Upon the completion of any sale and
compliance with all the terms thereof, the Mortgagee shall execute and deliver
to the purchaser or purchasers a good and sufficient deed of conveyance,
assignment and transfer, lawfully conveying, assigning and transferring the
property sold.  Payment to the Mortgagee of the entire purchase money shall be
full and sufficient discharge of any purchaser or purchasers of the property,
sold as aforesaid, for the purchase money; and no such purchaser, or his
representatives, successors or assigns, after paying such purchase money and
receiving the deed shall be bound to see to the application of such purchase
money.

 

(c)                                  In the case of any sale of the Property or
of any part thereof, whether under the power of sale herein granted, assent to
decree or through other judicial proceedings, the purchase money, proceeds and
avails thereof, together with any other sums which may then be held as security
hereunder or be due under any of the provisions hereof as a part of the
Property, shall be applied as follows:

 

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FIRST, to pay all proper costs, charges, fees and expenses, including the fees
and costs herein provided for and to pay the costs of appraisals of the Property
and the costs of title examination; and to pay or repay to Mortgagee  all moneys
advanced by them or either of them for taxes, insurance or otherwise, with
interest thereon as provided herein; and to pay all taxes due upon the Property
at the time of sale; and to pay any other lien or encumbrance prior to the legal
operation and effect of this Mortgage unless said sale is made subject to any
such taxes or other lien or encumbrance; and to pay a counsel fee of One
thousand Five hundred Dollars ($1,500.00) for conducting the proceedings if
without contest, but if legal services are rendered to Mortgagee in connection
with any contested matter in the proceedings, then such additional counsel fees
and expenses shall be allowed out of the proceeds of sale or sales as the court
may deem proper; and to pay additional reasonable counsel fees, if any, incurred
as a result of representing Mortgagee’s interest in any proceedings on behalf of
any Mortgagor before any United States Bankruptcy Court or similar State
insolvency proceedings; and also to pay a commission to the auctioneer or other
party making the sale equal to five percent (5%) of the gross sale price;

 

SECOND, to pay whatever may then remain unpaid under the Note and the interest
thereon to the date of payment, whether the same shall be due or not, it being
agreed that the Note shall, upon such sale being made before the maturity of the
Note, be and become immediately due and payable at the election of Mortgagee and
to pay all of the indebtedness secured hereby;

 

THIRD, to pay the remainder of said proceeds, if any, less the expense, if any,
of obtaining possession, to Mortgagor or other party lawfully entitled to
receive the same, upon the delivery and surrender of possession of the Property
sold and conveyed and delivery of all records, books, bank accounts, leases,
agreements, security deposits of the tenants and all other material relating to
the operation of the Property to the said purchaser or purchasers.

 

(d)           Immediately upon the filing or docketing of suit preliminary to a
foreclosure sale of the Property, or any part thereof under this Mortgage, there
shall be and become due and owing by Mortgagor, an auctioneer’s commission on
the total amount of the indebtedness secured hereby equal to two and one-half
percent (2 ½%), and Mortgagee shall not be required to receive the principal and
interest in satisfaction of the indebtedness secured hereby, but said sale may
be proceeded with unless, prior to the day appointed therefor, tender is made of
said principal, interest, commissions and all expenses and costs incident to
such sale and all other sums that are part of the indebtedness secured hereby.

 

(e)           Mortgagee may bid and become the purchaser at any sale under this
Mortgage.  If Mortgagee is the purchaser at any such sale, Mortgagee may apply
the outstanding indebtedness against all or any portion of the purchase price,
including the deposit.

 

4.5           Collection of Revenues.  In connection with the exercise by
Mortgagee of the rights and remedies provided for in subsection 4.2(b) hereof:

 

(a)           Mortgagee may notify any tenant, lessee or licensee of the
Property, either in the name of the Mortgagee or Mortgagor, to make payment of
Revenues directly to Mortgagee or Mortgagor’s agents, may advise any person of
Mortgagee’s interest in and to the revenues arising out of or in connection with
the Property and may collect directly from such tenants, lessees and licensees
all amounts due on account of such revenues;

 

(b)           At Mortgagee’s request, Mortgagor will provide written
notification to any or all tenants, lessees and licensees of the property
concerning Mortgagee’s interest in the revenues arising out of or in connection
with the Property and will request that such tenants, lessees and licensees
forward payment thereof directly to Lender;

 

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(c)           Mortgagor shall hold any proceeds and collections of any of the
revenues arising out of or in connection with the Property in trust for
Mortgagee and shall not commingle such proceeds or collections with any other
funds of Mortgagor; and

 

(d)           Mortgagor shall deliver all such proceeds to Mortgagee immediately
upon the receipt thereof by Mortgagor in the identical form received, but duly
endorsed or assigned on behalf of Mortgagor to Mortgagee.

 

4.6           Use and Occupation of Property.  In connection with the exercise
of Mortgagee’s rights under subsection 4.2(f), Mortgagee may enter upon, occupy,
and use all or any part of the Property and may exclude Mortgagor from the Land
and the Improvements thereon or portion thereof as may have been so entered
upon, occupied, or used.  Mortgagee shall not be required to remove any personal
Property from the Land and the Improvements upon Mortgagee’s taking possession
thereof, and may render any personal Property unusable to Mortgagor.  In the
event Mortgagor manages the Land and the improvements thereon in accordance with
subsection 4.2(f) herein, Mortgagor shall pay to Mortgagee on demand a
reasonable fee for the management thereof in addition to the indebtedness. 
Further, Mortgagee may construct such improvements on the Land or make such
alterations, renovations, repairs, and replacements to the Improvements, as
Mortgagee, in its sole discretion, deems proper or appropriate.  The obligation
of Mortgagor to pay such amounts and all expenses incurred by Mortgagee in the
exercise of its rights hereunder shall be included in the indebtedness and shall
accrue interest at the default rate of interest stated in the Note.

 

4.7           Partial Sales.  Mortgagor agrees that in case Mortgagee, in the
exercise of the power of sale contained herein or in the exercise of any other
rights hereunder given, elects to sell in parts or parcels, said sales may be
held from time to time and that the power shall not be exhausted until all of
the Property not previously sold shall have been sold, notwithstanding that the
proceeds of such sales exceed, or may exceed, the indebtedness.

 

4.8           Assembly of Property.  Upon the occurrence of any Event of
Default, Mortgagee may require Mortgagor to assemble the Property and make it
available to Mortgagee, at Mortgagor’s sole risk and expense, at a place or
places to be designated by Mortgagee which are reasonably convenient to both
Mortgagee and Mortgagor.

 

4.9           Power of Attorney.  Upon the occurrence of any Event of Default,
Mortgagor hereby irrevocably constitutes and appoints Mortgagee as Mortgagor’s
true and lawful attorney in fact to take any action with respect to the Property
to preserve, protect, or realize upon Mortgagee’s interest therein, each at the
sole risk, cost and expense of Mortgagor, but for the sole benefit of
Mortgagee.  The rights and powers granted Mortgagee by the within appointment
include, but are not limited to, the right and power to: (a) prosecute, defend,
compromise, settle, or release any action relating to the Property; (b) endorse
the name of Mortgagor in favor of Mortgagee upon any and all checks or other
items constituting revenues arising out of or in connection with the Property;
(c) sign and endorse the name of Mortgagor on, and to receive as secured party,
any of the Property; (d) sign and file or record on behalf of Mortgagor any
financing or other statement in order to perfect or protect Mortgagee’s security
interest; (e) enter into any contracts or agreements relative to, and to take
all action deemed necessary in connection with, the construction of any
improvements on the Land; (g) manage, operate, maintain or repair the Land and
the improvements; and (h) exercise the rights of Mortgagor under any contracts,
leases or intangible personal property.  Mortgagee shall not be obligated to
perform any of such acts or to exercise any of such powers, but if Mortgagee
elects so to perform or exercise, Mortgagee shall not be accountable for more
than it actually receives as a result of such exercise of power, and shall not
be responsible to Mortgagor except for Mortgagee’s willful misconduct or gross
negligence.  All powers conferred upon Mortgagee by this Mortgage and Security
Agreement, being coupled with an interest, shall be irrevocable until terminated
by a written instrument executed by a duly authorized officer of the Mortgagee.

 

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ARTICLE 5. MISCELLANEOUS

 

5.1           Mortgagee.  The Mortgagee shall be protected in acting upon any
notice, request, consent, demand, statement, note or other paper or document
believed by them to be genuine and to have been signed by the party or parties
purporting to sign the same.  The Mortgagee shall not be liable for any error of
judgment, nor for any act done or step taken or omitted, nor for any mistake of
law or fact, nor for anything which they may do or refrain from doing in good
faith nor generally shall a Mortgagee have any accountability hereunder except
for his own individual willful default.

 

5.2           Estoppel Certificates.  Mortgagor, upon request, made either
personally or by mail, shall, within six (6) days in case the request is made
personally, or within ten (10) days after the mailing of such request in case
the request is made by mail, certify, by a writing duly acknowledged, to
Mortgagee or to any proposed assignee of the Note, the amount of principal and
interest then owing on the Note and whether any offsets or defenses exist
against the indebtedness secured hereby.  At the request of Mortgagee, such
certificate shall also contain a statement that Mortgagor knows of no Event of
Default nor of any other default which, after notice or lapse of time or both,
would constitute an Event of Default, which has occurred and remains uncured as
of the date of such certificate, or, if any such Event of Default or other
default has occurred and remains uncured as of the date of such certificate,
then such certificate shall contain a statement specifying the nature thereof,
the time for which the same has continued and the action which Mortgagor has
taken or proposes to take with respect thereto.

 

5.3           Subrogation.  This Mortgage and the Mortgagee, as additional
security, are hereby subrogated to the lien or liens and to the rights of the
owners and holders thereof of each and every mortgage, lien or other encumbrance
on the Property, or any part thereof, or any claim or demand which is paid or
satisfied, in whole or in part, out of the proceeds of the indebtedness secured
hereby and the respective liens of said mortgages, liens and other encumbrances
and claims and demands shall pass to and be held by the Mortgagee as additional
security for the indebtedness to Mortgagee to the same extent that they would
have been preserved and would have been passed to and been held by Mortgagee had
they each been duly and regularly assigned, transferred, set over and delivered
to Mortgagee by separate deed of assignment, notwithstanding the fact the same
may be or may have been satisfied and cancelled of record, it being the
intention of the parties hereto that the same will be satisfied and cancelled of
record at or about the time they are paid or satisfied out of the proceeds of
the Loan.

 

5.4           Notices.  Unless specifically provided otherwise in this Mortgage
or by law, any notice required or permitted by or in connection with this
Mortgage shall be in writing and shall be made by facsimile or by hand delivery,
by overnight delivery service, or by certified mail, unrestricted delivery,
return receipt requested, postage prepaid, addressed to Mortgagee or Mortgagor
at the appropriate address set forth above or to such other address as may be
hereafter specified by written notice by Mortgagee or Mortgagor.  Notice shall
be considered given as of the date of the facsimile or the hand delivery, one
(1) calendar day after delivery to the overnight delivery service, or three (3)
calendar days after the date of mailing, independent of the date of actual
delivery or whether delivery is ever in fact made, as the case may be, provided
the giver of notice can establish that notice was given as provided herein.

 

5.5           Legal Construction.  This Mortgage shall be construed according to
the laws of New Jersey (excluding New Jersey conflict of laws) and any court of
competent jurisdiction of New Jersey shall have jurisdiction in any proceeding
instituted to enforce this Mortgage and any objections to venue are hereby
waived.

 

5.6           Usury Limitations.  No provision of this Mortgage shall require
the payment or permit the collection of interest or other sum in excess of the
maximum permitted by applicable law, including a judicial determination.  If any
excess of interest or other sum in such respect is herein provided for, or shall
be adjudicated to be so provided for herein, neither Mortgagor nor its
successors or assigns shall be obligated to pay such interest or other sum in
excess of the amount permitted by applicable law, including a judicial
determination, and the right to demand the payment of any such excess shall be
and hereby is waived.  The provisions of this Section shall control all other
provisions of this Mortgage.

 

5.7           Recording.  Mortgagor covenants and agrees to promptly cause all
documents required by Mortgagee to be properly recorded or filed, including this
Mortgage, and to pay all fees, taxes and

 

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expenses incident thereto.  Mortgagor shall hold harmless and indemnify
Mortgagee against any liability incurred by reason of the imposition of any fee,
tax or charge on the making and recording of this Mortgage.

 

5.8           Rights of Mortgagee.

 

(a)           Rights Not Limited.  The rights, powers, privileges and
discretions (hereinafter collectively called the “rights”) specifically granted
to the Mortgagee and those specifically granted to Mortgagee under this Mortgage
are not in limitation of but in addition to those to which they are entitled
under any general or local law relating to and mortgages in New Jersey, now or
hereafter existing.

 

(b)           Benefit to Successors and Assigns.  The rights to which Mortgagee
may be entitled shall inure to the benefit of its successors and assigns.

 

(c)           Rights Cumulative.  All the rights of Mortgagee are cumulative and
not alternative and may be enforced successively or concurrently.

 

5.9           No Waiver.  Failure of Mortgagee to exercise any of their rights
shall not impair any of their rights nor be deemed a waiver thereof, and no
waiver of any of their rights shall be deemed to apply to any other such rights,
nor shall it be effective unless in writing and signed by the party waiving the
right.  The acceptance by Mortgagee of any partial payment after default or an
Event of Default, with or without knowledge of the default or Event of Default,
shall not be a waiver of the default or Event of Default unless Mortgagee shall
specifically state in writing that the acceptance waives the default or Event of
Default or states further conditions which must be satisfied to constitute such
a waiver.  The failure of Mortgagee to exercise the option for acceleration of
maturity, foreclosure, or either, following an Event of Default or to exercise
any other option or privilege granted to Mortgagee hereunder in any one or more
instances, shall not constitute a waiver of any such default, but such option or
privilege shall remain continuously in force.

 

5.10         Mutual Waiver of Jury Trial.  Mortgagor and Mortgagee (by
acceptance of this Mortgage) each, on behalf of itself and its successors and
assigns, WAIVES to the fullest extent permitted by law all right to TRIAL BY
JURY of any and all claims between them arising under this Mortgage, the Note,
the Loan Agreement, or any other Loan Documents, and any and all claims arising
under common law or under any statute of any state or the United States of
America, whether any such claims be now existing or hereafter arising, now known
or unknown.  In making this waiver Mortgagee and Mortgagor acknowledge and agree
that any and all claims made by Mortgagee and all claims made against Mortgagee
shall be heard by a judge of a court of proper jurisdiction, and shall not be
heard by a jury.  Mortgagee and Mortgagor acknowledge and agree that THIS WAIVER
OF TRIAL BY JURY IS A MATERIAL ELEMENT OF THE CONSIDERATION FOR THIS
TRANSACTION.  Mortgagee and Mortgagor, with advice of counsel, each acknowledges
that it is knowingly and voluntarily waiving a legal right by agreeing to this
waiver provision.

 

5.11         Waiver by Mortgagor.  Mortgagor waives, on behalf of itself and all
persons now or hereafter interested in the Property, all rights under all
appraisement, homestead, moratorium, valuation, redemption, exemption, stay,
extension and marshalling statutes, laws or equities now or hereafter existing
and agrees that no defense based on any thereof will be asserted in any action
enforcing this Mortgage.

 

5.12         Secondary Market Cooperation.  Mortgagor acknowledges that
Mortgagee may (a) sell this Mortgage, the Note and the other Loan Documents to
one or more investors as a whole loan, (b) participate the Loan to one or more
investors, (c) deposit this Mortgage, the Note, the Guarantee and the other Loan
Documents with a  trust, which trust may sell certificates to investors
evidencing an ownership interest in the trust assets or (d) otherwise sell the
Loan or interest therein to investors (the transactions referred to in clauses
(a) through (d) are hereinafter referred to as “Secondary Market
Transactions”).  Mortgagor shall cooperate in good faith with Mortgagee in
effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements imposed by any rating agency involved in any
Secondary Market Transaction including, without limitation, all structural or
other changes to the Loan, modifications to any documents evidencing or securing
the Loan, delivery of opinions of

 

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counsel acceptable to the rating agency and addressing such matters as the
rating agency may require; provided, however, Mortgagor shall not be required to
modify any documents evidencing or securing the Loan which would modify (i) the
interest rate payable under the Note, (ii) the stated maturity of the Note,
(iii) the amortization of principal of the Note, or (iv) any other material
economic term of the Loan.  Mortgagor shall provide such information and
documents relating to Mortgagor, any guarantor of Mortgagor, the Property and
any tenant of the Property as Mortgagee may reasonably request in connection
with a Secondary Market Transaction.  Mortgagee shall have the right to provide
to prospective investors any information in its possession, including, without
limitation, financial statements relating to Mortgagor, any guarantor of
Mortgagor, the Property and any tenant of the Property.  Mortgagor acknowledges
that certain information regarding the Loan and the parties thereto and the
Property may be included in a private placement memorandum, prospectus or other
disclosure documents.

 

5.13         Indemnification.  Mortgagee shall not be obligated to perform or
discharge any obligation or duty to be performed or discharged by Mortgagor
under any lease. Mortgagor shall indemnify the Mortgagee for and save them
harmless from any and all liability arising from any lease or assignment of a
lease as security under this Mortgage. Mortgagee shall not have any
responsibility for the control, care, management or repair of the Property or be
liable for any negligence in the management, operation, upkeep, repair or
control of the Property resulting in loss or injury or death to any lessee or
any other person or entity.  The obligations and liabilities of Mortgagor under
this paragraph shall survive any termination, satisfaction or assignment of this
Mortgage and the exercise by Mortgagee of any of its rights or remedies
hereunder including, without limitation, the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.

 

5.14         Binding Effect.  The terms and conditions agreed to by Mortgagor
and the covenants of Mortgagor shall be binding upon the personal
representatives, successors and assigns of Mortgagor and of each of them, but
this provision does not waive any prohibition of assignment or any requirement
of consent to an assignment under the other provisions of this Mortgage; any
consent to an assignment shall not be consent to any further assignment, each of
which must be specifically obtained in writing.

 

5.15         Recitals.  The recitals of this Mortgage are incorporated herein
and made a part hereof.

 

5.16         Number and Gender.  Wherever used herein the singular shall include
the plural and the plural the singular, and the use of any gender shall include
all genders.

 

5.17         Time of Essence.  Time is of the essence of the obligations of
Mortgagor in this Mortgage and each and every term, covenant and condition made
herein by or applicable to Mortgagor.

 

5.18         Captions.  The captions of the Sections of this Mortgage are for
the purpose of convenience only and are not intended to be a part of this
Mortgage and shall not be deemed to modify, explain, enlarge, or restrict any of
the provisions hereof.

 

5.19.        Severability.  If any provision of this Mortgage or the application
thereof to any person or circumstance shall be invalid, inoperative or
unenforceable to any extent, the remainder of this Mortgage and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be valid, operative and enforceable to the greatest extent
permitted by law.

 

5.20.        Execution of Counterparts.  This Mortgage may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same Mortgage.

 

5.21.        Security Agreement.  Mortgagor has executed this instrument as a
Debtor under the Uniform Commercial Code of the state in which the Property is
located.  This Mortgage shall constitute and be a security agreement and
financing statement under the laws of such state.

 

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ARTICLE 6. ADDITIONAL COVENANTS

 

6.1           Leases of the Property.

 

6.1.1        Compliance with Leases.  Mortgagor shall carry out all of its
agreements and covenants as landlord contained in any leases (which word when
used in this Mortgage shall include, without limitation, all agreements,
licenses, contracts, reservations, accounts, and permits affecting all or any
part of the Property) and not permit a lien or other encumbrance superior to
such leases other than this Mortgage.  No lease shall include any space, or
grant to any tenant any right or interest in any area outside of the limits of
the Property.  Upon demand of Mortgagee, Mortgagor shall furnish Mortgagee an
executed copy of each lease immediately upon its execution.  All future leases
shall be written on the standard form accepted by Mortgagee, with only such
changes as Mortgagee shall have approved in writing or on a lease agreement
approved by Mortgagee.

 

6.1.2        Assignment of Leases.  Mortgagor hereby grants, conveys, assigns,
and transfers unto the Mortgagee, for the benefit of Mortgagee, all the right,
title, interest and privileges which Mortgagor has or may hereafter have in any
and all of said leases now existing or hereafter made affecting all or a part of
the Property, as said leases may have been or may from time to time be hereafter
modified, extended or renewed with all the rents (which word when used in this
Mortgage shall include, without limitation, all income and profits) due and
becoming due therefrom and including without limitation the right of Mortgagee
to inspect the leased areas and books and records of tenants.  Mortgagor shall,
upon written request by Mortgagee, execute assignments (in any form customarily
used by Mortgagee) of any present or future leases, together with the rents due
and becoming due therefrom, which affect in any way all or any part of the
Property.  No such assignment made or required hereby shall be construed as a
consent by Mortgagee  to any lease or to impose on Mortgagee any obligation with
respect thereto.  Mortgagor shall not make any other assignment, hypothecation
or pledge of any rents under any lease of part or all of the Property. 
Mortgagor shall not, without the prior written approval of Mortgagee, cancel any
of the leases, nor terminate or accept a surrender thereof, nor reduce the
payment of rent thereunder, nor modify any of said leases, nor accept any
prepayment of rent other than the usual prepayment as would result from the
acceptance by landlord more than fifteen (15) days before the first day of each
month for the ensuing month under leases approved by Mortgagee according to the
terms of such leases.  The covenants and restrictions of this subsection shall
be deemed covenants and restrictions running with the land.

 

6.1.3        Limitation on Subordinate Lienors.  Mortgagor covenants that
Mortgagee of any subordinate lien shall have no right, and shall acquire no
right, to terminate or modify any lease affecting the Property whether or not
such lease is subordinate to the legal operation and effect of this Mortgage.

 

6.1.4        Deposit of Rents.  All payments, including security deposits, under
any lease received by Mortgagor shall be deemed held by Mortgagor in trust for
the payment of the indebtedness secured hereby.  Mortgagor shall deposit in a
non-interest bearing account or accounts with Mortgagee all payments (except
security deposits made under residential leases, if any) made under all leases,
which sums, subject to the rights of the tenants therein, may be used by
Mortgagor in the ordinary course of Mortgagor’s business to the extent permitted
by law, until one or more of the Events of Default shall occur, but not
thereafter.

 

6.1.5        Assignment of Bankruptcy Awards.  Mortgagor hereby assigns to the
Mortgagee  any award made hereafter to it in any court procedure involving any
of the tenants in any bankruptcy, insolvency or reorganization proceeding in any
state or federal court and any and all payments by any tenant in lieu of rent.

 

6.1.6        Limitation of Liability under Leases.  The Mortgagee shall not be
obligated to perform or discharge any obligation or duty to be performed or
discharged by Mortgagor under any lease; and Mortgagor hereby agrees to
indemnify the Mortgagee for and to save them harmless from, any and all
liability arising from any lease, or this assignment thereof and this assignment
shall not place the responsibility for the control, care, management or repair
of the Property upon the Mortgagee, nor make said Mortgagee liable for any
negligence in the management, operation, upkeep, repair or control of the
Property resulting in loss or injury or death to any tenant, agent, guest, or
stranger.

 

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6.1.7        Security Deposits.  Mortgagor shall deposit in an account or
accounts with Mortgagee or its designee, under the depository’s standard program
for such accounts, all security deposits made under residential leases which
sums, subject to the rights of the tenants therein, may be used by Mortgagor in
the ordinary course of Mortgagor’s business to the extent permitted by law,
until one or more of the Events of Default shall occur, but not thereafter.  All
such deposits shall be the continuing responsibility of Mortgagor, and Mortgagor
shall comply with all applicable requirements of state and local law where the
Property is located.

 

6.2                               Environmental Covenants.

 

6.2.1        No Substances Present.  Mortgagor hereby represents and warrants to
Mortgagee that, after a due and diligent investigation, to the best of its
knowledge, there are not now and have never been any materials or substances
located on or near the Property that, under federal, state, or local law,
statute, ordinance, or regulation, or administrative or court order or decree,
or private agreement (collectively, the “Environmental Laws”), are regulated as
to use, generation, collection, storage, treatment, or disposal (such materials
or substances are hereinafter collectively referred to as “Substances”).  The
term “Substances” includes any materials or substances whose release or
threatened release may pose a risk to human health or the environment or
impairment of property values and shall also include without limitation
(i) asbestos in any form, (ii) urea formaldehyde foam insulation, (iii) paint
containing lead, (iv) transformers or other equipment which contains dielectric
fluid containing levels of polychlorinated biphenyls of 50 parts per million or
more, and (v) petroleum in any form. Mortgagor further represents and warrants
to Mortgagee that the Property is not now being used nor has it ever been used
in the past for any activities involving the use, generation, collection,
storage, treatment, or disposal of any Substances.  Mortgagor will not place or
permit to be placed any Substances on or near the Property except for those
Substances that are typically used in the operation of Mortgagor’s business
provided the same are in appropriately small quantities and are stored, used,
and disposed of properly; or Substances that are approved in writing by
Mortgagee.

 

6.2.2        Acting Upon Presence of Substances.  Mortgagor hereby covenants and
agrees that, if at any time (i) Substances are spilled, emitted, disposed, or
leaked in any amount; or (ii) it is determined that there are Substances located
on, in, or under the Property other than those of which Mortgagee has approved
in writing or which are permitted to be used on the Property without Mortgagee’s
written approval pursuant to subsection 6.2.1 of this Section, Mortgagor shall
immediately notify Mortgagee and any authorities required by law to be notified,
and shall, within thirty (30) days thereafter or sooner if required by Mortgagee
or any governmental authority, take or cause to be taken, at Mortgagor’s sole
expense, such action as may be required by Mortgagee or any governmental
authority.  If Mortgagor shall fail to take such action, Mortgagee may make
advances or payments towards performance or satisfaction of the same but shall
be under no obligation so to do; and all sums so advanced or paid, including all
sums advanced or paid in connection with any investigation or judicial or
administrative proceeding relating thereto, including, without limitation,
reasonable attorneys’ fees, expert fees, fines, or other penalty payments, shall
be at once repayable by Mortgagor and shall bear interest at the Default Rate,
from the date advanced or paid by Mortgagee until the date paid by Mortgagor to
Mortgagee, and all sums so advanced or paid, with interest as aforesaid, shall
become a part of the indebtedness secured hereby.

 

6.2.3        Environmental Audits.  Mortgagor, promptly upon the written request
of Mortgagee from time to time, shall provide Mortgagee, at Mortgagor’s expense,
from time to time with an environmental site assessment or environmental audit
report, or an update of such an assessment or report, all in scope, form, and
content satisfactory to Mortgagee.

 

6.2.4        Environmental Notices.  Mortgagor shall furnish to Mortgagee
duplicate copies of all correspondence, notices, or reports it receives from any
federal, state, or local agency or any other person regarding environmental
matters or Substances at or near the Property, immediately upon Mortgagor’s
receipt thereof.

 

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6.2.5        Condition of Property.  Mortgagor hereby represents and warrants
that there are no wells or septic tanks on the Property serving any other
property; no wells or septic tanks on other property serving the Property; no
burial grounds, archeological sites, or habitats of endangered or threatened
species on the Property; and that no part of the Property is subject to tidal
waters; has been designated as wetlands by any federal, state, or local law or
governmental agency; or is located in a special flood hazard area.

 

6.2.6        Environmental Indemnity.

 

6.2.6.1     Mortgagor shall at all times indemnify and hold harmless Mortgagee
against and from any and all claims, suits, actions, debts, damages, costs,
losses, obligations, judgments, charges, and expenses, of any nature whatsoever
suffered or incurred by Mortgagee, whether as beneficiary of this Mortgage, as
mortgagee in possession, or as successor-in-interest to Mortgagor by foreclosure
deed or deed in lieu of foreclosure, under or on account of the Environmental
Laws or any similar laws or regulations, including the assertion of any lien
thereunder, with respect to:

 

(a)           any discharge of Substances, the threat of a discharge of any
Substances, or the presence of any Substances affecting the Property whether or
not the same originates or emanates from the Property or any contiguous real
estate including any loss of value of the Property as a result of any of the
foregoing;

 

(b)           any costs of removal or remedial action incurred by the United
States Government or any costs incurred by any other person or damages from
injury to, destruction of, or loss of natural resources, including reasonable
costs of assessing such injury, destruction or loss incurred pursuant to any
Environmental Laws;

 

(c)           liability for personal injury or property damage arising under any
statutory or common law tort theory, including, without limitation, damages
assessed for the maintenance of a public or private nuisance or for the carrying
on of an abnormally dangerous activity at or near the Property; and/or

 

(d)           any other environmental matter affecting the Property within the
jurisdiction of the Environmental Protection Agency, any other federal agency,
or any state or local environmental agency.

 

Mortgagor’s obligations under this Agreement shall arise upon the discovery of
the presence of any Substance, whether or not the Environmental Protection
Agency, any other federal agency or any state or local environmental agency has
taken or threatened any action in connection with the presence of any
Substances.

 

7.                                       U.S. SMALL BUSINESS ADMINISTRATION
PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)                                      When SBA is the holder of the Note, this
document and all documents evidencing or securing this Loan will be construed in
accordance with federal law.

 

b)                                      Lender or SBA may use local or state
procedures for purposes such as filing papers, recording documents, giving
notice, foreclosing liens, and other purposes.  By using these procedures, SBA
does not waive any federal immunity from local or state control, penalty, tax or
liability.  No Borrower or Guarantor may claim or assert against SBA any local
or state law to deny any obligation of Borrower, or defeat any claim of SBA with
respect to this Loan.

 

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Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed on
its behalf and its seal to be hereunto affixed as of the date first above
written.

 

 

/s/ Brian Conners

 

Brian Todd Conners, individually

 

 

 

State/Commonwealth of New Jersey

 

County of Burlington

 

On this, the 10th day of March, 2011, before me Lisa Viscusi, the undersigned
officer, personally appeared Brian Todd Conners known to me (or satisfactorily
proven) to be the person(s)  whose name(s) is/are subscribed to the within
instrument, and acknowledged that he/she/they executed the same for the purposes
therein contained.

 

In witness whereof, I hereunto set my hand and official seal.

 

 

/s/ Denise Cascio

 

Notary Public

 

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EXHIBIT A

 

PROPERTY DESCRIPTION

 

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EXHIBIT B

 

PERMITTED ENCUMBRANCES

 

First mortgage in favor of ING Bank in the original amount of $339,920.00 dated
6/26/03 and recorded 7/19/03 in book 7122 page 5

 

Second mortgage in favor of Quicken Loans Inc. in the original amount of
$90,000.00 dated 6/15/04 and recorded 7/6/04 in book 7504 page 1634 (currently
serviced by E*TRADE Bank)

 

Pari passu mortgages in favor of Susquehanna Bank dated of even date herewith in
the original amounts of $2,100,000.00 and $1,400,000.00

 

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SECURITY AGREEMENT - COMMERCIAL

 

This Security Agreement - Commercial (“Security Agreement”) is executed, made
and delivered this 10th day of March, 2011 by Appliance Recycling Centers of
America, Inc. (herein the “Debtor”), whose address is 7400 Excelsior Boulevard,
Minneapolis, MN 55426, for the benefit of Susquehanna Bank, a Pennsylvania
state-chartered commercial banking corporation (the “Secured Party”), whose
address is 159 E. High Street, Pottstown, PA 19464.

 

FOR VALUE RECEIVED, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Debtor grants to Secured Party the security interest (and the
pledges and assignments as applicable) hereinafter set forth and agrees with
Secured Party as follows:

 

A.            OBLIGATIONS SECURED.  The security interest and pledges and
assignments as applicable granted hereby are to secure punctual payment and
performance of the following (i) a certain promissory note from ARCA Advanced
Processing, LLC, the (“Borrower”) of even date herewith in the original
principal sum of One Million Two Hundred Fifty Thousand Dollars and No Cents
($1,250,000.00) and payable to the order of Secured Party (the “Note”), and any
and all extensions, renewals, modifications and rearrangements thereof; and
(ii) any and all other indebtedness, liabilities and obligations whatsoever of
Debtor to Secured Party whether direct or indirect, absolutely or contingent,
primary or secondary, due or to become due and whether now existing or hereafter
arising and howsoever evidenced or acquired, whether joint or several, or joint
and several (all of which are herein separately and collectively referred to as
the “Obligations”).  Debtor acknowledges that the security interest hereby
granted shall secure all future advances as well as any and all other
indebtedness, liabilities and obligations of Debtor to Secured Party whether now
in existence or hereafter arising.

 

B.            USE OF COLLATERAL.  Debtor represents, warrants and covenants that
the Collateral will be used by the Debtor primarily for business, commercial, or
other similar purposes.

 

C.            DESCRIPTION OF COLLATERAL.  Debtor hereby grants to Secured Party
a security interest in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge
and assignment of, as applicable), the following property:

 

All Equipment.  A security interest in all equipment, now owned or hereafter
acquired by Debtor, including all appurtenances and additions thereto, and
substitutions therefor and replacement thereof, wheresoever located, including
all tools, parts and accessories used in connection therewith and including but
not limited to the collateral listed on Exhibit A” attached hereto.

 

The term “Collateral” as used in this Agreement shall mean and include, and the
security interest (and pledge and assignment as applicable) shall cover, all of
the foregoing property, as well as any accessions, additions and attachments
thereto, and the proceeds and products thereof, including without limitation,
all cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all returned or repossessed
goods arising from or relating to any of the property described herein or other
proceeds of any sale or other disposition of such property.

 

As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured
Party a security interest in, and a pledge and assignment of, any and all money,
property, deposit accounts, accounts, securities, documents, chattel paper,
claims, demands, instruments, items or deposits of the Debtor, and each of them,
or to which any of them is a party, now held or hereafter coming within Secured
Party’s custody or control, including without limitation, all certificates of
deposit and other depository accounts, whether such have matured or the exercise
of Secured Party’s rights results in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned. Without prior notice to or demand upon the Debtor, Secured Party may
exercise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party’s rights and remedies under
this paragraph shall be in addition to and cumulative of any other rights or
remedies at law and equity, including, without limitation, any rights of set-off
to which Secured Party may be entitled.

 

D.            REPRESENTATIONS. WARRANTIES AND COVENANTS OF DEBTOR.  Debtor

 

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represents and warrants as follows:

 

1.             Ownership; No Encumbrances.  Except for the security interest
(and pledges and assignments as applicable) granted hereby, the Debtor is, and
as to any property acquired after the date hereof which is included within the
Collateral, Debtor will be, the owner of all such Collateral free and clear from
all charges, liens, security interests, adverse claims and encumbrances of any
and every nature whatsoever.

 

2.             No Financing Statements.  There is no financing statement or
similar filing now on file in any public office covering any part of the
Collateral except those already disclosed to Secured Party by the pre-closing
searches, and Debtor will not execute and there will not be on file in any
public office any financing statement or similar filing except the pari passu
financing statements filed or to be filed in favor of, or assigned or to be
assigned on the date hereof to, Secured Party.

 

3.             Accuracy of Information.  All information furnished to Secured
Party concerning Debtor, the Collateral and the Obligations, or otherwise for
the purpose of obtaining or maintaining credit, is or will be at the time the
same is furnished, accurate and complete in all material respects.

 

4.             Authority.  Debtor has full right and authority to execute and
perform this Agreement and to create the security interest (and pledges and
assignment as applicable) created by this Agreement. The making and performance
by Debtor of this Agreement will not violate any articles of incorporation,
bylaws or similar document respecting Debtor, any provision of law, any order of
court or governmental agency, or any indenture or other agreement to which
Debtor is a party, or by which Debtor or any of Debtor’s property is bound, or
be in conflict with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture or other agreement, or result
in the creation or imposition of any charge, lien, security interest, claim or
encumbrance of any and every nature whatsoever upon the Collateral, except as
contemplated by this Agreement.

 

5.             Addresses.  The address of Debtor designated at the beginning of
this Agreement is Debtor’s place of business if Debtor has only one place of
business; Debtor’s chief executive office if Debtor has more than one place of
business; or Debtor’s residence if Debtor has no place of business. Debtor
agrees not to change such address without advance written notice to Secured
Party.

 

E.             GENERAL COVENANTS.  Debtor covenants and agrees as follows:

 

1.             Operation of Collateral.  Debtor agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper
manner, and in conformity with all applicable permits or licenses. Debtor shall
comply in all respects with all applicable statutes, laws, ordinances and
regulations. Debtor shall not use the Collateral in any unlawful manner or for
any unlawful purpose, or in any manner or for any purpose that would expose the
Collateral to unusual risk, or to penalty, forfeiture or capture, or that would
render inoperative any insurance in connection with the Collateral.

 

2.             Condition.  Debtor shall maintain, service and repair the
Collateral so as to keep it in good operating condition. Debtor shall replace
within a reasonable time all parts that may be worn out, lost, destroyed or to
otherwise rendered unfit for use, with appropriate replacement parts . Debtor
shall obtain and maintain in good standing at all times all applicable permits,
licenses, registrations and certificates respecting the Collateral.

 

3.             Assessments.  Debtor shall promptly pay when due all taxes,
assessments, license fees, and governmental charges levied or assessed against
Debtor or with respect to the Collateral or any part thereof.

 

4.             No Encumbrances.  Debtor agrees not to suffer or permit any
charge, lien, security interest, adverse claim or encumbrance of any and every
nature whatsoever against the Collateral or any part thereof.

 

5.             No Removal.  Except as otherwise provided in this Agreement,
Debtor shall not remove the Collateral from the County or counties designated at
the beginning of this Agreement without Secured Party’s written consent.

 

6.             No Transfer.  Except as otherwise provided in this Agreement with
respect to inventory, Debtor shall not, without the prior written consent of
Secured Party, sell, assign, transfer, lease, charter, encumber, hypothecate or
dispose of the Collateral, or any part thereof, or interest therein or offer to
do any of the foregoing.

 

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7.             Notices and Reports.  Debtor shall promptly notify Secured Party
in writing of any change in the name, identity or structure of Debtor, any
charge, lien, security interest, claim or encumbrance asserted against the
Collateral, any litigation against Debtor or the Collateral, any theft, loss,
injury or similar incident involving the Collateral, and any other material
matter adversely affecting Debtor or the Collateral. Debtor shall furnish such
other reports, information and data regarding Debtor’s financial condition and
operations, the Collateral and such other matters as Secured Party may request
from time to time.

 

8.             Landlord’s Waivers.  Debtor shall furnish to Secured Party, if
requested, a landlord’s waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord’s waivers to be in such form and upon such terms as are acceptable to
Secured Party.

 

9.             Additional Filings.  Debtor agrees to execute and deliver such
financing statement or statements, or amendments thereof or supplements thereto,
or other documents as Secured Party may from time to time require in order to
comply with the Minnesota Uniform Commercial Code (or other applicable state
laws of the jurisdiction where any of the Collateral is located) and to preserve
and protect the Secured Party’s rights to the Collateral.

 

10.           Protection of Collateral.  Secured Party, at its option, whether
before or after default, but without any obligation whatsoever to do so, may
(a) discharge taxes, claims, charges, liens, security interests, assessments or
other encumbrances of any and every nature whatsoever at any time levied, placed
upon or asserted against the Collateral, (b) place and pay for insurance on the
Collateral, including insurance that only protects Secured Party’s interest,
(c) pay for the repair, improvement, testing, maintenance and preservation of
the Collateral, (d) pay any filing, recording, registration, licensing or
certificate fees or other fees and charges related to the Collateral, or
(e) take any other action to preserve and protect the Collateral and Secured
Party’s rights and remedies under this Agreement as Secured Party may deem
necessary or appropriate. Debtor agrees that Secured Party shall have no duty or
obligation whatsoever to take any of the foregoing action. Debtor agrees to
promptly reimburse Secured Party upon demand for any payment made or any expense
incurred by the Secured Party pursuant to this authorization. These payments and
expenditures, together with interest thereon from date incurred until paid by
Debtor at the maximum contract rate allowed under applicable laws, which Debtor
agrees to pay, shall constitute additional Obligations and shall be secured by
and entitled to the benefits of this Agreement.

 

11.           Inspection.  Debtor shall at all reasonable times allow Secured
Party by or through any of its officers, agents, attorneys or accountants, to
examine the Collateral, wherever located, and to examine and make copies of or
extracts from Debtor’s books and records.

 

12.           Further Assurances.  Debtor shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and
assurances as Secured Party may request from time to time to protect, assure and
enforce Secured Party’s rights and remedies.

 

13.           Insurance.  Debtor shall have and maintain insurance at all times
with respect to all tangible Collateral insuring against risks of fire
(including so-called extended coverage), theft and such other risks as Secured
Party may require, containing such terms, in such form and amounts and written
by such companies as may be satisfactory to Secured Party, all of such insurance
to contain loss payable clauses in favor of Secured Party as its interest may
appear. All policies of insurance shall provide for fifteen (15) days written
minimum cancellation notice to Secured Party and at the request of Secured Party
shall be delivered to and held by it. Secured Party is hereby authorized to act
as attorney for Debtor in obtaining, adjusting, settling and canceling such
insurance to the Obligations secured hereby whether or not such Obligations are
then due and payable. Debtor specifically authorizes Secured Party to disclose
from the policies of insurance to prospective insurers regarding the Collateral.

 

14.           Additional Collateral.  If Secured Party should at any time be of
the opinion that the Collateral is impaired or insufficient, or has declined or
may decline in value, or should Secured Party deem payment of the Obligations to
be insecure, then Secured Party may call for additional security satisfactory to
Secured Party, and Debtor promises to furnish such additional security
forthwith. The call for additional security may be oral, by messenger or
telefax, or United States mail addressed to Debtor, and shall not affect any
other subsequent right of Secured Party to exercise the same.

 

15.           Goods.  Notwithstanding anything to the contrary contained in this
agreement, if any Debtor is a “consumer” as defined Regulation AA of the Board
of Governors of the Federal Reserve System, 12 C.F.R. Part 227, or the Federal
Trade Commission Credit Practices Rule, 16 C.F.R. Part 444, as applicable, no
lien or security interest created or evidenced by this agreement shall extend to
or cover a non-possessory lien or security interest in “household goods,” other
than a purchase money lien or security interest, in accordance with such
regulations as applicable.

 

F.             ADDITIONAL PROVISIONS REGARDING ACCOUNTS.  The following
provisions shall apply to all

 

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accounts included within the Collateral:

 

1.             Definitions.  The term “account”, as used in this Agreement,
shall have the same meaning as set forth in the Uniform Commercial Code of
Minnesota in effect as of the date of execution hereof, and as set forth in any
amendment to the Uniform Commercial Code of Minnesota to become effective after
the date of execution hereof, and also shall include all present and future
notes, instruments, documents, general intangibles, drafts, acceptances and
chattel paper of Debtor, and the proceeds thereof.

 

2.             Additional Warranties.  As of the time any account becomes
subject to the security interest (or pledge or assignment as applicable) granted
hereby, Debtor shall be deemed further to have warranted as to such and all of
such accounts as follows: (a) each account and all papers and documents relating
thereto are genuine and in all respects what they purport to be; (b) each
account is valid and subsisting and arises out of a bona fide sale or lease of
goods sold or leased and delivered to, or out of and for services therefore
actually rendered by the Debtor to, the account debtor named in the account;
(c) the amount of the account represented as owing is the correct amount
actually and unconditionally owning except for normal cash discounts and is not
subject to any set-offs, credits, defenses, deductions or countercharges; and
(d) Debtor is the owner thereof free and clear of any charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.

 

3.             Collection of Accounts.  Secured Party shall have the right in
its own name or in the name of the Debtor, whether before or after default, to
require Debtor forthwith to transmit all proceeds of collection of accounts
directly to Secured Party, to demand, collect, receive, receipt for, sue for,
compound and give acquittal for, any and all amounts due or to become due on the
accounts and to endorse the name of the Debtor on all Commercial paper given in
payment or part payment thereof, and in Secured Party’s discretion to file any
claim or take any other action or proceeding that Secured Party, may deem
necessary or appropriate to protect and preserve and realize upon the accounts
and related Collateral. Unless and until Secured Party elects to collect
accounts, and the privilege of Debtor to collect accounts is revoked by Secured
Party in writing, Debtor shall continue to collect accounts, account for same to
Secured Party, and shall not commingle the proceeds of collection of accounts
with any funds of the Debtor. In order to assure collection of accounts in which
Secured Party has a security interest (or which have been pledged or assigned to
Secured Party as applicable) hereunder, Secured Party may notify the post office
authorities to change the address for delivery of mail addressed to Debtor to
such address as Secured Party may designate, and to open and dispose of such
mail and receive the collections of accounts included herewith. Secured Party
shall have no duty or obligation whatsoever to collect any account, or to take
any other action to preserve or protect the Collateral; however, Debtor releases
Secured Party from any claim or claims for loss or damage arising from any act
or omission of Secured Party and its officers, directors, employees or agents,
should Secured Party elect to collect any account or take any possession of any
Collateral.

 

4.             Identification and Assignment of Accounts.  Upon Secured Party’s
request, whether before or after default, Debtor shall take such action and
execute and deliver such documents as Secured Party may request in order to
identify, confirm, mark, segregate and assign accounts and to evidence Secured
Party’s interest in same. Without limitation of the foregoing Debtor, upon
request, agrees to assign accounts to Secured Party, identify and mark accounts
as being subject to the security interest (or pledge or assignment as
applicable) granted hereby, mark Debtors books and records to reflect such
security interests, pledges and assignments, and forthwith to transmit to
Secured Party in the form received by Debtor any and all proceeds of collection
of such accounts.

 

5.             Account Reports.  Debtor will deliver to Secured Party, as Lender
may require, a written report in form and in content satisfactory to Secured
Party, showing a listing and aging of accounts and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of the assertion by any account debtor of any set-off, defense or
claim regarding an account or any other matter adversely affecting any account.

 

6.             Segregation of Returned Goods.  Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property. Debtor shall as often as requested by Secured Party, but not less
often than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included in assignments or
identifications made pursuant hereto.

 

7.             Right of Off-Set.  Any deposit or other sums at any time credited
by or due from the holder of the Obligations to Debtor or any endorser,
guarantor or surety of any of the Obligations and any securities or other
property of Debtor or any endorser, guarantor or surety of any of the
Obligations in the possession of the holder of the Obligations may at all times
be held and treated as additional and cumulative collateral security for the
payment of the Obligations and Debtor grants Secured Party a security interest
and contractual right of off-set in all such deposits, sums, securities and
other properties as additional and cumulative security for payment of the
Obligations. The holder of the Obligations may apply to set-off such deposits or
other sums against the Obligations at any time in the case of Debtor,  but only
with respect to matured liabilities in case of the endorsers, guarantors, or
sureties of any of the Obligations.

 

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G.            ADDITIONAL PROVISIONS REGARDING INVENTORY.  The following
provisions shall apply to all inventory included within the Collateral:

 

1.             Inventory Reports.  Debtor will deliver to Secured Party as
Secured Party may require, on such frequency as Secured Party may request, a
written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Debtors opening
inventory, inventory acquired, inventory sold, inventory leased, inventory
returned, inventory used in Debtor’s business, closing inventory, any other
inventory not within the preceding categories and such other information as
Secured Party may request from time to time. Debtor shall immediately notify
Secured Party of any matter adversely affecting the inventory, including,
without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss of depreciation.

 

2.             Location of Inventory.  Debtor will promptly notify Secured Party
in writing of any addition to, change in or discontinuance of its place(s) of
business as shown in this Agreement, the places at which inventory is located as
shown herein, the location of its chief executive office and the location of the
office where it keeps its records as set forth herein. All Collateral will be
located at the places of business shown below, as modified by any written
notices given pursuant hereto.

 

3.             Uses of Inventory.  Except as set forth in the loan agreement,
unless and until the privilege of Debtor to use inventory in the ordinary course
of Debtor’s business is revoked by Secured Party in the event of default or if
Secured Party deems itself insecure, Debtor may use the inventory in any manner
not inconsistent with this Agreement, may lease or sell that part of the
Collateral consisting of inventory provided that all such leases and sales are
in the ordinary course of business, and use and consume any raw materials or
supplies that are necessary in order to carry on Debtor’s business. A sale in
the ordinary course of business does not include a transfer in partial or total
satisfaction of a debt.

 

4.             Accounts as Proceeds.  All accounts that are proceeds of the
inventory included within the Collateral shall be subject to all of the terms
and provisions hereof pertaining to accounts.

 

5.             Protection of Inventory.  Debtor shall take all action necessary
to protect and preserve the inventory.

 

6.             Assignment of Rents and Leases.  Debtor hereby assigns to Secured
Party all rents and other benefits derived or to be derived from leases
(“Leases”) of the inventory now or hereafter existing or entered into, together
with all guarantees, amendments, modifications, extensions and renewals thereof
(the “Rents”). Prior to a foreclosure by Secured Party of any lien or security
interest which Secured Party may now or hereafter hold covering the inventory,
this Assignment of Rents is not intended to, and shall not, constitute payment
to Secured Party, unless Secured Party terminates Debtor’s license to collect
the Rents, and then it shall constitute payment only to the extent that prior to
foreclosure the Rents are actually received by Secured Party as opposed to
constituting a portion of the voluntary payments of principal and interest on
the indebtedness evidenced and secured hereby, and are not used for the
operation, maintenance or repair of the inventory, or for the payment of costs
and expenses in connection therewith. Except as otherwise provided herein,
Secured Party shall have the absolute right, power and authority to take any and
all actions which Secured Party deems necessary or appropriate in connection
with taking possession of the inventory, leasing all or any part of the
inventory, collecting all or any of the Rents and enforcing the rights of the
lessor under any of the leases, including without limitation, bringing,
prosecuting, defending or settling legal proceedings against lessees of the
inventory. Notwithstanding anything herein to the contrary, Secured Party shall
not be obligated to perform or discharge, and Secured Party does not undertake
to perform or discharge, any obligation, duty or liability with respect to the
Leases or the Rents under or by reason of this Assignment. This Assignment shall
not operate to place responsibility for the control, care, maintenance or repair
of the inventory upon Secured Party, or for any dangerous or defective condition
of the Inventory, or for any negligence in the arrangement, upkeep, repair, or
control of the inventory. Debtor shall retain a revocable license to collect and
receive the Rents as the agent of Secured Party, and to retain, use and enjoy
such Rents, provided that such revocable license ipso facto terminate without
further action by Secured Party and without notice to Debtor upon the occurrence
of any default or event of default as defined in any note, deed of trust,
security agreement, guaranty, financing statement, fixture filing or other loan
documents given to Secured Party by Debtor or any other party in connection with
any indebtedness or obligation of Debtor to Secured Party.

 

7.             Leased Inventory.  Debtor shall (a) observe and perform
faithfully every obligation which Debtor is required to perform under the
Leases; (b) enforce or secure the performance of, at its sole cost and expense,
every obligation to be performed by the lessees under the Leases; (c) not
collect any Rents in advance of the time when the same shall be due, or
anticipate any payments under any of the Leases, except for bona fide security
deposits not in excess of an amount equal to two (2) months Rent; (d) at the
request of Secured Party, deliver copies of Leases to Secured Party; and
(e) appear and defend against, at Debtor’s sole cost and expense, any action or
proceeding arising under, and in any manner connected with the Leases, the Rents
or the obligations, duties or liabilities of the lessor, lessee or guarantors
thereunder.

 

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H.            [INTENTIONALLY OMITTED]

 

I.              [INTENTIONALLY OMITTED]

 

J.             EVENTS OF DEFAULT.  Debtor shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal,
interest or other amount due on any Obligations; (ii) the occurrence of any
event which under the terms of any evidence of indebtedness, indenture, loan
agreement, security agreement or similar instrument permits the acceleration of
maturity of any of obligation of Debtor whether to Secured Party or to others;
(iii) any representation or warranty made by Debtor and/or others to Secured
Party in connection with this Agreement, the Collateral or the Obligations, or
in any statements or certificates, proves incorrect in any material respect as
of the date of the making or the issuance thereof; (iv) default occurs in the
observance or performance of or, if Debtor fails to furnish adequate evidence of
performance of, any provision of this Agreement or of any note, assignment,
transfer, other agreement, document or instrument delivered by Debtor to Secured
Party in connection with this Agreement, the Collateral or the Obligations;
(v) death, dissolution, liquidation, termination of existence, insolvency,
business failure or winding-up of Debtor, or any maker, endorser, guarantor,
surety or other party liable in any capacity for any of the Obligations;
(vi) the filing of a petition in bankruptcy by or against, or the application
for appointment of a receiver or any other legal custodian for any part of the
property of, or the assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy, rearrangement,
reorganization, insolvency or similar laws for the relief of Debtors by or
against, the Debtor, or any maker, endorser, guarantor, surety or other party
primarily or secondarily liable for any of the Obligations; (vii) the Collateral
becomes, in the judgment of Secured Party, impaired, unsatisfactory or
insufficient in character or value; (viii) the filing of any levy, attachment,
execution, garnishment or other process against the Debtor, or any of the
Collateral or any maker, endorser, guarantor, surety, or other party liable in
any capacity for any of the Obligations, or (ix) the Secured Party in good faith
believes that the prospect of repayment or performance of the Obligations or any
of the covenants, agreements or other duties under any writing executed in
connection herewith is impaired.

 

K.            REMEDIES.  Upon the occurrence of an Event of Default, or if
Secured Party deems payment or performance of the Obligations to be insecure,
Secured Party, at its option, shall be entitled to exercise any one or more of
the following remedies (all of which are cumulative):

 

1.             Declare Obligations Due.  Secured Party, at its option, may
declare the Obligations or any part thereof immediately due and payable, without
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor, or any other notice
whatsoever, all of which are hereby waived by Debtor, the Borrower and any
maker, endorser, guarantor, surety or other party liable in any capacity for any
of the Obligations.

 

2.             Remedies.  Secured Party shall have all of the rights and
remedies provided for in this Agreement and any other agreements executed by
Debtor, the rights and remedies in the Uniform Commercial Code of Minnesota, and
any and all rights and remedies at law or in equity, all of which shall be
deemed cumulative. Without limiting the foregoing, Debtor agrees that Secured
Party shall have the right to: (a) require Debtor to assemble the Collateral and
make it available to Secured Party at a place designated by Secured Party that
is reasonably convenient to both parties, which Debtor agrees to do; (b) take
possession of the Collateral with or without process of law, and, in this
connection, enter any premises where the Collateral is located to remove same,
to render it unusable, or to dispose of same on such premises; (c) sell, lease
or otherwise dispose of the Collateral, by public or private proceedings, for
cash or credit, without assumption of credit risks; and/or (d) whether before or
after default, collect and receipt for, compound, compromise, and settle, and
give releases, discharges and acquittances, with respect to, any and all amounts
owed by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of the
type customarily sold on a recognized market, Secured Party will send Debtor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or other disposition will be made. Any requirement of
reasonable notice to Debtor shall be met if such notice is mailed, postage
prepaid, to Debtor at the address of Debtor designated at the beginning of this
Agreement, at least five (5) days before the day of any public sale or at least
five (5) days before the time after which any private sale or other disposition
will be made.

 

3.             Expenses.  Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights and
remedies, in retaking, holding, testing, repairing, and proving, selling,
leasing or disposing of the Collateral, or like expenses, including, without
limitation, attorneys fees and legal expenses incurred by Secured Party. These
expenses, together with interest thereon from date incurred until paid by Debtor
at the maximum contract rate allowed under applicable laws, which Debtor agrees
to pay, shall constitute additional Obligations, and shall be secured and
entitled to the benefits of this Agreement.

 

4.             Proceeds; Surplus; Deficiencies.  Proceeds received by Secured
Party from disposition of the Collateral shall be applied toward Secured Party’s
expenses and other Obligations and in such order or manner as Secured Party may
elect.

 

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

 

Debtor shall be entitled to any surplus if one results after lawful application
of the proceeds.

 

5.             Remedies Cumulative.  The rights and remedies of Secured Party
are cumulative and the exercise of any one or more of the rights of remedies
shall not be deemed an election of rights or remedies or a waiver of any other
right or remedy. Secured Party may remedy any default and may waive any default
without waiving the default remedy or without waiving any other prior or
subsequent default.

 

L.            RELINQUISHMENT OF CERTAIN DEFENSES.  Regarding the enforcement of
the security interests and covenants and agreements contained in this Agreement
to secure payment of the Obligations, the Debtor covenants and agrees as
follows:

 

1.             Secured Party’s right of recovery against the Collateral for the
Obligations shall be determined as if Debtor were a primary obligor for the
payment of the Obligations regardless of whether or not Debtor is in fact
primarily liable for all or any part of the Obligations. Debtor specifically
agrees that it shall not be necessary or required, in order to enforce the
remedies under this Agreement, that the Secured Party have made demand for
payment upon the Borrower or any other person or entity liable for any portion
of the Obligations or have made protest thereof or have given notice to the
Borrower or any other party liable thereon of maturity or nonpayment of the
Obligations.

 

2.             The Debtor specifically waives any notice of acceptance of this
Agreement by the Secured Party and of the creation, advancement, existence,
extension, renewal, modification, consolidation, the rearrangement from time to
time of the Obligations, the increase from time to time in the principal amount
thereof, the increase or reduction from time to time of the rate of interest
thereon, or any indulgence from time to time with respect to the Obligations, or
any part thereof, and of nonpayment thereof or default thereon, and waives
grace, demand, protest, presentment and notice of demand, protest, and
presentment with respect to the Obligations, and waives notice of the amount of
the Obligations outstanding at any time, and agrees that the maturity of the
Obligations, or any part thereof, may be accelerated, extended, modified,
amended or renewed from time to time or any other indulgence may be granted with
respect thereto by the Secured Party at its will or as may be agreed by the
Borrower without notice to or further consent by the Debtor, at any time or
times.

 

3.             The Debtor agrees that: (i) no renewal, extension, modification,
consolidation, or rearrangement of or any other indulgence, forbearance or
compromise with respect to the Obligations, or any part thereof; (ii) no
increase in the principal amount of any of the Obligations; (iii) no increase or
reduction of the rate of interest thereon; (iv) no release, withdrawal,
substitution, surrender, subordination, exchange, deterioration, waste or other
impairment of any security or collateral or guaranty now or hereafter held by
the Secured Party for payment of the Obligations, or of any part thereof; (v) no
release of the Borrower, any guarantor, or of any other person primarily or
secondarily liable on the Obligations, or any part thereof; and (vi) no delay or
omission or lack of diligence or care in exercising any right or power with
respect to the Obligations or any security or collateral therefor or under this
Agreement shall in any manner impair, diminish or affect the rights of the
Secured Party or the liability of the Debtor hereunder. The Debtor specifically
agrees that it shall not be necessary or required, and that the Debtor shall not
be entitled to require, that the Secured Party mitigate damages, or file suit or
proceed to obtain or assert a claim for personal judgment against the Borrower
for the Obligations, or make any effort at collection of the Obligations from
the Borrower, or foreclose against or seek to realize upon any security or
collateral now or hereafter existing for the Obligations, or file suit or
proceed to obtain or assert a claim for personal judgment against any other
party (whether maker, guarantor, endorser or surety) liable for the Obligations,
or make any effort at collections of the Obligations from any such other party,
or exercise or assert any other right or remedy to which the Secured Party is or
may be entitled in connection with the Obligations or any security or collateral
or other Agreement therefor, or assert or file any claim against the assets or
estate of the Borrower or any guarantor or other person liable for the
Obligations, or any part thereof, before or as a condition of enforcing the
liability of the Debtor under this Agreement or requiring payment of the
Obligations by the Debtor hereunder, or at any time thereafter. The Debtor
expressly waives any right to the benefit of or to require or control
application of any security or collateral or the proceeds of any security or
collateral now existing or hereafter obtained by the Secured Party as security
for the Obligations, or any part thereof, and agrees that the Secured Party
shall have no duty insofar as the Debtor is concerned to apply upon any of the
Obligations any monies, payments or other property at any time received by or
paid to or in the possession of the Secured Party, except as the Secured Party
shall determine in its sole discretion. The Debtor specifically agrees that
Debtor shall not have any recourse or action against the Secured Party by reason
of any action the Secured Party may take or omit to take in connection with the
Obligations, the collection of any sums or amounts herein mentioned, or in
connection with any security or collateral or any Guaranty at any time existing
therefor.

 

4.             The Debtor agrees to the terms, provisions and conditions of the
Note and other instruments evidencing the Obligations and of any renewal,
modification, consolidation or rearrangement thereof or other agreements which
may have been or may hereafter be executed by the Borrower from time to time
evidencing or in connection with the Obligations or any part thereof, and agrees
that the Debtor’s liability hereunder shall in no manner be affected, reduced,
impaired or released by reason of any term, provision or condition of such Note
or other agreement or by the failure, refusal or omission of the Secured Party
to enforce or observe

 

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

 

any of same or any forbearance or compromise made by the Secured Party or any
action taken or omitted to be taken by the Secured Party pursuant thereto or in
connection therewith. The Debtor, by the execution and delivery of this
Agreement agrees, represents, warrants and acknowledges that Debtor shall be
bound by the provisions of any Agreement and Security Agreement and any
Environmental Certificate and Agreement of even date herewith, from the Borrower
to the Secured Party and which purport to be applicable to Debtor to the same
extent and with the same effect as if Debtor had executed and delivered such
document to the Secured Party. In that connection, the Debtor agrees that the
provisions of this Paragraph shall survive any exercise of the power of sale
granted in any instrument securing the Obligations, any foreclosure of the liens
created by any of the instruments securing the Obligations, any conveyance in
lieu of any such foreclosure, the repayment of the Obligations, and the
discharge and release of all liens, rights and interests securing payment of the
Obligations.

 

5.             The Debtor absolutely and unconditionally covenants and a agrees
that: (i) in the event that the Borrower does not or is unable to pay or perform
the Obligations for any reason including, without limitation, liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment or other
similar proceedings affecting the status, composition, identity, existence,
assets or Obligations of the Borrower, or the disaffirmance or termination of
any of the Obligations in or as a result of any such proceedings; and/or (ii) if
all or any part of the Obligations (or any instrument or agreement made or
executed in connection therewith) is for any reason found to be invalid,
illegal, unenforceable, uncollectible or legally impossible, for any reason
whatsoever (including, without limiting the generality of the foregoing, upon
the grounds that the payment and/or performance of the Obligations is ultra
vires or otherwise without authority, may violate applicable usury laws, is
subject to valid defenses, claims or offsets of the Borrower, or any instrument
evidencing any of the Obligations is forged or otherwise irregular), then in any
such case the Debtor shall pay and perform the Obligations as herein provided
and that no such occurrence shall in any way diminish or otherwise affect the
Debtor’s liabilities hereunder.

 

6.             Should the status, composition, structure or name of the Borrower
change, including, but not limited to, by reason of a merger, dissolution,
consolidation or reorganization, this Agreement shall continue and also cover
the Obligations and Obligations of the Borrower under the new status,
composition structure or name according to the terms hereof. If the Borrower is
a general or limited partnership, no termination of said partnership, nor
withdrawal therefrom or termination of any ownership interest therein owned, by
any general or limited partner of such partnership shall alter, limit,
terminate, excuse or modify the Debtor’s liabilities set forth in this
Agreement.

 

7.             In the event any payment from the Borrower to the Secured Party
is held to constitute a preference under the bankruptcy laws, or if for any
other reason the Secured Party is required to refund such payment or pay the
amount thereof to any other party, such payment by the Borrower to the Secured
Party shall not constitute a release of the Debtor from any liability hereunder,
and this Agreement shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments.

 

8.             At all times while any or all of the Obligations are now or
hereafter secured in whole or in part, the Debtor agrees that the Secured Party
may, from time to time, at its discretion, and with or without valuable
consideration, allow substitution, withdrawal, release, surrender, exchange,
subordination, deterioration, waste, loss or other impairment of all or any part
of such security or collateral, without notice to or consent by the Debtor, and
without in anywise impairing, diminishing or releasing the liability of the
Debtor hereunder.

 

9.             The Debtor waives marshalling of assets and liabilities, sale in
inverse order of alienation, and all defenses given to sureties or Debtors at
law or in equity other than actual payment of the Obligations and performance of
the actions constituting the Obligations, including, but not limited to, any
rights pursuant to the laws of Minnesota. The failure by the Secured Party to
file or enforce a claim against the estate (either in administration, bankruptcy
or other proceeding) of the Borrower or any other person primarily or
secondarily liable for the Obligations or of any other or others shall not
affect the liability of Debtor hereunder.

 

M.           OTHER AGREEMENTS.

 

1.             Savings Clause.  Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable usury
laws. If any such excessive interest is so provided for, then in such event
(i) the provisions of this paragraph shall govern and control, (ii) neither the
Debtor nor Debtor’s heirs, legal representatives, successors or assigns or any
other party liable for the payment thereof shall be obligated to pay the amount
of such interest to the extent that it is in excess of the maximum amount
permitted by law, (iii) any such excess interest that may have been collected
shall be, at the option of the holder of the instrument evidencing the
Obligations, either applied as a credit against the then unpaid principal amount
thereof or refunded to the maker thereof, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful rate under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction.

 

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

 

2.             Joint and Several Responsibility.  If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtors shall be
joint and several.

 

3.             Waivers.  Debtor and any maker, endorser, guarantor, surety or
other party liable in any capacity respecting the Obligations hereby waived
demand, notice of intention to accelerate, notice of acceleration, notice of
non-payment, presentment, protest, notice of dishonor and any other notice
whatsoever.

 

4.             Severability.  Any provision hereof found to be invalid by courts
having jurisdiction shall be invalid only with respect to such provision (only
to the extent necessary to avoid such invalidity). The offending provision shall
be modified to the minimum extent possible to confer upon Secured Party the
benefits intended thereby. Such provision as modified and the remaining
provisions hereof shall be construed and enforced to the same extent as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.

 

5.             Use of Copies.  Any carbon, photographic or other reproduction of
any financing statement signed by Debtor is sufficient as a financing statement
for all purposes, including without limitation, filing in any state as may be
permitted by the provisions of the Uniform Commercial Code of such state.  All
rights and remedies of Secured Party in all such agreements are cumulative, but
in the event of actual conflict in terms and conditions, the terms and
conditions of the latest security agreement shall govern and control.

 

6.             Authorization to File Financing Statements.  The Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Debtor is an organization, the type of organization
and any organizational identification number issued to the Debtor and, (ii) in
the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates.  The Debtor agrees
to furnish any such information to the Secured Party promptly upon the Secured
Party’s request.  The Debtor also ratifies its authorization for the Secured
Party to have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.

 

7.             Notices.  Any notice or demand given by Secured Party to Debtor
in connection with this Agreement, the Collateral or the Obligations shall be
deemed given and effective upon deposit in the United States mail, postage
pre-paid, addressed to Debtor at the address of the Debtor designated at the
beginning of this Agreement. Actual notice to Debtor shall always be effective
no matter how given or received.

 

8.             Headings and Gender.  Paragraph headings in this Agreement are
for convenience only and shall be given no meaning or significance in
interpreting this Agreement. All words used herein shall be construed to be or
such gender of number as the circumstances require.

 

9.             Amendments.  Neither this Agreement nor any of its provisions may
be changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification, waiver or discharge is sought.

 

10.           Binding Effect.  The provisions of this Security Agreement shall
be binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and the rights, powers and remedies of Secured
Party hereunder shall inure to the benefit of the successors and assigns of
Secured Party.

 

11.           Governing Law.  This Security Agreement shall be governed by the
law of Minnesota and applicable federal law.

 

12.           Statute of Frauds.  THIS COMMERCIAL SECURITY AGREEMENT, THE LOAN
AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED HEREIN OR IN THE LOAN
AGREEMENT, OR EXECUTED IN CONNECTION WITH OR ATTACHED TO THE LOAN AGREEMENT,
REPRESENT THE FINAL AGREEMENT BETWEEN DEBTOR AND SECURED PARTY, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN DEBTOR AND SECURED PARTY. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
DEBTOR AND SECURED PARTY.

 

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13.          U.S. SMALL BUSINESS ADMINISTRATION PROVISION:

 

The Loan secured by this lien was made under a United States Small Business
Administration (SBA) nationwide program which uses tax dollars to assist small
business owners.  If the United States is seeking to enforce this document, then
under SBA regulations:

 

a)             When SBA is the holder of the Note, this document and all
documents evidencing or securing this Loan will be construed in accordance with
federal law.

 

b)             Lender or SBA may use local or state procedures for purposes such
as filing papers, recording documents, giving notice, foreclosing liens, and
other purposes.  By using these procedures, SBA does not waive any federal
immunity from local or state control, penalty, tax or liability.  No Borrower or
Guarantor may claim or assert against SBA any local or state law to deny any
obligation of Borrower, or defeat any claim of SBA with respect to this Loan.

 

Any clause in this document requiring arbitration is not enforceable when SBA is
the holder of the Note secured by this instrument.

 

IN WITNESS WHEREOF, the undersigned has executed this Agreement effective as of
the date first written above.

 

 

DEBTOR

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

By:

/s/ Edward R. Cameron

 

 

Edward Cameron, President

 

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EXHIBIT A

 

See attached list of equipment

 

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CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

Appliance Recycling Centers of America, Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
Appliance Recycling Centers of America, Inc. (“Corporation”). The Corporation is
a corporation for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws of the
State of Minnesota. The Corporation is duly authorized to transact business in
all other states in which the Corporation is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
the Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 7400
Excelsior Boulevard, Minneapolis, MN 53426. Unless the Corporation has
designated otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The Corporation will notify Lender
prior to any change in the location of the Corporation’s state of organization
or any change in the Corporation’s name. The Corporation shall do all things
necessary to preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules,

 

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

 

ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to the Corporation and the
Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                                , at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of Appliance
Recycling Centers of America, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Edward Cameron

 

President

 

Y

 

/s/ Edward R. Cameron

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized person(s)
is/are authorized, empowered, and directed to do the following for and on behalf
of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

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ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

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

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                                  .  THIS RESOLUTION IS
GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE
AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Edward R. Cameron

 

Edward Cameron, President

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

Safe Disposal Systems, Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, , a Pennsylvania state-chartered commercial banking
corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
Safe Disposal Systems, Inc. (“Corporation”). The Corporation is a corporation
for profit which is, and at all times shall be, duly organized, validly
existing, and in good standing under and by virtue of the laws of the
Commonwealth of Pennsylvania. The Corporation is duly authorized to transact
business in all other states in which the Corporation is doing business, having
obtained all necessary filings, governmental licenses and approvals for each
state in which the Corporation is doing business. Specifically, the Corporation
is, and at all times shall be, duly qualified as a foreign corporation in all
states in which the failure to so qualify would have a material adverse effect
on its business or financial condition. The Corporation has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. The Corporation maintains an
office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the
Corporation has designated otherwise in writing, the principal office is the
office at which the Corporation keeps its books and records. The Corporation
will notify Lender prior to any change in the location of the Corporation’s
state of organization or any change in the Corporation’s name. The Corporation
shall do all things necessary to preserve and to keep in full force and effect
its existence, rights and privileges, and shall comply with all regulations,
rules,

 

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

 

ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to the Corporation and the
Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                                , at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of Safe Disposal
Systems, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

President/Secretary

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized person(s)
is/are authorized, empowered, and directed to do the following for and on behalf
of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the officer may in his or her discretion deem reasonably necessary
or proper in order to carry into effect the provisions of this Resolution.

 

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

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

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

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                                  .  THIS RESOLUTION IS
GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE
AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Brian Conners

 

Brian Conners, Secretary

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

AFFIDAVIT

 

RE:  $1,250,000.00 LIFE INSURANCE

 

I, Brian Conners, have life insurance in the amount of $1,250,000.00, as
evidenced by Policy No. Guardian Life Insurance Company Policy No. 6417978. 
Within sixty (60) days from today’s date, I shall provide to Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation (“Lender”) if not
already provided, the actual original life insurance policy(ies) and/or recorded
collateral assignment(s).  I recognize that my failure to provide the original
life insurance policy(ies) and recorded collateral assignment(s) will constitute
a default under the loan documents unless I take all reasonable steps to obtain
comparable coverage.

 

I further certify, as an additional inducement for Susquehanna Bank to make the
loan, that the policy referenced herein is in full force and effect, is current
on its premium payments, has not been assigned to any other creditor(s) and that
there are no other liens of any type whatsoever against the policy except the
pari passu liens of Susquehanna Bank.

 

I understand that Susquehanna Bank is relying on the representations set forth
in this Affidavit in the making of the loan and that any false statements
contained herein or any failure to comply with the undertakings set forth above
shall entitle the Lender to pursue any and all remedies to which it is entitled
under the loan documents or applicable law, including, but not limited to
acceleration of the indebtedness.

 

 

 

/s/ Brian Conners

 

Brian Conners

 

 

 

 

Sworn to and subscribed

 

before me this 10th day

 

of March, 2011.

 

 

 

 

 

/s/ Denise Cascio

 

Notary Public

 

 

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

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

S.D.S. Service Inc.

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is
S.D.S. Service Inc. (“Corporation”). The Corporation is a corporation for profit
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the Commonwealth of
Pennsylvania. The Corporation is duly authorized to transact business in all
other states in which the Corporation is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
the Corporation is doing business. Specifically, the Corporation is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition. The Corporation has the full power and authority to own
its properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 4301 N.
Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the Corporation has
designated otherwise in writing, the principal office is the office at which the
Corporation keeps its books and records. The

 

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

 

Corporation will notify Lender prior to any change in the location of the
Corporation’s state of organization or any change in the Corporation’s name. The
Corporation shall do all things necessary to preserve and to keep in full force
and effect its existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any governmental
or quasi-governmental authority or court applicable to the Corporation and the
Corporation’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation’s shareholders, duly called and held on
                     , at which a quorum was present and voting, or by other
duly authorized action in lieu of a meeting, the resolutions set forth in this
Resolution were adopted.

 

OFFICER. The following named person(s) is an/are officer(s) of S.D.S.
Service, Inc.;

 

NAMES

 

TITLE(S)

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

President/Secretary

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized person(s) listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation. Specifically, but without limitation, the authorized
person(s) is/are authorized, empowered, and directed to do the following for and
on behalf of the Corporation:

 

Borrow Money. To borrow, as a borrower, cosigner or otherwise, from time to time
from Lender, on such terms as may be agreed upon between the Corporation and
Lender, such sum or sums of money as in his or her judgment should be borrowed,
without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guaranties, surety agreement(s) or other evidence of the
Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, including confession of
judgment against the Corporation, evidencing the sums of money so borrowed or
any of the Corporation’s indebtedness to Lender, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of
the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property (tangible or intangible) of the Corporation, as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.

 

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation’s account with Lender, or to cause such other disposition of
the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being

 

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

 

authorized to request advances under such lines, and in all cases, to do and
perform such other acts and things, to pay any and all fees and costs, and to
execute and deliver such other documents and agreements as the officer may in
his or her discretion deem reasonably necessary or proper in order to carry into
effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Corporation may enter into transactions in which there
are multiple borrowers on obligations to Lender and the Corporation understands
and agrees that, with or without notice to the Corporation, Lender may discharge
or release any party or collateral securing an obligation, grant any extension
of time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Corporation; and that Lender may modify transactions without the consent of
or notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation’s name; (B) change
in the Corporation’s assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation’s principal office address; (F) change in the Corporation’s state of
organization; (G) conversion of the Corporation to a new or different type of
business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and
Lender. No change in the Corporation’s name or state of organization will take
affect until after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer(s) named above
is/are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy/occupies the position(s) set opposite his or her
respective name(s). This Resolution now stands of record on the books of the
Corporation, is in full force and affect, and has not been modified or revoked
in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender’s address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

 

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

 

IN TESTIMONY WHEREOF, I have hereunto set my hand, affixed the seal of the
Corporation and attest that the signature set opposite the name listed above is
his or her genuine signature.

 

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations made
in this Resolution are true and correct. This Corporate Resolution to Borrow /
Grant Collateral is dated                              .  THIS RESOLUTION IS
GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE
AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

 

 

CERTIFIED TO AND ATTESTED BY:

 

 

CORPORATE

 

SEAL

 

 

/s/ Brian Conners

 

Brian Conners, Secretary

 

NOTE: If the officer signing this Resolution is designated by the foregoing
document as one of the officers authorized to act on the Corporation’s behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

ARCA Advanced Processing, LLC

 

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is ARCA
Advanced Processing, LLC (“Company”). The Company is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Minnesota. The
Company is duly authorized to transact business in all other states in which the
Company is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which it is presently engaged or presently
proposes to engage. The Company maintains an office at 4301 N. Delaware

 

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

 

Avenue, Bldg. A, Philadelphia, PA 19137. Unless the Company has designated
otherwise in writing, the principal office is the office at which the Company
keeps its books and records. The Company will notify Lender prior to any change
in the location of the Company’s state of organization or any change in the
Company’s name. The Company shall do all things necessary to preserve and to
keep in full force and effect its existence, rights and privileges, and shall
comply with all regulations, rules, ordinances, statutes, orders and decrees of
any governmental or quasi-governmental authority or court applicable to the
Company and the Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                   at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of ARCA Advanced Processing,
LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

Chief Manager

 

Y

 

/s/ Brian Conners

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

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

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to Lender and receipt acknowledged by Lender in writing at
Lender’s address shown above (or such addresses as Lender may

 

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

 

designate from time to time). Any such notice shall not affect any of the
Company’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated
                               . THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS
INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A
SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

/s/ Brian Conners

 

Brian Conners, Chief Manager

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

4301 Operations, LLC

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is 4301
Operations, LLC (“Company”). The Company is a limited liability company which
is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Delaware. The Company
is duly authorized to transact business in all other states in which the Company
is doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which the Company is doing business.
Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which it is

 

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

 

presently engaged or presently proposes to engage. The Company maintains an
office at 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA 19137. Unless the
Company has designated otherwise in writing, the principal office is the office
at which the Company keeps its books and records. The Company will notify Lender
prior to any change in the location of the Company’s state of organization or
any change in the Company’s name. The Company shall do all things necessary to
preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental or quasi-governmental authority or court
applicable to the Company and the Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                                   at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions
set forth in this Resolution were adopted.

 

MEMBERS. The following named persons are members of 4301 Operations, LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

Brian Conners

 

Director

 

Y

 

/s/ Brian Conners

 

 

 

 

 

 

 

James Ford

 

Director

 

Y

 

/s/ James Ford

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account

 

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

 

with Lender, or to cause such other disposition of the proceeds derived
therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, Pledged,
transferred, endorsed, hypothecated or encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full

 

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

 

force and effect and Lender may rely on it until written notice of its
revocation shall have been delivered to Lender and receipt acknowledged by
Lender in writing at Lender’s address shown above (or such addresses as Lender
may designate from time to time). Any such notice shall not affect any of the
Company’s agreements or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated
                                . THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS
INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A
SEALED INSTRUMENT ACCORDING TO LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

/s/ Brian Conners

 

Brian Conners, Director

 

 

 

/s/ James Ford

 

James Ford, Director

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

LIMITED LIABILITY COMPANY RESOLUTION

TO BORROW / GRANT COLLATERAL

 

Scarabee Holdings, LLC

 

Borrower:

ARCA Advanced Processing, LLC

4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA  19137

 

Guarantor:

Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard
Minneapolis, MN 53426

 

Safe Disposal Systems, Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

4301 Operations, LLC
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

S.D.S. Service Inc.
4301 N. Delaware Avenue, Bldg. A
Philadelphia, PA 19137

 

Scarabee Holdings, LLC
51 Willard Avenue
Pocantino Hills, NY 10591

 

Brian Conners
8 Oak Hollow Drive
Voorhees, NJ 08043

 

James Ford
51 Willard Avenue
Pocantino Hills, NY 10591

 

Lender:

Susquehanna Bank, a Pennsylvania state-chartered commercial banking corporation

159 E. High Street

Pottstown, Pennsylvania 19464

 

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE COMPANY’S EXISTENCE. The complete and correct name of the Company is
Scarabee Holdings, LLC (“Company”). The Company is a limited liability company
which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of New York. The
Company is duly authorized to transact business in all other states in which the
Company is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which the Company is doing business.

 

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

 

Specifically, the Company is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Company has the full power and authority to own its properties
and to transact the business in which it is presently engaged or presently
proposes to engage. The Company maintains an office at 51 Willard Avenue,
Pocantino Hills, NY 10591. Unless the Company has designated otherwise in
writing, the principal office is the office at which the Company keeps its books
and records. The Company will notify Lender prior to any change in the location
of the Company’s state of organization or any change in the Company’s name. The
Company shall do all things necessary to preserve and to keep in full force and
effect its existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any governmental
or quasi-governmental authority or court applicable to the Company and the
Company’s business activities.

 

RESOLUTIONS ADOPTED. At a meeting of the members of the Company, duly called and
held on                          at which a quorum was present and voting, or by
other duly authorized action in lieu of a meeting, the resolutions set forth in
this Resolution were adopted.

 

MEMBERS. The following named persons are members of Scarabee Holdings, LLC:

 

NAMES

 

TITLES

 

AUTHORIZED

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

James Ford

 

Manager

 

Y

 

/s/ James Ford

 

ACTIONS AUTHORIZED. The authorized persons listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Company. Specifically, but without limitation, any of such authorized persons
are authorized, empowered, and directed to do the following for and on behalf of
the Company:

 

Borrow Money. To borrow, as a borrower, cosigner, guarantor or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Company and Lender, such sum or sums of money as in their judgment should be
borrowed, without limitation.

 

Execute Notes. To execute and deliver to Lender the promissory note or notes,
guaranty or guarantees or other evidence of the Company’s credit accommodations,
on Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, including confession of judgment against the Company, evidencing the sums
of money so borrowed or any of the Company’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of such
promissory notes), or any other or further indebtedness of the Company to Lender
at any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered,

 

Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one

 

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

 

of the above authorized persons may execute, deliver, or record financing
statements.

 

Negotiate items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Company or in which the Company may have an interest, and
either to receive cash for the same or to cause such proceeds to be credited to
the Company’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances under such lines,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as the members may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this Resolution.

 

ASSUMED BUSINESS NAMES. The Company has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Company, Excluding the name of the Company, the following is a complete list of
all assumed business names under which the Company does business:

 

ASSUMED BUSINESS NAME

 

FILING LOCATION

 

DATE

 

 

 

 

 

N/A

 

N/A

 

N/A

 

MULTIPLE BORROWERS. The Company may enter into transactions in which there are
multiple borrowers on obligations to Lender and the Company understands and
agrees that, with or without notice to the Company, Lender may discharge or
release any party or collateral securing an obligation, grant any extension of
time for payment, delay enforcing any rights granted to Lender, or take any
other action or inaction, without the loss to Lender of any of it rights against
the Company; and that Lender may modify transactions without the consent of or
notice to anyone other than the party with whom the modification is made.

 

NOTICES TO LENDER. The Company will promptly notify Lender in writing at
Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Company’s name; (B) change in
the Company’s assumed business name(s); (C) change in the management or in the
Members of the Company; (D) change in the authorized signer(s); (E) change in
the Company’s principal office address; (F) change in the Company’s state of
organization; (G) conversion of the Company to a new or different type of
business entity; or (H) change in any other aspect of the Company that directly
or indirectly relates to any agreements between the Company and Lender. No
change in the Company’s name or state of organization will take effect until
after Lender has received notice

 

ADDITIONAL ACTIONS AUTHORIZED - INTEREST RATE SWAP PROVISIONS. To enter into any
interest rate swaps, interest rate caps, interest rate floors, interest rate
collars, Treasury locks, Treasury caps, Treasury floors, Treasury collars,
barrier options, forward rate agreements, cross currency swaps, cross currency
caps, cross currency floors, cross currency collars, foreign exchange forward
contracts, options on any of the foregoing, and combinations of any of the
foregoing, with the Lender (each a “Swap Transaction”), to take all steps
necessary to effectuate and perform such Swap Transaction, including but not
limited to the execution and delivery to Lender an of an ISDA Master Agreement,
together with any and all exhibits and annexes thereto as may be requested by
Lender, the execution and delivery of confirmations of such Swap Transactions,
and the execution and delivery of all documents or agreements required pursuant
to any of the foregoing; to mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to lender any property now or hereafter belonging
to the Company or in which the Company now or hereafter may have an interest,
including without limitation all real property and all personal property
(tangible or intangible) of the Company, as security for the payment of any
indebtedness of the Company to the Lender arising out of a Swap Transaction,
however the same may be evidenced. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered at the time the Swap
Transaction is entered into, or at any other time or times, and may be either in
addition to or in lieu of any property

 

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

 

theretofore mortgaged, Pledged, transferred, endorsed, hypothecated or
encumbered.

 

CERTIFICATION CONCERNING MEMBERS AND RESOLUTIONS. The members named above are
duly elected, appointed, or employed by or for the Company, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Company, is in full force and effect,
and has not been modified or revoked in any manner whatsoever.

 

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to Lender and receipt acknowledged by Lender in writing at
Lender’s address shown above (or such addresses as Lender may designate from
time to time). Any such notice shall not affect any of the Company’s agreements
or commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signature set opposite the name listed above are their genuine signatures.

 

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Company certify that all statements and representations
made in this Resolution are true and correct. This Limited Liability Company
Resolution to Borrow / Grant Collateral is dated                               .
THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS
AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO
LAW.

 

CERTIFIED TO AND ATTESTED BY:

 

 

/s/ James Ford

 

James Ford, Manager

 

 

NOTE: If the members signing this Resolution are designated by the foregoing
document as one of the members authorized to act on the Company’s behalf, it is
advisable to have this Resolution signed by at least one non-authorized member
of the Company.

 

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

 

ASSIGNMENT OF LEASE

(Tenant’s Interest)

 

THIS ASSIGNMENT OF LEASE (“Assignment”) is made on 03/10/11 by ARCA Advanced
Processing, LLC (“Assignor”) whose address is 4301 N. Delaware Avenue, Bldg. A,
Philadelphia, PA 19137  to Susquehanna Bank, a Pennsylvania state-chartered
commercial banking corporation (“Assignee”) whose address is 159 E. High Street,
Pottstown, PA  19464.

 

1.             Definitions.

 

“Lease”:   Lease agreement, including all modifications, extensions and
renewals, dated June 18, 2010 by and between Assignor as tenant and Delaware
Ave, LLC (“Landlord”) of the Property.

 

“Loan Agreement”:  The Small Business Administration Authorization dated
December 23, 2010 between The United States Small Business Administration and
Assignee and the Loan Agreement dated of even date herewith between Assignor and
Assignee.

 

“Loan Documents”:  The Note, the Loan Agreement and any loan documents relating
to or securing the Note.

 

“Note”:  The promissory note dated of even date herewith in the original
principal amount of $1,250,000.00 delivered to Assignee by Assignor.

 

“Property”:  The leasehold interest in the real estate commonly known as 4301 N.
Delaware Avenue, Bldg. A, Philadelphia, PA 19137 .

 

“Indebtedness”: All amounts outstanding at any time under the Note and Loan
Documents.

 

All other capitalized terms used herein, unless otherwise specified, shall have
the same meaning ascribed to them in the Loan Agreement.

 

2.             Assignment.  Assignor, for good and valuable consideration, the
receipt of which is hereby acknowledged, does hereby assign, convey, and deliver
unto Assignee all of Assignor’s right, title and interest in the Lease.  To have
and to hold the same unto Assignee, its successors and assigns, until
termination of this Assignment as hereinafter provided.

 

3.             Collateral Assignment.  The parties intend that this Assignment
shall be a collateral assignment of the Lease.  Assignee shall not exercise its
rights under this Assignment until the occurrence of an Event of Default (as
defined in Paragraph 10).  Such assignment and grant shall continue in effect
until the Indebtedness is paid in full.

 

4.             Consideration.  This Assignment is made for and in consideration
of the loan made by Assignee to Assignor as set forth in the Loan Documents and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged.

 

5.             Indemnity.  Assignor agrees to pay and protect, and indemnify and
hold Assignee harmless from and against any and all claims, demands,
liabilities, losses, lawsuits, judgments and costs and expenses (including,
without limitation, reasonable attorneys’ fees) to which Assignee may become
exposed, or which Assignee may incur, in connection with the Lease or in
exercising its rights under this Assignment.

 

6.             Performance of Lease Covenants.  Upon the occurrence of a default
by Assignor under the Lease, Assignee may, at its option, perform any Lease
covenant for and on behalf of Assignor, and all monies expended in so doing
shall be chargeable to Assignor and added to the outstanding principal balance
of the Loan and shall be immediately due and payable.

 

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

 

7.             Representations and Warranties.  Assignor represents and
warrants:

 

(a)  The Lease is in full force and effect and has not been modified;

 

(b)  There are no defaults, defenses or setoffs of either landlord or Assignor
under the Lease nor, to the best of Assignor’s knowledge, is there any fact
which, with the giving of notice or lapse of time or both, would constitute a
default under the Lease;

 

(c)  The sole ownership of the entire tenant’s interest in the Lease is vested
in Assignor and the Lease has not been otherwise assigned or pledged; and

 

(d)   All rents due to date have been paid.

 

8.             Covenants and Agreements.  Assignor hereby covenants and agrees
as follows:

 

(a)  Assignor shall comply with and perform in a complete and timely manner all
of its obligations as tenant under the Lease.  Assignor shall give notice to
Assignee of any default by Assignor under the Lease in such time to afford
Assignee an opportunity to cure any such default prior to the landlord having
any right to terminate the Lease.  Assignor shall also provide Assignee with
notice of the commencement of an action of ejectment or any summary proceedings
for dispossession of the Assignor under the Lease;

 

(b)  Assignor shall furnish promptly to Assignee a certified copy of the Lease.
Assignee shall have the right to notify landlord at any time and from time to
time of any provision of the Loan Documents;

 

(c)  Assignor shall not permit the Lease to be modified, terminated, extended or
renewed without the prior written consent of Assignee, which consent shall not
be unreasonably withheld or delayed;

 

(d)  Assignor shall not without the prior written consent of Assignee:
(i) perform any act or execute any other instrument which might interfere with
the exercise of Assignee’s rights hereunder; or (ii) execute any assignment,
pledge or other encumbrance of the Lease; and

 

(e)  Assignee may assign its right, title and interest in the Lease and any
subsequent assignee shall have all of the rights and powers provided to Assignee
by this Assignment.

 

9.             No Obligation.  This Assignment shall not be deemed to impose
upon Assignee any of the obligations or duties of the Assignor provided in any
Lease.  Assignor hereby acknowledges and agrees: (i) Assignor is and will remain
liable under the Lease to the same extent as though this Assignment had not been
made; and (ii) Assignee has not by this Assignment assumed any of the
obligations of Assignor under the Lease, except as to such obligations which
arise after such time as Assignee shall have exercised its rights under this
Assignment and assumed Assignee’s obligations under the Lease.  This Assignment
shall not make Assignee responsible for the care or repair of the Property or
any personal property or for the carrying out of any of the terms of the Lease. 
Assignee shall not be liable in any way for any injury or damage to person or
property sustained by any person or persons, firm, or corporation in or about
the Property.

 

10.           Events of Default.  The occurrence of any one or more of the
following events shall constitute an “Event of Default” under this Assignment:

 

(a)  failure of Assignor to pay when due any of the Indebtedness, including any
payment due under the Note; or

 

(b)  failure of Assignor to strictly comply with Sections 8(a) and (c) of this
Assignment; or

 

(c)  breach of any covenant (other than those covenants set forth in subsections
(a) and (b) above), representation or warranty set forth in this Assignment
which is not cured within ten (10) days after notice; provided, however, if such
breach cannot by its nature be cured within ten (10) days, and

 

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

 

Assignor immediately initiates steps which Lender deems in Lender’s sole
discretion to be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce compliance as
soon as reasonably practical; or

 

(d)  the occurrence of an Event of Default under any other Loan Documents.

 

11.           Remedies.  Upon the occurrence of an Event of Default, then,
without notice to, or the consent of, Assignor,  Assignee shall be entitled to
exercise all of the rights and remedies contained in this Assignment or in any
other Loan Document or otherwise available at law or in equity.  The rights and
remedies of Assignee under this Assignment are cumulative and are not in lieu
of, but are in addition to, any other rights or remedies which Assignee may have
under the Loan Documents, at law or otherwise.

 

12.           Power of Attorney.  Upon the occurrence of an Event of Default,
Assignee shall have the right (and Assignor hereby irrevocably constitutes and
appoints Assignee as its attorney-in-fact, which power is coupled with an
interest, to do so) to demand, receive and enforce Assignor’s rights with
respect to the Lease, and to do any and all acts in the name of Assignor or in
the name of Assignee with the same force and effect as Assignor could do if this
Assignment had not been made.

 

13.           Defense.  Assignor shall at all times diligently enforce its
rights in, under and to the Lease, unless otherwise directed by Assignee in
writing, and shall, at Assignor’s sole cost and expense, appear in and defend
Assignee in any action or proceeding in any way connected with the Lease or this
Assignment, and shall pay all reasonable costs and expenses, including, without
limitation, attorneys’ fees, which Assignee may incur in connection with
Assignee’s appearance, voluntarily or otherwise, in any such action or
proceeding.

 

14.           No Waiver.  The exercise of any rights under this Assignment by
Assignee shall not cure or waive any Event of Default hereunder or under any of
the other Loan Documents.  Failure of Assignee to avail itself of any of the
terms of this Assignment for any period of time or for any reason shall not
constitute a waiver of the Assignment.

 

15.           Notices.  Any notice or other communication required or permitted
to be given shall be in writing addressed to the respective party as first set
forth above and shall be effective (i) when actually delivered, (ii) when
deposited with a nationally recognized overnight courier or (iii) when deposited
in the United States Mail, first class, certified or registered, postage
prepaid.  Any party may change its address for notices under this Assignment by
giving written notice to the other party as set forth above.

 

16.           Applicable Law.  This Assignment shall be governed by and shall be
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to conflicts of law principles.  This Assignment
shall be binding upon the parties hereto and their respective heirs, successors
and assigns, and may not be modified, amended or altered except by writing
signed by each of the parties hereto.

 

[signature page to follow]

 

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

 

IN WITNESS WHEREOF, Assignor has executed this Assignment or has caused the same
to be executed by its duly authorized representatives as of the date first set
forth above.

 

 

ASSIGNOR:

 

 

 

 

ARCA Advanced Processing, LLC

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

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

 

ENVIRONMENTAL INDEMNITY AGREEMENT

 

This Agreement is made on 03/10/11, by and between Susquehanna Bank, a
Pennsylvania state-chartered commercial banking corporation (“Lender”) and ARCA
Advanced Processing, LLC (“Borrower”) and Appliance Recycling Centers of
America, Inc., Safe Disposal Systems, Inc., 4301 Operations, LLC, S.D.S. Service
Inc., Scarabee Holdings, LLC, Brian Conners and James Ford (“Guarantor”)
(hereinafter individually and/or collectively the “Indemnitor”).

 

RECITALS

 

A.            Borrower desires to obtain a loan from Lender in the principal sum
of $1,250,000.00 (the “Loan”) as evidenced by that certain Promissory Note dated
03/10/11, a Loan Agreement, and other supporting collateral documents (the “Loan
Documents”).

 

B.            Indemnitor is or will be the owner and/or operator of certain real
property commonly known as 4301 N. Delaware Avenue, Bldg. A, Philadelphia, PA
19137 and 8 Oak Hollow Drive, Voorhees, New Jersey 08043 (the “Subject
Property”).  Indemnitor agrees that the Subject Property does not contain any
contamination caused by any Hazardous Substance(s) (as defined within this
Agreement) above action levels defined in any Environmental Laws.

 

C.            In order to induce Lender to make the Loan to Borrower, the
Subject Property is offered as security for the Loan.

 

D.            In order for Lender to accept the Subject Property as security for
the Loan, Lender requires that Indemnitor provide assurances the Subject
Property is, and will remain, clear of hazardous levels of toxic contaminants,
including but not limited to asbestos, PCB’s, chlorinated hydrocarbons,
petroleum products, pesticides and heavy metals (“Hazardous Substances”) as
defined by the Comprehensive Environmental Response Compensation and Liability
Act (“CERCLA”) or any federal, state or local environmental laws, rules or
regulations (collectively referred to as “Environmental Laws”).

 

Therefore, in consideration of the mutual covenants and promises contained
herein and in the Loan Documents, the Indemnitor hereby agrees to the following:

 

1.             Borrower agrees, prior to disbursement of the Loan, to submit to
Lender if required, a copy of a recent report prepared by a qualified, impartial
consultant, satisfactory to Lender, verifying that the Subject Property offered
as collateral has been tested and found clear of Hazardous Substances above
action levels defined in any Environmental Laws.

 

2.             Indemnitor represents that the Subject Property does not contain
and will not be used to generate, manufacture, refine, transport, treat, store,
handle or dispose of Hazardous Substances or other toxic materials unless said
actions are conducted pursuant to and in compliance with Environmental Laws
and/or the conditions of a permit issued by the appropriate federal or state
governmental authorities.  At the time Borrower submitted its application for
the Loan, Borrower was and shall continue to be in compliance with all
Environmental Laws.

 

3.             Indemnitor warrants that after due and diligent inquiry, to the
best of Indemnitor’s knowledge, the following statements are true and correct:

 

a.  There has not been any summons, citation, directive, letter or other
communication, written or oral, from any agency or department of any municipal,
county, state or the U.S. Government (collectively “Governmental Agency”)
concerning any intentional or unintentional action or omission on the part of
Borrower or any previous owner or operator of the Subject Property, which has
resulted in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping (“Discharge”) of any Hazardous Substances into the air, land
or waters above acceptable levels as established by any Governmental Agency.

 

b.  As a result of the past or present use of the Subject Property, there is no
unremedied damage known to have occurred to the air, lands, waters, fish,
shellfish, wildlife, biota or any other resource owned, managed, held in trust,
or otherwise controlled by the state in which Subject Property is located.

 

4.             Indemnitor agrees not to cause or permit to exist, as a result of
an intentional or unintentional act or omission on its part, a Discharge of any
Hazardous Substances into the air, waters, or lands within, under or outside the
Subject Property, where damage may result to the air, lands, water, fish,
shellfish, wildlife, biota and other resources unless

 

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

 

Discharge is pursuant to and in compliance with the conditions of a permit
issued by the appropriate Governmental Agency.

 

5.             Borrower agrees to submit to Lender, should Lender in its
discretion deem such is required, not more than once a year, an updated report
prepared by a qualified impartial consultant, satisfactory to Lender, verifying
that the Subject Property remains clear of hazardous levels of contaminants.  If
Borrower fails to provide such a report within thirty (30) days of request by
Lender, Lender has the right, but is not required, to order such a report at
Borrower’s expense.

 

6.             In the event that said report indicates that the Subject Property
is not clear of hazardous levels of toxic contaminants, Lender will provide
written notice to Indemnitor requiring correction of the condition within 30
days, or such reasonable additional time period as Lender may determine in its
sole discretion.

 

7.             In the event that Indemnitor fails to correct the condition to
the satisfaction of Lender within the period of time stated in the notice,
Lender may, with the concurrence of the U.S. Small Business Administration,
declare a default of the loan under the terms and conditions contained in the
Loan Documents.

 

8.             At all times Indemnitor agrees to immediately notify Lender
should Indemnitor become aware of (i) any toxic contaminants or other
environmental problem or liability with respect to the Subject Property, or (ii)
any lien, action or notice from any Governmental Agency concerning Hazardous
Substances on the Subject Property.  Indemnitor shall, at its own cost and
expense, take all actions as shall be necessary or advisable for the clean-up of
the Subject Property, including all remedial actions in accordance with all
applicable Environmental Laws (and in all events in a manner satisfactory to
Lender).  Indemnitor shall further pay or cause to be paid, at no expense to
Lender, all clean-up, administrative, and enforcement costs which may be
asserted against the Subject Property or the owner or operator thereof by any
Governmental Agency.

 

9.             Borrower acknowledges that Lender is relying on this Agreement in
making the Loan, and Borrower, Indemnitor and its principals as individuals
agree to indemnify and hold harmless Lender, its agents, and assigns from and
against any damages, cost, liability or expense, including attorney and other
professional fees, directly or indirectly attributable to the presence of
Hazardous Substances, on or under the Subject Property or adjoining real
property and based upon claims assertable by any Governmental Agency or other
third parties against Lender or its assigns.

 

10.           This indemnification will specifically survive, and is entirely
independent of the Borrower’s contractual obligation to repay the primary
obligation held by Lender as amended, extended or renewed by Lender and release
of Lender liens on Indemnitor’s real or personal property by payment,
foreclosure or other action including Lender’s discretionary abandonment of
lien.

 

11.           Those liabilities, losses, claims, damages and expenses for which
Lender is indemnified shall be reimbursable to Lender as Lender’s obligations to
make payments with respect thereto are incurred, notwithstanding any litigation,
claim or other proceeding.  Indemnitor shall pay such liability, losses, claims,
damages and expenses to Lender as incurred within thirty (30) days after notice
from Lender itemizing the amounts incurred to the date of such notice.  In
addition to any remedy available for failure to periodically pay such amounts,
such amounts shall thereafter bear interest at the maximum rate permitted by
law.

 

12.           Indemnitor waives any execution of this Environmental Indemnity
Agreement by Lender.  The failure of Lender to enforce any right or remedy
hereunder, or to promptly enforce any such right or remedy, shall not constitute
a waiver thereof nor give rise to any estoppel against Lender, nor excuse
Indemnitor from its obligations hereunder.  Any waiver of such right or remedy
must be in writing and signed by Lender.  Any waiver of any provision herein by
Lender shall not be deemed a continuing waiver thereof.  Any waiver of any part
or provision herein shall not be deemed a waiver of any other part or provision
herein whereas said other parts and provisions of the within Agreement shall
remain in full force and effect.  This Agreement is subject to enforcement at
law and/or equity, including actions for damages and/or specific performance.

 

[signature page to follow]

 

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

 

LENDER:

INDEMNITOR:

Susquehanna Bank

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Lisa Viscusi

 

By:

/s/ Brian Conners

 

                                                 ,                                         

 

Brian Conners, Chief Manager

 

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

Edward Cameron, President

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

4301 Operations, LLC

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

 

 

 

 

 

 

/s/ Brian Conners

 

Brian Conners, individually

 

 

 

 

 

 

 

/s/ James Ford

 

James Ford, individually

 

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

 

CLOSING CERTIFICATION

POST_CLOSING COMPLIANCE AND DOCUMENT CORRECTION AGREEMENT

AND

LIMITED POWER OF ATTORNEY

 

In consideration of the loan made by Susquehanna Bank, a Pennsylvania
state-chartered commercial banking corporation (the “Lender”) to ARCA Advanced
Processing, LLC (the “Borrower”) in the amount of $1,250,000.00 (the “Loan”) and
to induce the Lender to make the Loan, the undersigned do(es) hereby represent,
certify, covenant, and agree as follows:

 

1.             If any properties pledged as collateral are designated by the
Federal Government as falling within the boundaries of a special flood hazard
area and Federal Flood Insurance becomes available, the undersigned will
purchase and maintain such insurance in the amounts and coverage equal to the
lesser of (a) the insurable value of the property, or (b) the maximum limit of
coverage available at subsidized rates during the life of the Loan.  Borrower(s)
and/or Guarantor(s) will not be eligible for any future flood disaster
assistance if this flood insurance is not maintained.

 

2.             No life insurance in addition to the amount specified in the Loan
documents is to be purchased by the Borrower(s) and/or Guarantor(s) for this
Loan and no current policy collaterally assigned or to be collaterally assigned
to Lender will be converted until the Loan is fully paid without prior written
approval of the Lender.  In addition, the undersigned agree(s) to provide any
and all insurance forms and financial statements requested by Lender, including,
without limitation: (a) business financial statements for Borrower, along with
annual tax returns; (b) annual personal financial statements and tax returns for
Guarantor(s); (c) annual property tax receipts; and (d) hazard insurance
policy/ies covering collateral pledged to Susquehanna Bank.

 

3.             As of this date, there have been no unremedied adverse changes in
the Borrower(s) or Guarantor(s) financial condition, organization, operations or
fixed assets and there are no outstanding tax liabilities owed as of this date,
including, but not limited to the following:  Federal, State & Local income and
other taxes, since the loan application was submitted to Lender.

 

4.             F.I.C.A. and Withheld Income Tax of the Borrower are currently
being deposited on a regular basis.  All other payroll taxes are paid or
deposited quarterly.  The undersigned hereby certifies that Borrower is current
on all Federal and State taxes, including, but not limited to, income taxes,
payroll taxes, real estate taxes, and sales taxes, and that all future taxes
will be paid when due.

 

5.             All insurance, licenses, permits and/or other approvals necessary
to lawfully operate the Borrower’s/s’ business have been obtained or have been
applied for and will be obtained.  To the extent that it may later be determined
that any additional insurance, licenses, permits and/or other approvals may be
required, the undersigned will immediately secure them and forward copies to
Lender once they have been obtained.

 

6.             (a)           In consideration of Lender disbursing funds for the
closing of the Loan secured by the Property being encumbered, and regardless of
the reason for any loss, misplacement, or inaccuracy in any loan documentation,
the undersigned agree(s) as follows:  If any document is lost, misplaced,
misstated or inaccurately reflects the true and correct terms and conditions of
the Loan, upon request of the Lender, the undersigned will comply with Lender’s
request to execute, acknowledge, initial and deliver to Lender any documentation
Lender deems necessary to replace

 

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

 

or correct the lost, misplaced, misstated or inaccurate documents.  All
documents Lender requests of Borrower(s) and/or Guarantor(s) shall be referred
to as “Replacement Documents.”  The undersigned agree(s) to deliver the
Replacement Documents within ten (10) days after receipt by the undersigned of a
written request for such replacement.  The undersigned also agree(s) that upon
request the undersigned will supply additional amounts and/or pay to Lender any
additional sum previously disclosed to Borrower(s) and/or Guarantor(s) for any
cost or fee associated with the Loan, which for whatever reason it was not
collected at closing (“Additional Fees”).

 

(b)           Any request under this Agreement may be made by the Lender
(including assignees and persons acting on behalf of the Lender) and shall be
prima facie evidence of the necessity for same.  A written statement addressed
to the undersigned, or any of them at the address indicated in the Loan
documentation shall be considered conclusive evidence of the necessity for
Replacement Documents.

 

(c)           Failure or refusal by the undersigned to comply with the terms of
the correction request shall constitute a default under the note and/or
mortgage/deed of trust, and shall give Lender the option of declaring all sums
secured by the Loan documents immediately due and payable.

 

(d)           If Failure or refusal by the undersigned to execute, acknowledge,
initial and deliver the Replacement Documents or provide the Replacement
Documents or Additional Fees to Lender more than ten (10) days after being
requested to do so by Lender and understanding that Lender is relying on these
representations, Borrower(s) agrees to be liable for any and all loss or damage
which Lender reasonably sustains thereby, including, but not limited to all
reasonable attorney’s fees and costs incurred by Lender.

 

7.             LIMITED POWER OF ATTORNEY.  Notwithstanding the foregoing
paragraph, the undersigned, for and in consideration of the approval, closing
and funding of the Loan, hereby grant(s) to Lender a LIMITED POWER OF ATTORNEY
to correct and/or re-execute or initial documents containing typographical or
clerical errors discovered in any or all of the closing documentation required
to be executed by the undersigned at settlement or during the Loan approval
process, including, but not limited to:

 

(a)           Errors with the Borrower(s)’ or Guarantor(s)’ name(s) including,
but not limited to wrong or misspelled names;

 

(b)           Errors with the property address including, but not limited to,
wrong or misspelled street, city or town names, incorrect house or street
numbers or zip codes;

 

(c)           Errors in the legal description for the property;

 

(d)           Errors with the applicable county name, including wrong or
misspelled county names; and

 

(e)           Errors related to the date of documents, including wrong or
incomplete dates.

 

In the event the Limited Power of Attorney granted pursuant to this section is
exercised, Lender will notify the undersigned and will provide a copy of the
document(s) executed, initialed and/or corrected on their behalf.  The Power of
Attorney granted herein is limited to the rights set forth herein and may not be
used to increase the interest rate of the Loan, alter the term of the Loan,
increase the outstanding principal balance of the Loan or increase the monthly
principal

 

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and interest payment under the Loan.  The undersigned acknowledge(s) that the
grant of the Limited Power of Attorney set forth herein is in exchange for good
and valuable consideration and is intended to be coupled with an interest, and
the undersigned do(es) hereby make and declare this Limited Power of Attorney to
be irrevocable by the undersigned, or otherwise, renouncing all right to revoke
this power or to appoint any other person to perform any of the acts enumerated
herein.

 

8.             The undersigned have read all of the Loan documents relating to
the Loan and understand(s) the meaning and content of said Loan documents.

 

9.             The undersigned understand that the Loan documents constitute the
entire agreement between Borrower(s) and Lender and that no agent or
representative of Lender has made any statement, agreement or representation,
either oral or written, in connection with the Loan that would modify, add to or
change the terms and conditions set forth in the various documents executed in
conjunction with this transaction. It is the intention of both the Lender and
the undersigned that the following Disclaimer be incorporated by reference into
each of the Loan Documents so executed for this transaction.

 

“THIS WRITTEN LOAN AGREEMENT

REPRESENTS THE FINAL AGREEMENT

BETWEEN THE PARTIES

AND SHALL NOT BE CONTRADICTED BY

EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR

SUBSEQUENT ORAL AGREEMENTS

OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL

AGREEMENTS BETWEEN THE PARTIES.”

 

10.           The undersigned understand and acknowledge that the
representations made herein are material to Lender’s decision to close and fund
the Loan and that Lender is relying upon these representations in connection
with the making of the Loan.  The undersigned further acknowledge and understand
that the obligations enumerated herein shall survive closing and that any
failure to comply with the obligations as set forth herein shall constitute a
default under the Loan documents, entitling Lender to pursue any and all
remedies set forth in the Loan documents, including, but in no way limited to
acceleration of the indebtedness.

 

11.           Any documents required to be delivered to Lender shall be
delivered to the offices of Susquehanna Bank, 159 E. High Street, Pottstown,
Pennsylvania 19464, Attn: Loan Servicing.

 

12.           This agreement will survive the closing of the Loan, and inure to
the benefit of Lender’s successors and assigns and binding upon the heirs,
successors and assigns of Borrower(s).

 

[Signatures on following page]

 

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed to
be executed as of the date set forth herein.

 

ARCA Advanced Processing, LLC

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Chief Manager

 

 

 

 

 

 

 

Appliance Recycling Centers of America, Inc.

 

 

 

 

By:

/s/ Edward R. Cameron

 

 

Edward Cameron, President

 

 

 

 

 

 

 

Safe Disposal Systems, Inc.

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

4301 Operations, LLC

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, Director

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Director

 

 

 

 

 

 

 

S.D.S. Service Inc.

 

 

 

 

By:

/s/ Brian Conners

 

 

Brian Conners, President/Secretary

 

 

 

 

 

 

 

Scarabee Holdings, LLC

 

 

 

 

By:

/s/ James Ford

 

 

James Ford, Manager

 

 

 

 

 

 

 

/s/ Brian Conners

 

Brian Conners, individually

 

 

 

 

 

 

 

/s/ James Ford

 

James Ford, individually

 

 

 

 

 

 

 

Date: 03/10/11

 

 

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