Exhibit
10.7


 


SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT (the
“Agreement”) is made this 30th day of April, 2010, by SURPLUS ACQUISITION
VENTURE, LLC, a limited liability company organized under the laws of the State
of Delaware (the “Debtor”), for the benefit of BANK OF AMERICA, N.A., a
national banking association, its successors and assigns (the “Lender”).


 


RECITALS


 


A.            LIQUIDITY SERVICES, INC., a corporation organized
under the laws of the State of Delaware (the “Borrower”) has applied to the
Lender for a revolving credit facility in the maximum principal amount of
Thirty Million Dollars ($30,000,000) and, as part of that revolving credit facility, a letter
of credit facility in the maximum principal amount of Ten Million Dollars
($10,000,000)
(collectively, the “Credit Facilities”), which is to be advanced pursuant to
the terms of a Financing and Security Agreement of even date herewith by and
between the Borrower and the Lender (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the “Financing
Agreement”).


 


B.            All defined terms used in this Agreement and not
defined herein shall have the meaning given to such terms in the Financing
Agreement.


 


C.            The payment and performance of all Obligations of the
Borrower under the Financing Documents are unconditionally and irrevocably
guaranteed by Debtor pursuant to the terms and conditions of that certain
Guaranty of Payment Agreement of even date herewith, executed by Debtor in
favor of Lender (as amended, modified, substituted, extended and renewed from
time to time the “Guaranty”).


 


D.            The Lender has required, as a condition to entering
into the Financing Agreement, that the Debtor execute, among other things, the
Guaranty and this Agreement as additional security for the payment and
performance of the Guaranty.


 


AGREEMENTS


 


NOW, THEREFORE, in
consideration of the premises, the mutual agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Debtor and the Lender hereby agree as follows:


 


ARTICLE
I

COLLATERAL


 


As security for the payment
of all of the Obligations evidenced by the Financing Documents and for the
Debtor’s performance of, and compliance with, all of the terms, covenants, conditions,
stipulations and agreements contained in the Guaranty and all other Obligations
of the Debtor to the Lender, whether now existing or hereafter created, the
Debtor hereby grants to the Lender and agrees that the Lender shall have a
perfected, continuing security interest in all of the following property and
assets of the Debtor, wherever situated (the “Collateral”):


 

















 


(a)           All inventory, both now owned and hereafter acquired
and as the same may now and hereafter from time to time be constituted (the “Inventory”);


 


(b)           All accounts and contract rights, chattel paper,
instruments and documents, both now owned and hereafter created or acquired
(individually, an “Account” and collectively, the “Accounts”);


 


(c)           All equipment, furniture and fixtures, both now owned
and hereafter acquired, together with (i) all additions, parts, fittings,
accessories, special tools, attachments and accessions now and hereafter
affixed thereto and/or used in connection therewith and (ii) all
replacements thereof and substitutions therefore (the “Equipment”);


 


(d)           All general intangibles (including, without
limitation, all books and records, things in action, contractual rights, tax
returns, goodwill, literary rights, rights to performance, copyrights,
trademarks and patents), both now owned and hereafter acquired;


 


(e)           All notes, notes receivable, drafts, acceptances and
similar instruments and documents, both now owned and hereafter created or
acquired;


 


(f)            all proceeds (cash and non-cash) and products thereof,
and all returned, rejected or repossessed goods, the sale or lease of which
shall have given or shall give rise to an Account and all cash and non-cash
proceeds and products of all such goods;


 


provided, however,
notwithstanding the foregoing, “Collateral” shall not include (i) any
rights or obligations of the Debtor under any DoD Contract, (ii) any
equity interest (including, without limitation, any “ownership interest” as
such term is used in any DoD Contract) in Government Liquidation, (iii) any
permit, lease, license, contract, instrument or other agreement belonging to
the Debtor that prohibits, or requires the consent of any Person other than the
Debtor as a condition to, the creation of a Lien thereon, or any permit, lease,
license contract or other agreement belonging to the Debtor to the extent that
any requirement of law applicable thereto prohibits the creation of a Lien
thereon, but only, in each case, to the extent, and for so long as, such
prohibition is not terminated or rendered unenforceable or otherwise deemed
ineffective by the Uniform Commercial Code, Bankruptcy Code or any other
requirement of Law, (iv) any United States intent-to-use trademark or
service mark application to the extent, and solely during the period in which
the grant of a Lien therein would impair the validity or the enforceability of
such intent-to-use trademark or service mark under federal law, and (v) any
property subject to a Lien permitted by the Financing Agreement, if and for so
long as the contractual obligation governing such Lien prohibits the Lien of
this Agreement applying to such property.


 


The Debtor further agrees
that the Lender shall have in respect thereof all of the rights and remedies of
a secured party under the Uniform Commercial Code as well as those provided in
this Agreement.  The Debtor covenants and
agrees to execute and deliver such financing statements and other instruments
and filings as are necessary in the opinion of the Lender to perfect such
security interest.  Notwithstanding the
fact that the proceeds of the Collateral constitute a part of the Collateral,
the Debtor may not dispose of the Collateral, or any part


 


2

















 


thereof, other than in the ordinary course of its
business or as otherwise may be permitted by this Agreement.


 


ARTICLE
II

REPRESENTATIONS AND WARRANTIES


 


Debtor represents and
warrants to the Lender that:


 


Section 2.1             Title to Properties.


 


Debtor has good and
marketable title to all of its properties, including, without limitation, the
Collateral and Debtor has legal, enforceable and uncontested rights to use
freely such property and assets, except, in each case, as could not reasonably
be expected to have a Material Adverse Effect.


 


Section 2.2             Accounts.


 


With respect to all Accounts
and to the best of Debtor’s knowledge (a) they are genuine, and are not
evidenced by a judgment, an Instrument, or Chattel Paper (unless such judgment
has been assigned and such Instrument or Chattel Paper has been endorsed and
delivered to Lender); (b) they represent bona fide transactions completed
in accordance with the terms and provisions contained in the invoices, purchase
orders and other contracts relating thereto, and the underlying transaction
therefor is in accordance with all applicable Laws; and (c) the amounts
shown on Debtor’s books and records, with respect thereto are actually and
absolutely owing to Debtor and are not contingent or subject to reduction for
any reason other than regular discounts, credits or adjustments allowed by
Debtor in its reasonable discretion.


 


Section 2.3             Inventory.


 


Substantially all of the
Inventory of Debtor is located at the places of business set forth on the
Collateral Disclosure List or as permitted by Section 6.2.14 of the
Financing Agreement.


 


Section 2.4             Patents, Trademarks, Etc.


 


Each of Debtor and its
Subsidiaries owns, possesses, or has the right to use all necessary patents,
licenses, trademarks, copyrights, permits and franchises to own its properties
and to conduct its business as now conducted, without known conflict with the
rights of any other Person, except, in each case, as would not reasonably be
expected to have a Material Adverse Effect. 
Any and all obligations to pay royalties or other charges with respect
to such properties and assets are properly reflected on the financial
statements previously furnished to Lender, to the extent required by GAAP.


 


Section 2.5             Business Names and Addresses.


 


Debtor has not changed its
name, identity or corporate structure in a manner which could result in a
Material Adverse Effect, since the date Debtor or Borrower last delivered a
Collateral Disclosure List to Lender.


 


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Section 2.6             Presence of Hazardous
Materials or Hazardous Materials Contamination.


 


To the best of Debtor’s
knowledge, (a) no Hazardous Materials are located on any real property
owned, controlled or operated by of Debtor or for which Debtor is, or is
claimed to be, responsible, except for reasonable quantities of necessary
supplies for use by Debtor in the ordinary course of its current line of
business and stored, used and disposed in accordance with applicable Laws; and (b) no
property owned, controlled or operated by Debtor or for which Debtor has, or is
claimed to have, responsibility has ever been used as a manufacturing, storage,
or dump site for Hazardous Materials nor is affected by Hazardous Materials
Contamination at any other property.  “Hazardous
Materials” means (a) any “hazardous waste” as defined by the Resource
Conservation and Recovery Act of 1976, as amended from time to time, and
regulations promulgated thereunder; (b) any “hazardous substance” as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended from time to time, and regulations promulgated
thereunder; (c) any substance the presence of which on any property now or
hereafter owned, acquired or operated by Debtor is prohibited by any Law
similar to those set forth in this definition; and (d) any other substance
which by Law requires special handling in its collection, storage, treatment or
disposal.  “Hazardous Materials
Contamination” means the contamination (whether presently existing or occurring
after the date of this Agreement) by Hazardous Materials of any property owned,
operated or controlled by Debtor or for which Debtor has responsibility,
including, without limitation, improvements, facilities, soil, ground water,
air or other elements on, or of, any property now or hereafter owned, acquired
or operated by Debtor, and any other contamination by Hazardous Materials for
which Debtor is, or is claimed to be, responsible.


 


Section 2.7             Perfection and Priority of
Collateral.


 


Lender has, or upon
execution of this Agreement and filing of any financing statement required
under the Uniform Commercial Code, will have a valid and perfected Lien on and
security interest in all Collateral, free of all other Liens, claims and rights
of third parties whatsoever except Permitted Liens.


 


Section 2.8             Collateral Disclosure List.


 


As of the Closing Date, and
at all times thereafter, whenever a Collateral Disclosure List is delivered to
Lender pursuant to the Financing Agreement, the information contained in the
Collateral Disclosure List is complete and correct in all material respects.  The Collateral Disclosure List completely and
accurately identifies (a) the type of entity, the state of organization
and the chief executive office of Debtor, (b) each other place of business
of Debtor, (c) the location of all books and records pertaining to the Collateral,
and (d) each location, other than the foregoing, where any of the
Collateral is located and other than as permitted by Section 6.2.14 of the
Financing Agreement.


 


Section 2.9             No Suspension or Debarment.


 


Neither Debtor nor any
Subsidiary nor any of their respective directors, officers or employees has
received any notice of, or information concerning, any proposed, contemplated
or initiated suspension or debarment, be it temporary or permanent, due to an
administrative or a 


 


4

















 


statutory
basis, of Debtor or any Subsidiary by the United States of America or any
department, agency or instrumentality thereof. 
Debtor and each Subsidiary further warrants and represents that neither
Debtor nor any Subsidiary has defaulted under any DoD Contract, which default
is reasonably likely to result in the termination of such DoD Contract.


 


Section 2.10           Taxes.


 


Each of Debtor and its
Subsidiaries has filed all returns, reports and forms for taxes that, to the
knowledge of Debtor, are required to be filed, and has paid all taxes as shown
on such returns or on any assessment received by it, to the extent that such
taxes have become due, unless and to the extent only that such taxes,
assessments and governmental charges are currently contested in good faith and
by appropriate proceedings by Debtor, such taxes are not the subject of any
Liens other than Permitted Liens, and adequate reserves therefor have been
established as required under GAAP.  All
tax liabilities of Debtor were, as of the date of the audited financial
statements previously furnished to Lender, and are now, adequately provided for
on the books of Debtor or its Subsidiaries, as appropriate.


 


Section 2.11           ERISA.


 


With respect to any Plan
that is maintained or contributed to by Debtor and/or by any Commonly
Controlled Entity or as to which Debtor retains material liability: (a) no
“accumulated funding deficiency” as defined in Code §412 or ERISA §302 has
occurred, whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred other than events for which reporting has been
waived; (c) no termination of any plan subject to Title IV of ERISA has
occurred; (d) neither Debtor nor any Commonly Controlled Entity has
incurred a “complete withdrawal” within the meaning of ERISA §4203 from any
Multi-employer Plan; (e) neither Debtor nor any Commonly Controlled Entity
has incurred a “partial withdrawal” within the meaning of ERISA §4205 with
respect to any Multi-employer Plan; (f) no Multi-employer Plan to which
Debtor or any Commonly Controlled Entity has an obligation to contribute is in “reorganization”
within the meaning of ERISA §4241 nor has notice been received by Debtor or any
Commonly Controlled Entity that such a Multi-employer Plan will be placed in “reorganization”.  “Commonly Controlled Entity” means an entity,
whether or not incorporated, which is under common control with Debtor within
the meaning of Section 414(b) or (c) of the Internal Revenue
Code.  “Plan” means any pension plan that
is covered by Title IV of ERISA and in respect of which Debtor or a Commonly
Controlled Entity is an “employer” as defined in Section 3 of ERISA.  “Multi-employer Plan” means a Plan that is a
Multi-employer plan as defined in Section 4001(a)(3) of ERISA.


 


ARTICLE
III

AFFIRMATIVE COVENANTS OF DEBTOR


 


Until payment in full and
the performance of all of the Obligations, the Debtor agrees with Lender as
follows:


 


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Section 3.1             Compliance with Laws.


 


Debtor shall comply, and
cause each of its Subsidiaries to comply, with all applicable Laws and observe
the valid requirements of Governmental Authorities, the noncompliance with or
the nonobservance of which could reasonably be expected to have a Material
Adverse Effect.


 


Section 3.2             Insurance Generally.


 


(a)           Debtor shall maintain insurance in an amount customary
and consistent with Debtor’s current practice, covering property damage
(including loss of use and occupancy) to any of Debtor’s properties, business
interruption insurance, public liability insurance including coverage for
contractual liability, product liability and workers’ compensation, and any
other insurance which is usual for Debtor’s business.  Each policy shall provide for at least thirty
(30) days prior notice to Lender of any cancellation thereof and name Lender as
loss payee or additional insured, as appropriate.


 


(b)           In addition to the insurance requirements stated
above, Debtor shall also maintain all risk property damage insurance policies
covering the tangible property comprising the Collateral to the extent and in
amounts customary and consistent with Debtor’s current practice.  The insurance must include a lender’s loss
payable endorsement in favor of Lender in a form acceptable to Lender in its
reasonable discretion and shall provide for at least thirty (30) days prior
notice to Lender of any cancellation thereof.


 


(c)           Upon the request of Lender, Debtor shall deliver to
Lender a copy of each insurance policy, or, if permitted by Lender, a
certificate of insurance listing all insurance in force.


 


Section 3.3             Existence.


 


Debtor shall maintain its
existence in good standing in the State of Delaware and in each other
jurisdiction where it is required to register or qualify to do business if the
failure to do so in such other jurisdiction could reasonably be expected to
have a Material Adverse Effect and remain a Registered Organization under the
laws of the State of Delaware.


 


Section 3.4             Maintenance of Properties.


 


Debtor will, and will cause
each of its Subsidiaries to, at all times (a) maintain, preserve, protect
and keep its properties, whether owned or leased, in good operating condition,
working order and repair (ordinary wear and tear excepted), and from time to
time will make all proper repairs, maintenance, replacements, additions and
improvements thereto needed to maintain such properties in good operating
condition, working order and repair, and (b) do or cause to be done all
things necessary to preserve and to keep in full force and effect its material
franchises, leases of real and personal property, trade names, patents,
trademarks, copyrights and permits which are necessary for the orderly
continuance of its business, except, in each case, where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.


 


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Section 3.5             Maintenance of the
Collateral.


 


Debtor will maintain the
Collateral in the condition purchased, excepting ordinary wear and tear, and
will not permit anything to be done to the Collateral that may materially
impair the value thereof, taken a whole. 
Lender shall not have any duty to, and Debtor hereby releases Lender
from all claims of loss or damage caused by the delay or failure to collect or
enforce any of the receivables of Debtor or to, preserve any rights against any
other party with an interest in the Collateral.


 


Section 3.6             Taxes.


 


Except to the extent that
the validity or amount thereof is being contested in good faith and by
appropriate proceedings, Debtor will, and will cause each of its Subsidiaries
to, pay and discharge all taxes prior to the date when any interest or penalty
would accrue for the nonpayment thereof.


 


Section 3.7             ERISA.


 


Debtor will, and will cause
each of its Commonly Controlled Entities to, comply with the funding
requirements of ERISA with respect to Plans for its respective employees.  Debtor will not permit with respect to any
Plan (a) any prohibited transaction or transactions under ERISA or the Internal
Revenue Code, which results, or may result, in any material liability of Debtor
and/or any Subsidiary and/or Affiliate, or (b) any Reportable Event if,
upon termination of the Plan or Plans with respect to which one or more such
Reportable Events shall have occurred, there is or would be any material
liability of Debtor and/or any Subsidiary and/or Affiliate to the PBGC.  Upon Lender’s request, Debtor will deliver to
Lender a copy of the most recent actuarial report, financial statements and
annual report completed with respect to any Plan.


 


Section 3.8             Hazardous Materials;
Contamination.


 


Debtor agrees to:


 


(a)           give notice to Lender immediately upon Debtor’s
acquiring knowledge of the presence of any Hazardous Materials or any Hazardous
Materials Contamination on any property owned, operated or controlled by Debtor
or for which Debtor is, or is claimed to be, responsible (provided that such
notice shall not be required for Hazardous Materials placed or stored on such
property in accordance with applicable Laws in the ordinary course (including,
without limitation, quantity) of Debtor’s line of business expressly described
in this Agreement), with a full description thereof;


 


(b)           promptly comply with any Laws requiring the removal,
treatment or disposal of Hazardous Materials or Hazardous Materials
Contamination and provide Lender with satisfactory evidence of such compliance;


 


(c)           provide Lender, within thirty (30) days after a demand
by Lender, with a bond, letter of credit or similar financial assurance
evidencing to Lender’s satisfaction that the necessary funds are available to
pay the cost of removing, treating, and disposing of such Hazardous Materials
or Hazardous Materials Contamination and discharging any Lien which 


 


7

















 


may be established as a
result thereof on any property owned, operated or controlled by Debtor or for
which Debtor is, or is claimed to be, responsible; and


 


(d)           as part of the Obligations of Debtor, defend,
indemnify and hold harmless Lender and its agents, employees, trustees,
successors and assigns from any and all claims which may now or in the future
(whether before or after the termination of this Agreement) be asserted as a
result of the presence of any Hazardous Materials or any Hazardous Materials
Contamination on any property owned, operated or controlled by Debtor or for
which Debtor is, or is claimed to be, responsible.  Debtor acknowledges and agrees that this
indemnification shall survive the termination of this Agreement and the payment
and performance of all of the other Obligations.


 


Section 3.9             Other Liens, Security
Interests, Etc.


 


Debtor will keep the
Collateral free from all liens, security interests and claims of every kind and
nature, other than the security interest granted to the Lender pursuant to this
Agreement and the Permitted Liens.


 


Section 3.10           Defense of Title and Further
Assurances.


 


At its expense, Debtor will
defend the title to the Collateral (and any part thereof), and will, except as
otherwise set forth in this Section 3.10, immediately execute, acknowledge
and deliver any renewal, affidavit, deed, assignment, security agreement,
certificate or other document which Lender may require in order to perfect,
preserve, maintain, continue, protect and/or extend the Lien granted to Lender
under this Agreement and the first priority of that Lien, subject only to the
Permitted Liens.  Debtor hereby
authorizes the filing of any financing statement or continuation statement
required under the Uniform Commercial Code. 
Debtor will take any and all steps and observe such formalities as
Lender may require, in order to create and maintain a valid Lien upon, pledge
of, or paramount security interest in, the Collateral, subject to the Permitted
Liens.  Debtor shall pay to Lender on
demand all taxes, costs and expenses incurred by Lender in connection with the
preparation, execution, recording and filing of any such document or
instrument.  To the extent that the
proceeds of any of the Accounts or receivables of Debtor are expected to become
subject to the control of, or in the possession of, a party other than Debtor
or Lender, Debtor shall cause all such parties to execute and deliver security
documents or other documents as requested by Lender and as may be necessary to
evidence and/or perfect the security interest of Lender in those proceeds.  Debtor hereby irrevocably appoints Lender as
Debtor’s attorney-in-fact, with power of substitution, in the name of Lender or
in the name of Debtor or otherwise, for the use and benefit of Lender, but at
the cost and expense of Debtor and without notice to Debtor, to execute and
deliver any and all of the instruments and other documents and take any action
which Lender may require pursuant the foregoing provisions of this Section 3.10.


 


Section 3.11           Landlord’s Waivers.


 


Debtor shall use
commercially reasonable efforts to deliver to Lender a waiver in form
acceptable to Lender and its counsel in their reasonable discretion from each
landlord for Debtor’s premises listed on Schedule 6.1.14 of the Financing
Agreement.


 


8

















 


Section 3.12           Government Accounts.


 


Debtor will promptly notify
Lender if any of the Receivables arise out of contracts with the United States
of America or any department, agency or instrumentality thereof for the sale of
products or provision of services and, as appropriate and at request of Lender,
within thirty (30) days of such request, execute any documents and take any
steps required by Lender in order that all moneys due and to become due under
such contracts shall be assigned to Lender and notice thereof given to the
applicable Governmental Authority under the Federal Assignment of Claims Act or
any other applicable Laws.  Debtor shall
provide Lender with all necessary information and will execute and deliver such
documents as are required to comply with the Federal Assignment of Claims Act
of 1940 (31 U.S.C. §3727 and 41 U.S.C. §15).


 


Section 3.13           Use of Premises and
Equipment.


 


Debtor agrees that until the
Obligations are fully paid and Lender has no further obligation to extend any
credit to Borrower, during the occurrence and continuance of an Event of
Default, Lender shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Debtor’s owned or leased property.


 


Section 3.14           Protection of Collateral.


 


Debtor agrees that Lender
may at any time following an Event of Default take such steps as Lender deems
reasonably necessary to protect the interest of Lender in, and to preserve the
Collateral, including, the hiring of such security guards or the placing of
other security protection measures as Lender deems appropriate, may employ and
maintain at any of Debtor’s premises a custodian who shall have full authority
to do all acts necessary to protect the interests of Lender in the Collateral
and may lease warehouse facilities to which Lender may move all or any part of
the Collateral to the extent commercially reasonable.  Debtor agrees to cooperate fully with Lender’s
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as Lender may reasonably direct. 
All of Lender’s expenses of preserving the Collateral, including any
reasonable expenses relating to the compensation and bonding of a custodian,
shall be part of the Enforcement Costs.


 


Section 3.15           Business Names; Locations.


 


Debtor will notify and cause
each of its Subsidiaries to notify Lender not less than thirty (30) days prior
to (a) any change in the name under which Debtor or the applicable
Subsidiary conducts its business, (b) any change of the location of the
chief executive office of Debtor or the applicable Subsidiary, and (c) the
opening of any new place of business or the closing of any existing place of
business, and (d) any change in the location of the places where the
Collateral, or any part thereof, or the books and records, or any part thereof,
are kept other than as permitted by Section 6.2.14 of the Financing
Agreement.


 


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ARTICLE
IV

NEGATIVE COVENANTS OF DEBTOR


 


Until payment in full and
the performance of all of the Obligations, without the prior written consent of
the Lender, the Debtor will not directly or indirectly:


 


Section 4.1             Liens; Confessed Judgment.


 


(a) Create, incur,
assume or suffer to exist any Lien upon any of its properties or assets,
whether now owned or hereafter acquired, or permit any Subsidiary so to do,
except for Permitted Liens, (b) assume or suffer to exist any provision in
any instrument or other document for confession of judgment, cognovit or other
similar right or remedy, (c) allow or suffer to exist any Permitted Liens
to be superior to Lender’s Liens on the Collateral, (d) enter into any
contracts for the consignment of goods, will not execute or suffer the filing
of any financing statements or the posting of any signs giving notice of
consignments, and will not, as a material part of its business, engage in the
sale of goods belonging to others, and (e) allow or suffer to exist the
failure of any Lien described herein to attach to, and/or remain at all times
perfected on, any of the Collateral.


 


Section 4.2             ERISA Compliance.


 


And will not allow any
Commonly Controlled Entity to:  (a) engage
in or permit any “prohibited transaction” (as defined in ERISA); (b) cause
any “accumulated funding deficiency” as defined in ERISA and/or the Internal
Revenue Code; (c) terminate any pension plan in a manner which could
result in the imposition of a lien on the property of Debtor pursuant to ERISA;
(d) terminate or consent to the termination of any Multi-employer Plan; or
(e) incur a complete or partial withdrawal with respect to any
Multi-employer Plan.


 


Section 4.3             Prohibition on Hazardous
Materials.


 


Debtor shall not place,
manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned, operated or controlled by Debtor or
for which Debtor is responsible other than Hazardous Materials placed or stored
on such property in accordance with applicable Laws in the ordinary course of
Debtor’s business expressly described in this Agreement.


 


Section 4.4             Transfer of Collateral.


 


Transfer, or permit the
transfer, to a location not listed on the Collateral Disclosure List, of the
books and records related to any of the Collateral or of any of the Collateral
having an aggregate value in excess of Five Hundred Thousand Dollars ($500,000)
except for (a) Collateral in transit, (b) Collateral maintained at a
temporary location for a period not to exceed six (6) months or (c) Collateral
located at a customer’s place of business which is offered for sale in the
ordinary course of business; provided, however, after the occurrence and
continuance of an Event of Default, Debtor will promptly disclose the locations
of all of the Collateral to Lender.


 


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Section 4.5             Sale and Leaseback.


 


Directly or indirectly enter
into any arrangement to sell or transfer all or any substantial part of its
fixed assets then owned by it and thereupon or within one year thereafter rent
or lease the assets so sold or transferred.


 


Section 4.6             DoD Contracts.


 


Without the prior written
consent of the Lender, which consent shall not be unreasonably withheld or
delayed, amend, modify or change any provision in any DoD Contract which would
affect, in a manner materially adverse to the Lender, either (i) the
entities receiving distributions under any such DoD Contract or (ii) the
timing of distributions under any such DoD Contract.


 


Section 4.7             Sale of Accounts.


 


Except in the ordinary
course of its business, sell, discount, allow credits or allowances, transfer,
assign, extend the time for payment on, convey, lease, assign, transfer or
otherwise dispose of the Collateral, except, prior to an Event of Default,
dispositions expressly permitted elsewhere in this Agreement, the sale of Inventory
in the ordinary course of business.


 


ARTICLE
V

EVENTS OF DEFAULT


 


The occurrence of one or
more of the following events shall be “Events of Default” under this Agreement,
and the terms “Event of Default” or “default” shall mean, whenever they are
used in this Agreement, any one or more of the following events:


 


Section 5.1             Failure to Pay.


 


The Debtor shall fail to pay
or perform any of the Obligations, when and as the same shall become due and
payable under the Guaranty.


 


Section 5.2             Breach of Representations
and Warranties.


 


Any representation or
warranty made in this Agreement or in any report, statement, schedule,
certificate, opinion (including any opinion of counsel for Debtor), financial
statement or other document furnished in connection with this Agreement, any of
the other Financing Documents, or the Obligations, shall prove to have been
false or misleading when made (or, if applicable, when reaffirmed) in any
material respect.


 


Section 5.3             Failure to Comply with
Covenants.


 


The failure of Debtor to
perform, observe or comply with any covenant, condition or agreement contained
in Sections Section 3.2, 3.3, 3.6 or 3.8 hereof or in Section 4
hereof.


 


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Section 5.4             Other Defaults.


 


The failure of Debtor to
perform, observe or comply with any covenant, condition or agreement contained
in this Agreement other than those set forth in Sections 5.1, 5.2, or 5.3
above, which default shall remain un-remedied for thirty (30) days after
written notice thereof to the Debtor by the Lender.


 


Section 5.5             Default Under Other
Financing Documents.


 


A default shall occur under
any of the other Financing Documents, and such default is not cured within any
applicable grace period provided therein.


 


Section 5.6             Receiver; Bankruptcy.


 


Debtor or any Subsidiary
shall (a) apply for or consent to the appointment of a receiver, trustee
or liquidator of itself or any of its property, (b) admit in writing its
inability to pay its debts as they mature, (c) make a general assignment
for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, (e) file
a voluntary petition in bankruptcy or a petition or an answer seeking or
consenting to reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such
law, or take corporate action for the purposes of effecting any of the
foregoing, (f) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship
or proceeding to continue undischarged for a period of sixty (60) days, or (g) by
any act indicate its consent to, approval of or acquiescence in any order,
judgment or decree by any court of competent jurisdiction or any Governmental
Authority enjoining or otherwise prohibiting the operation of a material
portion of Debtor’s or any Subsidiary’s business or the use or disposition of a
material portion of Debtor’s or any Subsidiary’s assets.


 


Section 5.7             Involuntary Bankruptcy, etc.


 


(a) An order for relief
shall be entered in any involuntary case brought against Debtor or any
Subsidiary under the Bankruptcy Code, or (b) any such case shall be
commenced against Debtor or any Subsidiary and shall not be dismissed within
sixty (60) days after the filing of the petition, or (c) an order,
judgment or decree under any other Law is entered by any court of competent
jurisdiction or by any other Governmental Authority on the application of a
Governmental Authority or of a Person other than Debtor or any Subsidiary (i) adjudicating
Debtor, or any Subsidiary bankrupt or insolvent, or (ii) appointing a
receiver, trustee or liquidator of Debtor or of any Subsidiary, or of a
material portion of Debtor’s or any Subsidiary’s assets, or (iii) enjoining,
prohibiting or otherwise limiting the operation of a material portion of Debtor’s
or any Subsidiary’s business or the use or disposition of a material portion of
Debtor’s or any Subsidiary’s assets, and such order, judgment or decree
continues unstayed and in effect for a period of thirty (30) days from the date
entered.


 


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Section 5.8             Judgment.


 


Unless adequately insured in
the opinion of Lender, the entry of a final judgment for the payment of money
involving more than Two Million Dollars ($2,000,000) against Debtor or any
Subsidiary, and the failure by Debtor or such Subsidiary to discharge the same,
or cause it to be discharged, within thirty (30) days from the date of the
order, decree or process under which or pursuant to which such judgment was
entered, or to secure a stay of execution pending appeal of such judgment.


 


Section 5.9             Execution; Attachment.


 


Any execution or attachment
shall be levied against Collateral having an aggregate value in excess of Five
Hundred Thousand Dollars ($500,000), or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.


 


Section 5.10           Debarment or Suspension.


 


Debtor is debarred or
suspended, whether temporarily or permanently, by the United States of America
or any department, agency or instrumentality thereof.


 


Section 5.11           Liquidation, Termination or
Dissolution.


 


Debtor shall liquidate,
dissolve or terminate its existence or shall suspend or terminate a substantial
portion of its business operations.


 


Section 5.12           Default Under Other
Borrowings.


 


Default shall be made with
respect to any evidence of indebtedness or liability for borrowed money (other
than under the Credit Facilities and other unsecured Indebtedness of up to One
Million Dollars ($1,000,000)) if the effect of such default is to accelerate
the maturity of such evidence of indebtedness or liability or to permit the
holder or obligee thereof to cause any indebtedness to become due prior to its
stated maturity.


 


ARTICLE
VI

RIGHTS AND REMEDIES UPON DEFAULT


 


Section 6.1             Demand; Acceleration.


 


Upon the occurrence of an
Event of Default, and in every such event and at any time thereafter, the
Lender may declare the Obligations due and payable, without presentment,
demand, protest, or any notice of any kind, all of which are hereby expressly
waived, anything contained herein or in any of the other Financing Documents to
the contrary notwithstanding.


 


Section 6.2             Specific Rights With Regard
to Collateral.


 


In addition to all other
rights and remedies provided hereunder or as shall exist at law or in equity
from time to time, the Lender may, without notice to the Debtor:


 


13

















 


(a)           request any account debtor obligated on any of the
Accounts to make payments thereon directly to the Lender, with the Lender
taking control of the cash and non-cash proceeds thereof;


 


(b)           compromise, extend or renew any of the Collateral or
deal with the same as it may deem advisable;


 


(c)           make exchanges, substitutions or surrenders of all or
any part of the Collateral;


 


(d)           remove from any of the Debtor’s place of business all
books, records, ledger sheets, correspondence, invoices and documents, relating
to or evidencing any of the Collateral or without cost or expense to the
Lender, make such use of the Debtor’s place(s) of business as may be
reasonably necessary to administer, control and collect the Collateral;


 


(e)           repair, alter or supply goods if necessary to fulfill in
whole or in part the purchase order of any account debtor;


 


(f)            demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;


 


(g)           institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral;


 


(h)           settle, renew, extend, compromise, compound, exchange
or adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;


 


(i)            endorse the name of the Debtor upon any items of
payment relating to the Collateral or on any Proof of Claim in Bankruptcy
against an account debtor;


 


(j)            clear Inventory through customs in Lender’s or Debtor’s
name and to sign and deliver to customs officials powers of attorney in Debtor’s
name for such purpose; and


 


(k)           take any other action
necessary or beneficial to realize upon or dispose of the Collateral or to
carry out the terms of this Agreement.


 


Section 6.3             Application of Proceeds.


 


Any proceeds of sale or
other disposition of the Collateral will be applied by Lender to the payment
first of any and all Enforcement Costs, and any balance of such proceeds will
be applied to the Obligations in such order and manner as Lender shall
determine.  If the sale or other
disposition of the Collateral fails to fully satisfy the Obligations, Debtor
and Borrower shall remain liable to Lender for any deficiency.


 


Section 6.4             Performance by Lender.


 


If the Debtor shall fail to
pay the Obligations or otherwise fail to perform, observe or comply with any of
the conditions, covenants, terms, stipulations or agreements contained in this
Agreement or any of the other Financing Documents, the Lender without notice to
or demand 


 


14

















 


upon
Debtor and without waiving or releasing any of the Obligations or any Default
or Event of Default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Debtor, and may enter upon the premises of Debtor for that purpose
and take all such action thereon as Lender may consider necessary or
appropriate for such purpose and Debtor hereby irrevocably appoints Lender as
its attorney-in-fact to do so, with power of substitution, in the name of Lender,
in the name of Debtor or otherwise, for the use and benefit of Lender, but at
the cost and expense of Debtor and without notice to Debtor.  All sums so paid or advanced by Lender
together with interest thereon from the date of payment, advance or incurring
until paid in full at the Post-Default Rate and all costs and expenses, shall
be paid by Debtor to Lender on demand, and shall constitute and become a part
of the Obligations.


 


Section 6.5             Uniform Commercial Code.


 


Lender
shall have all of the rights and remedies of a secured party under the
applicable Uniform Commercial Code and other applicable Laws.  Upon demand by Lender, Debtor shall assemble
the Collateral and make it available to Lender, at a place designated by
Lender.  Lender or its agents may without
notice from time to time enter upon Debtor’s premises to take possession of the
Collateral, to remove it, to render it unusable, to process it or otherwise
prepare it for sale, or to sell or otherwise dispose of it.


 


Any
written notice of the sale, disposition or other intended action by Lender with
respect to the Collateral which is sent by regular mail, postage prepaid, to
Debtor at the address set forth in Section 7.1 (Notices), or such other
address of Debtor which may from time to time be shown on Lender’s records, at
least ten (10) days prior to such sale, disposition or other action, shall
constitute commercially reasonable notice to Debtor.  Lender may alternatively or additionally give
such notice in any other commercially reasonable manner.  Nothing in this Agreement shall require
Lender to give any notice not required by applicable Laws.


 


If
any consent, approval, or authorization of any state, municipal or other
Governmental Authority or of any other Person or of any Person having any
interest therein, should be necessary to effectuate any sale or other
disposition of the Collateral, Debtor agrees to execute all such applications
and other instruments, and to take all other action, as may be required in
connection with securing any such consent, approval or authorization.


 


Debtor recognizes that
Lender may be unable to effect a public sale of all or a part of the Collateral
consisting of Investment Property by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and other applicable Federal and
state Laws.  Lender may, therefore, in
its discretion, take such steps as it may deem appropriate to comply with such
Laws and may, for example, at any sale of the Collateral consisting of
securities restrict the prospective bidders or purchasers as to their number,
nature of business and investment intention, including, without limitation, a
requirement that the Persons making such purchases represent and agree to the
satisfaction of Lender that they are purchasing such securities for their
account, for investment, and not with a view to the distribution or resale of
any thereof.  Debtor covenants and agrees
to do or cause to be done promptly all such acts and things as Lender may request
from time to time and as may be necessary to offer and/or sell the securities
or any part thereof in a manner which is valid and binding and in conformance
with all applicable Laws.   Upon any 


 


15

















 


such
sale or disposition, Lender shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral consisting of securities so
sold.


 


Section 6.6             Other Remedies.


 


Lender may from time to time
proceed to protect or enforce its rights by an action or actions at law or in
equity or by any other appropriate proceeding, whether for the specific
performance of any of the covenants contained in this Agreement or in any of
the other Financing Documents, or for an injunction against the violation of
any of the terms of this Agreement or any of the other Financing Documents, or
in aid of the exercise or execution of any right, remedy or power granted in
this Agreement, the Financing Documents, and/or applicable Laws.  Lender is authorized to offset and apply to
all or any part of the Obligations all moneys, credits and other property of
any nature whatsoever of Debtor now or at any time hereafter in the possession
of, in transit to or from, under the control or custody of, or on deposit with,
Lender or any Affiliate of Lender.


 


ARTICLE
VII

MISCELLANEOUS


 


Section 7.1             Notices.


 


All notices, certificates or
other communications hereunder shall be given as set forth in Section 4.1
of the Guaranty.


 


Section 7.2             Consents and Approvals.


 


If any consent, approval, or
authorization of any state, municipal or other governmental department, agency
or authority or of any person, or any person, corporation, partnership or other
entity having any interest therein, should be necessary to effectuate any sale
or other disposition of the Collateral, the Debtor agrees to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.


 


Section 7.3             Remedies, Etc. Cumulative.


 


Each right, power and remedy
of the Lender as provided for in this Agreement or in any of the other
Financing Documents or now or hereafter existing at law or in equity or by
statute or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power or remedy provided for in this Agreement
or in any of the other Financing Documents or now or hereafter existing at law
or in equity, by statute or otherwise, and the exercise or beginning of the
exercise by the Lender of any one or more of such rights, powers or remedies
shall not preclude the simultaneous or later exercise by the Lender of any or
all such other rights, powers or remedies. 
In order to entitle the Lender to exercise any remedy reserved to it
herein, it shall not be necessary to give any notice, other than such notice as
may be expressly required in this Agreement.


 


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Section 7.4             No Waiver of Rights by the
Lender.


 


No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant
or agreement of this Agreement or of any of the other Financing Documents, or
to exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant or agreement or of
any such breach or preclude the Lender from exercising any such right, power or
remedy at any later time or times.  By
accepting payment after the due date of any amount payable under this Agreement
or under any of the other Financing Documents, the Lender shall not be deemed
to waive the right either to require prompt payment when due of all other
amounts payable under this Agreement or under any of the other Financing
Documents, or to declare a default for failure to effect such prompt payment of
any such other amount.


 


Section 7.5             Entire Agreement.


 


The Financing Documents
shall completely and fully supersede all other agreements, both written and
oral, between the Lender and the Debtor relating to the Obligations.  Neither the Lender nor the Debtor shall
hereafter have any rights under such prior agreements but shall look solely to
the Financing Documents for definition and determination of all of their
respective rights, liabilities and responsibilities relating to the
Obligations.


 


Section 7.6             Survival of Agreement;
Successors and Assigns.


 


All
covenants, agreements, representations and warranties made by the Debtor herein
and in any certificate, in the Financing Documents and in any other instruments
or documents delivered pursuant hereto shall survive the making by the Lender
of the Credit Facilities and the execution and delivery of the Revolving Credit
Note, and shall continue in full force and effect so long as any of the
Obligations are outstanding and unpaid. 
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Debtor, which are contained in this Agreement shall inure to the benefit of the
successors and assigns of the Lender, and all covenants, promises and
agreements by or on behalf of the Lender which are contained in this Agreement
shall inure to the benefit of the permitted successors and permitted assigns of
the Debtor, but this Agreement may not be assigned by the Debtor without the
prior written consent of the Lender.


 


Section 7.7             Enforcement Costs.


 


Debtor shall pay to Lender
on demand all Enforcement Costs, together with interest thereon from the date
incurred or advanced until paid in full at a per annum rate of interest equal
at all times to the Post-Default Rate. 
Enforcement Costs shall be immediately due and payable at the time
advanced or incurred, whichever is earlier. 
Without implying any limitation on the foregoing, Debtor shall pay, as
part of the Enforcement Costs, upon demand any and all stamp and other Taxes
and fees payable or determined to be payable in connection with the execution
and delivery of this Agreement and the other Financing Documents and to save
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or 


 


17

















 


omission
to pay any Taxes or fees referred to in this Section.  The provisions of this Section shall
survive the execution and delivery of this Agreement and the repayment of the
Obligations.


 


Section 7.8             Counterparts.


 


This Agreement may be
executed in any number of counterparts all of which together shall constitute a
single instrument.


 


Section 7.9             Governing Law.


 


(a)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE, WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES INSOFAR AS
SUCH PRINCIPLES WOULD DEFER TO THE SUBSTANTIVE LAWS OF SOME OTHER JURISDICTION.


 


(b)           EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.


 


(c)           EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING
DOCUMENT IN ANY COURT REFERRED TO IN SECTION 7.9(b).  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.


 


Section 7.10           Modifications.


 


No modification or waiver of
any provision of this Agreement, nor consent to any departure by the Debtor
therefrom, shall in any event be effective unless the same shall be in writing,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given.  No
notice to or demand on the Debtor in any case shall entitle the Debtor to any
other or further notice or demand in the same, similar or other circumstance.


 


18

















 


Section 7.11           Illegality.


 


If fulfillment of any
provision hereof or any transaction related hereto or to any of the other
Financing Documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity; and if any clause or provisions herein contained other than the
provisions hereof pertaining to repayment of the Obligations operates or would
prospectively operate to invalidate this Agreement in whole or in part, then
such clause or provision only shall be void, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full force
and effect; and if such provision pertains to repayment of the Obligations,
then, at the option of the Lender, all of the Obligations of the Debtor to the
Lender shall become immediately due and payable.


 


Section 7.12           Gender, Etc.


 


Whenever used herein, the
singular number shall include the plural, the plural the singular and the use
of the masculine, feminine or neuter gender shall include all genders.


 


Section 7.13           Headings.


 


The headings in this
Agreement are for convenience only and shall not limit or otherwise affect any
of the terms hereof.


 


Section 7.14           Waiver of Trial by Jury.


 


THE DEBTOR AND THE LENDER
HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH THE DEBTOR AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY
WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING
DOCUMENTS, OR (C) THE COLLATERAL. 
THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST
ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES
WHO ARE NOT PARTIES TO THIS AGREEMENT.


 


THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE DEBTOR AND THE LENDER, AND THE DEBTOR AND
THE LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT.  THE
DEBTOR AND THE LENDER FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.


 


Section 7.15           Liability of the Lender.


 


Debtor hereby agrees that
Lender shall not be chargeable for any negligence, mistake, act or omission of
any accountant, examiner, agency or attorney employed by Lender in making 


 


19

















 


examinations,
investigations or collections, or otherwise in perfecting, maintaining,
protecting or realizing upon any lien or security interest or any other
interest in the Collateral or other security for the Obligations.


 


By inspecting the Collateral
or any other properties of Debtor or by accepting or approving anything
required to be observed, performed or fulfilled by Debtor or to be given to
Lender pursuant to this Agreement or any of the other Financing Documents,
Lender shall not be deemed to have warranted or represented the condition,
sufficiency, legality, effectiveness or legal effect of the same, and such
acceptance or approval shall not constitute any warranty or representation with
respect thereto by Lender.


 


[SIGNATURES
APPEAR ON THE FOLLOWING PAGE]


 


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IN WITNESS WHEREOF, the
Debtor has signed this Agreement on the day and year first above written.


 


	
   

  	
  SURPLUS
  ACQUISITION VENTURE, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James M. Rallo

  
	
   

  	
   

  	
  Name:
  James M. Rallo

  
	
   

  	
   

  	
  Title:
  Treasurer

  



 


[Signature
Page to Security Agreement]