Document:

Exhibit 10.1

 

SECURITY AGREEMENT

 

THIS AGREEMENT, made this 7th day of June, 2005, by and
between LIQUIDITY SERVICES, INC., a Delaware corporation with principal
business office located at 2131 K Street, N.W., Washington, D.C. 20003 (hereinafter called the “Debtor”)
and UNITED BANK (hereinafter called the “Bank”).

 

WITNESSETH THAT:

 

FOR VALUABLE CONSIDERATION, and pursuant to a loan agreement of even
date herewith between the Bank, the Debtor and Surplus Acquisition Venture, LLC
(the “Guarantor”) (the “Loan Agreement”) to secure the payment when due
(whether at the stated maturity or by acceleration) of an indebtedness owed by
the Debtor to the Bank pursuant to a loan in the amount of $3,000,000.00 (the “Loan”),
plus interest or other amounts payable as set forth in a Note issued to
evidence the Loan and any other documents issued in connection with the Loan,
and also to secure any other indebtedness or liability of the Debtor to the
Bank, whether now existing or hereafter created or arising, direct or indirect,
matured or unmatured, and whether absolute or contingent, joint, several, or
joint and several, and no matter how the same may be evidenced or shall arise,
including all future advances or loans which may be made at the option of the
Bank (all hereinafter called the “Obligations”) the Debtor hereby grants and
conveys to the Bank a security interest in and mortgages to the Bank:

 

(a)                                The accounts
receivables of Debtor as more specifically defined in Exhibit A attached
hereto; and

 

(b)                                The
Inventory of the Debtor as more specifically defined in Exhibit A hereto;
and

 

(b)                                All earnings, revenue,
rents, issues, profits, amounts and other income of and from the aforesaid
collateral; and

 

(c)                                 All increases,
substitutions, renewals, replacements and accessions of and to any of the
aforesaid collateral; and

 

(d)                                All
proceeds and products of the aforesaid collateral.

 

All of the
above are hereinafter referred to as the “Collateral.”

 

1.                                   DEBTOR WARRANTS,
COVENANTS AND
AGREES AS FOLLOWS:

	
   

  	
   

  	
   

  
	
  PAYMENT

  	
   

  	
  (a) To
  pay and perform all of the Obligations secured by this Agreement according to
  their respective terms.

  
	
   

  	
   

  	
   

  
	
  DEFEND

  	
   

  	
  (b) To
  defend the title to the Collateral against all persons and all claims and
  demands whatsoever, which Collateral, except for the security interest
  granted hereby, is lawfully owned by the Debtor and is now free and clear of any and all liens,
  security interests, claims, charges, encumbrances, taxes and assessments. The
  Debtor agrees not to transfer 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	
   

  	
   

  	
  legal or
  equitable title to the Collateral to any other party without the Bank’s prior
  written consent.

  
	
   

  	
   

  	
   

  
	
  ASSURANCE

  	
   

  	
  (c) On
  demand of the Bank, to do the following:

  
	
  OF TITLE

  	
   

  	
  furnish
  further assurance of title, execute any written agreement or do any other
  acts necessary to effectuate the purposes and provisions of this Agreement,
  execute any instrument or statement required by law or otherwise in order to
  perfect, continue or terminate the security interest of the Bank in the
  Collateral and pay all costs of filing in connection therewith.

  
	
   

  	
   

  	
   

  
	
  POSSESSION

  	
   

  	
  (d) Except
  for Collateral in the possession of the Bank, to retain possession of the
  Collateral during the existence of this Agreement and not to sell, exchange,
  assign, loan, deliver, lease, mortgage or otherwise dispose of same without
  the written consent of the Bank.

  
	
   

  	
   

  	
   

  
	
  LOCATION

  	
   

  	
  (e) To
  keep the Collateral at the location agreed to with the Bank and not to remove
  same (except in the usual course of business for temporary periods) without
  the prior written consent of the Bank.

  
	
   

  	
   

  	
   

  
	
  LIENS

  	
   

  	
  (f) To keep the Collateral free
  and clear of all liens, charges, encumbrances, taxes and assessments.

  
	
   

  	
   

  	
   

  
	
  TAXES

  	
   

  	
  (g) To
  pay, when due, all taxes, assessments and license fees relating to the
  collateral.

  
	
   

  	
   

  	
   

  
	
  CHANGE OF

  ADDRESS

  	
   

  	
  (h) To
  immediately notify the Bank in writing of any change in or discontinuance of the Debtor’s
  place or places of business and/or residence.

  

 

2.                                   GENERAL
PROVISIONS:

 

	
  NOTES

  	
   

  	
  (a) Notes,
  if any, executed in connection with this Agreement, are separate instruments
  and may be negotiated by the Bank without releasing the Debtor, the
  Collateral, or any guarantor or co-maker.

  
	
   

  	
   

  	
   

  
	
  NON-WAIVER

  	
   

  	
  (b) Waiver of
  or acquiescence in any default by the Debtor, or failure of the Bank to
  insist upon strict performance by the Debtor of any warranties or agreements
  in this Agreement, shall not constitute a waiver of any subsequent or other
  default or failure.

  
	
   

  	
   

  	
   

  
	
  NOTICES

  	
   

  	
  (c) Notices
  to any party shall be in writing and shall be delivered personally or by
  mail, postage prepaid, addressed to the party at the address set forth or
  otherwise designated in writing.

  

 

2

 

	
  LAW

  APPLICABLE

  	
   

  	
  (d) The laws of the
  Commonwealth of Virginia shall govern the rights, duties and remedies of the
  parties and any provisions herein declared invalid under any law shall not
  invalidate any other provision of this Agreement.

  
	
   

  	
   

  	
   

  
	
  DEFAULT

  	
   

  	
  (e) The following
  shall constitute an Event of Default by the Debtor:

  
	
   

  	
   

  	
   

  
	
  Non-payment

  	
   

  	
  (1) Failure of the
  Debtor to pay any installment of principal and/or interest on the Obligations
  or any notes when due.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2) The failure of
  the Debtor to perform or observe any of its nonmonetary obligations or
  covenants under this Agreement which failure continues for a period of ten (10) days
  after written notice to Debtor, provided however, that if such nonmonetary
  default is not capable of being cured within said ten (10) day grace
  period, the Debtor, shall have an additional thirty (30) days in which to
  cure said default, provided that the default can be cured within the thirty
  (30) days and Debtor, diligently and in good faith initiates and pursues such
  action as is reasonably required to cure said nonmonetary default.

  
	
   

  	
   

  	
   

  
	
  Violation

  	
   

  	
  (3) Failure of the
  Debtor or Surplus Acquisition Venture, LLC (the “Guarantor”) to comply with
  or perform any of the provisions of the Loan Agreement of even date herewith
  between Debtor, Guarantors and Bank, beyond any applicable cure period.

  
	
   

  	
   

  	
   

  
	
  Misrepresentations

  	
   

  	
  (4) False or
  misleading representations or warranties made or given by the Debtor in
  connection with this Agreement or any note.

  
	
   

  	
   

  	
   

  
	
  Levy

  	
   

  	
  (5) Subjection of the
  Collateral to levy of execution or other judicial process.

  
	
   

  	
   

  	
   

  
	
  Insolvency

  	
   

  	
  (6) Commencement of
  any insolvency proceeding by or against the Debtor or Guarantor of or surety
  for the Obligations and continuation of such proceeding beyond any applicable
  time allowed by the Loan Documents in which such party may have the
  proceeding dismissed, bonded off or otherwise cured without being in default.

  
	
   

  	
   

  	
   

  
	
  Death

  	
   

  	
  (7) Dissolution of
  the Debtor or of any guarantor of or surety for any of the Obligations.

  
	
   

  	
   

  	
   

  
	
  Impairment

  of Security

  	
   

  	
  (8) Any reduction in
  the value of the Collateral.

  
	
   

  	
   

  	
   

  
	
  REMEDIES

  	
   

  	
  (f) Upon any Event of
  Default, at the option of the Bank,

  
	
  ON DEFAULT

  	
   

  	
  (1) the Obligations
  secured by this Agreement shall immediately become due and payable in full
  without notice or demand and the Bank shall have all the rights, remedies and
  acceleration privileges with respect to

  

 

3

 

	
   

  	
   

  	
  repossession,
  retention and sale of the Collateral and disposition of the proceeds as are
  accorded to a secured party by the applicable sections of the Uniform
  Commercial Code respecting “Default” in effect as of the date of this
  Agreement.

  
	
   

  	
   

  	
   

  
	
  Attorneys’

  Fees, etc.

  	
   

  	
  (2) Upon any
  default, the Bank’s reasonable attorneys’ fees, costs or fees, costs of
  collection and the legal and other expenses for pursuing, searching for,
  receiving, taking, keeping, storing, advertising, and selling the Collateral
  shall be chargeable to the Debtor.

  
	
   

  	
   

  	
   

  
	
  Deficiency

  	
   

  	
  (3) The
  Debtor shall remain liable for any deficiency resulting from a sale of the
  Collateral and shall pay such deficiency forthwith on demand.

  
	
   

  	
   

  	
   

  
	
  Monies

  Advanced

  	
   

  	
  (4) If the
  Debtor shall default in the performance of any of the provisions of this
  Agreement on the Debtor’s part to be performed, Bank may perform same for the
  Debtor’s account and any monies expended in so doing shall be chargeable with
  interest to the Debtor and added to the indebtedness secured hereby.

  
	
   

  	
   

  	
   

  
	
  Seizure;
  Assembly

  of Collateral;

  Notice of Sale 

  	
   

  	
  (5) In
  conjunction with, addition to or substitution for the foregoing rights, the
  Bank, at its discretion, may: (i) enter upon Debtor’s premises peaceably
  by the Bank’s own means or with legal process and take possession of the
  Collateral, or render it unusable, or dispose of the Collateral on the
  Debtor’s premises and the Debtor agrees not to resist or interfere;
  (ii) require the Debtor to assemble the Collateral and make it available
  to the Bank at a place to be designated by the Bank reasonably convenient to
  both parties (the Debtor agrees that the Bank’s address as set forth above is
  the place reasonably convenient for such assembling; (iii) unless the Collateral
  is perishable or threatens to decline speedily in value or is of a type
  customarily sold on a recognized market, the Bank will give the Debtor
  reasonable notice of the time and place of any public sale thereof or of the
  time after which any private sale or any other intended disposition thereof
  is to be made. The requirements of reasonable notice will be met if such
  notice is mailed, postage prepaid, to the address of the Debtor shown above,
  at least ten (10) days before the time of sale or disposition.

  
	
   

  	
   

  	
   

  
	
  ASSIGNMENT

  	
   

  	
  (g) The
  Bank may assign this Agreement and if assigned the assignee shall be
  entitled, upon notifying the Debtor, to performance of all of Debtor’s
  obligations and agreements hereunder and the assignee shall be entitled to
  all of the rights and remedies of the Bank hereunder. The Debtor will assert
  no claims or defenses Debtor may have against the assignee.

  
	
   

  	
   

  	
   

  
	
  FINANCING STATEMENTS
  

  	
   

  	
  (h) The
  Bank is
  hereby authorized to file Financing Statements covering the Collateral and to
  sign the Debtor’s signature thereto.

  

 

4

 

	
  CAPTIONS

  	
   

  	
  (i) The
  Captions are inserted only as a matter of convenience and for reference and
  in no way define, limit or describe the scope of this Agreement nor the
  intent of any provision thereof.

  

 

3.                                   ADDITIONAL
PROVISIONS:

 

	
  BOOKS AND RECORDS
  

  	
   

  	
  (a) The
  Debtor shall at all times maintain proper books of record and account in
  accordance with generally accepted accounting principles an procedures and
  will permit the Bank or its authorized officers or agents to have access to
  such books and records at all reasonable times.

  
	
   

  	
   

  	
   

  
	
  FINANCIAL STATEMENTS
  

  	
   

  	
  (b) The
  Debtor will provide the Bank with complete financial statements certified by
  an Officer of the Debtor (or an independent public accountant if required by
  the Bank), including both a balance sheet and profit and loss statements on a
  quarterly basis, and the Debtor will provide the Bank with such additional
  financial information as the Bank shall reasonably request from time to time.

  
	
   

  	
   

  	
   

  
	
  PRINCIPAL

  PLACE OF

  BUSINESS

  	
   

  	
  (c) The
  Debtor represents and warrants that its chief place of business and the
  office where its records with respect to accounts and/or contract rights are
  kept is at 2131 K Street, N.W., Washington, D.C. 20037. 

  
	
   

  	
   

  	
   

  
	
  GENDER AND NUMBER

  	
   

  	
  (d) The
  gender and number used in this Agreement are used as a reference term only
  and shall apply with the same effect whether the parties are of the masculine
  or feminine gender, corporate or other form, and the singular shall likewise
  include the plural.

  
	
   

  	
   

  	
   

  
	
  NO ORAL

  CHANGE

  	
   

  	
  (e) This
  Agreement may not be changed orally.

  

 

IN WITNESS
WHEREOF, the parties hereto have respectively signed and sealed these presents
the day and year first above written.

 

	
   

  	
   

  	
  DEBTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIQUIDITY SERVICES,
  INC.,

  
	
  Attest:

  	
   

  	
  A Delaware corporation

  
	
   

  	
   

  	
   

  
	
  /s/ William P. Angrick,

  	
   

  	
  BY:

  	
  /s/ James M.
  Rallo

  
	
  William P. Angrick, III, Secretary

  	
   

  	
  James M.
  Rallo, Chief Financial Officer and 

  
	
   

  	
   

  	
  Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
  (Corporate
  Seal)

  	
   

  	
   

  
					

 

5

 

	
   

  	
   

  	
  BANK:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  UNITED BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Barbara Hart

  	
   

  
	
   

  	
   

  	
  Barbara
  Hart, Vice President

  

 

6

 

EXHIBIT A

 

All of the following assets and property of the Debtor/Borrower,
wherever located whether now or hereafter owned or acquired:

 

1.                                    All
Accounts of Debtor/Borrower which shall mean all presently existing or
hereafter acquired or created accounts, accounts receivable, contract rights,
notes, drafts, instruments, acceptances, chattel paper, leases and writings
evidencing a monetary obligation or a security interest in or a lease of goods,
all rights to receive the payment of money or other consideration under present
or future contracts (including, without limitation, all rights to receive payments
under presently existing or hereafter acquired or created letters of credit),
or by virtue of merchandise sold or leased, services rendered, loans and
advances made or other considerations given, by or set forth in or rising out
of any present or future Chattel Paper, note, draft, lease, acceptance,
writing, bond, insurance policy, instrument, document or general intangible,
and all extensions and renewals of any thereof, all rights under or arising out
of present or future contracts, agreements or general interest in merchandise
which gave rise to any or all of the foregoing, or hereafter arising in
connection with or under any agreement or document or by operation of law or
otherwise, all collateral security of any kind (including real property mortgages)
given by any person with respect to any of the foregoing, all books and records
in whatever media (paper, electronic or otherwise) recorded or stored, with
respect to any or all of the foregoing and all equipment and general
intangibles necessary or beneficial desirable to retain, access and/or process
the information contained in those books and records, and all proceeds (cash
and non-cash) of the foregoing.

 

2.                                     All
Chattel Paper of Debtor/Borrower which shall mean any writing or writings which
evidence both a monetary obligation and a security interest in or lease of
specific goods; any returned, rejected or repossessed goods covered by any such
writing or writings and all proceeds (in any form including, without
limitation, accounts, contract and general intangibles) of such returned,
rejected or repossessed goods, and all proceeds (cash and non-cash) of the
foregoing.

 

3.                                      All
Inventory of Debtor/Borrower which shall mean all inventory of the
Debtor/Borrower and all right, title and interest of the Debtor/Borrower in and
to all of its now owned and hereafter acquired goods, merchandise and other
personal property furnished under any contract of service or intended for sale
or lease, including, without limitation, all raw materials, work-in-progress,
finished goods and materials and supplies of any kind, nature or description
which are used or consumed in the Debtor’s/Borrower’s business or are or might
be used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and any and all licenses,
warranties, franchises, general intangibles, personal property and all
documents of title or documents relating to the same and all proceeds (cash and
non-cash) of the foregoing; EXCLUDING any and all such inventory owned, held or
under the control of Debtor pursuant to any contract with the Defense
Reutilization Marketing Service or any other agency of the government of the
United States of America.

 

 

4.                                      All
proceeds of all insurance now or hereafter carried by, or payable to Debtor/Borrower
with respect to the aforesaid collateral, or
otherwise now or hereafter payable with respect to any loss or damage of
the aforesaid collateral, and all claims or demands with respect thereto.

 

5.                                      All
right, title and interest of Debtor/Borrower in and to all extensions,
improvements, betterments, renewals, substitutes and replacements of, and all
additions and appurtenances to all or any portion of the above-listed
collateral, hereafter acquired by, or released to Debtor/Borrower, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be.

 

6.                                     All
earnings, revenues, rent. issues, profits, avails and other income of and from
the aforesaid collateral.

 

7.                                      All
proceeds of the conversion, voluntary or involuntary, of any of the collateral
into cash or liquidated claims.

 

8.                                     All proceeds and
products of the aforesaid collateral.Exhibit 10.2

 

SECURITY AGREEMENT

 

THIS AGREEMENT, made this 7th day of June, 2005, by and
between SURPLUS ACQUISITION VENTURE, LLC, a Delaware limited liability company
with principal business office located at 2131 K Street, N.W., Washington, D.C.
20003 (hereinafter called the “Debtor”) and UNITED BANK (hereinafter called the
“Bank”).

 

W  I  T  N
E  S  S  E  T  H   T
H  A  T:

 

FOR VALUABLE CONSIDERATION, and pursuant to a loan agreement of even
date herewith between the Bank, the Debtor and Liquidity Services, Inc. (“Liquidity”)
(the “Loan Agreement”) and the Guaranty of even date herewith given by the
Debtor to the Bank to secure the payment when due (whether at the stated
maturity or by acceleration) of an indebtedness owed by Liquidity to the Bank
pursuant to a loan in the amount of $3,000,000.00 (the “Loan”), plus interest
or other amounts payable as set forth in a Note issued to evidence the Loan and
any other documents issued in connection with the Loan, and also to secure any
other indebtedness or liability of the Liquidity to the Bank, whether now
existing or hereafter created or arising, direct or indirect, matured or
unmatured, and whether absolute or contingent, joint, several, or joint and
several, and no matter how the same may be evidenced or shall arise, including
all future advances or loans which may be made at the option of the Bank (all
hereinafter called the “Obligations”) the Debtor hereby grants and conveys to
the Bank a security interest in and mortgages to the Bank:

 

(a)                                  The
accounts receivables of Debtor as more specifically defined in Exhibit A
attached hereto; and

 

(b)                                 The
Inventory of Debtor as more specifically defined in Exhibit A hereto; and

 

(c)                                  All
earnings, revenue, rents, issues, profits, amounts and other income of and from
the aforesaid collateral; and

 

(d)                                 All
increases, substitutions, renewals, replacements and accessions of and to any
of the aforesaid collateral; and

 

(e)                                  All
proceeds and products of the aforesaid collateral.

 

All of the above are hereinafter referred to as the “Collateral.”

 

1.                                       DEBTOR
WARRANTS, CONVENANTS AND AGREES AS FOLLOWS:

 

	
  PAYMENT

  	
  (a) To pay and perform all of the Obligations secured by this
  Agreement according to their respective terms.

   

  
	
  DEFEND

  	
  (b) To defend the title to the Collateral against all persons and
  all claims and demands whatsoever, which Collateral, except for the security
  interest granted hereby, is lawfully owned by the Debtor and is now free and
  clear of any and all liens, security interests, claims, charges,
  encumbrances, taxes and assessments. The Debtor agrees not to transfer

  

 

 

	
   

  	
  legal or equitable title to the Collateral to any other party without
  the Bank’s prior written consent.

   

  
	
  ASSURANCE

  OF TITLE

  	
  (c) On demand of the Bank, to do the following:

  furnish further assurance of title, execute any written agreement or
  do any other acts necessary to effectuate the purposes and provisions of this
  Agreement, execute any instrument or statement required by law or otherwise
  in order to perfect, continue or terminate the security interest of the Bank
  in the Collateral and pay all costs of filing in connection therewith.

   

  
	
  POSSESSION

  	
  (d) Except for Collateral in the possession of the Bank, to
  retain possession of the Collateral during the existence of this Agreement
  and not to sell, exchange, assign, loan, deliver, lease, mortgage or
  otherwise dispose of same without the written consent of the Bank.

   

  
	
  LOCATION

  	
  (e) To keep the Collateral at the location agreed to with the
  Bank and not to remove same (except in the usual course of business for
  temporary periods) without the prior written consent of the Bank.

   

  
	
  LIENS

  	
  (f) To keep the Collateral free and clear of all liens, charges,
  encumbrances, taxes and assessments.

   

  
	
  TAXES

  	
  (g) To pay, when due, all taxes, assessments and license fees
  relating to the collateral.

   

  
	
  CHANGE OF 

  ADDRESS

  	
  (h) To immediately notify the Bank in writing of any change in
  or discontinuance of the Debtor’s place or places of business and/or
  residence.

  

 

2.               GENERAL PROVISIONS:

 

	
  NOTES

  	
  (a) Notes, if any, executed in connection with this Agreement,
  are separate instruments and may be negotiated by the Bank without releasing
  the Debtor, the Collateral, or any guarantor or co-maker.

   

  
	
  NON-WAIVER

  	
  (b) Waiver of or acquiescence in any default by the Debtor, or
  failure of the Bank to insist upon strict performance by the Debtor of any
  warranties or agreements in this Agreement, shall not constitute a waiver of
  any subsequent or other default or failure.

   

  
	
  NOTICES

  	
  (c) Notice to any party shall be in writing and shall be
  delivered personally or by mail, postage prepaid, addressed to the party at
  the address set forth or otherwise designated in writing.

  

 

2

 

	
  LAW 

  APPLICABLE

  	
  (d) The laws of the Commonwealth of Virginia shall govern the
  rights, duties and remedies of the parties and any provisions herein declared
  invalid under any law shall not invalidate any other provision of this
  Agreement.

   

  
	
  DEFAULT

  	
  (e) The following shall constitute an Event of Default by the
  Debtor:

   

  
	
  Non-payment

  	
  (1) Failure of the Debtor to pay any installment of principal
  and/or interest on the Obligations or any notes when due.

   

  
	
   

  	
  (2) The failure of the Debtor to perform or observe any of its
  nonmonetary obligations or covenants under this Agreement which failure
  continues for a period of ten (10) days after written notice to Debtor,
  provided however, that if such nonmonetary default is not capable of being
  cured within said ten (10) day grace period, the Debtor, shall have an
  additional thirty (30) days in which to cure said default, provided that the
  default can be cured within the thirty (30) days and Debtor, diligently and
  in good faith initiates and pursues such action as is reasonably required to
  cure said nonmonetary default.

   

  
	
  Violation

  	
  (3) Failure of the Debtor or Surplus Acquisition Venture, LLC
  (the “Guarantor”) to comply with or perform any of the provisions of the Loan
  Agreement of even date herewith between Debtor, Guarantors and Bank, beyond
  any applicable cure period.

   

  
	
  Misrepresentations

  	
  (4) False or misleading representations or warranties made or
  given by the Debtor in connection with this Agreement or any note.

   

  
	
  Levy

  	
  (5) Subjection of the Collateral to levy of execution or other
  judicial process.

   

  
	
  Insolvency

  	
  (6) Commencement of any insolvency proceeding by or against the
  Debtor or Guarantor of or surety for the Obligations and continuation of such
  proceeding beyond any applicable time allowed by the Loan Documents in which
  such party may have the proceeding dismissed, bonded off or otherwise cured
  without being in default.

   

  
	
  Death

  	
  (7) Dissolution of the Debtor or of any guarantor of or surety
  for any of the Obligations.

   

  
	
  Impairment 

  of Security

   

  	
  (8) Any reduction in the value of the Collateral.

  
	
  REMEDIES ON DEFAULT

  	
  (f) Upon any Event of Default, at the option of the Bank. 

  (1) the Obligations secured by this Agreement shall immediately
  become due and payable in full without notice or demand and the Bank shall
  have all the rights, remedies and acceleration privileges with respect to 

  

 

3

 

	
   

  	
  repossession, retention and sale of the Collateral and disposition of
  the proceeds as are accorded to a secured party by the applicable sections of
  the Uniform Commercial Code respecting “Default” in effect as of the date of
  this Agreement.

   

  
	
  Attorneys’ 

  Fees, etc.

  	
  (2) Upon any default, the Bank’s reasonable attorneys’ fees,
  costs or fees, costs of collection and the legal and other expenses for
  pursuing, searching for, receiving, taking, keeping, storing, advertising,
  and selling the Collateral shall be chargeable to the Debtor.

   

  
	
  Deficiency

  	
  (3) The Debtor shall remain liable for any deficiency resulting
  from a sale of the Collateral and shall pay such deficiency forthwith on
  demand.

   

  
	
  Monies 

  Advanced

  	
  (4) If the Debtor shall default in the performance of any of the
  provisions of this Agreement on the Debtor’s part to be performed, Bank may
  perform same for the Debtor’s account and any monies expended in so doing
  shall be chargeable with interest to the Debtor and added to the indebtedness
  secured hereby.

   

  
	
  Seizure; Assembly 

  of Collateral; 

  Notice of Sale

  	
  (5) In conjunction with, addition to or substitution for the
  foregoing rights, the Bank, at its discretion, may: (i) enter upon
  Debtor’s premises peaceably by the Bank’s own means or with legal process and
  take possession of the Collateral, or render it unusable, or dispose of the
  Collateral on the Debtor’s premises and the Debtor agrees not to resist or
  interfere; (ii) require the Debtor to assemble the Collateral and make
  it available to the Bank at a place to be designated by the Bank reasonably
  convenient to both parties (the Debtor agrees that the Bank’s address as set
  forth above is the place reasonably convenient for such assembling;
  (iii) unless the Collateral is perishable or threatens to decline
  speedily in value or is of a type customarily sold on a recognized market,
  the Bank will give the Debtor reasonable notice of the time and place of any
  public sale thereof or of the time after which any private sale or any other
  intended disposition thereof is to be made. The requirements of reasonable
  notice will be met if such notice is mailed, postage prepaid, to the address
  of the Debtor shown above, at least ten (10) days before the time of
  sale or disposition.

   

  
	
  ASSIGNMENT

  	
  (g) The Bank may assign this Agreement and if assigned the
  assignee shall be entitled, upon notifying the Debtor, to performance of all
  of Debtor’s obligations and agreements hereunder the assignee shall be
  entitled to all of the rights and remedies of the Bank hereunder. The Debtor
  will assert no claims or defenses Debtor may have against the assignee.

   

  
	
  FINANCING STATEMENTS

  	
  (h) The Bank is hereby authorized to file Financing Statements
  covering the Collateral and to sign the Debtor’s signature thereto.

  

 

4

 

	
  CAPTIONS

  	
  (i) The Captions are inserted only as a matter of convenience
  and for reference and in no way define, limit or describe the scope of this Agreement
  nor the intent of any provision thereof.

  

 

3.                                       ADDITIONAL
PROVISIONS:

 

	
  BOOKS AND 

  RECORDS

  	
  (a) The Debtor shall at all times maintain proper books of
  record and account in accordance with generally accepted accounting
  principles an procedures and will permit the Bank or its authorized officers
  or agents to have access to such books and records at all reasonable times.

   

  
	
  FINANCIAL 

  STATEMENTS

  	
  (b) The Debtor will provide the Bank with complete financial
  statements certified by an Officer of the Debtor (or an independent public
  accountant if required by the Bank), including both a balance sheet and
  profit and loss statements on a quarterly basis, and the Debtor will provide
  the Bank with such additional financial information as the Bank shall
  reasonably request from time to time.

   

  
	
  PRINCIPAL 

  PLACE OF 

  BUSINESS

   

  	
  (c) The Debtor represents and warrants that its chief place of
  business and the office where its records with respect to accounts and/or
  contract rights are kept is at 2131 K Street, N.W., Washington, D.C. 20037.

   

  
	
  GENDER AND 

  NUMBER

  	
  (d) The gender and number used in this Agreement are used as a
  reference term only and shall apply with the same effect whether the parties
  are of the masculine or feminine gender, corporate or other form, and the
  singular shall likewise include the plural.

   

  
	
  NO ORAL 

  CHANGE

  	
  (e) This Agreement may not be changed orally.

  

 

IN WITNESS WHEREOF, the parties hereto have respectively signed and
sealed these presents the day and year first above written.

 

	
   

  	
  DEBTOR:

  
	
   

  	
   

  
	
   

  	
  SURPLUS ACQUISITION VENTURE,

  
	
   

  	
  LLC, A Delaware limited liability company 

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY:  

  	
  /s/ William P. Angrick,

  
	
   

  	
  William P. Angrick, III, Chairman of the Board 

  
	
   

  	
                                                    of
  Managers

  

 

5

 

	
   

  	
  UNITED BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY:  

  	
  /s/ Barbara Hart

  
	
   

  	
  Barbara Hart, Vice President

  

 

6

 

EXHIBIT A

 

All of the following assets and property of the Debtor/Borrower,
wherever located whether now or hereafter owned or acquired:

 

1.                                       All Accounts of
Debtor/Borrower which shall mean all presently existing or hereafter acquired
or created accounts, accounts receivable, contract rights, notes, drafts,
instruments, acceptances, chattel paper, leases and writings evidencing a
monetary obligation or a security interest in or a lease of goods, all rights
to receive the payment of money or other consideration under present or future
contracts (including, without limitation, all rights to receive payments under
presently existing or hereafter acquired or created letters of credit), or by
virtue of merchandise sold or leased, services rendered, loans and advances
made or other considerations given, by or set forth in or rising out of any
present or future Chattel Paper, note, draft, lease, acceptance, writing, bond,
insurance policy, instrument, document or general intangible, and all
extensions and renewals of any thereof, all rights under or arising out of
present or future contracts, agreements or general interest in merchandise
which gave rise to any or all of the foregoing, or hereafter arising in
connection with or under any agreement or document or by operation of law or
otherwise, all collateral security of any kind (including real property
mortgages) given by any person with respect to any of the foregoing, all books
and records in whatever media (paper, electronic or otherwise) recorded or
stored, with respect to any or all of the foregoing and all equipment and
general intangibles necessary or beneficial desirable to retain, access and/or
process the information contained in those books and records, and all proceeds
(cash and non-cash) of the foregoing.

 

2.                                       All Chattel Paper
of Debtor/Borrower which shall mean any writing or writings which evidence both
a monetary obligation and a security interest in or lease of specific goods;
any returned, rejected or repossessed goods covered by any such writing or
writings and all proceeds (in any form including, without limitation, accounts,
contract and general intangibles) of such returned, rejected or repossessed
goods, and all proceeds (cash and non-cash) of the foregoing.

 

3.                                       All Inventory of
Debtor/Borrower which shall mean all inventory of the Debtor/Borrower and all
right, title and interest of the Debtor/Borrower in and to all of its now owned
and hereafter acquired goods, merchandise and other personal property furnished
under any contract of service or intended for sale or lease, including, without
limitation, all raw materials, work-in-progress, finished goods and materials
and supplies of any kind, nature or description which are used or consumed in
the Debtor’s/Borrower’s business or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise and any and all licenses, warranties, franchises, general intangibles,
personal property and all documents of title or documents relating to the same
and all proceeds (cash and non-cash) of the foregoing; EXCLUDING any and all
such inventory owned, held or under the control of Debtor pursuant to any
contract with the Defense Reutilization Marketing Service or any other agency
of the government of the United States of America.

 

 

4.                                       All proceeds of
all insurance now or hereafter carried by, or payable to Debtor/Borrower with
respect to the aforesaid collateral, or otherwise now or hereafter payable with
respect to any loss or damage of the aforesaid collateral, and all claims or
demands with respect thereto.

 

5.                                       All right, title
and interest of Debtor/Borrower in and to all extensions, improvements,
betterments, renewals, substitutes and replacements of, and all additions and
appurtenances to all or any portion of the above-listed collateral, hereafter
acquired by, or released to Debtor/Borrower, and all conversions of the
security constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be.

 

6.                                       All earnings,
revenues, rent, issues, profits, avails and other income of and from the
aforesaid collateral.

 

7.                                       All proceeds of
the conversion, voluntary or involuntary, of any of the collateral into cash or
liquidated claims.

 

8.                                       All proceeds and
products of the aforesaid collateral.

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