LOAN AGREEMENT

Exhibit 10.25

LOAN AGREEMENT

        THIS AGREEMENT, made this 7 ^th day of June, 2005 by and among LIQUIDITY SERVICES, INC., a Delaware corporation (hereinafter referred to as the "Borrower"); SURPLUS ACQUISITION VENTURE, LLC, Delaware limited liability company (hereinafter referred to as the "Guarantor"); and UNITED BANK (hereinafter referred to as "Bank").

WITNESSETH:

        Borrower has applied to the Bank for a $3,000,000.00 line of credit (the "Loan"). The obligation of the Loan is evidenced by a Promissory Note of even date herewith in the principal amount of the Loan (the "Note").

        The Bank has agreed to make the Loan to Borrower upon and subject to the terms, conditions, and provisions of this Agreement and the Bank's Commitment Letter to Borrower dated April 28, 2005 (the "Commitment").

        The proceeds of the Loan, up to a maximum of $2,000,000.00, shall be used to fund the acquisition by the Borrower of the assets of Wholesale 411 Division of ALDnet Media Group, LLC. The balance shall be available for the operating needs of the Borrower.

        The Loan is to be secured by a) security agreements (the "Security Agreements") and financing statements (the "Financing Statements") creating a first lien on all of the accounts receivable of the Borrower and the Guarantor.

        The Loan shall be guaranteed by the Guarantor (the "Guaranty").

        This Agreement, the Commitment, the Note, the Security Agreements, the Financing Statements, the Guaranty, and all other documents which the Borrower, the Guarantor or any third party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure, or guaranty the Loan, or any part thereof, or in connection therewith, are hereinafter sometimes referred to collectively as the "Loan Documents." The term "Liabilities"as used in this Agreement shall mean the obligation of Borrower to pay (a) the unpaid principal amount of the Note, plus all accrued and unpaid interest thereon, and (b) all other charges, interest, and expenses chargeable by the Bank to Borrower under this Agreement and the other Loan Documents.

        NOW, THEREFORE, in consideration of the premises hereinabove recited, the mutual promises contained herein and for other, good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

        1.     The foregoing recitals are incorporated herein and made part hereof.

        2.     Disbursements.     (a)    The amount of $2,000,000.00 shall be disbursed at settlement (the "Initial Advance").

•         (b)   Upon proper application by Borrower to draw funds upon the Loan, the Bank shall make advances of funds ("Advanced") as follows:

• • i.

    Advances shall be made for the purpose of Borrower's operating needs and for such other purposes as may be approved by the Bank in its sole and unreviewable discretion. In the event that the Bank approves any Advances hereunder for purposes other than operating needs, such approval may be subject to such additional conditions, require such additional collateral security, and require execution of new or amended Loan Documents in connection with said Advances, as the Bank in its sole and unreviewable discretion may determine.
    
    

    ii.

    No Advance shall be for less than Ten Thousand Dollars ($10,000.00).
    
    

    iii.

    The aggregate amount advanced under the Loan shall not exceed Three Million Dollars ($3,000,000.00).
    
    

    iv.

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

  • •         I.     Bank shall have received evidence that this Agreement and all Loan Documents have been duly authorized, executed, and delivered by Borrower to Bank.

              II.    Bank shall have received such documents as Bank may reasonably request.

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

              IV.   The guarantee required by Bank for the credit facility(ies) shall have been executed by the Guarantor, delivered to Bank, and be in full force and effect.

              V.     Borrower shall have paid to Bank all fees, costs, and expenses specified in this Agreement and the Loan Documents as are then due and payable.

              VI.  The Bank shall have received confirmation that Borrower or Guarantor have been awarded a seven (7) year contract by Defense Reutilization Marketing Service (DRMS) for surplus scrap material.

              VII. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or the Loan Documents.

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• • v.

    Any amounts repaid to Bank hereunder prior to demand may be readvanced to Borrower and such readvances shall be treated as Advances.
    
    

    vi.

    No Advances shall be made after May 30, 2006.

        3.     Interest Rate.     (a)    The Note shall bear interest on the outstanding balance until maturity at an annual rate which floats and fluctuates monthly and which shall be equal at all times to the 30-day London Interbank Offered Rate (LIBOR), as defined in the Note, plus Two and Twenty-five one hundredths percent (2.25%).

•         (b)   Notwithstanding the foregoing, the Borrower may elect in writing to pay a fixed rate of interest on the Initial Advance of Two Million Dollars ($2,000,000.00) equal to the yield, as of the date of settlement, on United States Treasury Securities having a maturity of one year plus Two and Fifty One Hundredth percent (2.50%).

        4.     Repayment Terms.     (a)    Borrower shall make monthly payments of interest only on the Note on the Seventh day of each month commencing July 7, 2005. All unpaid principal and interest due on the Note shall be due on demand.

•         (b)   Borrower may make full or partial prepayments on the Note at any time and in any amount without penalty.

          (c)   If earlier demand is not made, the full amount of the Loan including all unpaid principal, interest, late fees or other fees or charges due under any of the Loan Documents shall be due and payable in full on May 30, 2006.

        5.     Collateral Security.     (a)    To secure the payment when due (whether at the stated maturity or by acceleration) of the Liabilities to the Bank and also to secure any other indebtedness or liability of the Borrower 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 Borrower and the Guarantor, as the case may be, shall and do hereby grant, assign and convey to the Bank a security interest in and to the following:

•         (a)   All the Accounts Receivable of Borrower and Guarantor as more specifically defined in Exhibit A attached hereto; and

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

          (c)   All earnings, revenues, rents, issues, profits, avails 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.

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        All of the above is hereinafter referred to as the "Collateral".

        6.     Other Conditions.     (a)    Borrower shall maintain its primary depository relationship with Bank until all Liabilities are paid in full.

•         (b)   Borrower and Guarantor shall promptly inform Bank in writing of (1) all material adverse changes in Borrower's or Guarantor's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or Guarantor which could materially affect the financial condition of Borrower or the financial condition of Borrower.

          (c)   Borrower and Guarantor shall furnish to Bank, as soon as possible, but in no event more than one hundred five (105) days after the end of each fiscal year during the term, their annual consolidated financial statement for that year which shall be prepared and audited by an independent certified public account acceptable to the Bank. Additionally, Borrower and Guarantor shall, at the same time, provide Bank with internally prepared consolidating financial statement.

          (d)   Borrower and Guarantor shall furnish to Bank, as soon as possible, but no later than thirty (30) days after they are filed, their Federal income tax returns for each year.

          (e)   Borrower and Guarantor shall furnish to bank its signed quarterly in-house financial statements within forty-five (45) days of the end of each calendar quarter.

          (f)    Borrower and Guarantor shall furnish to Bank an aging of its accounts receivables and accounts payable within forty-five (45) days of the end of each calendar quarter.

          (g)   Borrower and Guarantor shall maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Bank to examine and audit its books and records at all reasonable times, upon reasonable advance notice.

          (h)   Borrower and Guarantor shall furnish such additional information and statements, as Bank may reasonably request from time to time.

          (i)    At all times during the term of the Loan Borrower shall maintain the following financial and cash flow ratio requirements which shall be measured quarterly and calculated in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as true and correct:

  • (1)

    Minimum Interest Coverage Ratio of 4.0 to 1.0;
    
    

    (2)

    Minimum quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $1,000,000.00;
    
    

    (3)

    Minimum tangible net worth of $400,000.00 as of June 30, 2005 to be increased by $1,000,000.00 as of the end of each succeeding fiscal quarter (for purposes of this condition tangible net worth means Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, organizational expenses and similar

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• • • • intangible items, but including leaseholds and leasehold improvements) less total debt.

      (4)

      Minimum liquidity (consisting of cash and readily marketable securities) of $5,000,000.00.
      
      

      (5)

      Bank's funded debt shall not exceed 3x EBITDA.

•         (j)    Neither Borrower nor Guarantor shall have any change in ownership without the express written consent of the Bank, which consent will not be unreasonably withheld.

        7.     Guarantees.     The Loan will be guaranteed by Guarantor.

        8.     Representations and Warranties of Borrower and Guarantor.     Borrower and Guarantor represent and warrant, as of the date this Agreement is executed, that:

•         (a)   Borrower is a corporation which is, and at all times shall be, duly organized, validly existing and in good standing under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in all other states in which it is doing business, having obtained all necessary filings, governmental licenses and approvals for each such state. Specifically, Borrower is, and at all times shall be, qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition.

          (b)   Borrower's execution, delivery, and performance of this Agreement and all the Loan Documents have been duly authorized by all necessary action by Borrower, and does not conflict with, result in a violation of, or constitute a default under (1) any provision of Borrower's articles of incorporation, bylaws or other instrument binding upon Borrower; or (2) any law, governmental regulation, court decree, or order applicable to Borrower or its properties.

          (c)   Guarantor is a limited liability company which is, and at all times shall be, duly organized, validly existing and in good standing under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in all other states in which it is doing business, having obtained all necessary filings, governmental licenses and approvals for each such state. Specifically, Borrower is, and at all times shall be, qualified as a foreign limited liability company in all states in which the failure to do so qualify would have a material adverse effect on its business or financial condition.

          (d)   Guarantor's execution, delivery, and performance of this Agreement and all the Loan Documents have been duly authorized by all necessary action by Borrower, and does not conflict with, result in a violation of, or constitute a default under (1) any provision of Borrower's Articles of Organization, Operating Agreement or other instrument binding upon Borrower; or (2) any law, governmental regulation, court decree, or order applicable to Borrower or its properties.

          (e)   This Agreement constitutes, and any instrument or agreement Borrower or Guarantor is required to give under this Agreement when delivered will constitute, legal, valid, and binding obligations of Borrower and/or Guarantor enforceable against them in accordance with their respective terms.

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•         (f)    Borrower and Guarantor have no knowledge of or reason to believe that the execution of this Agreement will result in a breach or default under any other agreement, contract, lease or loan or credit agreement to which the Borrower or Guarantor is a party;

          (g)   All of the Collateral is owned free and clear of any lien or security interest by the party or parties hereto who are assigning or transferring it hereunder; there are no liens or encumbrances thereon, and there are no outstanding amounts due to any contractor, supplier, materialman or other entity which constitute or may constitute, or may in the future result in, a mechanics lien or any part of the Collateral.

          (h)   Borrower and Guarantor have filed all Federal, State and local income tax returns required to be filed with respect to the Collateral or the income therefrom and either has paid all Federal, State and local income taxes or other taxes of any kind due and payable which they are required to pay with respect to the Collateral, or in good faith have challenged the imposition of such taxes in appropriate judicial or administrative forums;

          (i)    Any and all property, transfer or other taxes due and payable with respect to the Collateral have been paid in full.

          (j)    The financial statements of the Borrower and Guarantor heretofore delivered to the Bank are true, correct and complete in all respects, fairly present the financial condition of the Borrower and the Guarantor on the respective date(s) thereof, and no material adverse change has occurred in the financial condition reflected therein since the respective date(s) thereof.

          (k)   As of the date hereof, there are no actions, suits, or proceedings pending, or, to the actual knowledge of the Borrower or Guarantor, threatened, (i) against or affecting the Collateral, (ii) against the Borrower or (iii) against the Guarantor, at law or in equity, or before or by any governmental authority except actions, suits and proceedings against the Borrower or the Guarantor, which are fully covered by insurance or which, if adversely determined, would not substantially impair the ability of the Borrower or Guarantor to pay when due the Liabilities and all other amounts which may become payable under the provisions of the Loan Documents; and, to the Borrower's and Guarantor's knowledge, they are not in default with respect to any order, writ, injunction, decree, or demand of any court or any governmental authority.

        9.     Covenants of the Borrower and Guarantor.     The Borrower and Guarantor covenant and agree with the Bank as follows:

•         (a)   That Borrower and Guarantor will fulfill all the conditions and perform all terms of the Commitment, this Agreement and the other Loan Documents and will discharge all of its said obligations when due.

          (b)   Borrower and Guarantor will promptly notify the Bank of any action or prospective claims, litigation or liens, including tax deficiencies, of a material nature which may be asserted against the Borrower, the Guarantor or the Collateral.

          (c)   Borrower and Guarantor agree to promptly report to Bank any material adverse change in their financial condition and in the event of default hereunder, they agree to immediately notify Bank of said event in writing.

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•         (d)   Borrower will pay all commitment and Loan fees of the Bank, all expenses involved in perfecting the lien status and priority of the Collateral and all other expenses of the Bank related to the Loans, including recording fees and taxes, lien search charges, and the reasonable fees and expenses of the Bank's legal counsel.

          (e)   Borrower will indemnify against, and hold the Bank harmless from, any loss or liability on account of any claim by any party arising out of the Loans.

        10.     Covenants of the Borrower and Guarantor With Respect to Collateral.     

•         (a)   Borrower and Guarantor are the lawful owners of all the Collateral, and, each has the right to pledge, sell, assign, grant and transfer the same and grant a valid security interest therein. Unless agreed to by Bank in writing in advance, no part of the aforesaid Collateral or any monies or proceeds thereof or contract rights arising therefrom is or shall be further pledged, sold, assigned, or transferred to any party other than Bank or in any way further encumbered except in favor of Bank.

          (b)   Borrower or Guarantor, as the case may be, at its sole expense, shall defend any claim or demand with respect to the Collateral adverse to the interest of Bank therein and shall at all times, preserve and protect Bank's interests therein.

          (c)   Borrower or Guarantor agree to execute such financing statements and to take whatever other actions are required by Bank to perfect and continue the Bank's security interests in the Collateral. Upon request of Bank, Borrower and/or Guarantor will deliver to Bank any and all of the documents evidencing or constituting the Collateral, and Borrower will note Bank's interest upon any and all chattel paper if not delivered to Bank for possession by Bank. Contemporaneous with the execution of the Agreement, Borrower or Guarantor will, if required, execute one or more UCC financing statements and any similar statements as may be required by applicable law, and Bank will file such financing statements and all such similar statements in the appropriate location or locations. Borrower and Guarantor hereby appoint Bank as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any security interest. Bank may at any time, and without further notification to Borrower or Guarantor file a carbon, photograph, facsimile or other reproduction of any financing statement for use as a financing statement. Borrower and Guarantor will reimburse Bank for all expenses for the perfection, termination, and the continuation of the perfection of Bank's security interest in the Collateral.

          (d)   Borrower does now, and at all time hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Bank or Bank's representative upon demand for inspection and copying at any reasonable time.

          (e)   No loss of the Collateral or failure to collect the same shall relieve the Borrower or Guarantor of any obligation with respect to the Liabilities, including obligations hereunder.

          (f)    Borrower and Guarantor shall maintain the Collateral in good condition and in accordance with the rules, regulations and orders promulgated by all duly constituted authorities, judgments, or charges of any kind levied or assessed thereon.

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        11.     Termination of Security Interest.     Bank agrees that, upon payment in full to it of the Liabilities, any interest due thereon, and any costs incurred with respect thereto, in collected Federal funds, it will promptly prepare and deliver to Borrower and Guarantor, for filing at its sole expense, appropriate termination statements and/or such other documents necessary to release Bank's interest in the Collateral.

        12.     Further Documents.     Borrower and Guarantor agree to execute and deliver such further assurances, assignments, agreements or other documents as may be requested by Bank to effectuate the purposes and provisions of this Agreement or the other Loan Documents and also to execute and deliver any instrument or statement required by law or otherwise to perfect, continue or terminate the security interest of the Bank in the Collateral.

        13.     Events of Default.     The occurrence of any of the following shall constitute an event of default ("Event of Default"):

•         (a)   Failure of Borrower to pay the Liabilities or any part thereof, or any other indebtedness it may owe to Bank, as the same become due, in accordance with the terms of the Note, the Loan Documents or any other notes, documents or instruments evidencing said indebtedness or when accelerated pursuant to any power to accelerate;

          (b)   The failure or default of the Borrower or Guarantor to perform or observe any warranty, covenant, agreement or condition herein contained, which failure or default continues for a period of ten (10) days after written notice to Borrower provided, however, that if such failure or default is not capable of being cured within the ten (10) day grace period, the Borrower or Guarantor, as the case may be, shall have an additional thirty (30) days in which to cure said default, provided that the default can be cured within the additional thirty (30) days and Borrower or Guarantor, as the case may be, diligently and in good faith initiates and pursues such action as is reasonably required to cure said failure or default;

          (c)   Failure or default of Borrower or Guarantor to punctually keep, observe, or faithfully perform any warranty, convenant, agreement, or condition contained herein, in any other instrument or paper evidencing or securing the Liabilities, or in any other agreement with Bank and such failure or default is not remedied within the applicable grace period specified in such instrument, paper or agreement;

          (d)   If any warranty, representation, condition or statement made herein or otherwise furnished to Bank by or on behalf of Borrower or Guarantor, shall be shown to have been false in any material respect when made or furnished;

          (e)   Insolvency, appointment of a receiver of any part of the property of, the issuance of an attachment or execution against the property of, or entry of judgment against, assignment for the benefit of creditors by, or the commencement of any proceedings under any bankruptcy or insolvency laws by, or against, Borrower or Guarantor;

          (f)    The filing against Borrower or Guarantor of any petition for involuntary bankruptcy under State or Federal Law if same is not bonded off, dismissed or otherwise cured within sixty (60) days from the date of the filing;

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•         (g)   If Borrower or Guarantor commits or suffers any act which would entitle Bank to accelerate, pursuant to the terms, the Note.

          (h)   Subjection of any part of the Collateral to levy of execution or other judicial process.

          (i)    Any material and adverse financial change in the condition of Borrower or Guarantor.

        14.     Remedies.     Upon the occurrence of any Event of Default, then and in such event, unless said Event of Default be specifically waived in writing by Bank, or be an Event of Default which is curable and is, in fact, cured, then Bank may, without giving any further notice or any period of grace or forbearance whatsoever to Borrower or Guarantor:

•         (a)Declare the entire principal balance of the Liabilities and all interest accrued thereon, to be immediately due and payable without further notice, demand, or presentment to Borrower or any other person obligated for the payment of the Liabilities, which notice, demand, or presentment is hereby expressly waived; and/or

          (b)   Make no further Advances hereunder; and/or

          (c)   Enter upon the premises where the Collateral or the documents evidencing the same may be and take possession thereof and remove same without being guilty of any manner of trespass; and/or

          (d)   Proceed to collect directly without further notice to Borrower or Guarantor upon any interest assigned by this Agreement or any other agreement from Borrower or Guarantor to Bank; and/or

          (e)   Proceed to sell or otherwise dispose of the Collateral upon such terms and in such manner as Bank elects in accordance with the laws of the Commonwealth of Virginia; and/or

          (f)    Institute and prosecute any other legal or equitable action or suit for the collection of the Liabilities and the enforcement of the security therefor, and upon the filing of any such suit or action, Borrower and Guarantor consent without further notice to the appointment on application of Bank of a receiver for the Collateral; and/or

          (g)   Exercise any other remedy at law or equity which may be appropriate

          (h)   Set off against the unpaid balance of the Liabilities any debt owing to Borrower or Guarantor by Bank, including any funds in any deposit account maintained by Borrower or Guarantor with Bank. Nothing in this Agreement shall be deemed to be a waiver or prohibition of Bank's right of banker's lien or setoff.

          (i)    Pursue such other remedies, including action for specific performance and damages, or any remedy provided by the Loan Documents or permitted by law, which the Bank may deem appropriate.

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•         (j)    Proceed to collect any of the Liabilities from Guarantor or to exercise any other remedy at law or equity against either or Guarantor which may be appropriate.

        In the event of any Event of Default, Bank may in its sole discretion cure such default and, if it does so, any reasonable expenditures made for such purpose shall be added to the Liabilities and shall be subject to all the terms and conditions of this Agreement and shall be secured by the Collateral.

        All the rights and remedies of Bank hereunder are cumulative of each other and every other right or remedy, including all rights and remedies available to Bank under the Uniform Commercial Code of the Commonwealth of Virginia, which Bank may otherwise have hereunder or at law or in equity or under any other document for the enforcement of this Agreement or the collection of the secured Liabilities, and the security therefor, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies. Waiver of or acquiescence in any default by the Borrower or Guarantor or failure of the Bank to insist upon strict performance by the Borrower or Guarantor of any warranties or agreements in this Agreement, shall not constitute a waiver of any subsequent or other default or failure.

        15.     Applicable Law.     This Agreement shall be construed in accordance with the laws of the Commonwealth of Virginia.

        16.     Costs and Expenses.     Borrower agrees to pay all costs incurred in connection with this Agreement including, but not limited to, recording and filing fees as hereinbefore provided; and Borrower further agrees to pay the legal fees of Bank's attorney for preparation and review of the documents herein.

        17.     Notices.     Any notice required or permitted to be delivered hereunder must be in writing and shall be deemed