Document:

Exhibit
10.4

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (the “Agreement”) is
made this 30th day of April, 2010, by GOVDEALS, INC., a corporation 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
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, (ii) 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 (iii) 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 thereof, other than in the ordinary course of
its business or as otherwise may be permitted by this Agreement.

 

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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.

 

Debtor 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 

 

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statutory basis, of Debtor
or any Subsidiary by the United States of America or any department, agency or
instrumentality thereof.

 

Section 2.10                                Taxes.

 

Debtor 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.

 

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:

 

Section 3.1                                      Compliance with Laws.

 

Debtor shall 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.

 

5

 

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 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.

 

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.

 

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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 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 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.

 

7

 

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.

 

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).

 

8

 

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 Lender not less than
thirty (30) days prior to (a) any change in the name under which Debtor
conducts its business, (b) any change of the location of the chief
executive office of Debtor, 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.

 

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, 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.

 

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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.

 

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                                      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:

 

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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.

 

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 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 business or the use or disposition of a material portion of
Debtor’s assets.

 

11

 

Section 5.7                                      Involuntary Bankruptcy, etc.

 

(a) An order for relief
shall be entered in any involuntary case brought against Debtor under the
Bankruptcy Code, or (b) any such case shall be commenced against Debtor
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 (i) adjudicating Debtor bankrupt or insolvent, or (ii) appointing
a receiver, trustee or liquidator of Debtor or of a material portion of Debtor’s
assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of Debtor’s business or the use or disposition
of a material portion of Debtor’s assets, and such order, judgment or decree
continues unstayed and in effect for a period of thirty (30) days from the date
entered.

 

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, and the
failure by Debtor 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.

 

12

 

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:

 

(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

 

13

 

(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 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 

 

14

 

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 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.

 

15

 

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.

 

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 

 

16

 

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 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 

 

17

 

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.

 

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.

 

18

 

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
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]

 

19

 

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

 

	
   

  	
  GOVDEALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James M. Rallo

  
	
   

  	
   

  	
  Name:

  	
  James M. Rallo

  
	
   

  	
   

  	
  Title:

  	
  Vice President, Chief
  Financial

  
	
   

  	
   

  	
   

  	
  Officer &
  Treasurer

  

 

[Signature Page to
Security Agreement]Exhibit
10.5

 

PLEDGE, ASSIGNMENT AND SECURITY
AGREEMENT

 

THIS PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT (this “Agreement”)
is made this 30th day of April, 2010, by LIQUIDITY SERVICES, INC., a
corporation organized under the laws of the State of Delaware (the “Borrower”),
in favor of BANK OF AMERICA, N.A., a national banking association, its
successors and assigns (the “Lender”).

 

RECITALS

 

A.            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.            As a condition precedent to making
advances under the Credit Facilities, the Lender required that Borrower, secure
the payment and performance of all of the Obligations by the execution of this
Agreement.

 

C.            All defined terms used in this Agreement
and not defined in this Agreement shall have the meaning given to such terms in
the Financing Agreement.  As used in this
Agreement, 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, as the context may require.

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the Lender’s
entering into the Financing Agreement and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Borrower hereby
agrees as follows:

 

ARTICLE I 

SECURITY

 

Section 1.1             The Stock Collateral.

 

As security for the prompt and full payment and
performance of all of the Obligations, and as security for the prompt and full
performance of all of the obligations of the Borrower under this Agreement and
all of the Obligations under the Financing Agreement and all of the other
Financing Documents, whether now in existence or hereafter created and whether
joint, several, or both, primary, secondary, direct, contingent or otherwise,
the Borrower hereby pledges, assigns and grants to the Lender a security
interest in the following property of the Borrower (collectively, the “Stock
Collateral”), whether now existing or hereafter created or arising:

 

 

(a)           One Hundred Twenty-Seven Million, Two Hundred
Ninety-Nine Thousand Seven Hundred Forty-Four (127,299,744) shares of the
common stock (the “Common Stock”) and Twenty-One Million Six Hundred Thirteen
Thousand (21,613,000) shares of the preferred stock (the “Preferred Stock” and
together with the Common Stock, the “Stock”) of GovDeals, Inc., a
corporation organized under the laws of the State of Delaware (the “Corporation”);

 

(b)           all stock rights, rights to subscribe, rights to
distributions, dividends (including, but not limited to, distributions in kind,
cash dividends, stock dividends, dividends paid in stock and liquidating
dividends) and any other rights and property interests including, but not
limited to, accounts, contract rights, instruments and general intangibles
arising out of or relating to the Corporation;

 

(c)           all other or additional (or less) stock or other
securities or property (including cash) paid or distributed in respect of the
Stock by way of stock-split, spin-off, split-up, reclassification, combination
of shares or similar corporate rearrangement;

 

(d)           all other or additional stock or other securities or
property (including cash) which may be paid or distributed in respect of the
Stock by reason of any consolidation, merger, exchange of stock, conveyance of
assets, liquidation or similar corporate reorganization; and

 

(e)           all proceeds (both cash and non-cash) of the
foregoing, whether now or hereafter arising under the foregoing.

 

Section 1.2             Rights of the Lender in the Stock Collateral.

 

The Borrower agrees that with respect to the Stock
Collateral the Lender shall have all the rights and remedies of a secured party
under the Uniform Commercial Code, as well as those provided by law and/or in
this Agreement.  Notwithstanding the fact
that the proceeds of the Stock Collateral constitute part of the Stock
Collateral, the Borrower may not dispose of the Stock Collateral or any part
thereof, except to the extent permitted by the Financing Documents.

 

Section 1.3             Rights of the Borrower in the Stock Collateral.

 

Until an Event of Default occurs, the Borrower shall
be entitled to receive all dividends and other distributions which may be paid
on the Stock Collateral and which are not otherwise prohibited by the Financing
Documents.  Any cash dividend or
distribution payable in respect of the Stock Collateral which represents, in
whole or in part a return of capital or a violation of this Agreement or the
other Financing Documents shall be received by the Borrower in trust for the
Lender, shall be paid immediately to the Lender and shall be retained by the
Lender as part of the Stock Collateral.

 

2

 

ARTICLE II 

REPRESENTATIONS AND WARRANTIES

 

To induce the Lender to advance sums to the Borrower
under the Financing Agreement, the Borrower represents and warrants to the
Lender and shall be deemed to represent and warrant at the time of each request
for, and the time of each advance under, the credit facilities described in the
Financing Agreement, as follows:

 

Section 2.1             Stock Interests.

 

The Stock represents one hundred percent (100%) of the
equity interests of the Corporation and thereafter the Stock Collateral will
continue to represent the same percentage of the equity interest of the
Corporation, unless otherwise permitted under the Financing Agreement.

 

Section 2.2             Title to Properties.

 

The Borrower has good and marketable title to the
Stock Collateral.  The Borrower has
legal, enforceable and uncontested rights to use freely such property and
assets.  The Borrower is the sole owner
of all of the Stock Collateral, free and clear of all security interests,
pledges, voting trusts, agreements, Liens, claims and encumbrances whatsoever,
other than the security interest, assignment and lien granted under this
Agreement.  The interests assigned as
Stock Collateral are subject to no outstanding options, voting trusts,
shareholders agreement, or other requirements with respect to such interests.

 

Section 2.3             Perfection and Priority of Stock Collateral.

 

The Lender has, or upon execution of this Agreement
and receipt of the certificates representing the shares of Stock, together with
executed irrevocable, blank stock powers, will have a valid and perfected Lien
on and security interest in all Stock Collateral, free of all other Liens,
claims and rights of third parties whatsoever.

 

ARTICLE III 

COVENANTS

 

Until payment in full and the performance of all of
the Obligations and all of the obligations of the Borrower hereunder or secured
hereby, the Borrower covenants and agrees with the Lender as follows:

 

Section 3.1             Delivery of Stock Collateral.

 

The Borrower shall deliver immediately to the Lender (a) the
certificates representing the shares of the Stock, (b) immediately upon
its receipt of any additional (or fewer) shares of stock in the Corporation, the
certificates representing such additional shares of stock, (c) all
instruments, items of payment and other Stock Collateral received by the
Borrower, and (d) executed irrevocable, blank stock powers for all of the
assigned shares of stock in form and substance satisfactory to the Lender and
its counsel.  All Stock Collateral at any
time received or held by the Borrower shall be received and held by the
Borrower in trust for the benefit of the

 

3

 

Lender, and shall be kept
separate and apart from, and not commingled with, the Borrower’s other assets.

 

Section 3.2             Defense of Title and Further Assurances.

 

The Borrower will do or cause to be done all things
necessary to preserve and to keep in full force and effect its interests in the
Stock Collateral, and shall defend, at its sole expense, the title to the Stock
Collateral and any part thereof.  The
Borrower hereby authorizes the filing of any financing statement or continuation
statement required under the Uniform Commercial Code.  Further, the Borrower shall promptly, upon
request by the Lender, execute, acknowledge and deliver any financing
statement, endorsement, renewal, affidavit, deed, assignment, continuation statement,
security agreement, certificate or other document as the Lender may reasonably
require in order to perfect, preserve, maintain, protect, continue, realize
upon, and/or extend the lien and security interest of the Lender under this
Agreement and the priority thereof.  The
Borrower shall pay to the Lender upon demand all taxes, costs and expenses
(including but not limited to reasonable attorney’s fees) incurred by the
Lender in connection with the preparation, execution, recording and filing of
any such document or instrument mentioned aforesaid.

 

Section 3.3             Protection of Stock Collateral.

 

The Borrower agrees that the Lender may at any time
take such steps as the Lender deems reasonably necessary to protect the Lender’s
interest in, and to preserve the Stock Collateral.  The Borrower agrees to cooperate fully with
the Lender’s efforts to preserve the Stock Collateral and will take such
actions to preserve the Stock Collateral as the Lender may in good faith
direct.  All of the Lender’s expenses of
preserving the Stock Collateral, including, without limitation, reasonable
attorneys’ fees, shall be part of the Enforcement Costs.

 

Section 3.4             Certain Notices.

 

The Borrower will promptly notify the Lender in
writing of any Event of Default and of any litigation, regulatory proceeding,
or other event which would reasonably be expected to have a Material Adverse
Effect.

 

Section 3.5             Books and Records; Information.

 

(a)           The Borrower shall maintain proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to the Stock Collateral and which reflect
the Lien of the Lender thereon.

 

(b)           The Borrower agrees that the Lender may
from time to time and at its option (i) require the Borrower to, and the
Borrower shall, periodically deliver to the Lender records and schedules, which
show the status of the Stock Collateral and such other matters which affect the
Stock Collateral; (ii) verify the Stock Collateral and inspect the books
and records of the Borrower and make copies thereof or extracts therefrom; (iii) notify
any prospective buyers or transferees of the Stock Collateral or any other
Persons of the Lender’s interest in the Stock Collateral; and (iv) disclose
to prospective buyers or transferees from the Lender any and all information regarding
the Corporation, the Stock Collateral and/or the Borrower.

 

4

 

Section 3.6             Disposition of Stock Collateral.

 

The Borrower will not sell, assign, convey, transfer
or otherwise dispose of the Stock Collateral or any part thereof, except, with
respect to any proceeds, to the extent permitted by the Financing Documents.

 

Section 3.7             Distributions.

 

The Borrower shall receive no dividend or distribution
or other benefit with respect to the Corporation, and shall not vote, consent,
waive or ratify any action taken, which would violate or be inconsistent with
any of the terms and provisions of this Agreement, the Financing Agreement or
any of the other Financing Documents or which would materially impair the
position or interest of the Lender in the Stock Collateral or dilute the
percentage of the ownership interests of the Corporation pledged to the Lender
hereunder, except as expressly permitted by the Financing Agreement.

 

Section 3.8             Liens.

 

The Borrower will not create, incur, assume or suffer
to exist any Lien upon any of the Stock Collateral, other than Liens in favor
of the Lender.

 

Section 3.9             Survival.

 

All representations and warranties contained in or
made under or in connection with this Agreement and the other Financing
Documents shall survive the making of any advance under the Financing Agreement
and the incurring of any other Obligations and the other obligations secured by
this Agreement.

 

ARTICLE IV 

DEFAULT AND RIGHTS AND REMEDIES

 

Section 4.1             Events of Default.

 

The occurrence of any one or more of the following
events shall constitute an “Event of Default” under the provisions of this
Agreement:

 

4.1.1        Default under Financing Agreement.

 

An Event of Default shall occur under the Financing Agreement.

 

4.1.2        Default under this Agreement.

 

If the Borrower shall fail to duly perform, comply
with or observe any of the terms, conditions or covenants of this Agreement.

 

4.1.3        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 the Borrower), financial statement or other document
furnished by the Borrower or its agents or representatives in connection with this
Agreement, any of the other Financing Documents, or the Obligations or

 

5

 

the other obligations
secured by this Agreement, shall prove to have been false or misleading when
made (or, if applicable, when reaffirmed) in any material respect.

 

4.1.4        Failure to Comply with Covenants.

 

The failure of the Borrower to perform, observe or
comply with any covenant, condition or agreement contained in this Agreement.

 

Section 4.2             Remedies.

 

Upon the occurrence of any Event of Default, the
Lender may at any time thereafter exercise any one or more of the following
rights, powers or remedies:

 

4.2.1        Uniform Commercial Code.

 

The 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 the
Lender and if not previously in the possession of the Lender, the Borrower
shall assist the Lender in the assembly of the Stock Collateral and assist in
making it available to the Lender, at a place designated by the Lender.  The Lender or its agents may without notice
from time to time enter upon the Borrower’s premises to take possession of the
Stock Collateral, to remove it, or otherwise to prepare it for sale, or to sell
or otherwise dispose of it.

 

4.2.2        Sale or Other Disposition of Stock Collateral.

 

The Lender may sell or redeem the Stock Collateral, or
any part thereof, in one or more sales, at public or private sale, conducted by
any officer or agent of, or auctioneer or attorney for, the Lender, at the
Lender’s place of business or elsewhere, for cash, upon credit or future
delivery, and at such price or prices as the Lender shall, in its sole
discretion, determine, and the Lender may be the purchaser of any or all of the
Stock Collateral so sold.  Further, any
written notice of the sale, disposition or other intended action by the Lender
with respect to the Stock Collateral which is sent by regular mail, postage
prepaid, to the Borrower at the address set forth in Section 5.1 (Notices),
or such other address of the Borrower which may from time to time be shown on
the Lender’s records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute commercially reasonable notice to
the Borrower.  The Lender may
alternatively or additionally give such notice in any other commercially
reasonable manner.  Nothing in this
Agreement shall require the Lender to give any notice not required by
applicable Laws.

 

If any consent, approval, or authorization of any
Governmental Authority or any Person having any interest therein, should be
necessary to effectuate any sale or other disposition of the Stock Collateral,
the Borrower 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.

 

The Borrower recognizes that the Lender may be unable
to effect a public sale of all or a part of the Stock Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, as amended, and other applicable federal and state Laws.  The 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 Stock Collateral

 

6

 

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 the 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.  The Borrower covenants and agrees to do or
cause to be done promptly all such acts and things as the 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.

 

4.2.3        Specific Rights With Regard to Stock Collateral.

 

In addition to all other rights and remedies provided
hereunder or as shall exist at law or in equity from time to time, upon the
continuance of an Event of Default, the Lender may (but shall be under no
obligation to), without notice to the Borrower, and the Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender or in the name of the Borrower or otherwise,
for the use and benefit of the Lender, but at the cost and expense of the
Borrower and without notice to the Borrower:

 

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

 

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

 

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

 

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

 

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

 

(f)            endorse or sign the name of the Borrower
upon any instruments, securities, powers, documents, or other writing relating
to or part of the Stock Collateral; and

 

(g)           take any other action necessary or
beneficial to realize upon or dispose of the Stock Collateral.

 

7

 

4.2.4        Application of Proceeds.

 

Any proceeds of sale or other disposition of the Stock
Collateral will be applied by the Lender to the payment of the Enforcement
Costs, and any balance of such proceeds will be applied by the Lender to the
payment of the balance of the Obligations and the other obligations secured by
this Agreement in such order and manner of application as the Lender may from
time to time in its sole and absolute discretion determine.  If the sale or other disposition of the Stock
Collateral fails to fully satisfy the Obligations and the other obligations
secured by this Agreement, the Borrower shall remain liable to the Lender for
any deficiency.

 

4.2.5        Performance by Lender.

 

If the Borrower shall 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 upon the Borrower 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 the Borrower, and may enter upon
the premises of the Borrower for that purpose and take all such action thereon
as the Lender may consider necessary or appropriate for such purpose  and the Borrower hereby irrevocably appoints
the Lender as its attorney-in-fact to do so, with power of substitution, in the
name of the Lender or in the name of the Borrower or otherwise, for the use and
benefit of the Lender, but at the cost and expense of the Borrower and without
notice to the Borrower.  All sums so paid
or advanced by the 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 deemed part of the Enforcement Costs, shall be
paid by the Borrower to the Lender on demand, and shall constitute and become a
part of the Obligations.

 

4.2.6        Other Remedies.

 

The 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.

 

Section 4.3             Costs and Expenses.

 

The Borrower shall pay on demand all costs and
expenses (including reasonable attorney’s fees), all of which shall be deemed
part of the Obligations, incurred by and on behalf of the Lender incident to
any collection, servicing, sale, disposition or other action taken by the
Lender with respect to the Stock Collateral or any portion thereof.

 

Section 4.4             Receipt Sufficient Discharge to Purchaser.

 

Upon any sale or other disposition of the Stock
Collateral or any part thereof, the receipt of the Lender or other Person
making the sale or disposition shall be a sufficient discharge to the

 

8

 

purchaser for the
purchase money, and such purchaser shall not be obligated to see to the
application thereof.

 

Section 4.5             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 in any
related instrument or agreement or now or thereafter 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 the other Financing Documents or in any related document,
instrument or agreement or now or hereafter existing at law or in equity or 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.

 

Section 4.6             No Waiver, etc.

 

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 of any related
documents, instruments or agreements, 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 or under any related document, instrument or agreement, 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 other
of the Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.

 

ARTICLE V 

MISCELLANEOUS

 

Section 5.1             Notices.

 

All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement shall be given as set forth in the Financing Agreement.

 

Section 5.2             Amendments; Waivers.

 

This Agreement may not be amended, modified, or
changed in any respect except by an agreement in writing signed by the Lender
and the Borrower.  No waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in
writing.  No course of dealing between
the Borrower and the Lender and no act or failure to act from time to time on
the part of the Lender shall constitute a waiver, amendment or modification of
any provision of this Agreement or any of the other Financing Documents or any
right or remedy under this Agreement, under any of the other Financing
Documents or under applicable Laws.

 

9

 

Section 5.3             Cumulative Remedies.

 

The rights, powers and remedies provided in this
Agreement and in the other Financing Documents are cumulative, may be exercised
concurrently or separately, may be exercised from time to time and in such
order as the Lender shall determine, subject to the provisions of this
Agreement, and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws.  In order to entitle the Lender to exercise
any remedy reserved to it in this Agreement, it shall not be necessary to give any
notice, other than such notice as may be expressly required in this
Agreement.  Without limiting the
generality of the foregoing and subject to the terms of this Agreement, Lender
may:

 

(a)           proceed against the Borrower with or
without proceeding against any other Person who may be liable for all or any
part of the Obligations;

 

(b)           proceed against the Borrower with or
without proceeding under any of the other Financing Documents or against any
Collateral or other collateral and security for all or any part of the
Obligations;

 

(c)           without notice, release or compromise
with any guarantor or other Person liable for all or any part of the
Obligations under the Financing Documents or otherwise; and

 

(d)           without reducing or impairing the
obligations of the Borrower and without notice thereof: (i) fail to
perfect the Lien in any or all Collateral or to release any or all the Stock
Collateral or to accept substitute collateral, (ii) waive any provision of
this Agreement or the other Financing Documents, (iii) exercise or fail to
exercise rights of set-off or other rights, or (iv) accept partial
payments or extend from time to time the maturity of all or any part of the
Obligations.

 

Section 5.4             Severability.

 

In case one or more provisions, or part thereof,
contained in this Agreement or in the other Financing Documents shall be
invalid, illegal or unenforceable in any respect under any Law, then without
need for any further agreement, notice or action:

 

(a)           the validity, legality and enforceability
of the remaining provisions shall remain effective and binding on the parties
thereto and shall not be affected or impaired thereby;

 

(b)           the obligation to be fulfilled shall be
reduced to the limit of such validity;

 

(c)           if such provision or part thereof
pertains to repayment of the Obligations, then, at the sole and absolute
discretion of the Lender, all of the Obligations of the Borrower to the Lender
shall become immediately due and payable; and

 

10

 

(d)           if the affected provision or part thereof
does not pertain to repayment of the Obligations, but operates or would
prospectively operate to invalidate this Agreement in whole or in material
part, then such provision or part thereof only shall be void, and the remainder
of this Agreement shall remain operative and in full force and effect.

 

Section 5.5             Successors and Assigns.

 

This Agreement shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lender.

 

Section 5.6             Applicable Law; Jurisdiction.

 

5.6.1        Applicable 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 5.6.1(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.

 

11

 

Section 5.7             Headings.

 

The headings in this Agreement are included herein for
convenience only, shall not constitute a part of this Agreement for any other
purpose, and shall not be deemed to affect the meaning or construction of any
of the provisions hereof.

 

Section 5.8             Entire Agreement.

 

This Agreement is intended by the Lender and the
Borrower to be a complete, exclusive and final expression of the agreements
contained herein.  Neither the Lender nor
the Borrower shall hereafter have any rights under any prior agreements but
shall look solely to this Agreement for definition and determination of all of
their respective rights, liabilities and responsibilities under this Agreement.

 

Section 5.9             Waiver of Trial by Jury.

 

THE BORROWER AND THE LENDER HEREBY JOINTLY AND
SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER
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 STOCK
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 Borrower and the Lender, and the Borrower 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 Borrower 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 5.10           Liability of the Lender.

 

The Borrower hereby agrees that the Lender shall not
be chargeable for any negligence, mistake, act or omission of any accountant,
examiner, agency or attorney employed by the Lender in making examinations,
investigations or collections, the Lender’s failure to preserve or protect any
rights of the Borrower under the Stock Collateral or the Lender’s failure to
perfect, maintain, protect or realize upon any lien or security interest or any
other interest in the Stock Collateral or other security for the Obligations.

 

By inspecting the Stock Collateral or any other
properties of the Borrower or by accepting or approving anything required to be
observed, performed or fulfilled by the Borrower or to be given to the Lender
pursuant to this Agreement or any of the other Financing Documents, the 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 the Lender.

 

[SIGNATURES APPEAR ON THE
FOLLOWING PAGE.]

 

12

 

IN WITNESS WHEREOF, the Borrower has caused this
Agreement to be executed and delivered, as of the day and year first written
above.

 

	
   

  	
  LIQUIDITY SERVICES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James M. Rallo

  
	
   

  	
   

  	
  Name: James M. Rallo

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer & Treasurer

  

 

[Signature Page to Pledge, Assignment and Security Agreement]

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