Exhibit 10.1

 

LIQUIDITY SERVICES, INC.
EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”), with an effective date of
February 23, 2012 (the “Effective Date”), is by and between Liquidity
Services, Inc., a Delaware corporation (“LSI” or the “Company”), and James M.
Rallo (the “Executive”).

 

1.    Employment Agreement.    On the terms and conditions set forth in this
Agreement, the Company agrees to employ the Executive and the Executive agrees
to be employed by the Company for the Employment Period set forth in Section 2
hereof and in the position and with the duties set forth in Section 3 hereof.
Terms used herein with initial capitalization are defined in Section 10.12
below.

 

2.    Term.    The term of employment under this Agreement (the “Employment
Period”) shall commence on the Effective Date and continue for an initial term
(the “Initial Term”) extending through February 20, 2013, and for automatic and
successive renewal terms of one (1) year each (each, a “Renewal Term”), unless
either the Company or Executive elects not to extend the term beyond the Initial
Term or any Renewal Term and gives to the other party hereto written notice of
such election at least thirty (30) days prior to the end of the Initial Term or
Renewal Term, as applicable, in accordance with Section 7.2 hereof.

 

3.    Position and Duties.    The Executive shall serve in the position and with
the duties and title set forth in Schedule 1 attached hereto during the
Employment Period. In such capacity, the Executive shall have the normal duties,
responsibilities, and authority of such position, subject to the power of the
Executive’s “Reporting Officer” as designated in Schedule 1, the Company’s
Chairman of the Board of Directors (the “Board”) or the Board to reasonably
expand or limit such duties, responsibilities and authority. The Executive shall
report to the Reporting Officer designated in Schedule 1. The Executive shall
devote the Executive’s best efforts and full business time and attention to the
business and affairs of the Company; provided, however, that Executive may, to
the extent such participation or service does not materially interfere with the
performance of the obligations described in this Agreement, (i) participate in
charitable, civic, political, social, trade, or other non-profit organizations
and (ii) with the consent of the Board, serve as a non-management director of
business corporations (or in a like capacity in other for-profit organizations).

 

4.    Place of Performance.    In connection with the Executive’s employment by
the Company, the Executive shall be based at the principal executive offices of
the Company, except as otherwise agreed by the Executive and the Company and
except for reasonable travel on Company business.

 

5.    Compensation.

 

5.1.    Base Salary.    During the Employment Period, the Company shall pay to
the Executive an annual base salary (the “Base Salary”), which initially shall
be at the rate per year as set forth in Schedule 1. The Executive will be
entitled to annual increases in Base Salary, at the discretion of the Reporting
Officer or the Board. The Base Salary shall be payable semi-monthly or in such
other installments as shall be consistent with the Company’s payroll procedures.
The Base Salary may be increased at any time or from time to time, but it may
not be decreased without the consent of the Executive.

 

5.2    Bonus.    The Executive shall be eligible for a performance bonus as set
forth in Schedule 1.

 

5.3    Benefits.    During the Employment Period, the Executive will be entitled
to receive such other benefits approved by the Reporting Officer and made
available to similarly situated senior executives of the Company, including
health insurance, disability insurance, and 401-K benefits. At all times the
Company agrees to maintain Director’s and Officer’s Liability coverage

 

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for the Executive. Nothing contained in this Agreement shall prevent the Company
from changing insurance carriers.

 

5.4    Employee Leave.    The Executive shall be entitled to all public holidays
observed by the Company, a total of 26 days of Paid Time Off (PTO) in accordance
with the applicable leave policies of the Company, which shall be taken at a
reasonable time or times.

 

6.    Expenses.    The Executive is expected and is authorized to incur
reasonable expenses in the performance of his duties hereunder, including the
costs of entertainment, travel, and similar business expenses incurred in the
performance of his duties. Company shall reimburse the Executive for all such
expenses promptly upon periodic presentation by the Executive of an itemized
account of such expenses and appropriate receipts.

 

7.    Termination of Employment.

 

7.1.    Termination.    The Executive’s employment by the Company during the
Employment Period will continue until Executive’s death, Disability, resignation
or until Executive’s termination by the Board at any time.

 

7.2.    Notice of Termination.    Any termination of the Executive’s employment
by the Company or the Executive (other than because of the Executive’s death)
and any election by the Company or the Executive not to extend the term of this
Agreement in accordance with Section 2 hereof shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 10.1
hereof. For purposes of this Agreement, a “Notice of Termination” shall mean,
(i) if not delivered in connection with an election not to extend the term of
this Agreement, a notice which shall indicate the specific termination provision
in this Agreement relied upon, if any, and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (ii) if delivered in
connection with an election not to extend the term of this Agreement, a notice
which shall indicate that the Company or the executive, as applicable, does not
elect to extend the term of the Agreement. Termination of the Executive’s
employment shall take effect on the Date of Termination.

 

8.    Compensation Upon Termination.

 

8.1.    Death.    If the Executive’s employment is terminated during the
Employment Period as a result of the Executive’s death, the Company shall pay to
the Executive’s estate, or as may be directed by the legal representatives of
such estate, the Executive’s full Base Salary through the next full calendar
month following the Date of Termination and all other unpaid amounts, if any, to
which the Executive is entitled as of the Date of Termination in connection with
any fringe benefits pursuant to Section 5.3 and expenses pursuant to Section 6.
The payments contemplated by this Section 8.1 shall be paid at the time they are
due, and the Company shall have no further obligations to the Executive or his
or her estate under this Agreement.

 

8.2.    Disability.    If the Company terminates the Executive’s employment
during the Employment Period because of the Executive’s Disability, the Company
shall pay the Executive the Executive’s full Base Salary through the third full
calendar month following the Date of Termination and all other unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination in
connection with any fringe benefits pursuant to Section 5.3 and expenses
pursuant to Section 6. The payments contemplated by this Section 8.2 shall be
paid at the time they are due, and the Company shall have no further obligations
to the Executive under this Agreement; provided, however, that the Base Salary
shall be reduced by the amount of any disability benefit payments made to the
Executive during a period of Disability from any insurance or other policies
provided by the Company.

 

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8.3.    By the Company with Cause, by the Executive without Good Reason or if
the Executive Elects not to Extend the Term of this Agreement.    If (i) the
Company terminates the Executive’s employment during the Employment Period for
Cause,(ii) the Executive voluntarily terminates the Executive’s employment
during the Employment Period other than for Good Reason or (iii) the Executive
elects not to extend the term of this Agreement in accordance with Section 2,
the Company shall pay the Executive the Executive’s full Base Salary through the
Date of Termination and all other unpaid amounts, if any, to which Executive is
entitled as of the Date of Termination in connection with any fringe benefits
pursuant to Section 5.3 and expenses pursuant to Section 6. The payments
contemplated by this Section 8.3 shall be paid at the time such payments are
due, and the Company shall have no further obligations to the Executive under
this Agreement.

 

8.4.    By the Company without Cause, by the Executive for Good Reason or if the
Company Elects not to Extend the Term of this Agreement.    If (i) the Company
terminates the Executive’s employment during the Employment Period other than
for Cause, Death, or Disability,(ii) the Executive terminates his employment
during the Employment Period for Good Reason or (iii) the Company elects not to
extend the term of this Agreement in accordance with Section 2, and Section 8.5
is not applicable, the Company shall pay the Executive: (A) the Executive’s full
Base Salary through the Date of Termination and all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of Termination in
connection with any fringe benefits pursuant to Section 5.2 and expenses
pursuant to Section 6; and (B) a lump-sum severance package equal to twelve
months of the sum of (x) the Executive’s Base Salary plus (y) an amount equal to
the average annual bonus earned by the Executive for the previous two fiscal
years (together, the “Severance Payment”). The Severance Payment under this
Section 8.4 shall be payable to the Executive within 30 days of the Notice of
Termination. Notwithstanding anything in this Agreement to the contrary, if the
Executive and the Company agree in writing that the term of this Agreement shall
not be extended in accordance with Section 2, the Company shall not pay the
Executive the Severance Payment.

 

8.5    By the Company without Cause or by the Executive for Good Reason
Following a Corporate Transaction.    If any of the following actions occur
during the twelve months after a Corporate Transaction: (i) the Company
terminates the Executive’s employment during the Employment Period other than
for Cause, Death, or Disability; (ii) the Executive terminates his employment
during the Employment Period for Good Reason or (iii) the Company elects not to
extend the term of this Agreement in accordance with Section 2, the Company
shall pay the Executive: (A) the Executive’s full Base Salary through the Date
of Termination and all other unpaid amounts, if any, to which the Executive is
entitled as of the Date of Termination in connection with any fringe benefits
pursuant to Section 5.2 and expenses pursuant to Section 6; and (B) a lump-sum
severance package equal to twenty-four months of the sum of (x) the Executive’s
then current Base Salary plus (y) an amount equal to the average annual bonus
earned by the Executive for the previous two fiscal years (together, the
“Corporate Transaction Severance Payment”). The Corporate Transaction Severance
Payment under this Section 8.5 shall be payable to the Executive within 30 days
of the Notice of Termination.  Notwithstanding anything in this Agreement to the
contrary, if the Executive and the Company agree in writing that the term of
this Agreement shall not be extended in accordance with Section 2, the Company
shall not pay the Executive the Corporate Transaction Severance Payment. By way
of illustrative example, in the event a Corporate Transaction Severance Payment
were to become payable pursuant to this Section 8.5, if the Executive’s then
current Base Salary were $311,456, and the Executive’s annual bonus during the
prior two fiscal years was $319,109 and $225,744, respectively, then the
Corporate Transaction Severance Payment would be equal to the sum of
(A) (2*$311,456) and (B) ($319,109+$225,744) or $1,167,765.

 

8.6    Code Section 409A Matters.  Anything in this Agreement to the contrary
notwithstanding, if (A) on the date of Executive’s “separation from service”
(within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of
1986, as amended (the “Code”)) with

 

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the Company, Executive is a “specified employee” (within the meaning of
Section 409A(a)(2)(B)(i) of the Code) and (B) as a result of such separation
from service, Executive would receive any payment under this Agreement that,
absent the application of this Section 8.5, would be subject to the additional
tax imposed pursuant to Section 409A(a) of the Code as a result of the
application of Section 409A(2)(B)(i) of the Code, then no such payment shall be
payable prior to the date that is the earliest of (1) six months after the
Executive’s separation from service, (2) the Executive’s death or (3) such other
date as will cause such payment not to be subject to such additional tax. Any
payments which are required to be delayed as a result of this Section 8.6 shall
be accumulated and paid as a lump-sum on the earliest possible date determined
in accordance the preceding sentence.

 

8.7    Release of Claims.  The severance payments to the Executive payable
pursuant to Sections 8.3, 8.4 and 8.5 are subject to the Executive executing
(and not revoking) the Company’s standard release of claims within 21 days
following the Date of Termination.

 

9.    Other Agreements.    The Executive has previously executed the Employee
Agreement attached hereto as Exhibit A (the “Employee Agreement”), the terms and
conditions of which are specifically incorporated herein by reference.

 

10.    Miscellaneous.

 

10.1.    Notices.    All notices, demands, requests or other communications
required or permitted to be given or made hereunder shall be in writing and
shall be delivered, telecopied or mailed by first class registered or certified
mail, postage prepaid, addressed as follows:

 

10.1.1. If to the Company:

 

Liquidity Services, Inc.
1920 L Street, NW 6th Floor

Washington, DC 20036

ATTN: William P. Angrick, III, Chairman and CEO

Fax: (202) 467-4030
Phone: (202) 467-6868

 

10.1.2. If to the Executive:

 

at the address set forth in Schedule 1.

 

or to such other address as may be designated by either party in a notice to the
other. Each notice, demand, request or other communication that shall be given
or made in the manner described above shall be deemed sufficiently given or made
for all purposes three days after it is deposited in the U.S. mail, postage
prepaid, or at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, the answer back, the confirmation (if telecopy)
or the affidavit of messenger being deemed conclusive evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.

 

10.2.    Representations.    Executive agrees to execute any proper oath or
verify any proper document required to carry out the terms of this Agreement.
Executive represents that performance of all the terms of this Agreement and the
Employee Agreement will not breach any non-compete or similar agreement.
Employee has not entered into, and Employee agrees not to enter into, any oral
or written agreement in conflict herewith.

 

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10.3.    Severability.    The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
the other provisions of this Agreement, which shall remain in full force and
effect.

 

10.4.    Survival.    It is the express intention and agreement of the parties
hereto that the provisions of Section 8 hereof shall survive the termination of
employment of the Executive. In addition, all obligations of the Company to make
payments hereunder shall survive any termination of this Agreement on the terms
and conditions set forth herein.

 

10.5.    Assignment.    The rights and obligations of the parties to this
Agreement shall not be assignable or delegable, except that (i) in the event of
the Executive’s death, the personal representative or legatees or distributees
of the Executive’s estate, as the case may be, shall have the right to receive
any amount owing and unpaid to the Executive hereunder and (ii) the rights and
obligations of the Company hereunder shall be assignable and delegable to any
Affiliate of the Company or in connection with any subsequent merger,
consolidation, sale of all or substantially all of the assets of the Company or
similar reorganization of a successor corporation.

 

10.6.    Binding Effect.    Subject to any provisions hereof restricting
assignment, this Agreement shall be binding upon the parties hereto and shall
inure to the benefit of the parties and their respective heirs, devisees,
executors, administrators, legal representatives, successors and assigns.

 

10.7.    Amendment; Waiver.    This Agreement shall not be amended, altered or
modified except by an instrument in writing duly executed by the parties hereto;
provided, that the parties may amend Schedule 1 hereto by executing and
delivering a revised version of Schedule 1 and attaching such revised version to
this Agreement. Neither the waiver by either of the parties hereto of a breach
of or a default under any of the provisions of this Agreement, nor the failure
of either of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall thereafter be construed as a waiver of any subsequent breach or default of
a similar nature, or as a waiver of any such provisions, rights or privileges
hereunder.

 

10.8.    Headings.    Section and subsection headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

 

10.9.    Governing Law.    This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the District of Columbia not
including the choice of law rules thereof.

 

10.10.    Entire Agreement.    This Agreement, including Schedule 1 hereto and
the Employee Agreement, constitute the entire agreement between the parties
respecting the employment of Executive, there being no representations,
warranties or commitments except as set forth herein.

 

10.11    Counterparts.    This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall be
deemed to constitute one and the same instrument.

 

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10.12.    Definitions.

 

“Affiliate” means as to a specified Person any other person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the specified Person.

 

“Agreement” means this Executive Employment Agreement.

 

“Base Salary” is defined in Section 5.1 above.

 

“Beneficial Owner” means a beneficial owner within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended.

 

“Cause” means (i) the commission of a felony or a crime involving moral
turpitude (specifically excluding felonies or crimes under any applicable state
or federal vehicle code) or the commission of any other act or omission
involving dishonesty or fraud with respect to the Company or any of its
Subsidiaries or any of their customers or suppliers, or (ii) recurring
violations of material Company rules, regulations policies or any material
provisions of this Agreement (which are not inconsistent with or in violation of
any of the provisions of this Agreement) after written notice to Executive from
the Company specifically enumerating all of the facts and circumstances
constituting the violation, the conduct or action which can be taken by
Executive to cure the violation, and a reasonable opportunity for Executive to
take corrective action, or (iii) gross negligence or willful misconduct with
respect to the Company or any of its Subsidiaries.

 

“Company” means Liquidity Services, Inc. and its successors and assigns.

 

“Corporate Transaction” means (i) the dissolution or liquidation of the Company
or a merger, consolidation, or reorganization of the Company with one or more
other entities in which the Company is not the surviving entity, (ii) a sale of
substantially all of the assets of the Company to another person or entity, or
(iii) any transaction (including without limitation a merger or reorganization
in which the Company is the surviving entity) which results in any person or
entity owning 50% or more of the combined voting power of all classes of stock
of the Company.

 

“Date of Termination” means (i) if the Executive’s employment is terminated by
the Executive’s death, the date of the Executive’s death; (ii) if the
Executive’s employment is terminated because of the Executive’s Disability,
30 days after Notice of Termination; (iii) if the Executive’s employment is
terminated by the Company for Cause or by the Executive for Good Reason, the
date specified in the Notice of Termination; (iv) if the Executive or the
Company elect not to extend the term of this Agreement in accordance with
Section 2, the day after the last day of the Employment Period or (v) if the
Executive’s employment is terminated during the Employment Period other than
pursuant to Section 7.1, the date on which Notice of Termination is given.

 

“Disability” means the Executive’s inability to perform all of the Executive’s
duties hereunder by reason of illness, physical or mental disability or other
similar incapacity, as determined by a competent medical doctor appointed by the
Reporting Officer after a complete and thorough medical examination and
evaluation, which inability shall continue for more than three consecutive
months or for such shorter periods that when aggregated exceed six (6) months in
any twelve (12) month period.

 

“Effective Date” means the date as of which this Agreement is executed as set
out above.

 

“Employee Agreement” is defined in Section 9 above.

 

“Employment Period” is defined in Section 2 above.

 

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“Good Reason” means (i) the Company’s failure to perform or observe any of the
material terms or provisions of this Agreement (including the provisions of
Schedule 1) or the Employee Agreement, and the continued failure of the Company
to cure such default within 30 days after written demand for performance has
been given to the Company by the Executive, which demand shall describe
specifically the nature of such alleged failure to perform or observe such
material terms or provisions; or (ii) a material reduction in the scope of the
Executive’s responsibilities and duties without the written consent of
Executive; or (iii) any change to the job title given to Executive without his
written consent; (iv) any reduction in Base Salary or any other benefits
provided to Executive hereunder; or (v) any constructive termination of
Executive; or (vi) any request, instruction, directive or order, whether direct
or indirect, to Executive by the Board, the Company or any executive officer of
the Company to perform any act which is unlawful.

 

“Notice of Termination” is defined in Section 7.2 above.

 

“Person” means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

 

“Severance Payments” is defined in Section 8.4 above.

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have
caused this Agreement to be duly executed on their behalf, as of the day and
year first hereinabove written.

 

 

LIQUIDITY SERVICES, INC.

 

 

 

By:

 

 

/s/ William P. Angrick, III

 

 

William P. Angrick, III

 

 

Chairman and CEO

 

 

 

EXECUTIVE:

 

 

 

/s/ James M. Rallo

 

James M. Rallo

 

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SCHEDULE 1

 

CERTAIN TERMS OF EMPLOYMENT

 

All capitalized but undefined terms in this Schedule shall have the meaning
ascribed to them in the Agreement.

 

Name: James M. Rallo

 

Position/Title: Chief Financial Officer and Treasurer

 

Duties: The Chief Financial Officer and Treasurer (“CFO”) position will be
responsible for supervising and managing LSI’s financial, accounting, treasury,
tax and investor relations activities. Specific CFO responsibilities are
summarized below.

 

A.                                    Manage all internal financial reporting on
a divisional and consolidated basis, including the preparation and review of
monthly, quarterly and annual financial statements with LSI senior management
and stakeholders

 

B.                                    Manage the internal budgeting and planning
process, including the maintenance of a rolling three-year Company budget on a
divisional and consolidated basis

 

C.                                    Manage and review actual versus budgeted
performance and key performance indicators on a monthly, quarterly and annual
basis with senior management and the Company’s Board as appropriate

 

D.                                    Perform operationally focused financial
reviews and analysis to identify areas for improvement

 

E.                                     Interface with the Company’s audit
committee as necessary regarding financial matters

 

F.                                      Lead and oversee the Company’s
relationship with its independent auditor, currently Ernst & Young, LLP

 

G.                                    Lead and manage the documentation of all
internal controls, systems and processes related to financial, accounting,
treasury, tax and investor relations activities

 

H.                                   Lead the development of business monitors,
controls and documentation to ensure the Company becomes compliant, and
maintains compliance, with the Sarbanes-Oxley Act requirements

 

I.                                        Oversee the Company’s capital raising
activities, including the development of financial models, related descriptive
memoranda and communication with interested parties, including investors and
analysts

 

J.                                       Develop and maintain productive
relationships with Company’s financial institutions partners and key suppliers

 

K.                                   Support the evaluation, due diligence,
closing and integration process for Company acquisitions, if any

 

L.                                     Lead and maintain financial discipline
across LSI through cost analysis, expense controls and risk management
techniques

 

Reporting Officer: Chairman and CEO

 

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Base Salary: $311,456 per annum (current base)

 

Bonus: Executive shall be eligible for an annual incentive bonus on the
Anniversary of the Effective Date under a sliding scale as approved by the
Reporting Officer that is equal to 60% of his Base Salary based upon the
achievement of certain deliverables or goals as agreed to by the Executive and
the Reporting Officer. These deliverables or goals will be agreed upon and
approved by the Board’s Compensation Committee prior to the start of each annual
period.  Such annual bonus shall be at least $50,000.

 

Notice Address:

 

Current:

 

James M. Rallo
10104 Flower Gate Terrace

Potomac, MD 20854

 

COMPANY:

 

EXECUTIVE:

 

 

 

/s/ William P. Angrick, III

 

/s/ James M. Rallo

William P. Angrick, III

 

James M. Rallo

Chairman and CEO

 

 

 

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