Exhibit 10.2
 
FIRST AMENDMENT TO FINANCING AND SECURITY AGREEMENT
 
THIS FIRST AMENDMENT TO FINANCING AND SECURITY AGREEMENT (this “Amendment”) is
made as of the 1st day of September, 2011 (the “Effective Date”), by and between
LIQUIDITY SERVICES, INC., a corporation organized under the laws of the State of
Delaware (“Borrower”) and BANK OF AMERICA, N.A., a national banking association,
its successors and assigns (“Lender”).
 
RECITALS
 
A. Borrower and Lender entered into a Financing and Security Agreement dated
April 30, 2010 (the same, as amended, modified, restated, substituted, extended,
and renewed at any time and from time to time, the “Financing Agreement”).
 
B. The Financing Agreement provides for some of the agreements between Borrower
and Lender with respect to certain Credit Facilities consisting of (i) a
revolving credit facility in the maximum principal amount of Thirty Million
Dollars ($30,000,000) and (ii) a letter of credit facility in the maximum
principal amount of Ten Million Dollars ($10,000,000) as part of that revolving
credit facility, to be used by Borrower for the Permitted Uses described in the
Financing Agreement.
 
C. Borrower has advised Lender that Profar Acquisition Partners, LLC, a Delaware
limited liability company and a wholly owned acquisition subsidiary of Borrower
(the “Acquisition Subsidiary”) intends to acquire certain of the assets (the
“Jacobs Trading Acquisition”) of Jacobs Trading, LLC, a limited liability
company organized under the laws of the State of Minnesota (“Jacobs Trading”).
 
D. In connection with the Jacobs Trading Acquisition, Borrower will issue to
Jacobs Trading an unsecured Subordinated Promissory Note in the original
principal amount of Forty Million and No/100 Dollars ($40,000,000.00) in
substantially the form of Exhibit A hereto (the “Jacobs Trading Subordinated
Note”).
 
E. Borrower has requested that Lender consent to the Jacobs Trading Acquisition,
including, without limitation, the issuance of the Jacobs Trading Subordinated
Note (collectively, the “Jacobs Trading Acquisition Transaction”), and Lender is
willing to consent to the Jacobs Trading Acquisition Transaction on the terms
and conditions set forth in this Amendment.
 
AGREEMENTS
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, receipt of which is hereby acknowledged, Borrower and Lender
agree as follows:
 
1 Recitals.  Borrower and Lender agree that the Recitals above are a part of
this Amendment.
 
 
 

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2  Definitions.  Unless otherwise expressly defined in this Amendment, terms
defined in the Financing Agreement shall have the meanings given thereto in the
Financing Agreement.
 
3  Consent.  Subject to the following terms and the terms of Section ‎17 below,
Lender hereby consents to the Jacobs Trading Acquisition Transaction and agrees
that (i) the Jacobs Trading Acquisition Transaction shall not, in and of itself,
be deemed to violate Sections 6.2.1 and 6.2.4 of the Financing Agreement, (ii)
the Jacobs Trading Acquisition constitutes a “Permitted Acquisition” for
purposes of the Financing Agreement and (iii) the Jacobs Trading Subordinated
Note constitutes “Subordinated Indebtedness” for purposes of the Financing
Agreement.
 
4  Covenants Regarding the Jacobs Trading Acquisition Transaction.  Borrower
hereby covenants, represents and warrants to Lender that:
 
(a)           the Jacobs Trading Subordinated Note will constitute “Subordinated
Indebtedness” pursuant to the terms of Jacobs Trading Subordination Agreement
(as hereinafter defined);
 
(b)           neither Borrower nor any of its Subsidiaries shall grant or permit
any Lien on any of its assets other than in favor of the Lender in connection
with the Jacobs Trading Acquisition Transaction; and
 
(c)           (i) pursuant to the definition of “Designated Senior Indebtedness”
in the Jacobs Trading Subordination Agreement, all Obligations (as defined in
the Financing Agreement) will be “Designated Senior Indebtedness” for all
purposes of, and as defined in, the Jacobs Trading Subordination Agreement, (ii)
pursuant to Section 6.2.7(a)(ii) of the Financing Agreement, the Borrower shall
not amend the Jacobs Trading Subordination Agreement and (iii) pursuant to
Section 6.2.7(c) of the Financing Agreement, the Borrower shall not designate
any other Indebtedness as “Designated Senior Indebtedness” without the prior
written consent of Lender, which Lender may grant or withhold in its sole and
absolute discretion.
 
5  Jacobs Trading Subordinated Note.  Borrower hereby represents and warrants to
the Lender that without the prior written consent of the Lender: (i) pursuant to
Section 6.2.18 of the Financing Agreement, it shall not amend, supplement or
modify, any of the Jacobs Trading Acquisition Documents (as hereinafter
defined), (ii) pursuant to Section 6.2.7(a)(ii) of the Financing Agreement, it
shall not amend, supplement or modify the Jacobs Trading Subordination
Agreement, (ii) pursuant to Sections 6.2.3 and 6.2.7(a)(iii) of the Financing
Agreement, it shall not make any payments of principal under the Jacobs Trading
Subordinated Note, other than (y) regularly scheduled principal payments and (z)
to the extent and at the time permitted by Sections 6.2.3(b)(y) and (z) and
6.2.7(a)(iii) of the Financing Agreement.

6  Defined Terms.  Section 1.1 of the Financing Agreement is hereby amended as
follows:
 
(a)           The definitions of “Fixed Charges” and “Pro Forma Calculation” are
amended and restated in their entirety as follows:
 
 
 

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“Fixed Charges” means as to the Borrower for any period of determination, the
sum of (a) current maturities of long term debt and Capital Leases measured as
of the date that is twelve (12) months prior to the last day of such testing
period, plus (b) required payments of interest on all Indebtedness for Borrowed
Money of the Borrower, plus (c) cash Taxes paid, plus (d) rent and lease
expense, provided that Fixed Charges shall not include any prepayments
(including, for the avoidance of doubt, pursuant to the exercise of any offset
under Section 10 of the Jacobs Trading Subordinated Note) on the Jacobs Trading
Subordinated Note permitted under this Agreement.
 
“Pro Forma Calculation” means a calculation made on a pro forma basis (after
giving effect to cost savings and synergies arising from acquisitions,
dispositions, investments and business restructurings that have been or are
expected to be realized within twelve (12) months from the date of determination
to the extent they are reasonably identifiable, actually supportable and
approved by the Lender in its sole but reasonable discretion).
 
(b)           The following definitions are hereby added in alphabetical order
to Section 1.1 of the Financing Agreement:
 
“Acquisition Subsidiary” has the meaning provided for in the First Amendment.
 
“First Amendment” means the First Amendment to Financing and Security Agreement
dated as of August 31, 2011 between Borrower and Lender.
 
“Jacobs Trading” means Jacobs Trading, LLC, a limited liability company
organized under the laws of the State of Minnesota.
 
“‘Jacobs Trading Acquisition Agreement’ means the Asset Purchase Agreement dated
as of August 31, 2011 among Borrower, Acquisition Subsidiary and Jacobs Trading.
 
“Jacobs Trading Subordinated Note” means that certain Subordinated Promissory
Note, in substantially the form attached to the First Amendment as Exhibit A,
issued by Borrower in favor of Jacobs Trading, LLC in the principal amount of
Forty Million Dollars ($40,000,000).
 
“Jacobs Trading Subordination Agreement” means that certain Subordination
Agreement in substantially the form of Exhibit B to the First Amendment by and
among Jacobs Trading, LLC, Borrower and Lender.
 
(c)           The following paragraph is added as the final paragraph of Section
1.1:
 
For purposes of computing the Fixed Charge Coverage Ratio and the ratio of
Funded Debt to EBITDA (and any financial calculations required to be made or
included within such ratios) as of any date, all components of such ratios for
the period of four fiscal quarters ending at the end of the fiscal quarter most
recently ended on or prior to such date shall be calculated on the basis of a
Pro Forma Calculation in respect of any business or assets that have been
acquired or disposed of as permitted under this
 
 
 

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Agreement by the Borrower or any of its Subsidiaries (including through mergers
or consolidations) after the first day of such period of four fiscal quarters
and prior to such date.
 
7  Purchase or Redemption of Securities, Dividend Restrictions.  Section 6.2.3
of the Financing Agreement is hereby amended and restated in its entirety as
follows:
 
6.2.3  Purchase or Redemption of Securities, Dividend Restrictions.
 
(a)           Borrower will not purchase, redeem or otherwise acquire any shares
of its capital stock or warrants now or hereafter outstanding, declare or pay
any dividends thereon (other than stock dividends), apply any of its property or
assets to the purchase, redemption or other retirement of, set apart any sum for
the payment of any dividends on, or for the purchase, redemption, or other
retirement of, make any distribution by reduction of capital or otherwise in
respect of, any shares of any class of capital stock of Borrower, or any
warrants, permit any Subsidiary to purchase or acquire any shares of any class
of capital stock of, or warrants issued by, Borrower, make any distribution to
stockholders or set aside any funds for any such purpose, and not voluntarily
prepay any Indebtedness for Borrowed Money under Section 6.2.4(e) and purchase
or redeem any Indebtedness for Borrowed Money other than the Obligations.
 
(b)           Notwithstanding the foregoing, Borrower:
 
(x)           may repurchase its common stock on the open market and the stock
of employees, directors or consultants, so long as:
 
(i)           a Default or an Event of Default does not exist at the time of any
such repurchase and would not exist after giving effect thereto on a pro forma
basis, and
 
(ii)          either (A) the proceeds of Revolving Loans are not used to make
such repurchase or (B) both (I) Borrower’s Pro Forma Calculation of Funded Debt
to EBITDA Ratio, for the rolling four (4) quarter period ending on that last day
of the most recent fiscal quarter for which financial statements have been, or
are required to have been, delivered pursuant to Section 6.1.1, is less than
1.25 to 1.00 and (II) the sum of (aa) cash and Cash Equivalents held by the
Borrower and its Subsidiaries after giving effect to such repurchase plus (bb)
availability under the Revolving Credit  Facility is not less than $15,000,000.
 
(y)          may exercise offset under Section 10 of the Jacobs Trading
Subordinated Note; and
 
(i)            a Default or an Event of Default does not exist; and
 
(ii)           Borrower’s Pro Forma Calculation of Funded Debt to EBITDA Ratio,
for the rolling four (4) quarter period ending on that last day of the most
recent fiscal quarter for which financial statements have been, or are required
to have been, delivered pursuant to Section 6.1.1, is less than 1.25 to 1.00.
 
 
 

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(z)           may voluntarily prepay, in whole or in part, the Jacobs Trading
Subordinated Note if each of the following conditions is met at the time of such
prepayment and after giving effect thereto:
 
8   Indebtedness.  Section 6.2.4 of the Financing Agreement is hereby amended by
(i) deleting the word “and” at the end of clause (e) thereof, (ii) replacing the
period at the end of clause (f) thereof with the expression “; and” and (iii)
adding a new clause (g) to read in its entirety as follows:
 
8.1          (g)           obligations to make earn-out payments in connection
with any Permitted Acquisition made in accordance with Section 6.2.1 of this
Agreement.
 
9   Subordinated Indebtedness.  Section 6.2.7 of the Financing Agreement is
hereby amended and restated in its entirety as follows:

6.2.7           Subordinated Indebtedness.  The Borrower will not, and will not
permit any Subsidiary to make:
 
(a)           in the case of Jacobs Trading Subordinated Note: (i) any payment
of principal of, or interest on, any of the Subordinated Indebtedness in
violation of Jacobs Trading Subordination Agreement; and (ii) any amendment or
modification of or supplement to the documents evidencing, subordinating or
securing the Jacobs Trading Subordinated Note; or (iii) payment of principal or
interest on the Jacobs Trading Subordinated Note other than (A) as permitted
pursuant to Section 6.2.3(b)(y) or (z) or (B) when due.
 
(b)           in the case of any Subordinated Indebtedness other than the Jacobs
Trading Subordinated Note: (i) any payment of principal of, or interest on, any
such Subordinated Indebtedness, if a Default or an Event of Default then exists
hereunder or would result from such payment; (ii) any payment of the principal
or interest due on such Subordinated Indebtedness as a result of acceleration
thereunder; (iii) any amendment or modification of or supplement to the
documents evidencing or securing such Subordinated Indebtedness; or (iv) payment
of principal or interest on such Subordinated Indebtedness other than when due.
 
(c)           Borrower will not designate any Indebtedness (as defined in the
Financing Agreement), other than the Obligations, as “Designated Senior
Indebtedness” under, and as defined in, the Jacobs Trading Subordination
Agreement without the prior written consent of Lender, which Lender may grant or
withhold in its sole and absolute discretion.

10   Transactions with Affiliates.  Section 6.2.9 of the Financing Agreement is
hereby amended and restated in its entirety as follows:
 
 
  6.2.9  Transactions with Affiliates.
 
Borrower and its Subsidiaries will not enter into or participate in any
transaction with any Affiliate or, except in the ordinary course of business,
with the
 
 
 

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officers, directors, employees and other representatives of Borrower and/or any
Subsidiary; provided that this Section 6.2.9 shall not limit (i) transactions
among the Borrower and its Subsidiaries that are on an arms-length basis or (ii)
transactions among the Borrower and the Guarantors.

11   Jacobs Trading Transaction.  The following is added immediately after
Section 6.2.17 of the Financing Agreement as Section 6.2.18:
 
6.2.18 Jacobs Trading Acquisition Transaction.

The Borrower shall not amend, supplement or modify any of the documents now or
hereafter evidencing the Jacobs Trading Acquisition Transaction, without the
prior written consent of Lender, which Lender may grant or withhold in its sole
and absolute discretion.

12   Representations and Warranties.  Borrower represents and warrants to Lender
as follows:
 
12.1  Borrower (a) is a Registered Organization and is in good standing under
the laws of the State of Delaware, (b) has the power to own its property and to
carry on its business as now being conducted, and (c) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned by it therein or in which the transaction of its business
makes such qualification necessary, except in each case referred to in clause
(c), to the extent that failure to do so would not reasonably be expected to
have a Material Adverse Effect;
 
12.2  Borrower has full power and authority to execute and deliver this
Amendment, and to incur and perform the Obligations under this Amendment, all of
which have been duly authorized by all proper and necessary action.  No consent
or approval of owners or any creditors of Borrower, and no consent, approval,
filing or registration with or notice to any Governmental Authority on the part
of Borrower, is required as a condition to the execution, delivery, validity or
enforceability of this Amendment;
 
12.3  The Financing Agreement, as heretofore amended and as amended by this
Amendment, and the other Financing Documents remains in full force and effect,
and constitutes the valid and legally binding obligation of Borrower,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties, and general principles of
equity regardless of whether applied in a proceeding in equity or at law;
 
12.4  All of Borrower’s representations and warranties contained in the
Financing Agreement and the other Financing Documents are true and correct on
and as of the date of Borrower’s execution of this Amendment (unless expressly
stated to be made as of a specified earlier date, in which case such
representations and warranties were true and correct on and as of such earlier
date);
 
 
 

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12.5  No Event of Default and Default, has occurred and is continuing under the
Financing Agreement or the other Financing Documents which has not been waived
in writing by Lender; and
 
12.6  Attached as Exhibit C is a true, complete and correct copy of the Jacobs
Trading Acquisition Agreement.  The Jacobs Trading Subordinated Note to be
executed at closing of the Jacobs Trading Acquisition Transaction will not,
without the prior written consent of the Lender, be modified in any material
manner from the form attached hereto as Exhibit A other than amendments to
insert the closing date and other non substantive changes.
 
13  Limitation of Amendments.
 
13.1  The amendments set forth above are effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to
(a) be a consent to any amendment, waiver or modification of any other term or
condition of any Financing Document, or (b) otherwise prejudice any right or
remedy which Lender may now have or may have in the future under or in
connection with any Financing Document.
 
13.2  This Amendment shall be construed in connection with and as part of the
Financing Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Financing Documents, except as herein
amended, are hereby ratified and confirmed and shall remain in full force and
effect.
 
14  Novation.  Borrower agrees that this Amendment is not intended to and shall
not cause a novation with respect to any or all of the Obligations.
 
15  Acknowledgements.  Borrower acknowledges and agrees that Lender has acted in
good faith and has conducted in a commercially reasonable manner its
relationships with Borrower in connection with this Amendment and generally in
connection with the Financing Agreement and the Obligations, Borrower hereby
waiving and releasing any claims to the contrary.
 
16  Fees and Expenses.  Borrower shall pay (i) on the Effective Date, to the
extent Lender provides Borrower with invoices therefore not later than the
Business Day prior to the Effective Date or (ii) otherwise, on the Business Day
after any such invoices are provided, all fees, commissions, costs, charges,
taxes and other expenses incurred by Lender and its counsel in connection with
review of the Jacobs Trading Acquisition Documents and the preparation and
negotiation of this Amendment and the Jacobs Trading Subordination Agreement,
including, but not limited to, reasonable fees and expenses of Lender’s counsel
and all recording fees, taxes and charges.
 
17  Conditions Precedent.  This Amendment shall be effective on the date (the
“Effective Date”) on which the Lender shall have received:
 
(a)       this Amendment duly executed by each party hereto;
 
 
 

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(b)  a copy of all of the duly executed documents relating to the Jacobs Trading
Acquisition, including, without limitation, the Jacobs Trading Subordinated
Note, certified by Borrower to Lender as being true, correct and complete;
 
(c)  the original fully executed Jacobs Trading Subordination Agreement;
 
(d)  an original Reaffirmation of Guaranty in form and substance satisfactory to
Lender in its reasonable discretion, duly executed by each Guarantor;
 
(e)  proof that Borrower has paid all costs and expenses to Lender payable to
Lender on the Effective Date pursuant to Section ‎16 of this Amendment; and
 
(f)  Such other information, instruments, documents, certificates and reports as
Lender may reasonably request.
 
18  Counterparts.  This Amendment may be executed in any number of duplicate
originals or counterparts, each of such duplicate originals or counterparts
shall be deemed to be an original and all taken together shall constitute but
one and the same instrument.  Borrower agrees that Lender may rely on a telecopy
of any signature of Borrower.  Lender agrees that Borrower may rely on a
telecopy of this Amendment executed by Lender.
 
19  Financing Documents; Governing Law; Etc.  This Amendment is one of the
Financing Documents defined in the Financing Agreement and shall be governed and
construed in accordance with the laws of the State of New York.  The headings
and captions in this Amendment are for the convenience of the parties only and
are not a part of this Amendment.
 
20  Modifications.  This Amendment may not be supplemented, changed, waived,
discharged, terminated, modified or amended, except by written instrument
executed by the parties.
 
 
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
 
 
 

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IN WITNESS WHEREOF, Borrower and Lender have executed this Amendment under seal
as of the date and year first written above.
 
 
WITNESS/ATTEST:
  LIQUIDITY SERVICES, INC.                                        
 
  By:
/s/ James M. Rallo
(Seal)        
Name: James M. Rallo
         
Title: Chief Financial Officer and Treasurer
                           
WITNESS:
  BANK OF AMERICA, N.A.                                             By:
/s/ Michael J. Radcliffe
(Seal)        
Name:  Michael J. Radcliffe
         
Title: Senior Vice President
   

 
 
 

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