LIQUIDITY SERVICES, INC. EXECUTIVE EMPLOYMENT AGREEMENT

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

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.

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.