EMPLOYMENT AGREEMENT
EXHIBIT 10.62
THIS EMPLOYMENT AGREEMENT (the
“Agreement”)
is made effective February 16, 2009 (the “Effective
Date”) by and among between U.S. Auto Parts Network, Inc., a Delaware
corporation (the “Company”),
and Xxx Xxxxxxx, an individual (the “Executive”).
WHEREAS, the parties hereto
desire to enter into a written agreement to document the terms of Executive’s
employment with the Company.
1. Duties
and Responsibilities.
A. Executive
shall serve as the Company’s Chief Financial Officer, reporting directly to the
Company’s Chief Executive Officer. Executive shall have the duties
and powers at the Company that are customary for an individual holding such
position.
B. Executive
agrees to use his best efforts to advance the business and welfare of the
Company, to render his services under this Agreement faithfully, diligently and
to the best of his ability.
C. Executive
shall be based at the Company’s office located at Carson, California, or at such
other offices of the Company located within 30 miles of such
offices.
2. Employment
Period. Following the Effective Date, Executive’s employment
with the Company shall be governed by the provisions of this Agreement for the
period commencing as of the date hereof and continuing until the earlier of (i)
Executive’s termination of employment with the Company for any reason, or (ii)
the fifth anniversary of the Effective Date (the “Employment
Period”). Provided that Executive’s employment has not been or
is not being terminated for any reason, Executive and the Company agree to
negotiate in good faith prior to the end of the Employment Period to enter into
a new Employment Agreement to take effect after the Employment Period.
3. Cash
Compensation.
A. Annual
Salary. Executive’s
initial base salary shall be $300,000 per year (the “Annual
Salary”), which shall be payable in accordance with the Company’s
standard payroll schedule (but in no event less frequent than on a monthly
basis), and may be increased from time to time at the discretion of the
Compensation Committee of the Company’s Board of Directors (the “Compensation
Committee”). The Compensation Committee shall review
Executive’s Annual Salary at least annually and may increase the Annual Salary
from time to time at its sole discretion. Any increased Annual Salary
shall thereupon be the “Annual Salary” for the purposes
hereof. Executive’s Annual Salary shall not be decreased without his
prior written consent at any time during the Employment Period.
B. Bonus.
(1) Signing
and Retention Bonus. The Company shall pay to Executive a
bonus of $25,000, which shall be payable in a lump sum as soon as reasonably
practicable following the Effective Date. In the event that
Executive’s employment is terminated for Cause (as defined below) or if
Executive resigns from the Company without Good Reason (as defined below) prior
to the first anniversary of the Effective Date, Executive agrees to reimburse
the Company for such bonus; provided however, that the amount of the reimbursed
bonus to the Company shall be reduced by $2,083 (1/12th of the
total bonus) for each complete month of Executive’s employment with the Company,
calculated from the Effective Date. Executive hereby agrees that the
Company may deduct such bonus reimbursement from any or all payments due to
Executive from the Company, including from his last paycheck (to the extent
legally permissible), and Executive agrees to provide the Company with any
further written authorization of the deduction as may be reasonably requested by
the Company to authorize, facilitate or substantiate such
deduction.
(2) Annual
Target Bonus. Executive shall also be entitled to receive an
annual target incentive bonus of up to 50% of the Executive’s current salary,
which target for the first calendar year shall be $150,000, pro-rated based upon
the Executive’s length of employment during such year. The annual
bonus shall be based upon the Company achieving its revenue and EBITDA goals,
Executive meeting the annual goals determined by the Compensation Committee, and
Executive being employed in good standing by Company at the time of the bonus
payment. The amount of the annual target bonus payable to Executive
in any given year shall be determined by the Compensation
Committee. The annual bonus shall be paid no later than the end of
February following the year for which such bonus is being paid.
C. Applicable
Withholdings. The Company shall
deduct and withhold from the compensation payable to Executive hereunder any and
all applicable federal, state and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the Company under
applicable statutes, regulations, ordinances or orders governing or requiring
the withholding or deduction of amounts otherwise payable as compensation or
wages to employees.
4. Equity
Compensation.
A. Initial
Grants. As of the close
of business on the date of the Executive’s first day of employment with the
Company, the Company’s Compensation Committee shall grant Executive
non-statutory stock options. The first stock option shall be an
option to purchase up to 400,000 shares of the Company’s common stock and shall
vest over four years; 25% of the shares shall vest on the first anniversary of
the grant date and the balance shall vest in 36 equal monthly installments
thereafter. The second stock option shall be a performance option to
purchase up to 100,000 shares of the Company’s common stock that will vest based
solely upon the average closing sales price of the Company’s common stock on the
grant date as reported by Nasdaq or the primary exchange on which the Company’s
common stock is then listed or quoted (the “Exchange”) during any consecutive
three calendar months. If during the Employment Period, the average
of the Monthly Average Price (as defined below) of the Company’s common stock
over any consecutive three months reaches $5 per share, the shares shall vest as
of the last day of such period. The “Monthly Average Price” shall be
calculated by adding the closing sales price reported by the Exchange for each
Trading Day in a given month and dividing such sum by the total number of
Trading Days in such month. For the purposes of this Agreement, a
“Trading Day” shall mean any day on which the Company’s common stock is listed
or quoted and traded on the Exchange. For example, if there are 20
Trading Days in each month and the Monthly Average Price was $4.75 in January,
$5.50 in February and $5.00 in March, then the shares subject to this option
shall vest on March 31 [(($4.75*20) + ($5.50*20) + ($5.00*20))/60 =
$5.08]. In addition, if the average of the Monthly Average Price of
the Company’s common stock exceeds the unachieved milestones set forth above for
either (i) the two calendar months immediately prior to Executive’s termination
of employment (other than for Cause or due to death or Disability) or
Executive’s resignation for Good Reason, or (ii) the last completed calendar
month immediately prior to such termination or resignation, then the consecutive
three month period used for determining whether the milestones have been met may
include one or two months following the date of such termination or resignation,
as the case may be, to complete the three month determination
period. For example, assuming the performance option has not yet
vested and assuming there are 20 Trading Days in each month, if the Monthly
Average Prices for the two months prior to such termination or resignation were
$4.00 and $5.50, then the calendar month during which Executive’s employment
ceased may be included in the three month determination period for the purposes
of calculating whether the vesting requirement has been met, even though
Executive was terminated in the first week of such month.
The foregoing options will be granted
pursuant to the Company’s 2007 New Employee Incentive Plan (the “Plan”),
and will be subject to the terms and conditions of the Plan in effect as of the
grant date and the related stock option agreements. The
exercise price for both options shall be equal to the closing sales price of the
Company’s common stock as reported by the Exchange on the date of grant of the
options. The option shall have provisions to accelerate the vesting
in the event either Executive’s employment is terminated without Cause or
Executive resigns for Good Reason within twelve months following a Change in
Control as defined in the Plan. Both options shall contain provisions
that will restrict the sale of the common stock issuable upon exercise of such
options for 18 months following the grant date, except to the extent necessary
to cover any current tax liabilities of Executive associated with such
options.
B. Other
Equity Compensation. Executive shall also be entitled to
participate in any other equity incentive plans of the Company. All
such other options or other equity awards will be made at the discretion of the
Company’s Compensation Committee of the Board of Directors pursuant and subject
to the terms and conditions of the applicable equity incentive plan, including
any provisions for repurchase thereof. The option exercise price or
value of any equity award granted to Executive will be established by the
Company’s Board of Directors as of the date such interests are granted but shall
not be less than the fair market value of the class of equity underlying such
award.
5. Expense
Reimbursement. In addition to
the compensation specified in Section 3, Executive shall be entitled to receive
reimbursement from the Company for all reasonable business expenses incurred by
Executive in the performance of Executive’s duties hereunder, provided that
Executive furnishes the Company with vouchers, receipts and other details of
such expenses in the form reasonably required by the Company to substantiate a
deduction for such business expenses under all applicable rules and regulations
of federal and state taxing authorities.
6. Fringe
Benefits.
A. Group
Plans. Executive shall,
throughout the Employment Period, be eligible to participate in all of the group
term life insurance plans, group health plans, accidental death and
dismemberment plans, short-term disability programs, retirement plans, profit
sharing plans or other plans (for which Executive qualifies) that are available
to the executive officers of the Company. During the Employment
Period, the Company will pay for coverage for Executive and his spouse and
dependents residing in Executive’s household (collectively, the “Dependents”)
under the Company’s health plan, and coverage for Executive under the Company’s
accidental death and dismemberment plan and for short-term
disability. In the event Executive elects not to participate in the
Company’s health plan, the Company shall reimburse Executive for the cost of
alternative health care coverage of his choosing for Executive and his
Dependents in an amount up to $1,500 per month. Payment for all other
benefit plans will be paid in accordance with the Company’s policy in effect for
similar executive positions.
B. Vacation. Executive shall
be entitled to at least four weeks paid vacation per year. Vacation
shall accrue pursuant to the Company’s vacation benefit policies.
C. Auto
Allowance. Executive shall be
entitled to an auto allowance for one vehicle for Executive’s use up to $1,000
per month.
D. Indemnification. As
of the Effective Date, the Company and Executive shall enter into the Company’s
standard indemnification agreement for its key executives.
7. Termination
of Employment. Executive’s employment with the Company is
“at-will.” This means that it is not for any specified period of time
and can be terminated by Executive or the Company at any time, with or without
advance notice, and for any or no particular reason or cause. Upon
such termination, Executive (or, in the case of Executive’s death, Executive’s
estate and beneficiaries) shall have no further rights to any other compensation
or benefits from the Company on or after the termination of employment except as
follows:
A. Termination
For Cause. In the event the Company terminates Executive’s
employment with the Company prior to expiration of the Employment Period for
Cause (as defined below), the Company shall pay to Executive the following: (i)
Executive’s unpaid Annual Salary that has been earned through the termination
date of his employment; (ii) Executive’s accrued but unused vacation; (iii) any
accrued expenses pursuant to Section 5 above, and (iv) any other payments as may
be required under applicable law (subsections (i) through (iv) above shall
collectively be referred to herein as the “Required
Payments”). For purposes of this Agreement, “Cause”
shall mean that Executive has engaged in any one of the
following: (i) misconduct involving the Company or its assets,
including, without limitation, misappropriation of the Company’s funds or
property; (ii) reckless or willful misconduct in the performance of Executive’s
duties in the event such conduct continues after the Company has provided 30
days written notice to Executive and a reasonable opportunity to cure; (iii)
conviction of, or plea of nolo contendre to, any felony or misdemeanor involving
dishonesty or fraud; (iv) the violation of any of the Company’s policies,
including without limitation, the Company’s policies on equal employment
opportunity and the prohibition against unlawful harassment; (v) the material
breach of any provision of this Agreement after 30 days written notice to
Executive of such breach and a reasonable opportunity to cure such breach; or
(vi) any other misconduct that has a material adverse effect on the business or
reputation of the Company.
B. Termination
Upon Death or Disability. If Executive dies during the
Employment Period, the Executive’s employment with the Company shall be deemed
terminated as of the date of death, and the obligations of the Company to or
with respect to Executive shall terminate in their entirety upon such date
except as otherwise provided under this Section 7B. If Executive
becomes Disabled (as defined below), then the Company shall have the right, to
the extent permitted by law, to terminate the employment of Executive upon 30
days prior written notice in writing to Executive. Upon termination
of employment due to the death or Disability of Executive, Executive (or
Executive’s estate or beneficiaries in the case of the death of Executive) shall
be entitled to receive the Required Payments; and Executive shall
also be entitled to the following: (i) Executive’s annual bonus for
the year of termination in accordance with Section 3B above (pro rated up to the
termination date), which bonus shall be paid at the earlier of (A) such time as
the Company regularly pays bonuses, or (B) 2 ½ months following the calendar
year in which the termination occurs; and (ii) continuation of his Annual Salary
following such termination for a period of one year, which shall be payable in
accordance with the Company’s standard pay schedules; and (iii) in the case of
termination due to Disability, the Company shall reimburse Executive’s COBRA
payments for Executive’s health insurance benefits for a period of one
year. For the purposes of this Agreement, “Disability”
shall mean a physical or mental impairment which, the Board of Directors
determines, after consideration and implementation of reasonable accommodations,
precludes the Executive from performing his essential job functions for a period
longer than three consecutive months or a total of one hundred twenty (120) days
in any twelve month period. Any termination of Executive’s employment
under this Section 7B (including separation on account of death) is intended to
qualify as an involuntary separation from service under Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”)
such that Executive’s right to benefits under this Section 7B is subject to a
substantial risk of forfeiture under Treasury Regulations Section
1.409A-1(d).
C. Termination
for Any Other Reason; Resignation for Good Reason. Should the
Company terminate Executive’s employment (other than for Cause or as a result of
Executive’s Death or Disability), or in the event Executive resigns for Good
Reason (as defined below), then the Company shall pay Executive the Required
Payments; and Executive shall also be entitled to the following: (i)
a pro rated share of Executive’s bonus (pro rated up to the termination or
resignation date, as the case may be), which bonus shall be paid at the earlier
of (A) such time as the Company regularly pays bonuses; or (B) no later than 2 ½
months following the calendar year in which the termination or resignation
occurs; (iii) continuation of Executive’s Annual Salary, which shall be payable
in accordance with the Company’s standard pay schedules for a period of one year
(provided however that if Executive obtains other employment, then his severance
payments shall be reduced after the first six months of the foregoing one year
severance period by any amounts received by Executive from his new employer for
the balance of the one year severance period); and (iv) the Company shall also
reimburse Executive’s actual COBRA payments for Executive’s health insurance
benefits for a period of one year. Any termination of Executive’s
employment under this Section 7C (including a separation for Good Reason) is
intended to qualify as an involuntary separation from service under Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”)
such that Executive’s right to benefits under this Section 7C is subject to a
substantial risk of forfeiture under Treasury Regulations Section
1.409A-1(d). For the purposes of this Agreement, “Good
Reason” shall mean Executive’s voluntary resignation for any of the
following events that results in a material negative change to the Executive;
(i) a reduction without Executive’s prior written consent in either
his level of Annual Salary or his target annual bonus as a percentage of Annual
Salary; (iii) a relocation of Executive more than thirty (30) miles from the
Company’s current corporate headquarters as of the date hereof, (iv) a material
breach of any provision of this Agreement by the Company or (v) the failure of
the Company to have a successor entity specifically assume this
Agreement. Notwithstanding the foregoing, “Good Reason” shall only be
found to exist if prior to Executive’s resignation for Good Reason, the
Executive has provided written notice to the Company within 90 days following
the existence of such Good Reason event indicating and describing the event
resulting in such Good Reason, and the Company does not cure such event within
30 days following the receipt of such notice from Executive. In the
event the Company fails to timely cure, Executive shall resign within 6 months
following the expiration of the cure period.
D. 409A
Compliance. To the extent the salary and COBRA continuation
pursuant to Section 7B and 7C (a) are paid from the date of Executive’s
termination of employment through March 15 of the calendar year following such
termination, such severance benefits are intended to constitute separate
payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and
thus payable pursuant to the “short-term deferral” rule set forth in Section
1.409A-1(b)(4) of the Treasury Regulations; (b) are paid following said March
15, such severance benefits are intended to constitute separate payments for
purposes of Section 1.409A-2(b)(2) of the Treasury Regulations made upon an
involuntary separation from service and payable pursuant to Section
1.409A-1(b)(9)(iii) of the Treasury Regulations, to the maximum extent permitted
by said provision, and (c) are in excess of the amounts specified in clauses (a)
and (b) of this paragraph, shall (unless otherwise exempt under Treasury
Regulations) be considered separate payments subject to the distribution
requirements of Section 409A(a)(2)(A) of the Code, including, without
limitation, the requirement of Section 409A(a)(2)(B)(i) of the Code that
payments or benefits be delayed until 6 months after Executive’s separation from
service (or death, if earlier) if he is a “specified employee” within the
meaning of the aforesaid section of the Code at the time of such separation from
service. In the event that a six month delay of any such separation
payments or benefits is required, on the first regularly scheduled pay date
following the conclusion of the delay period, Executive shall receive a lump sum
payment or benefit in an amount equal to the separation payments and benefits
that were so delayed, and any remaining separation payments or benefits shall be
paid on the same basis and at the same time as otherwise specified pursuant to
this Agreement (subject to applicable tax withholdings and
deductions). The term "termination of employment” as it appears in
Sections 7B and 7C shall be interpreted consistent with the term "separation
from service" within the meaning of section Treasury Regulation §1.409A-1(h),
but only to the extent strictly necessary to either qualify the arrangement as
an involuntary separation arrangement that is exempt from section 409A of the
Code, or establish a time of payment that complies with section 409A of the
Code.
8. Non-Competition
During the Employment Period. Executive acknowledges and
agrees that given the extent and nature of the confidential and proprietary
information he will obtain during the course of his employment with the Company,
it would be inevitable that such confidential information would be disclosed or
utilized by the Executive should he obtain employment from, or otherwise become
associated with, an entity or person that is engaged in a business or enterprise
that directly competes with the Company. Consequently, during any
period for which Executive is receiving payments from the Company, either as
wages or as a severance benefit, Executive shall not, without
prior written consent of the Chief Executive Officer, directly or indirectly
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be employed by or provide advice to, any enterprise
that is engaged in any business directly competitive to that of the Company in
the aftermarket auto parts market in the United States; provided, however, that
such restriction shall not apply to any passive investment representing an
interest of less than 1% of an outstanding class of publicly-traded securities
of any company or other enterprise where Executive does not provide any
management, consulting or other services to such company or
enterprise.
9. Proprietary
Information. Executive has
executed or is concurrently executing the Company’s standard Confidential
Information and Assignment of Inventions Agreement (the “Confidentiality
Agreement”), which is hereby incorporated by this reference as if set
forth fully herein. Executive’s obligations pursuant to the
Confidentiality Agreement will survive termination of Executive’s employment
with the Company. Executive agrees that he will not use or disclose
to the Company any confidential or proprietary information from any of his prior
employers.
10. Successors
and Assigns. This Agreement is
personal in its nature and the Executive shall not assign or transfer his rights
under this Agreement. The provisions of this Agreement shall inure to
the benefit of, and shall be binding on, each successor of the Company whether
by merger, consolidation, transfer of all or substantially all assets, or
otherwise, and the heirs and legal representatives of Executive.
11. Notices. Any
notices, demands or other communications required or desired to be given by any
party shall be in writing and shall be validly given to another party if served
either personally or via overnight delivery service such as Federal Express,
postage prepaid, return receipt requested. If such notice, demand or
other communication shall be served personally, service shall be conclusively
deemed made at the time of such personal service. If such notice,
demand or other communication is given by overnight delivery, such notice shall
be conclusively deemed given two business days after the deposit thereof
addressed to the party to whom such notice, demand or other communication is to
be given as hereinafter set forth:
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To
the Company:
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00000
Xxxxx Xxxxxx Xxxxxx
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Xxxxxx,
Xxxxxxxxxx 00000
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Attn: Chief
Executive Officer
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To
Executive:
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At
Executive’s last residence as provided
by
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Executive
to the Company for payroll records.
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Any party
may change such party’s address for the purpose of receiving notices, demands
and other communications by providing written notice to the other party in the
manner described in this Section 11.
12. Governing
Documents. This Agreement,
along with the documents expressly referenced in this Agreement, constitute the
entire agreement and understanding of the Company and Executive with respect to
the terms and conditions of Executive’s employment with the Company and the
payment of severance benefits, and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Company relating to such subject matter. This Agreement may only be
amended by written instrument signed by Executive and an authorized officer of
the Company. Any and all prior agreements, understandings or
representations relating to the Executive’s employment with the Company are
terminated and cancelled in their entirety and are of no further force or
effect.
13. Governing
Law. The provisions of
this letter agreement will be construed and interpreted under the laws of the
State of California. If any provision of this Agreement as applied to
any party or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision shall in no way affect (to the maximum extent permissible by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this
Agreement, or the enforceability or invalidity of this Agreement as a
whole. Should any provision of this Agreement become or be deemed
invalid, illegal or unenforceable in any jurisdiction by reason of the scope,
extent or duration of its coverage, then such provision shall be deemed amended
to the extent necessary to conform to applicable law so as to be valid and
enforceable or, if such provision cannot be so amended without materially
altering the intention of the parties, then such provision will be stricken and
the remainder of this Agreement shall continue in full force and
effect.
14. Remedies. All rights and
remedies provided pursuant to this Agreement or by law shall be cumulative, and
no such right or remedy shall be exclusive of any other. A party may
pursue any one or more rights or remedies hereunder, or may seek damages or
specific performance in the event of another party’s breach hereunder, or may
pursue any other remedy by law or equity, whether or not stated in this
Agreement.
15. No
Waiver. The waiver by
either party of a breach of any provision of this Agreement shall not operate
as, or be construed as, a waiver of any later breach of that
provision.
16. Counterparts. This Agreement
may be executed in more than one counterpart, each of which shall be deemed an
original, but all of which together shall constitute but one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
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By:
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/s/
XXXXX XXXXXXXXXX
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Name:
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Xxxxx
Xxxxxxxxxx
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Title:
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Chief
Executive Officer
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| Address: | 00000 Xxxxx Xxxxxx Xxxxxx Xxxxxx, XX 00000 | |
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By:
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/s/
XXX XXXXXXX
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Name:
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Xxxxxxxx
X. Xxxxxxx, Xx.
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| Title: | Chief Executive Officer | |
