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Exhibit 99.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “
Agreement ”) is made effective
October 12, 2007 (the “ Effective
Date ”) by and among between U.S. Auto Parts
Network, Inc., a Delaware corporation (the “
Company ”), and Shane Evangelist,
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 Executive Officer,
reporting directly to the Company’s Board of
Directors. Executive shall have the duties and
powers at the Company that are customary for an individual
holding such positions.
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 $350,000 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 $250,000, 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 $20,834 (1/12 th 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 60% of the
Executive’s current salary, which for the first
calendar year shall be an amount up to $210,000 per year, 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, and
Executive meeting the annual goals determined by the
Compensation Committee. 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 of
the date the Executive’s employment with the
Company is announced, the Company’s Compensation
Committee shall grant you two non-statutory stock
options. The first stock option shall be an option
to purchase up to 750,000 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 250,000 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 $14 per share, 125,000 of
the shares shall vest as of the last day of such
period. The balance of the shares shall vest on the
last day of any consecutive three months when and if the
average of the Monthly Average Price of the Company’s
common stock during such three month period has reached $18
per share. 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 $12.00 in January, $13.50 in February and $17.00 in March,
then the first installment or 125,000 of the shares subject to
this option shall vest on March 31 [(($12*20) + ($13.50*20) +
($17.00*20))/60 = $14.16]. In addition, if the
average of the Monthly Average Price of the Company’s
common stock exceeds one or both of 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 $14.00 and $16.00, 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.
Both of 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. Only the first
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 “
Dependen
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