UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-38296

 

PARTS iD, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware   81-3674868
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification Number)

 

1 Corporate Drive, Suite C
Cranbury, New Jersey 08512
(Address of Principal Executive Offices, Zip Code)

 

Registrant’s telephone number, including area code: (609) 642-4700

 

Securities registered under Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which
registered
Class A Common Stock, par value $0.0001 per share   ID   NYSE American

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 33,173,456 shares of Class A common stock, $0.001 par value per share, outstanding on August 3, 2021.

 

 

 

 

 

TABLE OF CONTENTS

 

   

Page

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS   ii
     
PART I  
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)   1
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   20
ITEM 4. CONTROLS AND PROCEDURES   20
     
PART II   21
ITEM 1. LEGAL PROCEEDINGS   21
ITEM 1A. RISK FACTORS   21
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   21
ITEM 6. EXHIBITS   22
     
SIGNATURES   23

  

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

All statements in this report that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “project,” “forecast,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “seeks,” “scheduled,” or “will,” and similar expressions are intended to identify forward-looking statements. These statements relate to future periods, future events or our future operating or financial plans or performance, are made on the basis of management’s current views and assumptions with respect to future events, including management’s current views regarding the likely impacts of the COVID-19 pandemic. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us, particularly those associated with the COVID-19 pandemic, which has had wide-ranging and continually evolving effects. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

 

  costs related to operating as a public company;
     
  difficulties in managing our international business operations, particularly in the Ukraine, including with respect to enforcing the terms of our agreements with our contractors and managing increasing costs of operations;
     
  the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;
     
  changes in our strategy, future operations, financial position, estimated revenue and losses, product pricing, projected costs, prospects and plans;
     
  the outcome of actual or potential litigation, complaints, product liability claims, or regulatory proceedings, and the potential adverse publicity related thereto;
     
  the implementation, market acceptance and success of our business model, expansion plans, opportunities and initiatives, including the market acceptance of our planned products and services;
     
  competition and our ability to counter competition, including changes to the algorithms of Google and other search engines;
     
  developments and projections relating to our competitors and industry;
     
  our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;
     
  ability to maintain and enforce intellectual property rights and ability to maintain technology leadership;
     
  our future capital requirements, our ability to raise capital and utilize sources of cash;
     
  our ability to obtain funding for our operations;
     
  changes in applicable laws or regulations;
     
  the effects of current and future U.S. and foreign trade policy and tariff actions;
     
  disruptions in the marketplace for online purchases of aftermarket auto parts;
     
  disruptions in the supply chain; and
     
  the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

 

See also the section titled “Risk Factors” (refer to Part II, Item 1A of this report and Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020), and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission (the “SEC”), for further discussion of certain risks and uncertainties that could cause actual results and events to differ materially from our forward-looking statements. Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This cautionary note is applicable to all forward-looking statements contained in this report.

 

ii

 

 

PART I

 

Item 1. Financial Statements

 

Index to Condensed Consolidated Financial Statements

 

  Page
   
Condensed Unaudited Consolidated Financial Statements
   
Condensed Consolidated Balance Sheets 2
   
Condensed Consolidated Statements of Operations 3
   
Condensed Consolidated Statements of Changes in Shareholders’ Deficit 4
   
Condensed Consolidated Statements of Cash Flows 5
   
Notes to Condensed Consolidated Financial Statements 6

 

1

 

 

PARTS iD, INC.

Condensed Consolidated Balance Sheets

As of June 30, 2021 and December 31, 2020

 

 

    June 30,
2021 (Unaudited)
    December 31,
2020
 
ASSETS            
Current assets            
Cash   $ 27,347,919     $ 22,202,706  
Accounts receivable     2,737,658       2,236,127  
Inventory     6,296,871       4,856,265  
Prepaid expenses and other current assets     4,558,380       5,811,332  
Total current assets     40,940,828       35,106,430  
                 
Property and equipment, net     12,189,425       11,470,360  
Intangible assets     237,752       237,752  
Deferred tax assets     1,099,800       1,099,800  
Other assets     267,707       267,707  
Total assets   $ 54,735,512     $ 48,182,049  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current liabilities                
Accounts payable   $ 35,599,711     $ 35,631,913  
Customer deposits     19,536,703       16,185,648  
Accrued expenses     6,493,160       5,468,570  
Other current liabilities     4,093,366       3,592,782  
Notes payable, current portion     9,233       19,706  
Total liabilities     65,732,173       60,898,619  
                 
COMMITMENTS AND CONTINGENCIES (Note 6)    
 
     
 
 
                 
SHAREHOLDERS’ DEFICIT                
Preferred stock, $0.0001 par value per share; 1,000,000 shares authorized and 0 issued and outstanding    
-
     
-
 
Common stock, $0.0001 par value per share;                
10,000,000 Class F shares authorized and 0 issued and outstanding
   
-
     
-
 
100,000,000 Class A shares authorized, and 33,173,456  and 32,873,457 issued and outstanding, as of June 30, 2021 and December 31, 2020, respectively
    3,317       3,287  
Additional paid in capital     1,738,580       -  
Accumulated deficit     (12,738,558 )     (12,719,857 )
Total shareholders’ deficit     (10,996,661 )     (12,716,570 )
                 
Total Liabilities and Shareholder’s Deficit   $ 54,735,512     $ 48,182,049  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2

 

 

PARTS iD, INC.

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2021 and 2020

 

 

    Three months ended
June 30,
    Six months ended
June 30,
 
    2021 (Unaudited)     2020 (Unaudited)     2021 (Unaudited)     2020 (Unaudited)  
                         
Net revenue   $ 130,409,332     $ 113,853,524     $ 239,482,960     $ 184,579,489  
Cost of goods sold     104,270,051       89,655,601       190,510,070       145,212,766  
                                 
Gross profit     26,139,281       24,197,923       48,972,890       39,366,723  
                                 
Operating expenses:                                
Advertising     10,907,319       9,296,637       21,406,705       15,390,787  
Selling, general and administrative     12,603,017       10,076,998       23,961,724       18,748,252  
Depreciation     1,819,581       1,783,415       3,593,354       3,308,098  
Total operating expenses     25,329,917       21,157,050       48,961,783       37,447,137  
Income from operations     809,364       3,040,873       11,107       1,919,586  
                                 
Interest expense     395       1,038       6,885       6,821  
Income before income taxes     808,969       3,039,835       4,222       1,912,765  
Income tax expense     182,857       766,120       22,923       483,620  
Net income (loss)   $ 626,112     $ 2,273,715     $ (18,701 )   $ 1,429,145  
                                 
Net income (loss)   $ 626,112     $ 2,273,715     $ (18,701 )   $ 1,429,145  
Less: Preferred stocks dividends     -       125,000       -       250,000  
Income (Loss) available to common shareholders   $ 626,112     $ 2,148,715     $ (18,701 )   $ 1,179,145  
Income (Loss) per common share                                
Basic income (loss) per share   $ 0.02     $ 0.09     $ (0.00 )   $ 0.05  
Weighted average number of shares (basic)     33,173,456       24,950,958       33,173,456       24,950,958  
Diluted income (loss) per share   $ 0.02     $ 0.09     $ (0.00 )   $ 0.05  
Weighted average number of shares (diluted)     33,130,599       24,950,958       33,002,738       24,950,958  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

PARTS iD, INC.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit

For the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

    Class A
Common Stock
    Class F
Common Stock
    Preferred Stock     Additional Paid In     Accumulated Deficit     Total Shareholders’  
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Amount     Deficit  
                                                       
Balance at January 1, 2020     24,950,958     $ 2,495      
-
    $
-
     
-
    $
-
    $ 4,998,505     $ (14,008,170 )   $ (9,007,170 )
Preferred stock dividend     -      
-
      -      
-
      -      
-
     
-
      (125,000 )     (125,000 )
Net loss     -      
-
      -      
-
      -      
-
     
-
      (844,570 )     (844,570 )
Balance at March 31, 2020     24,950,958     $ 2,495      
-
    $
-
     
-
    $
-
    $ 4,998,505     $ (14,977,740 )   $ (9,976,740 )
Preferred stock dividend     -      
-
      -      
-
      -      
-
     
-
      (125,000 )     (125,000 )
Net income     -      
-
      -      
-
      -      
-
     
-
      2,273,715       2,273,715  
Balance at June 30, 2020     24,950,958     $ 2,495      
-
    $
-
     
-
    $
-
    $ 4,998,505     $ (12,829,025 )   $ (7,828,025 )
                                                                         
                                                                         
Balance at January 1, 2021     32,873,457     $ 3,287      
-
    $
-
     
-
    $
-
    $
-
    $ (12,719,857 )   $ (12,716,570 )
Share based compensation     -      
-
      -      
-
      -      
-
      28,824       -       28,824  
Net loss     -      
-
      -      
-
      -      
-
     
-
      (644,813 )     (644,813 )
Balance at March 31, 2021     32,873,457     $ 3,287      
-
    $
-
     
-
    $
-
    $ 28,824     $ (13,364,670 )   $ (13,332,559 )
Issue of shares on release of working capital reserve     299,999       30      
-
     
-
     
-
     
-
      (30 )    
-
     
-
 
Share based compensation     -      
-
      -      
-
      -      
-
      1,709,786       -       1,709,786  
Net income     -      
-
      -      
-
      -      
-
     
-
      626,112       626,112  
Balance at June 30, 2021     33,173,456     $ 3,317      
-
    $
-
     
-
    $
-
    $ 1,738,580     $ (12,738,558 )   $ (10,996,661 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

  

4

 

 

PARTS iD, INC.

Condensed Consolidated Statements of Cash Flows

For the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

    Six months ended
June 30,
 
    2021 (Unaudited)     2020 (Unaudited)  
             
Cash Flows from Operating Activities:            
Net (loss) income   $ (18,701 )   $ 1,429,145  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:                
Depreciation     3,593,354       3,308,098  
Deferred income tax     -       451,098  
Share based compensation     1,321,428       -  
Changes in operating assets and liabilities:                
Accounts receivable     (501,531 )     (953,484 )
Inventory     (1,440,606 )     (1,969,866 )
Prepaid expenses and other current assets     1,252,952       366,582  
Accounts payable     (32,202 )     19,455,978  
Customer deposits     3,351,055       12,217,133  
Accrued expenses     1,024,590       246,925  
Other current liabilities     500,584       1,239,846  
Net cash provided by operating activities     9,050,923       35,791,455  
                 
Cash Flows from Investing Activities:                
Purchase of property and equipment     (283,786 )     (9,344 )
Website and software development costs     (3,611,451 )     (3,443,447 )
Net cash used in investing activities     (3,895,237 )     (3,452,791 )
                 
Cash Flows from Financing Activities:                
Principal paid on notes payable     (10,473 )     (11,043 )
Payments of preferred stock dividends     -       (250,000 )
Net cash used in financing activities     (10,473 )     (261,043 )
                 
Net change in cash     5,145,213       32,077,621  
Cash, beginning of period     22,202,706       13,618,835  
Cash, end of period   $ 27,347,919     $ 45,696,456  
                 
Supplemental disclosure of cash flows information:                
Cash paid for interest   $ 6,885     $ 35,225  
Cash paid for income taxes   $ 4,000     $ -  

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

5

 

 

PARTS iD, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1 – Organization and Description of Business

 

Description of Business

 

PARTS iD, Inc., a Delaware corporation (the “Company,” “PARTS iD,” “we” or “us”), is a technology-driven, digital commerce company focused on creating custom infrastructure and unique user experiences within niche markets. PARTS iD has a product portfolio comprising more than 17 million SKUs, an end-to-end digital commerce platform for both digital commerce and fulfillment, and a virtual shipping network comprising over 2,500 locations, nearly 5,000 active brands, and machine-learning algorithms for complex fitment industries such as vehicle parts and accessories. Management believes that the Company is a market leader and proven brand-builder, fueled by its commitment to delivering an engaging shopping experience; comprehensive, accurate and varied product offerings; and continued digital commerce innovation.

 

Merger between Legacy Acquisition Corp. and Onyx Enterprises Int’l, Corp.

 

On November 20, 2020, Legacy Acquisition Corp., a special purpose acquisition company and publicly traded “shell company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) (“Legacy”), and Onyx Enterprises Int’l, Corp., a New Jersey corporation (“Onyx”), consummated a business combination (the “Business Combination”) pursuant to that Business Combination Agreement, dated as of September 18, 2020 (the “Business Combination Agreement”), by and among Legacy, Excel Merger Sub I, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Legacy and directly owned subsidiary of Merger Sub 2 as defined below (“Merger Sub 1”), Excel Merger Sub II, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Legacy (“Merger Sub 2”), Onyx, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the stockholder representative, pursuant to which: (a) Merger Sub 1 merged with and into Onyx, with Onyx surviving as a direct wholly-owned subsidiary of Merger Sub 2, (b) Onyx merged with and into Merger Sub 2, with Merger Sub 2 surviving as direct wholly-owned subsidiary of Legacy, and (c) Legacy changed its name from Legacy Acquisition Corp. to PARTS iD, Inc. and Merger Sub 2 changed its name to PARTS iD, LLC.

 

At the effective time of the Business Combination, Legacy issued 24,950,958 shares of Class A common stock to Onyx shareholders and all outstanding shares of Legacy Class F common stock and warrants for Legacy Class A common stock were settled through a combination of cash, redemptions, cancellation and conversions into Class A common stock of the Company. In addition, all outstanding Onyx preferred shares were redeemed and settled through a combination of cash and issuance of Class A common stock of the Company.

 

The Business Combination was treated as a recapitalization and reverse acquisition for financial reporting purposes. Onyx is considered the acquirer for accounting purposes, and Legacy’s historical financial statements before the Business Combination have been replaced with the historical financial statements of Onyx in this and future filings with the SEC. Accordingly, the operations of the Company are primarily comprised of the historical operations of Onyx and the financial position and result of operations of Legacy have been incorporated into the Company’s consolidated financial statements beginning on November 20, 2020, the effective date of the Business Combination. Similarly, the outstanding number of common shares of Onyx, its par value and Additional paid in capital (APIC) as of December 31, 2019 were adjusted to reflect the exchange of shares and its par value of the legal acquirer, Legacy.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

 

6

 

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented.  The December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.  Results for interim periods should not be considered indicative of results for any other interim period or for the full year.

 

The consolidated financial statements include the accounts of PARTS iD, Inc. and its wholly-owned subsidiary PARTS iD, LLC. All intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements include revenue recognition, return allowances, allowance for doubtful accounts, depreciation, inventory valuation, valuation of deferred income tax assets and the capitalization and recoverability of software development costs.

 

Stock Compensation Policy

 

Compensation expense related to stock option awards and restricted stock units granted to certain employees, directors and consultants is based on the fair value of the awards on the grant date. If the service inception date precedes the grant date, accrual of compensation cost for periods before the grant date is based on the fair value of the award at the reporting date. In the period in which the grant date occurs, cumulative compensation cost is adjusted to reflect the cumulative effect of measuring compensation cost based on fair value at the grant date rather than the fair value previously used at the service inception date or any subsequent reporting date. Forfeitures are recorded as they occur. The Company recognizes compensation cost related to time-vested options and restricted stock units with graded vesting features on a straight-line basis over the requisite service period. Compensation cost related to a performance-vesting options and performance-based units, where a performance condition or a market condition that affects vesting exists, is recognized over the shortest of the explicit, implicit, or defined service periods. Compensation cost is adjusted depending on whether or not the performance condition is achieved. If the achievement of the performance condition is probable or becomes probable, the full fair value of the award is recognized. If the achievement of the performance condition is not probable or ceases to be probable, then no compensation cost is recognized.

 

Significant Accounting Policies

 

There have been no significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Form 10-K”).

 

7

 

 

Note 3 – Property and equipment

 

Property and equipment consisted of the following as of:

 

    June 30,
2021
    December 31,
2020
 
Website and software development   $ 37,922,840     $ 33,894,207  
Furniture and fixtures     850,511       843,575  
Computers and electronics     956,101       696,684  
Vehicles     430,162       430,162  
Leasehold improvements     237,190       219,757  
Video and equipment     176,903       176,903  
Total - Gross     40,573,707       36,261,288  
Less: accumulated depreciation     (28,384,282 )     (24,790,928 )
Total - Net   $ 12,189,425     $ 11,470,360  

 

Property and equipment included the following amounts for assets recorded under capital leases.

 

    June 30,
2021
    December 31,
2020
 
Gross value at cost   $ 303,230     $ 303,230  
Less: accumulated depreciation     (280,790 )     (269,382 )
Net   $ 22,440     $ 33,848  

 

Depreciation of property and equipment for the three months ended June 30, 2021 and 2020 amounted to $1,819,581 and $1,783,415, respectively and for the six months ended June 30, 2021 and 2020 amounted to $3,593,354 and $3,308,098, respectively.

 

Note 4 – Borrowings

 

Equipment Leases

 

As of June 30, 2021 and December 31, 2020, the Company’s borrowings consisted of equipment leases at an interest rate of 12.35% per annum. The principal and interest payments extend through November 30, 2021.

 

Future minimum lease payments under non-cancelable capital leases during the year ended June 30, are as follows:

 

2022   $ 9,520  
Less: Interest expenses     287  
Total   $ 9,233  

 

8

 

 

Note 5 – Shareholders’ Deficit

 

Preferred Stock

 

As of June 30, 2021, the Company had authorized for issuance a total of 1,000,000 shares of preferred stock, par value of $0.0001 per share (“Preferred Stock”), and as of that date, no shares of Preferred Stock were issued or outstanding.

 

Common Stock

 

Upon finalizing the calculation of the aggregate purchase price with respect to the Business Combination in April 2021, the Company released 299,999 shares of Class A common stock and $10 in cash in lieu of fractional shares to former Onyx shareholders pursuant to the Business Combination Agreement.

 

As of June 30, 2021, the Company had 33,173,456 shares of Class A common stock outstanding and had reserved 7,698,178 shares of Class A common stock for issuance as follows:

 

a) Indemnification reserve: Upon the expiration of the indemnification period of two years from the closing of the Business Combination as described in the Business Combination Agreement, subject to the payments of indemnity claims, if any, the Company will issue up to 750,000 shares of Class A common stock to former Onyx shareholders.

 

b) Equity Plans reserve: 4,904,596 shares of Class A common stock reserved for future issuance under the PARTS iD, Inc. 2020 Equity Incentive Plan, of which 2,968,881 shares of Class A Common Stock were subject to outstanding awards, and 2,043,582 shares of Class A common stock reserved for future issuance under the PARTS iD, Inc. 2020 Employee Stock Purchase Plan.

 

Further, pursuant to the Business Combination Agreement, the Sponsor has a right to 1,502,129 shares of Class A common stock should its price exceed $15.00 per share for any thirty-day trading period during the 730 calendar days after the closing of the Business Combination.

 

Note 6 – Commitments and Contingencies

 

As of June 30, 2021, there were no material changes to the Company’s legal matters and other contingencies disclosed in our 2020 Form 10-K, except for the following.

 

Seoul Semiconductor Co. LTD et. al. v. Onyx Enterprises Int’l Corp

 

On May 15, 2020, the Company was sued for patent infringement by Seoul Semiconductor Company (“Seoul Semiconductors”), a designer of LED component packages and the manufacturing processes necessary to produce LED packages. The Civil Action is captioned as Seoul Semiconductor Co., LTD. and Seoul Viosys Co., LTD v. Onyx Enterprises Int’l Corp, Civil Action Number 2:20-cv-05955 and was heard in the United States District Court for the District of New Jersey. The Company did not have knowledge of these patents, nor does it manufacturer LEDs. Rather, the Company sources lighting products for sale on its platforms through third party manufacturers. Seoul Semiconductors sought a royalty for past sales and an agreement to source future LED components from one of its approved component manufacturers. On April 29, 2021, the Company and Seoul Semiconductors entered into a Settlement and Patent License Agreement, pursuant to which the Company paid a cash settlement to Seoul Semiconductors, and which contained a mutual release of certain claims each party may have had against the other as well as certain licensing terms. The final disposition of this matter did not have a material adverse effect on the Company’s balance sheets or results of operations.

 

9

 

 

Stockholder Litigation and Business Combination Litigation

 

With respect to the Stockholder Litigation (as defined and described in Note 6 of the “Notes to Consolidated Financial Statements” included in our 2020 Form 10-K, on March 4, 2021, the Founder Stockholders (as defined in such Note 6) filed a motion to preserve various causes of action related to the Business Combination and the claims for indemnification. That motion was denied without prejudice on June 22, 2021. On June 18, 2021, the Founder Stockholders filed a “Supplemental Complaint” in the Stockholder Litigation related to the indemnification claims. The clerk of the court dismissed their Supplemental Complaint because the court did not grant leave to file a supplemental complaint. The Founder Stockholders filed a motion objecting to the order denying their motion to preserve claims for future litigation and have asked the Special Master to opine on the Supplemental Complaint and to preserve those claims. 

 

Note 7 — Stock-Based Compensation

 

During the three and six months ended June 30, 2021, selling, general and administrative expenses included $1,292,604 and $1,321,428 of stock-based compensation expense, respectively.

 

During the three and six months ended June 30, 2021, the Company capitalized $417,182 of stock-based compensation expense, associated with awards issued to consultants who are directly associated with and who devote time to our internal-use software.

 

Equity Incentive Plan

 

In October 2020, in connection with the Business Combination, the Company’s stockholders approved the PARTS iD, Inc. 2020 Equity Incentive Plan (the “2020 EIP”).  There are 4,904,596 shares of Class A common stock available for issuance under the 2020 EIP. The 2020 EIP became effective immediately upon the closing of the Business Combination.

 

The 2020 EIP provides for the grant of stock options, including incentive stock options, non-qualified stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, performance shares, other incentive awards, stock appreciation rights, and cash awards (collectively “awards”). The awards may be granted to employees and consultants of the Company’s affiliates and subsidiaries.

 

Beginning in January 2021, the Company has granted both restricted stock units (“RSUs”) and restricted performance-based stock units (“PSUs”) as described below.

 

Restricted Stock Units

 

The following table summarizes the activity related to RSUs during the six months ended June 30, 2021:

 

          Weighted  
    Restricted     Average  
    Stock     Grant Date  
    Units     Fair Value  
Balance at January 1, 2021    
-
    $
-
 
Granted     2,346,381     $ 6.54  
Balance at June 30, 2021     2,346,381     $ 6.54  

 

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The Company has granted RSUs that vest over a specified period, generally up to three years from the date of grant. Of the 2,346,381 RSUs granted during the six months ended June 30, 2021, 106,806 RSUs were granted to directors, of which 49,994 will vest on November 20, 2021 and the balance of 56,812 will vest on the earlier of June 8, 2022 or the date of the 2022 annual meeting of stockholders. The remaining 2,239,575 RSUs granted during the six months ended June 30, 2021 were to various employees and consultants and will vest in equal installments on November 20, 2021, 2022 and 2023. The Company recognized $1,438,344 and $1,467,168 of stock-based compensation expense associated with RSUs for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, approximately $13.9 million of unamortized stock-based compensation expense was associated with outstanding RSUs, which is expected to be recognized over a remaining weighted average period of 2.3 years.

 

Performance Based Restricted Stock Units

 

The following table summarizes the activity related to PSUs during the six months ended June 30, 2021:

 

PSU Type   Balance of PSUs at January 01, 2021     Units
Granted
    Weighted Average grant date fair value     Balance of PSUs at June 30,
2021
 
PSUs subject to Net Revenue    
-
      498,000     $ 8.02       498,000  
PSUs subject to Cash Flow    
-
      124,500     $ 6.04       124,500  
Total    
-
      622,500               622,500  

 

During the six months ended June 30, 2021, the Company granted 622,500 PSUs to several employees and consultants that contain both service and performance-based vesting conditions. The PSUs will vest in March 2024 based upon the level of achievement of several Company-specific operational performance milestones for the three years ended December 31, 2023, as determined by the Compensation Committee of the Company.

 

Of the 622,500 PSUs granted, 80%, or 498,000 PSUs, include net revenue performance-based vesting conditions that were established at the grant date. The remaining 20%, or 124,500 PSUs, granted are subject to cash flow performance-based vesting conditions, of which certain thresholds had not been established as of June 30, 2021. As a result, the service inception date of these remaining PSUs precedes the grant date associated with these PSUs and the recognition of compensation expense is based upon the fair value of these PSUs at June 30, 2021. See “Stock Compensation Policy” in Note 2 for more information.

 

During the three and six months ended June 30, 2021, the Company recognized stock-based compensation expense associated with PSUs of $271,442 and $271,442, respectively. As of June 30, 2021, approximately $4.5 million of unamortized stock-based compensation expense was associated with outstanding PSUs, which is expected to be recognized over a weighted average period of 2.5 years.

 

Note 8 – Income Taxes

 

For the three months ended June 30, 2021 and 2020, the effective income tax rates were 22.60% and 25.20%, respectively; and for the six months ended June 30, 2021 and 2020, the effective income tax rates were 542.94% and 25.28%, respectively.

 

The effective income tax rates differ from the federal statutory rate of 21% primarily due to the effect of state income taxes, share-based compensation and expenses not deductible for income tax purposes.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the United Sates. The CARES Act contains several tax provisions, including modifications to the NOL and business interest limitations as well as a technical correction to the recovery period for qualified improvement property. The Company has evaluated these provisions in the CARES Act and does not expect a material impact to its tax provision, except for the 80% of taxable income limitation in the future on the utilization of the Company’s NOLs.

 

The Company does not currently anticipate any significant increase or decrease of the total amount of unrecognized tax benefits within the next twelve months.

 

None of the Company’s U.S. federal or state income tax returns are currently under examination by the Internal Revenue Service (the “IRS”) or state authorities. However, fiscal years 2017 and later remain subject to examination by the IRS and respective states.

11

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following management’s discussion and analysis of financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements, together with the related notes thereto, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Form 10-K”).

 

For the purposes of this section, “we,” “us,” “our,” “Onyx,” the “Company” and “PARTS iD” each refer to Onyx prior to the closing of the Business Combination and PARTS iD, Inc. following the closing of the Business Combination, as the context indicates, unless the context otherwise refers to Legacy Acquisition Corp.

 

Overview

 

PARTS iD, Inc. is a technology-driven, digital commerce company focused on creating custom infrastructure and unique user experiences within niche markets. PARTS iD was originally founded in 2008 as Onyx Enterprises, Int’l, Corp. Our vision is to develop a leading technology platform purpose-built for purchasing complex parts and accessories for all vehicle types with a complete repository of fitment data, and to deliver an unrivaled parts and accessories shopping experience of extraordinary choice, competitive prices, and fast delivery.

 

The success of CARiD.com has inspired pursuit of our long-term strategy to scale into similar markets via our proprietary built, modular digital commerce technology platform. While our core focus continues to be automotive, in August 2018, we launched seven new verticals (including BOATiD.com, MOTORCYCLEiD.com, CAMPERiD.com and more) which demonstrates fungibility of our technology platform. These verticals address similar market challenges and focus on the enthusiasts’ needs through our seamless shopping experience using proprietary tools and techniques.

 

Although the ongoing COVID-19 pandemic has caused an economic downturn on a global scale, disrupted global supply chains, and created significant uncertainty, volatility, and disruption across economies, it has also led to an increased adoption of online shopping by consumers, which has had a positive effect on the Company’s revenue. Despite increases in order cancellations and delivery times, the Company has largely been successful in managing its supply chain to date.

 

We have made significant investments to provide an enhanced experience to our diverse base of “do-it-yourself” (“DIY”), “do-it-for-me” (“DIFM”) and PRO (mechanics) customers. As of June 30, 2021, we had over 1,000 active product vendors with their many shipping locations across the nation. This distributed, inventory-light fulfillment model allowed us to offer customers over 17 million SKUs on the platform as of June 30, 2021. Furthermore, our proprietary fulfillment algorithm determines and selects the most optimal fulfillment location based on inventory availability and proximity to the customer, thereby providing faster delivery speed and decreasing the total cost to the customer. We continue to focus on improving our product offerings in the catalog, specifically for new verticals, original equipment (“OE”) and repair parts business.

 

Despite a decrease in traffic in the three and six months ended June 30, 2021 as compared to the same prior year periods, we experienced better conversions and higher average order values, which contributed to an increase of 5.6% and 28.8% in the total value of orders received in the three and six months ended June 30, 2021, respectively, over the same prior year periods. By category of accessories and parts, the primary drivers of the increases in the total value of orders received were increases in Wheels and Tires by 20.3% and 47.4%, and in Repair parts by 17.3% and 28.9%, in the three and six months ended June 30, 2021, respectively.

 

We have also been focused on increasing our presence in the DIFM segment of the automotive aftermarket industry, including growing related partnerships, and we chose to invest in a tire installation network as our first step. Using our purpose-built data architecture and differentiated technology, consumers can visit CARiD.com, research and choose from a wide variety of tires, and in the same transaction select a tire installation center near them and schedule an appointment. Through partnerships with tire installation businesses, we had 2,117 active tire installation locations nationwide as of June 30, 2021. We recently made a technical enhancement in the process of adding new locations, and management now expects steady growth in the number of installation locations in the near future. The tire installation network initiative is one of many programs we are working on to advance CARiD.com’s position as a one-stop shop and seamless solution for all car enthusiast needs. 

 

12

 

 

Management continues to focus on several other efforts to drive growth, including product cultivation, vendor optimization, distribution network expansion and marketing diversification.

 

Effects of the COVID-19 Pandemic

 

The global spread of COVID-19 and related measures to contain its spread (such as government-mandated business closures and shelter-in-place guidelines) have created significant volatility, uncertainty and economic disruption. Recently, the extent and severity of the pandemic and such containment measures have abated somewhat due to the general public’s utilization of COVID-19 vaccines. However, public concern over COVID-19 remains, and related containment measures may increase in the future, especially due to the recent spread of COVID-19 variants.

 

Although the COVID-19 pandemic and related measures to contain its spread have not adversely affected the Company’s results of operations to date, they have adversely affected certain components of the Company’s business, including by increasing cancellations (which can result in an increase in advertisement costs), shipping times and costs and inefficiencies in sourcing products. In future periods, the pandemic might cause shipping difficulties, including slowed deliveries to customers; the potential for increased cancellations by customers; and the ability of consumers to pay for products. Although consumer demand for and the inventory of the Company’s products have remained stable, in future periods the COVID-19 pandemic could have an adverse impact on the Company through reduced consumer demand for or inventory of its products. If there is a prolonged impact of COVID-19, it could adversely affect the Company’s business, results of operations, financial condition and liquidity, perhaps materially. The future impact of COVID-19 and these containment measures cannot be predicted with certainty and may increase the Company’s borrowing costs, if any, and other costs of capital and otherwise adversely affect its business, results of operations, financial condition and liquidity, and the Company cannot assure that it will have access to external financing at times and on terms it considers acceptable, or at all, or that it will not experience other liquidity issues going forward. For more information on the risks the COVID-19 pandemic poses to the business, see Item 1A. “Risk Factors” in our 2020 Form 10-K.

 

Key Financial and Operating Metrics

 

We measure our business using financial and operating metrics, as well as non-GAAP financial measures. See “Results of Operations – Non-GAAP Financial Measures” below for more information on non-GAAP financial measures. We monitor several key business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions, including the following:

 

Traffic and Engagement Metrics

 

For the three months ended June 30,

 

    2021     2020     Change     % Change  
Number of Users     31,984,337       39,014,126       (7,029,789 )     (18.02 )%
Number of Sessions     59,523,329       76,376,487       (16,853,158 )     (22.07 )%
Bounce Rate     13.45 %     14.57 %     (1.12 )%     (7.70 )%
Number of Pageviews     255,491,738       323,963,567       (68,471,829 )     (21.14 )%
Pages/Session     4.29       4.24       0.05       1.19 %
Average Session Duration     0:03:25       0:03:31       (0:00:06)       (2.84 )%

 

For the six months ended June 30,

 

    2021     2020     Change     % Change  
Number of Users     64,637,688       69,834,009       (5,196,321 )     (7.44 )%
Number of Sessions     124,272,640       136,942,111       (12,669,471 )     (9.25 )%
Bounce Rate     13.73 %     14.77 %     (1.03 )%     (7.01 )%
Number of Pageviews     541,368,091       579,584,869       (38,216,778 )     (6.59 )%
Pages/Session     4.36       4.23       0.13       2.93 %
Average Session Duration     0:03:26       0:03:29       (0:00:03)       (1.44 )%

 

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We use the metrics above to gauge our ability to acquire targeted traffic and keep users engaged. This information informs us of how effective our proprietary technology, data, and content is, and helps us define our strategic roadmap and key initiatives.

 

Results of Operations

 

    Three months ended June 30,     Change  
    2021     % of Rev.     2020     % of Rev.     Amount     %  
Revenue, net   $ 130,409,332             $ 113,853,524             $ 16,555,808       14.5 %
Cost of goods sold     104,270,051       80.0 %     89,655,601       78.7 %     14,614,450       16.3 %
Gross profit     26,139,281       20.0 %     24,197,923       21.3 %     1,941,358       8.0 %
Gross Margin     20.0 %             21.3 %                        
Operating expenses                                                
Advertising     10,907,319       8.4 %     9,296,637       8.2 %     1,610,682       17.3 %
Selling, general & administrative     12,603,017       9.7 %     10,076,998       8.9 %     2,526,019       25.1 %
Depreciation     1,819,581       1.4 %     1,783,415       1.6 %     36,166       2.0 %
Total operating expenses     25,329,917       19.4 %     21,157,050       18.6 %     4,172,867       19.7 %
Income from operations     809,364       0.6 %     3,040,873       2.7 %     (2,231,509 )     (11.7 )%
Interest expense     395       0.0 %     1,038       0.0 %     (643 )     (61.9 )%
Income before income tax     808,969       0.6 %     3,039,835       2.7 %     (2,230,866 )     (73.4 )%
Income tax expense     182,857       0.1 %     766,120       0.7 %     (583,263 )     (76.1 )%
Net income   $ 626,112       0.5 %   $ 2,273,715       2.0 %   $ (1,647,603 )     (72.5 )%

 

    Six months ended June 30,     Change  
    2021     % of Rev.     2020     % of Rev.     Amount     %  
Revenue, net   $ 239,482,960             $ 184,579,489             $ 54,903,471       29.7 %
Cost of goods sold     190,510,070       79.6 %     145,212,766       78.7 %     45,297,304       31.2 %
Gross profit     48,972,890       20.4 %     39,366,723       21.3 %     9,606,167       24.4 %
Gross Margin     20.4 %             21.3 %                        
Operating expenses                                                
Advertising     21,406,705       8.9 %     15,390,787       8.3 %     6,015,918       39.1 %
Selling, general & administrative     23,961,724       10.0 %     18,748,252       10.2 %     5,213,472       27.8 %
Depreciation     3,593,354       1.5 %     3,308,098       1.8 %     285,256       8.6 %
Total operating expenses     48,961,783       20.4 %     37,447,137       20.3 %     11,514,646       30.7 %
Income from operations     11,107       0.0 %     1,919,586       1.0 %     (1,908,479 )     (6.3 )%
Interest expense     6,885       0.0 %     6,821       0.0 %     64       0.9 %
Income before income tax     4,222       0.0 %     1,912,765       1.0 %     (1,908,543 )     (99.8 )%
Income tax expense     22,923       0.0 %     483,620       0.3 %     (460,697 )     (95.3 )%
Net income (loss)   $ (18,701 )     0.0 %   $ 1,429,145       0.8 %   $ (1,447,846 )     (101.3 )%

 

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Revenue

 

Revenue increased $16.6 million, or 14.5%, for the three months ended June 30, 2021 and $54.9 million, or 29.7%, for the six months ended June 30, 2021, compared to the same prior year periods. These increases were primarily attributable to increases in conversion rates by 9.2% and 19.9% for the three and six months ended June 30, 2021, respectively, and in average order values by 20.0% and 16.4% for the three and six months ended June 30, 2021, respectively, partially offset by a decrease in traffic in both periods. The increases in conversion rates were primarily attributable to product growth in new verticals, search engine bidding automation and optimization, and increased e-commerce adoption. The increases in average order values were primarily attributable to increases in average numbers of items per order and changes in the mix of categories of items sold in the relevant periods.

 

Cost of Goods Sold

 

Cost of goods sold is composed of product cost, the associated fulfillment and handling costs charged by vendors, if any, and shipping costs. In the three and six months ended June 30, 2021, cost of goods sold increased by $14.6 million, or 16.3%, and $45.3 million, or 31.2%, respectively, compared to the three and six months ended June 30, 2020. These increases in cost of goods sold were primarily driven by increases in the number of orders or the products sold as well as increases in shipping costs.

 

For the three and six months ended June 30, 2021, cost of goods sold was 80.0% and 79.6% of revenue, respectively, compared to 78.7% of revenue in each of the three and six months ended June 30, 2020. The 1.3% and 0.9% increases in cost of goods sold as a percentage of revenue, respectively, were primarily attributable to increases in shipping costs and pricing and promotional tests in some categories. Management expects that these shipping cost pressures will ease as our supply chain becomes more efficient, which management expects will be the case if the current abatement of the COVID-19 pandemic and related containment measures continue.

 

Gross Profit and Gross Margin

 

Gross profit increased $1.9 million or 8.0%, and $9.6 million or 24.4%, for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020. These increases were primarily attributable to the 14.5% and 29.7% increases in revenue in the three and six months ended June 30, 2021, respectively, partially offset by increased shipping costs and pricing and promotional tests.

 

Gross margin of 20.0% and 20.4% in the three and six months ended June 30, 2021, respectively, was lower than the gross margin of 21.3% in each of the three and six months ended June 30, 2020, primarily attributable to increases in shipping costs and pricing and promotional tests designed to maximize revenue and gross profit.

 

Operating Expenses

 

Advertising expenses increased $1.6 million or 17.3%, and $6.0 million or 39.1%, for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020. These increases in advertising costs were primarily attributable to (i) an increase in cost-per-click, (ii) a change in the mix of advertising channels used, and (iii) testing of new advertising campaigns and content development. Management believes investment in advertisement is one of the key drivers of revenue and its efficiency is measured by management in terms of revenue per advertisement dollar spent.

 

Selling, general and administrative (“SG&A”) expenses increased $2.5 million, or 25.1%, and $5.2 million, or 27.8%, for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020. These increases were primarily attributable to an increase of (i) $1.3 million and $1.3 million, respectively, of non-cash share-based expenses, (ii) $1.1 million and $2.2 million, respectively, of public company operating expenses, and (iii) $0.2 million and $1.3 million, respectively, in merchant services provider processing fees in line with the increase in revenue.

 

Depreciation expenses increased $0.04 million, or 2.0%, and $0.3 million, or 8.6%, respectively, for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020.

 

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Interest Expense

 

Interest expense decreased by $643, or 61.9%, and increased by $64, or 0.9%, for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020.

 

Income Tax Expense

 

Income tax expenses decreased by $0.6 million, or 76.1%, and $0.5 million, or 95.3%, for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020. For the three and six months ended June 30, 2021, the effective income tax rate was 22.6% and 542.94%, respectively, compared to 25.2% and 25.28% for the three and six months ended June 30, 2020, respectively. The changes in rate were primarily attributable to changes in state taxes and expenses not deductible for income tax purposes.

 

Non-GAAP Financial Measures

 

EBITDA and Adjusted EBITDA

 

This report includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP. Management uses non-GAAP financial measures internally to evaluate the performance of the business. Additionally, management believes certain non-GAAP measures provide meaningful incremental information to investors to consider when evaluating the performance of the Company.

 

To this end, we provide EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. EBITDA consists of net income (loss) plus (a) interest expense; (b) income tax provision (or less benefit); and (c) depreciation expense. Adjusted EBITDA consists of EBITDA plus costs, fees, expenses, write offs and other items that do not impact the fundamentals of our operations, as described further below following the reconciliation of these metrics. Management believes these non-GAAP measures provide useful information to investors in their assessment of the performance of our business. The exclusion of certain expenses in calculating EBITDA and Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis as these costs may vary independent of business performance. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

 

EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

  Although depreciation is a non-cash charge, the assets being depreciated may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
     
  EBITDA and Adjusted EBITDA do not reflect changes in our working capital;
     
  EBITDA and Adjusted EBITDA do not reflect income tax payments that may represent a reduction in cash available to us;
     
  EBITDA and Adjusted EBITDA do not reflect depreciation and interest expenses associated with the lease financing obligations; and
     
  Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

 

Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results.

 

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The following table reflects the reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for each of the periods indicated.

 

    Three months ended June 30,     Six months ended June 30,  
    2021     2020     2021     2020  
Adjusted EBITDA                                
Net income (loss)   $ 626,112     $ 2,273,715     $ (18,701 )   $ 1,429,145  
Interest expense     395       1,038       6,885       6,821  
Income tax expense (benefit)     182,857       766,120       22,923       483,620  
Depreciation     1,819,581       1,783,415       3,593,354       3,308,098  
EBITDA     2,628,945       4,824,288       3,604,461       5,227,684  
Stock compensation expenses included in Statement of operations     1,292,604       -       1,321,428       -  
Founder’s compensation(1)     -       570,818       -       782,705  
Legal & settlement expenses (gains) (2)     239,761       (79,495 )     483,186       (49,237 )
Other items(3)     -       177,181       -       215,162  
Adjusted EBITDA Total   $ 4,161,310     $ 5,492,792     $ 5,409,075     $ 6,176,314  
% of revenue     3.2 %     4.8 %     2.3 %     3.3 %

 

(1) Represents the excess compensation paid to one of the founders of Onyx over the amount management believes would have been the compensation of an independent professional CEO for the applicable reporting periods.
(2) Represents legal and settlement expenses and gains related to significant matters that do not impact the fundamentals of our operations, pertaining to: (i) causes of action between certain of the Company’s shareholders and which involves claims directly against the Company seeking the fulfillment of alleged indemnification obligations with respect to these matters, and (ii) trademark and IP protection cases. We are involved in routine IP litigation, commercial litigation and other various litigation matters. We review litigation matters from both a qualitative and quantitative perspective to determine if excluding the losses or gains will provide our investors with useful incremental information. Litigation matters can vary in their characteristics, frequency and significance to our operating results.
(3) Includes write-offs of advances and certain fraud loss claims from earlier years that we determined were uncollectible.

 

Net income decreased by $1.6 million and $1.4 million for the three and six months ended June 30, 2021, respectively, as compared to the same prior year periods. The decreases in net income were primarily driven by incremental public company costs of $1,076,913 and $2,247,450 for those periods, respectively, increases in non-cash stock compensation, and increases in advertisement costs, as discussed above. The year-over-year decreases in Adjusted EBITDA for the three and six months ended June 30, 2021 were attributable to these decreases in net income, partially offset by founders compensation and other items during the 2020 periods not recurring in the 2021 periods, as noted in the reconciliation table above.

 

Free Cash Flow

 

To provide investors with additional information regarding our financial results, we have also disclosed free cash flow, a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities less capital expenditures (which consist of purchases of property and equipment and website and software development costs). We have provided a reconciliation below of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure.

 

17

 

 

We have included free cash flow in this report because it is an important indicator of our liquidity as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

 

Free cash flow has limitations as a financial measure, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. There are limitations to using non-GAAP financial measures, including that other companies, including companies in our industry, may calculate free cash flow differently. Because of these limitations, you should consider free cash flow alongside other financial performance measures, including net cash provided by (used in) operating activities, capital expenditures and our other GAAP results.

 

The following table presents a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated.

 

    Six months ended June 30,  
    2021     2020  
Net cash provided by operating activities   $ 9,050,923     $ 35,791,455  
Purchase of property and equipment     (283,786 )     (9,344 )
Website and software development costs     (3,611,451 )     (3,443,447 )
Free cash flow   $ 5,155,686     $ 32,338,664  

 

Liquidity and Capital Resources

 

Our primary sources of liquidity are cash on hand of $27.3 million as of June 30, 2021, cash generated from operations and changes in operating assets and liabilities. We believe our current resources will be sufficient to fund our cash needs for current operations for at least the next 12 months. Our primary uses of cash are for investment in website and software development.

 

The following table summarizes the key cash flow metrics from our statements of cash flows for the six months ended June 30, 2021 and 2020:

 

    Six months ended June 30,  
    2021     2020  
Net cash provided by operating activities   $ 9,050,923     $ 35,791,455  
Net cash used in investing activities     (3,895,237 )     (3,452,791 )
Net cash used in financing activities     (10,473 )     (261,043 )
Net change in cash   $ 5,145,213     $ 32,077,621  

 

Cash Flows from Operating Activities

 

The net cash provided by operating activities consists of our net income (loss) adjusted for certain non-cash items, including depreciation as well as the effect of changes in working capital and other activities. Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net income (loss). We have a negative working capital model (current liabilities exceed current assets). Any profitable growth in revenue results in incremental cash for the Company, as we receive funds when customers place orders on the website, while accounts payable are paid over a period time, based on vendor terms, which range on average from one week to eight weeks.

 

Net cash provided by operating activities in the six months ended June 30, 2021 was $9.1 million, resulting from a net loss of $18,701 and cash provided by a change in (a) operating assets and liabilities of $4.2 million, which in turn was primarily driven by increases in accounts payable and customer deposits, (b) depreciation expense of $3.6 million, and (c) non-cash share based compensation expense of $1.3 million.

 

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Net cash provided by operating activities in the six months ended June 30, 2020 was $35.8 million, resulting from net income of $1.4 million and cash provided by a change in (a) operating assets and liabilities of $30.6 million, which in turn was primarily driven by increases in accounts payable and customer deposits, (b) depreciation expense of $3.3 million, and (c) non-cash deferred income tax expense of $0.5 million.

 

Cash Flows from Investing Activities

 

Net cash used in investing activities was $3.9 million for the six months ended June 30, 2021, consisting of website and software development costs and purchases of property and equipment. Cash used in investing activities varies depending on the timing of technology and product development cycles.

 

Net cash used in investing activities was $3.5 million for the six months ended June 30, 2020, consisting primarily of website and software development costs.

 

Cash Flows from Financing Activities

 

Net cash used in financing activities for the six months ended June 30, 2021 was $10,473, compared to $261,043 in the six months ended June 30, 2020. The decrease was primarily related to cessation of payments of preferred stock dividends.

 

Critical Accounting Estimates

 

SEC guidance defines critical accounting estimates as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operation of the registrant. There were no significant changes in our critical accounting estimates from those discussed in our 2020 Form 10-K, except as disclosed below. See Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements for our other significant accounting policies and accounting pronouncements that may impact the Company’s consolidated financial position, earnings, cash flows or disclosures.

 

Revenue Recognition

 

Our revenue recognition is impacted by estimates of unshipped and undelivered orders at the end of the applicable reporting period. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data. If actual unshipped and undelivered orders are not consistent with our estimates, the impact on our revenue for the applicable reporting period could be material. Unshipped and undelivered orders as of June 30, 2021 and December 31, 2020 were $19.5 million and $16.2 million, respectively, which are reflected as customer deposits on our balance sheets.

 

The outstanding days from the order date of our unshipped and undelivered orders based on our actual determination were, on average, 13.0 days as of June 30, 2021, and 12.7 days as of December 31, 2020.

 

Sales discounts earned by customers at the time of purchase and taxes collected from customers, which are remitted to governmental authorities, are deducted from gross revenue in determining net revenue. Allowances for sales returns are estimated and recorded based on historical experience and reduce product revenue, inclusive of shipping fees, by expected product returns. Our estimated net allowances for sales returns at June 30, 2021 and 2020 were $800,215 and $712,744 respectively.

 

If actual sales returns are not consistent with our estimates, or if we have to make adjustments, we may incur future losses or gains that could be material. Adjustments to our estimated net allowances for sales returns over the three months and six months ended June 30, 2021 and 2020 were as follows:

 

    Three months ended June 30,     Six months ended June 30,  
    2021     2020     2021     2020  
Balance at beginning of period   $ 1,125,970     $ 554,753     $ 1,062,077     $ 495,697  
Adjustment     (325,755 )     157,991       (261,862 )     217,047  
Balance at Closing of period   $ 800,215     $ 712,744     $ 800,215     $ 712,744  

 

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Website and Software Development

 

We capitalize certain costs associated with website and software (technology platform including the catalog) developed for internal use in accordance with Accounting Standards Codification (“ASC”) 350-50, Intangibles — Goodwill and Other — Website Development Costs, and ASC 350-40, Intangibles — Goodwill and Other — Internal Use Software, when both the preliminary project design and the testing stage are completed and management has authorized further funding for the project, which it deems probable of completion and to be used for the function intended. Capitalized costs include amounts directly related to website and software development such as contractors’ fees, payroll and payroll-related costs for employees who are directly associated with and who devote time to our internal-use software. Capitalization of such costs ceases when the project is substantially complete and ready for its intended use. Capitalized costs are amortized over a three-year period commencing on the date that the specific module or platform is placed in service. Costs incurred during the preliminary stages of development and ongoing maintenance costs are expensed as incurred. Determinations as to when a project is substantially complete and what constitutes ongoing maintenance require judgments and estimates by management. We periodically review the carrying values of capitalized costs and makes judgments as to ultimate realization. The amount of capitalized software costs for the six months ended June 30, 2021 and 2020 were as follows:

 

Six months ended June 30,   Capitalized 
Software
 
2021 (Includes non-cash share-based compensation capitalized $417,182)   $ 4,028,633  
2020   $ 3,443,447  

 

Off-Balance Sheet Arrangements

 

PARTS iD is not a party to any off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures

 

Management’s Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of June 30, 2021.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II

 

Item 1. Legal Proceedings

 

We are routinely involved in a number of legal actions, proceedings, litigation and other disputes arising in the ordinary course of our business. See Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding legal matters and proceedings, which is incorporated herein by reference, as well as the information below.

 

Lexidine LLC v. Onyx Enterprises Int’l Corp

 

On January 20, 2021, Lexidine, LLC filed a patent infringement suit against the Company in the United States District Court for the District of New Jersey. The case is based upon United States Patent No. 7,609,961 and is directed toward certain OEM Fit 3rd Brake Light Cameras offered for sale by third party brands on the Company’s eCommerce platform. It is captioned as Lexidine LLC v. Onyx Enterprises Int’l Corp, d/b/a www.carid.com, Case No. 3:21-cv-00946. Lexidine is seeking monetary relief for the sale of allegedly infringing products as well as injunctive relief. This matter was administratively terminated by the United States District Court for the District of New Jersey on July 27, 2021.

 

Item 1A. Risk Factors

 

There have been no material changes to our risk factors from those previously disclosed in our 2020 Form 10-K, except as disclosed below.

 

The SEC issued guidance on the application of warrant accounting guidance which might require that our warrants be accounted for as liabilities rather than as equity and might result in a restatement of our previously issued financial statements.

 

On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Statement”). In the Statement, the SEC staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Until the closing of the Business Combination on November 20, 2020, we had outstanding warrants that were accounted for as equity on our balance sheets. We are in the process of discussing and evaluating with our independent auditors whether our warrants should have been presented as liabilities on our previously issued financial statements.

 

If we conclude that our previously-outstanding warrants should have been classified as derivative liabilities measured at fair value on our balance sheets, we may be required to restate our previously issued financial statements. This could result in additional costs, diversion of management resources, a determination that our internal control over financial reporting or our disclosure controls and procedures are or were not effective, potential loss of investor confidence, and a decline in the market value of our common stock.

 

In addition to a potential restatement, there might be further inquiries from the SEC or the NYSE American regarding our financial statements, if restated, or matters relating thereto. Any potential future inquiries from the SEC or the NYSE American as a result of the potential restatement of our historical financial statements, would, regardless of the outcome, likely consume a significant amount of our resources in addition to any resources consumed in connection with the potential restatement itself.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Recent Sales of Unregistered Securities

 

Upon finalizing the calculation of the aggregate purchase price with respect to the Business Combination, on April 8, 2021, the Company released 299,999 shares of Class A common stock and $10 in cash in lieu of fractional shares to former Onyx shareholders pursuant to the Business Combination Agreement. These securities were issued under Section 4(a)(2) and Rule 506 of the Securities Act in a transaction not involving a public offering.

 

21

 

 

Issuer Purchases of Equity Securities

 

During the three months ended June 30, 2021, the Company did not repurchase any of its securities.

 

Item 6. Exhibits

 

Exhibit

Number

  Description
     
10.1*   Employment Agreement, amended and restated on July 19 2021, between PARTS iD, LLC and Ajay Roy.
     
10.2*   Employment Agreement, amended and restated on July 12, 2021, between PARTS iD, LLC and Antonino Ciappina.
     
10.3*   Employment Agreement, amended and restated on July 13, 2021, between PARTS iD, LLC and Kailas Agrawal.
     
10.4*   PARTS iD 2020 Equity Incentive Plan.
     
31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
     
31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
     
32.1   Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2   Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.1   The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Changes in Shareholders’ Deficit, (iv) Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements
     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)

 

* Each of these Exhibits constitutes a management contract, compensatory plan or arrangement.

  

22

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  PARTS iD, INC.
   
August 9, 2021 By: /s/ Antonino Ciappina
    Antonino Ciappina
    Chief Executive Officer
     
August 9, 2021 By: /s/ Kailas Agrawal
    Kailas Agrawal
    Chief Financial Officer

 

 

23

 

 

 

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Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is amended and restated on July 19, 2021 (the “Amendment Date”), between Parts iD, LLC, a Delaware limited liability company having its principal place of business at 1 Corporate Drive, Suite C, Cranbury, New Jersey, 08512, (the “Company”), and Ajay Roy, with a mailing address of 31 River Court, Apartment #1805, Jersey City, New Jersey 02474 (“Employee”). Additionally, both Employee and Company may be referred to as a “Party,” or “Parties” throughout this Agreement.

 

WHEREAS, the Employee entered into an employment agreement with Onyx Enterprises Int’l Corp., a New Jersey registered Corporation (“Onyx”), on October 8, 2019 (the “Original Agreement”);

 

WHEREAS, on November 20, 2020 (the “Closing Date”), PARTS iD, Inc., a Delaware corporation (f/k/a Legacy Acquisition Corp. (“Legacy” or “Parent”)) consummated the transactions contemplated by that certain Business Combination Agreement dated September 18, 2020 (the “Business Combination Agreement”), by and among Legacy and the other parties thereto, including Onyx;

 

WHEREAS, as a result of the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), Onyx was merged with and into the Company, as the surviving entity and a wholly owned subsidiary of Parent; and

 

WHEREAS, the Company, as the successor to Onyx, and the Employee desire to amend and restate the Original Agreement to reflect certain changes in the terms and conditions of the Employee’s employment with the Company and its affiliates. For the avoidance of doubt, the amendment and restatement does not change the base salary or quarterly bonuses in respect of calendar year 2020 that were actually paid to the Employee by the Company prior to the Amendment Date under the Original Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the promises and mutual covenants contained herein, and intending to be legally bound, the parties agree as follows:

 

1. Position and Term. On the terms and subject to the conditions set forth in this Agreement, the Company shall employ Employee, and Employee shall serve the Company as Chief Operating Officer (“COO”) of Parent and the Company, reporting directly to the Chief Executive Officer (“CEO”) of Parent.

 

2. Duties. Employee’s duties shall be prescribed from time to time by the Board of Directors of Parent (the “Board”) and shall include such responsibilities as are customary for employees performing functions similar to those of Employee. In addition, Employee shall serve at no additional compensation in such executive capacity or capacities with respect to any subsidiary or affiliate of Parent or the Company, respectively, to which he may be elected, assigned or appointed. Employee shall devote substantially all of his time and attention to the performance of his duties and responsibilities for and on behalf of Parent, the Company and their subsidiaries and affiliates (individually or collectively, as the context may require, the “Company Group”) except as set forth herein, or as may be consented to by the Company. In addition, Employee shall be required to travel to all locations, whether national or international, in order to further develop and learn the needs of the business. Notwithstanding anything to the contrary herein, nothing in this Agreement shall preclude Employee from: (i) serving as a member of the board of directors or advisory board (or their equivalents in the case of a non-corporate entity) of any charitable or philanthropic organization, separate from the Company Group; (ii) engaging in charitable, community or philanthropic activities or any other activities or (iii) serving as an executor, trustee or in a similar fiduciary capacity; provided, that the activities set out in the foregoing clauses shall be limited by Employee so as not to affect, individually or in the aggregate, or interfere with the performance of Employee’s duties and responsibilities hereunder, without the consent of the Company. During Employee’s employment with the Company, Employee shall be governed by and be subject to, and Employee hereby agrees to comply with, all Company Group policies, procedures, rules and regulations applicable to employees generally, or to employees at executives grade level, including without limitation, the Company’s Employee Handbook, and in each case, as they may be amended from time to time in the Company’s sole discretion.

 

 

 

 

3. Starting Date, At Will Employment. The Employee began his employment with the Company on October 21st, 2019 (“Starting Date”). The Employee’s employment hereunder is on an at-will basis. Both Parties agree that this Agreement and the Employee’s employment hereunder may be terminated at any time by either the Employee or Company at any time for any reason or for no reason. After termination by either of the Parties, neither will have any obligation other than what is specifically agreed to herein.

 

4. Representations and Warranties.

 

The Employee hereby represents and warrants to the Company that the Employee has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the Employee enforceable against him in accordance with its terms.

 

The Company represents and warrants to the Employee as follows:

 

a. The Corporation is duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to conduct its business in the manner presently contemplated.

 

b. The Company has full power and authority to enter into this Agreement and to incur and perform its obligations hereunder.

 

c. The execution, delivery and performance by the Company of this Agreement does not conflict with or result in a breach or violation of or constitute a default under (whether immediately, upon the giving of notice or lapse of time or both) the certificate of incorporation or bylaws of the Corporation, or any agreement or instrument to which the Corporation is a party or by which the Corporation of any of its properties may be bound or affected.

 

d. The Company makes no representations or warranties regarding any pending sale, merger or acquisition of or by the Company that could result in the change of management or control, except that the Company reserves the right at all times to enter into to such transactions in the best interests of the Company and its shareholders.

 

2

 

 

5. Compensation. The Employee shall receive, for all services rendered to the Company pursuant to this Agreement, the following:

 

a.Salary. Employee shall be paid a compensation package at the rate of $300,000 per annum (the “Salary”). The Salary shall be payable in accordance with the Company’s then current general salary payment policies and shall be paid on a bi-weekly basis and subject to deductions for taxes and other withholdings as required by law and/or the polices of the Company. Furthermore, during employment, the Employee shall be eligible for periodic increases in Salary, in the sole discretion of the Company.

 

b. Bonus. The Employee shall be eligible to earn an annual bonus for each fiscal year of the Parent based on the achievement of pre-established performance goals set each fiscal year of the Parent by the Board or the Compensation Committee of the Board. The amount of the annual bonus earned by the Employee in respect of any fiscal year will be determined by the Board or the Compensation Committee, and any such amount will be paid to the Employee no later than March 15 of the year following the year in which such bonus was earned, subject to the Employee’s continued employment with the Company Group through such date. The Employee’s target annual bonus for the Parent’s 2021 fiscal year will be equal to 30% of his base salary. The annual bonus will also be subject to any terms or conditions of the annual bonus plan that may be in effect from time to time.

 

c. Benefits. Employee has chosen to opt out of the Health benefit plan(s) of the Company. However, the Employee will be provided life insurance coverage for sum of one hundred and fifty thousand dollars ($150,000) paid by the Company. Such insurance will be provided within 90 days from the date of joining. Further, after the date of joining, the Employee has the option to enroll under the currently established 401(k) Plan. The currently available 401(k) plan is a Defined Contribution Plan, without an Employer match. The Employee acknowledges and agrees that the Benefits Plans may from time to time be modified by the Company as it deems necessary and appropriate.

 

d. Deductions. The Company shall deduct and withhold from Employee’s gross compensation all necessary or required taxes, including, but not limited to, social security, self-employment, withholding and otherwise, and any other amounts required by law or any taxing authority.

 

e.Absences. Employee shall be permitted to accrue up to (4) weeks’ of Paid Time Off (“PTO”) which includes vacation time, personal or family illness, sick leave, or any other time off, per annum, which is accrued on a monthly basis, and in accordance with the Company’s current procedures and policies, as the same may be amended from time to time. PTO does not include company recognized holidays, which are announced annually to all employees by the Human Resources Department and will also be available upon request of the Employee.

 

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f. Primary Location. The Employee is expected to operate out of the primary Corporate offices in the State of New Jersey, unless otherwise traveling for business or otherwise.

 

g. Expenses. Subject to advanced written approval by the Company, the Company shall reimburse Employee for all reasonable out-of-pocket expenses incurred by Employee in connection with the performance of his duties and responsibilities hereunder upon presentment of a valid receipt or other usual and customary documents evidencing such expenses and in compliance with the Company’s expense reimbursement policies then in effect. The Company will reimburse properly substantiated and timely submitted expenses no later than 30 days after the date the appropriate documentation is submitted by Employee.

 

h. Long Term Incentive In lieu of Stock Option Plan. The Company and Employee acknowledge and agree that the Employee previously participated in a cash-based long-term incentive plan (the “LTI”). Pursuant to Section 15 of the Employee’s Restricted Stock Unit Grant Agreement issued with a date of grant of April 16, 2021, under the Parts iD, Inc. 2020 Equity Incentive Plan (the “RSU Agreement”), the Employee acknowledged and agreed that the LTI was terminated effective as of November 20, 2020 (the “LTI Termination Date”) in accordance with the terms of the Original Agreement. The Parties further agreed that the Employee accrued an amount equal to $56,575.34 (the “Accrued LTI”) under the LTI prior to the LTI Termination Date, and the Employee will not accrue any additional amounts under the Cash LTI. As provided in the RSU Agreement, the Accrued LTI will be paid to the Employee on October 20, 2023, subject to the Employee’s continuous employment with the Company Group through such date. The Employee waives any and all claims arising out of or related to the LTI other than the Company’s obligation to pay the Accrued LTI when it becomes due.

 

6. Termination.

 

a. For Cause. The Company may terminate this Agreement and Employee’s employment hereunder at any time for Cause. “Cause” shall mean (i) the conviction of, or the entry of a plea of guilty or nolo contendre to a charge of the commission of a felony or any other crime involving moral turpitude or the willful commission of any other act or omission involving misappropriation, embezzlement or fraud with respect to the Company Group, (ii) conduct that brings the Company Group into material disgrace or disrepute or that causes the Company Group material economic harm as reasonably determined by the Board, (iii) failure, other than by reason of death, disability or similar incapacity, to perform duties and/or obligations as reasonably and lawfully directed by the Board, Executives, Senior Executive officers or their respective designees, (iv) any act or omission constituting a material breach of a fiduciary duty, gross negligence or willful misconduct with respect to the Company Group, or (v) any material breach of this Agreement or any other written agreement between Employee and the Company Group with respect to the treatment of confidential information, the assignment of intellectual property rights to the Company Group or restrictive covenants limiting the activities of Employee.

 

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b. Without Cause. The Company may, without cause, terminate this Agreement and the Employee’s employment hereunder at any time by giving thirty (30) days’ written notice to the Employee. In that event, the Employee, if requested by the Employer, shall continue to render his services, and shall be paid his regular compensation up to the date of termination. The Employee may, without cause, terminate this Agreement and the Employee’s employment hereunder by giving 30 (30) days’ written notice to the Company. In such event, the Employee shall continue to render his services and shall be paid his regular compensation up to the date of termination.

 

c. Death. This Agreement and the Employee’s employment hereunder will terminate automatically upon the death of Employee.

 

d. Disability. The Company may terminate this Agreement and the Employee’s employment hereunder if Employee suffers from a physical or mental disability. Employee will only be deemed to have a physical or mental disability if he is unable to perform the essential functions of his position, with reasonable accommodation, for a period of at least one hundred twenty (120) consecutive days because of a physical or mental impairment.

 

e. Compensation in the Event of Termination. In the event that this Agreement and the Employee’s employment hereunder is terminated by the Company for any reason or no reason, or terminated by the Employee, the Company shall pay to the Employee within thirty (30) days of such termination: (i) accrued and unpaid Salary in accordance with Section 5, (ii) accrued and unpaid amounts for any unused vacation days which have accrued (but not including any unused personal or sick days) and (iii) any unreimbursed expenses payable in accordance with this Agreement. In the event that this Agreement and the Employee’s employment hereunder is terminated by the Company without Cause, subject to the Employee’s execution and non-revocation of a general release of claims, the Company will continue to pay the Employee’s base salary for three (3) months (the “Severance Pay”) following such termination of employment. The Severance Pay will be paid in bi-weekly installments in accordance with the Company’s customary payroll practices and will be subject to all applicable withholdings, provided that any amount of the Severance Pay that would otherwise have been paid during the period from the Employee’s termination of employment through the effective date of the Employee’s release and waiver of claims will be paid instead in a lump-sum in the first regular bi-weekly payroll installment that follows such effective date. If the Company terminates the employment of Employee for Cause, as defined above, or if the Employee voluntarily resigns from employment, the Employee shall not be entitled to receive Severance Pay, but Employee shall still be entitled to payment in accordance with (i), (ii) and (iii) herein. For the avoidance of doubt, the Severance Pay is intended to satisfy the “separation pay plan” exception under Section 409A of the Code, and no portion of the Severance Pay will be payable later than the last day of the second taxable year of the Employee following the taxable year of the Employee in which the separation from service occurs.

 

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f. Return of Property. Immediately after termination of the Employee’s employment with Company, regardless of the reason for termination, the Employee must (at the Company’s sole option and direction) return to the Company or destroy any and all of the Company Group’s property and Confidential Information regardless of the form or format in which it is kept, stored or maintained, whether electronic, digital or hard-copy. Notwithstanding any other provision herein, Employee’s return and/or destruction of material pursuant to this paragraph shall take place no later than five (5) calendar days following Employee’s separation from employment. Employee understands and acknowledges that failure to return and/or destroy Employer’s property and Confidential Information as required herein may be considered a breach of contract and/or a criminal act, and the Employee specifically consents to injunctive relief in favor of the Company to enforce the provisions of this Section.

 

7. Restrictive Covenants. Employee acknowledges and agrees that he has, and will have, access to secret and confidential information of the Company Group (“Confidential Information”) and that the following restrictive covenants are necessary to protect the interests and continued success of the Company Group.

 

a. Confidential Information means all material, non-public, business-related information, written or oral, whether or not it is marked that it is confidential, proprietary or disclosed or made available to the Employee, directly or indirectly, through any form or means of communication or observation as provided by the Company Group. The parties agree that the term “Confidential Information” shall be given its broadest possible interpretation to cover all facets of business information. Confidential Information shall also include any such information included in discussions which are taking place between the Parties, whether preliminary or subsequent to the execution of this Agreement.

 

b. Confidentiality. Employee agrees that at all times both during employment and after termination hereof, the Employee shall not disclose to any other person, firm or entity, or in any way use for his own benefit, except as required in the conduct of the Company Group’s business or as authorized in writing on behalf of the Company Group, any trade secrets or Confidential Information obtained during the course of the Employee’s employment with Company. Employee understands that the post-employment prohibition on disclosure of Confidential Information is necessary to effectuate the Company Group’s legitimate interests in safeguarding its business, relationships and property.

 

c. Non-Compete. In consideration of the employment hereunder, Employee agrees that during his employment and for a period of two (2) years thereafter, he will not (and will cause any entity controlled by him not to), directly or indirectly, whether or not for compensation and whether or not as an employee, be engaged in or have any financial interest in any business competing with the business of the Company Group within any state, country, region or locality in which the Company Group is then doing business or marketing its products or solicit, advise, provide or sell any services or products of the same or similar nature to services or products of the Company Group to any person or entity. The Employee understands that as the prohibitions contained in this Section relate to the e-commerce industry, which is internet based and geographically boundless, this prohibition shall not be geographically restricted. For purposes of this Agreement, Employee will be deemed to be engaged in or to have a financial interest in such competitive business if he is an officer, director, shareholder, joint venturer, agent, salesperson, consultant, investor, advisor, principal or partner, of any person, partnership, corporation, trust or other entity which is engaged in such a competitive business, or if he directly or indirectly performs services for such an entity or if a member of Employee’s immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however, that the foregoing will not prohibit Employee or a member of his immediate family from owning, for the purpose of passive investment, less than 5% of any class of securities of a publicly held corporation.

 

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d. Non-Solicitation/Non-Interference. Employee agrees that during his employment and for an additional two (2) years after the termination thereof, he shall not (and shall cause any entity controlled by him not to), directly or indirectly, acting as an employee, owner, shareholder, partner, joint venturer, officer, director, agent, salesperson, consultant, advisor, investor or principal of any corporation, trust or other entity: (i) solicit, request or otherwise attempt to induce or influence, directly or indirectly, any present client, distributor, licensor or supplier, or prospective client, distributor, licensor or supplier, of the Company Group, or other persons sharing a business relationship with the Company Group, to cancel, limit or postpone their business with the Company Group, or otherwise take action which might cause a financial disadvantage of the Company Group; or (ii) hire or solicit for employment, directly or indirectly, or induce or actively attempt to influence, any employee, officer, director, agent, contractor or other business associate of the Company Group to terminate his or her employment or discontinue such person’s consultant, contractor or other business association with the Company Group. For purposes of this Agreement the term prospective client shall mean any person, group of associated persons or entity whose business the Company Group has solicited at any time prior to the termination of his employment.

 

e.Non-Disparagement. The Parties agree that they will not in any way disparage each other, including current or former officers, directors and employees, nor will they make or solicit any comments, statements or the like to the media or to others that may be considered to be disparaging, derogatory or detrimental to the good name or business reputation of the other.

 

f. Enforcement Provisions. In order to ensure compliance with this Section of the Agreement, upon the written request of the Company, the Employee agrees to provide the Company with full cooperation and such information as the Company may reasonably require relating to its investigation of any potential breaches of the Agreement. This provision shall be enforceable in accordance with Section 15(a) of this Agreement.

 

g. Certain Exceptions. Notwithstanding anything set forth herein, nothing in this Agreement shall (i) prohibit the Employee from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934, as amended, or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of federal law or regulation, or (ii) require notification or prior approval by the Company of any such report; provided that, the Employee is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal. Nothing herein regarding confidentiality shall prohibit the Employee from contacting the EEOC, SEC, or other governmental agencies to report any violations of law or the Employee’s belief as to such violations and no action shall be taken to retaliate against the Employee because of such reports or filings

 

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8. Ownership of Intellectual Property.  Employee acknowledges that the Company Group shall be the sole owner of all the results and products of the services Employee provides to the Company Group, and any and all inventions made, developed or created by Employee (whether at the request or suggestion of the Company Group or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) during the period of Employee’s employment by the Company, relating to or which may be directly or indirectly useful to the Company Group’s business (collectively, the “Developments”). All right, title and interest in the Developments shall be and remain the sole and exclusive property of the Company Group. Employee shall promptly disclose any and all Developments to the Company and shall deliver to the Company all papers, data and other materials relating to any Developments made, developed or created by Employee. Employee acknowledges that all copyrightable Developments shall be considered works “made for hire” or commissioned works under the Federal Copyright Act. Employee hereby assigns all Developments to the Company and agrees that Employee shall execute such documents and cooperate with the Company’s reasonable requests in connection with any copyright or patent applications, and do all other acts as the Company reasonably deems necessary to establish, protect, enforce or defend the Employer’s right, title and interest in such Developments. Finally, Employee acknowledges that the Company has the right to decide all issues relating to the format, style or printing of Developments, the presentation, trademark, logo imprint or other identifying mark, the retail price and all other matters relating to sale, distribution, advertising or promotion of Developments.

 

9. Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled pursuant to the underlying action.

 

10. No Conflicts. Employee represents and warrants to the Company that the execution, delivery and performance by him of this Agreement does not conflict with, or result in, a violation or breach of, or constitute (with or without the giving of notice or the lapse of time or both) a default under any contract, agreement or understanding, whether oral or written, to which he is a party or by which he is bound and that there are no restrictions, covenants, agreements or limitations on his right or ability to enter into and perform the terms of this Agreement, and Employee agrees to indemnify and hold the Company harmless from any liability, cost or expense, including attorney’s fees, based upon or arising out of any breach of this Section 10.

 

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11. Waiver. The waiver by either party of any breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such party. No person acting other than pursuant to a resolution of the Company shall have authority on behalf of the Company to agree to amend, modify, repeal, waive or extend any provision of this Agreement.

 

12. Assignment. Neither this Agreement nor any of the Employee’s rights, powers, duties, or obligations hereunder may be assigned by Employee. This Agreement shall be binding upon and inure to the benefit of the Employee and his or her heirs and legal representatives and the Company and its successors. Successors of the Company shall include, without limitation, any company or companies acquiring, directly or indirectly, all or substantially all of the assets of the Company, whether by merger, consolidation, purchase, lease, or otherwise, and such successor shall thereafter be deemed “the Company” for the purpose hereof.

 

13. AGREEMENT TO ARBITRATE ALL CLAIMS. Any controversy or claim arising out of or relating to this Employment Agreement and the Employee’s employment with the Company, shall be adjudicated and settled by binding arbitration, administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures at a location in the State of New Jersey. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind. In agreeing to submit all claims to Arbitration, the Employee hereby acknowledges and agrees that he is VOLUNTARILY WAIVING AND RELINQUISHING HIS RIGHT TO A JURY TRIAL. The judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Parties agree to be bound by the decision of the arbitrator(s). The costs and expenses of the arbitrators shall be shared equally by the parties, which each party responsible for its own costs and expenses in presenting the dispute for arbitration.

 

14. Notices. All notices that are to be sent under this Agreement shall be done in writing and to be delivered via Certified Mail (return receipt) to the following mailing addresses:

 

If Notice To Company   If Notice to Employee

 

PARTS iD, LLC.

1 Corporate Drive, Suite C

Cranbury, New Jersey 08512

 

 

Mr. Ajay Roy

31 River Court, Apartment #1805

Jersey City, New Jersey 02474

 

The aforementioned addresses may be changed with the act of either party providing written notice. Additionally, the parties may satisfy this requirement by email, by sending Notice to legal@partsid.com and finance@partsid.com.

 

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15. Construction of Agreement.

 

a.Governing Law. This Agreement shall be governed under the laws in the State of New Jersey. EACH PARTY HERETO SPECIFICALLY WAIVES ANY RIGHT IT MIGHT OTHERWISE HAVE TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING UNDER THIS AGREEMENT.

 

b. Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

c.Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for the convenience of the reader, for reference only, and shall not constitute a part of this Agreement.

 

d. Section 409A. (i) If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Employee to incur any additional tax or interest under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or any regulations or Treasury guidance promulgated thereunder, the Company shall reform such provision to comply with Section 409A of the Code; provided, that the Company agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Employee of the applicable provision without violating the provisions of Section 409A of the Code. (ii) Notwithstanding any provision to the contrary in this Agreement, if the date of any payment or the commencement of any installment payments payable under this Agreement must be delayed for six months in order to meet the requirements of Section 409A(a)(2)(B) of the Code applicable to “specified employees”, then any such payment or payments shall not be made or provided (subject to the last sentence hereof) prior to the earlier of (A) the expiration of the six month period measured from the date of the Employee’s “separation from service” (as such term is defined in Treasury Regulations issued under Code Section 409A) or (B) the date of the Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 15(d) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, and any remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. (iii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” (iv) (a) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee; (b) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; and (c) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit. (v) For purposes of Code Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

e.Voluntary Agreement. Employee hereby acknowledges that Employee (a) has read and understands the foregoing Agreement (b) has been afforded the opportunity to consult with an attorney of Employee’s own choosing concerning the terms of this Agreement; and (c) has affixed Employee’s signature hereto voluntarily and without coercion.

 

f. Entire Agreement. Other than as set forth herein, this Agreement contains the entire agreement of the parties concerning Employee’s employment and all promises, representations, understandings, arrangements and prior agreements on such subject (including without limitation the Original Agreement) are merged herein and superseded hereby.

 

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IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized officer and Employee has set his hand, all as of the day and year first above written.

 

AJAY ROY   PARTS iD, LLC
/s/ Ajay Roy   /s/ Antonino Ciappina
(Signature)   (Signature)
     
Ajay Roy  

Antonino Ciappina

(Printed Name)   (Printed Name)
     
Chief Operating Officer   CEO and Assistant Corporate Secretary
(Title)   (Title) 
     

(Date)

 

(Date)

 

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EXHIBIT A

 

Prior Inventions: none

 

 

 

 

 

 

 

 

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is amended and restated on July 12, 2021 (the “Amendment Date”), between Parts iD, LLC, a Delaware limited liability company having its principal place of business at 1 Corporate Drive, Suite C, Cranbury, New Jersey, 08512, ( the “Company”), and Antonino Ciappina, with a mailing address of 44 Oakhill Road , Midland Park, New Jersey 07432 (“Employee”). Additionally, both Employee and Company may be referred to as a “Party,” or “Parties” throughout this Agreement.

 

WHEREAS, the Employee entered into an employment agreement with Onyx Enterprises Int’l Corp., a New Jersey registered Corporation (“Onyx”), on November 28, 2019 (the “Original Agreement”);

 

WHEREAS, on November 20, 2020 (the “Closing Date”), PARTS iD, Inc., a Delaware corporation (f/k/a Legacy Acquisition Corp. (“Legacy” or “Parent”)) consummated the transactions contemplated by that certain Business Combination Agreement dated September 18, 2020 (the “Business Combination Agreement”), by and among Legacy and the other parties thereto, including Onyx;

 

WHEREAS, as a result of the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), Onyx was merged with and into the Company, as the surviving entity and a wholly owned subsidiary of Parent; and

 

WHEREAS, the Company, as the successor to Onyx, and the Employee desire to amend and restate the Original Agreement to reflect certain changes in the terms and conditions of the Employee’s employment with the Company and its affiliates. For the avoidance of doubt, this amendment and restatement does not change the base salary or quarterly bonuses in respect of calendar year 2020 that were actually paid to the Employee by the Company prior to the Amendment Date under the Original Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the promises and mutual covenants contained herein, and intending to be legally bound, the parties agree as follows:

 

1. Position and Term. The Company shall employ Employee, and Employee shall serve the Company as the Chief Executive Officer (“CEO”) and Assistant Corporate Secretary of Parent and the Company, reporting directly to the Board of Directors of Parent (the “Board”).

 

 

 

 

2. Duties. Employee’s duties shall be prescribed from time to time by the Board and shall include such responsibilities as are customary for employees performing functions similar to those of Employee. In addition, Employee shall serve at no additional compensation in such executive capacity or capacities with respect to any subsidiary or affiliate of Parent or the Company, respectively, to which he may be elected, assigned or appointed. Employee shall devote substantially all of his time and attention to the performance of his duties and responsibilities for and on behalf of Parent, the Company and their subsidiaries and affiliates (individually or collectively, as the context may require, the “Company Group”) except as set forth herein, or as may be consented to by the Company. In addition, Employee shall be required to travel to all locations, whether national or international, in order to further develop and learn the needs of the business. Notwithstanding anything to the contrary herein, nothing in this Agreement shall preclude Employee from: (i) serving as a member of the board of directors or advisory board (or their equivalents in the case of a non-corporate entity) of any charitable or philanthropic organization, separate from the Company Group; (ii) engaging in charitable, community or philanthropic activities or any other activities or (iii) serving as an executor, trustee or in a similar fiduciary capacity; provided, that the activities set out in the foregoing clauses shall be limited by Employee so as not to affect, individually or in the aggregate, or interfere with the performance of Employee’s duties and responsibilities hereunder, without the consent of the Company. During Employee’s employment with the Company, Employee shall be governed by, subject to, and be in compliance with all Company Group policies, procedures, guidelines, practices, rules and regulations applicable to employees generally (“Company Policies”), including without limitation, the Company’s Employee Handbook, and in each case, as they may be amended from time to time in the Company’s sole discretion. It is expressly understood that any violation of the terms of such Company Policies shall be considered a breach of the terms of this Agreement.

 

3. Starting Date, At Will Employment. The Employee began his employment with the Company on January 6, 2020 (“Starting Date”). The Employee’s employment hereunder is on an at-will basis. Both Parties agree that this Agreement and the Employee’s employment hereunder may be terminated at any time by either the Employee or Company for any reason or for no reason. After termination of this Agreement by either of the Parties, neither will have any obligation other than what is specifically agreed to herein.

 

4. Representations and Warranties.

 

The Employee hereby represents and warrants to the Company that the Employee has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the Employee enforceable against him in accordance with its terms.

 

The Company represents and warrants to the Employee as follows:

 

a. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to conduct its business in the manner presently contemplated.

 

b. The Company has full power and authority to enter into this Agreement and to incur and perform its obligations hereunder.

 

c. The execution, delivery and performance by the Company of this Agreement does not conflict with or result in a breach or violation of or constitute a default under (whether immediately, upon the giving of notice or lapse of time or both) the certificate of incorporation or bylaws of the Company, or any agreement or instrument to which the Company is a party or by which the Company of any of its properties may be bound or affected.

 

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d. The Company makes no representations or warranties regarding any pending sale, merger or acquisition of or by the Company that could result in the change of management or control, except that the Company reserves the right at all times to enter into to such transactions in the best interests of the Company and its shareholders.

 

5. Compensation. The Employee shall receive, for all services rendered to the Company Group pursuant to this Agreement, the following:

 

a. Salary. From and after the Amendment Date, but with retroactive effect to November 23, 2020, the Employee shall be paid a base salary at the rate of $400,000 per annum (the “Salary”). The Salary shall be payable in accordance with the Company’s then current general salary payment policies and shall be paid on a bi-weekly basis and subject to deductions for taxes and other withholdings as required by law and/or the policies of the Company. Furthermore, during employment, the Employee shall be eligible for periodic increases in Salary, in the sole discretion of the Company. For the avoidance of doubt, the Employee acknowledges and agrees that as of the date hereof, the Company has paid to the Employee all additional amounts of base salary that were due for the period following November 23, 2020 through and including the Amendment Date as a result of the retroactive increase to the Employee’s Salary.

 

b. Bonus. The Employee shall be eligible to earn an annual bonus for each fiscal year of the Parent based on the achievement of pre-established performance goals set each fiscal year of the Parent by the Board or the Compensation Committee of the Board. The amount of the annual bonus earned by the Employee in respect of any fiscal year will be determined by the Board or the Compensation Committee, and any such amount will be paid to the Employee no later than March 15 of the year following the year in which such bonus was earned, subject to the Employee’s continued employment with the Company Group through such date. The Employee’s target annual bonus for the Parent’s 2021 fiscal year will be equal to 50% of his base salary. The annual bonus will also be subject to any terms or conditions of the annual bonus plan that may be in effect from time to time.

 

c. Benefits. Employee and his “dependents,” as that term may be defined under the applicable benefit plan(s) of the Company, shall be entitled to participate, to the extent eligible thereunder, in any and all standard benefit plans, programs and policies of the Company, which may include health care insurance (medical, dental and vision), long-term disability plans, life insurance, supplemental disability insurance, supplemental life insurance and a 401(k) plan (the “Benefits Plans”). The currently available 401(k) plan is a Defined Contribution Plan, without an Employer match and per the defined plan commences 12 months post the date of joining. Employee acknowledges and agrees that the Benefits Plans may from time to time be modified by the Company as it deems necessary and appropriate. Nothing herein shall be construed to limit the Company’s ability to amend or terminate any employee benefit plan or program in its sole discretion.

 

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d. Deductions. The Company shall deduct and withhold from Employee’s gross compensation all necessary or required federal, state and local taxes, including, but not limited to, social security, self-employment, withholding and otherwise, and any other amounts required by law or any taxing authority.

 

e. Absences. Employee shall be permitted to accrue up to 4 weeks (or 20 business days) of Paid Time Off (“PTO”) which is inclusive of vacation time, personal or family illness, sick leave, or any other time off, per annum, which is accrued on a monthly basis, and in accordance with the Company’s current procedures and policies, as the same may be amended from time to time. PTO does not include company recognized holidays, which are announced annually to all employees by the Human Resources Department and will also be available upon request of the Employee. PTO, as contemplated in this Section, shall follow the rules as outlined in the Company’s Employee Handbook, as well as be subject to any other Company Policies in effect at the time of the execution of this Agreement.

 

f. Primary Location. The Employee is expected to operate out of the primary Company offices in the State of New Jersey, unless otherwise traveling for business or otherwise.

 

g. Expenses. Subject to advanced written approval by the Company, the Company shall reimburse Employee for all reasonable out-of-pocket pre-approved business and travel expenses incurred by Employee in connection with the performance of his duties and responsibilities hereunder, upon presentment of a valid receipt or other usual and customary documents evidencing such expenses and in compliance with the Company’s expense reimbursement policies then in effect. The Company will reimburse properly substantiated and timely submitted expenses no later than 30 days after the date the appropriate documentation is submitted by Employee.

 

h. Long Term Incentive In Lieu of Stock Option Plan. The Company and Employee acknowledge and agree that the Employee previously participated in a cash-based long-term incentive plan (the “LTI”). Pursuant to Section 15 of the Employee’s Restricted Stock Unit Grant Agreement issued with a date of grant of April 16, 2021, under the Parts iD, Inc. 2020 Equity Incentive Plan (the “RSU Agreement”), the Employee acknowledged and agreed that the LTI was terminated effective as of November 20, 2020 (the “LTI Termination Date”) in accordance with the terms of the Original Agreement. The Parties further agreed that the Employee accrued an amount equal to $43,835.62 (the “Accrued LTI”) under the LTI prior to the LTI Termination Date, and the Employee will not accrue any additional amounts under the Cash LTI. As provided in the RSU Agreement, the Accrued LTI will be paid to the Employee on January 5, 2024, subject to the Employee’s continuous employment with the Company Group through such date. The Employee waives any and all claims arising out of or related to the LTI other than the Company’s obligation to pay the Accrued LTI when it becomes due.

 

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6. Termination.

 

a. For Cause. The Company may terminate this Agreement and the Employee’s employment hereunder at any time for Cause. “Cause” shall mean (i) the conviction of, or the entry of a plea of guilty or nolo contendre to a charge of the commission of a felony or any other crime involving moral turpitude or the willful commission of any other act or omission involving misappropriation, embezzlement or fraud with respect to the Company Group, (ii) any action, behavior or conduct that brings the Company Group into material disgrace or disrepute, causes any member of the Company Group to suffer damage to its business interest, financial interest or reputation, or that causes the Company Group material economic harm as reasonably determined by the Board, (iii) failure, other than by reason of death, disability or similar incapacity, to perform duties and/or obligations as reasonably and lawfully directed by the Board or its designee, (iv) any act or omission constituting a material breach of a fiduciary duty, gross negligence or willful misconduct or insubordination with respect to the Company Group, or (v) any material breach of this Agreement or any other written agreement between Employee and any member of the Company Group with respect to the treatment of confidential information, the assignment of intellectual property rights to the Company Group or restrictive covenants limiting the activities of Employee.

 

b. Without Cause. The Company may, without cause, terminate this Agreement and the Employee’s employment hereunder at any time by giving thirty (30) days’ written notice to the Employee. In that event, the Employee, if requested by the Employer, shall continue to render his services, and shall be paid his regular compensation up to the date of termination. The Employee may, without cause, terminate this Agreement and the Employee’s employment hereunder by giving thirty (30) days’ written notice to the Company. In such event, the Employee shall continue to render his services and shall be paid his regular compensation up to the date of termination.

 

c. Death. This Agreement and the Employee’s employment hereunder will terminate automatically upon the death of Employee.

 

d. Disability. The Company may terminate this Agreement and the Employee’s employment hereunder if Employee suffers from a physical or mental disability. Employee will only be deemed to have a physical or mental disability if he is unable to perform the essential functions of his position, with reasonable accommodation, for a period of at least one hundred twenty (120) consecutive days because of a physical or mental impairment.

 

e. Compensation in the Event of Termination. In the event that this Agreement and the Employee’s employment hereunder is terminated by the Company for any reason or no reason, or terminated by the Employee, the Company shall pay to the Employee within thirty (30) days of such termination: (i) accrued and unpaid Salary in accordance with Section 5, (ii) accrued and unpaid amounts for any unused vacation days which have accrued (but not including any unused personal or sick days) and (iii) any unreimbursed expenses payable in accordance with this Agreement. In the event that this Agreement and the Employee’s employment hereunder is terminated by the Company without Cause, subject to the Employee’s execution and non-revocation of a general release of claims, the Company will continue to pay the Employee’s base salary for six (6) months (the “Severance Pay”) following such termination of employment. The Severance Pay will be paid in bi-weekly installments in accordance with the Company’s customary payroll practices and will be subject to all applicable withholdings, provided that any amount of the Severance Pay that would otherwise have been paid during the period from the Employee’s termination of employment through the effective date of the Employee’s release and waiver of claims will be paid instead in a lump-sum in the first regular bi-weekly payroll installment that follows such effective date. If the Company terminates the employment of Employee for Cause, as defined above, or if the Employee voluntarily resigns from employment, the Employee shall not be entitled to receive Severance Pay, but Employee shall still be entitled to payment in accordance with (i), (ii) and (iii) herein. For the avoidance of doubt, the Severance Pay is intended to satisfy the “separation pay plan” exception under Section 409A of the Code, and no portion of the Severance Pay will be payable later than the last day of the second taxable year of the Employee following the taxable year of the Employee in which the separation from service occurs.

 

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f. Return of Property. Immediately after termination of the Employee’s employment with Company, regardless of the reason for termination, the Employee must (at the Company’s sole option and direction) return to the Company or destroy any and all of the Company Group’s property and Confidential Information regardless of the form or format in which it is kept, stored or maintained, whether electronic, digital or hard-copy. Notwithstanding any other provision herein, Employee’s return and/or destruction of material pursuant to this paragraph shall take place no later than five (5) calendar days following Employee’s separation from employment. Employee understands and acknowledges that failure to return and/or destroy Employer’s property and Confidential Information as required herein may be considered a breach of contract and/or a criminal act, and the Employee specifically consents to injunctive relief in favor of the Company to enforce the provisions of this Section.

 

7. Restrictive Covenants. Employee acknowledges and agrees that he has, and will have, access to secret and confidential information of the Company Group (“Confidential Information”) and that the following restrictive covenants are necessary to protect the interests and continued success of the Company Group.

 

a. Confidential Information means all material, non-public, business-related information, whether former or informal, whether written or oral, whether or not it is marked that it is confidential, proprietary or disclosed or made available to the Employee, directly or indirectly, through any form or means of communication or observation as provided by the Company Group. The parties agree that the term “Confidential Information” shall be given its broadest possible interpretation to cover all facets of business information and material shared between management. Confidential Information shall also include any such information included in discussions which are taking place between the Parties, whether preliminary or subsequent to the execution of this Agreement.

 

b. Confidentiality. Employee agrees that at all times both during employment and after termination hereof, the Employee shall not disclose to any other person, firm or entity, or in any way use for his own benefit, except as required in the conduct of the Company’s business or as authorized in writing on behalf of the Company Group, any trade secrets or Confidential Information obtained during the course of the Employee’s employment with Company. Employee understands that the post-employment prohibition on disclosure of Confidential Information is necessary to effectuate the Company Group’s legitimate interests in safeguarding its business, relationships and property.

 

c. Non-Compete. In consideration of the employment hereunder, Employee agrees that during his employment and for a period of two (2) years after the termination or separation thereof (the “Restricted Period”), he will not (and will cause any entity controlled by him not to), directly or indirectly, whether or not for compensation and whether or not as an employee, be engaged in or have any financial interest in any business competing with the business of the Company Group within any state, country, region or locality in which the Company Group is then doing business or marketing its products or solicit, advise, provide or sell any services or products of the same or similar nature to services or products of the Company Group to any person or entity. The Employee understands that as the prohibitions contained in this Section relate to the e-commerce industry, which is internet based and geographically boundless, this prohibition shall not be geographically restricted. For purposes of this Agreement, Employee will be deemed to be engaged in or to have a financial interest in such competitive business if he is an officer, director, shareholder, joint venturer, agent, salesperson, consultant, investor, advisor, principal or partner, of any person, partnership, corporation, trust or other entity which is engaged in such a competitive business, or if he directly or indirectly performs services for such an entity or if a member of Employee’s immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however, that the foregoing will not prohibit Employee or a member of his immediate family from owning, for the purpose of passive investment, less than 5% of any class of securities of a publicly held corporation.

 

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d. Non-Solicitation/Non-Interference. Employee agrees that during his employment and during the Restricted Period, he shall not (and shall cause any entity controlled by him not to), directly or indirectly, acting as an employee, owner, shareholder, partner, joint venturer, officer, director, agent, salesperson, consultant, advisor, investor or principal of any corporation, trust or other entity: (i) solicit, request or otherwise attempt to induce or influence, directly or indirectly, any present client, distributor, licensor or supplier, or prospective client, distributor, licensor or supplier, of the Company Group, or other persons sharing a business relationship with the Company Group, to cancel, limit or postpone their business with the Company Group, or otherwise take action which might cause a financial disadvantage of the Company Group; or (ii) hire or solicit for employment, directly or indirectly, or induce or actively attempt to influence, any employee, officer, director, agent, contractor or other business associate of the Company Group, to terminate his or her employment or discontinue such person’s consultant, contractor or other business association with the Company Group. For purposes of this Agreement the term prospective client shall mean any person, group of associated persons or entity whose business the Company Group has solicited at any time prior to the termination of his employment.

 

e. Non-Disparagement. The Parties agree that they will not in any way disparage each other, including current or former officers, directors and employees, nor will they make or solicit any comments, statements or the like to the media or to others that may be considered to be disparaging, derogatory or detrimental to the good name or business reputation of the other.

 

f. Enforcement Provisions. In order to ensure compliance with this Agreement, upon the written request of the Company, the Employee agrees to provide the Company with full cooperation and such information as Company may reasonably require relating to its investigation of any potential breaches of the Agreement. This provision shall be enforceable in accordance with Section 15(a) of this Agreement.

 

g. Certain Exceptions. Notwithstanding anything set forth herein, nothing in this Agreement shall (i) prohibit the Employee from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934, as amended, or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of federal law or regulation, or (ii) require notification or prior approval by the Company of any such report; provided that, the Employee is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal. Nothing herein regarding confidentiality shall prohibit the Employee from contacting the EEOC, SEC, or other governmental agencies to report any violations of law or the Employee’s belief as to such violations and no action shall be taken to retaliate against the Employee because of such reports or filings.

 

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8. Ownership of Intellectual Property.  Employee acknowledges that the Company Group shall be the sole owner of all the results and products of the services Employee provides to the Company Group, and any and all inventions made, developed or created by Employee (whether at the request or suggestion of the Company Group or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) during the period of Employee’s employment by the Company, relating to or which may be directly or indirectly useful to the Company Group’s business (collectively, the “Developments”). All right, title and interest in the Developments shall be and remain the sole and exclusive property of the Company. Employee shall promptly disclose any and all Developments to the Company and shall deliver to the Company all papers, data and other materials relating to any Developments made, developed or created by Employee. Employee acknowledges that all copyrightable Developments shall be considered works “made for hire” or commissioned works under the Federal Copyright Act. Employee hereby assigns all Developments to the Company and agrees that Employee shall execute such documents and cooperate with the Company’s reasonable requests in connection with any copyright or patent applications and do all other acts as the Company reasonably deems necessary to establish, protect, enforce or defend the Employer’s right, title and interest in such Developments. Finally, Employee acknowledges that the Company has the right to decide all issues relating to the format, style or printing of Developments, the presentation, trademark, logo imprint or other identifying mark, the retail price and all other matters relating to sale, distribution, advertising or promotion of Developments.

 

9. Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled pursuant to the underlying action.

 

10. No Conflicts. Employee represents and warrants to the Company that the execution, delivery and performance by him of this Agreement does not conflict with, or result in, a violation or breach of, or constitute (with or without the giving of notice or the lapse of time or both) a default under any contract, agreement or understanding, whether oral or written, to which he is a party or by which he is bound and that there are no restrictions, covenants, agreements or limitations on his right or ability to enter into and perform the terms of this Agreement, and Employee agrees to indemnify and hold the Company harmless from any liability, cost or expense, including attorney’s fees, based upon or arising out of any breach of this Section 10.

 

11. Waiver. The waiver by either party of any breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such party. No person acting other than pursuant to a resolution of the Company shall have authority on behalf of the Company to agree to amend, modify, repeal, waive or extend any provision of this Agreement.

 

12. Assignment. Neither this Agreement nor any of Employee’s rights, powers, duties, or obligations hereunder may be assigned by Employee. This Agreement shall be binding upon and inure to the benefit of Employee and his or her heirs and legal representatives and the Company and its successors. Successors of the Company shall include, without limitation, any company or companies acquiring, directly or indirectly, all or substantially all of the assets of the Company, whether by merger, consolidation, purchase, lease, or otherwise, and such successor shall thereafter be deemed “the Company” for the purpose hereof.

 

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13. AGREEMENT TO ARBITRATE ALL CLAIMS. Any controversy or claim arising out of or relating to this Employment Agreement and the Employee’s employment with the Company Group, shall be adjudicated and settled by binding arbitration, administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures at a location in the State of New Jersey. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind. In agreeing to submit all claims to Arbitration, the Employee hereby acknowledges and agrees that he is VOLUNTARILY WAIVING AND RELINQUISHING HIS RIGHT TO A JURY TRIAL. The judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Parties agree to be bound by the decision of the arbitrator(s). The costs and expenses of the arbitrators shall be shared equally by the parties, which each party responsible for its own costs and expenses in presenting the dispute for arbitration.

 

14. Notices. All notices that are to be sent under this Agreement shall be done in writing and to be delivered via Certified Mail (return receipt) to the following mailing addresses:

 

If Notice To Company

If Notice to Employee

   

PARTS iD, LLC.

Attn: Legal; Attn: Finance

1 Corporate Drive, Suite C

Cranbury, New Jersey 08512

[legal@partsid.com; finance@partsid.com] 

Mr. Antonino Ciappina,

44 Oakhill Road

Midland Park, New Jersey 07432

Antonino.ciappina@gmail.com

 

Delivery shall be deemed effective upon (a) receipt of actual Notice by the Party, or (b) confirmation of the carrier that such Notice was, in fact, delivered. In the event that a Party rejects the Notice, confirmation of such rejection shall constitute delivery for purposes herein. The aforementioned addresses may be changed with the act of either party providing written notice. Additionally, the parties may satisfy this requirement by email, by sending Notice to the email addresses listed above. Delivery of email shall be deemed effective upon proper delivery receipt from serve.

 

15. Construction of Agreement.

 

a. Governing Law. This Agreement shall be governed under the laws in the State of New Jersey. EACH PARTY HERETO SPECIFICALLY WAIVES ANY RIGHT IT MIGHT OTHERWISE HAVE TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING UNDER THIS AGREEMENT.

 

b. Severability; Survivorship. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Furthermore, except as otherwise set forth in this Agreement, the respective rights and obligations of the parties shall survive any termination of Employee’s employment.

 

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c. Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for the convenience of the reader, for reference only, and shall not constitute a part of this Agreement.

 

d. Section 409A. (i) If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Employee to incur any additional tax or interest under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or any regulations or Treasury guidance promulgated thereunder, the Company shall reform such provision to comply with Section 409A of the Code; provided, that the Company agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Employee of the applicable provision without violating the provisions of Section 409A of the Code. (ii) Notwithstanding any provision to the contrary in this Agreement, if the date of any payment or the commencement of any installment payments payable under this Agreement must be delayed for six months in order to meet the requirements of Section 409A(a)(2)(B) of the Code applicable to “specified employees”, then any such payment or payments shall not be made or provided (subject to the last sentence hereof) prior to the earlier of (A) the expiration of the six month period measured from the date of the Employee’s “separation from service” (as such term is defined in Treasury Regulations issued under Code Section 409A) or (B) the date of the Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 15(d) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, and any remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. (iii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” (iv) (a) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee; (b) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; and (c) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit. (v) For purposes of Code Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

e. Voluntary Agreement. Employee hereby acknowledges and represents that Employee (a) has read and understands the foregoing Agreement, is competent and of sound mind to execute this Agreement; (b) has been afforded, and advised to do so by the Company, the opportunity to consult with an attorney of Employee’s own choosing concerning the terms of this Agreement; and (c) has affixed Employee’s signature hereto voluntarily and without coercion, based on his own judgment and without duress.

 

f. Entire Agreement. Other than as set forth herein, this Agreement contains the entire agreement of the parties concerning Employee’s employment and all promises, representations, understandings, arrangements and prior agreements on such subject (including without limitation the Original Agreement) are merged herein and superseded hereby.

 

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IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized officer and Employee has set his hand, all as of the day and year first above written.

 

Antonino Ciappina   PARTS iD, LLC
     
/s/ Antonino Ciappina   /s/ Kailas Agrawal
(Signature)   (Signature)
     
Antonino Ciappina   Kailas Agrawal
(Printed Name)   (Printed Name)
     
CEO and Assistant Corporate Secretary   CFO and Corporate Secretary
(Title)   (Title)
     
     
(Date)   (Date)

 

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EXHIBIT A

 

Prior Inventions: none

 

 

 

 

 

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is amended and restated on July 13, 2021 (the “Amendment Date”), between Parts iD, LLC, a Delaware limited liability company having its principal place of business at 1 Corporate Drive, Suite C, Cranbury, New Jersey, 08512, (the “Company”), and Kailas Agrawal, with a mailing address of 2 Sisley Crescent, Thornhill ON L4J9J1 (“Employee”). Additionally, both Employee and Company may be referred to as a “Party,” or “Parties” throughout this Agreement.

 

WHEREAS, the Employee entered into an employment agreement with Onyx Enterprises Int’l Corp., a New Jersey registered Corporation (“Onyx”), on August 4, 2020 (the “Original Agreement”);

 

WHEREAS, on November 20, 2020 (the “Closing Date”), PARTS iD, Inc., a Delaware corporation (f/k/a Legacy Acquisition Corp. (“Legacy” or “Parent”)) consummated the transactions contemplated by that certain Business Combination Agreement dated September 18, 2020 (the “Business Combination Agreement”), by and among Legacy and the other parties thereto, including Onyx;

 

WHEREAS, as a result of the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), Onyx was merged with and into the Company, as the surviving entity and a wholly owned subsidiary of Parent; and

 

WHEREAS, the Company, as the successor to Onyx, and the Employee desire to amend and restate the Original Agreement to reflect certain changes in the terms and conditions of the Employee’s employment with the Company and its affiliates. For the avoidance of doubt, this amendment and restatement does not change the signing bonus, base salary or quarterly bonuses in respect of calendar year 2020 that were actually paid to the Employee by the Company prior to the Amendment Date under the Original Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the promises and mutual covenants contained herein, and intending to be legally bound, the parties agree as follows:

 

1. Position and Term. On the terms and subject to the conditions set forth in this Agreement, the Company shall employ Employee, and Employee shall serve the Company as the Chief Financial Officer (“CFO”) and Corporate Secretary of Parent and the Company, reporting directly to the Chief Executive Officer (“CEO”) of Parent.

 

 

 

 

2. Duties. Employee’s duties shall be prescribed from time to time by the Board of Directors of Parent (the “Board”) and shall include such responsibilities as are customary for employees performing functions similar to those of Employee. In addition, Employee shall serve at no additional compensation in such executive capacity or capacities with respect to any subsidiary or affiliate of Parent or the Company, respectively, to which he may be elected, assigned or appointed. Employee shall devote substantially all of his time and attention to the performance of his duties and responsibilities for and on behalf of Parent, the Company and their subsidiaries and affiliates (individually or collectively, as the context may require, the “Company Group”) except as set forth herein, or as may be consented to by the Company. In addition, Employee shall be required to travel to all locations, whether national or international, in order to further develop and learn the needs of the business. Notwithstanding anything to the contrary herein, nothing in this Agreement shall preclude Employee from: (i) serving as a member of the board of directors or advisory board (or their equivalents in the case of a non-corporate entity) of any charitable or philanthropic organization, separate from the Company Group; (ii) engaging in charitable, community or philanthropic activities or any other activities or (iii) serving as an executor, trustee or in a similar fiduciary capacity; provided, that the activities set out in the foregoing clauses shall be limited by Employee so as not to affect, individually or in the aggregate, or interfere with the performance of Employee’s duties and responsibilities hereunder, without the consent of the Company. During Employee’s employment with the Company, Employee shall be governed by, subject to, and be in compliance with all Company Group policies, procedures, guidelines, practices, rules and regulations applicable to employees generally (“Company Policies”), including without limitation, the Company’s Employee Handbook, and in each case, as they may be amended from time to time in the Company’s sole discretion. It is expressly understood that any violation of the terms of such Company Policies shall be considered a breach of the terms of this Agreement.

 

3. Starting Date, At Will Employment. The Employee began his employment with the Company on August 6, 2020 (“Starting Date”). The Employee’s employment hereunder is on an at-will basis. Both Parties agree that this Agreement and the Employee’s employment may be terminated at any time by either the Employee or Company at any time for any reason or for no reason. After termination of this Agreement by either of the Parties, neither will have any obligation other than what is specifically agreed to herein.

 

4. Representations and Warranties.

 

The Employee hereby represents and warrants to the Company that the Employee has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the Employee enforceable against him in accordance with its terms.

 

The Company represents and warrants to the Employee as follows:

 

a. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to conduct its business in the manner presently contemplated.

 

b. The Company has full power and authority to enter into this Agreement and to incur and perform its obligations hereunder.

 

c. The execution, delivery and performance by the Company of this Agreement does not conflict with or result in a breach or violation of or constitute a default under (whether immediately, upon the giving of notice or lapse of time or both) the certificate of incorporation or bylaws of the Company, or any agreement or instrument to which the Company is a party or by which the Company of any of its properties may be bound or affected.

 

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d. The Company makes no representations or warranties regarding any pending sale, merger or acquisition of or by the Company that could result in the change of management or control, except that the Company reserves the right at all times to enter into to such transactions in the best interests of the Company and its shareholders.

 

5. Compensation. The Employee shall receive, for all services rendered to the Company pursuant to this Agreement, the following:

 

a. Salary. Employee shall be paid a compensation package at the rate of $300,000 per annum (the “Salary”). The Salary shall be payable in accordance with the Company’s then current general salary payment policies and shall be paid on a bi- weekly basis and subject to deductions for taxes and other withholdings as required by law and/or the policies of the Company. Furthermore, during employment, the Employee shall be eligible for periodic increases in Salary, in the sole discretion of the Company.

 

b. Bonus. The Employee shall be eligible to earn an annual bonus for each fiscal year of the Parent based on the achievement of pre-established performance goals set each fiscal year of the Parent by the Board or the Compensation Committee of the Board. The amount of the annual bonus earned by the Employee in respect of any fiscal year will be determined by the Board or the Compensation Committee, and any such amount will be paid to the Employee no later than March 15 of the year following the year in which such bonus was earned, subject to the Employee’s continued employment with the Company Group through such date. The Employee’s target annual bonus for the Parent’s 2021 fiscal year will be equal to 30% of his base salary. The annual bonus will also be subject to any terms or conditions of the annual bonus plan that may be in effect from time to time.

 

c. Benefits. Employee and his “dependents,” as that term may be defined under the applicable benefit plan(s) of the Company, shall be entitled to participate, to the extent eligible thereunder, in any and all standard benefit plans, programs and policies of the Company, which may include health care insurance (medical, dental and vision), long-term disability plans, life insurance, supplemental disability insurance, supplemental life insurance and a 401(k) plan (the “Benefits Plans”). Further, after the date of joining, the Employee has the option to enroll under the currently established 401(k) Plan. The currently available 401(k) plan is a Defined Contribution Plan, without an Employer match. The Employee acknowledges and agrees that the Benefits Plans may from time to time be modified by the Company as it deems necessary and appropriate.

 

d. Deductions. The Company shall deduct and withhold from Employee’s gross compensation all necessary or required federal, New Jersey State, and local taxes, including, but not limited to, social security, self-employment, withholding and otherwise, and any other amounts required by law or any taxing authority.

 

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e. Absences, Paid Time Off & Vacation Time. In accordance with applicable Federal, and State law, the Company provides employees with flexible Paid Time Off (“PTO”), which can be used for desired needs of the Employee, including vacation time, personal or family illness, sick leave, or any other time off, per annum. Employee shall be permitted to accrue up to 4 weeks (or 20 business days) of flexible Paid Time Off (“PTO”) which is accrued on a monthly basis, and in accordance with the Company’s current procedures and policies, as the same may be amended from time to time. PTO does not include company recognized holidays, which are announced annually to all employees by the Human Resources Department and will also be available upon request of the Employee. PTO, as contemplated in this Section, shall follow the rules as outlined in the Company’s Employee Handbook, as well as be subject to any other Company Policies in effect at the time of the execution of this Agreement.

 

f. Primary Location. While in the U.S., the Employee is expected to operate out of the primary Company offices in the State of New Jersey, unless otherwise traveling for business or otherwise.

 

g. Expenses. Subject to advanced written approval by the Company, the Company shall reimburse Employee for all reasonable out-of-pocket pre-approved business and travel expenses incurred by Employee in connection with the performance of his duties and responsibilities upon presentment of a valid receipt or other usual and customary documents evidencing such expenses and in compliance with the Company’s expense reimbursement policies then in effect. Approved expenses include but are not limited to travel and lodging to and from the U.S., Visa and immigration expenses. The Company will reimburse properly substantiated and timely submitted expenses no later than 30 days after the date the appropriate documentation is submitted by Employee.

 

h. Long Term Incentive In Lieu of Stock Option Plan. The Company and Employee acknowledge and agree that the Employee previously participated in a cash- based long-term incentive plan (the “LTI”). Pursuant to Section 15 of the Employee’s Restricted Stock Unit Grant Agreement issued with a date of grant of April 16, 2021, under the Parts iD, Inc. 2020 Equity Incentive Plan (the “RSU Agreement”), the Employee acknowledged and agreed that the LTI was terminated effective as of November 20, 2020 (the “LTI Termination Date”) in accordance with the terms of the Original Agreement. The Parties further agreed that the Employee accrued an amount equal to $23,818.49 (the “Accrued LTI”) under the LTI prior to the LTI Termination Date, and the Employee will not accrue any additional amounts under the Cash LTI. As provided in the RSU Agreement, the Accrued LTI will be paid to the Employee on August 6, 2022, subject to the Employee’s continuous employment with the Company Group through such date. The Employee waives any and all claims arising out of or related to the LTI other than the Company’s obligation to pay the Accrued LTI when it becomes due.

 

6. Termination.

 

a. For Cause. The Company may terminate this Agreement and the Employee’s employment hereunder at any time for Cause. “Cause” shall mean (i) the conviction of, or the entry of a plea of guilty or nolo contendre to a charge of the commission of a felony or any other crime involving moral turpitude or the willful commission of any other act or omission involving misappropriation, embezzlement or fraud with respect to the Company Group, (ii) any action, behavior or conduct that brings the Company Group into material disgrace or disrepute, causes the Company Group to suffer damage to its business interest, financial interest or reputation, or that causes the Company Group material economic harm as reasonably determined by the Board, (iii) failure, other than by reason of death, disability or similar incapacity, to perform duties and/or obligations as reasonably and lawfully directed by the Board, Executives, Senior Executive officers or their respective designees, (iv) any act or omission constituting a material breach of a fiduciary duty, gross negligence or willful misconduct or insubordination with respect to the Company Group, or (v) any material breach of this Agreement or any other written agreement between Employee and the Company Group with respect to the treatment of confidential information, the assignment of intellectual property rights to the Company Group or restrictive covenants limiting the activities of Employee.

 

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b. Without Cause. The Company may, without cause, terminate this Agreement and the Employee’s employment hereunder at any time by giving thirty (30) days’ written notice to the Employee. In that event, the Employee, if requested by the Employer, shall continue to render his services, and shall be paid his regular compensation up to the date of termination. The Employee may, without cause, terminate this Agreement and the Employee’s employment hereunder by giving thirty (30) days’ written notice to the Company. In such event, the Employee shall continue to render his services and shall be paid his regular compensation up to the date of termination.

 

c. Death. This Agreement and the Employee’s employment hereunder will terminate automatically upon the death of Employee.

 

d. Disability. The Company may terminate this Agreement and the Employee’s employment hereunder if Employee suffers from a physical or mental disability. Employee will only be deemed to have a physical or mental disability if he is unable to perform the essential functions of his position, with reasonable accommodation, for a period of at least one hundred twenty (120) consecutive days because of a physical or mental impairment.

 

e. Compensation in the Event of Termination. In the event that this Agreement and the Employee’s employment hereunder is terminated by the Company for any reason or no reason, or terminated by the Employee, the Company shall pay to the Employee within thirty (30) days of such termination: (i) accrued and unpaid Salary in accordance with Section 5, (ii) accrued and unpaid amounts for any unused vacation days which have accrued (but not including any unused personal or sick days) and (iii) any unreimbursed expenses payable in accordance with this Agreement. In the event that this Agreement and the Employee’s employment hereunder is terminated by the Company without Cause, subject to the Employee’s execution and non-revocation of a general release of claims, the Company will continue to pay the Employee’s base salary for three hundred sixty five (365) days (the “Severance Pay”) following such termination of employment. The Severance Pay will be paid in bi-weekly installments in accordance with the Company’s customary payroll practices and will be subject to all applicable withholdings, provided that any amount of the Severance Pay that would otherwise have been paid during the period from the Employee’s termination of employment through the effective date of the Employee’s release and waiver of claims will be paid instead in a lump-sum in the first regular bi- weekly payroll installment that follows such effective date. If the Company terminates the employment of Employee for Cause, as defined above, or if the Employee voluntarily resigns from employment, the Employee shall not be entitled to receive Severance Pay, but Employee shall still be entitled to payment in accordance with (i), (ii) and (iii) herein. For the avoidance of doubt, the Severance Pay is intended to satisfy the “separation pay plan” exception under Section 409A of the Code, and no portion of the Severance Pay will be payable later than the last day of the second taxable year of the Employee following the taxable year of the Employee in which the separation from service occurs.

 

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f. Return of Property. Immediately after termination of the Employee’s employment with Company, regardless of the reason for termination, the Employee must (at the Company’s sole option and direction) return to the Company or destroy any and all of the Company Group’s property and Confidential Information regardless of the form or format in which it is kept, stored or maintained, whether electronic, digital or hard-copy. Notwithstanding any other provision herein, Employee’s return and/or destruction of material pursuant to this paragraph shall take place no later than five (5) calendar days following Employee’s separation from employment. Employee understands and acknowledges that failure to return and/or destroy Employer’s property and Confidential Information as required herein may be considered a breach of contract and/or a criminal act, and the Employee specifically consents to injunctive relief in favor of the Company to enforce the provisions of this Section.

 

7. Restrictive Covenants. Employee acknowledges and agrees that he has, and will have, access to secret and confidential information of the Company Group (“Confidential Information”) and that the following restrictive covenants are necessary to protect the interests and continued success of the Company Group.

 

a. Confidential Information means all material, non-public, business- related information, whether former or informal, whether written or oral, whether or not it is marked that it is confidential, proprietary or disclosed or made available to the Employee, directly or indirectly, through any form or means of communication or observation as provided by the Company Group. The parties agree that the term “Confidential Information” shall be given its broadest possible interpretation to cover all facets of business information and material shared between management. Confidential Information shall also include any such information included in discussions which are taking place between the Parties, whether preliminary or subsequent to the execution of this Agreement.

 

b. Confidentiality. Employee agrees that at all times both during employment and after termination hereof, the Employee shall not disclose to any other person, firm or entity, or in any way use for his own benefit, except as required in the conduct of the Company’s business or as authorized in writing on behalf of the Company Group, any trade secrets or Confidential Information obtained during the course of the Employee’s employment with Company. Employee understands that the post-employment prohibition on disclosure of Confidential Information is necessary to effectuate the Company Group’s legitimate interests in safeguarding its business, relationships and property.

 

c. Non-Compete. In consideration of the employment hereunder, Employee agrees that during his employment and for a period of two (2) years after the termination or separation thereof (the “Restricted Period”), he will not (and will cause any entity controlled by him not to), directly or indirectly, whether or not for compensation and whether or not as an employee, be engaged in or have any financial interest in any business competing with the business of the Company Group within any state, country, region or locality in which the Company Group is then doing business or marketing its products or solicit, advise, provide or sell any services or products of the same or similar nature to services or products of the Company Group to any person or entity. The Employee understands that as the prohibitions contained in this Section relate to the e-commerce industry, which is internet based and geographically boundless, this prohibition shall not be geographically restricted. For purposes of this Agreement, Employee will be deemed to be engaged in or to have a financial interest in such competitive business if he is an officer, director, shareholder, joint venturer, agent, salesperson, consultant, investor, advisor, principal or partner, of any person, partnership, corporation, trust or other entity which is engaged in such a competitive business, or if he directly or indirectly performs services for such an entity or if a member of Employee’s immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however, that the foregoing will not prohibit Employee or a member of his immediate family from owning, for the purpose of passive investment, less than 5% of any class of securities of a publicly held corporation.

 

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d. Non-Solicitation/Non-Interference. Employee agrees that during his employment and during the Restricted Period, he shall not (and shall cause any entity controlled by him not to), directly or indirectly, acting as an employee, owner, shareholder, partner, joint venturer, officer, director, agent, salesperson, consultant, advisor, investor or principal of any corporation, trust or other entity: (i) solicit, request or otherwise attempt to induce or influence, directly or indirectly, any present client, distributor, licensor or supplier, or prospective client, distributor, licensor or supplier, of the Company Group, or other persons sharing a business relationship with the Company Group, to cancel, limit or postpone their business with the Company Group, or otherwise take action which might cause a financial disadvantage of the Company Group; or (ii) hire or solicit for employment, directly or indirectly, or induce or actively attempt to influence, any employee, officer, director, agent, contractor or other business associate of the Company Group to terminate his or her employment or discontinue such person’s consultant, contractor or other business association with the Company Group. For purposes of this Agreement the term prospective client shall mean any person, group of associated persons or entity whose business the Company Group has solicited at any time prior to the termination of his employment.

 

e. Non-Disparagement. The Parties agree that they will not in any way disparage each other, including current or former officers, directors and employees, nor will they make or solicit any comments, statements or the like to the media or to others that may be considered to be disparaging, derogatory or detrimental to the good name or business reputation of the other.

 

f. Enforcement Provisions. In order to ensure compliance with this Agreement, upon the written request of the Company, the Employee agrees to provide the Company with full cooperation and such information as Company may reasonably require relating to its investigation of any potential breaches of the Agreement. This provision shall be enforceable in accordance with Section 15(a) of this Agreement.

 

g. Certain Exceptions. Notwithstanding anything set forth herein, nothing in this Agreement shall (i) prohibit the Employee from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934, as amended, or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of federal law or regulation, or (ii) require notification or prior approval by the Company of any such report; provided that, the Employee is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal. Nothing herein regarding confidentiality shall prohibit the Employee from contacting the EEOC, SEC, or other governmental agencies to report any violations of law or the Employee’s belief as to such violations and no action shall be taken to retaliate against the Employee because of such reports or filings.

 

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8. Ownership of Intellectual Property. Employee acknowledges that the Company Group shall be the sole owner of all the results and products of the services Employee provides to the Company Group, and any and all inventions made, developed or created by Employee (whether at the request or suggestion of the Company Group or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) during the period of Employee’s employment by the Company, relating to or which may be directly or indirectly useful to the Company Group’s business (collectively, the “Developments”). All right, title and interest in the Developments shall be and remain the sole and exclusive property of the Company Group. Employee shall promptly disclose any and all Developments to the Company and shall deliver to the Company all papers, data and other materials relating to any Developments made, developed or created by Employee. Employee acknowledges that all copyrightable Developments shall be considered works “made for hire” or commissioned works under the Federal Copyright Act. Employee hereby assigns all Developments to the Company and agrees that Employee shall execute such documents and cooperate with the Company’s reasonable requests in connection with any copyright or patent applications and do all other acts as the Company reasonably deems necessary to establish, protect, enforce or defend the Employer’s right, title and interest in such Developments. Finally, Employee acknowledges that the Company has the right to decide all issues relating to the format, style or printing of Developments, the presentation, trademark, logo imprint or other identifying mark, the retail price and all other matters relating to sale, distribution, advertising or promotion of Developments.

 

9. Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled pursuant to the underlying action.

 

10. No Conflicts. Employee represents and warrants to the Company that the execution, delivery and performance by him of this Agreement does not conflict with, or result in, a violation or breach of, or constitute (with or without the giving of notice or the lapse of time or both) a default under any contract, agreement or understanding, whether oral or written, to which he is a party or by which he is bound and that there are no restrictions, covenants, agreements or limitations on his right or ability to enter into and perform the terms of this Agreement, and Employee agrees to indemnify and hold the Company harmless from any liability, cost or expense, including attorney’s fees, based upon or arising out of any breach of this Section 10.

 

11. Waiver. The waiver by either party of any breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such party. No person acting other than pursuant to a resolution of the Company shall have authority on behalf of the Company to agree to amend, modify, repeal, waive or extend any provision of this Agreement.

 

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12. Assignment. Neither this Agreement nor any of Employee’s rights, powers, duties, or obligations hereunder may be assigned by Employee. This Agreement shall be binding upon and inure to the benefit of Employee and his or her heirs and legal representatives and the Company and its successors. Successors of the Company shall include, without limitation, any company or companies acquiring, directly or indirectly, all or substantially all of the assets of the Company, whether by merger, consolidation, purchase, lease, or otherwise, and such successor shall thereafter be deemed “the Company” for the purpose hereof.

 

13. AGREEMENT TO ARBITRATE ALL CLAIMS. Any controversy or claim arising out of or relating to this Employment Agreement and the Employee’s employment with the Company, shall be adjudicated and settled by binding arbitration, administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures at a location in the State of New Jersey. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind. In agreeing to submit all claims to Arbitration, the Employee hereby acknowledges and agrees that he is VOLUNTARILY WAIVING AND RELINQUISHING HIS RIGHT TO A JURY TRIAL. The judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Parties agree to be bound by the decision of the arbitrator(s). The costs and expenses of the arbitrators shall be shared equally by the parties, which each party responsible for its own costs and expenses in presenting the dispute for arbitration.

 

14. Notices. All notices that are to be sent under this Agreement shall be done in writing and to be delivered via Certified Mail (return receipt) to the following mailing addresses:

 

If Notice To Company If Notice to Employee
   

PARTS iD, LLC

Attn: Legal; Attn: Finance 1
Corporate Drive, Suite C
Cranbury, New Jersey 08512

legal@partsid.com; finance@partsid.com

Mr. Kailas Agrawal,
2 Sisley Crescent
Thornhill, ON L4J9J1

kailas_agrawal@yahoo.com

 

Delivery shall be deemed effective upon (a) receipt of actual Notice by the Party, or (b) confirmation of the carrier that such Notice was, in fact, delivered. In the event that a Party rejects the Notice, confirmation of such rejection shall constitute delivery for purposes herein. The aforementioned addresses may be changed with the act of either party providing written notice. Additionally, the parties may satisfy this requirement by email, by sending Notice to the email addresses listed above. Delivery of email shall be deemed effective upon proper delivery receipt from serve.

 

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15. Construction of Agreement.

 

a. Governing Law. This Agreement shall be governed under the laws in the State of New Jersey. EACH PARTY HERETO SPECIFICALLY WAIVES ANY RIGHT IT MIGHT OTHERWISE HAVE TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING UNDER THIS AGREEMENT.

 

b. Severability; Survivorship. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Furthermore, except as otherwise set forth in this Agreement, the respective rights and obligations of the parties shall survive any termination of Employee’s employment.

 

c. Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for the convenience of the reader, for reference only, and shall not constitute a part of this Agreement.

 

d. Section 409A. (i) If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Employee to incur any additional tax or interest under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or any regulations or Treasury guidance promulgated thereunder, the Company shall reform such provision to comply with Section 409A of the Code; provided, that the Company agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Employee of the applicable provision without violating the provisions of Section 409A of the Code. (ii) Notwithstanding any provision to the contrary in this Agreement, if the date of any payment or the commencement of any installment payments payable under this Agreement must be delayed for six months in order to meet the requirements of Section 409A(a)(2)(B) of the Code applicable to “specified employees”, then any such payment or payments shall not be made or provided (subject to the last sentence hereof) prior to the earlier of (A) the expiration of the six month period measured from the date of the Employee’s “separation from service” (as such term is defined in Treasury Regulations issued under Code Section 409A) or (B) the date of the Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 15(d) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, and any remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. (iii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within themeaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” (iv) (a) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Employee; (b) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; and (c) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit. (v) For purposes of Code Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

e. Voluntary Agreement. Employee hereby acknowledges and represents that Employee (a) has read and understands the foregoing Agreement, is competent and of sound mind to execute this Agreement; (b) has been afforded, and advised to do so by the Company, the opportunity to consult with an attorney of Employee’s own choosing concerning the terms of this Agreement; and (c) has affixed Employee’s signature hereto voluntarily and without coercion, based on his own judgment and without duress.

 

f. Entire Agreement. Other than as set forth herein, this Agreement contains the entire agreement of the parties concerning Employee’s employment and all promises, representations, understandings, arrangements and prior agreements on such subject (including without limitation the Original Agreement) are merged herein and superseded hereby.

 

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IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized officer and Employee has set his hand, all as of the day and year first above written.

 

KAILAS AGRAWAL   PARTS iD, LLC
     
/s/ Kailas Agrawal   /s/ Antonino Ciappina
(Signature)   (Signature)
     
Kailas Agrawal   Antonino Ciappina
(Printed Name)   (Printed Name)
     
CFO and Corporate Secretary   CEO and Assistant Corporate Secretary
(Title)   (Title)
     
(Date)   (Date)

 

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EXHIBIT A

 

Prior Inventions: none

 

 

 

 

 

Exhibit 10.4 

 

 

 

 

 

 

 

 

 

 

PARTS iD, Inc.

2020 EQUITY INCENTIVE PLAN

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

1. Establishment, Purpose and Term of Plan.
  1.1 Establishment 1 
  1.2 Purpose 1 
  1.3 Term of Plan 1 
2. Definitions and Construction. 1 
  2.1 Definitions 1 
  2.2 Construction 6 
3. Administration.
  3.1 Administration by the Committee 6 
  3.2 Authority of Officers 6 
  3.3 Administration with Respect to Insiders 7 
  3.4 Powers of the Committee 7 
  3.5 Option or SAR Repricing 7 
  3.6 Indemnification 8 
4. Shares Subject to Plan. 8
  4.1 Maximum Number of Shares Issuable 8
  4.2 Share Counting 8
  4.3 Adjustments for Changes in Capital Structure
  4.4 Assumption or Substitution of Awards 9 
5. Eligibility, Participation and Award Limitations. 9 
  5.1 Persons Eligible for Awards 9 
  5.2 Participation in the Plan 9 
  5.3 Incentive Stock Option Limitations 9 
  5.4 Nonemployee Director Award Limit 10 
6. Stock Options. 10 
  6.1 Exercise Price 10 
  6.2 Exercisability and Term of Options 10 
  6.3 Payment of Exercise Price 10 
  6.4 Effect of Termination of Service 11 
  6.5 Transferability of Options 12 
7. Stock Appreciation Rights. 12 
  7.1 Types of SARs Authorized 12 
  7.2 Exercise Price 12 
  7.3 Exercisability and Term of SARs 12 
  7.4 Exercise of SARs 13 
  7.5 Deemed Exercise of SARs 13 
  7.6 Effect of Termination of Service 13 
  7.7 Transferability of SARs 13 
8. Restricted Stock Awards. 13 
  8.1 Types of Restricted Stock Awards Authorized 13 
  8.2 Purchase Price 14 
  8.3 Purchase Period 14 
  8.4 Payment of Purchase Price 14 
  8.5 Vesting and Restrictions on Transfer 14 
  8.6 Voting Rights; Dividends and Distributions 14 
  8.7 Effect of Termination of Service 15 
  8.8 Nontransferability of Restricted Stock Award Rights 15 

 

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9. Restricted Stock Units. 15 
  9.1 Grant of Restricted Stock Unit Awards 15 
  9.2 Purchase Price 15 
  9.3 Vesting 15 
  9.4 Voting Rights, Dividend Equivalent Rights and Distributions 15 
  9.5 Effect of Termination of Service 16 
  9.6 Settlement of Restricted Stock Unit Awards 16 
  9.7 Nontransferability of Restricted Stock Unit Awards 16 
10. Performance Awards. 16 
  10.1 Types of Performance Awards Authorized 16 
  10.2 Initial Value of Performance Shares and Performance Units 16 
  10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula 17 
  10.4 Measurement of Performance Goals 17
  10.5 Settlement of Performance Awards 18 
  10.6 Voting Rights; Dividend Equivalent Rights and Distributions 19 
  10.7 Effect of Termination of Service 20 
  10.8 Nontransferability of Performance Awards 20 
11. Cash-Based Awards and Other Stock-Based Awards. 20 
  11.1 Grant of Cash-Based Awards 20 
  11.2 Grant of Other Stock-Based Awards 20 
  11.3 Value of Cash-Based and Other Stock-Based Awards 20 
  11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards 21 
  11.5 Voting Rights; Dividend Equivalent Rights and Distributions 21 
  11.6 Effect of Termination of Service 21 
  11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards 21 
12. Standard Forms of Award Agreement. 21 
  12.1 Award Agreements 21 
  12.2 Authority to Vary Terms 21 
13. Change in Control. 22 
  13.1 Effect of Change in Control on Awards 22 
  13.2 Effect of Change in Control on Nonemployee Director Awards 22 
  13.3 Federal Excise Tax Under Section 4999 of the Code. 23 
14. Compliance with Securities Law. 23 
15. Compliance with Section 409A. 23 
  15.1 Awards Subject to Section 409A 23 
  15.2 Deferral and/or Distribution Elections 24 
  15.3 Subsequent Elections 24 
  15.4 Payment of Section 409A Deferred Compensation. 24 
16. Tax Withholding. 26 
  16.1 Tax Withholding in General 26
  16.2 Withholding in or Directed Sale of Shares 26 
17. Amendment, Suspension or Termination of Plan. 26 
18. Miscellaneous Provisions. 27 
  18.1 Repurchase Rights 27 
  18.2 Forfeiture Events. 27 
  18.3 Provision of Information 27 
  18.4 Rights as Employee, Consultant or Director 27 
  18.5 Rights as a Stockholder 28 
  18.6 Delivery of Title to Shares 28 
  18.7 Fractional Shares 28 
  18.8 Retirement and Welfare Plans 28
  18.9 Beneficiary Designation 28
  18.10 Severability 28
  18.11 No Constraint on Corporate Action 28 
  18.12 Unfunded Obligation 28 
  18.13 Choice of Law 29 

 

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Parts iD, Inc.
2020 Equity Incentive Plan

 

1. Establishment, Purpose and Term of Plan.

 

1.1 Establishment. The Parts iD, Inc. 2020 Equity Incentive Plan (the Plan) is hereby established effective as of October 1, 2020, the date of its approval by the stockholders of the Company (the Effective Date).

 

1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.

 

1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, within ten (10) years from the Effective Date.

 

2. Definitions and Construction.

 

2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:

 

(a) Affiliate means (i) a parent entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the terms “parent,” “subsidiary,” “control” and “controlled by” shall have the meanings assigned such terms for the purposes of registration of securities on Form S-8 under the Securities Act.

 

(b) Award means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.

 

(c) Award Agreement means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions applicable to an Award.

 

(d) Board means the Board of Directors of the Company.

 

(e) Cash-Based Award means an Award denominated in cash and granted pursuant to Section 11.

 

(f) Cashless Exercise means a Cashless Exercise as defined in Section 6.3(b)(i).

 

(g) Cause means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant’s material failure to abide by a Participating Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company’s reputation or business; (v) the Participant’s repeated failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability; (vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a Participating Company.

 

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(h) Change in Control means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the occurrence of any one or a combination of the following:

 

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than any of the stockholders of Onyx Enterprises Int’l Corp. immediately prior to its merger with the Company, becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or

 

(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a Transaction) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(cc)(iii), the entity to which the assets of the Company were transferred (the Transferee), as the case may be; or

 

(iii) a date specified by the Committee following approval by the stockholders of a plan of complete liquidation or dissolution of the Company.

 

For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple events described in subsections (i), (ii) and (iii) of this Section 2.1(h) are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.

 

(i) Code means the Internal Revenue Code of 1986, as amended, and any applicable regulations and administrative guidelines promulgated thereunder.

 

(j) Committee means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is No committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.

 

(k) Company means Parts iD, Inc., a Delaware corporation, and any successor corporation thereto.

 

(l) Consultant means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act.

 

(m) Director means a member of the Board.

 

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(n) Disability means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.

 

(o) Dividend Equivalent Right means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.

 

(p) Employee means any person treated as an employee (including an Officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director or Consultant nor payment of a Director’s or Consultant’s fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee. For the avoidance of doubt, a Consultant engaged by a Participating Company as an independent contractor or private entrepreneur (as defined by applicable law) shall not be treated as an employee.

 

(q) Exchange Act means the Securities Exchange Act of 1934, as amended.

 

(r) Fair Market Value means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:

 

(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.

 

(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value of a share of Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A. The Committee may also determine the Fair Market Value upon the average selling price of the Stock during a specified period that is within thirty (30) days before or thirty (30) days after such date, provided that, with respect to the grant of an Option or SAR, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified period. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.

 

(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.

 

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(s) Full Value Award means any Award settled in Stock, other than (i) an Option, (ii) a Stock Appreciation Right, or (iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to or greater than the Fair Market Value (determined on the effective date of grant) of the shares subject to such Award.

 

(t) Incentive Stock Option means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.

 

(u) Insider means an Officer, a Director or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

 

(v) Net Exercise means a Net Exercise as defined in Section 6.3(b)(iii).

 

(w) Nonemployee Director means a Director who is not an Employee.

 

(x) Nonemployee Director Award means any Award granted to a Nonemployee Director.

 

(y) Nonstatutory Stock Option means an Option not intended to be (as set forth in the Award Agreement) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of the Code.

 

(z) Officer means any person designated by the Board as an officer of the Company.

 

(aa) Option means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

 

(bb) Other Stock-Based Award means an Award denominated in shares of Stock and granted pursuant to Section 11.

 

(cc) Ownership Change Event means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).

 

(dd) Parent Corporation means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.

 

(ee) Participant means any eligible person who has been granted one or more Awards.

 

(ff) Participating Company means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.

 

(gg) Participating Company Group means, at any point in time, the Company and all other entities collectively which are then Participating Companies.

 

(hh) Performance Award means an Award of Performance Shares or Performance Units.

 

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(ii) Performance Award Formula means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.

 

(jj) Performance Goal means a performance goal established by the Committee pursuant to Section 10.3.

 

(kk) Performance Period means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.

 

(ll) Performance Share means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based upon attainment of applicable Performance Goal(s).

 

(mm) Performance Unit means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon attainment of applicable Performance Goal(s).

 

(nn) Restricted Stock Award means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.

 

(oo) Restricted Stock Bonus means Stock granted to a Participant pursuant to Section 8.

 

(pp) Restricted Stock Purchase Right means a right to purchase Stock granted to a Participant pursuant to Section 8.

 

(qq) Restricted Stock Unit means a right granted to a Participant pursuant to Section 9 to receive on a future date or occurrence of a future event a share of Stock or cash in lieu thereof, as determined by the Committee.

 

(rr) Rule 16b-3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.

 

(ss) SAR or Stock Appreciation Right means a right granted to a Participant pursuant to Section 7 to receive payment, for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price thereof.

 

(tt) Section 409A means Section 409A of the Code.

 

(uu) Section 409A Deferred Compensation means compensation provided pursuant to an Award that constitutes nonqualified deferred compensation within the meaning of Section 409A.

 

(vv) Securities Act means the Securities Act of 1933, as amended.

 

(ww) Service means a Participant’s employment or service with the Participating Company Group, whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service or a change in the Participating Company for which the Participant renders Service, provided that there is No interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds three (3) months, then on the first (1st) day following the end of such three-month period the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of and reason for such termination.

 

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(xx) Stock means the Class A common stock of the Company, as adjusted from time to time in accordance with Section 4.33.

 

(yy) Stock Tender Exercise means a Stock Tender Exercise as defined in Section 6.3(b)(ii).

 

(zz) Subsidiary Corporation means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.

 

(aaa) Ten Percent Owner means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.

 

(bbb) Trading Compliance Policy means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.

 

(ccc) Vesting Conditions mean those conditions established in accordance with the Plan prior to the satisfaction of which an Award or shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service or failure of a performance condition to be satisfied.

 

2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

3. Administration.

 

3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in connection with the administration of the Plan shall be paid by the Company.

 

3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has apparent authority with respect to such matter, right, obligation, determination or election. To the extent permitted by applicable law, the Committee may, in its discretion, delegate to a committee comprised of one or more Officers the authority to grant one or more Awards, without further approval of the Committee, to any Employee, other than a person who, at the time of such grant, is an Insider, and to exercise such other powers under the Plan as the Committee may determine; provided, however, that (a) the Committee shall fix the maximum number of shares subject to Awards that may be granted by such Officers, (b) each such Award shall be subject to the terms and conditions of the appropriate standard form of Award Agreement approved by the Board or the Committee and shall conform to the provisions of the Plan, and (c) each such Award shall conform to such other limits and guidelines as may be established from time to time by the Committee.

 

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3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered so as to permit Awards to comply with Rule 16b-3.

 

3.4 Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:

 

(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;

 

(b) to determine the type of Award granted;

 

(c) to determine the Fair Market Value of shares of Stock or other property;

 

(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of expiration of any Award, (vii) the effect of any Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;

 

(e) to determine whether an Award will be settled in shares of Stock, cash, other property or in any combination thereof;

 

(f) to approve one or more forms of Award Agreement;

 

(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;

 

(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;

 

(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose residents may be granted Awards; and

 

(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.

 

3.5 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs having exercise prices per share greater than the then Fair Market Value of a share of Stock (“Underwater Awards”) and the grant in substitution therefor of new Options or SARs having a lower exercise price, Full Value Awards or payments in cash, or (b) the amendment of outstanding Underwater Awards to reduce the exercise price thereof. This Section shall not be construed to apply to (i) “issuing or assuming a stock option in a transaction to which Section 424(a) applies,” within the meaning of Section 424 of the Code, (ii) adjustments pursuant to the assumption of or substitution for an Option or SAR in a manner that would comply with Section 409A, or (iii) an adjustment pursuant to Section 4.3.

 

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3.6 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

 

4. Shares Subject to Plan.

 

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2, 4.3, 4.4, and 4.5, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to 4,904,596 shares, and such shares shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.

 

4.2 Share Counting. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised. Shares purchased in the open market with proceeds from the exercise of Options shall not be added to the limit set forth in Section 4.1. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the exercise or settlement of Options or SARs pursuant to Section 16.2 shall not again be available for issuance under the Plan. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the vesting or settlement of Full Value Awards pursuant to Section 16.2 shall not again become available for issuance under the Plan.

 

4.3 Adjustments for Changes in Capital Structure. Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, the Award limits set forth in Section 5.3 and Section 5.4, and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the New Shares), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the exercise or purchase price per share shall be rounded up to the nearest whole cent. In No event may the exercise or purchase price, if any, under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.

 

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4.4 Assumption or Substitution of Awards. The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code. In addition, subject to compliance with applicable laws, and listing requirements, shares available for grant under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for awards under the Plan to individuals who were not Employees or Directors of the Participating Company Group prior to the transaction and shall not reduce the number of shares otherwise available for issuance under the Plan.

 

5. Eligibility, Participation and Award Limitations.

 

5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and Directors.

 

5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.

 

5.3 Incentive Stock Option Limitations

 

(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in Section 4.33, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed 4,904,596 shares. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3, and 4.4.

 

(b) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an ISO-Qualifying Corporation). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.

 

(c) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise of the Option, shares issued pursuant to each such portion shall be separately identified.

 

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5.4 Nonemployee Director Award Limit. No Nonemployee Director shall be granted within any fiscal year of the Company one or more Nonemployee Director Awards pursuant to the Plan which in the aggregate are for more than a number of shares of Stock determined by dividing $250,000 by the Fair Market Value of a share of Stock determined on the last trading day immediately preceding the date on which the applicable Nonemployee Director Award is granted.

 

6. Stock Options.

 

Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) No Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price less than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Section 409A or Section 424(a) of the Code.

 

6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) No Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) No Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option and (c) No Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.

 

6.3 Payment of Exercise Price.

 

(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Committee and subject to the limitations contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (iv) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.

 

(b) Limitations on Forms of Consideration.

 

(i) Cashless Exercise. A Cashless Exercise means the delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.

 

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(ii) Stock Tender Exercise. A Stock Tender Exercise means the delivery of a properly executed exercise notice accompanied by a Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock owned by the Participant having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. If required by the Company, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.

 

(iii) Net Exercise. A Net Exercise means the delivery of a properly executed exercise notice followed by a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.

 

6.4 Effect of Termination of Service.

 

(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided by this Plan and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate.

 

(i) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event No later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the Option Expiration Date).

 

(ii) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event No later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months (or such longer or shorter period provided by the Award Agreement) after the Participant’s termination of Service.

 

(iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.

 

(iv) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event No later than the Option Expiration Date.

 

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(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would No longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event No later than the Option Expiration Date.

 

6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such Option as an Incentive Stock Option.

 

7. Stock Appreciation Rights.

 

Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a Tandem SAR) or may be granted independently of any Option (a Freestanding SAR). A Tandem SAR may only be granted concurrently with the grant of the related Option.

 

7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR. Notwithstanding the foregoing, an SAR may be granted with an exercise price lower than the minimum exercise price set forth above if such SAR is granted pursuant to an assumption or substitution for another stock appreciation right in a manner that would qualify under the provisions of Section 409A of the Code.

 

7.3 Exercisability and Term of SARs.

 

(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable No later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.

 

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(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that (i) No Freestanding SAR shall be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR and (ii) No Freestanding SAR granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such SAR (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of a Freestanding SAR, each Freestanding SAR shall terminate ten (10) years after the effective date of grant of the SAR, unless earlier terminated in accordance with its provisions.

 

7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum upon the date of exercise of the SAR. When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.

 

7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall automatically be deemed to be exercised as of such date with respect to such portion.

 

7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.

 

7.7 Transferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.

 

Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act.

 

8. Restricted Stock Awards.

 

Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5.

 

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8.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law or other applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit (unless consideration in the form of services is disallowed by the applicable law) having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award or such other value as determined in the Award Agreement evidencing the Restricted Stock Award.

 

8.3 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in No event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.

 

8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.

 

8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, that if so determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid, and otherwise shall be paid No later than the end of the calendar year in which such dividends or distributions are paid to stockholders (or, if later, the 15th day of the third month following the date such dividends or distributions are paid to stockholders). In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.33, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.

 

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8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.

 

8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

 

9. Restricted Stock Units.

 

Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5.

 

9.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.

 

9.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award.

 

9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have No voting or dividend rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with a cash amount or with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Restricted Stock Units (rounded to the nearest whole number), if any, to be credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. If so determined by the Committee and provided by the Award Agreement, such cash amount or additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.33, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.

 

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9.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.

 

9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee in compliance with Section 409A, if applicable, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that if the settlement date with respect to any shares issuable upon vesting of Restricted Stock Units would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the settlement date shall be deferred until the next trading day on which the sale of such shares would not violate the Trading Compliance Policy but in any event No later than the 15th day of the third calendar month following the year in which such Restricted Stock Units vest. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.

 

9.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

 

10. Performance Awards.

 

Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.

 

10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.33, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.

 

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10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

 

10.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained (Performance Targets) with respect to one or more measures of business or financial performance or other criteria established by the Committee (each, a Performance Measure), subject to the following:

 

(a) Performance Measures. Performance Measures based on objective criteria shall be calculated in accordance with the Company’s financial statements, or, if such measures are not reported in the Company’s financial statements, they shall be calculated in accordance with generally accepted accounting principles, a method used generally in the Company’s industry, or in accordance with a methodology established by the Committee prior to the grant of the Performance Award. Performance Measures based on subjective criteria shall be determined on the basis established by the Committee in granting the Award. As specified by the Committee, Performance Measures may be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes, one or more Subsidiary Corporations or such division or other business unit of any of them selected by the Committee. Unless otherwise determined by the Committee prior to the grant of the Performance Award, the Performance Measures applicable to the Performance Award shall be calculated prior to the accrual of expense for any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) on the Performance Measures of any change in accounting standards or any unusual or infrequently occurring event or transaction, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award. Performance Measures may be based upon one or more of the following, without limitation, as determined by the Committee:

 

(i) revenue;

 

(ii) sales;

 

(iii) expenses;

 

(iv) operating income;

 

(v) gross margin;

 

(vi) operating margin;

 

(vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;

 

(viii) pre-tax profit;

 

(ix) net operating income;

 

(x) net income;

 

(xi) economic value added;

 

(xii) free cash flow;

 

(xiii) operating cash flow;

 

(xiv) balance of cash, cash equivalents and marketable securities;

 

(xv) stock price;

 

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(xvi) earnings per share;

 

(xvii) return on stockholder equity;

 

(xviii) return on capital;

 

(xix) return on assets;

 

(xx) return on investment;

 

(xxi) total stockholder return;

 

(xxii) employee satisfaction;

 

(xxiii) employee retention;

 

(xxiv) market share;

 

(xxv) customer satisfaction;

 

(xxvi) product development;

 

(xxvii) research and development expenses;

 

(xxviii) completion of an identified special project;

 

(xxix) completion of a joint venture or other corporate transaction; and

 

(xxx) personal performance objectives established for an individual Participant or group of Participants.

 

(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the Performance Target level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Committee.

 

10.5 Settlement of Performance Awards.

 

(a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall determine the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.

 

(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine.

 

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(c) Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on an unpaid leave of absence.

 

(d) Notice to Participants. As soon as practicable following the Committee’s determination in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.

 

(e) Payment in Settlement of Performance Awards. As soon as practicable following the Committee’s determination in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 15.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to the Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.

 

(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above.

 

10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have No voting or dividend rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant either in cash or in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Performance Shares (rounded to the nearest whole number), if any, to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights, if any, shall be accumulated and paid to the extent that the related Performance Shares become nonforfeitable. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalent Rights shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.33, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.

 

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10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s termination of Service on the Performance Award shall be as follows:

 

(a) Death or Disability. If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participant’s Service during the Performance Period. Payment shall be made following the end of the Performance Period in any manner permitted by Section 10.5.

 

(b) Other Termination of Service. If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the event of an involuntary termination of the Participant’s Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner provided by Section 10.7(a). Payment of any amount pursuant to this Section shall be made following the end of the Performance Period in any manner permitted by Section 10.5.

 

10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, No Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

 

11. Cash-Based Awards and Other Stock-Based Awards.

 

Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

11.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.

 

11.2 Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Other Stock-Based Awards may be made available as a form of payment in the settlement of other Awards or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

 

11.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met.

 

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11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.

 

11.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have No voting or dividend rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.33, appropriate adjustments shall be made in the Participant’s Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.

 

11.6 Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service. Such provisions shall be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.

 

11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.

 

12. Standard Forms of Award Agreement.

 

12.1 Award Agreements. Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means.

 

12.2 Authority to Vary Terms. The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.

 

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13. Change in Control.

 

13.1 Effect of Change in Control on Awards. In the event of a Change in Control, outstanding Awards shall be subject to the definitive agreement entered into by the Company in connection with the Change in Control. Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:

 

(a) Accelerated Vesting. In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following the Change in Control, and to such extent as the Committee determines.

 

(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the Acquiror), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

 

(c) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards, consistent with the requirements of Section 409A, if applicable.

 

13.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 15.4(f), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 13.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control.

 

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13.3 Federal Excise Tax Under Section 4999 of the Code.

 

(a) Excess Parachute Payment. If any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, then, provided such election would not subject the Participant to taxation under Section 409A, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.

 

(b) Determination by Tax Firm. To aid the Participant in making any election called for under Section 13.3(a), No later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 13.3(a), the Company shall request a determination in writing by the professional firm engaged by the Company for general tax purposes, or, if the tax firm so engaged by the Company is serving as accountant or auditor for the Acquiror, the Company will appoint a nationally recognized tax firm to make the determinations required by this Section (the “Tax Firm”). As soon as practicable thereafter, the Tax Firm shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Tax Firm may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Tax Firm such information and documents as the Tax Firm may reasonably request in order to make its required determination. The Company shall bear all fees and expenses the Tax Firm charges in connection with its services contemplated by this Section.

 

14. Compliance with Securities Law.

 

The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, No Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

 

15. Compliance with Section 409A.

 

15.1 Awards Subject to Section 409A. The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and the Plan shall be so construed. The provisions of this Section 15 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:

 

(a) A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.

 

(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.

 

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Subject to the provisions of Section 409A, the term “Short-Term Deferral Period means the 2½ month period ending on the later of (i) the 15th day of the third month following the end of the Participant’s taxable year in which the right to payment under the applicable portion of the Award is No longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Company’s taxable year in which the right to payment under the applicable portion of the Award is No longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning provided by Section 409A.

 

15.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral and/or payment elections (each, an “Election”) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:

 

(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.

 

(b) Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to the Participant.

 

(c) Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 15.3.

 

15.3 Subsequent Elections. Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:

 

(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.

 

(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.

 

(c) No subsequent Election related to a payment pursuant to Section 15.4(a)(iv) shall be made less than twelve (12) months before the date on which such payment would otherwise have been made.

 

(d) Subsequent Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section 15.3.

 

15.4 Payment of Section 409A Deferred Compensation.

 

(a) Permissible Payments. Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:

 

(i) The Participant’s “separation from service” (as defined by Section 409A);

 

(ii) The Participant’s becoming “disabled” (as defined by Section 409A);

 

(iii) The Participant’s death;

 

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(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 15.2 or 15.3, as applicable;

 

(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or

 

(vi) The occurrence of an “unforeseeable emergency” (as defined by Section 409A).

 

(b) Installment Payments. It is the intent of this Plan that any right of a Participant to receive installment payments (within the meaning of Section 409A) shall, for all purposes of Section 409A, be treated as a right to a series of separate payments.

 

(c) Required Delay in Payment to Specified Employee Pursuant to Separation from Service. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, No payment pursuant to Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a “specified employee” (as defined by Section 409A) as of the date of the Participant’s separation from service before the date (the Delayed Payment Date) that is six (6) months after the date of such Participant’s separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

 

(d) Payment Upon Disability. All distributions of Section 409A Deferred Compensation payable pursuant to Section 15.4(a)(ii) by reason of a Participant becoming disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election. If the Participant has made No Election with respect to distributions of Section 409A Deferred Compensation upon becoming disabled, all such distributions shall be paid in a lump sum upon the determination that the Participant has become disabled.

 

(e) Payment Upon Death. If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death. If the Participant has made No Election with respect to distributions of Section 409A Deferred Compensation upon death, all such distributions shall be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.

 

(f) Payment Upon Change in Control. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 13.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 15.4(c)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.

 

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(g) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for payment pursuant to Section 15.4(a)(vi) in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum upon the Committee’s determination that an unforeseeable emergency has occurred. The Committee’s decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.

 

(h) Prohibition of Acceleration of Payments. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.

 

(i) No Representation Regarding Section 409A Compliance. Notwithstanding any other provision of the Plan, the Company makes No representation that Awards shall be exempt from or comply with Section 409A. No Participating Company shall be liable for any tax, penalty or interest imposed on a Participant by Section 409A.

 

16. Tax Withholding.

 

16.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company shall have No obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.

 

16.2 Withholding in or Directed Sale of Shares. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of any Participating Company. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates (or the maximum individual statutory withholding rates for the applicable jurisdiction if use of such rates would not result in adverse accounting consequences or cost). The Company may require a Participant to direct a broker, upon the vesting, exercise or settlement of an Award, to sell a portion of the shares subject to the Award determined by the Company in its discretion to be sufficient to cover the tax withholding obligations of any Participating Company and to remit an amount equal to such tax withholding obligations to such Participating Company in cash.

 

17. Amendment, Suspension or Termination of Plan.

 

The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s stockholders, there shall be (a) No increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Sections 4.2, 4.3, 4.3 and 4.5, (b) No change in the class of persons eligible to receive Incentive Stock Options, and (c) No other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, No amendment, suspension or termination of the Plan may have a materially adverse effect on any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

 

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18. Miscellaneous Provisions.

 

18.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

18.2 Forfeiture Events.

 

(a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service, or any accounting restatement due to material noncompliance of the Company with any financial reporting requirements of securities laws as a result of which, and to the extent that, such reduction, cancellation, forfeiture, or recoupment is required by applicable securities laws. In addition, to the extent that claw-back or similar provisions applicable to Awards are required by applicable law, listing standards and/or policies adopted by the Company, Awards granted under the Plan shall be subject to such provisions.

 

(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve- (12-) month period.

 

18.3 Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.

 

18.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. Nothing in the Plan or any Award granted under the Plan shall be understood or interpreted to mean that a Consultant has an employment relationship with any Participating Company or its Affiliate. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in No event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.

 

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18.5 Rights as a Stockholder. A Participant shall have No rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.33 or another provision of the Plan.

 

18.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.

 

18.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.

 

18.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit. In addition, unless a written employment agreement or other service agreement specifically references Awards, a general reference to “benefits” or a similar term in such agreement shall not be deemed to refer to Awards granted hereunder.

 

18.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.

 

18.10 Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.

 

18.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.

 

18.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. The Participants shall have No claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.

 

18.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without regard to its conflict of law rules. 

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IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Parts iD, Inc. 2020 Equity Incentive Plan as duly adopted by the Board on October 1, 2020.

 

  /s/ Kailas Agrawal
  Kailas Agrawal, Secretary

 

 

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Exhibit 31.1

 

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Antonino Ciappina, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of PARTS iD, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  /s/ Antonino Ciappina
  Antonino Ciappina
  Chief Executive Officer

 

Date: August 9, 2021

Exhibit 31.2

 

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Kailas Agrawal, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of PARTS iD, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  /s/ Kailas Agrawal
  Kailas Agrawal
  Chief Financial Officer

 

Date: August 9, 2021

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of PARTS iD, Inc. (the “Company”) for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Antonino Ciappina, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Antonino Ciappina
  Antonino Ciappina
  Chief Executive Officer

 

Date: August 9, 2021

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of PARTS iD, Inc. (the “Company”) for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Kailas Agrawal, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Kailas Agrawal
  Kailas Agrawal
  Chief Financial Officer

 

Date: August 9, 2021