NON-QUALIFIED STOCK OPTION AGREEMENT
Exhibit
99.4
This
NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”)
is made this 15th day of October 2007, by and between U.S. Auto Parts Network,
Inc., a Delaware corporation (the “Company”), and
Xxxxx Xxxxxxxxxx, an individual
(“Optionee”). Capitalized terms used but
not otherwise defined herein shall have the meaning ascribed to such terms
in
the U.S. Auto Parts Network, Inc. 2007 New Employee Incentive Plan (the
“Plan”).
1. Grant
of Option. The
Company hereby grants Optionee the option (the
“Option”) to purchase all or any part of an aggregate
of 250,000 shares (the “Shares”) of
common stock, $0.001 par value (“Common Stock”), of
the Company at the exercise price of $8.65 per share according to the terms
and
conditions set forth in this Agreement and in the Plan. The Option
will not be treated as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”). The Option is issued
under the Plan and is subject to its terms and conditions. A copy of
the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business ten (10) years from the date
hereof (the “Expiration Date”).
2. Vesting
of Option Rights.
(a) Unless
otherwise provided in this Agreement, the Option shall be exercisable for vested
Shares only. The Option shall initially be for unvested Shares, and
the Shares shall become vested Shares as follows: (i) 125,000 of the Shares
shall become vested Shares on the last day of any consecutive three calendar
months when and if the average of the Monthly Average Prices (as defined below)
of the Common Stock during such three month period reaches or exceeds $14.00
(as
adjusted for any stock dividends, splits, combinations or similar events with
respect to the Common Stock after the date of this Agreement) and (ii) the
balance of the Shares shall vest on the last day of any consecutive three
calendar months when and if the average of the Monthly Average Prices of the
Common Stock during such three month period reaches or exceeds $18.00 (as
adjusted for any stock dividends, splits, combinations or similar events with
respect to the Common Stock after the date of this Agreement); provided that,
in
each such case (for both clauses (i) and (ii)), Optionee shall have continuously
provided Service from the date of this Agreement through the date of such
vesting (such proviso, the “Continuous Service
Requirement”). The “Monthly Average
Price” shall be calculated by adding the closing sales price of
one share of the Common Stock as reported by the Exchange for each Trading
Day
in a given calendar month and dividing such sum by the total number of Trading
Days in such month. For the purposes of this Agreement,
“Exchange” shall mean the NASDAQ Global Market or the
primary securities exchange on which the Company’s common stock is then listed
or quoted, and “Trading Day” shall mean any day on
which the Common Stock is listed or quoted and traded on the
Exchange. For example, if there are 20 Trading Days in each calendar
month and the Monthly Average Price was $12.00 in January 2009, $13.50 in
February 2009 and $17.00 in March 2009, and if Optionee had continuously
provided Service from the date of this Agreement through the end of March 2009,
then the first installment (or 125,000 of the Shares) shall vest on March 31,
2009 [(($12.00 ´ 20) + ($13.50
´
20) + ($17.00 ´ 20))/60
=
$14.16.]. In no event
shall any Shares vest after the fifth anniversary of the date of this
Agreement.
Notwithstanding
the Continuous Service Requirement, to the extent one or both of the milestones
set forth above have not been achieved, if the Monthly Average Price of the
Common Stock equals or exceeds $18.00 (or $14.00 if the first milestone has
not
been achieved), as adjusted for any stock dividends, splits, combinations or
similar events with respect to the Common Stock after the date of this
Agreement, for either (A) each of the last two completed calendar months
immediately prior to (x) the termination of Optionee’s employment (other than
for Cause (as defined in Section 3(e)) or due to death or Disability (as defined
in Section 3(f)) or (y) Optionee’s resignation for Good Reason or (B) the last
completed calendar month immediately prior to such termination or resignation,
then the consecutive three calendar month period used for determining whether
the milestones have been met may include the one or two calendar months, as
the
case may be, immediately following the last completed calendar month prior
to
such termination or resignation to complete the three month determination
period, provided that the last day of such three month period falls on or prior
to the fifth anniversary of the date of this Agreement. For example,
assuming none of the Shares have vested and assuming there are 20 Trading Days
in each month, if Optionee resigns for Good Reason prior to September 30, 2012
and the Monthly Average Prices for the two calendar months immediately prior
to
such resignation were $14.00 and $16.00, then the calendar month during which
Optionee resigns may be included in the three month determination period for
the
purposes of calculating whether the vesting requirement set forth in the first
paragraph of this Section 2(a) has been met, even if Optionee had resigned
in
the first week of such month.
For
purposes of this Agreement, “Good Reason” shall mean
any of the following events: (1) a reduction in the scope of
Optionee’s duties and responsibilities or the level of management to which he
reports effected by the Company without Optionee’s prior written consent; (2) a
reduction in his level of annual base salary or bonus as a percentage of annual
base salary without his prior written consent; (3) a relocation of Optionee
more
than thirty (30) miles from the Company’s current corporate headquarters as of
the date hereof effected by the Company without Optionee’s prior written
consent; (4) a material breach of any provision of the Employment Agreement
(as
defined in Section 3(e)) by the Company; or (5) the failure of the Company
to
have a successor entity specifically assume the Employment
Agreement. Notwithstanding the foregoing, “Good Reason” shall only be
found to exist if prior to Optionee’s resignation for Good Reason, the Optionee
has provided 30 days written notice to the Company of such Good Reason event
indicating and describing the event resulting in such Good Reason, and the
Company does not cure such event within 90 days following the receipt of such
notice from Optionee.
(b) During
the lifetime of Optionee, the Option shall be exercisable only by Optionee
and
shall not be assignable or transferable by Optionee, other than by will or
the
laws of descent and distribution. Notwithstanding the foregoing,
Optionee may transfer the Option to any Family Member (as such term is defined
in the General Instructions to Form S-8 (or successor to such Instructions
or
such Form)); provided, however, that (i) Optionee may not
receive any consideration for such transfer, (ii) the Family Member must agree
in writing not to make any subsequent transfers of the Option other than by
will
or the laws of the descent and distribution and (iii) the Company receives
prior
written notice of such transfer.
3. Exercise
of Option after Death or Termination of Employment or Service. The
Option shall terminate and may no longer be exercised if Optionee ceases to
be
employed by or provide Service to the Company or its Affiliates, except
that:
(a) If
Optionee’s employment or Service shall be terminated for any reason, voluntary
or involuntary, other than for Cause or Optionee’s death or Disability, Optionee
may, at any time within a period of one (1) month after the later of (i) the
date of such termination or (ii) the date of any vesting of the Option pursuant
to the application of the provisions in the second paragraph of Section 2(a)
(the later of (i) and (ii), the “Final Vesting Date”),
exercise the Option to the extent the Option was exercisable by Optionee on
the
Final Vesting Date.
(b) If
Optionee’s employment or Service is terminated for Cause, the Option shall be
terminated as of the date of the act giving rise to such
termination.
(c) If
Optionee shall die while the Option is still exercisable according to its terms,
or if employment or Service is terminated because of Optionee’s Disability while
in the employ of the Company, and Optionee shall not have fully exercised the
Option, such Option may be exercised, at any time within twelve (12) months
after Optionee’s death or date of termination of employment or Service for
Disability, by Optionee, personal representatives or administrators or guardians
of Optionee, as applicable, or by any person or persons to whom the Option
is
transferred by will or the applicable laws of descent and distribution, to
the
extent of the full number of Shares Optionee was entitled to purchase under
the
Option on (i) the earlier of the date of death or termination of employment
or
Service or (ii) the date of termination for such Disability, as
applicable.
(d) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after
the termination date of the Option.
(e) “Cause”
shall mean Optionee has engaged in any one of the following: (i)
misconduct involving the Company or its assets, including, without limitation,
misappropriation of the Company’s funds or property; (ii) reckless or willful
misconduct in the performance of Optionee’s duties in the event such conduct
continues after the Company has provided 30 days written notice to Optionee
and
a reasonable opportunity to cure; (iii) conviction of, or plea of nolo contendre
to, any felony or misdemeanor involving dishonesty or fraud; (iv) the violation
of any of the Company’s policies, including without limitation, the Company’s
policies on equal employment opportunity and the prohibition against unlawful
harassment; (v) the material breach of any provision of this Agreement or the
Employment Agreement between the Company and Optionee (the
“Employment Agreement”) after 30 days written notice
to Optionee of such breach and a reasonable opportunity to cure such breach;
or
(vi) any other misconduct that has a material adverse effect on the business
or
reputation of the Company. The foregoing definition shall not in any
way preclude or restrict the right of the Company (or any Affiliate) to
discharge or dismiss any Optionee or other person in the Service of the Company
(or any Affiliate) for any other acts or omissions but such other acts or
omissions shall not be deemed, for purposes of the Agreement, to constitute
grounds for termination for Cause.
(f) “Disability”
shall mean a physical or mental impairment which, the Board of Directors
determines, after consideration and implementation of reasonable accommodations,
precludes the Optionee from performing his essential job functions for a period
longer than three consecutive months or a total of one hundred twenty (120)
days
in any twelve month period.
4. Method
of Exercise of Option. Subject
to the foregoing, the Option may be exercised in whole or in part from time
to
time by serving written notice of exercise on the Company at its principal
office within the Option period. The notice shall state the number of
Shares as to which the Option is being exercised and shall be accompanied by
payment of the exercise price. Payment of the exercise price shall be
made (i) in cash (including bank check, personal check or money order payable
to
the Company), (ii) with the approval of the Company (which may be given in
its
sole discretion), by delivering to the Company for cancellation shares of the
Company’s Common Stock already owned by Optionee having a Fair Market Value
equal to the full exercise price of the Shares being acquired, (iii) with the
approval of the Company (which may be given in its sole discretion) and subject
to Section 402 of the Xxxxxxxx-Xxxxx Act of 2002, by delivering to the Company
the full exercise price of the Shares being acquired in a combination of cash
and Optionee’s full recourse liability promissory note with a principal amount
not to exceed eighty percent (80%) of the exercise price and a term not to
exceed five (5) years, which promissory note shall provide for interest on
the
unpaid balance thereof which at all times is not less than the minimum rate
required to avoid the imputation of income, original issue discount or a
below-market rate loan pursuant to Sections 483, 1274 or 7872 of the Code or
any
successor provisions thereto, (iv) subject to Section 402 of the Xxxxxxxx-Xxxxx
Act of 2002, to the extent this Option is exercised for vested shares, through
a
special sale and remittance procedure pursuant to which Optionee shall
concurrently provide irrevocable instructions (1) to Optionee’s brokerage firm
to effect the immediate sale of the purchased Shares and remit to the Company,
out of the sale proceeds available on the settlement date, sufficient funds
to
cover the aggregate exercise price payable for the purchased Shares plus all
applicable income and employment taxes required to be withheld by the Company
by
reason of such exercise and (2) to the Company to deliver the certificates
for
the purchased shares directly to such brokerage firm in order to complete the
sale, or (v) with the approval of the Company (which may be given in its sole
discretion) and subject to Section 402 of the Xxxxxxxx-Xxxxx Act of 2002, by
delivering to the Company a combination of any of the forms of payment described
above. This Option may be exercised only with respect to full shares
and no fractional share of stock shall be issued.
5. Change
in Control.
(a) If
this
Option is assumed in connection with a Change in Control or otherwise continued
in effect, then this Option shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Change in Control
had the Option been exercised immediately prior to such Change in Control,
and
appropriate adjustments shall also be made to the exercise price,
provided the aggregate exercise price shall remain the
same. To the extent that the actual holders of the Company’s
outstanding Common Stock receive cash consideration for their Common Stock
in
consummation of the Change in Control, the successor corporation may, in
connection with the assumption of this Option, substitute one or more shares
of
its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in
Control.
(b) This
Agreement shall not in any way affect the right of the Company to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
(c) For
purposes of this Agreement, “Change in Control” shall
mean a change in ownership or control of the Company effected through any of
the
following transactions: (i) a merger, consolidation or other reorganization
unless securities representing more than 50% of the total combined voting power
of the voting securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Company’s outstanding
voting securities immediately prior to such transaction; (ii) the sale, transfer
or other disposition of all or substantially all of the Company’s assets; or
(iii) the acquisition, directly or indirectly by any person or related group
of
persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company),
of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of
securities possessing more than 50% of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer made
directly to the Company’s stockholders.
6. Capital
Adjustments and Reorganization. Should
any change be made to the Common Stock by reason of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Company’s receipt of consideration, appropriate adjustments shall be
made to (a) the number and/or class of securities subject to this Option and
(b)
the exercise price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
7. Restrictions
on Transfer of Shares.
(a) Except
for any Permitted Transfer, Optionee shall not sell, make any short sale of,
loan, pledge, encumber, assign, grant any option for the purchase of, or
otherwise dispose or transfer, or otherwise agree to engage in any of the
foregoing transactions with respect to, any of the Shares during the period
beginning on the date hereof and ending on the date which is 18 months after
the
date of this Agreement (such period, the “Restricted
Period”). For purposes of this Agreement,
“Permitted Transfer” shall mean (i) a
gratuitous transfer of the Shares, provided and only if Optionee obtains the
Company’s prior written consent to such transfer, (ii) a transfer of title to
the Shares effected pursuant to Optionee’s will or the laws of inheritance
following Optionee’s death, or (iii) a transfer of the Shares only to the extent
necessary to cover any current tax liabilities of Optionee associated with
the
exercise of the Option.
(b) Each
person to whom the Shares are transferred by means of clause (i) or (ii) of
Section 7(a) above (“Transferee”) must, as a condition
precedent to the validity of such transfer, acknowledge in writing to the
Company that Transferee is bound by the provisions of this Agreement and that
Transferee will not transfer, assign, encumber or otherwise dispose of any
of
the Shares during the Restricted Period.
(c) Any
new,
substituted or additional securities which are distributed with respect to
the
Shares by reason of any recapitalization or reorganization of the Company shall
be immediately subject to the transfer restrictions set forth in this Section
7,
to the same extent the Shares are at such time covered by such
provisions.
(d) In
order
to enforce these transfer restrictions, the Company may impose stop-transfer
instructions with respect to the Shares during the Restricted
Period.
(e) During
the Restricted Period, any and all stock certificates for the Shares shall
be
endorsed with a restrictive legend substantially in the following
form:
“The
shares represented by this certificate are subject to certain transfer
restrictions and may not be sold, assigned, transferred, encumbered, or in
any
manner disposed of except in conformity with the terms of a written agreement
by
and between the Company and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is
maintained at the Company’s principal corporate offices.”
8. Miscellaneous.
(a) Entire
Agreement; Plan Provisions Control. This Agreement (and any
addendum hereto) and the Plan constitute the entire agreement between the
parties hereto with regard to the subject matter hereof. In the event
that any provision of the Agreement conflicts with or is inconsistent in any
respect with the terms of the Plan, the terms of the Plan shall
control. All decisions of the Committee with respect to any question
or issue arising under the Plan or this Agreement shall be and binding on all
persons having an interest in this Option. All capitalized terms used
in this Agreement and not otherwise defined in this Agreement shall have the
meaning assigned to them in the Plan.
(b) No
Rights of Stockholders. Neither Optionee, Optionee’s legal
representative nor a permissible assignee of this Option shall have any of
the
rights and privileges of a stockholder of the Company with respect to the
Shares, unless and until such Shares have been issued in the name of Optionee,
Optionee’s legal representative or permissible assignee, as applicable, without
restrictions thereto.
(c) No
Right to Employment. The grant of the Option shall not be
construed as giving Optionee the right to be retained in the employ of, or
if
Optionee is a director of the Company or an Affiliate as giving the Optionee
the
right to continue as a director of, the Company or an Affiliate, nor will it
affect in any way the right of the Company or an Affiliate to terminate such
employment or position at any time, with or without cause. In
addition, the Company or an Affiliate may at any time dismiss Optionee from
employment, or terminate the term of a director of the Company or an Affiliate,
free from any liability or any claim under the Plan or the
Agreement. Nothing in the Agreement shall confer on any person any
legal or equitable right against the Company or any Affiliate, directly or
indirectly, or give rise to any cause of action at law or in equity against
the
Company or an Affiliate. The Option granted hereunder shall not form
any part of the wages or salary of Optionee for purposes of severance pay or
termination indemnities, irrespective of the reason for termination of
employment. Under no circumstances shall any person ceasing to be an
employee of the Company or any Affiliate be entitled to any compensation for
any
loss of any right or benefit under the Agreement or Plan which such employee
might otherwise have enjoyed but for termination of employment, whether such
compensation is claimed by way of damages for wrongful or unfair dismissal,
breach of contract or otherwise. By participating in the Plan,
Optionee shall be deemed to have accepted all the conditions of the Plan and
the
Agreement and the terms and conditions of any rules and regulations adopted
by
the Committee and shall be fully bound thereby.
(d) Governing
Law. The validity, construction and effect of the Plan and the
Agreement, and any rules and regulations relating to the Plan and the Agreement,
shall be determined in accordance with the internal laws, and not the law of
conflicts, of the State of Delaware.
(e) Severability. If
any provision of the Agreement is or becomes or is deemed to be invalid, illegal
or unenforceable in any jurisdiction or would disqualify the Agreement under
any
law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so construed
or
deemed amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Agreement, such provision
shall be stricken as to such jurisdiction or the Agreement, and the remainder
of
the Agreement shall remain in full force and effect.
(f) No
Trust or Fund Created. Neither the Plan nor the Agreement shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and Optionee or
any
other person.
(g) Headings. Headings
are given to the Sections and subsections of the Agreement solely as a
convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation
of
the Agreement or any provision thereof.
(h) Notices. Any
notice required to be given or delivered to the Company under the terms of
this
Agreement shall be addressed to the Company at its principal corporate
offices. Any notice required to be given or delivered to Optionee
shall be addressed to Optionee at the address of record provided to the Company
by Optionee in connection with Optionee’s employment with or Services provided
to the Company or such other address as Optionee may designate by ten (10)
days’
advance written notice to the Company. Any notice required to be
given under this Agreement shall be in writing and shall be deemed effective
upon personal delivery or upon the third (3rd) day following deposit in the
U.S.
mail, registered or certified, postage prepaid and properly addressed to the
party entitled to such notice.
(i) Conditions
Precedent to Issuance of Shares. Shares shall not be issued
pursuant to the exercise of the Option unless such exercise and the issuance
and
delivery of the applicable Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, state blue
sky laws, the requirements of any applicable Stock Exchange or the Nasdaq Stock
Market and the Delaware General Corporation Law. As a condition to
the exercise of the purchase price relating to the Option, the Company may
require that the person exercising or paying the purchase price represent and
warrant that the Shares are being purchased only for investment and without
any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation and warranty is required by
law.
(j) Withholding. In
order to provide the Company with the opportunity to claim the benefit of any
income tax deduction which may be available to it upon the exercise of the
Option and in order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems appropriate
to
insure that, if necessary, all applicable federal or state payroll, withholding,
income or other taxes are withheld or collected from Optionee.
(k) Consultation
With Professional Tax and Investment Advisors. Optionee
acknowledges that the grant, exercise and vesting with respect to this Option,
and the sale or other taxable disposition of the Shares, may have tax
consequences pursuant to the Code or under local, state or international tax
laws. Optionee further acknowledges that Optionee is relying solely
and exclusively on Optionee’s own professional tax and investment advisors with
respect to any and all such matters (and is not relying, in any manner, on
the
Company or any of its employees or representatives). Optionee
understands and agrees that any and all tax consequences resulting from the
Option and its grant, exercise and vesting, and the sale or other taxable
disposition of the Shares, is solely and exclusively the responsibility of
Optionee without any expectation or understanding that the Company or any of
its
employees or representatives will pay or reimburse Optionee for such taxes
or
other items.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the Company and Optionee have executed this Agreement
on the date set forth in the first paragraph.
|
By: /s/
Xxxxxxx X. XxXxxxx
Name: Xxxxxxx
X. XxXxxxx
Title: Chief
Financial Officer, Executive Vice President of Finance and
Treasurer
OPTIONEE:
By: /s/
Xxxxx Xxxxxxxxxx
Name: Xxxxx
Xxxxxxxxxx
|
