NON-INCENTIVE STOCK OPTION AGREEMENT
EXHIBIT 10.3
This
NON-INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”) is made this
April 28, 2008, by and between U.S. Auto Parts Network, Inc., a Delaware
corporation (the “Company”), and Alexander Adegan, an individual
resident of California (“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 Omnibus 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 120,000 shares (the “Shares”)
of common stock, $0.001 par value (“Common Stock”), of the Company at
the exercise price of $3.16 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.
2. Vesting
of Option Rights.
(a) The
Option shall have a vesting commencement date of April 28, 2008, (the
“Vesting Commencement Date”), and except as otherwise provided in this
Agreement, the Option shall be exercisable for vested Shares
only. The Option shall initially be for unvested
Shares. The Shares shall become vested Shares in a series of
twenty-two (22) successive equal monthly installments upon Optionee’s completion
of each additional month of Service over the twenty-one (21) month period
measured from the Vesting Commencement Date. In no event shall any
additional Shares vest after Optionee’s Service ceases.
(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 “Misconduct” (as defined in Section
3(e)) or Optionee’s death or Permanent Disability, Optionee may at any time
within a period of one (1) month after such termination exercise the Option
to
the extent the Option was exercisable by Optionee on the date of the termination
of Optionee’s employment or Service.
(b) If
Optionee’s employment or Service is terminated for Misconduct, 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 Permanent
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 Permanent 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 Permanent 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) “Misconduct”
shall have the same meaning as “Cause”, as such term is defined in the
Consulting Agreement dated April 28, 2008 by and between the Company and
Optionee. 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
Misconduct.
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) Immediately
prior to the specified effective date of a Change in Control, the unvested
Shares subject to this Option shall automatically become vested Shares, and
this
Options shall be exercisable for all or any portion of such Shares.
(b) Immediately
following the consummation of the Change in Control, this Option shall
terminate, except to the extent assumed by the successor corporation (or parent
thereof) or otherwise continued in effect pursuant to the terms of the Change
in
Control transaction. 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.
(c) 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.
(d) 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. 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
of
1933, as amended, the Exchange Act of 1934, as amended, 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.
(l) Acceptance
of Option. By accepting receipt of this Agreement, Optionee
hereby agrees to the terms and conditions set forth in this Agreement and the
Plan with respect to the Option and any Shares issued as a result of the
exercise of the Option, in whole or in part.
IN
WITNESS WHEREOF, the Company has executed this Agreement and caused
this Option to be issued to Optionee on the date set forth in the first
paragraph above.
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By: /s/
XXXXXXX XxXXXXX
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Name: Xxxxxxx
XxXxxxx
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Title: Chief
Financial Officer
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