0001193125-14-366979.txt : 20141009 0001193125-14-366979.hdr.sgml : 20141009 20141008202808 ACCESSION NUMBER: 0001193125-14-366979 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20141008 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20141009 DATE AS OF CHANGE: 20141008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U.S. Auto Parts Network, Inc. CENTRAL INDEX KEY: 0001378950 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 680623433 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33264 FILM NUMBER: 141149080 BUSINESS ADDRESS: STREET 1: 16941 KEEGAN AVE CITY: CARSON STATE: CA ZIP: 90746 BUSINESS PHONE: (310) 735-0085 MAIL ADDRESS: STREET 1: 16941 KEEGAN AVE CITY: CARSON STATE: CA ZIP: 90746 8-K 1 d801594d8k.htm 8-K 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 8, 2014

 

 

U.S. AUTO PARTS NETWORK, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-33264   68-0623433

(State of incorporation

or organization)

 

(Commission

file number)

 

(I.R.S. Employer

Identification Number)

16941 Keegan Avenue, Carson, CA 90746

(Address of principal executive offices) (Zip Code)

(310) 735-0092

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

On October 8, 2014, AutoMD, Inc. (“AutoMD”), a subsidiary of U.S. Auto Parts Network, Inc. (the “Company”), entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Muzzy-Lyon Auto Parts, Inc. (“Muzzy-Lyon”), Manheim Investments, Inc. (“Manheim”), the Company, Oak Investment Partners XI, L.P. (“Oak”) and the Sol Khazani Living Trust (the “Trust”, and collectively with Muzzy-Lyon, Manheim, the Company and Oak, the “Investors”). Upon execution of the Purchase Agreement, Muzzy-Lyon, Manheim, Oak and the Trust purchased an aggregate of 7,000,000 shares of AutoMD common stock (the “Financing”) at a purchase price of $1.00 per share (the “Initial Closing”). Additionally, pursuant to the terms of the Purchase Agreement, the Company may be required to purchase 2,000,000 shares of AutoMD common stock at a purchase price of $1.00 per share, with such purchase to be triggered, if applicable, if during the two years following the closing date for the Initial Closing AutoMD fails to meet specified cash balances and numbers of approved auto repair shops submitting a quotation on AutoMD’s website (the “Second Closing”). Following the Initial Closing, AutoMD ceased to be a wholly-owned subsidiary of the Company, with the Company now holding approximately 64.1% of AutoMD’s outstanding common stock. Fredric W. Harman and Sol Khazani, each a current director of the Company, are affiliated with Oak and the Trust, respectively.

Concurrently with the execution of the Purchase Agreement, AutoMD and the Investors entered into an Investor Rights Agreement (the “Investor Rights Agreement”), pursuant to which AutoMD granted the Investors certain registration rights with respect to the AutoMD common stock held by the Investors, granted the Investors certain information rights relating to AutoMD’s business and financial condition and operating results and granted the Investors the right to purchase their pro rata amount of certain future equity issuances by AutoMD. Pursuant to the terms of the Investor Rights Agreement, for a period of three years, without the prior consent of Muzzy-Lyon, Manheim, Oak and the Trust (collectively, the “Outside Investors”), the Company may not sell or transfer any AutoMD common stock then-held by the Company to the extent that such transaction would result in the Company owning less than 50% of the outstanding capital stock of AutoMD (a “Restricted Transfer”); provided, however, that in the event of a proposed Restricted Transfer for which any Outside Investor does not provide its consent, in the alternative, the Company may elect, at its sole option, to purchase the shares of AutoMD common stock purchased by such non-consenting Outside Investor at the Initial Closing at a purchase price equal to $1.00 per share, plus an annual interest rate of 10% thereon. Furthermore, for a period of three years, without the prior consent of each Outside Investor, AutoMD may not be sold pursuant to an acquisition or sale of assets and AutoMD may not issue equity securities pursuant to an acquisition, business combination, joint venture, strategic agreement or any similar arrangement (any such transaction, a “Sale or Strategic Transaction”); provided, however, that in the event of a proposed Sale or Strategic Transaction for which an Outside Investor does not provide its consent, in the alternative, AutoMD may elect to repurchase the shares of AutoMD common stock purchased by such non-consenting Outside Investor at the Initial Closing at a purchase price equal to $1.00 per share, plus, under certain circumstances, an annual interest rate of 10% thereon (the “AutoMD Repurchase Option”). In the event that AutoMD does not have sufficient funds to consummate the AutoMD Repurchase Option in circumstances where AutoMD is permitted to and has elected to consummate the AutoMD Repurchase Option, then the Company is required to negotiate the terms of a transaction between AutoMD and the Company pursuant to which AutoMD will be provided sufficient funds to consummate the AutoMD Repurchase Option. Additionally, pursuant to the terms of the Investor Rights Agreement, for a period of three years the Company has agreed to reimburse AutoMD for all expenses actually and reasonably incurred by AutoMD in connection with certain legal proceedings related to AutoMD’s intellectual property, up to an aggregate maximum amount of $2,500,000 (the “IP Reimbursement”).

In connection with the Financing, AutoMD and the Investors also entered into a Voting Agreement (the “Voting Agreement”) and a Right of First Refusal and Co-Sale Agreement (the “Co-Sale Agreement”). The Voting Agreement provides that, for so long as each Investor exceeds specified ownership thresholds in AutoMD,


each of the Investors will vote to elect three individuals designated by the Company, one individual designated by Muzzy-Lyon, one individual designated by Oak, and one individual designated by Manheim as the members of the AutoMD board of directors; provided, however, during such period of time that Muzzy-Lyon, Oak and Manheim have an aggregate of three representatives serving on the AutoMD board of directors, the Company shall be permitted to designate a fourth individual to serve on the AutoMD board of directors. At the Initial Closing, the Company designated Sol Khazani, Robert J. Majteles and Joshua L. Berman as its designees on the AutoMD board of directors and Oak designated Fredric W. Harman as its designee on the AutoMD board of directors, which such individuals also currently serve as directors of the Company. Muzzy-Lyon and Manheim have each elected not to designate a representative on the AutoMD board of directors. The Co-Sale Agreement provides that, subject to limited exceptions, prior to the sale of AutoMD common stock by any Investor, such Investor must provide first to AutoMD and second to the Investors a right of first refusal with respect to such shares of common stock being sold. In the event that AutoMD and the non-transferring Investors elect not to exercise their respective right of first refusal, the non-transferring Investors have the right to participate in such sale on a pro rata basis.

In order to effect the transactions contemplated above and the performance of the obligations set forth in the Purchase Agreement, the Investor Rights Agreement and the other documents entered into in connection with the Financing (collectively, the “Financing Documents”), on October 8, 2014, the Company, certain of its domestic subsidiaries and JPMorgan Chase Bank, N.A. (“JPMorgan”) entered into a Fifth Amendment to Credit Agreement and First Amendment to Pledge and Security Agreement (the “Amendment”), which amended the Credit Agreement previously entered into by the Company, certain of its domestic subsidiaries and JPMorgan on April 26, 2012 (as amended, the “Credit Agreement”) and the Pledge and Security Agreement previously entered into by the Company, certain of its domestic subsidiaries and JPMorgan on April 26, 2012. Pursuant to the Amendment, JPMorgan increased its revolving commitment from $20,000,000 to $25,000,000, which is subject to a borrowing base derived from certain receivables, inventory, property and pledged cash. In addition, the Company’s and AutoMD’s ability to perform certain obligations set forth in the Financing Documents (including the Company electing to purchase AutoMD common stock in connection with a Restricted Transfer, AutoMD electing to exercise the AutoMD Repurchase Option, the Company’s ability to consummate the Second Closing and the Company’s ability to consummate the IP Reimbursement) is dependent on the Company satisfying certain contractual and financial tests, including, without limitation, (i) with respect to the consummation of the Second Closing, the Company having excess availability to borrow under the Credit Agreement of at least $4 million and the satisfaction of a minimum fixed charge coverage ratio of 1.25:1.0, (ii) with respect to the consummation of the IP Reimbursement, the Company having excess availability to borrow under the Credit Agreement of at least $4 million, and (iii) with respect to the Company electing to purchase AutoMD common stock in connection with a Restricted Transfer or AutoMD electing to exercise the AutoMD Repurchase Option, the Company having excess availability to borrow under the Credit Agreement of at least $6 million and the satisfaction of a minimum fixed charge coverage ratio of 1.25:1.0.

The foregoing descriptions of the terms of the Purchase Agreement, the Investor Rights Agreement, the Voting Agreement, the Co-Sale Agreement and the Amendment are qualified in their entirety by reference to the Purchase Agreement, the Investor Rights Agreement, the Voting Agreement, the Co-Sale Agreement and the Amendment, which are attached hereto as Exhibit 99.1, Exhibit 99.2, Exhibit 99.3, Exhibit 99.4 and Exhibit 99.5, respectively.


Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit
No.

  

Description

99.1    Common Stock Purchase Agreement, dated October 8, 2014, by and among AutoMD, Inc., U.S. Auto Parts Network, Inc., Muzzy-Lyon Auto Parts, Inc., Manheim Investments, Inc., Oak Investment Partners XI, L.P. and the Sol Khazani Living Trust.
99.2    Investor Rights Agreement, dated October 8, 2014, by and among AutoMD, Inc., U.S. Auto Parts Network, Inc., Muzzy-Lyon Auto Parts, Inc., Manheim Investments, Inc., Oak Investment Partners XI, L.P. and the Sol Khazani Living Trust.
99.3    Voting Agreement, dated October 8, 2014, by and among AutoMD, Inc., U.S. Auto Parts Network, Inc., Muzzy-Lyon Auto Parts, Inc., Manheim Investments, Inc., Oak Investment Partners XI, L.P. and the Sol Khazani Living Trust.
99.4    Right of First Refusal and Co-Sale Agreement, dated October 8, 2014, by and among AutoMD, Inc., U.S. Auto Parts Network, Inc., Muzzy-Lyon Auto Parts, Inc., Manheim Investments, Inc., Oak Investment Partners XI, L.P. and the Sol Khazani Living Trust.
99.5    Fifth Amendment to Credit Agreement and First Amendment to Pledge and Security Agreement, dated October 8, 2014, by and among U.S. Auto Parts Network, Inc., certain of its domestic subsidiaries and JPMorgan Chase Bank, N.A.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

    U.S. Auto Parts Network, Inc.
Dated: October 8, 2014     By:   /s/ Bryan P. Stevenson
    Name:   Bryan P. Stevenson
    Title:   VP, General Counsel
EX-99.1 2 d801594dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

AUTOMD, INC.

COMMON STOCK PURCHASE AGREEMENT

OCTOBER 8, 2014


AUTOMD, INC.

COMMON STOCK PURCHASE AGREEMENT

This COMMON STOCK PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of October 8, 2014, by and among AUTOMD, INC., a Delaware corporation (the “Company”), and each of those persons and entities, severally and not jointly, whose names are set forth on the applicable Schedule of Purchasers attached hereto as Exhibit A (which persons and entities are hereinafter collectively referred to as “Purchasers” and each individually as a “Purchaser”).

RECITALS

WHEREAS, the Company has authorized the sale and issuance of an aggregate of 9,000,000 shares of its Common Stock (the “Shares”);

WHEREAS, Purchasers desire to purchase the Shares on the terms and conditions set forth herein; and

WHEREAS, the Company desires to issue and sell the Shares to Purchasers on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties, and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. AGREEMENT TO SELL AND PURCHASE.

1.1 Authorization of Shares. The Company has authorized the sale and issuance to Purchasers of the Shares. The Shares have been authorized pursuant to the Amended and Restated Certificate of Incorporation of the Company which has been filed with the Delaware Secretary of State on or about the date hereof (the “Restated Charter”).

1.2 Sale and Purchase. Subject to the terms and conditions hereof, at each Closing (as hereinafter defined) the Company hereby agrees to issue and sell to each Purchaser participating in such Closing, and each such Purchaser agrees to purchase from the Company, severally and not jointly, the number of Shares set forth opposite such Purchaser’s name on Exhibit A, at a purchase price of one dollar ($1.00) per share.

2. CLOSING, DELIVERY AND PAYMENT.

2.1 Initial Closing. The initial closing of the sale and purchase of the Shares under this Agreement (the “Initial Closing”) shall take place at 1:00 p.m. on the date hereof, at the offices of Cooley LLP, 4401 Eastgate Mall, San Diego, CA, 92121 or at such other time or place as the Company and Purchasers participating in the Initial Closing may mutually agree (such


date is hereinafter referred to as the “Initial Closing Date”). At the Initial Closing, the Company shall sell and each such Purchaser shall purchase, severally and not jointly, the number of Shares set forth opposite such Purchaser’s name on Exhibit A under the heading “Initial Closing Schedule of Purchasers”.

2.2 Delivery. At the Initial Closing, subject to the terms and conditions hereof, the Company will deliver to each Purchaser a certificate representing the number of Shares to be purchased at the Initial Closing by such Purchaser, against payment of the purchase price therefor by check or wire transfer made payable to the order of the Company.

2.3 U.S. Auto Parts Closing. If, at any time during the two years following the Initial Closing, the Board of Directors of the Company (the “Board”) determines in good faith that the Funding Milestone (as defined below) has been triggered by the Company, the Chief Executive Officer of the Company shall deliver a written notice (the “Funding Notice”) to U.S. Auto Parts Network, Inc. (“U.S. Auto Parts”), which Funding Notice shall certify that the Funding Milestone has occurred and shall specify the closing (the “Parts Closing” and together with the Initial Closing, each a “Closing”) of the purchase and sale of additional Shares to U.S. Auto Parts, such Parts Closing to occur no earlier than five and no later than 10 business days after the delivery of the Funding Notice (such date together with the Initial Closing Date, each a “Closing Date”). At the Parts Closing, the Company hereby agrees to issue and sell to U.S. Auto Parts, and U.S. Auto Parts agrees to purchase from the Company, the number of Shares set forth opposite U.S. Auto Parts’ name on Exhibit A under the heading “Parts Closing Schedule of Purchasers”. The sale of Shares made at the Parts Closing shall be made on the terms and conditions set forth in this Agreement, provided that (i) the representations and warranties of the Company and U.S. Auto Parts set forth in Section 3 below (and the Schedule of Exceptions) shall speak only as of the Initial Closing and the Company and U.S. Auto Parts shall have no obligation to update any such disclosures in connection with the Parts Closing and (ii) the representations and warranties of U.S. Auto Parts set forth in Section 4 hereof shall speak as of the Parts Closing. The Shares sold at the Parts Closing pursuant to this Section 2.3 shall be deemed to be “Shares” for all purposes under this Agreement and following the Parts Closing U.S. Auto Parts shall be deemed to be a “Purchaser” for all purposes under this Agreement. For purposes of this Section 2.3, the “Funding Milestone” shall mean the simultaneous occurrence of (i) the Company having less than $2,000,000 in cash and cash equivalents (as determined pursuant to United States generally accepted accounting principles) and (ii) the Company having less than 5,000 third parties (e.g., an automobile repair shop) that as part of their business install or replace automobile parts, that are approved by the Company as being permitted to submit a quotation displayed on the Company’s website in response to an end user’s query that provides a price quote for an auto repair service with respect to that end user’s automobile (such approved third parties, “Approved Company Repair Shops”); provided, however, that, notwithstanding the foregoing, on the date that is (i) the one year anniversary of this Agreement, the “Funding Milestone” shall mean the Company having less than 2,000 Approved Company Repair Shops (irrespective of the amount of cash and cash equivalents held by the Company on such date) and (ii) the two year anniversary of this Agreement, the “Funding Milestone” shall mean the Company having less than 5,000 Approved Company Repair Shops (irrespective of the amount of cash and cash equivalents held by the Company on such date). For the avoidance of doubt, the parties to this Agreement acknowledge and agree that following the date that is the two year anniversary of this Agreement, the Funding Milestone cannot be triggered, and this Section 2.3 shall automatically terminate and be of no further force or effect, including, without limitation, the obligation of U.S. Auto Parts to purchase Shares at the Parts Closing.

 

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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth on a Schedule of Exceptions delivered by the Company to Purchasers at the Initial Closing, each of the Company and U.S. Auto Parts jointly and severally hereby represents and warrants to each Purchaser as of the date of this Agreement as set forth below.

3.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and the Investor Rights Agreement to be executed on or about the date hereof (the “Investor Rights Agreement”), the Right of First Refusal and Co-Sale Agreement to be executed on or about the date hereof (the “Co-Sale Agreement”) and the Voting Agreement to be executed on or about the date hereof (the “Voting Agreement”, and together with the Investor Rights Agreement and the Co-Sale Agreement, the “Related Agreements”), to issue and sell the Shares, and to carry out the provisions of this Agreement, the Related Agreements and the Restated Charter and to carry on its business as presently conducted. The Company is duly qualified to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.

3.2 Subsidiaries. The Company does not own or control any equity security or other interest of any other corporation, partnership, limited liability company or other business entity. The Company is not a participant in any joint venture, partnership, limited liability company or similar arrangement. Since its inception, the Company has not consolidated or merged with, acquired all or substantially all of the assets of, or acquired the stock of or any interest in any corporation, partnership, limited liability company or other business entity.

3.3 Capitalization; Voting Rights.

(a) The authorized capital stock of the Company, immediately prior to the Initial Closing, consists of 21,500,000 shares of Common Stock, par value $0.001 per share, 12,500,000 shares of which are issued and outstanding.

(b) Except as may be granted pursuant to this Agreement and the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities.

(c) All issued and outstanding shares of the Company’s Common Stock (i) have been duly authorized and validly issued and are fully paid and nonassessable and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

 

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(d) When issued in compliance with the provisions of this Agreement and the Restated Charter, the Shares will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances other than (i) liens and encumbrances created or imposed upon by the Purchasers and (ii) any restriction on transfer contained in the bylaws; provided, however, that the Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. The sale of the Shares is not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

3.4 Authorization; Binding Obligations. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder at each Closing and the authorization, sale, issuance and delivery of the Shares pursuant hereto has been taken. The Agreement and the Related Agreements, when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions in the Investor Rights Agreement may be limited by applicable laws.

3.5 Agreements; Action.

(a) Except for agreements explicitly contemplated hereby (including agreements with any Purchaser to be executed concurrently with this Agreement), there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, employees, affiliates or any affiliate thereof.

(b) Other than as set forth on Schedule 3.5(b), there are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound which may involve (i) future obligations (contingent or otherwise) of, or payments to, the Company in excess of $100,000, or (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from the Company (other than licenses by the Company of “off the shelf” or other standard products).

(c) The Company has not (i) accrued, declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iii) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.

(d) For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

 

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3.6 Obligations to Related Parties. Except for agreements explicitly contemplated hereby (including agreements with any Purchaser to be executed concurrently with this Agreement), there are no obligations of the Company to officers, directors, stockholders, or employees of the Company or U.S. Auto Parts other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee benefits made generally available to all employees.

3.7 Changes. Since December 31, 2013, there has not been to the Company’s knowledge:

(a) Any change in the assets, liabilities, financial condition or operations of the Company, other than changes in the ordinary course of business, none of which individually or in the aggregate has had a material adverse effect on such assets, liabilities, financial condition or operations of the Company;

(b) Any material change in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise;

(c) Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or prospects or financial condition of the Company;

(d) Any waiver by the Company of a valuable right or of a material debt owed to it;

(e) Any sale, assignment, or exclusive license or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;

(f) Any change in any material agreement to which the Company is a party or by which it is bound which materially and adversely affects the business, assets, liabilities, financial condition, operations or prospects of the Company;

(g) Any other event or condition of any character that, either individually or cumulatively, has materially and adversely affected the business, assets, liabilities, financial condition or operations of the Company; or

(h) Any arrangement or commitment by the Company to do any of the acts described in subsection (a) through (g) above.

3.8 Title to Properties and Assets; Liens, Etc. The Company has good and marketable title to its properties and assets and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent, and (b) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company.

3.9 Intellectual Property.

 

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(a) Other than as set forth in Schedule 3.9(a), to the best of its knowledge, the Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business in all material respects as now conducted and as presently proposed to be conducted, without any infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products.

(b) Other than as set forth in Schedule 3.9(b), the Company has not received any communications alleging that the Company has violated or, by conducting its business as presently proposed to be conducted, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity.

3.10 Compliance with Other Instruments. The Company is not in violation or default of any term of its charter documents, as amended, or of any provision of any mortgage, indenture, contract, lease, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order or writ. The execution, delivery, and performance of and compliance with this Agreement, and the Related Agreements, and the issuance and sale of the Shares pursuant hereto will not, with or without the passage of time or giving of notice, result in any such violation, or be in conflict with or constitute a default under any such term or provision, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties.

3.11 Litigation. There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened in writing against the Company that would reasonably be expected to result, either individually or in the aggregate, in any material adverse change in the assets, condition, affairs or prospects of the Company, financially or otherwise, or any change in the current equity ownership of the Company or that questions the validity of this Agreement or the Related Agreements or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate.

3.12 Employees. The Company has no collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to the Company’s knowledge, threatened with respect to the Company. The Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. No employee of the Company has been granted the right to continued employment by the Company or to any compensation following termination of employment with the Company. To the Company’s knowledge, no employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract,

 

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proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company; and to the Company’s knowledge the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such violation has occurred. There are no actions pending, or to the Company’s knowledge, threatened, by any former or current employee concerning such person’s employment by the Company.

3.13 Registration Rights and Voting Rights. Except as required pursuant to the Investor Rights Agreement, the Company is presently not under any obligation, and has not granted any rights, to register under the Securities Act of 1933, as amended (the “Securities Act”), any of the Company’s presently outstanding securities or any of its securities that may hereafter be issued. To the Company’s knowledge, except as contemplated in the Voting Agreement, no stockholder of the Company has entered into any agreement with respect to the voting of equity securities of the Company.

3.14 Compliance with Laws; Permits. The Company is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties, which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement or the issuance of the Shares, except such as have been duly and validly obtained or filed, or with respect to any filings that must be made after the Initial Closing, as will be filed in a timely manner. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, assets, properties or financial condition of the Company and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted.

3.15 Environmental and Safety Laws. The Company has never been and is not in violation of any applicable statute, law, regulation or order relating to the environment, hazardous waste, toxic materials, or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.

3.16 Foreign Corrupt Practices Act. None of the Company, or, to the knowledge of the Company, any employee, Company representative or other person associated with or acting on behalf of the Company has, directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence, payment, kickback or other similar unlawful payment to any officer or employee of any governmental entity, a member of a foreign political party or a candidate for political office in a foreign country for the purpose of influencing any act or decision of any such person acting in

 

7


his or her official capacity or inducing the person to do or omit to do any action in violation of his or her lawful duty, inducing such person to use his or her influence with any government to affect or influence any act or decision of such government or instrumentality, in order to assist the Company to obtain or retain business for or with any person.

3.17 ERISA. In all material respects, each Company Employee Plan (as defined below) has been established and maintained in accordance with its terms and in compliance with all applicable legal requirements, including but not limited to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the Internal Revenue Code of 1986, as amended (the “Code”). The Company does not sponsor any Company Employee Plan intended to be qualified under Section 401(a) of the Code or any trust intended to qualify under Section 501(a) of the Code. No “prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee Plan that would reasonably be expected to result in any material liability. There are no current actions, suits or claims pending, or, to the knowledge of the Company, threatened in writing or reasonably anticipated against any Company Employee Plan or against the assets of any Company Employee Plan. There are no material audits, inquiries or proceedings pending or, to the knowledge of the Company, threatened in writing by any governmental entity with respect to any Company Employee Plan. For purposes of this Agreement, “Company Employee Plan” shall mean any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, change of control payments, termination pay, commission pay, incentive or bonus pay, retention pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is currently maintained, contributed to, or required to be contributed to, by the Company for the benefit of any employee of the Company.

3.18 Offering Valid. Assuming the accuracy of the representations and warranties of Purchasers contained in Section 4.2 hereof, the offer, sale and issuance of the Shares will be exempt from the registration requirements of the Securities Act, and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons so as to bring the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws.

4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS.

Each Purchaser (including U.S. Auto Parts with respect to the Parts Closing) hereby represents and warrants to the Company, severally and not jointly, to be true on and as of the applicable Closing Date (such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in Article 3 hereof):

 

8


4.1 Requisite Power and Authority. Purchaser has all necessary power and authority to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All action on Purchaser’s part required for the lawful execution and delivery of this Agreement and the Related Agreements has been taken. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) as limited by general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of the Investor Rights Agreement may be limited by applicable law.

4.2 Investment Representations. Purchaser understands that the Shares have not been registered under the Securities Act. Purchaser also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser’s representations contained in the Agreement. Purchaser hereby represents and warrants as follows:

(a) Purchaser Bears Economic Risk. Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Purchaser must bear the economic risk of this investment indefinitely unless the Shares are registered pursuant to the Securities Act, or an exemption from registration is available. Purchaser understands that the Company has no present intention of registering the Shares or any shares of its Common Stock. Purchaser also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Purchaser to transfer all or any portion of the Shares under the circumstances, in the amounts or at the times Purchaser might propose.

(b) Acquisition for Own Account. Purchaser is acquiring the Shares for Purchaser’s own account for investment only, and not with a view towards their distribution.

(c) Purchaser Can Protect Its Interest. Purchaser represents that by reason of its, or of its management’s, business or financial experience, Purchaser has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement.

(d) Accredited Investor. Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

(e) Company Information. Purchaser has had an opportunity to discuss the Company’s business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company’s operations and facilities. Purchaser has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of this investment.

 

9


(f) Rule 144. Purchaser acknowledges and agrees that the Shares are “restricted securities” as defined in Rule 144 promulgated under the Securities Act as in effect from time to time and must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser has been advised or is aware of the provisions of Rule 144, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations.

(g) Residence. If Purchaser is an individual, then Purchaser resides in the state or province identified in the address of Purchaser set forth on Exhibit A; if Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of Purchaser in which its investment decision was made is located at the address or addresses of Purchaser set forth on Exhibit A.

(h) Bad Actor. Each Purchaser is not a “bad actor” as such term is described in Rule 506(d) under the Securities Act.

(i) Foreign Investors. If Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any government or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Shares. The Company’s offer and sale and Purchaser’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of Purchaser’s jurisdiction.

4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that the Shares are subject to restrictions on transfer as set forth in the Investor Rights Agreement.

5. CONDITIONS TO CLOSING.

5.1 Conditions to Purchasers’ Obligations at Initial Closing. Each Purchaser’s obligation to purchase the Shares at the Initial Closing is subject to the satisfaction, at or prior to the Initial Closing, of the following conditions:

(a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company and U.S. Auto Parts in Section 3 hereof shall be true and correct in all material respects as of the Initial Closing Date with the same force and effect as if they had been made as of the Initial Closing Date, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Initial Closing.

 

10


(b) Legal Investment. On the Initial Closing Date, the sale and issuance of the Shares shall be legally permitted by all laws and regulations to which the Purchasers and the Company are subject.

(c) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement and the Related Agreements.

(d) Filing of Restated Charter. The Restated Charter shall have been filed with the Secretary of State of the State of Delaware and shall continue to be in full force and effect as of the Initial Closing Date.

(e) Corporate Documents. The Company shall have delivered to Purchasers or their counsel copies of all corporate documents of the Company as Purchasers shall reasonably request.

(f) Investor Rights Agreement. The Investor Rights Agreement shall have been executed and delivered by the parties thereto.

(g) Co-Sale Agreement. The Co-Sale Agreement shall have been executed and delivered by the parties thereto.

(h) Voting Agreement. The Voting Agreement shall have been executed and delivered by the parties thereto.

(i) Board of Directors. Upon the Initial Closing, the authorized size of the Board shall be four members and the Board shall consist of Sol Khazani, Robert J. Majteles, Joshua L. Berman and Fredric W. Harman.

(j) Marketing Agreement. A Marketing Agreement mutually agreeable to both the Company and Muzzy-Lyon Auto Parts, Inc. (the “Marketing Agreement”), shall have been executed and delivered by the parties thereto.

(k) Services Agreement. A Services Agreement mutually agreeable to both the Company and U.S. Auto Parts (the “Services Agreement”), shall have been executed and delivered by the parties thereto.

(l) Due Diligence. Each Purchaser shall have completed legal and business due diligence with respect to the Company, and the results of such diligence are satisfactory to each Purchaser.

(m) No Material Adverse Change. No Material Adverse Change shall have occurred as of the Initial Closing Date. For purposes of this subsection (m), “Material Adverse Change” shall mean any event, circumstance or condition that has had or could reasonably be expected to have a material and adverse effect on (a) the business, financial condition or prospects of the Company, taken as a whole, (b) the ability of Company to perform its obligations under this Agreement or the documents and agreements to be executed in connection herewith, or (c) the rights and remedies of Purchasers under this Agreement or the documents and agreements to be executed in connection herewith.

 

11


(n) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the applicable Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to Purchasers and their special counsel, and Purchasers and their special counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

5.2 Conditions to Obligations of the Company at Initial Closing. The Company’s obligation to issue and sell the Shares at the Initial Closing is subject to the satisfaction, on or prior to the Initial Closing Date of the following conditions:

(a) Representations and Warranties True. The representations and warranties made by each Purchaser in Section 4 hereof shall be true and correct in all material respects at the date of the Initial Closing Date, with the same force and effect as if they had been made on and as of said date.

(b) Performance of Obligations. Each Purchaser shall have performed and complied with all agreements and conditions herein required to be performed or complied with by such Purchaser on or before the Initial Closing Date.

(c) Filing of Restated Charter. The Restated Charter shall have been filed with the Secretary of State of the State of Delaware and shall be effective.

(d) Investor Rights Agreement. The Investor Rights Agreement shall have been executed and delivered by the parties thereto.

(e) Co-Sale Agreement. The Co-Sale Agreement shall have been executed and delivered by the parties thereto.

(f) Voting Agreement. The Voting Agreement shall have been executed and delivered by the parties thereto.

(g) Marketing Agreement. The Marketing Agreement shall have been executed and delivered by the parties thereto.

(h) Services Agreement. The Services Agreement shall have been executed and delivered by the parties thereto.

(i) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be properly obtained subsequent to the Initial Closing Date).

 

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5.3 Conditions to U.S. Auto Parts Obligations at Parts Closing. U.S. Auto Parts’ obligation to purchase the Shares at the Parts Closing is subject to the satisfaction, at or prior to the Parts Closing Date, of the following conditions:

(a) Legal Investment. On the Parts Closing Date, the sale and issuance of the Shares shall be legally permitted by all laws and regulations to which U.S. Auto Parts and the Company are subject.

5.4 Conditions to Obligations of the Company at Parts Closings. The Company’s obligation to issue and sell the Shares at the Parts Closing Date is subject to the satisfaction, on or prior to the Parts Closing Date, of the following conditions:

(a) Representations and Warranties True. The representations and warranties made by U.S. Auto Parts in Section 4 hereof shall be true and correct in all material respects at the date of the Parts Closing, with the same force and effect as if they had been made on and as of said date.

(b) Performance of Obligations. U.S. Auto Parts shall have performed and complied with all agreements and conditions herein required to be performed or complied with by U.S. Auto Parts on or before the Parts Closing Date.

With respect to this Section 5, neither the Purchasers nor the Company may rely, as a basis for not consummating the applicable Closing, on the failure of any condition set forth in Section 5.1, Section 5.2, Section 5.3 or Section 5.4, as the case may be, to be satisfied if such failure was caused by such party’s breach in any material respect of any provision of this Agreement or failure in any material respect to use the commercially reasonable standard of efforts required from such party to consummate the transactions contemplated hereby.

6. MISCELLANEOUS.

6.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware in all respects as such laws are applied to agreements among Delaware residents entered into and performed entirely within Delaware, without giving effect to conflict of law principles thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in New York, New York.

6.2 Use of Proceeds. Unless otherwise approved by the Board, the Company shall use the proceeds from the sale of the Shares for general operating purposes.

6.3 Survival. The representations, warranties, covenants and agreements made herein shall survive the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. The representations, warranties, covenants and obligations of the

 

13


Company, and the rights and remedies that may be exercised by the Purchasers, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Purchasers or any of their representatives.

6.4 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the parties hereto and their respective successors, assigns, heirs, executors and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Shares from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Shares specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such Shares in its records as the absolute owner and holder of such Shares for all purposes.

6.5 Entire Agreement. This Agreement and the exhibit hereto, the Related Agreements and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof.

6.6 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

6.7 Amendment and Waiver. This Agreement may be amended or modified, and the obligations of the Company and the rights of the holders of the Shares under this Agreement may be waived, only upon the written consent of the Company and holders of at least a majority of the Shares purchased pursuant to this Agreement; provided, however, that any amendment or modification of Section 2.3 or the “Parts Closing Schedule of Purchasers” on Exhibit A shall require the written consent of (i) the Company, (ii) the holders of at least a majority of the Shares purchased pursuant to this Agreement and (iii) U.S. Auto Parts.

6.8 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Related Agreements or the Restated Charter, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any party’s part of any breach, default or noncompliance under this Agreement, the Related Agreements or under the Restated Charter or any waiver on such party’s part of any provisions or conditions of the Agreement, the Related Agreements, or the Restated Charter must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Related Agreements, the Restated Charter, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

6.9 Waiver of Conflicts. Each party to this Agreement acknowledges that Cooley LLP (“Cooley”), outside general counsel to the Company, has in the past performed and is or

 

14


may now or in the future represent one or more Purchasers or their affiliates in matters unrelated to the transactions contemplated by this Agreement (the “Financing”), including representation of such Purchasers or their affiliates in matters of a similar nature to the Financing. The applicable rules of professional conduct require that Cooley inform the parties hereunder of this representation and obtain their consent. Cooley has served as outside general counsel to the Company and has negotiated the terms of the Financing solely on behalf of the Company. The Company and each Purchaser hereby (a) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse consequences of such representation; (b) acknowledge that with respect to the Financing, Cooley has represented solely the Company, and not any Purchaser or any stockholder, director or employee of the Company or any Purchaser; and (c) gives its informed consent to Cooley’s representation of the Company in the Financing.

6.10 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail, telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, with written verification of receipt, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to Purchaser at the address set forth on Exhibit A attached hereto or at such other address or electronic mail address as the Company or Purchaser may designate by 10 days advance written notice to the other parties hereto.

6.11 Expenses. Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of the Agreement.

6.12 Titles and Subtitles. The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

6.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

6.14 Broker’s Fees. Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 6.14 being untrue.

6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it is not relying upon any person, firm, or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Shares.

 

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6.16 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

6.17 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE.

 

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IN WITNESS WHEREOF, the parties hereto have executed the COMMON STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

 

COMPANY:     PURCHASERS:
AUTOMD, INC.     MUZZY-LYON AUTO PARTS, INC.
By:   /s/ Tracey Virtue     By:   /s/ Michelle Taigman
Name:   Tracey Virtue     Name:   Michelle Taigman
Title:   President     Title:   Assistant Secretary
Address:          
      OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP
    By: Oak Associates XI, LLC, its General Partner
      By:   /s/ Fred Harman
      Name: Fred Harman
      Title: Managing Member
      MANHEIM INVESTMENTS, INC.
      By:   /s/ Joseph Luppino
      Name:   Joseph Luppino
      Title:   Senior Vice President

 

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In Witness Whereof, the parties hereto have executed the COMMON STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

 

PURCHASERS:
SOL KHAZANI LIVING TRUST
By:   /s/ Sol Khazani
Name:   Sol Khazani
Title:   Trustee
U.S. AUTO PARTS NETWORK, INC.
By:   /s/ Shane Evangelist
Name:   Shane Evangelist
Title:   CEO

 

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EXHIBIT A

INITIAL CLOSING SCHEDULE OF PURCHASERS

 

NAME AND ADDRESS

   SHARES      AGGREGATE
PURCHASE
PRICE
 

MUZZY-LYON AUTO PARTS, INC.

     3,000,000       $ 3,000,000   

26555 Northwestern Highway

     

Southfield, MI 48033

     

Attn: General Counsel

     

MANHEIM INVESTMENTS, INC.

     2,000,000       $ 2,000,000   

6205 Peachtree Dunwoody Road

     

Atlanta, Georgia 30328

     

Attn: General Counsel

     

OAK INVESTMENT PARTNERS XI, L.P.

     1,500,000       $ 1,500,000   

525 University Avenue

     

Suite 1300

     

Palo Alto, CA 94301

     

Attn: Fred Harman / Craig Lang

     

SOL KHAZANI LIVING TRUST

     500,000       $ 500,000   

578 Washington Blvd#854

     

Marina Del Rey, Ca 90292

     

TOTAL:

     7,000,000       $ 7,00,000   
  

 

 

    

 

 

 


PARTS CLOSING SCHEDULE OF PURCHASERS

 

NAME AND ADDRESS

   SHARES      AGGREGATE
PURCHASE
PRICE
 

U.S. AUTO PARTS NETWORK, INC.

     2,000,000       $ 2,000,000   

16941 Keegan Avenue

     

Carson, California 90746

     

Attn: General Counsel

     
EX-99.2 3 d801594dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

AUTOMD, INC.

INVESTOR RIGHTS AGREEMENT


AUTOMD, INC.

INVESTOR RIGHTS AGREEMENT

This INVESTOR RIGHTS AGREEMENT (the “Agreement”) is entered into as of the 8th day of October, 2014, by and among AUTOMD, INC., a Delaware corporation (the “Company”), and the investors listed on Exhibit A hereto, referred to hereinafter as the “Investors” and each individually as an “Investor.”

RECITALS

WHEREAS, certain of the Investors are purchasing shares of the Company’s Common Stock (the “Common Stock”) pursuant to that certain Common Stock Purchase Agreement (the “Purchase Agreement”) of even date herewith (the “Financing”), and certain of the Investors are existing holders of the Common Stock;

WHEREAS, the obligations in the Purchase Agreement are conditioned upon the execution and delivery of this Agreement; and

WHEREAS, in connection with the consummation of the Financing, the parties desire to enter into this Agreement in order to grant registration, information rights and other rights as set forth below.

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. GENERAL.

1.1 Definitions. As used in this Agreement the following terms shall have the following respective meanings:

(a) Designated Director” shall have the meaning given in Section 3.2.

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

(c) “Form S-3 means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

(d) “Holder means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.8 hereof.

(e) “Qualified Initial Offering means the Company’s first firm commitment underwritten public offering of its Common Stock registered under the Securities Act which issuance generates net proceeds of at least $30 million for the Company.


(f) “Register,” “registered,” and registration refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

(g) “Registrable Securities means any Common Stock of the Company (or any Common Stock issuable upon the conversion or exercise of any warrant, right or other security which is issued) or any dividend or other distribution with respect to, or in exchange for or in replacement of, such Common Stock of the Company. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or Rule 144 or (ii) sold in a private transaction in which the transferor’s rights under Section 2 of this Agreement are not assigned.

(h) “Registrable Securities then outstanding shall be the number of shares of the Company’s Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities.

(i) “Registration Expenses shall mean all expenses incurred by the Company in complying with Sections 2.2 and 2.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements not to exceed twenty-five thousand dollars ($25,000) of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

(j) “SEC or Commission means the Securities and Exchange Commission.

(k) “Securities Act shall mean the Securities Act of 1933, as amended.

(l) “Selling Expenses shall mean all underwriting discounts and selling commissions applicable to the sale.

(m) “Special Registration Statement shall mean (i) a registration statement relating to any employee benefit plan or (ii) with respect to any corporate reorganization or transaction under Rule 145 of the Securities Act, any registration statements related to the issuance or resale of securities issued in such a transaction or (iii) a registration related to stock issued upon conversion of debt securities.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.

2.1 Restrictions on Transfer.

(i) Each Holder agrees not to make any disposition of all or any portion of the Registrable Securities unless and until:

 

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(ii) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

(A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144, except in unusual circumstances. After a Qualified Initial Offering, the Company will not require any transferee pursuant to Rule 144 to be bound by the terms of this Agreement if the shares so transferred do not remain Registrable Securities hereunder following such transfer.

(b) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, or (D) an individual transferring to the Holder’s family member or trust for the benefit of such individual Holder; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder.

(c) Each certificate representing Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

 

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(d) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Company has completed its Qualified Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.

(e) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

2.2 Demand Registration.

(a) Subject to the conditions of this Section 2.2, if the Company shall receive a written request from Holders of at least 10% in the aggregate of then-outstanding Registrable Securities (collectively, the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of their Registrable Securities, then the Company shall, within thirty (30) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2.2, effect, as expeditiously as reasonably possible, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.

(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 and the Company shall include such information in the written notice referred to in Section 2.2(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities held by all Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 2.2, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

 

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(c) The Company shall not be required to effect a registration pursuant to this Section 2.2:

(i) prior to the sixth anniversary of the date of this Agreement;

(ii) after the Company has effected one registration pursuant to this Section 2.2, and such registration has been declared or ordered effective;

(iii) if within thirty (30) days of receipt of a written request from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the Holders of the Company’s intention to file a registration statement for its Qualified Initial Offering within ninety (90) days;

(iv) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.2 a certificate signed by the Chairman of the Board of Directors stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders; provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period; or

(v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

2.3 Piggyback Registrations. The Company shall notify all Holders of Registrable Securities in writing at least fifteen days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within fifteen days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

(a) Underwriting. If the registration statement of which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to include Registrable Securities in a registration pursuant to this Section 2.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute

 

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their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the managing underwriter, in good faith, advises the Board of Directors of the Company that the requested registration of Registrable Securities pursuant to this Section 2.3 will interfere with the successful marketing of the proposed offering, then the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second to the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders; and third, to any stockholder of the Company (other than a Holder) on a pro rata basis; provided, however, that no such reduction shall reduce the amount of securities of the selling Holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration, unless such offering is a Qualified Initial Offering and such registration does not include shares of any other selling stockholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding clause. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least 10 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Holder, or the estates and family members of any such partners, retired partners, members and retired members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

(b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 whether or not any Holder has elected to include securities in such registration, and shall promptly notify any Holder that has elected to include shares in such registration of such termination or withdrawal. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.4 hereof.

2.4 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2 or 2.3 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to deem such registration to have been effected as of the date of such withdrawal for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) to undertake any subsequent registration, in which event such right shall be forfeited by all Holders. If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including

 

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Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested. If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then such registration shall not be deemed to have been effected for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) to undertake any subsequent registration.

2.5 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to thirty (30) days or, if earlier, until the Holder or Holders have completed the distribution related thereto; provided, however, that at any time, upon written notice to the participating Holders and for a period not to exceed sixty (60) days thereafter (the “Suspension Period”), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation (as defined below). In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period. The Company may extend the Suspension Period for an additional consecutive sixty (60) days with the consent of the holders of a majority of the Registrable Securities registered under the applicable registration statement, which consent shall not be unreasonably withheld. If so directed by the Company, all Holders registering shares under such registration statement shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension; and (ii) use their best efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holders’ possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. Notwithstanding the foregoing, the Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement other than a registration statement on Form S-3 that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above.

(c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

 

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(d) Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use commercially reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

(g) Use its reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

2.6 Delay of Registration; Furnishing Information.

(a) No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

(b) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2 or 2.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

(c) The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 if the number of shares or the anticipated aggregate offering

 

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price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in Section 2.2.

2.7 Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 2.2 or 2.3:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, member, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter or controlling person of such Holder.

(b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact

 

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contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act (collectively, a “Holder Violation”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance solely upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.7 exceed the net proceeds from the offering received by such Holder.

(c) Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses thereof to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7 to the extent, and only to the extent, prejudicial to its ability to defend such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7.

(d) If, and only if, the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) or Holder Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other

 

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things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder.

(e) The obligations of the Company and Holders under this Section 2.7 shall survive completion of any offering of Registrable Securities in a registration statement and, with respect to liability arising from an offering to which this Section 2.7 would apply that is covered by a registration filed before termination of this Agreement, such termination. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

2.8 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities (for so long as such shares remain Registrable Securities) that (a) is a subsidiary, parent, general partner, limited partner, retired partner, member or retired member, or stockholder of a Holder that is a corporation, partnership or limited liability company, (b) is a Holder’s family member or trust for the benefit of such individual Holder, or (c) is an entity affiliated by common control (or other related entity) with such Holder provided, however, (i) the transferor shall, within ten days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement.

2.9 Limitation on Subsequent Registration Rights. Other than as provided in Section 5.10, after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder rights to demand the registration of shares of the Company’s capital stock, or to include such shares in a registration statement that would reduce the number of shares includable by the Holders.

2.10 Market Stand-Off Agreement. Each Holder hereby agrees that such Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) during the 180-day period following the effective date of the Qualified Initial Offering (or such longer period as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation); provided that all officers and directors of the Company and holders of at least five percent (5%) of the Company’s voting securities are bound by and have entered into similar agreements.

2.11 Agreement to Furnish Information. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing

 

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underwriters that are consistent with the Holder’s obligations under Section 2.10 or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within 10 days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in Section 2.10 and this Section 2.11 shall not apply to a Special Registration Statement. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such shares of Common Stock (or other securities) until the end of such period. Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by Sections 2.10 and 2.11. The underwriters of the Company’s stock are intended third party beneficiaries of Sections 2.10 and 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

2.12 Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

(a) make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public;

(b) file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

(c) so long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.

2.13 Termination of Demand Registration Rights. The right of any Holder to request registration of Registrable Securities in any registration pursuant to Section 2.2 hereof shall terminate upon such time as such Holder holds less than 10% of the Company’s outstanding Common Stock and the Company has completed its Qualified Initial Offering.

2.14 Termination of Piggyback Registration Rights. The right of any Holder to request inclusion of Registrable Securities in any registration pursuant to Section 2.3 hereof shall terminate upon such time as such Holder holds less than 1% of the Company’s outstanding Common Stock, the Company has completed its Qualified Initial Offering and all Registrable Securities of the Company held by and issuable to such Holder (and its affiliates) may be sold pursuant to Rule 144 during any ninety (90) day period.

 

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SECTION 3. COVENANTS OF THE COMPANY.

3.1 Basic Financial Information and Reporting.

(a) As soon as practicable after the end of each fiscal year of the Company, and in any event within 60 days thereafter, the Company will furnish each Investor a balance sheet of the Company, as at the end of such fiscal year, and a statement of income and a statement of cash flows of the Company, for such year, all prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein) and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail. Such financial statements shall be reviewed or audited by independent public accountants of national standing selected by the Company’s Board of Directors.

(b) The Company will furnish to each Investor, as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within 30 days thereafter, a balance sheet of the Company as of the end of each such quarterly period, and a statement of income and a statement of cash flows of the Company for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.

(c) The Company will furnish each Investor, at least 30 days prior to the beginning of each fiscal year, an annual budget and operating plans for such fiscal year (and as soon as available, any subsequent written revisions thereto).

(d) Notwithstanding the provisions of Section 3.1(a), (b) and (c) to the contrary, the Company shall not be required to provide any Investor the information required pursuant to Section 3.1(a), (b) or (c) to the extent that such disclosure would cause U.S. Auto Parts Network, Inc. (“U.S. Auto Parts”) to violate Regulation FD under the Exchange Act, in which case the Company shall promptly notify the Investors of such potential violation and shall work in good faith with the Investors to determine alternatives, within the limitations of all securities laws and regulations applicable to U.S. Auto Parts and the Company, to provide the Investors with reasonable information about the Company.

(e) Notwithstanding anything else set forth in this Agreement to the contrary (including, without limitation, this Section 3.1 or Section 3.4), the Company shall not be required to furnish any information that the Company deems to be confidential information of the Company, as determined by the Company in its sole and absolute discretion, to Muzzy-Lyon Auto Parts, Inc. (“Muzzy-Lyon”), its parent Federal-Mogul Motorparts Corporation or their subsidiaries or affiliates, or any director, officer, stockholder, affiliate, or agent of such entities.

3.2 Confidentiality of Records. Each Investor agrees to use the same degree of care as such Investor uses to protect its own confidential information to keep confidential any information furnished to such Investor hereof that the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Investor may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent

 

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of such Investor as long as such partner, subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.2 or comparable restrictions; (ii) at such time as it enters the public domain through no fault of such Investor; (iii) that is communicated to such Investor free of any obligation of confidentiality; (iv) that is developed by such Investor or its agents independently of and without reference to any confidential information communicated by the Company; or (v) as required by applicable law. Neither Muzzy-Lyon nor Manheim Investments, Inc. (“Cox”) shall be subject to, or be required to comply with, the provisions of this Section 3.2. In the event that Muzzy-Lyon or Cox elects to designate a representative to the Company’s Board of Directors (a “Designated Director”), then (x) only such Designated Director individually, and not Muzzy-Lyon or Cox, as applicable, its parent or their subsidiaries, affiliates, directors, officers, stockholders or agents, shall have any obligations to the Company and its shareholders, and (y) such Designated Director shall only have such obligations as are imposed by applicable state and federal securities laws and fiduciary duties imposed by the General Corporation Law of the State of Delaware on members of the Company’s Board of Directors.

3.3 Related-Party Transactions. The Company shall not, without the prior approval of a majority of the members of the Board of Directors who are not Interested Members, and except for the transactions contemplated by this Agreement, the Purchase Agreement and the documents delivered in connection therewith, authorize or enter into any transaction with (i) any director or officer, or any member of such director’s or officer’s immediate family or (ii) any Investor or such Investor’s affiliates (any such related-party transaction, a “Related Transaction”); provided further, that any Related Transaction with total potential consideration in excess of $1,000,000 shall require a fairness opinion from a firm selected by a majority of the members of the Company’s Board of Directors who are not Interested Members. For purposes of this Section 3.3, “Interested Members” shall mean any director who (1) is an executive officer or employee of the Company or U.S. Auto Parts or (2) who has or will have a direct or indirect material interest in the Related Transaction (including any financial or other interest in such Related Transaction) or whose Immediate Family Member (as defined below) has or will have a direct or indirect material interest in the Related Transaction. “Immediate Family Member” means a child, stepchild, parent, stepparent, spouse, domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director.

3.4 Board Observers.

(a) If U.S. Auto Parts is not represented on the Company’s Board of Directors and so long as U.S. Auto Parts and/or any person or entity affiliated with U.S. Auto Parts together own at least 5% of the then-outstanding Registrable Securities of the Company, the Company shall (a) permit one representative of U.S. Auto Parts to attend all meetings of the Company’s Board of Directors in a non-voting observer capacity and (b) give such representative copies of all notices, minutes, consents and other materials that the Company provides to its directors at the same time that it provides such materials to such directors; provided, however, that the Company reserves the right to exclude such representative from access to any material or meeting or portion thereof if (i) the Board of Directors of the Company determines in good faith that such exclusion is reasonably necessary to preserve the attorney-client privilege, or to protect confidential proprietary information of the Company, its affiliates or any third party or to comply with applicable state and federal securities laws or (ii) to enable

 

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the Board of Directors of the Company (or any committee thereof) to in good faith discuss matters relating to agreements and the business relationship between the Company and U.S. Auto Parts for reasonable portions of a meeting.

(b) If Oak Investment Partners XI, L.P. (“Oak”) is not represented on the Company’s Board of Directors and so long as Oak and/or any person or entity affiliated with Oak together own at least 5% of the then-outstanding Registrable Securities of the Company, the Company shall (a) permit one representative of Oak to attend all meetings of the Company’s Board of Directors in a non-voting observer capacity and (b) give such representative copies of all notices, minutes, consents and other materials that the Company provides to its directors at the same time that it provides such materials to such directors; provided, however, that the Company reserves the right to exclude such representative from access to any material or meeting or portion thereof if (i) the Board of Directors of the Company determines in good faith that such exclusion is reasonably necessary to preserve the attorney-client privilege, or to protect confidential proprietary information of the Company, its affiliates or any third party or to comply with applicable state and federal securities laws or (ii) to enable the Board of Directors of the Company (or any committee thereof) to in good faith discuss matters relating to agreements and the business relationship between the Company and Oak for reasonable portions of a meeting.

(c) For so long as the Sol Khazani Living Trust owns at least 2% of the then-outstanding Registrable Securities of the Company, the Company shall (a) permit one representative of the Sol Khazani Living Trust to attend all meetings of the Company’s Board of Directors in a non-voting observer capacity and (b) give such representative copies of all notices, minutes, consents and other materials that the Company provides to its directors at the same time that it provides such materials to such directors; provided, however, that the Company reserves the right to exclude such representative from access to any material or meeting or portion thereof if (i) the Board of Directors of the Company determines in good faith that such exclusion is reasonably necessary to preserve the attorney-client privilege, or to protect confidential proprietary information of the Company, its affiliates or any third party or to comply with applicable state and federal securities laws or (ii) to enable the Board of Directors of the Company (or any committee thereof) to in good faith discuss matters relating to agreements and the business relationship between the Company and the Sol Khazani Living Trust for reasonable portions of a meeting.

(d) If Muzzy-Lyon is not represented on the Company’s Board of Directors and so long as Muzzy-Lyon and/or any person or entity affiliated with Muzzy-Lyon together own at least 5% of the then-outstanding Registrable Securities of the Company, the Company shall (a) permit one representative of Muzzy-Lyon to attend all meetings of the Company’s Board of Directors in a non-voting observer capacity and (b) give such representative copies of all notices, minutes, consents and other materials that the Company provides to its directors at the same time that it provides such materials to such directors; provided, however, that the Company reserves the right to exclude such representative from access to any material or meeting or portion thereof if (i) the Company determines in good faith that such exclusion is reasonably necessary to preserve the attorney-client privilege, or to protect confidential or proprietary information of the Company, its affiliates or any third party or to comply with applicable state and federal securities laws or (ii) to enable the Board of Directors of the Company (or any committee thereof) to in good faith discuss matters relating to agreements and

 

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the business relationship between the Company and Muzzy-Lyon for reasonable portions of a meeting. The Company acknowledges and agrees that Muzzy-Lyon (including any observer of the Company’s Board of Directors representing Muzzy-Lyon) shall not owe any duties, including, without limitation, fiduciary duties, or confidentiality obligations, to the Company, its stockholders or otherwise due to Muzzy-Lyon’s board observer rights. In the event that Muzzy-Lyon elects to designate a Designated Director, then (x) only such Designated Director individually, and not Muzzy-Lyon, its parent or their subsidiaries, affiliates, directors, officers, stockholders or agents shall have any obligations to the Company and its shareholders, and (y) such Designated Director shall only have such obligations as are imposed by applicable state and federal securities laws and fiduciary duties imposed by the General Corporation Law of the State of Delaware on members of the Company’s Board of Directors.

(e) If Cox is not represented on the Company’s Board of Directors and so long as Cox and/or any person or entity affiliated with Cox together own at least 5% of the then-outstanding Registrable Securities of the Company, the Company shall (a) permit one representative of Cox to attend all meetings of the Company’s Board of Directors in a non-voting observer capacity and (b) give such representative copies of all notices, minutes, consents and other materials that the Company provides to its directors at the same time that it provides such materials to such directors; provided, however, that the Company reserves the right to exclude such representative from access to any material or meeting or portion thereof if (i) the Company determines in good faith that such exclusion is reasonably necessary to preserve the attorney-client privilege, or to protect confidential or proprietary information of the Company, its affiliates or any third party or to comply with applicable state and federal securities laws or (ii) to enable the Board of Directors of the Company (or any committee thereof) to in good faith discuss matters relating to agreements and the business relationship between the Company and Cox for reasonable portions of a meeting. The Company acknowledges and agrees that Cox (including any observer of the Company’s Board of Directors representing Cox) shall not owe any duties, including, without limitation, fiduciary duties, or confidentiality obligations, to the Company, its stockholders or otherwise due to Cox’s board observer rights. In the event that Cox elects to designate a Designated Director, then (x) only such Designated Director individually, and not Cox, its parent or their subsidiaries, affiliates, directors, officers, stockholders or agents shall have any obligations to the Company and its shareholders, and (y) such Designated Director shall only have such obligations as are imposed by applicable state and federal securities laws and fiduciary duties imposed by the General Corporation Law of the State of Delaware on members of the Company’s Board of Directors

(f) Subject to compliance with applicable state and federal securities laws and fiduciary duties imposed by the General Corporation Law of the State of Delaware on members of the Company’s Board of Directors, nothing in this Agreement shall be construed to prohibit Muzzy-Lyon or Cox, or any person or entity affiliated with Muzzy-Lyon or Cox, as applicable, from, either individually or together with one or more other persons, engaging or investing in, and devoting its time to, any other business venture, transaction or activity of any nature and description (independently or with others), whether or not such other activity may be deemed or construed to be in competition with the Company and whether or not such activity constitutes a “corporate opportunity” to which the Company could avail itself. Neither the Company nor any stockholder thereof shall have any right by virtue of this Agreement, or the relationship created hereby, to participate in or join such other venture, transaction or activity of Muzzy-Lyon or Cox

 

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or any person or entity affiliated with Muzzy-Lyon or Cox (or to the income or proceeds derived therefrom), and the pursuit thereof, even if competitive with the business of the Company or a potential “corporate opportunity” of the Company, shall not be deemed wrongful or improper. Neither Muzzy-Lyon nor Cox nor any person or entity affiliated with Muzzy-Lyon or Cox, as applicable, shall have any obligation or duty to communicate or offer to the Company any opportunity with respect to a potential transaction, agreement, arrangement or other matter of which Muzzy-Lyon or Cox, as applicable, has knowledge that may be a “corporate opportunity” of the Company.

3.5 Dividends or Distributions. In addition to any other vote or consent required by law, the vote or written consent of the holders of at least 66 2/3% of the then outstanding Registrable Securities shall be necessary for the Company to effect or validate any redemption, repurchase, payment or declaration of dividends or other distributions with respect to the Company’s Common Stock, except for (i) acquisitions of Common Stock by the Company pursuant to the Company Buyout Option (as defined in Section 4.8), (ii) acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares from management level employees of the Company at cost (or the lesser of cost or fair market value) upon termination of services to the Company, in an aggregate amount not to exceed $500,000 or (iii) acquisitions of Common Stock in exercise of the Company’s right of first refusal to repurchase such shares; provided that the Board of Directors of the Company shall not declare any dividends or other distributions with respect to the Company’s Common Stock unless such dividends or other distributions are made available on a pro rata basis to all stockholders.

3.6 Competitive Information. The Company will use its good faith efforts to prevent its disclosure, directly or indirectly, to any Investor of competitively sensitive material information about a competitor of such Investor, including pricing and margin information and terms of sale.

3.7 Transfer Restriction.

(a) Prior to October 8, 2017, U.S. Auto Parts shall not transfer shares of capital stock of the Company owned by U.S. Auto Parts or enter into any transaction or arrangement (including, without limitation, any sale, gift, merger or consolidation) that would result in U.S. Auto Parts owning, at any time, less than 50% of the shares of capital stock of the Company (a “Restricted Transfer”) without the prior written consent of Muzzy-Lyon, Cox, Oak and the Sol Khazani Living Trust; provided, however, that in the event of a proposed Restricted Transfer for which any of Muzzy-Lyon, Cox, Oak or the Sol Khazani Living Trust does not provide its written consent (such non consenting party, the “Non-Consenting Party”), in the alternative, upon not less than 30 days prior written notice to such Non-Consenting Party, U.S. Auto Parts may elect, at its sole option, to:

(i) In the event that Muzzy-Lyon is a Non-Consenting Party, purchase all shares of the Company’s Common Stock then owned by Muzzy-Lyon (up to a maximum of 3,000,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof ) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date

 

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hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed;

(ii) In the event that Cox is a Non-Consenting Party, purchase all shares of the Company’s Common Stock then owned by Cox (up to a maximum of 2,000,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof ) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed;

(iii) In the event that Oak is a Non-Consenting Party, purchase all shares of the Company’s Common Stock then owned by Oak (up to a maximum of 1,500,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof ) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed; and

(iv) In the event that the Sol Khazani Living Trust is a Non-Consenting Party, purchase all shares of the Company’s Common Stock then owned by the Sol Khazani Living Trust (up to a maximum of 500,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof ) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed.

(b) All shares of the Company’s Common Stock purchased by U.S. Auto Parts pursuant to this Section 3.7(a) shall be defined as the “Subject Stock” and the exercise by U.S. Auto Parts of its option to purchase shares of Common Stock from a Non-Consenting Party pursuant to this Section 3.7(a) shall be defined at the “PRTS Buyout Option”.

(c) In the event that U.S. Auto Parts elects to exercise the PRTS Buyout Option with respect to all Non-Consenting Parties to any Restricted Transfer, U.S. Auto Parts shall consummate the PRTS Buyout Option with respect to all such Non-Consenting Parties prior to the consummation of the applicable Restricted Transfer and shall be entitled to consummate such Restricted Transfer once the PRTS Buyout Option has so been consummated with respect to all the applicable Non-Consenting Parties.

(d) In connection with the consummation of the PRTS Buyout Option, each Non-Consenting Party shall represent and warrant to U.S. Auto Parts that: (a) such Non-Consenting Party is the beneficial owner of the Subject Stock being sold by such Non-Consenting Party, free and clear of any liens, encumbrances, taxes, security interests, equities, claims or demands or any restrictions on transfer or cancellation; (b) such Non-Consenting Party has the absolute and unrestricted right, power and capacity to deliver the Subject Stock being

 

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sold by such Non-Consenting Party to U.S. Auto Parts; and (c) the sale of the Subject Stock to U.S. Auto Parts by such Non-Consenting Party will not violate any order, decree, ruling, injunction or other restriction of any government, governmental agency or court to which such Non-Consenting Party is subject.

(e) Neither the Company, U.S. Auto Parts, Muzzy-Lyon, Cox, Oak nor the Sol Khazani Living Trust makes any representation as to the tax consequences to the other of the transactions provided for in this Section 3.7, which consequences, if any, shall be the sole responsibility of each such party for its own account.

3.8 Termination of Covenants. All covenants of the Company contained in Section 3 of this Agreement shall expire and terminate upon the earlier of (i) the effective date of the registration statement pertaining to a Qualified Initial Offering or (ii) upon the closing of an Acquisition or Asset Transfer (each as defined below); provided, however, that prior to October 8, 2017, (i) if Muzzy-Lyon and/or any person or entity affiliated with Muzzy-Lyon owns any shares of then-outstanding Registrable Securities of the Company, no Acquisition or Asset Transfer will be permitted without the consent of Muzzy Lyon, (ii) if Oak and/or any person or entity affiliated with Oak owns any shares of then-outstanding Registrable Securities of the Company, no Acquisition or Asset Transfer will be permitted without the consent of Oak, (iii) if the Sol Khazani Living Trust owns any shares of then-outstanding Registrable Securities of the Company, no Acquisition or Asset Transfer will be permitted without the consent of the Sol Khazani Living Trust and (iv) if Cox owns any shares of then-outstanding Registrable Securities of the Company, no Acquisition or Asset Transfer will be permitted without the consent of Cox; provided, however, that in the event of a proposed Acquisition or Asset Transfer for which Muzzy-Lyon, Oak, the Sol Khazani Living Trust or Cox does not provide its written consent, and such written consent is required pursuant to this Section 3.8, in the alternative, upon not less than 30 days prior written notice to each such non-consenting party, the Company may elect, at its sole option (subject to the requirement set forth below that such exercise has been approved by the Board of Directors of U.S. Auto Parts), to exercise the Company Buyout Option (as defined and pursuant to the terms set forth below in Section 4.8(b), (c) and (d)). In the event that the Company elects to exercise the Company Buyout Option, such transaction shall be consummated prior the consummation of any such Acquisition or Asset Transfer. Notwithstanding the foregoing, the Company shall not be permitted to exercise the Company Buyout Option unless and until the Board of Directors of U.S. Auto Parts has approved the Company’s exercise of the Company Buyout Option by providing its written consent to an officer or director of the Company.

For purposes of this Agreement “Acquisition” shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization of the Company, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; provided that an Acquisition shall not include any transaction or series of transactions (subject to

 

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compliance of such transaction or transactions with Section 4) principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof.

For purposes of this Agreement “Asset Transfer” shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

SECTION 4. RIGHTS OF FIRST REFUSAL.

4.1 Subsequent Offerings. Subject to applicable securities laws, each Major Investor, as defined below, shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.7 hereof. Each Investor’s pro rata share is equal to the ratio of (a) the number of shares of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon the exercise of outstanding warrants or options) of which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company’s outstanding Common Stock (including all shares of Common Stock issued or issuable upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities. The term “Major Investor” shall mean (i) between the period beginning from the date of this Agreement and ending on the third anniversary of this Agreement, each Investor, and (ii) following the third anniversary of this Agreement, only each Investor who, together with any person or entity affiliated with such Investor, holds at least 5% of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon the exercise of outstanding warrants or options). The term “Equity Securities” shall mean (i) any Common Stock, Preferred Stock or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other security or (iv) any such warrant or right. Notwithstanding anything to the contrary contained in this Agreement, in lieu of exercising its right of first refusal under this Section 4 in connection with the Company’s issuance of additional Equity Securities, any Major Investor may instead require that the Company exercise the Company Buyout Option (as defined in Section 4.8 below) with respect to its shares, provided, however, that the Company would not be obligated to pay the Interest Payment.

4.2 Exercise of Rights. If the Company proposes to issue any Equity Securities, it shall give each Major Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Major Investor shall have 15 days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Major Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.

 

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4.3 Issuance of Equity Securities to Other Persons. The Company shall have 90 days thereafter to sell the Equity Securities in respect of which the Major Investor’s rights were not exercised, at a price and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company’s notice to the Major Investors pursuant to Section 4.2 hereof. If the Company has not sold such Equity Securities within 90 days of the notice provided pursuant to Section 4.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Major Investors in the manner provided above.

4.4 Sale Without Notice. In lieu of giving notice to the Major Investors prior to the issuance of Equity Securities as provided in Section 4.2, the Company may elect to give notice to the Major Investors within 30 days after the issuance of Equity Securities. Such notice shall describe the type, price and terms of the Equity Securities. Each Major Investor shall have 20 days from the date of receipt of such notice to elect to purchase up to the number of shares that would, if purchased by such Major Investor, maintain such Major Investor’s pro rata share (as set forth in Section 4.1) of the Company’s equity securities after giving effect to all such purchases and the Company’s issuances. The closing of such sale shall occur within 60 days of the date of notice to the Major Investors. The Major Investors may still require that the Company exercise the Company Buyout Option in connection with a sale made pursuant to this Section 4.4.

4.5 Termination and Waiver of Rights of First Refusal. The rights of first refusal established by this Section 4 shall not apply to, and shall terminate upon the earlier of (i) the effective date of the registration statement pertaining to the Company’s Qualified Initial Offering or (ii) an Acquisition or Asset Transfer. Notwithstanding Section 5.5 hereof, the rights of first refusal established by this Section 4 may be amended, or any provision waived with and only with the written consent of the Company and the Major Investors holding a majority of the Registrable Securities held by all Major Investors, or as permitted by Section 5.5.

4.6 Assignment of Rights of First Refusal. The rights of first refusal of each Major Investor under this Section 4 may be assigned to the same parties, subject to the same restrictions as any transfer of registration rights pursuant to Section 2.8.

4.7 Excluded Securities. The rights of first refusal established by this Section 4 shall have no application to any of the following Equity Securities:

(a) shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights issued or to be issued after the date hereof to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements that are approved by the Company’s Board of Directors, provided, however, that such Common Stock and rights therefor may not exceed 10% of all issued and outstanding Common Stock of the Company at any time;

(b) stock issued pursuant to any rights or agreements, options, warrants or convertible securities permitted by and issued after the date of this Agreement, so long as the rights of first refusal established by this Section 4 were complied with, waived, or were inapplicable pursuant to any provision of this Section 4.7 with respect to the initial sale or grant by the Company of such rights or agreements;

 

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(c) any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination; provided that prior to October 8, 2017, (i) if Muzzy-Lyon and/or any person or entity affiliated with Muzzy-Lyon owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(c) shall have been approved by Muzzy-Lyon, (ii) if Oak and/or any person or entity affiliated with Oak owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(c) shall have been approved by Oak, (iii) if the Sol Khazani Living Trust owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(c) shall have been approved by the Sol Khazani Living Trust and (iv) if Cox owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(c) shall have been approved by Cox;

(d) any Equity Securities issued in connection with any stock split or stock dividend by the Company;

(e) any Equity Securities issued in connection with strategic transactions involving the Company and other entities, including, without limitation (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that prior to October 8, 2017, (i) if Muzzy-Lyon and/or any person or entity affiliated with Muzzy-Lyon owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(e) shall have been approved by Muzzy-Lyon, (ii) if Oak and/or any person or entity affiliated with Oak owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(e) shall have been approved by Oak, (iii) if the Sol Khazani Living Trust owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(e) shall have been approved by the Sol Khazani Living Trust and (iv) if Cox owns any shares of then-outstanding Registrable Securities of the Company, any issuance contemplated by this Section 4.7(e) shall have been approved by Cox;

(f) any Equity Securities that are issued by the Company pursuant to an underwritten public offering of up to 19.9% of the fully diluted common stock of the Company if such issuance generates net proceeds of at least $30 million for the Company; and

(g) any Equity Securities issued by the Company pursuant to the terms of the Purchase Agreement.

4.8 Company Buyout Option.

(a) Prior to October 8, 2017, the Company shall not issue Equity Securities pursuant to Section 4.7(c) or 4.7(e) (a “Dilutive Issuance”) (i) if Muzzy-Lyon and/or any person or entity affiliated with Muzzy-Lyon owns any shares of then-outstanding Registrable Securities of the Company, without the consent of Muzzy Lyon, (ii) if Oak and/or any person or entity affiliated with Oak owns any shares of then-outstanding Registrable Securities of the Company,

 

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without the consent of Oak, (iii) if the Sol Khazani Living Trust owns any shares of then-outstanding Registrable Securities of the Company, without the consent of the Sol Khazani Living Trust and (iv) if Cox owns any shares of then-outstanding Registrable Securities of the Company, without the consent of Cox; provided, however, that in the event of a proposed Dilutive Issuance for which any of Muzzy-Lyon, Oak, the Sol Khazani Living Trust or Cox does not provide its written consent, and such written consent is required pursuant to this Section 4.8(a) (such non consenting party, the “Option Non-Consenting Party”), in the alternative, upon not less than 30 days prior written notice to such Option Non-Consenting Party, the Company may elect, at its sole option (subject to the requirement set forth below that such exercise has been approved by the Board of Directors of U.S. Auto Parts), to exercise the Company Buyout Option (as defined below). In the event that the Company elects to exercise the Company Buyout Option with respect to all Option Non-Consenting Parties to any Dilutive Issuance, the Company shall consummate the Company Buyout Option with respect to all such Option Non-Consenting Parties prior to the consummation of the applicable Dilutive Issuance and shall be entitled to consummate such Dilutive Issuance once the Company Buyout Option has so been consummated with respect to all the applicable Option Non-Consenting Parties. Notwithstanding the foregoing, the Company shall not be permitted to exercise the Company Buyout Option unless and until the Board of Directors of U.S. Auto Parts has approved the Company’s exercise of the Company Buyout Option by providing its written consent to an officer or director of the Company.

(b) The “Company Buyout Option” shall mean:

(i) In the event that Muzzy-Lyon is an Option Non-Consenting Party, the Company’s repurchase of all shares of the Company’s Common Stock then owned by Muzzy-Lyon (up to a maximum of 3,000,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed (the “Interest Payment”), provided, however, that the Interest Payment will not be owing if the Dilutive Issuance does not result in a Change of Control, where a “Change of Control” is defined for purposes of this Section 4.8(b)(i) as any transaction or series of related transactions (other than a merger) to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred;

(ii) In the event that Cox is an Option Non-Consenting Party, the Company’s repurchase of all shares of the Company’s Common Stock then owned by Cox (up to a maximum of 2,000,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed (the “Interest Payment”), provided, however, that the Interest Payment will not be owing if the Dilutive Issuance does not result in a Change of Control, where a “Change of Control” is defined for purposes of this Section 4.8(b)(ii) as any transaction or series of related transactions (other than a merger) to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred;

 

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(iii) In the event that Oak is an Option Non-Consenting Party, the Company’s repurchase of all shares of the Company’s Common Stock then owned by Oak (up to a maximum of 1,500,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed (the “Interest Payment”), provided, however, that the Interest Payment will not be owing if the Dilutive Issuance does not result in a Change of Control, where a “Change of Control” is defined for purposes of this Section 4.8(b)(iii) as any transaction or series of related transactions (other than a merger) to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; and

(iv) In the event that the Sol Khazani Living Trust is an Option Non-Consenting Party, the Company’s repurchase of all shares of the Company’s Common Stock then owned by the Sol Khazani Living Trust (up to a maximum of 500,000 shares, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the date hereof) at a purchase price equal to $1.00 per share (as adjusted for any stock combinations, splits, recapitalizations and the like after the date hereof) plus an annual rate of 10% thereon, compounded annually from the date of this Agreement computed on the basis of a year of 365 or 366 days for the actual number of days elapsed (the “Interest Payment”), provided, however, that the Interest Payment will not be owing if the Dilutive Issuance does not result in a Change of Control, where a “Change of Control” is defined for purposes of this Section 4.8(b)(iv) as any transaction or series of related transactions (other than a merger) to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred.

(c) All shares of the Company’s Common Stock repurchased by the Company pursuant to this Section 4.8 shall be defined as the “Company Option Subject Stock”.

(d) In connection with the consummation of a Company Buyout Option, each Option Non-Consenting Party shall represent and warrant to the Company that: (a) such Option Non-Consenting Party is the beneficial owner of the Company Option Subject Stock being sold by such Option Non-Consenting Party, free and clear of any liens, encumbrances, taxes, security interests, equities, claims or demands or any restrictions on transfer or cancellation; (b) such Option Non-Consenting Party has the absolute and unrestricted right, power and capacity to deliver the Company Option Subject Stock being sold by such Option Non-Consenting Party to the Company; and (c) the sale of the Company Option Subject Stock to the Company by such Option Non-Consenting Party will not violate any order, decree, ruling, injunction or other restriction of any government, governmental agency or court to which such Option Non-Consenting Party is subject. Neither the Company, Muzzy-Lyon, Cox, Oak nor the Sol Khazani Living Trust makes any representation as to the tax consequences to the other of the transactions provided for in this Section 4.8, which consequences, if any, shall be the sole responsibility of each such party for its own account.

 

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(e) In the event that the Company’s Board of Directors has approved exercising the Company Buyout Option (and such exercise has been approved by the Board of Directors of U.S. Auto Parts), but at the time of such approval the Company does not have sufficient current assets to consummate such Company Buyout Option, then U.S. Auto Parts shall negotiate the terms of a transaction with the Company pursuant to which the Company shall be provided sufficient funds to consummate the Company Buyout Option (a “PRTS Funding”). Notwithstanding the foregoing, U.S. Auto Parts shall have no obligation to make the PRTS Funding to the Company unless the Board of Directors of U.S. Auto Parts has approved the PRTS Funding and determined that the consummation of the PRTS Funding is in the best interests of U.S. Auto Parts and its stockholders.

SECTION 5. MISCELLANEOUS.

5.1 U.S. Auto IP Litigation Defense.

(a) U.S. Auto Parts shall reimburse the Company for all Expenses incurred by the Company during the Indemnification Period in connection with any IP Proceeding, up to an aggregate maximum amount equal to $2,500,000 (the “Defense Amount”) in connection with all IP Proceedings.

(b) In the event that U.S. Auto Parts breaches its obligations set forth in Section 5.1(a), then Muzzy-Lyon shall provide written notice to U.S. Auto Parts (a “Reimbursement Notice”), which such Reimbursement Notice shall describe in commercially reasonable detail all Expenses which were incurred by the Company during the Indemnification Period that U.S. Auto Parts failed to reimburse the Company for pursuant to its obligations set forth in Section 5.1(a) (such Expenses, the “Unfunded Reimbursement Amounts”).

(c) In the event that U.S. Auto Parts does not reimburse the Company for Unfunded Reimbursement Amounts within 30 days following its receipt of a Reimbursement Notice (up to an aggregate amount not to exceed the Defense Amount), then the Company shall be obligated to pay Muzzy-Lyon an amount equal to such Unfunded Reimbursement Amounts, up to an aggregate amount not to exceed the Defense Amount less the aggregate amount of Expenses reimbursed by U.S. Auto Parts during the Indemnification Period (such amount, the “Remaining Defense Amount”); provided, however, that if at the time any such payment is due the Company does not have sufficient current assets to pay the Remaining Defense Amount to Muzzy-Lyon, U.S. Auto Parts shall provide the necessary funds to the Company to allow it to satisfy its obligations to Muzzy-Lyon under this Section 5.1(c) in full as an expense reimbursement (which expense reimbursement may not result in dilution of any other Investor).

(d) For purposes of this Section 5.1, “Expenses” shall mean all costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by the Company in connection with the investigation, defense or appeal of an IP Proceeding, and amounts paid in any judgment, fine, penalty or settlement by or on behalf of the Company in connection with an IP Proceeding.

 

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(e) For purposes of this Section 5.1, “Indemnification Period” shall mean the period starting with the date of this Agreement and ending on October 8, 2017.

(f) For purposes of this Section 5.1, “IP Proceeding” shall mean any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution, administrative hearing or any other actual or threatened proceeding in which the Company is involved as a party, a central or significant issue of which relates to whether the Company owns or possesses sufficient legal rights to any patent, trademark, service mark, trade name, copyright, trade secret, license, information or other proprietary right necessary for the Company’s business as then being conducted, to avoid infringement of the rights of others.

5.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware as such laws are applied to agreements among Delaware residents entered into and performed entirely within the State of Delaware, without reference to the conflict of laws provisions thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in New York, New York.

5.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors, and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.

5.4 Entire Agreement. This Agreement and the exhibit hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.

5.5 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

5.6 Amendment and Waiver. Except as otherwise expressly provided, this Agreement may be amended or modified, and the obligations of the Company and the rights of the Holders under this Agreement may be waived, only upon the written consent of the Company and the holders of at least a majority of the then-outstanding Registrable Securities.

 

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5.7 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party’s part of any breach, default or noncompliance under the Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

5.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, with written verification of receipt, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or Exhibit A hereto or at such other address or electronic mail address as such party may designate by 10 days advance written notice to the other parties hereto.

5.9 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

5.10 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Common Stock pursuant to the Purchase Agreement, as may be amended from time to time, any purchaser of such shares of Common Stock shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor,” a “Holder” and a party hereunder. Notwithstanding anything to the contrary contained herein, if the Company shall issue Equity Securities in accordance with Section 4.7 (c), (e) or (g) of this Agreement, any purchaser of such Equity Securities may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor,” a “Holder” and a party hereunder.

5.11 No Restrictions. Nothing in this Agreement shall limit the rights of Cox or Muzzy-Lyon, its parent Federal-Mogul Motorparts Corporation or their applicable subsidiaries or affiliates (other than, if applicable, any Designated Director) to conduct their businesses in any manner they choose, including without limitation the right to invest in, or themselves to operate, business lines that are directly competitive with the Company or any website, business or service operated by the Company, to enter into the distribution or auto repair business or to enter into new, or alter their existing, business relationships with any of the Company’s customers, competitors or others with whom the Company has or may in the future have business

 

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relationships. In the event that Muzzy-Lyon or Cox elects to designate a Designated Director, then (x) only such Designated Director individually, and not Muzzy-Lyon or Cox, as applicable, its parent or their subsidiaries, affiliates, directors, officers, stockholders or agents shall have any obligations to the Company and its shareholders, and (y) such Designated Director shall only have such obligations as are imposed by applicable state and federal securities laws and fiduciary duties imposed by the General Corporation Law of the State of Delaware on members of the Company’s Board of Directors.

5.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

5.13 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

5.14 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

5.15 Termination. This Agreement shall terminate and be of no further force or effect upon the earlier of (i) an Acquisition or Asset Transfer or (ii) the date three years following the closing of the Qualified Initial Offering.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.

 

COMPANY:

 

   

INVESTORS:

 

AUTOMD, INC.

 

   

U.S. AUTO PARTS NETWORK, INC.

 

By:   /s/ Tracey Virtue     By:   /s/ Shane Evangelist
Name:   Tracey Virtue     Name:   Shane Evangelist
Title:   President     Title:   CEO
     

 

MUZZY-LYON AUTO PARTS, INC.

 

      By:   /s/ Michelle Taigman
      Name:   Michelle Taigman
      Title:   Assistant Secretary
     

 

MANHEIM INVESTMENTS, INC.

 

      By:   /s/ Joseph Luppino
      Name:   Joseph Luppino
      Title:   Senior Vice President


IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.

 

    INVESTORS:
    OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP
    By: Oak Associates XI, LLC, its General Partner
    By:   /s/ Fred Harman
    Name: Fred Harman
    Title: Managing Member
    SOL KHAZANI LIVING TRUST
    By:   /s/ Sol Khazani
    Name:   Sol Khazani
    Title:   Trustee


EXHIBIT A

SCHEDULE OF INVESTORS

U.S. Auto Parts Network, Inc.

16941 Keegan Avenue

Carson, California 90746

Muzzy-Lyon Auto Parts, Inc.

26555 Northwestern Highway

Southfield, MI 48033

Manheim Investments, Inc.

6205 Peachtree Dunwoody Road

Atlanta, Georgia 30328

Oak Investment Partners XI, L.P.

525 University Avenue

Suite 1300

Palo Alto, CA 94301

Sol Khazani Living Trust

578 Washington Blvd#854

Marina Del Rey, Ca 90292

EX-99.3 4 d801594dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

AUTOMD, INC.

VOTING AGREEMENT

This VOTING AGREEMENT (the “Agreement”) is made and entered into as of this 8th day of October, 2014, by and among AUTOMD, INC., a Delaware corporation (the “Company”), and the persons and entities listed on Exhibit A hereto (the “Investors”).

WITNESSETH

WHEREAS, certain of the Investors are purchasing shares of the Company’s Common Stock (the “Common Stock”) pursuant to that certain Common Stock Purchase Agreement (the “Purchase Agreement”) of even date herewith (the “Financing”), and certain of the Investors are existing holders of the Common Stock;

WHEREAS, the obligations in the Purchase Agreement are conditioned upon the execution and delivery of this Agreement; and

WHEREAS, in connection with the consummation of the Financing, the Company and the Investors have agreed to provide for the future voting of their shares of the Company’s capital stock as set forth below.

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

1. VOTING.

1.1 Investor Shares. The Investors each agree to hold all shares of voting capital stock of the Company registered in their respective names or beneficially owned by them as of the date hereof and any and all other securities of the Company legally or beneficially acquired by each of the Investors after the date hereof (hereinafter collectively referred to as the “Investor Shares”) subject to, and to vote the Investor Shares in accordance with, the provisions of this Agreement.

1.2 Election of Directors. On all matters relating to the election and removal of directors of the Company, the Investors agree to vote all Investor Shares held by them (or the holders thereof shall consent pursuant to an action by written consent of the holders of capital stock of the Company) so as to elect members of the Company’s Board of Directors as follows:

(a) At each election of or action by written consent to elect directors, the Investors shall vote all of their respective Investor Shares so as to elect: (i) three individuals designated by U.S. Auto Parts Network, Inc. (“U.S. Auto Parts”), so long as it holds not fewer than 51% of the outstanding shares of the Company’s capital stock and at U.S. Auto Parts’ sole option, which individuals shall initially be Sol Khazani, Robert J. Majteles and Joshua L. Berman, (ii) one individual designated by Muzzy-Lyon Auto Parts, Inc. (“Muzzy-Lyon”), so long


as it holds not fewer than 5% of the outstanding shares of the Company’s capital stock and at Muzzy-Lyon’s sole option, which individual shall initially be undesignated, (iii) one individual designated by Oak Investment Partners XI, L.P. (“Oak”), so long as it holds not fewer than 5% of the outstanding shares of the Company’s capital stock and at Oak’s sole option, which individual shall initially be Fredric W. Harman and (iv) one individual designated by Manheim Investments, Inc. (“Cox”), so long as it holds not fewer than 5% of the outstanding shares of the Company’s capital stock and at Cox’s sole option, which individual shall initially be undesignated. Any vote taken to remove any director elected pursuant to this Section 1.2(a), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 1.2(a), shall also be subject to the provisions of this Section 1.2(a). Upon the request of any party entitled to designate a director as provided in this Section 1.2(a), each Investor agrees to vote its Investor Shares for the removal of such director.

(b) At any time that the Company has three directors serving on its Board of Directors designated by Investors pursuant to Section 1.2(a)(ii), (iii) and (iv) above (each, a “Trigger Event”), at each election of or action by written consent to elect directors following such Trigger Event, the Investors shall vote all of their respective Investor Shares so as to elect one additional individual designated by U.S. Auto Parts, so long as it holds not fewer than 51% of the outstanding shares of the Company’s capital stock and at U.S. Auto Parts’ sole option. At any time following a Trigger Event that the Company does not have three directors serving on its Board of Directors designated by Investors pursuant to Section 1.2(a)(ii), (iii) and (iv) above, for a continuous six month period, U.S. Auto Parts shall request to have such additional director removed from the Board. Any vote taken to remove any director elected pursuant to this Section 1.2(b), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 1.2(b), shall also be subject to the provisions of this Section 1.2(b). Upon the request of any party entitled to designate a director as provided in this Section 1.2(b), each Investor agrees to vote its Investor Shares for the removal of such director.

1.3 No Liability for Election of Recommended Director. None of the parties hereto and no officer, director, stockholder, partner, employee or agent of any party makes any representation or warranty as to the fitness or competence of the nominee of any party hereunder to serve on the Board of Directors by virtue of such party’s execution of this Agreement or by the act of such party in voting for such nominee pursuant to this Agreement. Any director nominated by U.S. Auto Parts, Muzzy-Lyon, Oak or Cox will be indemnified by the Company to the fullest extent permitted by applicable law.

1.4 Legend.

(a) Concurrently with the execution of this Agreement, there shall be imprinted or otherwise placed, on certificates representing the Investor Shares the following restrictive legend (the “Legend”):

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL

 

2


BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.”

(b) The Company agrees that, during the term of this Agreement, it will not remove, and will not permit to be removed (upon registration of transfer, reissuance of otherwise), the Legend from any such certificate and will place or cause to be placed the Legend on any new certificate issued to represent Investor Shares theretofore represented by a certificate carrying the Legend. If at any time or from time to time any Investor holds any certificate representing shares of the Company’s capital stock not bearing the aforementioned legend, such Investor agrees to deliver such certificate to the Company promptly to have such legend placed on such certificate.

1.5 Successors. The provisions of this Agreement shall be binding upon the successors in interest to any of the Investor Shares. The Company shall not permit the transfer of any of the Investor Shares on its books or issue a new certificate representing any of the Investor Shares unless and until the person to whom such security is to be transferred shall have executed a written agreement, substantially in the form of this Agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person were an Investor.

1.6 Other Rights. Except as provided by this Agreement or any other agreement entered into in connection with the Financing, each Investor shall exercise the full rights of a holder of capital stock of the Company with respect to the Investor Shares.

1.7 Change of Control. Beginning five years from the date hereof, in the event that holders of at least a majority of the Investor Shares (the “Requisite Investors”) approve a sale of the Company or all or substantially all of the Company’s assets (an “Approved Sale”) whether by means of a merger, consolidation or sale of stock or assets, or otherwise, (i) if the Approved Sale is structured as a merger or consolidation of the Company, or a sale of all or substantially all of the Company’s assets, each Investor agrees to be present, in person or by proxy, at all meetings for the vote thereon, to vote all shares of capital stock held by such person for and raise no objections to such Approved Sale, and waive and refrain from exercising any dissenters rights, appraisal rights or similar rights in connection with such merger, consolidation or asset sale, or (ii) if the Approved Sale is structured as a sale of the stock of the Company, the Investors shall each agree to sell their Investor Shares on the terms and conditions approved by the Requisite Investors, provided that each holder of each class or series of the Company’s stock will receive the same amount of consideration per share for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock. The Investors shall each take all reasonably necessary actions approved by the Requisite Holders in connection with the consummation of the Approved Sale, including the execution of such agreements and such instruments and other actions reasonably necessary to (a) provide the representations, warranties, indemnities, covenants, conditions, escrow agreements and other provisions and agreements relating to such Approved Sale and (b) effectuate the allocation and distribution of the aggregate consideration upon the Approved Sale.

 

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1.8 Irrevocable Proxy. To secure the Investor’s obligations to vote the Investor Shares in accordance with this Agreement, each Investor hereby appoints the Chairman of the Board of Directors or the Chief Executive Officer of the Company, or either of them from time to time, or their designees, as such Investor’s true and lawful proxy and attorney, with the power to act alone and with full power of substitution, to vote all of such Investor’s Investor Shares as set forth in this Agreement and to execute all appropriate instruments consistent with this Agreement on behalf of such Investor if, and only if, such Investor fails to vote all of such Investor’s Investor Shares or execute such other instruments in accordance with the provisions of this Agreement. The proxy and power granted by each Investor pursuant to this Section are coupled with an interest and are given to secure the performance of such party’s duties under this Agreement. Each such proxy and power will be irrevocable for the term hereof. The proxy and power, so long as any party hereto is an individual, will survive the death, incompetency and disability of such party or any other individual holder of the Investor Shares, and, so long as any party hereto is an entity, will survive the merger or reorganization of such party or any other entity holding any Investor Shares. The proxy granted pursuant to this Section 1.8 shall be revoked automatically and without any further act of the Investor upon termination of this Agreement in accordance with its terms.

1.9 No “Bad Actor” Disqualification.

(a) The Company has exercised reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act of 1933, as amended (“Disqualification Events”). To the Company’s knowledge, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(e) under the Securities Act of 1933, as amended. For purposes of this Agreement, “Company Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act of 1933, as amended; provided, however, that Company Covered Persons do not include (a) any Investor, (b) any person or entity that is deemed to be an affiliated issuer of the Company solely as a result of the relationship between the Company and any Investor or (c) any director of the Company that has been designated by any Investor.

(b) Each Investor represents and warrants that neither (i) such person, nor (ii) any entity that controls such person or is under the control of, or under common control with, such person, nor (iii) any director of the Company that has been designated by such person, is subject to any Disqualification Event (as defined in Section 1.9(a) above), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) under the Securities Act of 1933, as amended, and disclosed in writing in reasonable detail to the Company. No party to this Agreement will select a designee that is subject to any Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act of 1933, as amended, in which case such party will promptly disclose in writing to the Company and other parties to this Agreement any and all information necessary for the Company to determine whether Rule 506(d)(2)(ii) or (iii) or (d)(3) applies.

 

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(c) Each party to this Agreement represents that it has exercised reasonable care to determine the accuracy of the representation made by it in either Section 1.9(a) or (b) as applicable, and agrees to notify each other party to this Agreement if it becomes aware of any fact that makes the representation given by it hereunder inaccurate.

(d) Notwithstanding any other provision in this Agreement to the contrary, no party to this Agreement will be required to vote for any director or proposed director who is subject to a Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act of 1933, as amended.

2. TERMINATION.

2.1 This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety:

(a) the date of the closing of a firmly underwritten public offering of the Company’s Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission, and declared effective under the Securities Act of 1933, as amended;

(b) the date of the closing of an Acquisition or Asset Transfer (each as defined below); or

(c) the date as of which the parties hereto terminate this Agreement by written consent of the holders of a majority of the Investor Shares, including the written consent of U.S. Auto Parts so long as such party is entitled to designate directors pursuant to Section 1.2(a)(i) or Section 1.2(b), the written consent of Muzzy-Lyon so long as such party is entitled to designate a director pursuant to Section 1.2(a)(ii), the written consent of Oak so long as such party is entitled to designate a director pursuant to Section 1.2(a)(iii) and the written consent of Cox so long as such party is entitled to designate a director pursuant to Section 1.2(a)(iv).

For purposes of this Agreement “Acquisition” shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization of the Company, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; provided that an Acquisition shall not include any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof.

For purposes of this Agreement “Asset Transfer” shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

3. MISCELLANEOUS.

 

5


3.1 Ownership. Each Investor represents and warrants to the Investors and the Company that (a) such Investor now owns, or will own upon the Initial Closing (as defined in the Purchase Agreement), the Investor Shares listed on Exhibit A hereto, free and clear of liens or encumbrances, and has not, prior to or on the date of this Agreement, executed or delivered any proxy or entered into any other voting agreement or similar arrangement, and (b) such Investor has full power and capacity to execute, deliver and perform this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of, such Investor enforceable in accordance with its terms.

3.2 Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto or his heirs, personal representatives, or assigns institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

3.3 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware as such laws are applied to agreements among Delaware residents entered into and performed entirely within the State of Delaware, without reference to the conflict of laws provisions thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in New York, New York.

3.4 Amendment or Waiver. This Agreement may be amended or modified (or provisions of this Agreement waived) only upon the written consent of (i) the Company and (ii) the Investors holding at least a majority of the Common Stock held by all Investors. Any amendment or waiver so effected shall be binding upon the Company, each of the parties hereto and any assignee of any such party; provided, however, that notwithstanding the foregoing, Section 1.2(a) of this Agreement shall not be amended or waived without the written consent of U.S. Auto Parts so long as such party is entitled to designate directors pursuant to Section 1.2(a)(i), the written consent of Muzzy-Lyon so long as such party is entitled to designate a director pursuant to Section 1.2(a)(ii), the written consent of Oak so long as such party is entitled to designate a director pursuant to Section 1.2(a)(iii), and the written consent of Cox so long as such party is entitled to designate a director pursuant to Section 1.2(a)(iv); provided, further, that Section 1.2(b) of this Agreement shall not be amended or waived without the written consent of U.S. Auto Parts so long as such party holds not fewer than 51% of the outstanding shares of the Company’s capital stock.

3.5 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

6


3.6 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors and administrators and other legal representatives.

3.7 Additional Shares. In the event that subsequent to the date of this Agreement any shares or other securities are issued on, or in exchange for, any of the Investor Shares by reason of any stock dividend, stock split, combination of shares, reclassification or the like, such shares or securities shall be deemed to be Investor Shares for purposes of this Agreement.

3.8 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Common Stock pursuant to the Purchase Agreement, as may be amended from time to time, any purchaser of such shares of Common Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor” and a party hereunder.

3.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together shall constitute one instrument.

3.10 Waiver. No waivers of any breach of this Agreement extended by any party hereto to any other party shall be construed as a waiver of any rights or remedies of any other party hereto or with respect to any subsequent breach.

3.11 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any party’s part of any breach, default or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of the Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement by law, or otherwise afforded to any party, shall be cumulative and not alternative.

3.12 Notices. All notices required in connection with this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, with written notification of receipt, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written notification of receipt. All communications shall be sent to the holder appearing on the books of the Company or at such address as such party may designate by ten (10) days advance written notice to the other parties hereto.

 

7


3.13 Entire Agreement. This Agreement and the exhibit hereto, along with the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement, the Purchase Agreement and the other documents delivered pursuant thereto.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

8


IN WITNESS WHEREOF, the parties hereto have executed this VOTING AGREEMENT as of the date first above written.

 

COMPANY:     INVESTORS:
AUTOMD, INC.     U.S. AUTO PARTS NETWORK, INC.
By:   /s/ Tracey Virtue     By:   /s/ Shane Evangelist
Name:   Tracey Virtue     Name:   Shane Evangelist
Title:   President     Title:   CEO
      MUZZY-LYON AUTO PARTS, INC.
      By:   /s/ Michelle Taigman
      Name:   Michelle Taigman
      Title:   Assistant Secretary
      MANHEIM INVESTMENTS, INC.
      By:   /s/ Joseph Luppino
      Name:   Joseph Luppino
      Title:   Senior Vice President

 

9


IN WITNESS WHEREOF, the parties hereto have executed this VOTING AGREEMENT as of the date first above written.

 

INVESTORS:
OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP
By: Oak Associates XI, LLC, its General Partner
By:  

/s/ Fred Harman

Name: Fred Harman

Title: Managing Member
SOL KHAZANI LIVING TRUST
By:   /s/ Sol Khazani
Name:   Sol Khazani
Title:   Trustee

 

10


EXHIBIT A

LIST OF INVESTORS

 

NAME OF INVESTOR

   SHARES OF
COMMON STOCK
 

U.S. Auto Parts Network, Inc.

16941 Keegan Avenue

Carson, California 90746

     12,500,000   

Muzzy-Lyon Auto Parts, Inc.

26555 Northwestern Highway

Southfield, Michigan 48033

     3,000,000   

Manheim Investments, Inc.

6205 Peachtree Dunwoody Road

Atlanta, Georgia 30328

     2,000,000   

Oak Investment Partners XI, L.P.

525 University Avenue

Suite 1300

Palo Alto, CA 94301

     1,500,000   

Sol Khazani Living Trust

578 Washington Blvd#854

Marina Del Rey, Ca 90292

     500,000   

 

11

EX-99.4 5 d801594dex994.htm EX-99.4 EX-99.4

Exhibit 99.4

AUTOMD, INC.

RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

This RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (the “Agreement”) is made and entered into as of this 8th day of October, 2014, by and among AUTOMD, INC., a Delaware corporation (the “Company”), and each of the persons and entities listed on Exhibit A hereto (the “Investors”).

RECITALS

WHEREAS, certain of the Investors are purchasing shares of the Company’s Common Stock (the “Common Stock”) pursuant to that certain Common Stock Purchase Agreement (the “Purchase Agreement”) of even date herewith (the “Financing”), and certain of the Investors are existing holders of the Common Stock;

WHEREAS, the obligations in the Purchase Agreement are conditioned upon the execution and delivery of this Agreement; and

WHEREAS, in connection with the consummation of the Financing, the Company and the Investors have agreed to enter into this Agreement in order to grant first refusal and co-sale rights as set forth below.

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS.

1.1 “Investor Stock shall mean the shares of Common Stock now owned or subsequently acquired by the Investors whether or not such securities are only registered in an Investor’s name or beneficially or otherwise legally owned by such Investor.

1.2 For purposes of this Agreement, the term “Transfer” shall include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by request, devise or descent, or other transfer or disposition of any kind, including, but not limited to, transfers to receivers, levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law, directly or indirectly, of any of the Investor Stock.

2. Transfers by an Investor.

2.1 Notice of Transfer. Other than in connection with a Transfer excluded by Section 3.1, if an Investor (the “Selling Investor”) proposes to Transfer any shares of Investor Stock then the Selling Investor shall promptly give written notice (the “Notice”) simultaneously to the Company and to each of the other Investors at least 45 days prior to the closing of such Transfer. The Notice shall describe in reasonable detail the proposed Transfer including, without

 

1.


limitation, the number of shares of Investor Stock to be transferred, the nature of such Transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee.

2.2 Company Right of First Refusal. For a period of 30 days (the “Company ROFR Period”) following receipt of any Notice described in Section 2.1, the Company shall have the right to purchase all (but not less than all) of the Investor Stock subject to such Notice on the same terms and conditions as set forth therein. The Company’s purchase right shall be exercised by written notice signed by an officer of the Company (the “Company Notice”) and delivered to the Selling Investor within the Company ROFR Period. The Company shall effect the purchase of the Investor Stock, including payment of the purchase price, not more than five business days after delivery of the Company’s Notice, and at such time the Selling Investor shall deliver to the Company the certificate(s) representing the Investor Stock to be purchased by the Company, each certificate to be properly endorsed for transfer. The Investor Stock so purchased shall thereupon be cancelled and cease to be issued and outstanding shares of the Company’s Common Stock.

2.3 Investor Right of First Refusal.

(a) In the event that the Company does not elect to purchase all of the Investor Stock available pursuant to its rights under Section 2.2 within the Company ROFR Period, the Selling Investor shall give written notice within 20 days following the earlier to occur of (i) any waiver by the Company of its rights under Section 2.2 or (ii) the expiration of Company ROFR Period (the “Second Notice”) to each of the other Investors, which shall state that the Company did not purchase the Investor Shares subject to the Notice set forth in Section 2.1. Each Investor which, together with any person or entity affiliated with such Investor, owns at least 10% of the outstanding Common Stock as of the date of the Second Notice (such Investors, the “Qualified Investors”) shall then have the right, exercisable upon written notice to the Selling Investor (the “Investor Notice”) within 10 days after the receipt of the Second Notice (the “Investor ROFR Period”), to purchase its pro rata share of the Investor Stock subject to the Second Notice and on the same terms and conditions as set forth therein. Except as set forth in Section 2.3(c), the Qualified Investors who so exercise their rights (the “Participating Investors”) shall effect the purchase of the Investor Stock, including payment of the purchase price, not more than five days after delivery of the Investor Notice, and at such time the Selling Investor shall deliver to the Participating Investors the certificate(s) representing the Investor Stock to be purchased by the Participating Investors, each certificate to be properly endorsed for transfer.

(b) Each Qualified Investor’s pro rata share shall be equal to the product obtained by multiplying (i) the aggregate number of shares of Investor Stock covered by the Second Notice and (ii) a fraction, the numerator of which is the number of shares of Common Stock held by the Participating Investor at the time of the First Notice, and the denominator of which is the total number of shares of Common Stock outstanding at the time of the First Notice held by all Qualified Investors.

(c) In the event that not all of the Qualified Investors elect to purchase their pro rata share of the Investor Stock available pursuant to their rights under Section 2.3(a) within the Investor ROFR Period, then the Selling Investor shall give written notice to each of the

 

2.


Participating Investors within 20 days following the expiration of the Investor ROFR Period (the “Overallotment Notice”), which shall set forth the number of shares of Investor Stock not purchased by the other Qualified Investors, and shall offer such Participating Investors the right to acquire such unsubscribed shares. Each Participating Investor shall have five days after receipt of the Overallotment Notice to deliver a written notice to the Selling investor (the “Participating Investors Overallotment Notice”) indicating the number of unsubscribed shares that such Participating Investor desires to purchase, and each such Participating Investor shall be entitled to purchase such number of unsubscribed shares on the same terms and conditions as set forth in the Second Notice. In the event that the Participating Investors desire, in the aggregate, to purchase in excess of the total number of available unsubscribed shares, then the number of unsubscribed shares that each Participating Investor may purchase shall be reduced on a pro rata basis. For purposes of this Section 2.3(c) the denominator described in clause (ii) of subsection 2.3(b) above shall be the total number of shares of Common Stock held by all Participating Investors at the time of the First Notice. The Participating Investors shall then effect the purchase of the Investor Stock, including payment of the purchase price, not more than five days after delivery of the Participating Investors Overallotment Notice, and at such time, the Selling Investor shall deliver to the Participating Investors the certificates representing the Investor Stock to be purchased by the Participating Investors, each certificate to be properly endorsed for transfer.

2.4 Right of Co-Sale.

(a) In the event the Company and the Qualified Investors fail to exercise their respective rights to purchase all of the Investor Stock subject to Sections 2.2 and 2.3 hereof, following the exercise or expiration of the rights of purchase set forth in Section 2.2 and 2.3, then the Selling Investor shall deliver to the Company and each Qualified Investor written notice (the “Co-Sale Notice”) that each Qualified Investor shall have the right, exercisable upon written notice to such Selling Investor with a copy to the Company within 15 days after receipt of the Co-Sale Notice (the “Co-Sale Period”), to participate in such Transfer of Investor Stock on the same terms and conditions. Such notice shall indicate the number of shares of Investor Stock up to that number of shares determined under Section 2.4(b) such Qualified Investor wishes to sell under his or her right to participate. To the extent one or more of the Qualified Investors exercise such right of participation in accordance with the terms and conditions set forth below, the number of shares of Investor Stock that such Qualified Investor may sell in the transaction shall be correspondingly reduced.

(b) Each Qualified Investor may sell all or any part of that number of shares equal to the product obtained by multiplying (i) the aggregate number of shares of Investor Stock covered by the Co-Sale Notice and not purchased by the Company or Qualified Investors pursuant to Section 2.2 or 2.3 by (ii) a fraction the numerator of which is the number of shares of Common Stock held by such Qualified Investor at the time of the First Notice and the denominator of which is the total number of shares of Common Stock held by all Qualified Investors (excluding shares purchased by the Company and/or Qualified Investors pursuant to Section 2.2 or 2.3).

(c) Each Qualified Investor who elects to participate in the Transfer pursuant to this Section 2.4 (a “Co-Sale Participant”) shall effect its participation in the Transfer by

 

3.


promptly delivering to such Selling Investor for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the number of shares of Common Stock which such Co-Sale Participant elects to sell.

(d) The stock certificate or certificates that the Co-Sale Participant delivers to such Selling Investor pursuant to Section 2.4(c) shall be transferred to the prospective purchaser in consummation of the sale of the Common Stock pursuant to the terms and conditions specified in the Co-Sale Notice, and the Selling Investor shall concurrently therewith remit to such Co-Sale Participant that portion of the sale proceeds to which such Co-Sale Participant is entitled by reason of its participation in such sale. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase shares or other securities from a Co-Sale Participant exercising its rights of co-sale hereunder, such Selling Investor shall not sell to such prospective purchaser or purchasers any Investor Stock unless and until, simultaneously with such sale, such Selling Investor shall purchase such shares or other securities from such Co-Sale Participant on the same terms and conditions specified in the Co-Sale Notice.

(e) The exercise or non-exercise of the rights of any Qualified Investor hereunder to participate in one or more Transfers of Investor Stock made by any Qualified Investor shall not adversely affect his right to participate in subsequent Transfers of Investor Stock subject to Section 2.

(f) To the extent that the Qualified Investors do not elect to participate in the sale of the Investor Stock subject to the Co-Sale Notice, such Selling Investor may, not later than 60 days following delivery to the Company of the Co-Sale Notice, enter into an agreement providing for the closing of the Transfer of such Investor Stock covered by the Co-Sale Notice within 30 days of such agreement on terms and conditions not materially more favorable to the transferor than those described in the Co-Sale Notice. Any proposed Transfer on terms and conditions materially more favorable than those described in the Co-Sale Notice, as well as any subsequent proposed Transfer of any of the Investor Stock by an Investor, shall again be subject to the first refusal and co-sale rights of the Company and/or Investors and shall require compliance by an Investor with the procedures described in this Section 2.

3. EXEMPT TRANSFERS.

3.1 Notwithstanding the foregoing, the notice, first refusal and co-sale rights of the Company and/or the Investors set forth in Section 2 above shall not apply to (i) any transfer without consideration to the Investor’s ancestors, descendants or spouse or to trusts for the benefit of such persons or the Investor, (ii) transfers to any person or entity affiliated with such Investor, or (iii) any transfer in connection with a PRTS Buyout Option or a Company Buyout Option (each as defined in the Company’s Investor Rights Agreement, dated as of the date hereof); provided that in the event of any transfer made pursuant to one of the exemptions provided by clauses (i) or (ii), the pledgee or transferee shall enter into a written agreement to be bound by and comply with all provisions of this Agreement, as if it were an original Investor hereunder, including without limitation Section 2. Such transferred Investor Stock shall remain “Investor Stock” hereunder, and such pledgee or transferee shall be treated as the “Investor” for purposes of this Agreement.

 

4.


3.2 Notwithstanding the foregoing, the provisions of Section 2 shall not apply to the sale of any Investor Stock to the public pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”).

3.3 This Agreement is subject to, and shall in no manner limit the right which the Company may have to repurchase securities from the Investor pursuant to any right of first refusal set forth in the Bylaws of the Company.

4. PROHIBITED TRANSFERS.

4.1 Call Option. In the event of a prohibited transfer in violation of Section 2.3 hereof (a “Prohibited Transaction”), the Qualified Investors shall have the option to purchase from the pledgee, purchaser or transferee of the Investor Stock transferred in violation of Section 2.3, the number of shares that the Qualified Investors would have been entitled to purchase had such Prohibited Transaction been effected in accordance with Section 2.3 hereof, on the following terms and conditions:

(a) the price per share at which the shares are to be purchased by the Qualified Investor shall be equal to the price per share paid to such Selling Investor by the third party purchaser or purchasers of such Investor Stock that is subject to the Prohibited Transaction; and

(b) the Selling Investor effecting such Prohibited Transaction shall reimburse the Qualified Investor for any expenses, including legal fees and expenses, incurred in effecting such purchase.

4.2 Put Option.

(a) In the event that an Investor should sell any Investor Stock in contravention of the co-sale rights of each Qualified Investor under Section 2.4 of this Agreement (a “Prohibited Transfer”), each Qualified Investor, in addition to such other remedies as may be available at law, in equity or hereunder, shall have the put option provided below, and such Selling Investor shall be bound by the applicable provisions of such option.

(b) In the event of a Prohibited Transfer, each Qualified Investor shall have the right to sell to such Selling Investor the type and number of shares of Common Stock equal to the number of shares each Qualified Investor would have been entitled to transfer to the purchaser under Section 2.4 hereof had the Prohibited Transfer been effected pursuant to and in compliance with the terms hereof. Such sale shall be made on the following terms and conditions:

(c) The price per share at which the shares are to be sold to the Selling Investor shall be equal to the price per share paid by the purchaser to such Selling Investor in such Prohibited Transfer. The Selling Investor shall also reimburse each Qualified Investor for any and all fees and expenses, including legal fees and expenses, incurred in connection with the exercise or the attempted exercise of the Qualified Investor’s rights under Section 2.4.

 

5.


(d) Within 90 days after the date on which a Qualified Investor received notice of the Prohibited Transfer, such Qualified Investor shall, if exercising the option created hereby, deliver to the Selling Investor the certificate or certificates representing the shares to be sold, each certificate to be properly endorsed for transfer.

(e) Such Selling Investor shall, upon receipt of the certificate or certificates for the shares to be sold by a Qualified Investor, pursuant to this Section 4.2, pay the aggregate purchase price therefor and the amount of reimbursable fees and expenses, as specified in Section 4.2(c), in cash or by other means acceptable to the Investor.

4.3 Voidability of Transfer. Notwithstanding the foregoing, any purported Transfer by an Investor in violation of Section 2 and/or Section 3 hereof shall be voidable at the option of the holders of a majority of the Investor Stock if the holders of a majority of the Investor Stock do not elect to exercise the call or put option set forth in this Section 4, and the Company agrees it will not effect such a transfer nor will it treat any alleged transferee as the holder of such shares without the written consent of the holders of a majority of the Investor Stock.

5. LEGEND.

5.1 Each certificate representing shares of Investor Stock now or hereafter owned by the Investors or issued to any person in connection with a Transfer pursuant to Section 3.1 hereof shall be endorsed with the following legend:

“THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND IN SOME CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT BY AND AMONG THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.”

5.2 The Investors agree that the Company may instruct its transfer agent to impose transfer restrictions on the shares represented by certificates bearing the legend referred to in Section 5.1 above to enforce the provisions of this Agreement and the Company agrees to promptly do so. The legend shall be removed at the request of any Investor following termination of this Agreement.

6. MISCELLANEOUS.

6.1 Conditions to Exercise of Rights. Exercise of the Investors’ rights under this Agreement shall be subject to and conditioned upon, and the Company shall use its best efforts to assist each Investor in, compliance with applicable laws.

6.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware as such laws are applied to agreements among Delaware residents

 

6.


entered into and performed entirely within the State of Delaware, without reference to the conflict of laws provisions thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in New York, New York.

6.3 Amendment. Any provision of this Agreement may be amended or modified and/or the observance thereof may be waived or this Agreement terminated, only with the written consent of (i) the Company and (ii) the Investors holding at least a majority of the Common Stock held by all Investors. Any amendment or waiver effected in accordance with this Section 6.3 shall be binding upon each Investor, its successors and assigns and the Company. No consent of any party hereto shall be necessary to include as a party to this Agreement any transferee required to become a party hereto pursuant to Section 3.1 hereof.

6.4 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors and administrators and other legal representatives.

6.5 Term. This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety:

(a) the date of the closing of a firm commitment underwritten public offering of the Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission, and declared effective under the Securities Act of 1933, as amended; or

(b) the date of the closing of an Acquisition or Asset Transfer (each as defined below).

For purposes of this Agreement “Acquisition” shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization of the Company, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; provided that an Acquisition shall not include any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof.

For purposes of this Agreement “Asset Transfer” shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

6.6 Ownership. Each Investor represents and warrant that he, she or it is the sole legal and beneficial owner of those shares of Investor Stock he or she currently holds subject to the Agreement and that no other person has any interest (other than a community property interest) in such shares.

 

7.


6.7 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, with written verification of receipt, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature page or Exhibits hereof or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.

6.8 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

6.9 Entire Agreement. This Agreement and the exhibit hereto, along with the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.

6.10 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Common Stock pursuant to the Purchase Agreement, as may be amended from time to time, any purchaser of such shares of Common Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor” hereunder.

6.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

8.


The foregoing RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT is hereby executed as of the date first above written.

 

COMPANY:     INVESTORS:
AUTOMD, INC.    

U.S. AUTO PARTS NETWORK, INC.

By:   /s/ Tracey Virtue     By:   /s/ Shane Evangelist
Name:   Tracey Virtue     Name:   Shane Evangelist
Title:   President     Title:   CEO
      MUZZY-LYON AUTO PARTS, INC.
      By:   /s/ Michelle Taigman
      Name:   Michelle Taigman
      Title:   Assistant Secretary
      MANHEIM INVESTMENTS, INC.
      By:   /s/ Joseph Luppino
      Name:   Joseph Luppino
      Title:   Senior Vice President


The foregoing RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT is hereby executed as of the date first above written.

 

    INVESTORS:
    OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP
    By: Oak Associates XI, LLC, its General Partner
    By:   /s/ Fred Harman
    Name:   Fred Harman
    Title:   Managing Member
    SOL KHAZANI LIVING TRUST
    By:   /s/ Sol Khazani
    Name:   Sol Khazani
    Title:   Trustee

 

2


EXHIBIT A

LIST OF INVESTORS

 

NAME OF INVESTOR

   SHARES OF COMMON STOCK

U.S. Auto Parts Network, Inc.

16941 Keegan Avenue

Carson, California 90746

   12,500,000

Muzzy-Lyon Auto Parts, Inc.

26555 Northwestern Highway

Southfield, Michigan 48033

   3,000,000

Manheim Investments, Inc.

6205 Peachtree Dunwoody Road

Atlanta, Georgia 30328

   2,000,000

Oak Investment Partners XI, L.P.

525 University Avenue

Suite 1300

Palo Alto, CA 94301

   1,500,000

Sol Khazani Living Trust

578 Washington Blvd#854

Marina Del Rey, Ca 90292

   500,000

 

A-1

EX-99.5 6 d801594dex995.htm EX-99.5 EX-99.5

Exhibit 99.5

FIFTH AMENDMENT TO CREDIT AGREEMENT

AND

FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT

THIS FIFTH AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT (this “Amendment”), dated as of October 8, 2014, is entered into by and among U.S. AUTO PARTS NETWORK, INC., a Delaware corporation (“Company”), PARTSBIN, INC., a Delaware corporation (“PartsBin”), LOCAL BODY SHOPS, INC., a Delaware corporation (“Local Body Shops”), PRIVATE LABEL PARTS, INC., a Delaware corporation (“Private Label Parts”), WHITNEY AUTOMOTIVE GROUP, INC., a Delaware corporation (“Whitney Auto”, and together with the Company, PartsBin, Local Body Shops and Private Label Parts, collectively, “Borrowers” and each individually a “Borrower”), the other Loan Parties party hereto, the Lenders (as defined below) party hereto, and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, “Administrative Agent”).

RECITALS

 

A. Borrowers, the other parties signatory thereto as “Loan Parties” (each individually, a “Loan Party” and collectively, the “Loan Parties”), Administrative Agent, and the financial institutions party thereto as lenders (each individually, a “Lender” and collectively, the “Lenders”) have previously entered into that certain Credit Agreement, dated as of April 26, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement.

 

B. Borrowers, the other Loan Parties and Administrative Agent have previously entered into that certain Pledge and Security Agreement, dated as of April 26, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”).

 

C. Borrowers and the other Loan Parties have requested that Administrative Agent and the Lenders amend the Credit Agreement and the Security Agreement, and Administrative Agent and the Lenders are willing to amend the Credit Agreement and the Security Agreement pursuant to the terms and conditions set forth herein.

 

D. Each Borrower and each other Loan Party is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Administrative Agent’s or any Lender’s rights or remedies as set forth in the Credit Agreement and the other Loan Documents are being waived or modified by the terms of this Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

  1. Amendments to Credit Agreement.

 

  a. The following definitions are hereby added to Section 1.01 of the Credit Agreement in their proper alphabetical order:


“‘AutoMD Investor Rights Agreement’ means that certain Investor Rights Agreement, dated as of the Fifth Amendment Effective Date, by and among Company, AutoMD and the other parties thereto.”

“‘AutoMD Transaction’ means the issuance and sale by AutoMD of up to 9,000,000 shares of its common stock to the Company and certain third parties pursuant to the AutoMD Stock Purchase Agreement in accordance with the terms of the AutoMD Transaction Documents and the terms hereof.”

“‘AutoMD Stock Purchase Agreement’ means that certain Stock Purchase Agreement, dated as of the Fifth Amendment Effective Date, by and among Company, AutoMD and the other parties thereto.”

“‘AutoMD Transaction Documents’ means the AutoMD Stock Purchase Agreement, the AutoMD Investor Rights Agreement, the Amended and Restated Certificate of Incorporation of AutoMD, Inc. and any other documents executed in connection with the AutoMD Transaction.”

“‘Disqualified Equity Interests’ shall mean any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests and other than Equity Interests issued by AutoMD in connection with the AutoMD Transaction), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests and other than Equity Interests issued by AutoMD in connection with the AutoMD Transaction), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date.”

“‘Fifth Amendment Effective Date’ means October 8, 2014.”

“‘Qualified Equity Interest’ means and refers to any Equity Interest that is not a Disqualified Equity Interest.”

 

  b. The following definitions set forth in Section 1.01 of the Credit Agreement are hereby amended and restated to read in their entirety as follows:

“‘Change in Control’ means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of Equity Interests representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Company; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were neither (i) nominated by the board of directors of the

 

2


Company nor (ii) appointed by directors so nominated; (c) the acquisition of direct or indirect Control of the Company by any Person or group; (d) the Company shall cease to own, free and clear of all Liens or other encumbrances, (i) 100% of the outstanding voting Equity Interests of each of the Loan Parties other than AutoMD on a fully diluted basis, unless such cessation of ownership is the result of a transaction that is otherwise permitted by this Agreement, and (ii) 51% of the outstanding voting Equity Interests of AutoMD on a fully diluted basis; or (e) a “Change of Control” as defined in the Certificate of Designation shall occur.

“‘EBITDA’ means, for any period, Net Income for such period plus (a) without duplication and to the extent deducted in determining Net Income for such period, the sum of (i) Interest Expense for such period, (ii) income tax expense for such period net of tax refunds, (iii) all amounts attributable to depreciation and amortization expense for such period, (iv) any extraordinary non-cash charges for such period, (v) any other non-cash charges for such period (but excluding any non-cash charge in respect of an item that was included in Net Income in a prior period and any non-cash charge that relates to the write-down or write-off of inventory), (vi) cash charges for non-recurring restructuring/integration expenses and legal expenses incurred during the Company’s 2011 fiscal year in amounts not to exceed: (A) $313,000 for the fiscal month ended January 29, 2011, (B) $339,000 for the fiscal month ended February 26, 2011, (C) $651,000 for the fiscal month ended April 2, 2011, (D) $521,000 for the fiscal month ended April 30, 2011, (E) $434,000 for the fiscal month ended May 28, 2011, (F) $749,000 for the fiscal month ended July 2, 2011, (G) $264,000 for the fiscal month ended July 30, 2011, (H) $262,000 for the fiscal month ended August 27, 2011, (I) $3,501,000 for the fiscal month ended October 1, 2011, (J) $224,000 for the fiscal month ended October 29, 2011, (K) $114,000 for the fiscal month ended November 26, 2011, and (L) $627,000 for the fiscal month ended December 31, 2011, (vii) cash charges for expenses incurred during the fiscal quarters of Company ending June 28, 2014, and September 27, 2014, in connection with the closure of the Company’s Carson, California distribution facility, in an aggregate amount not to exceed $1,325,000 less any cash proceeds received in connection with such disposition, (viii) non-cash charges relating to the write-down of slow moving inventory (A) in the fiscal quarter of Company ending June 28, 2014, in an aggregate amount not to exceed $450,000, and (B) in the fiscal quarters of Company ending September 27, 2014 and January 3, 2015, in an aggregate amount for both quarters not to exceed $1,000,000, and (ix) an amount equal to (A) the operating expenses of AutoMD incurred during such period to the extent such expenses are paid for in such period with the identifiable proceeds contained in the AutoMD Specified Account (as defined in the Security Agreement), multiplied by (B) the percentage of total funds in the AutoMD Specified Account that were received by AutoMD from Persons that are not Loan Parties as calculated immediately prior to the payment of any such expenses; minus (b) without duplication and to the extent included in Net Income, (i) any cash payments made during such period in respect of non-cash charges described in clause (a)(v) taken in a prior period, (ii) any extraordinary gains and any non-cash items of income for such period, (iii) any software development costs to the extent capitalized during such period, and (iv) any Excess Subject Inventory Net Income, all calculated for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP.”

“‘Fixed Charge Coverage Ratio’ means, for any period, the ratio of (a) EBITDA minus the unfinanced portion of Capital Expenditures (it being understood that the

 

3


amount of Capital Expenditures made using identifiable proceeds contained in the AutoMD Specified Account (as defined in the Security Agreement), multiplied by the percentage of total funds in the AutoMD Specified Account that were received by AutoMD from Persons that are not Loan Parties as calculated immediately prior to the making of any such Capital Expenditures, shall be deemed to be financed); to (b) Fixed Charges, all calculated for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP.”

“‘Indebtedness’ of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (provided that any obligations of the Company and AutoMD to repurchase common stock of AutoMD pursuant to the AutoMD Investor Rights Agreement shall not constitute Indebtedness by virtue of interest being payable thereon), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (k) all obligations of such Person under any liquidated earn-out, and (l) any other Off-Balance Sheet Liability of such Person. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.”

“‘Lien’ means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities (other than Qualified Equity Interests of AutoMD (including, for the avoidance of doubt, rights of first refusal, co-sale rights or other similar rights relating to Equity Interests of AutoMD, the issuance of which are not otherwise prohibited by the Loan Documents, regardless of the holder or issuer of such rights)), any purchase option, call or similar right of the Company or any third party with respect to such securities.”

 

  c. In clause (a) of the definition of “Covenant Testing Trigger Period” set forth in Section 1.01 of the Credit Agreement, the text “$6,000,000 (or $4,000,000 solely during the period of March 1, 2013, through and including April 15, 2013)” is hereby deleted and replaced with the text “$5,000,000”.

 

4


  d. The last sentence of the definition of “Revolving Commitment” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

“The initial aggregate amount of the Lenders’ Revolving Commitments as of the Fifth Amendment Effective Date is $25,000,000.”

 

  e. Clause (a) of the definition of “Prepayment Event” in Section 1.01 of the Credit Agreement is hereby deleted and replaced with the following:

“(a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any Collateral, other than dispositions described in Section 6.05(a), (b), (c), (d), (g) or (j); or”

 

  f. Section 5.13(b) is hereby amended and restated to read in its entirety as follows:

“(b) Except for the shares of AutoMD’s common stock issued to Persons that are not Loan Parties pursuant to the AutoMD Stock Purchase Agreement on or about the Fifth Amendment Effective Date in accordance with the terms hereof and thereof and in connection with subsequent issuances of AutoMD’s common stock to Persons that are not Loan Parties that are not otherwise prohibited by the Loan Documents, each Borrower and each Subsidiary that is a Loan Party will cause (i) 100% of the issued and outstanding Equity Interests of each of its domestic Subsidiaries and (ii) 65% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2) in each foreign Subsidiary directly owned by such Borrower or any domestic Subsidiary to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent pursuant to the terms and conditions of the Loan Documents or other security documents as the Administrative Agent shall reasonably request.”

 

  g. Section 5.13(d) is hereby amended and restated to read in its entirety as follows:

“(d) If any material assets (including any real property with a fair market value in excess of $1,000,000 or improvements thereto or any interest therein) are acquired by any Borrower or any Subsidiary that is a Loan Party after the Effective Date (other than Excluded Collateral, the Excluded Accounts (as defined in the Security Agreement) and assets constituting Collateral under the Security Agreement that become subject to the Lien in favor of the Security Agreement upon acquisition thereof), the Borrower Representative will (i) notify the Administrative Agent and the Lenders thereof and, if requested by the Administrative Agent or the Required Lenders, cause such assets to be subjected to a Lien securing the Secured Obligations and (ii) take, and cause each Subsidiary that is a Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (c) of this Section, all at the expense of the Loan Parties.”

 

  h. Section 6.04 of the Credit Agreement is hereby amended as follows:

 

  i. In clause (iv) of Section 6.04(l) of the Credit Agreement, the text “3,300,000 in any fiscal year of the Company” is hereby deleted and replaced with the text “(i) $1,650,000 in the fiscal year of the Company ending January 3, 2015, and (ii) $0 in any fiscal year of the Company thereafter, in each case,”;

 

5


  ii. the word “and” at the end of Section 6.04(n) is hereby deleted;

 

  iii. in Section 6.04(o) of the Credit Agreement, the text “8,000,000” is hereby deleted and replaced with the text “6,000,000”, and the text “1.15” is hereby deleted and replaced with the text “1.25”; and

 

  iv. addition of new Sections 6.04(p), (q) and (r) as follows:

“(p) the funding obligations of the Company pursuant to Section 4.8(e) of the AutoMD Investor Rights Agreement and the payment by the Company of such obligations; provided, that no payment may be made with respect to such obligations unless (A) no Default has occurred and is continuing or would result from any such payment, (B) both before and after giving effect to any such payment, the Borrowers shall have Excess Availability of at least $6,000,000 and (C) immediately after giving effect to any such payment, the Borrowers shall have a Fixed Charge Coverage Ratio, recomputed on a trailing twelve (12) month pro forma basis for the most recent month for which financial statements have been delivered, of no less than 1.25 to 1.0;

(q) the reimbursement obligations of the Company with respect to certain obligations of AutoMD pursuant to Section 5.1 of the AutoMD Investor Rights Agreement and the payment by the Company of such obligations; provided, that (i) no payment may be made with respect to such reimbursement obligations unless (A) no Default has occurred and is continuing or would result from any such payment, and (B) both before and after giving effect to any such payment, the Borrowers shall have Excess Availability of at least $4,000,000, and (ii) the aggregate amount of all such payments made by the Company may not exceed $2,500,000; and

(r) the purchase of up to 2,000,000 shares of the common stock of AutoMD for an aggregate purchase price not to exceed $2,000,000 in accordance with the terms of the AutoMD Transaction Documents, so long as (A) no Default has occurred and is continuing or would result from any such purchase, (B) both before and after giving effect to any such purchase, the Borrowers shall have Excess Availability of at least $4,000,000 and (C) immediately after giving effect to any such purchase, the Borrowers shall have a Fixed Charge Coverage Ratio, recomputed on a trailing twelve (12) month pro forma basis for the most recent month for which financial statements have been delivered, of no less than 1.25 to 1.0.”

 

  i. Section 6.05 of the Credit Agreement is hereby amended as follows:

 

  i. the word “and” at the end of Section 6.05(i) is hereby deleted;

 

  ii. replacement of the text “(g)” in Section 6.05(j) with the text “(l)”;

 

  iii. replacement of the “(j)” at the beginning of Section 6.05(j) with “(l)” and

 

6


  iv. insertion of a new Section 6.05(j) and 6.05(k) between Section 6.05(i) and Section 6.05(l) as follows:

“(j) issuance and sale by AutoMD of shares of its common stock to Persons that are not Loan Parties in accordance with the terms of the AutoMD Transaction Documents and other subsequent issuances of Qualified Equity Interests of AutoMD to Persons that are not Loan Parties, the issuance of which is not otherwise prohibited by the Loan Documents; and

(k) issuance and sale by AutoMD of up to 2,000,000 shares of its common stock to Company for an aggregate purchase price not to exceed $2,000,000 in accordance with the terms of the AutoMD Transaction Documents, so long as such investment by Company is also permitted under Section 6.04(r).”

 

  j. Section 6.08(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“No Loan Party will, nor will it permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) each of the Loan Parties and their Subsidiaries may declare and pay, and agree to pay, dividends with respect to its common stock payable solely in additional shares of its common stock, and, with respect to its preferred stock, payable solely in additional shares of such preferred stock or in shares of its common stock, (ii) the Borrowers may make, and agree to make, Restricted Payments, not exceeding $1,000,000 during any fiscal year of the Company, pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrowers and their Subsidiaries, (iii) (A) any Borrower or Guarantor may make, and agree to make, Restricted Payments to a Borrower, (B) any Guarantor may make, and agree to make, Restricted Payments to another Guarantor and (C) any Subsidiary that is not a Loan Party may make, and agree to make, Restricted Payments to a Loan Party, (iv) each of the Loan Parties and their Subsidiaries may agree to make Restricted Payments in accordance with and subject to the terms of the AutoMD Transaction Documents (it being understood and agreed that the actual payment or making of such Restricted Payments by such Loan Party or Subsidiary shall not be made in reliance of this clause (iv)), and (v) any Loan Party or any Subsidiary may make, and agree to make, any other Restricted Payments, so long as (A) no Default has occurred and is continuing or would result from any such Restricted Payment, (B) both before and after giving effect to any such Restricted Payment, the Borrowers shall have Excess Availability of at least $6,000,000 and (C) immediately after giving effect to any such Restricted Payment, the Borrowers shall have a Fixed Charge Coverage Ratio, recomputed on a trailing twelve (12) month pro forma basis for the most recent month for which financial statements have been delivered, of no less than 1.25 to 1.0.”

 

  k. Section 6.09 of the Credit Agreement is hereby amended as follows:

 

  i. Section 6.09(a)(i) is restated as follows:

 

7


“(i) are in the ordinary course of business (it being understood that issuances of Qualified Equity Interests of AutoMD shall be deemed ordinary course solely for purposes of this Section 6.09)”

 

  ii. the word “and” at the end of Section 6.09(g) is hereby deleted;

 

  iii. the word “and” is hereby added at the end of Section 6.09(h); and

 

  iv. addition of a new Section 6.09(i) as follows:

“(i) transactions effected pursuant to the AutoMD Transaction Documents.”

 

  l. Section 6.11 is hereby amended and restated to read in its entirety as follows:

“SECTION 6.11. Amendment of Material Documents. No Loan Party will, nor will it permit any Subsidiary to, amend, modify or waive any of its rights under (a) any agreement relating to any Subordinated Indebtedness or, if an Event of Default has occurred and is continuing, any other Indebtedness, (b) its certificate of incorporation (other than pursuant to the Certificate of Designation, the amendment and restatement of the Certificate of Incorporation of AutoMD on or about the Fifth Amendment Effective Date in connection with the AutoMD Transaction, and such further amendments thereto as may be necessary to permit the issuance of additional Qualified Equity Interests of AutoMD that are not otherwise prohibited by the Loan Documents so long as any such amendment is not materially adverse to the Lenders; provided, that such an amendment shall not be materially adverse to the Lenders merely because it dilutes the Company’s ownership percentage of AutoMD within the parameters set forth in the definition of Change in Control), by-laws, operating, management or partnership agreement or other organization documents, or (c) any of the AutoMD Transaction Documents, to the extent any such amendment, modification or waiver would be adverse to the Lenders.”

 

  m. Article VII of the Credit Agreement is hereby amended as follows:

 

  i. the word “or” at the end of clause (r) is hereby deleted;

 

  ii. the word “or” is hereby added at the end of clause (s); and

 

  iii. addition of a new clause (t) as follows:

“(t) any Loan Party shall fail to make a payment in excess of $2,500,000 in respect of its obligations under any AutoMD Transaction Document, when and as the same shall be due and payable (after giving effect to any grace or cure period set forth therein);”

 

  n. The Commitment Schedule attached to the Credit Agreement is hereby amended and restated in its entirety with the Commitment Schedule attached hereto identified as such.

 

  o. Schedule 3.15 attached to the Credit Agreement is hereby amended and restated in its entirety with the Schedule 3.15 attached hereto identified as such.

 

8


  2. Amendments to Security Agreement.

 

  a. The following definition is hereby added to Article I of the Security Agreement in its proper alphabetical order:

“‘AutoMD Specified Account’ means a specified deposit account held with Administrative Agent containing solely the Net Proceeds received by AutoMD in connection with (a) the AutoMD Transaction, and (b) the issuance and sale of Qualified Equity Interests by AutoMD to Persons that are not Loan Parties as permitted under the Credit Agreement.”

 

  b. The following definition set forth in Article I of the Security Agreement is hereby amended and restated to read in its entirety as follows:

“‘Excluded Accounts’ means the collective reference to: (a) the Deposit Accounts of Grantors specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the Grantors’ employees (provided that the amount on deposit in such accounts does not exceed the then current amount of such payroll, payroll taxes and other employee wage and benefit obligations); (b) a Deposit Account or Securities Account containing not more than $500,000 at any one time; provided, however, that the aggregate amount of funds and the fair market value of all other assets contained in all such Deposit Accounts or Securities Accounts referred to in this clause (b) shall not exceed $500,000 at any one time; (c) solely for the period commencing on the date hereof and ending thirty (30) days after the date hereof, any Deposit Accounts or Securities Accounts not maintained at Silicon Valley Bank or JPMorgan Chase Bank, N.A.; and (d) the AutoMD Specified Account.”

 

  c. The definition of “Excluded Collateral” in Article I of the Security Agreement is hereby amended as follows:

 

  i. the word “and” at the end of clause (iv) is hereby deleted;

 

  ii. addition of a new clauses (vi) and (vii) as follows:

“(vi) the AutoMD Specified Account and any and all cash, cash equivalents, Investments or other instruments or amounts contained therein from time to time so long as such amounts consist solely of Net Proceeds received by AutoMD in connection with (a) the AutoMD Transaction, and (b) the issuance and sale of Qualified Equity Interests by AutoMD to Persons that are not Loan Parties as permitted under the Credit Agreement; and

(vii) Qualified Equity Interests issued by AutoMD to Persons that are not Loan Parties in connection with the AutoMD Transaction Documents and other subsequent issuances of Qualified Equity Interests of AutoMD to Persons that are not Loan Parties that are not otherwise prohibited by the Loan Documents;”

 

  d. In the definition of “Dominion Trigger Period” in Article I of the Security Agreement, the text “$6,000,000” is hereby deleted and replaced with the text “$5,000,000”, and the text “7,000,000” is hereby deleted and replaced with the text “6,000,000”.

 

9


  e. In Section 3.13(a) of the Security Agreement, the text “On the date hereof” is hereby deleted and replaced with the text “As of the Fifth Amendment Effective Date”.

 

  f. Clause (ii) of Section 3.13(b) of the Security Agreement is hereby deleted and replaced with the following:

“(ii) other than the issuance of Qualified Equity Interests not otherwise prohibited by the Loan Documents, no options, warrants, calls or commitments of any character whatsoever (A) exist relating to such Pledged Collateral or (B) obligate the issuer of any Equity Interest included in the Pledged Collateral to issue additional Equity Interests, and”

 

  g. Section 4.6(b) of the Security Agreement is hereby deleted and replaced with the following:

“(b) Issuance of Additional Securities. Other than the issuance of Qualified Equity Interests not otherwise prohibited by the Loan Documents, such Grantor will not permit or suffer the issuer of an Equity Interest constituting Pledged Collateral owned by it to issue additional Equity Interests, any right to receive the same or any right to receive earnings, except to such Grantor.”

 

  h. Exhibit B attached to the Security Agreement is hereby amended and restated in its entirety with the Exhibit B attached hereto identified as such.

3. Conditions Precedent to Effectiveness of this Amendment. The following shall have occurred before this Amendment is effective:

 

  a. Amendment. Administrative Agent shall have received this Amendment fully executed in a sufficient number of counterparts for distribution to all parties.

 

  b. AutoMD Transaction Documents. Administrative Agent shall have received fully executed copies of the AutoMD Transaction Documents in form and substance satisfactory to Agent.

 

  c. Representations and Warranties. The representations and warranties set forth herein, and in the Credit Agreement and the Security Agreement (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof), must be true and correct in all material respects without duplication of any materiality qualifier contained therein.

4. Representations and Warranties. Each Borrower and each other Loan Party represents and warrants as follows:

 

  a. Authority. Each Borrower and each other Loan Party has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery, and performance by each Borrower and each other Loan Party of this Amendment have been duly approved by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restriction binding on such Borrower or such Loan Party.

 

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  b. Enforceability. This Amendment has been duly executed and delivered by each Borrower and each other Loan Party. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid, and binding obligation of each Borrower and each other Loan Party, enforceable against each Borrower and each other Loan Party in accordance with its terms, and is in full force and effect.

 

  c. Representations and Warranties. The representations and warranties contained in the Credit Agreement and the Security Agreement (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof in all material respects without duplication of any materiality qualifier contained therein as though made on and as of the date hereof.

 

  d. No Default. No event has occurred and is continuing that constitutes a Default or Event of Default.

5. Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the laws of the State of New York, but without giving effect to any federal laws applicable to national banks.

6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telefacsimile shall be effective as delivery of a manually executed counterpart of the Amendment.

7. Reference to and Effect on the Loan Documents.

 

  a. Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

 

  b. Upon and after the effectiveness of this Amendment, each reference in the Security Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Security Agreement, and each reference in the other Loan Documents to “the Security Agreement”, “thereof” or words of like import referring to the Security Agreement, shall mean and be a reference to the Security Agreement as modified and amended hereby.

 

  c. Except as specifically set forth in this Amendment, the Credit Agreement, the Security Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified, and confirmed and shall constitute the legal, valid, binding, and enforceable obligations of each Borrower and the other Loan Parties to Administrative Agent and the Lenders without defense, offset, claim, or contribution.

 

  d. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power, or remedy of Administrative Agent or any Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

 

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8. Ratification. Each Borrower and each other Loan Party hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement and Security Agreement, as amended hereby, and the Loan Documents effective as of the date hereof.

9. Estoppel. To induce Administrative Agent and Lenders to enter into this Amendment and to induce Administrative Agent and the Lenders to continue to make advances to Borrowers under the Credit Agreement, each Borrower and each other Loan Party hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Default or Event of Default and no right of offset, defense, counterclaim, or objection in favor of any Borrower or any other Loan Party as against Administrative Agent or any Lender with respect to the Obligations.

10. Integration. This Amendment, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

11. Severability. In case any provision in this Amendment shall be invalid, illegal, or unenforceable, such provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

12. Submission of Amendment. The submission of this Amendment to the parties or their agents or attorneys for review or signature does not constitute a commitment by Administrative Agent or any Lender to waive any of their respective rights and remedies under the Loan Documents, and this Amendment shall have no binding force or effect until all of the conditions to the effectiveness of this Amendment have been satisfied as set forth herein.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the day and year first above written.

 

    BORROWERS:
   

U.S. AUTO PARTS NETWORK, INC.,

a Delaware corporation

    By   /s/ Shane Evangelist
            Name:   Shane Evangelist
            Title:   CEO
   

PARTSBIN, INC.,

a Delaware corporation

    By   /s/ Shane Evangelist
            Name:   Shane Evangelist
            Title:   President
   

LOCAL BODY SHOPS, INC.,

a Delaware corporation

    By   /s/ Robert Hamman
            Name:   Robert Hamman
            Title:   Secretary
   

PRIVATE LABEL PARTS, INC.,

a Delaware corporation

    By   /s/ Arthur Simitian
            Name:   Arthur Simitian
            Title:   President
   

WHITNEY AUTOMOTIVE GROUP, INC.,

a Delaware corporation

    By   /s/ James Nelson
            Name:   James Nelson
            Title:   President


    OTHER LOAN PARTIES:
   

LOBO MARKETING, INC.,

a Texas corporation

    By   /s/ Brian Hafer
            Name:   Brian Hafer
            Title:   President
   

AUTOMD, INC.,

a Delaware corporation

    By   /s/ Bryan Stevenson
            Name:   Bryan Stevenson
            Title:   Secretary
   

PACIFIC 3PL, INC.,

a Delaware corporation

    By   /s/ James Nelson
            Name:   James Nelson
            Title:   Secretary
   

GO FIDO, INC.,

a Delaware corporation

    By   /s/ Aaron Coleman
            Name:   Aaron Coleman
            Title:   President
   

AUTOMOTIVE SPECIALTY ACCESSORIES AND PARTS, INC.,

a Delaware corporation

    By   /s/ David L. Spangler
            Name:   David L. Spangler
            Title:   President


ADMINISTRATIVE AGENT AND LENDER

JPMORGAN CHASE BANK, N.A.,

individually as a Lender and as Administrative Agent

By   /s/ Jolinda N. Walton
  Name: Jolinda N. Walden
  Title: Authorized Officer


COMMITMENT SCHEDULE

 

Lender

 

Revolving Commitment

 

Commitment

JPMorgan Chase Bank, N.A.

  $25,000,000   $25,000,000
   
   
   
   
   
   
   
   
   

Total

  $25,000,000   $25,000,000


SCHEDULE 3.15

Capitalization and Subsidiaries


EXHIBIT B

(See Section 3.5 and 7.1 of Security Agreement)

DEPOSIT ACCOUNTS