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Exhibit 10.18
RESTRICTED UNIT AGREEMENT
This Restricted Unit Agreement (the "Agreement"), made this 28th day of
February, 2000, by and among SpinCycle, Inc., a Delaware corporation (the
"Company"), E-Wash, Inc., a Delaware corporation, and its successors and assigns
("E-Wash"), E-Wash, LLC, a Delaware limited liability company, and its
successors and assigns ("Limited"), and Xxxxx Ax, an employee of the Company
(hereinafter called the "Employee");
W I T N E S S E T H:
WHEREAS, E-Wash, as of the date hereof, is a wholly-owned subsidiary of
the Company; and
WHEREAS, Limited, as of the date hereof, is a wholly-owned subsidiary
of E-Wash; and
WHEREAS, the Board of Directors of the Company has determined it to be
in the best interest of the Company to issue restricted units in Limited to
certain key executives of the Company in order to provide such executives which
an additional stake in the growth and prosperity of Limited and to encourage
them to continue serving the Company; and
WHEREAS, the issuance of such units is subject to the terms and
conditions as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto, it is agreed as follows:
1. Issuance of Units. Subject to the provisions of Section 11 hereof, Limited
hereby issues to the Employee and the Employee accepts One Million Two Hundred
Seventy-five Thousand (1,275,000) Units (the "Units") of Limited, subject to the
restrictions, terms and conditions set forth in this Agreement. In exchange for
such Units, the Employee shall or has contributed to the capital of Limited the
amount set forth on Exhibit A of the Limited Liability Company Agreement of
Limited opposite the Employee's name.
2.
3. Restrictions. Notwithstanding any provisions of the Limited Liability Company
Agreement of Limited while any Units are subject to the forfeiture provisions
described in Section 4 below (the "Restricted Units"), the Employee may not
directly or indirectly, by operation of law or otherwise, voluntarily or
involuntarily, anticipate, alienate, attach, sell, assign, pledge, encumber,
charge or otherwise transfer any Restricted Units.
4.
5. Award Date. The effective date of issuance of the Units to the Employee (the
"Award Date") shall be February 28, 2000.
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1. Restrictions and Restricted Period.
2.
(a) Units shall be issued in the name of the Employee upon the
execution by the Employee of this Agreement, and shall be evidenced on the books
and records of Limited. One-third of the Units issued herein shall be free of
any transfer or forfeiture restrictions set forth in Sections 2 and 4 of this
Agreement as of the Award Date.
(b) If the Employee voluntarily resigns his employment with
the Company, or the Company terminates the service of the Employee for "Cause"
(as hereafter defined) prior to the first anniversary of the Award Date, the
remaining two-thirds of the Units issued to the Employee herein shall be
forfeited and void, and the cash capital contribution paid by the Employee in
respect of such forfeited Restricted Units shall be returned to the Employee. If
the Employee is in the employ of the Company on the first anniversary of the
award date, an additional one-third of the Units granted to the Employee herein
shall be free of all restrictions contained in this Agreement.
(c) If the Employee voluntarily resigns his employment with
the Company, or the Company terminates the service of the Employee for Cause
after the first anniversary of the Award Date but prior to the second
anniversary of the Award Date, the final one-third of the Units constituting
Restricted Units shall be forfeited and void, and the cash capital contribution
paid by the Employee in respect of such forfeited Restricted Units shall be
returned to the Employee. If the Employee is in the employ of the Company on the
second anniversary of the Award Date, all restrictions with respect to all Units
covered by this Agreement shall lapse.
(d) Notwithstanding the foregoing provisions of this Section
4, all forfeiture and transfer restrictions with respect to the Units (other
than as provided in Section 9 hereof) shall lapse (i) upon the death or
permanent and total disability of the Employee; (ii) if the Company exercises
its "Bring-Along Rights" described in Section 7 hereof; (iii) if the Company
terminates the Employee's service without Cause; or (iv) if there is a "Change
in Control" (as hereafter defined).
(e) For the purpose of this Section 4, a transfer of
employment from the Company to and among the Company, E-Wash and Limited or from
any of the Company, E-Wash or Limited as an employee to a director's or
consultant's role shall not be deemed a termination of employment with the
Company.
(f) Definitions. For the purposes of this Section 4:
(i) A "Change in Control" shall mean:
(1) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "1934 Act") of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 0000 Xxx) of 50%
or more of the combined voting power of all of the then
outstanding voting classes or series of
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units of Limited (the "Outstanding Voting Units"); provided,
however, that the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from Limited
or any of its subsidiaries, (B) any acquisition by Limited or
any of its subsidiaries, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by
Limited or any of its subsidiaries, (D) any acquisition by any
corporation with respect to which, following such acquisition,
more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by
individuals, entities or groups who were the beneficial
owners, respectively, of at least 50% of the Outstanding
Voting Units immediately prior to such acquisition in
substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding
Voting Units, or (E) the acquisition of Outstanding Voting
Units by any individual, entity or group which on the Award
Date owned 50% or more of the Outstanding Voting Units;
(2) Approval by the holders of a majority of
the Units of Limited of a reorganization, merger or
consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Voting
Units immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more
than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting
from or surviving such reorganization, merger or consolidation
in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation, of the Outstanding Voting Units; or
(3) Approval by the requisite vote of the
shareholders of E-Wash of (A) a complete liquidation or
dissolution of Limited or (B) the sale or other disposition of
all or substantially all of the assets of Limited other than
to a corporation, with respect to which following such sale or
other disposition, more than 50% of the then outstanding
shares of common stock of such company and the combined voting
power for the then outstanding voting securities of such
company entitled to vote is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners of the Outstanding
Voting Units immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other
disposition, of the Outstanding Voting Units.
(ii) "Cause" shall mean a termination of the
Employee's employment with the Company upon the determination
of the Company's Board of Directors that the Employee has
engaged in one or more of the following types of misconduct:
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(i) The Employee's failure or refusal,
after written notice thereof, to
perform specific directives approved
by a majority of the Board of
Directors which are consistent with
the scope and nature of the
Employee's duties and
responsibilities as Chairman and
Chief Operating Officer of the
Company;
(ii) Habitual drunkenness or use of drugs
which interferes with the
performance of the Employee's duties
and obligations under this
Agreement;
(iii) the Employee's conviction of a
felony or of any crime involving
moral turpitude, fraud, defalcation,
or misrepresentation; or
(iv) Any gross or willful misconduct of
the Employee resulting in
substantial loss to the Company or
substantial damages to the Company's
reputation.
1. Custody of Restricted Units; Tax Withholding; Voting and Dividends.
2.
3. (a) Restricted Units. The Restricted Units will be registered in the name of
the Employee. All indicia of ownership representing Restricted Units shall be
retained by the Company.
4.
5. (b) Voting Rights. The Employee will have all rights of a member of Limited
with respect to voting of the Restricted Units.
6.
7. (c) Distributions. All distributions of profits and losses, cash flow and
capital interests made with respect to the Restricted Units shall, with respect
to record dates on or after the Award Date, be distributed to the Employee in
accordance with the Limited Liability Company Agreement of E-Wash, LLC, as
amended from time to time (the "Operating Agreement").
8.
9. Piggyback Registration Rights. In the event that as a result of a merger or
other reorganization of Limited such that the Employee's Units are exchanged for
shares of stock of E-Wash, E-Wash grants to the Employee the following
registration rights with respect to such E-Wash shares:
(a) (i) Incidental Rights. If at any time after six months
after the completion of an underwritten initial public offering by
E-Wash on a firm commitment basis, E-Wash proposes to register, on any
form which may be used for the registration of its common stock, other
than Forms S-4 or S-8 (or any successor or similar forms then in
effect), any of its securities under the Securities Act of 1933, as
amended (the "Securities Act"), whether or not pursuant to registration
rights granted to other holders of its securities and whether or not
for sale for its own account, in a manner which would permit
registration of common stock for sale to the public under the
Securities Act, X-
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Wash will each such time give written notice to the Employee of its
intention to do so and of Employee's rights under this Section 6; such
notice to be given to Employee at least twenty (20) days prior to the
initial filing of such proposed registration statement. Upon the
written request of the Employee made within fifteen (15) days after the
giving of any such notice (which request shall specify the number of
shares intended to be disposed of by the Employee and the intended
method or methods of disposition thereof), E-Wash will use its
reasonable efforts to effect the registration under the Securities Act
of the "Registerable Amount" (as defined in 6(b) hereof) of common
stock which E-Wash has been so requested to register by the Employee,
to the extent necessary to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the common stock so to be
registered. Promptly upon notification to E-Wash from the managing
underwriter of the price at which the shares of common stock requested
to be registered pursuant to this Section 6 are to be sold, E-Wash
shall advise the Employee, of such price, and if such price is below
the price which Employee shall have indicated to be acceptable to the
Employee, the Employee shall then have the right to withdraw its
request to have its shares included in such registration statement.
(ii) Not Deemed a Demand Registration. No
registration effected pursuant to this Section 6 shall be deemed to be
a demand registration right. Any registration rights granted hereunder
shall be subordinate to any demand registration rights hereafter
granted by E-Wash to others.
(iii) Holdback. If E-Wash previously shall have
received a request for registration from a shareholder having demand
registration rights or under this Section 6, and if such previous
registration shall not have been withdrawn or abandoned, E-Wash will
not be required to effect any registration of any of its securities
under the Securities Act, whether or not for sale for its own account,
until a period of ninety (90) days shall have elapsed from the
effective date of such previous registration.
(iv) Discontinuance. Notwithstanding anything to the
contrary in this Section 6, E-Wash shall have the right to discontinue
any registration under this Section 6 at any time prior to the
effective date of such registration, if the registration of other
securities giving rise to such registration under this Section 6 is
discontinued; but no such discontinuation shall preclude an immediate
or subsequent request for registration pursuant to this Section 6.
(v) Termination of Piggyback Rights. The provisions
of this Section 6 shall expire as to any shares at such time as the
Employee may sell shares in E-Wash without the need for registration
under the federal securities laws.
(b) Registerable Amount. For the purpose of this Section 6,
the "Registerable Amount" means the maximum number of shares of common stock of
E-Wash issued to the Employee in exchange for the Units granted under this
Agreement which the Employee is eligible to sell in any registration covered by
this Section 6. The Registerable Amount is expressed as a fraction, the
numerator of which will be the number of shares issued to Employee in exchange
for the Units granted under this Agreement and held by the Employee at the time
of the public registration and the denominator of which shall be the number of
shares of such
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common stock held by other holders of common stock having registration rights
pari passu with the Employee's rights. If the registration is an underwritten
registration, and the managing underwriter gives written notice to E-Wash that
in its reasonable opinion the number of shares of common stock of E-Wash to be
included in the registration should be less than the aggregate number of shares
of common stock that E-Wash, the Employee and all other eligible holders of such
common stock have proposed to include in such registration, then E-Wash shall
have first priority to include in such registration all shares of common stock
it proposes to register. If such amount does not exceed the maximum number of
shares which the underwriter has reasonably determined can be registered in the
offering, then the remaining number of shares (the "Available Amount") shall be
allocated among the Employee and the other holders of common stock proposing to
register securities in the offering by multiplying the Available Amount by a
fraction, the numerator of which shall be the number of shares each of the
eligible participants owns and the denominator of which is the total number of
shares owned by all eligible participants. E-Wash shall have the exclusive right
to select the managing underwriters in such registration. For purposes of this
paragraph (b), if there is no underwriter for an offering, then the
determinations to be reasonably made by the managing underwriter hereunder shall
be made by the E-Wash board of directors.
(c) Hold-back Agreements. The Employee agrees, if so required
by the managing underwriter, not to effect any public sale or distribution of
securities of E-Wash of the same class as the securities included in such
registration statement, during the seven (7) days prior to the date on which any
underwritten registration has become effective and the one-hundred eighty (180)
days (or such longer period as shall have been agreed to by E-Wash and the
managing underwriters with respect to such registration statement) thereafter,
except as part of such underwritten registration. E-Wash agrees not to effect
any public sale or distribution of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the seven (7) days prior to and ninety (90) days after any underwritten
registration has become effective, except as part of such underwritten
registration.
(d) Public Offering by Limited. All rights granted to Employee
in this Section 6 shall be effective with respect to Limited in the event that
Limited becomes a publicly traded company rather than E-Wash.
1. Bring-Along Right. For so long as the Company owns at least 33.33% of E-Wash
or Limited, if the Company or E-Wash proposes to make a bona fide sale in a
private offering of all of its E-Wash shares or of Limited units, the Company
and/or E-Wash shall have the right (the "Bring-Along Right"), exercisable upon
15 days' prior written notice, to require the Employee to sell his Units to such
third party upon terms no less favorable to the Employee than those that apply
to the Company or E-Wash with respect to such third party sale. In such case all
restrictions contained in Sections 2 and 4 applicable to any Restricted Units
shall lapse. The Employee hereby agrees to cooperate with the Company or E-Wash
and to take any and all action reasonably required in connection with the
consummation of such third party sale. Without limiting the foregoing, at the
closing of any sale under this Section, the Employee shall represent and warrant
that he is the beneficial owner of such Units free and clear of any liens or
encumbrances with full power and authority to transfer such shares.
2.
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3. Tag-Along Right. For so long as the Company owns at least 33.33% of E-Wash or
Limited, in the event that the Company or E-Wash (the "Purchase Offer
Recipient") shall receive a bona fide offer to purchase less than all shares of
E-Wash or Limited units (a "Purchase Offer"), the Purchase Offer Recipient shall
either decline such Purchase Offer or, if the Purchase Offer Recipient
determines to accept such Purchase Offer, then, prior to accepting any Purchase
Offer, arrange for the proposed purchaser to make, in addition to the Purchase
Offer, a bona fide offer to purchase from the Employee, and all other similarly
situated persons, upon the same terms as the Purchase Offer, units of Limited
owned by such parties, including the Employee (the "Tag Along Rights") in the
proportion and otherwise as described in the second succeeding sentence (the
"Unit Purchase Offer"). In the event a Unit Purchase Offer is made, the Purchase
Offer Recipient shall give the Employee written notice thereof (the "Notice")
specifying (i) the number of Units that the Employee may sell, and (ii) the
terms (including the price and the proposed date of consummation thereof) of
such Unit Purchase Offer. Upon receipt of the Notice, the Employee shall have
the right to sell that number of Units owned by him and which are not then
Restricted Units equal to (A) the product of (a) the total number of Limited
units proposed to be purchased in the Purchase Offer, the Unit Purchase Offer
and similar offers being made to other members of Limited concurrently with the
Purchase Offer, and (b) a fraction, the numerator of which shall be the number
of Tag-Along Units (as defined below) owned by the Employee and the denominator
of which shall be the number of shares of Limited units owned by the Purchase
Offer Recipient plus the number of shares of Tag-Along Units owned by all
members electing to participate in such sale. For purposes of the foregoing,
"Tag-Along Units" shall mean all units of Limited outstanding on the date of the
Sale. The Tag-Along Right may be exercised by the Employee by delivery, not
later than 5 days after receipt of the Notice, of a written notice (the
"Tag-Along Notice") to the Purchase Offer Recipient, which shall state the
maximum number of Units which are not Restricted Units that the Employee wishes
to include in such sale to the purchaser. The Employee shall participate in any
purchase specified in the Notice on the terms set forth therein (or on terms no
less favorable to the Employee) and as provided in the Tag-Along Notice during
the 90-day period following the date of the Notice. Any purchases following such
90-day period shall require a new Notice.
1. Restrictions in Operating Agreement. The rights and obligations of the
Employee as a member of Limited and the restrictions and rights as a holder of
Units, including transfer restrictions, are further governed by the terms of the
Operating Agreement.
1. Effect of Reclassification, etc., of Units. In the event of reclassification,
recapitalization, reorganization, merger, consolidation or combination such that
the holders of Units receive a different security in exchange for their Units,
then notwithstanding the provisions of Section 2, hereof, the Employee may
exchange his Units for shares of the same class of security which other holders
of Limited's Units receive, and the rights, restrictions, terms and conditions
of this Agreement shall apply to the securities received by the Employee to the
same extent as provided herein with respect to the Units.
2.
3. Shareholder Approval. Notwithstanding any provision of this Agreement to the
contrary, the issuance of Units contained herein is subject to the approval
within 12 months of the Award Date by the holders of the requisite majorities of
all three classes of preferred stock of the Company as required in the
agreements relating to the purchase of Series A, B and C Convertible
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Preferred Stock in the Company, as those agreements have been amended to date.
In the event that such shareholder approval is not obtained, the issuance of
Units shall be forfeited on the first anniversary of the Award Date. In case of
forfeiture, the capital cash contribution paid by the Employee for the Units
shall be returned to the Employee.
4.
5. Entire Understanding. This Agreement constitutes the entire understanding
between the parties relating to the matters described herein (other than
Limited's Limited Liability Company Agreement which is incorporated herein by
this reference) and supercedes and cancels all prior written and oral
understandings and agreements with respect to such matters.
6.
7. Binding Effect. This Agreement shall be binding upon and inure to the benefit
of the employees, executors, administrators, legal representatives, heirs and
legatees of the Employee and the successors and assigns of the Company.
8.
9. Employment Rights. Nothing contained in this Agreement shall confer upon
Employee any right with respect to the continuance of employment by the Company
or any related company, nor interfere in any way with the right of the Company
or any related company to terminate the Employee's employment at any time for
any reason.
10.
11. Governing Law. This Agreement shall be governed by, and interpreted,
construed and enforced in accordance with the laws of the State of Arizona.
12.
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14.
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IN WITNESS WHEREOF, the Company, E-Wash, Limited, and the Employee have
caused this Restricted Unit Agreement to be executed as of the day and year
first above written.
1.
2.
3. SPINCYCLE, INC.
4.
5. By /s/ Xxxxx Ax
6.
7.
8. E-WASH, INC.
9.
10. By /s/ Xxxxx Ax
11.
12.
13. E-WASH, LLC
14.
15. By /s/ Xxxxx Ax
16.
17. EMPLOYEE:
18.
19. /s/ Xxxxx Ax
Print Name: Xxxxx Ax
20.
21. 264098.3
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