1
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated December 1, 1996, by and between SPINCYCLE, INC.,
a Minnesota corporation (the "Company") and XXXXX AX, a New York resident
("Executive").
WHEREAS, the Company and Executive wish to enter into an employment
agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and the Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company agrees to employ Executive as Chief
Financial Officer and Executive accepts such employment and agrees to perform
services for the Company for the period and upon the other terms and conditions
set forth in this Agreement
2. Term. Unless terminated at an earlier date in accordance with other
provisions of this Agreement, the term of Executive's employment hereunder shall
be for a period of four (4) years, commencing on the date of this Agreement.
Thereafter, the term of this Agreement shall be automatically extended for
successive one (1) year periods unless either party objects to such extension by
written notice to the other party at least six (6) months prior to the end of
the initial term or any extension term.
3. Position and Duties.
3.1 Service with Company. During the term of this Agreement,
Executive agrees to serve as Chief Financial Officer and to perform such other
reasonable employment duties, consistent with Executive's position and as the
Board of Directors of the Company shall assign to him from time to time.
Executive agrees to serve the Company faithfully and to the best of his ability.
4. Compensation.
4.1 Base Salary. As compensation in full for all services to
be rendered by the Executive during the term of this Agreement, the Company
shall pay to Executive a base salary of $150,000.00 per year, which salary shall
be paid in accordance with the Company's normal payroll procedures and policies.
4.2 Incentive Compensation. In addition to the base salary
described in Section 4.01, Executive shall be eligible to participate in any
incentive compensation plans which may be established by the Board of Directors
of the Company from time to time.
2
4.3 Participation in Benefit Plans. Executive shall also be
entitled to participate in all employee benefit plans or programs (including
vacation time) of the Company to the extent that his position, title, tenure,
salary, age, health and other qualifications make him eligible to participate.
The Company does not guarantee the adoption or continuance of any particular
employee benefit plan or program during the term of this Agreement, and
Executive's participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto.
4.4 Expenses. The Company will pay or reimburse Executive for
all reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the presentment of
appropriate vouchers in accordance with the Company's normal policies for
expense verification.
4.5 Options. Executive shall be entitled to receive stock
options under the Company's Employee Stock Option Plan as the Board of Directors
may deem appropriate from time to time.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with prior to the termination
of the period of his employment by the Company (including employment by the
Company or any affiliated companies prior to the date of this Agreement),
whether developed by himself or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any
aspect of the business of the Company, any customer or supplier lists of the
Company, any confidential or secret development or research work of the Company,
or any other confidential information or secret aspect of the business of the
Company. Executive acknowledges that the above-described knowledge or
information constitutes a unique and valuable asset of the Company and
represents a substantial investment of time and expense by the Company and its
predecessors, and that any disclosure or other use of such knowledge or
information other than for the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. Both during and after the term of
the Agreement, Executive will refrain from any acts or omissions that would
reduce the value of such confidentiality, however, shall not apply to any
knowledge or information which is now published or which subsequently becomes
generally publicly known in the form in which it was obtained from the Company,
other than as a direct or indirect result of the breach of this Agreement by
Executive.
6. Noncompetition Covenant.
6.1 Agreement Not to Compete.
-2-
3
(a) Executive agrees that, during the term of his
employment by the Company and for a period of one (1) year after the termination
of such employment (whether such termination is with or without cause, or
whether such termination is occasioned by Executive or the Company), he shall
not, directly or indirectly, engage in competition with the Company in any
manner or capacity (e.g., as an advisor, principal, agent, partner, officer,
director, stockholder, employee, member of any association, or otherwise) in any
phase of the business which the Company is conducting during the term of this
Agreement.
(b) The Company shall make monthly payments to
Executive, in consideration for Executive's agreement not to compete, equal to
his monthly base salary at the time of termination (excluding any bonus or other
compensation or employee benefits); provided, however, that such payments will
cease if Executive's employment has been terminated "for cause" as defined
elsewhere in this Agreement and the Company, at its option, elects to terminate
Executive's agreement not to compete.
6.2 Geographic Extent of Covenant. The obligations of
Executive under Section 6.01 shall apply to any geographic area in which the
Company:
(a) has engaged in business during the term of this
Agreement through production, promotional, sales or marketing activity, or
otherwise; or
(b) has otherwise established its goodwill, business
reputation, or any customer or supplier relations.
6.3 Indirect Competition. Executive further agrees that,
during the term of this Agreement, he will not, directly or indirectly, assist
or encourage any other person in carrying out, direct or indirectly, any
activity that would be prohibited by the above provisions of this Section if
such activity were carried out by Executive, either directly or indirectly; and
in particular Executive agrees that he will not, directly or indirectly, induce
any employee of the Company to carry out, directly or indirectly, any such
activity.
7. Termination.
7.1 Grounds for Termination.
Executive's employment with the Company shall terminate prior to the
expiration of any initial term set forth in this Agreement or any extension
thereof under any of the circumstances set forth below.
(a) By the Company if during the initial term or any
extension thereof:
(i) Executive shall die, or
-3-
4
(ii) The Board of Directors of the
Company shall determine that:
(1) Executive has become
disabled, or
(2) Executive has breached
this Agreement in any
material respect, which
breach is not cured by
Executive or is not
capable of being cured by
Executive within thirty
(30) days after written
notice of such breach is
delivered to Executive, or
(3) Executive has engaged in
willful and material
misconduct which shall
mean the willful engaging
by Executive in illegal
conduct that is materially
and demonstrably injurious
to the Company.
All terminations pursuant to this Section 7.01 (a) shall be deemed "for
cause." If Executive's employment is terminated "for cause," the Company's
obligation to pay base salary and other compensation to Executive shall cease as
of the date of termination except as provided in Sections 6.01(b) or 7.04, if
applicable.
(b) By the Company without cause whereupon Executive
shall receive his base salary for the remaining term of the Agreement together
with any accrued bonuses or other accrued incentive compensation.
(c) By the Executive at any time by giving ninety
(90) days advance notice of his intention to terminate his employment with the
Company. Further, if Executive terminates his employment, the Company's
obligation to pay base salary and other compensation to Executive shall cease as
of the date of termination except as provided in Section 6.01(b).
Notwithstanding any termination of this Agreement and Executive's employment by
the Company, Executive, in consideration of his employment hereunder to the date
of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to periods, activities or obligations upon or
subsequent to the termination of Executive's employment including without
limitation the provisions of Sections 5 and 6 hereof.
7.2 "Disability" Defined. The Board of Directors may determine
that Executive has become disabled, for the purposes of this Agreement, in the
event that Executive shall fail, because of illness or incapacity, to render
services of the character contemplated by this Agreement over a period of ninety
(90) days during any one hundred eighty (180) day period. The existence or
nonexistence of grounds for termination of this Agreement for any reason under
Section 7.01(b)(i) will be determined in good faith by the Board or Directors
after notice in
-4-
5
writing given to Executive at least thirty (30) days prior to such
determination. During such thirty (30) day period, Executive shall be permitted
to make a presentation to the Board of Directors for its consideration.
7.3 Surrender of Records and Property. Upon termination of his
employment with the Company, Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in his possession or
under his control.
7.4 Severance Upon Death or Disability. If this Agreement is
terminated upon the death or disability of Executive, the Company agrees to pay
compensation as follows:
(a) Upon death, base salary for 12 months payable
monthly; and
(b) Upon disability, base salary for 12 months
payable monthly.
8. Miscellaneous.
8.1 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Minnesota.
8.2 Prior Agreements. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all prior agreements and understandings with respect to such subject matter, and
the parties hereto have made no agreement, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
8.3 Withholding Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
8.4 Amendments. No amendments or modifications of this
Agreement shall be deemed effective unless made in writing and signed by the
parties hereto.
8.5 No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there by an estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless
-5-
6
specifically stated, shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any act other than that specifically waived.
8.6 Severability. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance and not
in limitation of the foregoing, should the duration or geographical extent of,
or business activities covered by, any provision of this Agreement by in excess
of that which is valid and enforceable under applicable law, then such provision
shall be construed to cover only that duration, extent or activities which may
validly and enforceably be covered. Executive acknowledges the uncertainty of
the law in this respect and expressly stipulates that this Agreement be given
the construction which renders its provisions valid and enforceable to the
maximum extent (not exceeding its express terms) possible under applicable law.
8.7 Assignment. This Agreement shall not be assignable, in
whole or in part, by either party without the written consent of the other
party, except that the Company may, without the consent of Executive, assign its
rights and obligations under this Agreement to any corporation, firm or other
business entity with or into which the Company may merge or consolidate, or to
which the Company may sell or transfer all or substantially all of its assets,
or of which 50% or more of the equity investment and the voting control is
owned, directly or indirectly, by, or is under common ownership with, the
Company. After any such assignment by the Company, the Company shall be
discharged from all further liability hereunder and such assignee shall
thereafter be deemed to be the Company for the purposes of all provisions of
this Agreement including this Section 10.
8.8 Injunctive Relief. Executive agrees that it would be
difficult to compensate the Company fully for damages for any violation of the
provisions of this Agreement, including without limitation the provisions of
Sections 5 and 6. Accordingly, Executive specifically agrees that the Company
shall be entitled to temporary and permanent injunctive relief to enforce the
provisions of this Agreement and that such relief may be granted without the
necessity of proving actual damages. This provision with respect to injunctive
relief shall not, however, diminish the right of the Company to claim and
recover damages in addition to injunctive relief.
-6-
7
IN WITNESS WHEREOF, Executive and Company have executed this Agreement
as of the date set forth in the first paragraph.
SPINCYCLE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Its: Chief Executive Officer
--------------------------------
/s/ Xxxxx X. Ax
----------------------------------------
Xxxxx Ax
-7-
