CONSULTING SERVICE AGREEMENT
EXHIBIT
10.1
EXECUTTION
COPY
This
Consulting Service Agreement (this “Agreement”) is made this 7th day of July,
2006 (the “Commencement Date”) by and between MTM Technologies, Inc. (the
“Company”), with offices at 0000 Xxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000,
Xxxxxx X. Xxxxxxx (the “Consultant”), who is domiciled at 00 Xxxxxxx Xxxx, Xxx
Xxxx, XX 00000, and SCR Consulting LLC, an entity wholly-owned by Consultant
and
his spouse (“SCR Consulting”).
1.
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Engagement.
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The
Company hereby engages Consultant to render to the Company the services
described in Section 2, below, during the term described in Section 3,
below.
2.
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Services;
Right of First Refusal.
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(a) The
scope
of the services to be performed by Consultant will consist of advice and
consultation regarding acquisitions by the Company, as
the
Company and the Consultant shall agree upon from time to time (together, the
“Services”), provided that this Agreement shall not require Consultant to make
any minimum time commitment to providing Services to the Company. This Agreement
will not limit in any way the ability of the Company to enter into other
agreements or arrangements with other persons or firms to provide the same
or
similar services to the Company as the Services.
(b) During
the Term (as defined herein), before Consultant offers or otherwise provides
information to any third party regarding any bona fide potential acquisition
or
other similar transaction not currently being independently pursued by the
Company which involves a business or company in the same or similar business
as
the Company as it is then conducted (each, a “Potential Transaction”), the
Company shall have a right of first refusal with respect to such Potential
Transaction (the "Right of First Refusal"). The Consultant shall provide written
notice (“Transaction Notice”) of any Potential Transaction to the Company and
shall provide to the Company the Materials (as defined below). At any time
within ten (10) business days following delivery of all Materials to the
Company, the Company may give notice to Consultant that it wishes to pursue
the
Potential Transaction (each such transaction, an “Accepted Transaction”) and in
such case, Consultant shall not offer or otherwise provide information to any
third party regarding such Potential Transaction until the Company has provided
notice (“Abandonment Notice”) that it no longer intends to pursue such Potential
Transaction (any such transaction, an “Abandoned Transaction”). As used herein
“Materials” shall mean the following with respect to the business or company to
be acquired: (i) an income statement for the most recent fiscal year, (ii)
a
year to date income statement, (iii) a recent balance sheet, (iv) a general
description of the business, including locations, partnership relationships,
and
headcount, and (v) a breakdown of revenue by product and service category,
provided that if the foregoing are not available to Consultant with reasonable
diligence, such other information as reasonably agreed by the parties. In the
event Consultant complies with his obligations with respect to the Right of
First Refusal with respect to a Potential Transaction and the Company does
not
give timely notice that it wishes to pursue such Potential Transaction,
Consultant’s offering such Potential Transaction to any competitor of the
Company shall not be deemed a violation of Section 7 of the Employment
Agreement, dated as of May 21, 2004, between Consultant and the Company or
Section 13 of the Release Agreement (as defined below).
3.
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Term
and Termination.
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(a) This
Agreement will be effective, and Consultant will provide the Services,
commencing on the Commencement Date, and continuing thereafter through and
including March 31, 2008 (the “Term”).
(b) This
Agreement may be terminated by the parties prior to its expiration, as
follows:
(i) By
the
Company: If Consultant, (1) commits willful or grossly negligent acts to the
substantial detriment of the Company; (2) breaches any provision of Section
7 of
the Employment Agreement he entered into with the Company, dated as of May
21,
2004 (the “Employment Agreement”), as modified by the Agreement and General
Release entered into by the Company and Consultant dated as of July 6, 2006
(the
“Release Agreement”), (3) breaches any material provision of the Release
Agreement, (4) breaches Section 2(b) of this Agreement, (5) breaches the Waiver
Letter, dated as of July 6, 2006, entered into by the Company and Consultant,
or
(6) exercises his revocation rights under the Release Agreement.
(ii) By
Consultant: If the Company breaches any material term or provision of this
Agreement and such breach is not cured within ten (10) days after Consultant
gives the Company written notice complaining of such breach unless such breach
is not capable of being cured within such period.
(c) This
Agreement and Consultant’s Services hereunder will terminate automatically upon
Consultant’s death. In such event, the Company shall pay to Consultant’s estate
all compensation that would have been owed to Consultant under this Agreement
through the Term of this Agreement, had Consultant lived. Such compensation
shall be paid on a quarterly basis, in accordance with Section 4(a) of this
Agreement.
(d) Notwithstanding
the provisions of Section 3(b)(i)(2), it shall be a condition precedent to
the
Company's right to terminate this Agreement pursuant to such Section 3(b)(i)(2)
that (x) the Company shall first have given Consultant written notice stating
with reasonable specificity the reason for the termination ("breach") and (y)
if
such breach is susceptible of cure or remedy, a period of ten days from and
after the giving of such notice shall have elapsed without Consultant having
effectively cured or remedied such breach during such 10-day period.
Notwithstanding anything to the contrary contained herein, the right to cure
set
forth in this Section 3(d) shall not apply if there are habitual or repeated
breaches by Consultant of Section 7 of the Employment Agreement.
4.
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Compensation.
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(a) Quarterly
Fee; Signing Fee.
For
services rendered under this Agreement, the Company will, during the period
July
1, 2006 to December 31, 2007, pay Consultant fees at the rate of $265,000 per
annum, payable quarterly in advance on the 15th
of every
July, October, January, and April (the “Quarterly Fee”). For any less than full
quarterly period, the Quarterly Fee will be computed on a per diem basis by
dividing the number of business days in said period for which fees are owed,
by
the total number of business days in said period. In addition to the Quarterly
Fee, the Company will pay Consultant a one-time fee (the “Signing Fee”) of
$50,000, such fee to be paid concurrently with the payment of the first
Quarterly Fee.
(b) Acquisition
Fees.
In the
event the Company completes any (i) Accepted Transaction at any time during
the
Term or thereafter, (ii) Potential Transaction (that was not an
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Accepted
Transaction) at any time for a period of eighteen (18) months following delivery
of the Transaction Notice for such transaction, or (iii) Abandoned Transaction
at any time for a period of eighteen (18) months following delivery of the
Abandonment Notice for such transaction the Company shall pay to the Consultant,
in cash, a fee (“Transaction Fee”) an amount equal to one percent (1%) of the
Aggregate Purchase Price (as defined below) paid by the Company at closing
in
such transaction. Notwithstanding the foregoing, (i) the maximum amount of
any
Transaction Fee for any single transaction shall be $500,000, and (ii) for
any
transaction for which the Transaction Notice is delivered to the Company on
or
before December 31, 2007, the Company shall have the right to offset Transaction
Fees against total amount of Quarterly Fees paid under Section 4(a) above.
For
the purposes of determining the value of any stock delivered by the Company
in a
transaction as part of the purchase price, such shares will be valued on the
basis provided for in the purchase agreement governing the transaction, and
if
such valuation is not provided for, shall be valued at the fair market value
of
such shares on the date of closing of the transaction. As used herein the term
“Aggregate Purchase Price” shall mean (a) any and all cash and stock delivered
at the closing of the transaction, plus (b) any deferred payment by the Company
which is solely conditioned upon the passage of time (such as promissory notes
and installment sale payments), plus (c) and earnouts or similar deferred
payments that are conditioned upon the achievement of performance targets
relating to a period of six (6) months or less from the closing of such
transaction (“Short Term Earnouts”) and shall exclude any (i) debt or other
liabilities assumed in the transaction, (ii) earnouts or similar deferred
payments that are conditioned upon the achievement of performance targets
relating to a period of greater than six (6) months from the closing of such
transaction, and (iii) equity awards granted to the employees of the acquired
companies and payments under employment agreements with the employees of the
acquired company. The parties agree that any Transaction Fee related to Short
Term Earnouts will only be due and payable upon the achievement of such Short
Term Earnout.
(c) Other
Benefits.
The
Consultant shall be provided telephonic, voicemail, e-mail and other such
services as may be agreed by the Company and the Consultant during the Term,
provided that such services are to be used by Consultant for business purposes
only, and in connection with his Services under this Agreement.
(d) Expenses.
During
the Term, the Company shall not be obligated to reimburse the Consultant for
any
business expenses Consultant incurs in the performance of the Services, unless
the Company, in its sole discretion, approves reimbursement of such business
expenses, in advance, and in writing.
(e) Stock
Options.
Consultant’s change in status from an employee of the Company to a consultant
shall not affect Consultant’s right to vest and exercise the vested stock
options or restricted stock units described below:
Grant
Date
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Options
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Exercise
Price
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7/13/1998
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50,000
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$2.25
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10/12/1999
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5,200
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$2.69
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9/11/2001
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50,000
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$1.29
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4/15/2005
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8,000
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$4.05
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Grant
Date
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RSUs
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4/15/2005
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2,000
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For
the
avoidance of doubt, the vesting and exercise of the foregoing options will
remain the same as if Consultant was an employee of the Company, provided that
the character of such options will change from Incentive Stock Options to
Nonqualified Stock Options pursuant to the applicable provisions of the United
States Internal Revenue Code.
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(f) Payment
of Fees.
All
fees payable by the Company under the terms of this Agreement shall be paid
to
SCR Consulting, provided that SCR Consulting has provided to the Company a
IRS
Form W-9. The Company will provide SCR Consulting with a Form 1099 reflecting
the fees paid during each affected tax year. Payments made under Sections 4(a)
and Section 4(b) above shall be made by wire transfer of immediately available
funds to such account as designated in writing from time to time by the
Consultant to the Company.
5.
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Independent
Contractor.
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The
relationship between the Company and Consultant is that of independent
contractor, and both the Company and Consultant will represent, and will cause
their officers, employees, agents and representatives, if any, to represent
to
third parties that Consultant’s capacity hereunder is that of a “consultant” or
“advisor”. Neither party will be the agent of the other for any purpose
whatsoever, have power or authority to make or give any promise, to execute
any
contract or otherwise create, or to assume any liability or obligation in the
name of or on behalf of the other party. Neither party will misrepresent, and
each party will cause their officers, employees, agents and representatives,
if
any, not to misrepresent, to any third party that it has any power or authority
which is denied to it by the preceding sentence. The making of any such
misrepresentation is a breach of a material term of this Agreement, is not
capable of cure, and is sufficient reason for termination of this Agreement
pursuant to Section 3(b)(i) or Section 3(b)(ii). As an independent contractor,
Consultant will not (except as otherwise provided in the Release Agreement
and
this Agreement) be entitled to participate in any Company-sponsored employee
benefits programs, and will be wholly and fully responsible for any taxes owed
to any governmental authority with respect to the fees set forth in Section
4,
above. Consultant represents and warrants that Consultant will pay any such
taxes as and when due.
6.
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Assignment.
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This
Agreement is personal to the parties hereto and neither party may assign its
rights or delegate its obligations hereunder without the prior written consent
of the other party, which may be withheld without cause or explanation. Any
purported assignment or delegation in violation of this Section shall be
void.
7.
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Notice.
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All
notices, requests and other communications pursuant to this Agreement shall
be
in writing and shall be deemed effective upon (a) personal delivery, if
delivered by hand, (b) the next business day, if sent by a prepaid overnight
courier service, or (c) three days after the date of deposit in the mails,
if
mailed by registered or certified mail, and in each case addressed as
follows:
If
to Consultant
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Xxxxxx
Xxxxxxx
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or SCR Consulting
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00
Xxxxxxx Xxxx,
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Xxx
Xxxx, XX 00000
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With
a copy to:
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Snow
Xxxxxx Xxxxxx P.C.
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000
Xxxxx Xxxxxx, 00xx Xxxxx
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Xxx
Xxxx, XX 00000
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Attn:
Xxxx X. Xxxxxxx, Esq.
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If
to the Company:
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0000
Xxxx Xxxxx Xxxx
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Xxxxxxxx,
Xxxxxxxxxxx 00000
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Attn.:
Chief Executive Officer
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With
a copy to:
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0000
Xxxx Xxxxx Xxxx
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Xxxxxxxx,
Xxxxxxxxxxx 00000
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Attn.:
General Counsel
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Either
party may change the address to which notices to such party are to be sent
by
giving notice of such change of address in the manner provided by this Section
7.
8.
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Waiver
of Breach.
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Any
waiver of any breach of this Agreement shall not be construed to be a continuing
waiver or consent to any subsequent breach on the part either of Consultant
or
of the Company.
9.
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Severability.
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To
the
extent any provision of this Agreement or portion thereof shall be invalid
or
unenforceable, it shall be considered deleted therefrom and the remainder of
such provision and of this Agreement shall be unaffected and shall continue
in
full force and effect.
10.
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Counterparts.
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This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together will constitute one and
the
same instrument.
11.
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Governing
Law.
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This
Agreement shall be construed, interpreted and enforced in accordance with the
laws of the State of New York, without giving effect to the choice or conflicts
of law principles thereof.
12.
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Entire
Agreement.
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This
Agreement contains the entire agreement between the Company and Consultant
with
respect to Consultant’s provision of future personal services to the
Company.
13.
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Amendment.
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No
provision of this Agreement may be canceled or amended by the parties hereto
except by an instrument in writing signed on behalf of each of the parties
hereto. A provision of this Agreement may be waived only by a written instrument
signed by the party against whom or which enforcement of such waiver is
sought.
14.
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Dispute
Resolution.
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(a) Except
as
specifically provided herein, any dispute or controversy arising under or in
connection with this Agreement shall be, upon the demand of either party,
subject to a
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non-binding
mediation proceeding before a mediator on the panel of the CPR Institute
for Dispute Resolution, such mediator to be agreed
upon by the parties.
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(b) If
a
mediator is not agreed upon or if mediation is not successful, any dispute
or
controversy between the Company and Consultant arising under or in connection
with this Agreement (except any claim by the Company relating to Consultant’s
breach of Section 7 of the Employment Agreement, as modified by the Release
Agreement) shall be settled by binding arbitration before a single arbitrator
in
New York, New York pursuant to the Employment Dispute Resolution Rules of the
American Arbitration Association (“AAA”). The losing party in such arbitration
shall be obligated to pay the fees of the arbitrator and the AAA and the party
prevailing in such arbitration shall be entitled, in addition to such other
relief as may be granted, to reimbursement from the other party to a reasonable
sum as and for its attorney fees and costs in such arbitration. Judgment upon
any resulting arbitration award may be entered in any court of competent
jurisdiction.
(c) Neither
party shall be required to mediate or arbitrate any dispute arising between
it
and the other party relating to any breach of Section 7 of the Employment
Agreement, as modified by the Release Agreement, but shall have the right to
institute judicial proceedings in the United States District Court for the
Southern District of New York or in a state court having jurisdiction located
in
the State of New York, County of New York, with respect to such dispute or
claim. Each party hereby consents to, and waives any objection to, the personal
jurisdiction and venue of the aforesaid courts, and waives any claim that the
aforesaid courts constitute an inconvenient forum and any right to trial by
jury. If such judicial proceedings are instituted, the parties agree that such
proceedings shall not be stayed pending the outcome of any arbitration
proceedings hereunder.
15.
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Xxxxxxx
Xxxxxxx.
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Consultant
acknowledges and agrees that he is subject to the terms and conditions of the
Company’s Xxxxxxx Xxxxxxx Policy, as the same exists from time to time, and that
he will comply with the terms of such policy.
16.
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Other
Activities.
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Subject
to the restrictions imposed upon Consultant by the provisions of Section 7
of
the Employment Agreement, as modified by the Release Agreement, the parties
agree that Consultant may enter into agreements to provide consulting services
to other persons or entities.
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
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By:
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/s/ Xxxxxxx X. Xxxxxx | /s/ Xxxxxx X. Xxxxxxx | |
Name:
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Xxxxxxx
X. Xxxxxx
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Name:
Xxxxxx X. Xxxxxxx
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Title:
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Chief
Executive Officer
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