Exhibit 10.9
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CONSULTING AGREEMENT
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This CONSULTING AGREEMENT is made as of April 17, 1997 by and between Mac-
Gray II, Inc., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxx
("Consultant"). Reference is made to that certain Agreement and Plan of Merger
dated as of the date of this Agreement (the "Merger Agreement") by and among the
Company, Xxx-Xxxx Co., Inc., Xxx-Xxxx Acquisition Corp. ("Acquisition Corp."),
Consultant, Sun Services of America, Inc., a Florida corporation ("SSA"), and X.
Xxxxxx Coin-Op-Laundry, Inc., a Florida corporation ("Xxxxxx"). Capitalized
terms used in this Agreement and not defined herein shall have the respective
meanings given to them in the Merger Agreement.
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties are consummating the transactions contemplated by the Merger
Agreement, pursuant to which Acquisition Corp. will merge with and into Xxxxxx,
SSA will merge with and into the Company and Consultant will receive in exchange
for the capital stock of SSA and Xxxxxx cash and shares of Company Stock (the
"Mergers");
WHEREAS, prior to the Mergers, Consultant was the sole stockholder of, and
was principally involved in the management of the business of, each of SSA and
Xxxxxx;
WHEREAS, the Company desires to continue to have the benefit of
Consultant's experience and knowledge in the card and coin-operated laundry
business and industry; and
WHEREAS, as a material inducement to the Company and Consultant to
consummate the transactions contemplated by the Merger Agreement, the Company
and Consultant are executing and delivering this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Consulting Arrangement. Subject to the terms of this Agreement, for a
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period from the date hereof until the earlier of (a) the fifth anniversary of
the date hereof and (b) the effective date of any termination of this Agreement
pursuant to Section 5 hereof (the "Consulting Period"), Consultant shall serve
as a consultant to the Company. During the Consulting Period, Consultant shall
render such services of an advisory or consulting nature as the Chief Executive
Officer or President of the Company, and/or their respective designees, may,
from time to time, reasonably request, in order that the Company may continue to
have the benefit of Consultant's experience and knowledge of the card and coin-
operated laundry business and industry including, without limitation, advising
and consulting with the Company with respect to the initiation, negotiation and
consummation of acquisitions of businesses in the card and coin-operated laundry
business (the "Consulting Services"). The Consultant shall at all times perform
and discharge his duties and responsibilities under this Agreement faithfully,
diligently and to the best of his ability.
2. Confidentiality. Consultant agrees that, for the benefit of the
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Company and each of its Affiliates (as defined below), during the Consulting
Period, he shall not (nor shall Consultant assist any other person to) directly
or indirectly furnish, divulge, reveal, report, publish or disclose (other than
as may be required under applicable law) any Confidential Information (as
hereinafter defined) to any person, firm, corporation or other entity, or
hereafter use (or assist any person to use) such Confidential Information;
provided, however, that Consultant may use or disclose Confidential Information
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as directed by the Company in connection with the provision of the Consulting
Services under this Agreement. For purposes of this Agreement, the term
"Confidential Information" means all information or material not generally known
to the public, which gives the Company and any of its Affiliates some
competitive business advantage or the opportunity of obtaining such advantage or
the disclosure of which could be detrimental to the interests of the Company and
any of its Affiliates, including, without limitation, trade secrets, inventions,
drawings, file data, documentation, diagrams, specifications, know how,
processes, formulas, models, subscriber lists, sales representative lists,
proprietary information, research and development procedures, research or
development and test results, marketing techniques and materials, marketing and
development plans, price lists, pricing policies, business plans, information
relating to customers and/or suppliers' identities, characteristics and
agreements, financial information and projections, and employee files.
"Confidential Information" also includes any information described above which
the Company or any of its Affiliates obtains from another party and which the
Company or such Affiliate treats as proprietary or designates as Confidential
Information, whether or not owned or developed by the Company or such Affiliate.
For purposes of this Agreement, the term "Affiliate" shall mean, with respect to
any person or entity (herein the "first party"), any other person or entity that
directly or indirectly controls, or is controlled by, or is under common control
with, such first party (the term "control" as used herein (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to (a) vote twenty-five percent (25%) or more of the
outstanding voting securities of such person or entity, or (b) otherwise direct
the management or policies of such person or entity by contract or otherwise).
3. Payment. During the Consulting Period, as compensation in full for
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providing the Consulting Services under this Agreement, the Company shall
compensate Consultant as follows:
(a) Retainer. The Company shall pay to Consultant a base retainer
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(the "Annual Retainer") equal to (i) with respect to each of the first and
second Consulting Years (as defined below), $50,000 per year and (ii) with
respect to each of the third, fourth and fifth Consulting Years, $100,000
per year. The Annual Retainer shall be payable in equal monthly
installments during each Consulting Year during the Consulting Period and
shall be subject to reduction pursuant to Section 4 hereof.
(b) Bonus. The Company shall pay to Consultant an annual bonus
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(the "Annual Bonus") for each Consulting Year during the Consulting Period
which (i) in the case of the first and second Consulting Years, shall be
payable in cash in installments of $56,250 on the 90th, 180th and 270th
days (or, if not a business day, the next succeeding business day) of each
such Consulting Year with the balance of
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such Annual Bonus payable within sixty (60) days following the end of each such
Consulting Year and (ii) in the case of the third, fourth and fifth Consulting
Years, shall be payable in cash within sixty (60) days following the end of such
Consulting Year (or, in the case of any portion of the Annual Bonus due with
respect to the fifth Consulting Year for Acquired Entities acquired during the
Tail Period (as defined below), within sixty (60) days following the end of the
Tail Period), determined as follows:
(i) with respect to each of the first and second Consulting
Years, the Annual Bonus shall be an amount equal to the greater of (x) the
product of (A) one percent (1%) multiplied by (B) the Acquired Entity
Revenues (as defined below) for the calendar year ended immediately prior
to the end of such Consulting Year and (y) $225,000; and
(ii) with respect to each of the third, fourth and fifth
Consulting Years, the Annual Bonus shall be an amount equal to the product
of (x) seventy-five one hundredths of one percent (.75%) multiplied by (y)
the Acquired Entity Revenues for the calendar year ended immediately prior
to the end of such Consulting Year.
(c) Definition. For purposes of this Agreement, the following terms shall
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have the following meanings:
(i) "Acquired Entity" means, with respect to any Consulting
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Year, a business operating in the card or coin-operated laundry business
which both (A) the Company acquires during such Consulting Year and, in
addition, in the case of the fifth Consulting Year, which the Company
acquires within six months following the end of such fifth Consulting Year
(the "Tail Period") if a letter of intent or acquisition agreement was
executed with respect thereto during such fifth Consulting Year, and (B)
either (x) has more than twelve hundred and fifty (1250) revenue producing
washers and dryers that are acquired by the Company or (y) which is
approved as an "Acquired Entity" by the Chairman of the Board of Directors
of the Company, acting in his sole and absolute discretion; provided,
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however, that in no event shall the term Acquired Entity include any
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business acquired from any of the entities listed on Schedule A attached
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hereto or any business acquired from any Affiliate of any of such entities
unless after a period of two years from the date of this Agreement a letter
of intent has not been signed by the Company and any of the entities listed
on Schedule A or any of their Affiliates, in which case any such entity,
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for which there is no signed letter of intent, shall become eligible to
become an Acquired Entity if the other requirements of this subsection are
met.
(ii) "Acquired Entity Revenues" means, with respect to any
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calendar year, the sum of the gross revenues from coin-route operations
(which shall exclude, without limitation, revenues from sales of laundry
machines, parts and
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accessories) for such calendar year of all Acquired Entities for the
Consulting Year ended immediately after such calendar year.
(iii) "Consulting Years" means (A) the period commencing
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on April 17, 1997 and ending on Xxxxx 00, 0000, (X) the one-year
period commencing on April 17, 1998 and ending on April 16,
1999, the one-year period commencing on April 17, 1999 and
ending on Xxxxx 00, 0000, (X) the one-year period commencing on
April 17, 2000 and ending on April 16, 2001 and (E) the one-year
period commencing on April 17, 2001 and ending on April 16,
2002.
(d) Calculation of Bonus. The Company shall provide to
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Consultant at the time of the payment of each Annual Bonus under this
Agreement, a reasonably detailed statement setting forth the calculation of
such Annual Bonus (an "Annual Bonus Statement").
If Consultant disputes the calculation of any Annual Bonus, Consultant
shall notify the Company in writing within 30 days after the delivery to
Consultant of the Annual Bonus Statement with respect thereto, which notice
shall specify the nature of such dispute and the basis therefor (the "Dispute
Notice"). For a period of 15 days after the Company's receipt of the Dispute
Notice, at the request of Consultant and during the regular business hours of
the Company, the Company shall grant to Consultant and his representatives
reasonable access to the books and records of the Company that directly relate
to the calculation of the Annual Bonus. The parties shall attempt in good faith
to reach agreement resolving all of the disputes set forth in the Dispute Notice
within 15 days after the Dispute Notice is received by the Company, in which
event the Annual Bonus Statement, as amended to the extent necessary to reflect
the resolution of all such disputes, shall be conclusive and binding on the
parties. If the parties are unable to resolve any or all of such disputes within
the aforesaid 15 day period, the parties shall, promptly after the expiration of
such time period, submit all unresolved disputes to a nationally recognized
independent accounting firm mutually agreeable to the parties (the "Arbiter")
for resolution. Promptly, but no later than 30 days after its acceptance of its
appointment as Arbiter, the Arbiter shall determine, based solely on
presentations by the Company and Consultant, only those items in dispute on the
Annual Bonus Statement, and shall render a written report as to the resolution
of each dispute and the resulting calculation of the Annual Bonus Statement. The
Arbiter shall have exclusive jurisdiction over, and resort to the Arbiter, as
provided in this Section 3(d) shall be the sole recourse and remedy of the
parties with respect to, any disputes arising out of or relating to the Annual
Bonus Statement, and the Arbiter's determination shall be conclusive and binding
on the parties and shall be enforceable in any court of competent jurisdiction.
The fees and expenses of the Arbiter shall be borne equally by the Company and
Consultant.
4. Expense Reimbursement; Insurance. The Company shall, in addition to
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the payments contemplated by Section 3 hereof, reimburse Consultant for all
reasonable out-of-pocket costs and expenses incurred by Consultant in connection
with the performance of the Consulting Services hereunder. Such reimbursement
shall be made within fifteen (15) days after receipt by the Company of
statements detailing such costs and expenses and other
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appropriate documentation reasonably satisfactory to the Company. During the
Consulting Period, the Company shall provide health insurance coverage for
Consultant and his spouse and children under the Company's group health
insurance plan. The incremental cost to the Company for providing such coverage
shall be paid by Consultant by a reduction in each monthly installment of the
Annual Retainer.
5. Termination. The Company may terminate this Agreement and Consultant's
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engagement hereunder upon (a) any act of fraud or embezzlement by Consultant
with respect to the Company or its Affiliates or (b) gross negligence of
Consultant in connection with the rendering of Consulting Services hereunder;
provided that such gross negligence has not been cured by the date thirty (30)
days after the Company has given written notice to Consultant specifying such
gross negligence in reasonable detail. In the event of any termination pursuant
to this Section 5, the Company shall pay to Consultant (i) the Annual Retainer
then in effect, pro rated to the effective date of such termination and (ii)
within 60 days after the end of the Consulting Year in which such termination
occurs, the Annual Bonus for such Consulting Year, based on the Acquired
Entities acquired during, or within six (6) months after the end of, such
Consulting Year for which letters of intent or acquisition agreements were
executed on or prior to the effective date of such termination. Upon any
termination of this Agreement pursuant to this Section 5, (i) the Company's
obligations to Consultant shall be limited to the payments provided for in the
preceding sentence and (ii) all other provisions of this Agreement shall
terminate.
6. Status. The Company and Consultant agree that Consultant shall be an
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independent contractor of the Company and that nothing in this Agreement shall
be construed or deemed to create any other relationship. Without limiting the
foregoing, the relationship between the Company and Consultant shall not be that
of any employer-employee, joint venturers or partners. The Company shall not
make any deductions or withholdings from Consultant's compensation as might
otherwise be required by federal or state laws. Consultant expressly understands
and agrees that he shall be solely responsible for all withholding and income
taxes, and that he will not be covered by FICA, SDI or Workmen's Compensation
laws during the Consulting Period. Consultant agrees to provide the Company with
written evidence of compliance with federal and state withholding requirements
upon request.
7. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Florida, without regard to the
conflicts or choice of law provisions thereof.
8. Dispute Resolution. Except as provided below, any dispute arising out
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of or relating to this Agreement or the breach, termination or validity hereof
shall be finally settled by arbitration conducted expeditiously in accordance
with the CPR Institute for Dispute Resolution Rules for Non-Administered
Arbitration of Business Disputes (the "CPR Rules"). The CPR Institute for
Dispute Resolution shall appoint a neutral advisor from its National CPR Panel.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S)1-16, and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration shall
be Tampa, Florida.
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Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided by the following agreed upon procedures:
(a) mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the initiation of the procedure;
(b) no other discovery;
(c) hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three (3) hours; such
hearings to take place on one or two days at a maximum; and
(d) decision to be rendered not more than ten (10) days
following such hearings.
Notwithstanding anything to the contrary contained herein, the provisions
of this Section 8 shall not apply with regard to any equitable remedies to which
any party may be entitled hereunder.
Each of the parties hereto (i) hereby irrevocably submits to the
jurisdiction of the United States District Court for the District of
Massachusetts for the purpose of enforcing the award or decision in any such
proceeding, (ii) hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court, and (iii) hereby waives
and agrees not to seek any review by any court of any other jurisdiction which
may be called upon to grant an enforcement of the judgment of any such court.
Each of the parties hereto hereby consents to service of process by registered
mail at the address to which notices are to be given. Each of the parties hereto
agrees that its or his submission to jurisdiction and its or his consent to
service of process by mail is made for the express benefit of the other parties
hereto. Final judgment against any party hereto in any such action, suit or
proceeding may be enforced in other jurisdictions by suit, action or proceeding
on the judgment, or in any other manner provided by or pursuant to the laws of
such other jurisdiction; provided, however, that any party hereto may at its or
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his option bring suit, or institute other judicial proceedings, in any state or
federal court of the United States or of any country or place where the other
parties or their assets, may be found.
9. Successors and Assigns. This Agreement shall inure to the benefit of,
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and be binding upon, the successors of the Company by way of merger,
consolidation or transfer of all or substantially all of the assets of the
Company, and may not be assigned by Consultant.
10. No Conflicting Obligations. Consultant hereby represents and warrants
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to the Company that he is not now under, or bound to be under in the future, any
obligation to any
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person, firm or corporation which is or would be inconsistent or in conflict
with this Agreement or would prevent, limit or impair in any way the full and
absolute performance by Consultant of his obligations hereunder. In addition,
Consultant covenants that he will not enter into or discuss entering into any
such agreement during the Consultant Period.
11. Entire Agreement; Modifications. This Agreement, the Merger
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Agreement, the Noncompetition Agreement and the Stockholders' Agreement
constitute the entire agreement between the parties pertaining to their subject
matter and supersede all prior and contemporaneous agreements, representations,
negotiations and understandings of the parties, whether oral or written. No
supplement, modification or amendment to this Agreement shall be binding unless
executed in writing by all the parties hereto.
12. Waivers. The failure of any party to require the performance or
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satisfaction of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent subsequent enforcement
of such term or obligation or be deemed a waiver of any subsequent failure or
breach.
13. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
14. Notices. All notices and other communications under this Agreement
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shall be in writing and shall be delivered in accordance with the provisions of
the Merger Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Consulting
Agreement as of the date and year first written above.
COMPANY:
MAC-GRAY II, INC., a Delaware
corporation
/s/
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Name:
Title:
CONSULTANT:
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Consulting Agreement
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SCHEDULE A
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LIST OF EXCLUDED ENTITIES
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Material listed on this Schedule A has been omitted pursuant to a request for
confidential treatment and has been filed separately with the office of the
Secretary of the Securities and Exchange Commission.
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