EXHIBIT 10.10 Engagement AgreementEngagement Agreement |
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Exhibit 10.10
August 24, 2006
Mr. Mike Drace
US Dry Cleaning Corporation
125 E Tahquitz Canyon, Suite 203
Palm Springs, CA 92262
Re: Engagement Agreement for Investment Banking Services
This letter sets forth an Engagement Agreement (“Agreement”) between Marino Capital Partners, Inc., a California corporation (“MCP”) and US Dry Cleaning Corporation, a Delaware corporation (“USDC” or “Company”).
1. Investment Banking and Advisory Services. MCP will provide a range of investment banking and advisory services to USDC, which may include, however, are not limited to: (a) Underwriting. Upon USDC filing an SB-2 for a secondary registration of shares, MCP will enter into an LOI that will utilize such filing for a firm commitment primary issuance. Proposed Terms of such offering are attached as Exhibit “C”; (b) Private Offering. Raising up to $5 million in capital from institutional investors or other accredited investors either pursuant to terms proposed by the investor or in a Private Offering which shall begin upon delivery of an Offering Circular (“OC”), to be attached as Exhibit “B”, that is satisfactory to MCP, including at minimum the items listed in Section 8 of this Agreement. Completion of the offering will be in 45 days or less from the time the OC is available; in any case, in the event that the Company goes into registration prior to the completion of the offering, upon written notice by the Company such offering will close within 3 business days. Proposed Terms of such offering are attached as Exhibit “D”. Use of proceeds from the offering are to fund EBITDA profitable acquisitions totaling at least $5 million in annualized run rate revenues, based on last trailing quarter’s revenues, and for accounting and legal expenses related to the filing of the SB-2 and underwriting; (c) Debt. Raising up to $5 million in debt from institutional investors or other accredited investors on terms acceptable to Company; (d) introducing USDC to other investment banking and underwriting firms; (e) if requested, recommending potential suitable candidates to help enhance the Board of Directors and Management Team of USDC; and (f) assisting in the negotiation of identified potential acquisition candidates (Al Philips-HI, Delphi Management, Boston Cleaners-Riverside and Team-Fresno), as well as, at the Company’s request, additional acquisition candidates on a going-forward basis.
2. Exclusive Engagement. With the exception of the carve-outs described in 4.(c) and specifically listed in Exhibit “G”, MCP’s engagement shall be exclusive for
4600 Campus Drive, Suite 105, Newport Beach, California 92660
Telephone (949) 222-1930 Fax (949) 767-5888
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the period specified in paragraph 3, below, such that only MCP shall have the right to provide investment banking services to USDC, and to earn compensation in connection with any transaction or any investment by any investors, including with respect to transactor parties, lenders or investors identified by USDC and not necessarily introduced to USDC by MCP. As lead investment banker, MCP shall be permitted to engage other NASD member firms in a selling syndicate and/or third-party finders, provided that all compensation to such parties shall be paid out of the total fees payable to MCP hereunder. No directors or officers of USDC shall receive any additional or separate compensation for their role in any transaction or the sale of USDC securities.
3. Engagement Period / Termination.
(a) The term of this Agreement (the “Engagement Period”) will expire upon the earlier to occur of (i) 1 year from the date this engagement agreement is executed, or (ii) the mutual written agreement of USDC and MCP.
(b) If, on the date that would otherwise be the termination date of this Agreement, Escrow is open for a scheduled Closing of any transaction or offering, this Agreement shall automatically be extended until that scheduled
Close of Escrow.
(c) Notwithstanding any other provisions of this Agreement, if at any time during the 12-month period after termination of this Agreement, USDC completes a transaction with a prospective party, lender or investor (or an affiliate of any such entity), that was introduced by MCP to USDC during the Engagement Period, upon the Closing of any such transaction, USDC will be obligated to pay the fees otherwise due to MCP under this Agreement.
(d) If, during the term of this engagement, USDC is presented with an opportunity to raise capital by another investment bank or agent, while MCP reserves the right of first refusal to lead that effort, MCP agrees to operate in good faith to serve the needs of the Company and, if deemed necessary in its sole judgment, waive its rights to participate or be compensated, should the terms of that effort fall outside MCP’s area of expertise or limitations of its personnel.
4. MCP Compensation.
(a) Commitment Fee. In exchange for MCP’s role in preparing for the equity and/or debt capital raise and providing the additional advisory services, including management structure, capital structure and merger and acquisition, USDC hereby agrees to pay MCP a non-refundable commitment fee of $45,000 or $30,000 upon execution of the Agreement with an additional $20,000 due 30 days thereafter.
(b) Equity and Debt Investments. In exchange for equity and/or convertible debt investments in USDC, collectively referred to herein as “gross investment”, MCP shall receive the following compensation: (i) a success fee equal to 10 percent (10%) of the gross investment, payable in cash at Closing, (ii) a non-accountable expense allowance equal to three percent (3%) of the gross investment, payable in cash at Closing, and (iii) warrants to acquire USDC common stock equal to ten percent (10%) of the gross investment, with an exercise price of one hundred percent (100%) of the price per share established in the transaction, exercisable for five (5) years from the effective date, and containing net issuance, anti-dilution provisions for split adjustments and “piggyback”
4600 Campus Drive, Suite 105, Newport Beach, California 92660
Telephone (949) 222-1930 Fax (949) 767-5888
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registration rights, all as mutually agreed to by the parties within sixty (60) days from the date of this Agreement, and (iv) additionally, to the extent that securities sold in any offering include warrants to the investor, upon the exercise of any such warrants, MCP shall be entitled to receive 9% of the gross proceeds received by USDC as a result of such exercise. Provided that MCP stands ready and demonstrates capability to assist in the management of the warrant exercise process, MCP shall be entitled to such compensation even in the event the Company chooses to engage another firm or to manage the process in house. Such management of the warr






