CONSULTING AGREEMENT BETWEEN US DRY CLEANING CORPORATION AND THE WATLEY GROUP, LLC
Exhibit
10.6
BETWEEN
US
DRY CLEANING CORPORATION
AND
THE
XXXXXX GROUP, LLC
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THIS
AGREEMENT is
entered into as of the 12th day of July, 2005, by and among the following
parties (hereinafter collectively referred to as the "Parties");
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The
Xxxxxx Group, LLC, a California limited liability company
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AND
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US
Dry Cleaning Corporation, a Nevada corporation
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RECITALS
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US
Dry Cleaning (hereinafter referred to as the "USDC" or the "Company"),
a
Nevada corporation, directly or through one or more of its affiliates
would like to enter into a business combination transaction (the
Transaction") with Publico, a publicly tradable company (following
the
closing of the Transaction), (Publico and USDC are referred to herein
as
the "Public Company") and, thereafter, to list the Public Company's
shares
of common stock (the "Common Stock") on a nationally recognized stock
exchange or to request a market-maker to commence quotations of the
Common
Stock on an electronic exchange medium. The company plans to acquire
other
dry cleaning businesses as well as grow;
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AND
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| Whereas, Xxxxxx is a management consulting and advisory firm with management consulting expertise and has relationships and contacts that will assist the Company in achieving its business plan and financing needs; | |
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AGREEMENT
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| NOW THEREFORE, for good and valuable consideration, the Parties, intending legally to be bound, hereby agree as follows | |
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SERVICES
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1.
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During
the term of any consulting agreement hereof, Xxxxxx shall act as
a
management consultant to USDC or the Public Company, as relevant.
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2.
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During
the term hereof, Xxxxxx shall act as the exclusive financial consultant
to
USDC and, following the closing of the Transaction, the Public Company.
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3.
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If
Requested by USDC ("USDC" or the "Company") or the Public Company,
in
anticipation of the closing of the Transaction and for the benefit
of USDC
and the Public Company, Xxxxxx will conduct a two-day strategic planning
seminar with USDC's senior management, directors, and consultants.
Thereafter, but possibly prior to the effective date of this Agreement,
Xxxxxx will provide various management consulting, strategic plan,
and
prospective operations services.
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4.
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If
requested by USDC or the Public Company, Xxxxxx shall provide advice
and
assistance in the preparation and periodic updating of a strategic
plan
designed to optimize such entity's business and value for its
stockholders, which strategic plan shall be suitable for presentation
to
financial and securities analysts and to such entity's current
stockholders, as well as to prospective investors.
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5.
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In
connection with the strategic plan, Xxxxxx shall provide advice and
assistance recommend alternative organizational structures and assignments
of responsibilities.
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6.
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If
requested by USDC, Xxxxxx shall use commercially reasonable efforts
to
assist USDC in its efforts to identify prospective investors to obtain
a
bridge capital in the form of senior secured convertible notes of
up to
$3,000,000 on terms and conditions reasonably acceptable to, and
subject
to the approval of, the Board of Directors of USDC.
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7.
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If
requested by USDC or the Public Company, as relevant, Xxxxxx shall
use
commercially reasonable efforts to assist such entity in its efforts
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identify prospective investors to obtain up to an additional $10,000,000
of debt or equity financing in one or more tranches, on terms and
conditions reasonably acceptable to, and subject to the approval
of, the
Board of Directors of such entity. Xxxxxx shall analyze and quantify
alternative structures for equity, debt, or quasi-equity financing
that
are designed to meet 'such entity's growth plan in accordance its
strategic plan.
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8.
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If
requested by USDC or the Public Company, as relevant, Xxxxxx shall
provide
advice and assistance to such entity regarding negotiations with
lenders
or leasing companies for the placement of any commercial debt,
subordinated debt, mezzanine debt, other debt facility, or leasing
facility.
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9.
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If
requested by USDC or the Public Company, as relevant, Xxxxxx shall
assist
such entity's management, attorneys, and accountants with the preparation
of the various documents to be utilized with respect to USDC's or
the
Public Company's debt or equity capital raising or leasing activities.
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10
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If requested by USDC or the Public Company, as relevant, Xxxxxx shall
provide advice and assistance to such entity in respect of all aspects
of
the merger or acquisition process, from identifying such entity's
business
requirements and financial abilities, to identifying prospective
targets
and assisting with the due diligence investigations thereof, assisting
with the structure of the proposed transaction, and providing advice
regarding various alternatives for financing the proposed
transaction.
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If requested by USDC or the Public Company, as relevant, Xxxxxx shall
provide advice and recommendations to such entity regarding alternative
composition structures and functions of such entity's board of directors,
including designing codes of conduct and ethics, trading policies,
and
rules to implement good corporate governance.
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12.
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If
requested by USDC or the Public Company, as relevant, Xxxxxx shall
provide
advice regarding adequate D&O insurance to protect and indemnify the
officers, directors, and such entity.
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If requested by the Company, Xxxxxx shall assist the company in selecting
appropriate investor relations' specialists to compliment any existing
investor relations' firm that may be retained by the company.
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14.
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If
requested by the Company, Xxxxxx will advise and assist the Company
on
such other issues as the Company may request from time to time during
the
period of this agreement.
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15.
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If
requested by USDC or the Public Company, Xxxxxx shall help recruit
directors to serve as non-executive members of the Board or as a
non-executive Director of either or both of USDC or the Public Company.
Such appointments will be subject to (i) the approval of the Board
of
Directors of USDC or the Public Company, as relevant, and (ii) such
entity
obtaining a D&O insurance policy, reasonably acceptable to the
directors, of not less than $2,000,000 of coverage, unless waived
by the
director.
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FEES
AND PAYMENTS
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1.
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The
initial term of this engagement will be for two years. For the initial
two-month period of the engagement, the Company will pay a
management-consulting fee equal to be agreed. At any time, the company
may
elect to pay the consultant's management consulting fees only, with
shares
of common stock issued pursuant to an effective S-8 registration
statement. If the company requests, Xxxxxx shall assist the company
in the
preparation of an appropriate S-8 registration statement. The number
of
shares to be issued to the consultant for any monthly fee shall be
determined by dividing the average closing price of the stock for
five
days preceding the issuance of the shares into the amount of the
fee. In
addition, USDC shall issue to Xxxxxx or its designated nominees or
affiliates, 2,300,000 shares of common in USDC for overall consulting
services during the first 24 months.
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2.
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USDC
or the Public Company, as relevant, shall pay to Xxxxxx a fee for
the
services described in Section 6 & 7, above, in cash at the closing of
such an equity, debt, or quasi-equity financing. Such fees shall
be
equivalent to ten percent (10%) of the first $10,000,000 of aggregate
gross proceeds of such financing and seven and one-half percent (7
1/2%)
of any amount of aggregate gross proceeds of such financing in excess
of
$10,000,000. This fee applies to any equity, debt, or quasi-equity
financing transactions that close during the term of this Agreement
or
within twelve months thereafter if the party making equity, debt,
or
quasi-equity investment was introduced to USDC or the Public Company,
as
relevant, during the term hereof.
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3.
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USDC
or the Public Company, as relevant, will pay to Xxxxxx a fee for
the
services described in Section 8, above, in cash at the closing of
such a
commercial loan or lease transaction. Such fees shall be equivalent
to
five percent (5%) of the first $10,000,000 of borrowings or lease
transactions in favor of USDC or the Public Company, as relevant,
and two
and one-half percent (2 1/2%) of any amount of borrowings or lease
transactions in excess of $10,000,000. This fee applies to any borrowings
or lease transactions that close during the term of this Agreement
or
within twelve months thereafter if the party making such loan or
lease
transaction was introduced to USDC or the Public Company, as relevant,
during the term hereof. If warrants or other equity or quasi-equity
structures are granted or issued in connection with such a borrowing
or
lease transaction lenders or lessors, USDC or the Public Company,
as
relevant, will pay a fee to Xxxxxx equivalent to ten percent (10%)
of the
total amount of funds to be received by USDC or the Public Company
upon
the exercise of the warrants and for the warrants, equity or quasi-equity,
on an as received by USDC or the Public Company as relevant, basis.
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4.
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USDC
or the Public Company, as relevant, will pay to Xxxxxx a fee for
the
services described in Section 10, above, in cash at the closing of
such a
merger or acquisition. Such fees shall be equivalent to six percent
(6%)
of the first $5,000,000 of enterprise value of such merger or acquisition
and three percent (3%) of any amount of enterprise value in excess
of
$5,000,000. 70% of the fees for M&A services will be paid to Xxxxxx
Xxx in accordance with his management contract.
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1.
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As
of the closing of the Transaction and in connection with such closing,
USDC will cause the Public Company to assume all of USDC's obligations
hereunder. This Section 8 shall not act as a novation of USDC's
obligations under this Agreement, such that notwithstanding such
assumption, USDC shall remain liable, jointly and severally, therefor
and,
upon the request of Xxxxxx, shall execute such documents as Xxxxxx
may
reasonably request such that USDC shall become an absolute guarantor
of
any obligations hereunder incurred by the Public Company.
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DISPUTES
AND CONTROVERSIES
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The
Parties agree that all disputes, claims, and other matters in controversy
arising out of or relating to this Agreement, or the performance
or breach
thereof, shall be submitted to binding arbitration in accordance
with the
provisions and procedures of this paragraph; provided, however, that
the
arbitrator shall not be empowered to award punitive, exemplary or
consequential damages.
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Any
arbitration shall be held in Los Angeles, California in accordance
with
applicable law except as provided to the contrary hereunder. Such
arbitration shall be held before and decided by a single neutral
arbitrator. The single neutral arbitrator shall be selected from
a list of
retired judges of the Court of Los Angeles by a process mutually
agreed
upon by the parties.
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The
parties shall mutually agree upon the date and location of the arbitration
subject to the availability of the arbitrator, except that the arbitrator
shall give not less than (30) days notice of the hearing unless the
parties mutually agree to shorten time for notice.
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The
parties shall be entitled to undertake discovery in the arbitration
in
accordance with California law. In conjunction with these processes,
the
parties shall be entitled to request and obtain production of documents
in
discovery in the arbitration in accordance with the same rights,
remedies
and procedures, and shall be subject to all of the same duties,
liabilities and obligations as if the subject matter of the arbitration
were pending in a civil action before a Superior Court of the State
of
California. The parties hereby agree that any discovery talked hereunder
shall be permitted without first securing leave of the arbitrator
and
shall be kept to a reasonable minimum.
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| The decision of the arbitrator appointed pursuant to this agreement shall be final and binding. | |
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The
arbitration proceedings themselves and any discovery taken in connection
with the arbitration, shall be kept strictly confidential and shall
not be
disclosed to any third party. The arbitrator may award to any prevailing
party, as determined by the arbitrator, part or all of the prevailing
party's costs and fees. "Cost and fees" means all reasonable pre-award
expenses of the arbitration, including the arbitrators fees,
administrative fees, travel expenses, out-of-pocket expenses such
as
photocopy, telecopy and telephone charges, witness fees and attorneys'
fees.
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CONFIDENTIALITY
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Xxxxxx
acknowledges and agrees that it will receive and become aware of
certain
information which is proprietary to the Company, including, without
limitation, prices, costs, personnel, knowledge, data and techniques,
other non-public information concerning the business or finances
of the
Company, and other information the disclosure of which might harm
or
destroy the competitive advantage of the Company (all of the foregoing
shall hereinafter be referred to as the "Proprietary Information").
Notwithstanding the foregoing, the Proprietary Information shall
not
include any information which is generally known or becomes part
of the
public domain through no fault of Xxxxxx, or is required to be disclosed
in the context of any administrative or judicial proceeding. Xxxxxx
agrees
that it will not, directly or indirectly, disclose any Proprietary
Information to third parties, copy or use any Proprietary Information,
or
publish any Proprietary Information, except for the purpose of fulfilling
its obligations to the Company.
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INDEMNIFICATION
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Except
as may be prohibited by applicable law, the Company shall indemnify
and
hold harmless Xxxxxx including each member, Executive Committee member
and
officer thereof, their respective partners, officers, directors,
shareholders and trustees and the partners, officers, directors,
shareholders and trustees of such parties and in the discretion of
the
Executive Committee, may indemnify and hold harmless any Affiliate
thereof, and any employee or agent of, or adviser to, each member,
Executive Committee member and officer, and their respective Affiliates
(such Persons, to the extent they are required to be indemnified
hereunder
or are provided indemnity hereunder by the Executive Committee, are
herein
collectively referred to as "Indemnified Parties") from and against
any
and all losses, claims, demands, costs, damages, liabilities, expenses
of
and nature (including reasonable attorneys' fees and expenses), judgments,
fines, settlements and other amounts (collectively, the "Liabilities")
arising from, or related or incidental to, any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or
investigative, in which such Indemnified Party may be involved, or
threatened to be involved, as a party or otherwise, and arising out
of or
related to this agreement or the services to be provided by Xxxxxx
under
this Agreement without limitation, liabilities under
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California
law if such Indemnified Party acted in good faith and in a manner
it
reasonably believed to be in, or not opposed to, the interests office
the
Company, and, with respect to any criminal proceeding, did not in
good
faith believe its conduct was unlawful; provided, however, that such
Indemnified Party shall not be indemnified against any such Liabilities
and the Indemnified Party shall repay all amounts previously advanced
by
the Company pursuant hereto, that were caused by such Indemnified.
Party's
actual fraud, gross negligence or wanton or willful misconduct, unless
the
court in which such proceeding was brought shall determine the Indemnified
Party is fairly and reasonably entitled to indemnify in which case
such
indemnification shall be provided only to the extent permitted by
such
court. Notwithstanding the foregoing, to the extent that an Indemnified
Party has been successful on the merits or otherwise in defense of
any
action, suit or proceeding referred to in this paragraph, or in connection
with any appeal therein, or in defense of any claim, issue or matter
therein, the Company shall indemnify such Indemnified Party against
the
expenses, including, without limitation, reasonable attorneys' and
accountants' fees and expenses, incurred by such Indemnified Party
in
connection therewith. The termination of any pending or threatened
action,
suit or proceeding by judgment, order settlement, conviction, or
upon a
plea of nolo contendere or its equivalent shall not, in and of itself,
create a presumption or otherwise constitute evidence that the Indemnified
Party did not satisfy standards indemnification set forth in this
paragraph.
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Liabilities
incurred by any Indemnified Party in defending any pending or threatened
claim, demand, action, suite or proceeding shall, from time to time,
be
paid by the Company in advance of the final disposition or settlement
of
such claim, demand, action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Indemnified Party to repay such
amounts
(or a proportionate share of such amounts determined in accordance
with
clause (c) of this paragraph if applicable) if it is ultimately determined
that The Indemnified Party is not to be indemnified by The Company
as
provided in this agreement.
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If
for any reason (other than the gross negligence or the wanton or
willful
misconduct or bed fish office Indemnified Party), the foregoing
indemnification is unavailable to such Indemnified Party, then the
Company
shall contribute to the amount paid or payable by such Indemnified
Party
as a result of such Liabilities in such proportion as is appropriate
to
reflect not only the relative benefits received by the Company, on
the one
hand, and such Indemnified Party on the other hand, but also the
relative
fault of the Company and such Indemnified Party as well as any relevant
equitable considerations.
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The
indemnification (or contribution) and advancement of amounts provided
by
this agreement shall not be deemed exclusive of, but shall be in
addition
to. any other rights to which those persons seeking indemnification
(or
contribution) or advancement of amounts may otherwise be entitled
and
shall continue as to any Indemnified Party notwithstanding the dissolution
or other cessation to exist of such Indemnified Party or the withdrawal,
adjudication of bankruptcy or insolvency of such Indemnified Party,
such
Indemnified Party's no longer serving m the capacity entitling it
to
indemnification under the provisions of this agreement. or the termination
of the Company.
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The
advancement, indemnity and contribution obligations of the Company
under
this Agreement shall be in addition to any obligation which the Company
may otherwise have, shall be binding upon and inure to the benefit
of any
successors assigns, heirs and personal representatives of the Company
and
each of the Indemnified Parties and shall not be deemed to create
any
rights for the benefit of any other party. The provisions of this
paragraph shall survive any termination of this Agreement.
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| This Agreement shall constitute the whole and entire agreement of the parties hereto with respect to the matters set forth herein and shall not be modified or amended in any respect. | |
| This Agreement is governed by and to be construed in accordance with the laws of the State of California without regard to conflict of laws principles. | |
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So
Agreed,
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For
The Xxxxxx Group, LLC
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For
US Dry Cleaning Corporation
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| /s/ Xxxxxxx Xxxxx | /s/ Xxxxxxx X. Xxxxx | |
| Xxxxxxx Xxxxx | Xxxxxxx X. Xxxxx | |
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