EMPLOYMENT AGREEMENT

Employment Agreement

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This Employment Agreement involves

US DRY CLEANING CORP | Robert Y. Lee

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Title: EMPLOYMENT AGREEMENT
Governing Law: California Date: 12/18/2006
Industry: SOFTWR Sector: TECHNO

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EX 10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 12th day of December, 2006, by and between U.S. Dry Cleaning Corporation, a Delaware Corporation (“the Company”), and Robert Y. Lee (“Employee”).

RECITALS

WHEREAS, the Company intends to embark upon a series of acquisitions in the highly fragmented dry cleaning industry which will require significant additional financing for the Company; and

WHEREAS, the Board of Directors of the Company has determined that it is crucial to the success of such endeavor that the Company engage the services of a new chief executive officer who has been successful in both areas; and

WHEREAS, Employee has successfully consolidated highly fragmented, small store retail operations in the past; and

WHEREAS, Employee has extensive experience structuring the acquisition of such retail operations; and

WHEREAS, Employee is well-know and respected in the investment banking community and has been successful in securing financing for other companies in the same stage of development as the Company; and

WHEREAS, Employee is experienced in managing the operations of consolidated small retail stores; and

WHEREAS, Employee has extensive knowledge of the dry cleaning industry and has developed a pipeline of prospective acquisition candidates for the Company; and

WHEREAS, Employee has intimate knowledge of the Company and its operations; and

WHEREAS, Employee has comprehensive experience in growing and managing retail operations from start up to in excess of $100,000,000 in annual revenues as a public company chief executive officer; and

WHEREAS, for all of the reasons set forth above, the Board of Directors of the Company wishes to employ Employee as the Company’s chief executive officer; and

WHEREAS, Employee is willing to be so employed under the terms set forth in this Agreement;

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AGREEMENT

NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants and conditions set forth herein, the parties hereto agree as follows:

Term of Employment. The Company hereby employs Employee, and Employee hereby agrees to serve the Company, under and subject to all of the terms, conditions and provisions of this Agreement for a period of three (3) years from the date hereof, in the capacity of Chief Executive Officer of the Company, or to serve in such other executive capacity with the Company as the Company’s board of directors (the “Board”) may from time to time designate, provided such assignment is consistent with Employee’s level of experience and expertise. This Agreement may be extended for up to three additional years upon mutual written agreement of the Company and the Employee. Company shall give Employee six months advance notice of its intentions regarding such extension. In the performance of his duties and the exercise of his discretion, Employee shall report only to the Board of Directors. Employee’s duties shall be designated by the Board and shall be subject to such policies and directions as may be established or given by the Board from time to time.

Devotion of Time to Company Business. Employee shall devote substantially all of his productive time, ability and attention to the business of the Company during the term of this Agreement. Employee shall not, without the prior written consent of the Board, directly or indirectly render any services of a business, commercial or professional nature to any other person or organization, whether for compensation or otherwise, which may compete or conflict with the Company’s business or with Employee’s duties to the Company.

Compensation.

3.1

Base Salary. For all services rendered by Employee under this Agreement, the Company shall pay Employee a base salary (“Base Salary”) payable semi-monthly, at the rate of $20,000.00 per month until the Company achieves monthly revenues from normal operations in excess of $4,166,667 and positive four-wall income for all stores considered in the aggregate for any 30 day period, and $25,000.00 per month thereafter.

3.2

Bonuses. In addition to the amount specified in Section 3.1, the Company shall pay or deliver Employee the following bonuses at the times indicated below:

(a)

Promptly after the execution of this Agreement a promissory note in the amount of Two Hundred Thousand Dollars ($200,000.00) bearing interest at the rate of eight percent (8%) per annum payable interest only on monthly basis, with: (i) $50,000 of the principal balance of such note payable at the earlier of the

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expiration of three years from the date of this Agreement and the closing subsequent to the date of this Agreement of a debt or equity financing for the Company of at least $1,500,000 and (ii) the balance of such note payable upon the earlier of the expiration of three years from the date of this Agreement and initial sale of the Company’s stock following the date of this Agreement with proceeds of at least $3,000,000; and

(b)

If, upon the Company achieving monthly revenues in excess of $4,166,667 and positive “Four-Wall Income” for all stores considered in the aggregate for any 30 day period on or before December 31, 2007, the market price of the Company’s common stock (appropriately adjusted to reflect stock splits, combinations and dividends, recapitalizations, and reclassifications after the date of this Agreement) equals or exceeds $5.00 per share, a bonus of $350,000, or if the market price of the Company’s common stock is less than $5.00 per share, a bonus of $250,000; and

(c)

If, upon the Company achieving monthly revenues in excess of $8,333,333 and positive Four-Wall Income for all stores considered in the aggregate for any 30 day period on or before December 31, 2008, the market price of the Company’s common stock (appropriately adjusted to reflect stock splits, combinations and dividends, recapitalizations, and reclassifications after the date of this Agreement) equals or exceeds $5.00 per share, a bonus of $500,000, or if the market price of the Company’s common stock is less than $5.00 per share, a bonus of $350,000.

For purposes of this Agreement, the term “Four-Wall Income” shall mean Operating Income computed in accordance with generally accepted accounting principals plus Administrative Expenses and Professional Fees. In the sole discretion of the Board of Directors (with Employee not voting and not present during the deliberations of the Board of Directors), the Company may award discretionary additional cash bonuses to Employee for significant accomplishments that produce material benefits for the Company. In considering whether to award any such discretionary bonus, the Board shall take into account the size such discretionary bonus, the size and nature of the matter, the extra efforts of Employee, the difficulty of attaining the result that he has attained, the time required to accomplish the result, the merits and benefits to the Company, the effect on the market price of the Company’s stock, and such other factors as the Board may deem appropriate. The Board shall not be required to award any such additional bonus, and neither the Company nor the directors shall have any liability to Employee for any action or non-action with respect to any such discretionary additional bonus under this Section 3.2.

3.3

In addition to his Base Salary and cash bonuses, if any, the Employee shall receive the following fully vested options under the Company’s stock option plan:

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(a)

Incentive stock options to purchase 200,000 shares of the Company’s common stock at $3.50 per share;

(b)

Incentive stock options to purchase an additional 200,000 shares of the Company’s common stock at $5.00 per share;

(c)

Incentive stock options to purchase an additional 200,000 shares of the Company’s common stock at $7.50 per share;

(d)

Incentive stock options to purchase an additional 200,000 shares of the Company’s common stock at $10.00 per share.

Such options shall be granted under the Company’s stock option plan and shall be evidenced by a stock option agreement containing terms and conditions satisfactory to the Board of Directors (with Employee not voting and not present during the deliberations of the Board of Directors).

Benefits.

4.1

In addition to the compensation set forth in Section 3, Employee will be entitled to participate in all benefits of employment available to other members of the Company’s management, on a commensurate basis as they may be offered from time to time by the Board of Directors to the Company’s other management employees. Such benefits include, but are not limited to, full medical (including vision), dental and long term disability insurance for Employee and his family, participation in group life insurance and retirement plans. The Company shall also maintain Employee’s existing $1,000,000 whole life insurance policy, payable to Employee’s designees, and the Employee’s existing $500,000 whole life and $2,500,000 term life insurance policies payable to the Company, both of which will be transferred to the Employee upon his termination other than upon his death. The policies payable to the Company may be converted to universal life policies at the option of Employee, provided the premiums for all such policies shall not in the aggregate exceed $50,000 annually.

4.2

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