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;
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing, and of the mutual covenants and conditions set forth
herein, the parties hereto agree as follows:
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1.
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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.
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2.
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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.
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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.
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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:
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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
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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
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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.
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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.
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3.3
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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)
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Incentive stock options to purchase
200,000 shares of the Company’s common stock at $3.50 per
share;
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Incentive stock options to purchase
an additional 200,000 shares of the Company’s common stock at
$5.00 per share;
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Incentive stock options to purchase
an additional 200,000 shares of the Company’s common stock at
$7.50 per share;
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Incentive stock options to purchase
an additional 200,000 shares of the Company’s common stock at
$10.00 per share.
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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).
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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.
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It is anticipated that Employee will
spend considerable amount of time travel
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