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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:
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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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3.1
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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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3.2
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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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(a)
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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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(b)
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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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(c)
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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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Page 3
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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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(b)
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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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(c)
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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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(d)
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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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4.1
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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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