Employment Agreement


    Exhibit
      10.1

     

    EMPLOYMENT
      AGREEMENT

     

    THIS
      EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the
      18th
      day of
      July 2007, by and between U.S. Dry Cleaning Corporation, a Delaware corporation
      (the “Company”), and F. Kim Cox (“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 plus financial and operational
      experience;

     

    WHEREAS,
      the Company desires to engage the services of a Chief Financial Officer (the
      “CFO”) who can assist its Chief Executive Officer (the “CEO"”) in accomplishing
      the Company’s goals; and

     

    WHEREAS,
      Employee has successfully carried out such responsibilities; and

     

    WHEREAS,
      Employee is experienced in managing corporate operations and finance functions
      in a public environment; 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 CFO; 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:

     

    1.    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 CFO of the Company, or to serve in such other executive capacity
      with the Company as the Company’s CEO may from time to time designate, provided
      such assignment is consistent with Employee’s current position, 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.
      The 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 CEO. Employee’s duties shall
      be designated by the CEO and shall be subject to such policies and discretions
      as may be established or given by the Company from time to time.

     

    2.    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 CEO, 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    3.    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 $16,666,667 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 $20,850.00 per
      month thereafter.

     

    3.2.    Employee
      shall be included in the bonus plans, if any, provided other executives and
      such
      other bonus awards as approved by the CEO and/or Board of
      Directors.

     

    3.3.    For
      purposes of this Agreement, the term “four-wall income” shall mean Operating
      Income computed in accordance with generally accepted accounting principles
      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 of such
      discretionary bonus, the size and nature of the matter, the extra efforts of
      Employee, the difficulty of attaining the result that 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 3.3.

     

    3.4.   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:

     

    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).

     

    (a)    Incentive
      stock options to purchase 100,000 shares of the Company’s common stock at $3.50
      per share;

     

    (b)    Incentive
      stock options to purchase an additional 100,000 shares of the Company’s common
      stock at $5.00 per share,

     

    (c)    Incentive
      stock options to purchase an additional 100,000 shares of the Company’s common
      stock at $7.00 per share.

     

    
      
        
        

      

      
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    4.    Benefits.

     

    4.1.   The
      Company shall maintain Employee’s existing life and disability insurance
      policies provided such cost shall not exceed $25,000 annually.

     

    4.2.    It
      is
      anticipated that Employee will spend considerable amount of time traveling
      to
      the Company’s headquarters and on behalf of the Company in the discharge of his
      duties. During the period of his employment hereunder, a Company credit card
      will be available for reasonable business, travel and entertainment expenses
      incurred in accordance with Company policy on behalf of the Company in
      connection with his employment. Additional out-of-pocket expenses will be
      reimbursed when necessary. Employee will be required to submit appropriate
      expense reports for approval by signature of the CEO as a condition of
      reimbursement of such expenses. Frequent traveler bonus points thus earned
      will
      accrue to the personal account of Employee as additional
      compensation.

     

    4.3.    In
      lieu
      of a Company provided automobile, the Company will pay an expense allowance
      for
      an automobile owned by Employee, in an amount of $2,000 per month.

     

    4.4.    Employee
      shall be entitled to one (1) week vacation upon completion of every three (3)
      full months of employment under this Agreement. To the extent that Employee
      does
      not take vacation, Employee may accumulate such vacation time throughout the
      term of this Agreement up to a maximum of six (6) weeks. Upon the termination
      of
      this Agreement, with or without cause, and to the extent that Employee has
      accumulated vacation time up to the maximum allowed, the Company shall pay
      to
      Employee, in addition to all other consideration due Employee in the event
      of
      termination herein, the full value of such accumulated vacation time
      commensurate with the Base Salary provided above.

     

    4.5.    The
      Company acknowledges that Employee maintains his principal residence in
      Portland, Oregon. Employee shall not be required to move his principal
      residence. Recognizing that Employee will perform his duties at the Company’s
      headquarters, the Company will provide Employee with reimbursement for housing
      in Palm Springs, California at such times as Employee determines necessary
      or
      appropriate of up to $4,000.00 per month. If Employee agrees to change his
      permanent residence at the request of the Company, the Company shall pay
      reasonable relocation costs, including but not limited to moving
      expenses.

     

    4.6.    Employee,
      due to his professional degrees in both accounting and finance, is required
      to
      meet certain training classes required by the relevant licensing authorities.
      The Company shall treat the cost of classes as a reimbursable business expense
      so long as reasonable and approved.

     

    5.    Authority.
      So long
      as Employee serves as CFO of the Company under this Agreement, he shall have
      the
      authority specified by the CEO, except that he shall not proceed with any
      matters, or permit the Company to take any actions, which are prohibited by,
      or
      are in conflict with, resolutions or guidelines adopted by the Board of
      Directors; and under no circumstances shall Employee, without express prior
      authorization by the Board of Directors, make any change in capital structure
      or
      issue any stock of the Company, incur additional debt, change the Company’s
      lines of business, or make any other material changes to the corporate structure
      and provided further that any payments or checks in excess of $100,000, shall
      require the signature of two persons designated by resolution of the Board
      of
      Directors.

     

    
      
        
        

      

      
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    6.    Termination.
      This
      Agreement shall terminate in advance of the time specified in Section 1 above
      (and except as provided herein, Employee shall have no right to receive any
      compensation due and payable to him or his estate at the time of such
      termination) under any of the following circumstances:

     

    6.1.    Upon
      the
      death of Employee during the term of this Agreement, the Company shall pay
      to
      the estate of Employee Base Salary, bonuses, and any other compensation accrued
      or earned by Employee as of the date of death, plus an amount equal to the
      lesser of (a) six (6) months of Base Salary or (b) the Base Salary that Employee
      would have received up to the expiration of the Agreement.

     

    6.2.    In
      the
      event that Employee shall become either physically or mentally incapacitated
      so
      as to not be capable of performing his duties as required hereunder, and if
      such
      incapacity shall continue for a period of three months consecutively, the
      Company may, at its option, terminate this Agreement by written notice to
      Employee at that time or at any time thereafter while such incapacity continues.
      In case of termination under this Section, Employee or his estate shall be
      entitled to receive Base Salary, bonuses and any other compensation accrued
      or
      earned as of the date of termination, and for six months following such
      termination or until the expiration of the term of this Agreement, whichever
      is
      earlier. In addition, the Company shall permit Employee to participate in
      Company’s medical, dental, and long term disability and long term care insurance
      plans, if any, at Employee’s cost, for a period of one (1) year following
      termination herein and to the extent permitted by law.

     

    6.3.    By
      Employee, if the Company shall have materially breached any of the provisions
      of
      this Agreement and failed to cure such breach within 15 calendar days after
      the
      Board of Directors of the Company receives written notice of such breach from
      Employee, or by the Company without Cause; provided, that the Company shall
      pay
      Employee his Base Salary through the remaining term of this
      Agreement.

     

    6.4.    By
      the
      Company for Cause. The term “Cause” used in this Section 6.4 means that
      Employee, (i) after repeated written notices and warnings and a reasonable
      opportunity for cure, fails to perform his reasonably assigned duties as
      reasonably determined by the CEO, (ii) is convicted of any felony involving
      moral turpitude, or (iii) commits any intentional act which materially damages
      or may damage the Company’s business or reputation. If the Company terminates
      Employee for Cause, no payments or benefits under this Agreement shall become
      payable after the date of Employee’s termination.

     

    6.5.    Notwithstanding
      anything in this Agreement to the contrary:

     

    (a)    If
      payment or provision of any amount or other benefit to Employee that is
“deferred compensation” subject to Section 409A of the internal Revenue Code
      (“Code”) at the time otherwise specified in this Agreement would subject such
      amount or benefit to additional tax pursuant to Section 409A(a)(1)(B) of the
      Code, and if payment or provision thereof at a later date would avoid any such
      additional tax, then the payment or provision thereof shall be postponed to
      the
      earliest date on which such amount or benefit can be paid or provided without
      incurring such additional tax.

     

    
      
        
        

      

      
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    (b)    If
      any
      payment or benefit permitted or required under this Agreement is reasonably
      determined by either party to be subject for any reason to a material risk
      of
      additional tax pursuant to Section 409A(a)(1)(B) of the Code, then the parties
      shall promptly agree in good faith on appropriate provisions to avoid such
      risk
      without materially changing the economic value of this Agreement to either
      party.

     

    7.    Loyalty,
      Non-Competition and Confidentiality.

     

    7.1.    Non-Competition.
      Employee agrees and covenants that, except for the benefit of the Company
      (and/or successor, parent or subsidiary) during the Non-Competition Period
      (as
      defined in Section 7(b)) he will not engage, directly or indirectly (whether
      as
      an officer, director, consultant, employee, representative, agent, partner,
      owner, stockholder, or otherwise), in any business engaged in by the Company
      in
      the Non-Competition Area (as defined in Section 7.3) nor will Employee compete
      against the Company for any transaction or corporate opportunity which the
      Company has or may have an interest in pursuing. It is the parties’ express
      intention that if a court of competent jurisdiction finds or holds the
      provisions of this Section 7 to be excessively broad as to time, duration,
      geographical scope, activity or subject, this Section 7 shall then be construed
      by limiting or reducing it so as to comport with then applicable
      law.

     

    7.2.    Non-Competition
      Period. As used herein, the “Non-Competition Period” means the period beginning
      on the date hereof and ending on a date which is three years from the date
      of
      this Agreement; provided, however, that if Employee’s employment is terminated
      by the Company without Cause, the Non-Competition Period shall end on the date
      of such termination.

     

    7.3.    Non-Competition
      Area. As used herein, the term “Non-Competition Area” means any county within
      the United States in which any store is operated by the Company during the
      term
      of this Agreement.

     

    7.4.    Other
      Employees. Employee agrees that during the Non-Competition Period he shall
      not,
      directly or indirectly, for his own account or as agent, servant or employee
      of
      any business entity, engage, hire or offer to hire or entice away or in any
      other manner persuade any officer, employee or agent of the Company or any
      subsidiary to discontinue his relationship with the Company or any subsidiary
      of
      the Company.

     

    7.5.    Confidentiality.
      Employee acknowledges that he has learned and will learn Confidential
      Information, as defined in Section 7.6, relating to the business of the Company.
      Employee agrees that he will not, except in the normal and proper course of
      his
      duties, disclose or use, either during the Non-Competition Period or
      subsequently thereto, any such Confidential Information without prior written
      approval of the Board of Directors of the Company.

     

    7.6.    Confidential
      Information. “Confidential Information” shall mean contractual arrangements,
      plans, locations, strategies, tactics, potential acquisitions or business
      combinations or joint venture possibilities, policies and negotiations;
      marketing information, including sales, purchasing and inventory plans,
      strategies, tactics, methods, customers, advertising, promotion or market
      research data; financial information, including operating results and
      statistics, costs and performance data, projections, forecasts, investors,
      and
      holdings; and operational information, including trade secrets, secret formulae,
      control and inspection practices, accounting systems and controls, computer
      programs and data, personnel lists, resumes, personal data, organizational
      structure and performance evaluations and other information of the Company
      which
      derives economic value from not being generally known to the public or the
      Company’s competitors. Confidential Information does not include skills,
      knowledge and experience acquired by Employee during his employment with any
      prior employer.

     

    
      
        
        

      

      
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    7.7.    Corporate
      Documents. Employee agrees that all documents of any nature pertaining to
      activities of the Company or to any of the Company’s Confidential Information in
      his possession now or at any time during the Non-Competition Period, including,
      without limitation, memoranda, notebooks, notes, computer records, disks,
      electronic information, data sheets, records and blueprints, are and shall
      be
      the property of the Company and that they and all copies of them shall be
      surrendered to the Company whenever requested by the Board of Directors from
      time to time during the Non-Competition Period and thereafter and with or
      without request upon termination of Employee’s employment with the
      Company.

     

    8.    Equitable
      Remedies.
      In the
      event of a breach by Employee of any of the provisions of Section 7, the
      Company, in addition to any other remedies it may have, shall be entitled to
      an
      injunction restraining Employee from doing or continuing to do any such act
      in
      violation of Section 7.

     

    9.    Attorney
      Fees.
      Employee and Company agree that any controversy or issue arising under this
      Agreement shall be submitted to arbitration. The successful party in any
      arbitration or litigation relating to matters covered by this Agreement shall
      be
      entitled to an award of reasonable attorneys’ fees in such action.

     

    10.    Assignment.
      Neither
      this Agreement nor any of the rights or obligations of either party hereunder
      shall be assignable by either Employee or the Company, except that this
      Agreement shall be assignable by the Company to and shall inure to the benefit
      of and be binding upon (i) any successor of the Company by way of merger,
      consolidation or transfer of all or substantially all of the assets of the
      Company to an entity other than any parent, subsidiary or affiliate of the
      Company and (ii) any parent, subsidiary or affiliate of the Company to which
      the
      Company may transfer its rights hereunder.

     

    If
      to the
      Company, to:

     

    U.S.
      Dry
      Cleaning Corporation

    125
      E.
      Tahquitz Canyon, Suite 203

    Palm
      Springs, CA 92262

    Attn:
      Chairman of the Board

    Fax:
      (760) 323-3390

     

    
      
        
        

      

      
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    If
      to
      Employee, to:

     

    F.
      Kim
      Cox

    11806
      S.E. Eastbourne Lane

    Portland,
      Oregon 97086

    Phone:
      503-658-5596

    Fax:
      503-658-2783

     

    11.    Binding
      Effect.
      The
      terms, conditions, covenants and agreements set forth herein shall inure to
      the
      benefit of, and be binding upon, the heirs, administrators, successors and
      assigns of each of the parties hereto, and upon any corporation, entity or
      person with which the Company may become merged, consolidated, combined or
      otherwise affiliated.

     

    12.    Amendment.
      This
      Agreement may not be altered or modified except by further written agreement
      by
      the parties.

     

    13.    Prior
      Agreements.
      This
      Agreement supersedes and replaces all prior agreements between the parties
      hereto.

     

    14.    Notices.
      Any
      notice required or permitted to be given under this Agreement by one party
      to
      the other shall be sufficient if given or confirmed in writing and delivered
      personally or mailed by first class mail, registered or certified, return
      receipt requested (if mailed from the United States), postage prepaid, or sent
      by facsimile transmission addressed to such party as respectively indicated
      below or as otherwise designated by such party in writing.

     

    15.    California
      Law.
      This
      Agreement is being executed and delivered and is intended to be performed and
      shall be governed by and construed in accordance with the laws of the State
      of
      California.

     

    16.    Indemnification.
      The
      Company has entered or shall enter into an Indemnification Agreement with
      Employee indemnifying him against personal liability to the fullest extent
      permissible under applicable corporate law and shall, to the extent it is
      reasonably economical to do so, maintain Side A and Side B Directors and
      Officers liability insurance for obligations of indemnification.

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      date
      and year first above written.

     

    U.S.
      DRY CLEANING CORPORATION

     

             
      /s/ Anthony A.
      Bryan                                  
 

    ANTHONY
      A. BRYAN

    Name:
      Anthony J.A. Bryan

    Title:
      Chairman of the Board

     

            
      /s/ F. Kim
      Cox                                                    

    F.
      Kim
      Cox

     

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