Document:

Exhibit 10.4 Drace Agreement

    Exhibit 10.4

    
 

    EMPLOYMENT
      AGREEMENT

    

    THIS
      EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 29th
      day
      of July, 2005, by and between U.S. Dry Cleaning Corporation ("the Company")
      a
      Delaware Corporation, and Michael Eugene Drace ("Employee"). 

    

    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 from the date hereof through July 31, 2007, 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.

    

    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 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.

    

    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$14,585.00 per month for the first year and $15,300.00 per month for the
      second year.

    

    3.2 Bonuses.
      In
      addition to the amount specified in Section 3.1, at 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
      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
      Board shall take into account 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 bonus, and neither the Company nor the directors shall have
      any liability to Employee for any action or non-action under this Section
      3.2.

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    3.3 In
      addition to the Base Salary and bonuses, if any, the Employee shall participate
      in the Company's stock option plan at a level commensurate with the position
      of
      Chief Operating Officer. The option 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 Company and consistent with stock options
      granted by fair market value of the Company's Common Stock on the date of grant,
      as determined in good faith by the Board of Directors (with Employee not voting
      and not present during the deliberations of the Board of
      Directors.)

    

    4. 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, dental and long
      term disability insurance for Employee, participation in group life insurance
      and retirement plans, and whole life insurance of$ 1,000,000.00 payable to
      Employee's designees, provided premium for such policy shall not exceed $18,000
      annually. (The company may also purchase and maintain up to $1,000,000.00 of
      term life insurance on Employee's life payable to the Company.)

    

    4.2 It
      is
      anticipated that Employee will spend considerable amount of time traveling
      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
      Chief Financial Officer or Chairman of the Board 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 $1,500 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 Employee
      shall not be required to move his principle residence during the first term
      of
      this agreement. If a change of residence becomes a condition for subsequent
      extensions, the Company shall pay reasonable relocation costs, including but
      not
      limited to moving expenses.

    

    5. Authority.
      So long
      as Employee serves as Chief Executive Officer of the Company under this
      Agreement he shall have the authority specified in the By-Laws of the Company,
      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 $75,000.00 shall require the signature of two
      persons designated by resolution of the Board of Directors.

    

    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 his 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
      (a) six (6) months of Base Salary or (b) the Base Salary that Employee would
      have received up to the expiration of the Agreement, whichever period is
      less.

    

    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 or to 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; provided,
      that
      the Company shall pay Employee his Base Salary through the remaining term of
      this Agreement.

    

    6.4 By
      the
      Company at any time, without Cause; provided that the Company
      shall pay Employee his Base Salary and any bonuses which would otherwise have
      become payable under Section 3.2 above, for six months following such
      termination or until the expiration of the term of this Agreement, whichever
      is
later.

    

    6.5 By
      the
      Company for Cause. The term "Cause" used in this Section (6.5)
      means Employee., (i) after repeated notices and warnings, fails to perform
      his
      reasonably assigned duties as reasonably determined by the Company, (ii)
      materially breaches any of the terms or conditions of Sections 1 or 2 of this
      Agreement, or (iii) commits or engages in a felony or any intentionally
      dishonest or fraudulent 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. 

    

    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 one
      year after
      the
      later to occur of (i) July 31, 2007 or (ii) the date on which Employee's
      employment with the Company terminates; 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 anywhere with a three-mile radius of any store 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 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.

    

    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 Chairman of the Board of
      the
      Company.

    

    7.6 Confidential
      Information.
      "Confidential Information" shall include, but is not limited to, the following
      types of information regarding the Company: corporate information, including
      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. Confidential Information does not include
      skills, knowledge and experience acquired by Employee during his employment
      with
      any prior employer.

    

    7.7 Corporate
      Documents.
      Employee agrees that all documents of any nature pertaining to activities of
      the
      Company or to any of the forgoing, matters 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 Company 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 the 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 the Section 7.

    

    9. Attorney
      Fees.
      The
      successful party in any 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.

    

    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. 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 Untied 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.

    

    
      	
              If
                to the Company, to:

            	 
	 	
              U.S.
                Dry Cleaning Corporation

            
	 	
              32-325
                Date Palm Drive Suite 211

            
	 	
              Cathedral
                City, CA. 92234

            
	 	
              Attn:
                Chairman of the Board

            
	 	
              Fax:
                (760)324-7345

            

    

    

    
 

    
      	
              If
                to Employee, to:

            	 
	 	
              Michael
                E. Drace

            
	 	
              224
                Kuuhale Street

            
	 	
              Kailua,
                HI 96734

            

    

    

    14. 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.

    

    15. Indemnification.
      The
      Company has entered or shall enter into and Indemnification Agreement with
      Employee indemnifying him
      against
      personal liability to the fullest extent permissible under applicable corporate
      law.

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    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/
Robert
      Y. Lee                        

    By:
      Robert Y. Lee, Chairman of the Board of Directors

    

    
/s/
Michael
      Eugene Drace                    

    Michael
      Eugene DraceExhibit 10.5 Libby Agreement

Exhibit
    10.5
    US
      Dry Cleaning Memo

    

    

    
      	
              TO:
                

            	
              Haddon
                Libby ("HL")

            
	
              FROM:

            	
              John
                Bryan

            
	
              DATE:

            	
              Wednesday,
                October 19,2005

            
	
              SUBJECT:

            	
              Employment
                Offer and Term Sheet

            

    

    

    Dear
      Haddon,

    

    This
      is
      subject to the approval of the Board of Directors and the Compensation Committee
      of the Board of Directors of USDC and FVC.

    

    

    

    
      	
              Position:
                

            	
              Chief
                Financial Officer of USDC or, in the event a change is necessary,
                a senior
                officer of the company;

            
	 	 
	
              Start
                Date: 

            	
              2
                weeks from the date of signing this agreement; 

            
	 	 
	
              Job
                Responsibilities: 

            	
              Regardless
                of HL's title, HL is responsible for (a) overseeing the $20 million
                next
                round of financing (the "Financing") and assisting in the preparation
                of
                all financing documents in conjunction with the USDC's investment
                bankers,
                lawyers, and auditors and (b) leading and successfully completing
                the $7.5
                million minimum Financing by December31st and the $20 million maximum
                by
                February 28th, 2006, and, (c) managing the day-to-day financial activities
                and SEC reporting of USDC, and (d) originating and completing subsequent
                financings approved by the Board of Directors, and, (e) assist with
                the
                analysis and completion of all acquisitions approved by the Board
                of
                Directors, and, (f) day to day CFO duties commensurate with a public
                company, and (g) other such activities as requested by the
                Chairman;

            
	 	 
	
              Salary
                

            	
              Compensation:
                $150,000per year paid to HL. HL's salary will be subject to the review
                of
                the compensation committee of USDC's Board of Directors after the
                confirmation of the merger with FVC;

            
	 	 
	
              Bonus
                Compensation: 

            	
              Subject
                to the development of quantitative and qualitative goals and subject
                to
                the approval of the compensation committee of the Board of Directors
                of
                FVC, HL will receive periodic performance bonuses. Bonus compensation
                will
                be up to a maximum of 300% of Salary Compensation;

            
	 	 
	
              Health
                Care: 

            	
              HL
                will receive a comprehensive health care package covering himself
                and his
                immediate family.

            
	 	 
	
              Stock
                Options:

            	
              HL
                will receive stock options, in accordance with an approved S-8 stock
                option plan (the "Plan") that will be filed with the SEC within 6
                months
                of the merger with FVC. The options granted to HL will be equal to
                300,000
                shares and are subject to the confirmation and approval of the
                compensation committee of the Board of Directors of FVC. 150,000shareswill
                be at a strike price of $1.00and 150,000 shares will be at a strike
                price
                of $2.00 per share. Upon execution of this agreement you will be
                granted
                the first 150,000 options on standard and customary Terms and conditions
                and on month 13 you will receive the remaining 150,000 options on
                similar
                terms. The option terms and conditions will conform to the
                Plan;

            
	 	 
	
              Office
                Location:

            	
              You
                will have an office at the corporate headquarters in Palm Springs,
                CA and
                you will be expected to travel to LA and other such places as
                necessary;

            
	 	 
	
              Other:

            	
              HL's
                term sheet will be replaced by a comprehensive 2 year employment
                contract
                subject to the approval of the Board of Directors of FVC after completion
                of the merger with USDC. HL's contract will include severance provisions
                of 6 months in the event HL's employment is terminated by USDC or
                FVC for
                any reason except cause. Other such terms and conditions may be included
                as may be found in similar CFO contracts for public companies of
                this
                size. HL agrees to devote substantially all of his working time and
                efforts to US DC and FVC.

            

    

    

    

    

    

    
      	
              SIGNED
                AND AGREED BY:

            	 	 
	 	 	 
	/s/
              Robbie Lee	 	10/21/05
	
              Robbie
                Lee

            	 	
              DATE

            
	
              For
                USDC

            	 	 
	 	 	 
	/s/
              Haddon Libby	 	10/21/05
	
              Haddon
                Libby

            	 	
              DATE

            
	
              For
                Himself

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