EMPLOYMENT AGREEMENT
Exhibit
10.1
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. Xxx Xxx (“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
000
X.
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxxxxx, XX 00000
Attn:
Chairman of the Board
Fax:
(000) 000-0000
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If
to
Employee, to:
F.
Xxx
Xxx
00000
X.X. Xxxxxxxxxx Xxxx
Xxxxxxxx,
Xxxxxx 00000
Phone:
000-000-0000
Fax:
000-000-0000
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/ Xxxxxxx X.
Xxxxx
XXXXXXX
X. XXXXX
Name:
Xxxxxxx X.X. Xxxxx
Title:
Chairman of the Board
/s/ F. Xxx
Xxx
F.
Xxx
Xxx
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