1
Exhibit 10.7
EMPLOYMENT CONTRACT
This EMPLOYMENT CONTRACT (the "Contract") is made and entered into as of
the 1st day of October, 1996, by and between DAKA INTERNATIONAL, INC., a
Delaware corporation, having its principal place of business at One Corporate
Place, 00 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (hereinafter referred to
as "Employer" or the "Company"), and XXXXXXX X. XXXXXXXXX whose business address
is at One Corporate Place, 00 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000
(hereinafter referred to as "Employee").
WHEREAS, Employer is the parent of three principal wholly owned
subsidiaries (the "Principal Subsidiaries"), Fuddruckers, Inc., a Texas
corporation ("Fuddruckers"), Daka, Inc., a Massachusetts corporation ("Daka"),
and Champps Entertainment, Inc., a Minnesota corporation ("Champps") (the term
"Employer" to include, as the context requires, one, some, all or none of the
Principal Subsidiaries, as well as any, all or none of the direct and indirect
subsidiaries of the Principal Subsidiaries (the Principal Subsidiaries and such
other subsidiaries collectively the "Subsidiaries")); and
WHEREAS, Employee is currently employed by Employer in the capacity of its
Chairman of the Board of Directors and Chief Executive Officer and by
Fuddruckers as its Chairman, President and Chief Executive Officer; and
WHEREAS, Employee possesses an intimate knowledge of the business and
affairs of Employer, its policies, methods, personnel and problems; and
WHEREAS, Employee and Employer have previously entered into an Employment
Contract, dated January 1, 1992 and Employer and Employee desire to enter into
this
1
2
Contract effective upon the expiration of the initial term of such Employment
Contract on January 1, 1997; and
WHEREAS, the Board of Directors of Employer recognizes that Employee's
contribution to the growth and success of Employer and the Subsidiaries has been
substantial and desires to assure Employer and the Subsidiaries of Employee's
continued employment in an executive capacity and to compensate him therefor;
and
WHEREAS, Employee is desirous of committing himself to serve Employer and
the Subsidiaries on the terms herein provided;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained and the mutual benefits to be gained by the performance thereof, the
parties hereto hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby accepts
employment with Employer on the terms and conditions hereinafter set forth.
2. TERM OF EMPLOYMENT. The commencement date ("Commencement Date") of this
Contract shall be January 1, 1997. Subject to the provisions for termination
hereinafter provided, the term (the "Initial Term") of this Contract shall be
for a period of three (3) years from the Commencement Date; provided, however,
that the term hereof shall automatically extend (the "Extended Term") for
periods of one (1) year commencing on the first anniversary of the Commencement
Date and on each subsequent anniversary date thereafter, unless this Contract is
terminated in accordance with the terms hereof. The Initial Term and Extended
Term are hereinafter referred to as the "Employment Period".
2
3
3. DUTIES OF EMPLOYEE. Employee is hereby employed by Employer as a
full-time employee in the capacity of Chairman of the Board of Directors and
Chief Executive Officer of Employer and Chairman, President and Chief Executive
Officer of Fuddruckers, and his duties as such shall include, but not be limited
to, those normally performed by a senior executive officer of equal rank in the
restaurant and foodservice industry for an expanding diversified restaurant
company with national and international operations. Employee shall comply with
all of the policies, standards, and regulations of Employer now or hereafter
promulgated. Employer shall have the right to assign Employee other managerial
duties in addition to the duties originally assigned and specified above;
PROVIDED, HOWEVER, in no event shall Employee be assigned, without Employee's
consent, duties other than those reasonably required of a Chairman and Chief
Executive Officer of an expanding diversified restaurant company with national
and international operations. In the event Employee assumes and performs duties
beyond those contemplated hereby to be within the scope of his employment, and
those that he is required to perform hereunder, it is anticipated his
compensation will be equitably adjusted. Employee is employed by Employer on a
full time basis and Employee shall be required to devote his best efforts and
business judgment, productive time, ability and attention to the business of
Employer and the Subsidiaries during the Employment Period. During the
Employment Period, Employee shall not be engaged in any other business activity
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage that will significantly interfere with his duties as
Chairman and Chief Executive Officer of Employer. With prior approval of the
Board of Directors of Employer, Employee may serve on the boards of directors of
other companies.
3
4
4. COMPENSATION. For all services rendered by Employee to Employer and the
Subsidiaries under this Contract, Employee shall receive the following
compensation:
(a) As compensation for services rendered under this Contract for the
term commencing as of the date hereof, Employee shall receive an initial annual
base salary of Four Hundred Fifty Thousand Five Hundred Dollars ($450,500) (the
"Base Salary"), payable in periodic installments in accordance with Employer's
usual practice for its senior executives. During the Employment Period, the Base
Salary will be subject to annual review by the Board of Directors of Employer
and if warranted, adjusted upward to reflect external conditions, Employee's
performance, and changing size and nature of Employer's operations.
(b) Annually and from time to time, as additional incentive
compensation from Employer to Employee, Employer, within its sole discretion,
may pay to Employee a bonus or additional compensation in an amount determined
by the Board of Directors of Employer.
5. VACATIONS, FRINGE BENEFITS, REIMBURSEMENT OF BUSINESS EXPENSES. Employee
shall be entitled to a paid vacation in accordance with the vacation policy
established by Employer. The times for such vacations shall be mutually agreed
upon by Employee and Employer but such vacation shall not be cumulative from
year to year during the Employment Period. No payment shall be made for unused
vacation time, unless otherwise required by law.
Employer shall grant a Six Hundred Dollar ($600) monthly car allowance for
use as Employee deems appropriate.
4
5
As a full-time employee of Employer, Employee shall be entitled to
participate in such other fringe benefits that are formally adopted by Employer
from time to time for and on behalf of all of its full-time employees. Employee
shall be reimbursed for reasonable travel and other expenses incurred by
Employee in promoting the business of Employer and the Subsidiaries and
performing his obligations hereunder in accordance with the policy adopted by
the Employer.
6. TRADE SECRETS. During the Employment Period, Employee will have access
to and become familiar with Employer's trade secrets, recipes, business
concepts, marketing and related records and specifications, which are owned by
Employer and which are regularly used in the operation of the business of
Employer and the Subsidiaries (collectively, "Confidential Information").
Employee hereby agrees he shall not disclose any Confidential Information,
directly or indirectly, nor use it in any way, either during the Employment
Period or at any time thereafter, except as required in the course of his
employment with Employer and the Subsidiaries. All files, records, documents,
drawings, specifications, equipment and other similar items relating to the
business of Employer and the Subsidiaries shall remain the sole and exclusive
property of Employer and the Subsidiaries and shall not be removed from the
premises of Employer under any circumstances whatsoever without the prior
written consent of Employer and shall not be reproduced or copied.
7. DEATH BENEFITS. If Employee dies during the term of employment, Employer
shall pay to the estate of Employee the compensation which would otherwise be
payable to Employee up to the date of the month in which his death occurs. In
addition,
5
6
Employer shall purchase a straight term life insurance policy for Employee in
the amount of One Million Dollars ($1,000,000). Employee shall have the
exclusive right during the term of this Contract to name the beneficiary of his
choice to such policy, provided, however, that the cost of such term insurance
shall be additional compensation to Employee.
8. TERMINATION OF CONTRACT BY EMPLOYER.
-----------------------------------
(a) TERMINATION FOR CAUSE. This Contract may be terminated by Employer
at any time for Cause, as hereinafter defined. For the purposes hereof, the term
"Cause" shall include: (1) Employee's theft from or fraud upon Employer; (2)
Employee's conviction of a felony; (3) Employee's willful violation of terms and
conditions hereof; (4) Employee's willful disregard or neglect in the duties he
is required to perform under the terms hereof; or (5) Employee's willful and
demonstrated unwillingness to prosecute and perform such duties to the extent
deemed reasonably necessary and advisable, which duties encompass the duties
reasonably required of a Chief Executive Officer of an expanding diversified
restaurant company with national and international operations. For purposes of
clauses (3), (4) and (5) above, no act, or failure to act, on the Employee's
part shall be deemed "willful" unless done, or omitted to be done, by Employee
without reasonable belief that his act, or failure to act, was in the best
interest of Employer. Notwithstanding anything in this Agreement to the
contrary, Employee shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to him a copy of a resolution duly
adopted by the Board of Directors at a meeting of the Board of Directors called
and held for such purpose (after reasonable notice to Employee and an
opportunity for him, together with his counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of
6
7
the Board of Directors Employee was guilty of the conduct enumerated in any of
clauses (1) through (5) above under the definition of Cause and specifying the
particulars thereof in detail. Upon such Cause, Employer may, at its option,
terminate this Contract by giving written notice (a "Notice of Termination") to
Employee, which termination is without prejudice to any other remedy to which
Employer may be entitled, and such termination shall be effective as of the date
said written notice is received by Employee.
(b) TERMINATION WITHOUT CAUSE. In the event Employer shall terminate
this Contract without Cause, as hereinabove defined, by Notice of Termination to
Employee, all obligations of Employee hereunder shall terminate upon receipt of
such Notice of Termination. Nothing in this Contract shall be construed as
giving Employee the right to be retained as an employee of Employer or as
impairing the rights of Employer to terminate Employee's services.
9. TERMINATION OF CONTRACT BY EMPLOYEE. Employee may terminate his
employment hereunder (1) for Good Reason, or (2) at any time by giving Notice of
Termination to Employer at least forty-five (45) days prior to the effectiveness
of such termination. For purposes of this Contract, "Good Reason" shall mean (a)
any assignment to Employee of any duties other than those contemplated by, or
any limitation of the powers of Employee in any respect not contemplated by,
this Contract, (b) any removal of Employee from or any failure to re-elect
Employee to the position of Chairman and Chief Executive Officer of Employer,
except in connection with termination of Employee's employment for Cause, or (c)
a reduction in Employee's rate of compensation or a reduction
7
8
in Employee's fringe benefits; PROVIDED, HOWEVER, that Employer shall have at
least thirty (30) days to remedy the existence of any Good Reason for
termination by Employee of which it is made aware, whether in a Notice of
Termination or otherwise.
10. COMPENSATION UPON TERMINATION.
-----------------------------
(a) TERMINATION BY EMPLOYER FOR CAUSE OR BY EMPLOYEE WITHOUT GOOD
REASON. If Employee's employment shall be terminated by Employer for Cause or
termination by Employee without Good Reason, Employer shall pay Employee that
portion of his Base Salary which accrued through the date of termination at the
rate in effect at the time Notice of Termination is given and Employer shall
have no further obligations to Employee under this Contract.
(b) TERMINATION BY EMPLOYER WITHOUT CAUSE OR BY EMPLOYEE WITH GOOD
REASON. If Employer shall terminate Employee's employment without Cause or
Employee shall terminate his employment for Good Reason, then: (i) Employer
shall pay Employee that portion of his Base Salary which accrued through the
date of termination at the rate in effect at the time Notice of Termination is
given; (ii) in lieu of any further salary payments to Employee for periods
subsequent to the date of termination, Employer shall pay as liquidated damages
to Employee an amount equal to three (3) times the annual Base Salary in effect
at the time Notice of Termination is given, to be paid in the normal pay periods
of the Company over the three year period following the date of termination;
provided, however, that if termination occurs within twelve months after a
Change of Control (as defined below), Employer shall pay as liquidated damages
to Employee an amount equal to three (3) times the "base amount" (as such term
is defined in Section 280G(b)(3) of the Internal Revenue
8
9
Code of 1986, as amended (the "Code")) applicable to Employee, less One Dollar
($1.00), to be paid in the normal pay periods of the Company over the three year
period following the date of termination; and (iii) Employer shall make the
following changes with respect to all outstanding unexercised stock options held
by Employee: (x) the date of vesting and exercisability of all unexercised and
unexpired stock options or other stock based incentive awards shall be
accelerated to the date of termination, (y) the period during which all
unexercised and unexpired options which are not incentive stock options as
defined in Section 422 of the Code ("NQSO") may be exercised by Employee shall
be extended until the expiration date of such options and (z) if Employee so
elects in writing within 90 days after the date of termination, all unexercised
and unexpired options which are incentive stock options ("ISO") as defined in
Section 422 of the Code shall be converted into NQSO and shall thereby become
eligible for the benefit described in clause (y) above as if they had been NQSO
as of the date of termination.
A "Change in Control" shall be deemed to have occurred in any one of the
following events: (1) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than the
Company, any of its Subsidiaries, or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of Employer),
together with all "affiliates" and "associates" (as such terms are defined in
Rule 12b-2 under the Act) of such person, shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 50% or more of either (A) the combined
voting power of the Company's then outstanding securities having the right to
vote in an election of the
9
10
Company's Board of Directors ("Voting Securities") or (B) the then outstanding
shares of capital stock of Code of 1986, as amended (the "Code")) applicable to
Employee, less One Dollar ($1.00), to be paid the Company ("Stock") (in either
such case other than as a result of an acquisition of securities directly from
the Company or by the Company); or (2) persons who, as of the date hereof,
constitute the Company's Board of Directors (the "Incumbent Directors") cease
for any reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors shall, for
purposes of this Agreement, be considered an Incumbent Director; or (3) the
stockholders of the Company shall approve (A) any consolidation or merger of the
Company or any Subsidiary where the shareholders of the Company, immediately
prior to the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, shares representing in the aggregate 80%
or more of the voting shares of the corporation issuing cash or securities in
the consolidation or merger (or of its ultimate parent corporation, if any), (B)
any sale, lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of Employer or (C) any plan or proposal for the
liquidation or dissolution of the Company.
It is the intention of Employee and Employer that no payments by Employer
to or for the benefit of Employee under this Agreement shall be non-deductible
to Employer by reason of the operation of Section 280G of the Code relating to
parachute payments. Accordingly,
10
11
and notwithstanding any other provision of this Agreement, if by reason of the
operation of said Section 280G, any such payments exceed the amount which can be
deducted by Employer, such payments shall be reduced to the maximum amount which
can be deducted by Employer. To the extent that there is more than one method of
reducing the payments (including by way of elimination or reduction of the
changes to Employee's options described in clause (iii) above) to bring them
within the limitations of said Section 280G, Employee shall determine which
method shall be followed, provided that if Employee fails to make such
determination within forty-five (45) days after Employer has sent Employee
written notice of the need for such reduction, Employer may determine the method
of such reduction in its sole discretion.
11. NO MITIGATION. Employer agrees that, if Employee's employment by
Employer is terminated during the term of this Agreement, Employee is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to Employee by Employer pursuant to Section 10 hereof. Further, the
amount of any payment provided for in this Agreement shall not be reduced by any
compensation earned by Employee as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to be owed by
Employee to Employer or otherwise.
12. SETTLEMENT AND ARBITRATION OF DISPUTES. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by Employer, one by Employee and the third by the first two
arbitrators. If the first two arbitrators cannot agree
11
12
on the appointment of a third arbitrator, then the third arbitrator shall be
appointed by the American Arbitration Association in the City of Boston. Such
arbitration shall be conducted in the City of Boston in accordance with the
rules of the American Arbitration Association for commercial arbitrations,
except with respect to the selection of arbitrators which shall be as provided
in this Section 13. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
13. NON-COMPETITION AGREEMENT. During the Employment Period, and unless
Employee's employment is terminated by Employee for Good Reason or by Employer
without Cause, for a period of one (1) year after the termination of his service
to Employer and the Subsidiaries, Employee covenants and agrees not to directly
or indirectly (a) engage or be interested in any business as owner, officer,
director, employee, consultant or otherwise which during the Employment Period
is in competition with the business of Employer or any of the Subsidiaries or
which following the Employment Period is in competition with such business as
conducted on the last day of the Employment Period, or (b) solicit or endeavor
to entice away, offer employment to or employ, or offer or conclude any contract
for personal services with, any person who during the preceding six months was
an employee of Employer. However, the restrictions in clause (a) shall not
prevent Employee from owning or dealing in securities of any corporation or
other entity which are traded on any national securities exchange or in the
over-the-counter market, and the restrictions in clause (b) prohibiting the
employment of any person who during the preceding six months was an employee of
Employer shall not apply with respect to Employee who, without otherwise
breaching clause (b) (by soliciting or enticing away a former employee),
12
13
hires a former employee who has voluntarily left the employ of Employer or who
has been terminated involuntarily by Employer.
14. INJUNCTIVE RELIEF. Employee irrevocably acknowledges that any violation
of this Contract will cause Employer immediate and irreparable harm and that the
damage that Employer will suffer may be difficult or impossible to measure.
Therefore, upon any actual or impending violation of this Contract, Employer
shall be entitled to the issuance of a restraining order, preliminary or
permanent injunction, without bond, restraining or enjoining such violation by
Employee or any entity or person acting in concert with Employee. Such remedy
shall be additional to and not in limitation of any other remedy which may
otherwise be available to Employer.
15. RELATIONSHIP OF THE PARTIES. The parties acknowledge, agree and
recognize that the Board of Directors of Employer shall manage the business
affairs of Employer and that the relationship of Employer and Employee is that
of employer and employee and any other relationship is hereby expressly
disclaimed.
16. ASSIGNMENT; OBLIGATIONS OF SUCCESSOR. Neither Employer nor Employee may
make any assignment of this Agreement or any interest herein, by operation of
law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon
Employer and Employee, their respective successors, executors, administrators,
heirs and permitted assigns. In the event of Employee's death after termination
of employment but prior to the completion by Employer of all payments due
Employee hereunder, Employer shall continue such payments to
13
14
Employee's beneficiary designated in writing to Employer prior to his death (or
to his estate, if Employee fails to make such designation). In addition to any
obligations imposed by law upon any successor to Employer, Employer will use its
best efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of Employer to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that Employer would be required to
perform if no such succession had taken place.
17. NOTICES. Any notice to be given hereunder by either party to the other
must be in writing and may be effective either by personal delivery or by
certified mail, postage prepaid with return receipt requested. Mailed notices
shall be addressed to the parties at the addresses appearing in the introductory
paragraph. Notices delivered personally shall be deemed communicated as of the
actual receipt thereof; mailed notices shall be deemed communicated and received
three (3) days after the mailing of same.
18. INVALID PROVISIONS. The invalidity or unenforceability of a particular
provision of this Contract shall not affect the enforceability of any other
provisions hereof and this Contract shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
19. AMENDMENTS TO THE CONTRACT. This Contract may only be amended in
writing by an agreement executed by both parties hereto.
20. LAW GOVERNING CONTRACT. This Contract is made and performable in the
Commonwealth of Massachusetts, and shall be construed under the laws of the
Commonwealth of Massachusetts.
14
15
21. INDEMNITY. Employer shall indemnify Employee and hold him harmless for
any acts or decisions made by him in good faith while performing services for
Employer as a director, employee and/or agent of Employer and, in addition
thereto, shall use its best efforts to obtain insurance coverage for him under
any insurance policy now in force or hereinafter obtained during the Employment
Period covering the officers and directors of Employer against lawsuits as
director, employee and/or agent of Employer. Employer will pay all expenses,
including attorney's fees, actually and necessarily incurred by Employer in
connection with the defense of any action, suit or proceeding, and in connection
with any appeal thereon, including the costs of an out-of-court settlement
previously approved by Employer, with respect to any acts or decisions which
Employee shall have performed or made in good faith in performing services for
Employer; PROVIDED, HOWEVER, that Employer's obligations under the terms of this
paragraph are subject to any limitations imposed by Employer's Certificate of
Incorporation and By-Laws and applicable state law.
22. CONSTRUCTION. Waiver by any party hereto of a breach of any provision
of this Contract shall not operate or be construed as a waiver of any subsequent
breach of any party. This Contract shall not be assignable except on the part of
Employer as provided in Paragraph 14 above. Subject to the prohibition against
assignment of this Contract, the terms and conditions herein shall inure to the
benefit of and be binding upon the Parties hereto, their successor, heirs and
legal representatives.
23. LITIGATION AND REGULATORY COOPERATION. During and after Employee's
employment, Employee shall reasonably cooperate with Employer in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the
15
16
future against or on behalf of Employer which relate to events or occurrences
that transpired while Employee is or was employed by Employer. Employee's
reasonable cooperation in connection with such claims or actions shall include,
but not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of Employer at mutually
convenient times. During and after Employee's employment, Employee also shall
reasonably cooperate with Employer in connection with any investigation or
review of any federal, state or local regulatory authority as any such
investigation or review relates to events or occurrences that transpired while
Employee was employed by Employer. The Company shall, at the request of
Employee, pay in advance any out-of-pocket expenses that Employee would
otherwise be required to incur in connection with Employee's performance of its
obligations pursuant to this clause, and shall reimburse Employee for any
reasonable out-of-pocket expenses incurred by Employee that were not so paid in
advance by Employer.
24. ENTIRE AGREEMENT. This Contract will be effective as of the date of
termination of the Employment Contract between Employer and Employee dated
January 1, 1992 and upon such effectiveness will contain the entire agreement of
the parties hereto and supersede any and all prior agreements, oral or written,
and negotiations between said parties regarding the subject matter herein
contained.
16
17
IN WITNESS WHEREOF, the parties have executed this Contract this day and
year first above written.
EMPLOYER EMPLOYEE
DAKA INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxx, Xx. /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------- ---------------------------
Xxxxxxx X. Xxxxxxxxxxx, Xx. Xxxxxxx X. Xxxxxxxxx
Senior Vice President and
General Counsel
17
