EMPLOYMENT CONTRACT
This EMPLOYMENT CONTRACT (the "Contract") is made and entered into
this 10th day of October, 1995, 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"), Champps Entertainment, Inc.,
a Minnesota company, having its principal place of business at 000 Xxxx Xxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000 ("Champps"), and XXXX X. XXXXXX whose
business address is at 000 Xxxx Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000
(hereinafter referred to as "Employee").
WHEREAS, Champps operates casual theme restaurants under the
Champps Americana trademark; and
WHEREAS, Employee has been an officer and key employee of Champps;
and
WHEREAS, reference is made to the Agreement and Plan of Merger
dated as of October 10, 1995 by and among Employer, CEI Acquisition Corp.,
a Minnesota corporation and a wholly-owned subsidiary of Employer
("Acquisition"), and Champps (together with any amendments thereto or
modifications thereof, the "Merger Agreement"), pursuant to which
Acquisition is to be merged with and into Champps and Champps is to become
a wholly-owned subsidiary of Employer (the "Merger"), subject to the terms
and conditions set forth in the Merger Agreement;
and
WHEREAS, Employer desires to provide Employee with an incentive to
contribute to the future profitability of Champps and to assure that
Employee's knowledge and familiarity with the business of Champps will
continue to be available to Champps after the Merger and Employee desires
to commit himself to serve Employer and Champps 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; EFFECTIVENESS; TERMINATION OF PRIOR AGREEMENT.
Subject to this Contract becoming effective as provided below, Employer
hereby agrees to employ Employee after the Effective Time (as defined below)
and Employee hereby accepts such employment with Employer on the terms and
conditions hereinafter set forth. This Contract shall become effective as
of the effective time of the Merger in accordance with the terms of the
Merger Agreement (the "Effective Time"), but subject in all events to the
consummation of the Merger and effective only if the Merger is actually
consummated. At the Effective Time and subject in all events to the
consummation of the Merger, that certain Employment Agreement dated
January 1, 1994 (the "Old Contract") between Champps and Employee shall
terminate and have no further force or effect and shall be replaced and
superseded for all purposes by this Contract; provided, however, that
Champps shall make all payments due in accordance with the terms of the
Old Contract through the Effective Date; provided further, however, that
Employee hereby agrees that he will not make any claim for severance or
other payments under the Old Contract on account of or by reason of the
Merger or any event or occurrence prior to the Merger if the Merger is
consummated. If the Merger is not consummated for any reason whatsoever,
or if the Merger Agreement is terminated for any reason whatsoever, or if
Employee's employment with Champps under the Old Contract is terminated by
Employee or Champps for any reason whatsoever prior to or as of the
Effective Time, this Contract shall not become effective and shall be
null and void and shall have no force and effect to the same extent as if
this Contract had never been executed and delivered by the parties hereto
and there shall be no liability under or by reason of the terms hereof on
the part of Employer, Acquisition, or Champps, or any of their respective
officers, directors, employees, agents, successors or assigns, or of
Employee, without limitation of any other rights any of them may have.
2. TERM OF EMPLOYMENT. Subject to this Contract becoming
effective as provided in Section 1, and subject to the provisions for
termination hereinafter provided, the term of this Contract shall be for
a period of five (5) years, commencing at the Effective Time (the
"Initial Term"). Upon the expiration of the Initial Term, unless Employer
shall have given written notice to Employee to the contrary at least 60
days prior to such expiration, Employee's employment by Employer shall
thereafter continue (the "Extended Term") until 60 days after either party
gives notice of termination of this Contract to the other party in writing.
The Initial Term and Extended Term are hereinafter referred to as the
"Employment Period".
3. DUTIES OF EMPLOYEE. After the Effective Time Employee will
be employed by Employer as a full-time employee in the capacity of
Chairman of the Board of Directors and Chief Executive Officer and
President of Champps, and his duties as such shall include those normally
performed by a senior executive officer of equal rank in the restaurant
industry for an expanding restaurant company, including, without limitation,
responsibility for (a) the complete operations of Champps, including full
authority to manage the store operations, determine the size of any store,
determine the location and site of any store, determine the decor of any
store, make all final decisions relating to marketing, food product
specifications, promotions, and menus (including prices); and
(b) the employment and retention of all Champps employees. Employee shall
continue to maintain the authority to control the operations of Champps as
described above in subparagraphs (a) and (b), so long as the average annual
gross revenues per square foot of the Champps-owned restaurants is at least
$400. In the event that average annual gross revenues per square foot of
Champps-owned restaurants are less than $400, the authority to control the
operations of Champps as described above in subparagraphs (a) and (b) shall
be by mutual agreement between Employee and the Chief Executive Officer of
Employer. Employee shall comply with all of the policies, standards, and
regulations of Employer and Champps 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 restaurant company. 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 will
be 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 Champps during the Employment Period.
During the Employment Period, Employee shall not (i) 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
Champps or (ii) directly or indirectly engage or be interested as owner,
officer, director, employee, consultant or otherwise in any business which
is in competition with the business of Champps. With prior approval of the
Board of Directors of Employer, Employee may serve on the boards of
directors of other companies. During the term of this Contract, Employer
shall not take any action to operate restaurants incorporating the Champps
concept as developed by Employee prior to the acquisition of Champps by
Employer, other than through the Champps entity, a subsidiary of the
Champps entity or Americana Dining Corporation, a subsidiary of Employer.
4. COMPENSATION. For all services rendered by Employee under
this Contract, Employee shall receive the following compensation:
(a) As compensation for services rendered under this
Contract during the Employment Period, Employee shall receive an initial
annual base salary of Three Hundred Fifty Thousand Dollars ($350,000)
(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 applying principles, methodologies and criteria for
performance comparable in all material respects to those established by the
Board of Directors of Employer for the Chairman and Chief Executive Officer
of Employer.
(b) As additional incentive compensation from Employer
to Employee, Employer agrees to pay to Employee a bonus based on a target
level equal to 50% of Base Salary if Employee meets his performance targets,
with a maximum bonus of 100% of Base Salary if Employee exceeds his
performance targets by margins determined by the Board of Directors of
Employer (the "Maximum Bonus"); provided, however, it is specifically
understood and agreed that (i) the formula, performance targets and level
of bonus payments relative to base salary for Employee shall be comparable
in all material respects to those established by the Board of Directors of
Employer for the Chairman and Chief Executive Offices of Employer and
(ii) 20% of bonus payments for Employee shall be related to performance
targets for Employer as a whole and 80% of bonus payments for Employee
shall be related to performance targets for Champps.
5. VACATIONS, FRINGE BENEFITS, REIMBURSEMENT OF BUSINESS
EXPENSES.
(a) Employee shall be entitled to a paid vacation in
accordance with the vacation policy established by Employer; provided,
however, Employee shall be entitled to at least four (4) weeks of paid
vacation. 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.
(b) Employer shall grant a One Thousand Five Hundred
Dollar ($1,500) monthly car allowance for use as Employee deems appropriate.
(c) 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 its full-time
employees; provided, however, that Employer will provide Employee health
insurance and shall purchase a straight term life insurance policy insuring
the life of Employee with the proceeds to be paid to one or more beneficiaries
designated by Employee in the amount of One Million Dollars ($1,000,000).
(d) Employee shall be reimbursed for reasonable travel
and other expenses incurred by Employee in promoting the business of
Employer and Champps and performing his obligations hereunder in the same
manner and on the same basis as he was reimbursed by Champps immediately
prior to the date hereof.
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 its 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. All files,
records, documents, drawings, specifications, equipment and other similar
items relating to the business of Employer and its subsidiaries shall
remain the sole and exclusive property of Employer and its 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. During the Employment Period any
ideas and concepts related to the business of Employer or Champps shall
become the sole property of Employer.
7. OFFICE AND FACILITIES. Employer shall furnish the Employee
with office space substantially equivalent in size, quality, furnishings
and in other respects to the office space provided him prior to the date
hereof by Champps, and secretarial service, together with such other
reasonable facilities and services as Champps determines as appropriate
to Employee's duties and responsibilities. During the Employment Period,
the principal executive offices of Champps shall remain in Wayzata,
Minnesota or such other location as is acceptable to both Employer and
Employee.
8. BOARD OF DIRECTORS OF EMPLOYER AND CHAMPPS. During the
term of this Contract, the Board of Directors of Champps shall consist of
three members and Employer shall cause Employee, Xxxxxxx X. Xxxxxxxxx (or
his successor as Chief Executive Officer of Employer) and a person to be
agreed to by Employee and Xx. Xxxxxxxxx (or his successor as Chief
Executive Officer of Employer) to be the members of such Champps' Board
of Directors. In addition, Employer shall nominate Employee for a position
as a member of Employer's Board of Directors and use its best efforts to
solicit proxies from the stockholders of Employer to secure Employee's
election to Employer's Board of Directors during the Employment Period.
Notwithstanding any other provision of this Contract, Employee agrees to
resign as a member of Employer's Board of Directors immediately upon the
termination of Employee's employment with Employer for any reason
(voluntary or involuntary); provided, however, that in the event that
Employee's employment under this Contract is terminated by Employer
pursuant to paragraph 9(c) below, then Employee will be entitled to
remain as a member of the Board of Directors of Employer for up to 90
days after such termination at the option of Employee. Simultaneously
with the execution and delivery of this Contract, Employee is executing
and delivering to Employer an undated resignation as a member of the Board
of Directors of Employer and Employee hereby authorizes Employer to deem
such resignation tendered upon termination of Employee's employment with
Employer to the extent required in order to give effect to the covenant
of Employee set forth in the immediately preceding sentence.
9. TERMINATION. During the Initial Term, Employee's employment
under this Contract may only be terminated for the following reasons:
(a) By Employee:
(i) for good reason, which shall be defined as
(x) 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, (y) any removal of Employee from or any
failure to re-elect Employee to the position of Chairman and Chief
Executive Officer of Champps, except in connection with termination of
Employee's employment for cause pursuant to paragraph 9(b) below, or
(z) a reduction in Employee's rate of compensation or a reduction 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 from Employee or otherwise; or
(ii) upon 60-days' written notice to Employer of
his resignation for any reason other than as provided in paragraph 9(a)(i)
above;
(b) By Employer at any time for cause, which shall be
defined as (i) Employee's theft from or fraud upon Employer; (ii) Employee's
conviction of a felony; (iii) Employee's violation of terms and conditions
hereof; (iv) Employee's conscious disregard or neglect in the duties he is
required to perform under the terms hereof; or (v) Employee's 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 restaurant
company. Upon such cause, Employer may, at its option, terminate this
Contract by giving written notice to Employee, which notice of termination
shall provide a description of the cause which is the grounds for
termination, and 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;
(c) By Employer upon written notice to Employee for any
reason other than those set forth in paragraph 9(b) above; or
(d) Employee's death.
10. COMPENSATION UPON TERMINATION.
(a) In the event that Employee's employment under this
Contract is terminated pursuant to paragraphs 9(a)(i) or 9(c) above,
Employer shall be obligated to continue to pay to Employee periodically
in accordance with the terms of this Contract (i) the Employee's Base
Salary, as in effect as of the date of such termination, from the date of
such termination to the end of the Initial Term and (ii) bonus payments
equal to the Maximum Bonus to which Employee would be entitled pursuant
to the provisions of paragraph 4(b) above.
(b) In the event that Employee's employment under this
Contract is terminated pursuant to paragraph 9(b) above, 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.
(c) In the event that Employee gives notice of termination
of his employment under this Contract, or terminates his employment,
pursuant to paragraph 9(a)(ii) after the Effective Time, 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.
(d) In the event that Employee's employment under this
Contract is terminated pursuant to paragraph 9(d) above, Employer shall
pay to Employee's estate 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 obligation to
Employee under this Contract except for the obligation to turn over to
Employee's estate the proceeds of any life insurance policies insuring
the life of Employee to which he, his estate or any beneficiary designated
by him are entitled, including without limitation, the insurance policy
referred to in paragraph 5 above.
(e) In the event that Employee's employment under this
Contract is terminated by Employer at any time after the end of Initial
Term for any reason other than for cause as defined in paragraph 9(b)
above, Employer shall be obligated to continue to pay to Employee
periodically in accordance with the terms of this Contract (i) his Base
Salary as in effect as of the date of such termination of employment for
a period of 12 months after the date of such termination and (ii) bonus
payments equal to the Maximum Bonus to which Employee would be entitled
pursuant to the provisions of paragraph 4(b) above for the twelve month
period immediately following the date of Employee's termination of
employment hereunder.
(f) In the event of the death of Employee at any time
after his termination of employment under this Contract, but prior to the
time that all payments due under the previous provisions of this paragraph
10 have been made, any remaining payments under the provisions of this
paragraph 10 shall be made to Employee's estate.
11. 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.
12. RELATIONSHIP OF THE PARTIES. The parties acknowledge,
agree and recognize that the Board of Directors of Employer and Champps
shall manage the business affairs of Champps and that the relationship of
Employer and Employee is that of employer and employee and any other
relationship is hereby expressly disclaimed.
13. ASSIGNMENT. It is hereby agreed between Employer and
Employee that this Contract may be assigned by Employer and the assignee
thereof shall assume all of the benefits and obligations of Employer
hereunder; provided, however, that any such assignment shall not release
or discharge Employer from being secondarily responsible for its obligations
or liabilities hereunder. Employee shall not assign this Contract, in
whole or in part.
14. NOTICES. Any notice to be given hereunder by either party
to the other must be in writing and may be effected 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.
15. INVALID PROVISIONS. The invalidity or unenforceability of
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.
16. AMENDMENTS TO THE CONTRACT. This Contract may only be
amended in writing by an agreement executed by all parties hereto.
17. LAW GOVERNING CONTRACT. This Contract is made and
performable in the State of Minnesota and shall be construed under the
laws of the State of Minnesota.
18. 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.
19. 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 13 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 successors, heirs and legal representatives.
20. ARBITRATION. Any dispute arising out of this Contract shall
be submitted to arbitration in Minneapolis, Minnesota in accordance with
the rules of the American Arbitration Association, and any decision arising
therefrom shall be enforceable in any court of competent jurisdiction.
Such arbitration shall be governed by the substantive contract law of the
State of Minnesota and neither party shall be entitled to recover their
attorney's fees or administrative costs. If Employee initiates arbitration
proceedings to enforce his rights or alleged rights under Paragraph 9 or
10 then Employer shall pay Employee's reasonable expenses of such
arbitration proceedings (including without limitation reasonable attorney's
fees and expenses) whether or not Employee prevails, so long as Employee
does not challenge the outcome of such arbitration proceedings.
21. FRANCHISE AGREEMENTS. In the event that Employee's
employment under this Contract is terminated for any reason other than by
the Employer for cause as defined in paragraph 9(b) above or the death of
Employee, Employee shall be provided the right to establish as a franchisee
five (5) Champps Americana restaurants anywhere in the world, so long as
it is not (i) within a 20 mile radius of any other Champps restaurant, or
(ii) in any territory that has been franchised and/or licensed by Champps
unless the franchisee and/or licensee gives its consent; provided, however,
that at the time Employee requests to become a franchisee, he meets Champps'
then existing requirements for franchisee approval and agrees to pay
standard fees under Champps' franchising program as in effect at the time;
provided further, however, that (x) the royalty for Employee will be
equal to 1.25% of gross revenues and (y) Champps shall reduce the customary
initial franchise fee on account of services which Employee does not
request or need Champps to perform, such as pre-opening and opening support.
22. ENTIRE AGREEMENT. This Contract contains the entire
agreement of the parties hereto and supersedes any and all prior agreements,
oral or written, and negotiations between said parties regarding the
subject matter herein contained.
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. Xxxxxxxxx /s/Xxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxxxxx Xxxx X. Xxxxxx
CHAMPPS
CHAMPPS ENTERTAINMENT, INC.
By:
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Its
