Employment Contract - Daka International Inc. and Dean P. Vlahos
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, 55
Ferncroft Road, Danvers, Massachusetts 01923 (hereinafter referred to as
"Employer"), Champps Entertainment, Inc., a Minnesota company, having its
principal place of business at 153 East Lake Street, Wayzata, Minnesota 55391
("Champps"), and DEAN P. VLAHOS whose business address is at 153 East Lake
Street, Wayzata, Minnesota 55391 (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
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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
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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
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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
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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
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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
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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.
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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, William H. Baumhauer (or his successor as Chief
Executive Officer of Employer) and a person to be agreed to by Employee and Mr.
Baumhauer (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:
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(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
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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
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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.
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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
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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.
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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
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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.
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IN WITNESS WHEREOF, the parties have executed this Contract this day and
year first above written.
EMPLOYER EMPLOYEE
DAKA INTERNATIONAL, INC.
By: /s/ William H. Baumhauer /s/ Dean P. Vlahos
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William H. Baumhauer Dean P. Vlahos
CHAMPPS
CHAMPPS ENTERTAINMENT, INC.
By: /s/ Shaun P. Nugent
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Shaun P. Nugent
Its Chief Financial Officer