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                                                                   EXHIBIT 10.16



                              SEPARATION AGREEMENT
                               AND GENERAL RELEASE


Mark A. Payne
8860 Flesher Circle
Eden Prairie, MN 55347

Dear Mark:

         This letter will document our agreement concerning the termination of
your employment with Famous Dave's of America, Inc. (the "Company") on February
3, 1998 ("Termination Date"). The Company is prepared to offer you certain
benefits in exchange for your execution of this Separation Agreement and General
Release ("Separation Agreement"). The terms of the Company's Separation
Agreement with you are set forth in this letter. The Company hereby advises you
to consult legal counsel of your choice prior to signing this Separation
Agreement.

1.       Benefits of Separation Agreement.

         A.       Severance Pay

         Within two (2) days following the date of your signature on this
         Separation Agreement, the Company agrees to pay you the gross sum of
         $175,000.00 as a severance benefit (the "Severance Payment"), subject
         to all legally required withholding and deductions. You hereby
         acknowledge that the severance payment is full and fair payment for the
         release of your claims as set forth below and is equal or greater in
         value than any severance benefit to which you are entitled.

         B.       Acceleration of Option Vesting and Extension of Exercise
         Period

                  i.       With respect to the Option Agreement dated as of
                           August 12, 1996 between you and the Company relating
                           to a total of 25,000 shares of common stock, which
                           option vested in full on the closing date of the
                           Company's initial public offering, you or your legal
                           representative shall have until December 31, 1998 to
                           exercise such option notwithstanding the provisions
                           of Section 5 of said Option Agreement.


                  ii.      With respect to the Option Agreement dated as of
                           August 12, 1996 between you and the Company relating
                           to a total of 100,000 shares of common stock, in
                           addition to the portion of the option to purchase
                           25,000 shares which vested on August 12, 1997, an
                           additional portion of the option to purchase 65,000
                           shares shall vest on the date hereof.  You or your
                           legal representative


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                           shall have until December 31, 1998 to exercise all
                           vested  portions  of the option  notwithstanding  the
                           provisions of Section 4 of said Option Agreement. The
                           remaining  unvested portion of the option to purchase
                           10,000 shares shall terminate on the date hereof.

                  iii.     With respect the Option Agreement dated as of March
                           26, 1997 between you and the Company relating to a
                           total of 50,000 shares of common stock, no portion of
                           which has vested as of the date hereof, such option
                           shall terminate in full on the date hereof.

2.       Employment Inquiries.

         The Company agrees that all requests by third parties for information
         concerning your employment with the Company will be handled by the
         Company's Human Resources Department which, pursuant to Company policy,
         is authorized to provide only basic employment history indicating dates
         of employment, positions held, and responsibilities performed without
         qualitative comment of any kind.

3.       Tax Treatment.

         You acknowledge that the Company has made no representation or warranty
         whatsoever concerning the treatment for tax purposes of any payments
         made pursuant to this Separation Agreement, that you have not relied
         upon any such representation or warranty, and that the terms of this
         Separation Agreement are not intended to guarantee any particular tax
         treatment with regard to such payments.

4.       Confidentiality.

         You agree that Article IV of the Employment Agreement dated as of
         August 12, 1996 between you and the Company, as amended (the
         "Employment Agreement"), shall remain in full force and effect.

5.       Non-Competition.

         You agree that Article V of the Employment Agreement shall remain in
         full force and effect.

6.       Nondisclosure.

         You agree that you will keep the terms of this Separation Agreement
         confidential and that you will not disclose any of its terms to any
         third party, other than to your spouse, financial advisor and legal
         counsel. In turn, these persons shall be advised regarding the
         confidentiality provisions of this Separation Agreement and must agree
         to maintain the confidentiality of this Separation Agreement as a
         condition of disclosure to them.



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7.       Entire Agreement.

         This Separation Agreement constitutes the entire understanding between
         you and the Company and supersedes all prior agreements with respect to
         the matters herein relating to your employment and the termination of
         your employment.

8.       Release.

         In exchange for receiving the payments and other consideration set
         forth in this Separation Agreement, you hereby promise to give up all
         of your claims against the Company. You hereby release, give up, and
         otherwise relinquish all of your claims against the Company. You agree
         that you will not bring any lawsuits or make any other demands against
         the Company except if necessary to enforce the provisions of this
         Separation Agreement. You agree that the money and benefits which you
         will receive as set forth in this Separation Agreement are full and
         fair payment for the release of all your claims. The Company does not
         owe you anything in addition to what you will receive under this
         Separation Agreement.

         The claims which you are releasing, giving up, and otherwise
         relinquishing as provided above include all of your rights to any
         relief of any kind from the Company including, but not limited to:

         a)       All claims you have now, whether or not you now know about
                  the claims;

         b)       All claims for attorneys' fees;

         c)       All claims for alleged discrimination and all other claims
                  under federal, state, or local law;

         d)       All claims arising from your employment or separation from
                  employment with the Company, including, but not limited to,
                  any alleged breach of contract, wrongful termination,
                  interference with contract, defamation, promissory estoppel,
                  or infliction of emotional distress; and

         e)       All claims for any other alleged unlawful employment practices
                  arising out or relating to your employment or separation from
                  employment.

         By your signature below, you acknowledge that you fully understand and
accept the terms of this Separation Agreement and Release and you represent and
agree that your signature is freely, voluntarily and knowingly given, having had
the advice and assistance of legal counsel. This Agreement does not constitute,
and shall not be construed as, an admission of fault or liability of any kind,
and the Company expressly denies any fault, liability or wrongdoing of any kind
with regard to you or any other employee.



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         For purposes of this paragraph, "you" means Mark A. Payne and all and
anybody who has or acquires legal rights or claims through you; and "Company"
means Famous Dave's of America, Inc., and all and each of its parent,
subsidiary, and affiliated corporations, and all and each of the past and
present officers, directors, employees, agents, successors and assigns of the
foregoing entities.

         You agree that this Separation Agreement shall be construed and
interpreted in accordance with the law of the State of Minnesota.

         If you are in agreement with the terms set out in this letter, please
sign both copies and return one to me.

FAMOUS DAVE'S OF AMERICA, INC.


/s/ David W. Anderson
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David W. Anderson
Chairman of the Board


                                   ACCEPTANCE


Read, agreed to, and accepted this 3rd day of February, 1998.



                                                  /s/ Mark A. Payne
                                                  ----------------------------
                                                  Mark A. Payne

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