Exhibit 10.1


 


EMPLOYMENT AGREEMENT


 


 


THIS AGREEMENT is entered into effective the
1st day of July, 2003, by and between AUSTINS STEAKS & SALOON, INC.
(“Company”), and James C. Verney (Executive).


 


WHEREAS, Company is a corporation organized
under the laws of the State of Delaware, with its principal place of business
in Roanoke, Virginia; and


 


WHEREAS, Executive is and desires to be
employed by the Company on the terms set forth in this Agreement; and


 


WHEREAS, Company has offered employment to
Executive, a resident of the State of North Carolina, subject to the execution
of this Agreement; and the Company is willing to employ the Executive only if
the Executive executes this Agreement; and Executive desires to be employed
with Company, on the terms hereinafter set forth effective as of the Effective
Date.


 


NOW, THEREFORE, in consideration of the above
premises and the mutual covenants contained in this Agreement and other good
and valuable consideration, the parties agree as follows:


 


1.                                      Duties
and Obligations.  The Company and
Executive agree that Executive shall serve as President and Chief Executive
Office of the Company.  In such capacity
he shall be the principal executive officer of the Company, and shall be
responsible for the day-to-day operation of the Company. Executive shall have
and fulfill all duties and responsibilities as may be determined from time to
time by the Board of Directors of the Company.


 


Executive shall serve Company faithfully and
to the best of his ability under the direction of the Board of Directors, and
shall devote all his professional time, energy and skill to such
employment.  Except for his employment
with the Company, during the term of this Agreement, Executive shall not enter
into any employment, independent contractor relationship, or consulting
arrangement, with any other person or entity, or provide services to any other
person or entity, without the prior written consent of the Company.  Executive may engage in personal charitable
activities so long as such activities do not interfere with the performance of
his duties as an employee of the Company.


 


In the event of his election to the Board of
Directors of the Company, Executive will receive no additional compensation for
his services as a Board member.


 


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2.                                      Compensation
and Bonus.  Executive’s base
salary will be at the rate of $210,000 per annum, for the Initial Contract Term
as defined in Section 6 of this Agreement. 
Thereafter, for any Renewal Term, as defined in Section 6 of this
Agreement, Executive’s base salary will be determined by the Board, but shall
not be less than $210,000 per annum. 
Executive’s base salary shall be paid in twenty-six (26) equal bi-weekly
payments.


 


In addition to base salary, beginning with
the calendar year 2004, Executive will be eligible to receive an annual bonus,
based upon meeting or exceeding performance objectives (the Performance Target)
determined annually by the Board of Directors of Company.  Executive will be consulted in the determination
of the Performance Target, but the Board of Directors of Company will have the
sole discretion to establish the Performance Target.  No bonus will be paid for the calendar year
ending December 31, 2003.


 


The Performance Target will be established on
or before January 1, 2004, by the Compensation Committee of the
Board.  Attainment of 80% , but less than
100%, of the Performance Target will result in payment of an amount equal to
one-third (1/3) of the Bonus Fund (defined below).  Attainment of 100%, but less than 120%, of
the Performance Target will result in payment of an amount equal to two-thirds
(2/3) of the Bonus Fund.  The attainment
of 120% or more of the Target will result in payment of the entire Bonus
Fund.  Bonus terms for Renewal Years
shall be determined by the Board.  The
Bonus Fund shall be an amount equal to Fifty Percent (50%) of Executive’s then
annual base salary. Under no circumstances shall Executive’s annual bonus
exceed an amount equal to Fifty Percent (50%) of Executive’s then annual base
salary.


 


The Company shall reimburse Executive for all
ordinary and necessary expenses in a reasonable amount that Executive incurs in
performing his duties under this Agreement, including, but not limited to,
travel, entertainment, professional dues and subscriptions and all dues, fees
and expenses associated with membership in various professional, business and
civic associations and societies in which Executive’s participation is
determined to be beneficial for the Company. 
Such expenses will be accounted for and reimbursed through Company’s
normal expense-reporting and approval process.


 


3.                                      Location
of Employment.  Executive will
perform his services under this Agreement at the principal office of the
Company, located in Roanoke, Virginia. 
The Company shall provide Executive with such office space, secretarial
or support staff, and other facilities and services as may be suitable to his
position and appropriate for the performance of his duties.  During the first year of the Initial Contract
Term, Executive may occasionally work from Executive’s home office in
Charlotte, NC.


 


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4.                                      Benefits.  In addition to salary, Executive shall be
entitled to participate in benefit plans which Company adopts and offers to
employees, subject to the same terms, conditions and eligibility requirements
as other Company employees, including, without limitation health insurance, and
retirement, whether pension or profit sharing, plans.  Executive’s participation under any group
insurance programs, retirement plans, or other benefit programs, shall be
subject to the applicable terms and conditions of the particular plans or
programs.  This paragraph shall not be
construed as a commitment on the part of the Company to establish, maintain, or
continue any such plans or programs. 
Company specifically reserves the right to amend, alter, or terminate
such plans or programs, as it deems appropriate.


 


Notwithstanding the foregoing, Executive will
not participate in any life or disability insurance benefit plan currently
offered by the Company to its employees. 
In lieu thereof, Executive will be provided, at no cost to Executive,
with a $1 million face amount standard (non-rated) term life insurance policy
which shall be in effect during the Initial Contract Term, the First Renewal
Term and the Second Renewal Term.  In the
event that Executive is unable to qualify for a standard premium, and Executive
obtains a $1 million face amount non-standard (rated) term life insurance
policy, the Company will reimburse Executive the cost of a $1 million face
amount standard (non-rated) term life insurance policy.  In addition, Executive shall be reimbursed
for the cost (not to exceed $333.00 per month) of a Northwestern Mutual Individual
Disability Policy currently in force covering Executive.


 


Executive shall be entitled to a $1,000 per
month transportation allowance for the Initial Contract Term.  Such allowance shall cover automobile as well
as other non-job related transportation expenses, including airfare for
Executive.


 


Executive shall be reimbursed reasonable
relocation expenses to move his sole residence to Roanoke, Virginia, which
shall be limited to the cost to relocate personal property.  Relocation expenses will be paid within 15
days after submission to the Company of any invoice received by Executive in
regard to the said expenses.  Executive
shall be reimbursed for actual expenses related to the cost of maintaining a
non-primary residence in Roanoke, Virginia, not to exceed $1,750.00 per month,
through June 30, 2004.


 


5.                                      Stock
Options.  The Board of Directors
shall grant to Executive, options to purchase common stock of the Company as
follows:


 


(a) As soon as
is practicable following the execution of this Agreement, Options to purchase
75,000 shares of common stock of Company. 
Said Options shall vest as of the last day of the Initial


 


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Contract Term, assuming Executive remains
employed or his employment has been terminated without cause.  Said Option shall also vest upon a Change of
Control.  Said Options shall be subject
to exercise within 10 years of vesting, or within 90 days after termination of
employment.  The exercise price for said
Options shall be the Book Value per share of the common stock as of
March 31, 2003, or $0.88 per share.


 


(b)  Options to purchase an additional 50,000
shares of common stock of Company shall be granted at the beginning of the
First Renewal Term.  Said Option shall
vest as of the last day of the First Renewal Term, assuming Executive remains
employed or his employment has been terminated without cause.  Said Option shall also vest upon a Change of
Control.  Said Options shall be subject
to exercise within 10 years of vesting, or within 90 days after termination of
employment.  The exercise price for said
Options shall be the Book Value per share of the common stock as of
March 31, 2003, or $0.88.


 


All options will be subject to a separate
option agreement which will contain standard anti-dilution provisions and
appropriate acceleration provisions in connection with (i) the sale of all or
substantially all of the assets of the Company (ii) the merger of the Company
or (iii) a sale of control of the Company to a non-affiliated third party.


 


For purposes of this Agreement, a Change in
Control of the Company means the occurrence of any of the following events
during the period in which this Agreement remains in effect.  A Change in Control will be deemed to occur
on the date the event occurs:





 


A.                                   Change
in Voting Power. Any person or persons acting together which would
constitute a “group” for purposes of Section 13(d) of the Exchange Act
(other than the Company, or any Subsidiary, or any entity beneficially owned by
any of the foregoing) acquire and beneficially own (as defined in Rule 13(d)-3
under the Exchange Act) without Board approval or consent, directly or
indirectly, at least thirty percent (30%) of the total voting power of the
Company entitled to vote generally in the election of the Board;


 


B.                                     Change
in Board of Directors. Either:


 


1.                                       the
Current Directors (as hereinafter defined) cease for any reason to constitute
at least a majority of the members of the Board (for these purposes, a “Current
Director” means any


 


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member of the Board as of the date of this
Agreement, and any successor of a Current Director whose election or nomination
for election by the Company̓s stockholders was approved by at least a
majority of the current Directors then on the Board); or


 


2.                                       at
any meeting of the stockholders of the Company called for the purpose of
electing directors, a majority of the persons nominated by the Board for
election as directors fail to be elected;


 


C.                                     Liquidation,
Merger, Consolidation or Recapitalization. The stockholders of the Company
approve:


 


1.                                       a
plan of complete liquidation of the Company; or


 


2.                                       an
agreement providing for the merger, consolidation or recapitalization of the
Company (i) in which the Company is not the continuing or surviving corporation
(other than consolidation or merger with a wholly owned subsidiary of the
Company in which all shares outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same consideration) or (ii)
pursuant to which the shares are converted into cash, securities or other
property, except a consolidation, merger, or recapitalization of the Company in
which the holders of the shares immediately prior to the consolidation, merger,
or recapitalization have, directly or indirectly, at least a majority of the
common stock of the continuing or surviving corporation immediately after such
consolidation,  merger, or
recapitalization in which the Board immediately prior to the merger or
consolidation would, immediately after the merger , or recapitalization or
consolidation, constitute a majority of the board of directors of the continuing
or surviving corporation;


 


D.                                    Sale
of Assets. The stockholders of the Company approve an agreement (or
agreements) providing for the sale or other disposition (in one transaction or
a series of transactions) of all or substantially all of the assets of the
Company.


 


6.                                      Term
and Termination. Unless otherwise terminated in accordance with this
Agreement, Executive’s employment shall continue for an Initial Term commencing
on the effective date of this Agreement, and continuing for a period of
eighteen (18) months thereafter (the “Initial Term”).


 


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Thereafter, the Agreement shall automatically
renew for subsequent one year terms (Renewal Terms) unless either party
provides written notice of termination to the other party more than 30 days in
advance of the beginning of any Renewal Term.


 


Executive’s employment shall be terminated
only in one of the following ways:


 


A.                                   At
any time by mutual written agreement of both parties to this Agreement;                                or


 


B.                                     Upon
thirty (30) days written notice from the Company to Executive; or


 


C.                                     Automatically
and immediately should one of the following events occur:


 


1.                                       Death.  Executive dies; or


 


2.                                       Disability.  Executive becomes totally and permanently
disabled, meaning Executive’s inability for a period of three (3) months, to
perform his duties contemplated by this Agreement, such that he does not
constitute a Qualified Individual with a Disability under the terms of the
Americans with Disabilities Act of 1990. 
Such total and permanent disability shall be determined by the Company
based on medical and other evidence satisfactory to it; or


 


D.                                    For
Cause.  At any time by the Company,
by written notice to Executive, terminating this Agreement and discharging
Executive for Cause, as defined in this section of this Agreement.


 


1.                                       Cause.
Termination by the Company of Executive’s employment for “Cause” means:


 


1.                                       Executive
has materially breached this Agreement. 
A material breach of this Agreement shall include but shall not be
limited to a habitual or repeated neglect of Executive’s duties (illness,
injury or incapacity of the Executive, or Executive’s failure to meet the
performance criteria established for and communicated to Executive, in writing,
by the Company shall not constitute “Cause”);


 


2.                                       Executive
has breached his duty of loyalty to the


 


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Company;


 


3.                                       Executive
has committed an act of gross negligence, in connection with the performance of
his duties that is injurious to the business of the Company;


 


4.                                       Executive
has committed an act of gross misconduct relating to his employment or the
Company’s business, including, but not limited to, theft or embezzlement of the
Company’s property or money, or an act of fraud against the Company;


 


5.                                       Executive
is convicted of a felony, or a crime involving moral turpitude.


 


2.                                       If
Company believes Cause exists, as defined herein, a written notice will be
delivered to Executive by the Chairman of the Board or of the Compensation
Committee, that specifically identifies the manner in which the Chairman
believes that Executive has given the Company Cause for termination of
Executive’s employment, and giving Executive an opportunity for Executive,
together with Executive’s counsel, to be heard before the Board of Directors of
the Company.  The meeting of the Board of
Directors shall not be sooner than fifteen (15) calendar days from the date of
the written notice.  After granting
Executive the opportunity to be heard, the Board of Directors of the Company
may then make a finding that, in the good faith opinion of two-thirds of the
Board of Directors (excluding the Executive), Executive acted (or failed to act
when he should have acted) in a manner constituting Cause as defined herein,
and specifying the particulars of that finding. 
Following the opportunity for the Executive, together with the
Executive’s counsel, to be heard, the Board of Directors may excuse the
Executive from any further Board of Directors’ proceeding where the finding is
discussed or made.  Pending an
opportunity for Executive, together with Executive’s counsel, to be heard
before the Board of Directors of the Company, Executive may be immediately
placed upon an indefinite suspension without pay and shall be required to
immediately leave the Company’s premises. 
In the event that two-thirds of the Board of Directors (excluding the
Executive), do not find that Executive acted (or failed to act when he should
have acted) in a manner constituting Cause as defined herein,


 


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then Executive shall be reimbursed for any
compensation lost during said suspension.


 


In the event Executive’s employment is
terminated at any time by mutual written agreement of both parties, voluntarily
terminated by Executive, automatically and immediately terminated upon
Executive’s death or total and permanent disability, or terminated for “Cause”,
as defined in this Agreement, then following termination, Executive shall not
be entitled to payment of further compensation (whether salary or bonus) or
benefits of any type (other Executive’s right to “vested” benefits under the
Company’s benefit plans or continuing insurance coverage under the Company’s
Health Benefit Plan pursuant to the Consolidated Omnibus Budget Reconciliation
Act (COBRA) at Executive’s sole expense) under this agreement.  In the event Executive’s employment is
terminated without “Cause,” as defined in this Agreement, then Executive shall
be entitled to a Severance Benefit as set forth in Section 7, below.  If the Company terminates this Agreement
without Cause, the Company shall have the right at its option, to require
Executive to immediately leave the Company’s premises.


 


7.                                      Severance.  In the event that the Company terminates
Executive’s employment at any time, upon thirty (30) days’ written notice,
without Cause, then Executive’s sole remedy shall be payment of the following
Severance Benefit.


 


A.                                   If
said termination without Cause occurs during the Initial Term of this
Agreement, Executive shall be entitled to a severance payment in an amount
equal to six (6) months’ base salary at the rate then in effect.  If the Company terminates this Agreement
without Cause, the Company shall have the right at its option, to require
Executive to immediately leave the Company’s premises; provided, that the
Company shall be obligated to pay (as additional severance) Executive’s base
salary during the 30-day notice period.


 


B.                                     If
termination occurs during a one (1) year renewal period under this Agreement,
Executive shall be entitled to a severance payment in an amount equal to one
(1) year’s base salary at the rate then in effect.  If the Company terminates this Agreement
without Cause, the Company shall have the right at its option, to require
Executive to immediately leave the Company’s premises; provided, that the
Company shall be obligated to pay (as additional severance) Executive’s base
salary during the 30-day notice period.


 


C.                                     Executive
shall not be entitled to, and shall not receive any cash


 


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bonus paid for any year in which the
termination occurs, on or pro rata basis or otherwise.  The base salary portion of the severance
shall be payable, at the Executive’s option, in a lump sum or in equal monthly
installments consistent with the Company’s ordinary payroll practices.


 


D.                                    In
the event Executive elects continuing insurance coverage under the Company’s
Health Benefit Plan pursuant to the Consolidated Omnibus Budget Reconciliation
Act (COBRA) following any Termination Without Cause, then, in addition to
payment of salary as set forth above, the Company shall reimburse Executive for
all premiums paid by Executive for said continuation coverage for a period of
six-months, if the Termination Without Cause occurs within or at the expiration
the Initial Contract Term, or for a period of one year, if the Termination
Without Cause occurs following the Initial Contract Term.


 


8.                                      Company
Property.


 


A.                                   Confidential
Information.  “Confidential
Information” shall mean all financial, advertising, marketing, sales, computer
systems, computer software, and any other information relating to the Company’s
Business, its intellectual property, trade secrets, proprietary information,
customers, vendors, distributors, licensors and employees, including, without
limitation, any information, knowledge, data, forms, manuals or systems
relating to:


 


1.                                       Customer,
vendor, licensor, distributor and personnel files of the Business and all
contracts and commitments of the Business;


 


2.                                       All
technical, and non-technical trade secrets, ideas, research and development,
know-how, formulas, software programs, software documentation, source codes,
computer databases (including without limitation, data and related
documentation), all other proprietary rights of the Business, all copies and
tangible embodiments thereof (in whatever form or medium) compositions,
manufacturing, design and production processes and techniques, technical data,
proprietary technical information, data processing reports, and other technical
information and systems relating to the goods and services of the Business;


 


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designs, drawings, specifications; pricing
and cost information; customer, vendor, licensor and distributor lists and
data;


 


3.                                       Financial
reports, budgets or projections for all or any portion of the Business;


 


4.                                       Business,
advertising and marketing plans, data and proposals for presently offered or
prospective products or services of the Business.


 


B.                                     Trade
Secrets.  Confidential Information
shall remain the sole property of Company, and shall be deemed trade secrets as
defined by Virginia law; provided, however, that Confidential Information shall
not include any information known generally to the public (other than as a
result of unauthorized disclosure by the Executive or the Company or any other
past, present or future employee of Company) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by the Company or any of its affiliates.


 


C.                                     Restrictions
on Use.  During the term of
employment hereunder and indefinitely thereafter, Executive shall not, without
the written consent of the Board of Directors of the Company or a person
authorized thereby, disclose or use (except in the course of his employment
hereunder and in furtherance of the business of the Company or any of its
affiliates) any such Confidential Information or proprietary data of the
Company or any of its affiliates unless such disclosure is required by the
order of a court of competent jurisdiction or a governmental agency having
authority to issue such an order.  Upon
termination of his employment under this Agreement, Executive shall promptly
return to Company any and all copies he may have of any of the materials,
Confidential Information, data and other items referred to above, and shall not
retain or use any such information.


 


D.                                    Intellectual
Property.  Any and all writings,
analysis, improvements, procedures, methods, discoveries, concepts and
techniques (collectively the “Intellectual Property”),  which Executive may make, conceive, discover
or develop, either solely or jointly with any other person or persons, at any
time during the term of this Agreement, whether during working hours or at any
other time and whether at the request or upon the suggestion of the Company or
otherwise, which relate to or are useful in


 


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connection with any business now or hereafter
carried on or contemplated by the Company, including, without limitation,
developments or expansions of its present fields of operations, shall be the
sole and exclusive property of the Company.


 


9.                                      Diversion
of Employees. During the term of Executive’s employment under this
Agreement, and for a period of eighteen (18) months after the termination of
his employment with Company for any reason whatsoever, Executive will not,
directly or indirectly, (a) induce or attempt to influence any employee of
Company to terminate his employment with Company; (b) employ or recommend for
employment (other than in response to potential employers seeking job
references about employees they specifically identify by name) any employee of
the Company; or (c) identify for purposes of employment any employee of
Company.


 


10.                               Non-competition
Agreement.  Executive
acknowledges that Company is engaged in a business involving relationships with
franchisees and customers, the success of which business is in large part due
to the undisturbed continuation of such relationships with customers and that
all goodwill created as a result of any such contact belongs to Company.


 


Executive acknowledges his duty of loyalty to
the Company and agrees that during the term of Executive’s employment,
Executive will not directly or indirectly, for his own account or for the
account of another, cause, encourage, induce, attempt to induce, or aid,
assist, or abet any other party or person in inducing or attempting to induce
any franchisee or customer of Company to terminate or change in any manner
adverse to the Company any existing relationship with the Company, other than
for the benefit of the Company.


 


In order to further protect the Company’s
legitimate business interests which are a product of substantial effort and
investment by Company, including, without limitation, and the Company’s
goodwill, the Executive agrees that if his employment with the Company
terminates, voluntarily or otherwise, for any reason whatsoever, Executive
shall not, directly or indirectly, for himself or on behalf or in conjunction
with any other person (including, without limitation, any sole proprietor,
general partnership, limited liability company, limited liability partnership,
limited partnership, business trust, corporation or other entity) for a period
of one (1) year following the latter of the date of termination of his
employment, accept an engagement as an independent contractor or employment as
an employee with any entity which is defined as a Competitor of the Company, as
defined on Exhibit B attached hereto (even if such engagement or employment
offer is unsolicited) which involves Executive providing products or services
comparable to those provided by the Company to its customers.


 


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Executive acknowledges that he has carefully
read and considered the provisions of this agreement and agrees that the
restrictions contained in this Section are reasonable and necessary in
order to protect the legitimate interests of the Company and that any breach of
these covenants by Executive will cause Company irreparable harm for which
there exists no adequate remedy at law. 
Executive, therefore, acknowledges that in the event of his violation of
the provisions of this Section, Company shall be entitled to obtain from any
court of competent jurisdiction preliminary and/or permanent injunctive relief
arising from such violation, which rights shall be cumulative and in addition
to any other rights or remedies to which the Company may be entitled.  Executive is fully aware of the restrictions
that this agreement places upon Executive’s future employment with someone
other than the Company.


 


11.                               Prior
Agreements.  Executive represents
to Company (a) that there are no restrictions, agreements or understandings
whatsoever to which Executive is party which would prevent or make unlawful his
execution or performance of this Agreement or his employment hereunder, (b)
that his execution of this Agreement and his employment hereunder shall not
constitute a breach of any contract, agreement or understanding, oral or
written, to which he is a party or by which he is bound, and (c) that he is
free and able to execute this Agreement and, as to the Effective Date, to begin
his employment with Company.


 


12.                               Applicable
Law.  The validity and
construction of this Agreement or any of its provisions shall be governed by
and determined in accordance with the laws of the State of Virginia.


 


13.                               Entire
Agreement.  This Agreement
contains the entire understanding between the parties and supercedes all other
oral and written agreements or understandings between them relating to
Executive’s employment.  No modification
or addition to this Agreement, or waiver or cancellation of any provision under
this Agreement, shall be valid except by a written agreement signed by both
parties.


 


14.                               Non-Waiver.  No delay or failure by either party to
exercise any right under this Agreement, and no partial or single exercise or
waiver of that right, shall constitute a waiver of that or any other or future
right.


 


15.                               Notices.  Any notice to be delivered under this
Agreement shall be given in writing and delivered, personally, via telefax or
similar electronic transmission, or by certified mail, postage prepaid, addressed
to the Company or to Executive at its or his last known address.  Any such notice shall be deemed given when
actually received by the party to whom the notice is directed.


 


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16.                               Assignment.  In no event may Executive assign to another
any of his duties or obligations under this Agreement.


 


17.          Construction.  The language in all parts of this Agreement
shall in all cases be construed as a whole according to its fair meaning,
strictly neither for nor against any party hereto, and without implying a
presumption that the terms thereof shall be more strictly construed against one
party.


 


18.          Severability.  If any portion of this Agreement shall be
invalid or unenforceable, the parties agree that such invalidity or
unenforceability shall in no way affect the validity or enforceability of any
other portion of this Agreement.


 


19.          Survival.  The provisions of this agreement shall
survive the termination of Executive’s employment.


 


20.          Review
and Execution. 
Executive acknowledges that he has read and understands all of the terms
of this Agreement, that he is executing the Agreement voluntarily with full
knowledge of its significance, that he has been advised to consult with an
attorney prior to signing the Agreement, and that has been offered an
opportunity to take a reasonable time to consider the Agreement.


 


 


	
   

  	
  AUSTINS STEAKS & SALOON, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul C. Schorr, III

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JAMES C. VERNEY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James C. Verney

  	
   

  



 


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