Trenton Brown Complaint

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOISCOUNTY DEPARTMENT, LAW DIVISION

TRENTON H. BROWN,

Plaintiff,

vs. Case No.

FRANCESCA'S MIDWEST HOLDINGS,INC.

COMPLAINT

Defendant.c"l ~(.,~ ---

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The Plaintiff, Trenton H. Brown ("Brown"), complains of the Defendant; ~an~scatfJ;.: :.~ ..~ -.:l: ,- \ .,.'

Midwest Holdings, Inc. ("Francesca's") as follows: d

Nature of the Case

1. Plaintiff, Brown, is an individual formerly employed by Francesca's as its

President and Chief Executive Officer. Prior to his employment with Francesca's, Brown held

top management positions with certain privately and publicly held corporations.

2. Defendant, Francesca's, is a privately held Delaware corporation and the holding

company for the Francesca's restaurant chain and certain other Member Companies and

Affiliates, all of which are owned or controlled by Scott Harris ("Harris"). Francesca's is

registered to do business in Illinois, and is engaged in the operation of restaurants in Chicago and

the surrounding metropolitan area.

3. This case arises from Francesca's wrongful termination of Brown's employment

after he raised questions with Harris about certain business and financial practices engaged in by

some Member Companies and Affiliates, and refused to participate in them. This action seeks

compensatory damages for breach of contract, statutory remedies, including an award of

attorneys fees under the Illinois Whisteblower Act, and compensatory and punitive damages for

retaliatory discharge in breach of Illinois public policy.

Background Facts

4. In early August, 2011, Francesca's, through its agent, Harris, engaged Brown to

serve as President and CEO for an initial term of five years. Terms and conditions of Brown's

employment were set forth in a written Employment Agreement dated September 1, 2011, a copy

of which is attached hereto as Exhibit A ("Agreement").

5. The Agreement provided that Brown would be responsible for leading

Francesca's businesses, including Member Companies and Affiliates throughout the United

States, by the oversight and management of existing restaurant operations, expansion, overall

profitability, and implementation of other strategic goals. The Agreement further provided that

Brown would report directly to Harris, and serve on the Boards of Directors of Member

Companies and all Affiliates. (Agreement, ~~ 3, 4.)

6. In exchange for Brown's agreement to serve as President and CEO, Francesca's

promised to pay Brown a signing bonus, salary, automobile lease or purchase payments, and an

annual bonus. Brown's compensation also included stock ownership, medical insurance,

reimbursement of reasonable and necessary business expenses, and paid vacation. (Agreement,

~5.)

7. The Agreement contained a provision relating to termination of the employment

relationship which expressly stated, "If the Company terminates the Employee, the Employee

shall be entitled to one (1) year's compensation (base salary and bonus) and expense

reimbursement." (Agreement, ~2B.)

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8. Francesca's terminated Brown's employment on or about August 10, 2012. No

specific reason was given for the termination, except that Harris was "ready" to take over and

intended to run the business himself. In fact, Brown was terminated because he objected to

certain business and financial practices engaged in by Harris and some Member Companies and

Affiliates under Harris' direction and control, including but not limited to:

(a) the preparation of false and misleading financial statements for certainMember Companies and Affiliates in violation of state and federal laws;

(b) the making of false and misleading statements to investors and regulatoryagencies concerning the operations and profitability of certain MemberCompanies and Affiliates, in violation of state and federal laws;

(c) failure to fully account for revenues, profits and shareholder distributionsin violation of state and federal laws;

(d) failure to pay taxes on profits and distributions not accounted for, inviolation of state and federal laws;

(e) failure of certain Member Companies and Affiliates to comply withfederal immigration laws governing the employment of workers in theirrestaurants;

(f) permitting an unlicensed vendor to supply alcoholic beverages toFrancesca's restaurants, in violation of state laws; and

(g) engagement in certain discriminatory practices that resulted in harassment,sexual harassment and/or hostile working environments, in violation ofstate and federal laws.

9. Brown refused to participate in the above-described activities by, among other

things, refusing to sign or approve false and misleading financial statements and other

documents, refusing to solicit investors under false pretenses, and calling on Harris to take

corrective action. Harris did not take corrective action, but discharged Brown from his position

as President and CEO.

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COUNT I - VIOLATION OF ILLINOIS WHISTLEBLOWER ACT(740 ILCS 174/1 ET SEQ.)

10. Brown adopts and realleges paragraphs 1 through 9 of the preceding allegations as

paragraph 10 of this Count I as though fully set forth herein.

11. The Illinois Whistleblower Act (the "Act") provides, in relevant part:

An employer may not retaliate against an employee for refusing toparticipate in an activity that would result in a violation of a stateor federal law, rule or regulation. (740ILCS 174/20.)

12. Francesca's is an "employer" as defined in the Act, and Brown is an "employee"

within the meaning of the Act.

13. Francesca's violated the Act by terminating Brown for his refusal to participate in

activities that violated or would result in violation of state or federal laws, rules and regulations.

14. As a result of Francesca's violation of the Act, Brown has suffered damages,

including but not limited to loss of his position, lost compensation, and expenses incurred to

protect his legal interests.

WHEREFORE, Plaintiff Brown prays for entry of judgment in his favor and against

Defendant, Francesca's, awarding him all statutory remedies including without limitation,

reinstatement to his prior position, back pay, compensatory damages in an amount exceeding

$600,000 plus reimbursable expenses and the present value of stock equities, costs of suit

including reasonable attorneys fees and expert fees, a permanent injunction prohibiting

Francesca's from further violation of the Act, and such other relief as the court may deem just.

COUNT II - RETALIATORY DISCHARGE

15. Brown adopts and realleges paragraphs 1 through 9 of the preceding allegations as

paragraph 15 of this Count II as though fully set forth herein.

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16. The State of Illinois has announced a clear public policy in favor of requiring

businesses to comply with state and federal laws, rules and regulations, and in protecting

employees who report or refuse to participate in violations of all such laws, rules and regulations.

17. Francesca's violated clearly established Illinois public policy by discharging

Brown from his position as President and CEO in retaliation for his refusal to participate in

illegal employment and financial practices.

18. As a result of Francesca's retaliatory discharge, Brown has suffered damages,

including but not limited to monetary loss.

WHEREFORE, Plaintiff, Brown, prays for entry of judgment in his favor and against

Francesca's, awarding damages exceeding $600,000 or other amount sufficient to compensate

him for all pecuniary and other injuries sustained by him, to be determined at trial; punitive

damages of $2,000,000 or other amount of sufficient to deter Francesca's from engaging in

similar action in the future; plus costs of suit and such other relief as the court may deem just.

COUNT III - BREACH OF CONTRACT

19. Brown adopts and realleges paragraphs 1 through 9 of the preceding allegations as

paragraph 19 of Count III, as though fully set forth herein.

20. At all times during his employment with Francesca's, Brown performed all

obligations required of him under the Agreement in his capacity as President and CEO.

Notwithstanding Brown's performance, Francesca's failed to perform its obligations under the

Agreement, in the following ways:

(a) failed and refused to convey any stock ownership interests to Brown uponexecution of the Agreement;

(b) failed and refused to pay any portion of the annual minimum bonus dueand owing Brown during his employment; and

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(c) failed and refused to pay any portion of the salary, bonus and expensereimbursement due and payable to Brown at the time of termination, asrequired.

21. Francesca's failure to perform each of the aforesaid obligations constitute material

breaches of the parties' Agreement, directly causing injury to Brown in the form of lost

compensation to which he was entitled under the Agreement, and other damages.

WHEREFORE, the Plaintiff, Brown, prays for entry ofjudgment in his favor and against

the Defendant, Francesca's, awarding damages in an amount sufficient to compensate him for all

pecuniary losses and other injuries sustained by him, in an amount exceeding $600,000 plus

reimbursable expenses and the value of stock equities to be determined at trial, plus costs of suit

and such other relief as the court may deem just.

Dated: February 13,2013

By:

Elizabeth J. Boddy, Esq.SHEFSKY & FROELICH LTD.

111 East Wacker Drive, Suite 2800Chicago, Illinois 60601312-527-4000Finn ID 29143

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TRENTON H. BROWN

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is made and entered as of the date executed byand between Francescas Midwest Holdings, Inc., a Delaware corporation (the "Company") andthe employee (the "Employee") identified in Exhibit A,

FOR AND IN CONSIDERATION of the mutual promises contained herein, the sum of ten($10.00) dollars and other good and valuable consideration, the receipt and sufficiency of whichis hereby acknowledged, the parties agree as follows: .

1) Employment:

A) The Company hereby employs Employee, and Employee accepts employment by TheCompany pursuant to the terms and conditions set forth in this Agreement. Employee'stitle shall be as designated in Exhibit A.

B) General Description of Responsibilities Required. Employee shall be responsiblefor leading the Company's overall businesses to include all Affiliate brands. Employeewill be responsible for managing existing stores and new store expansion. Employee willfocus on the Company's profitability, customer service and retention, quality reputation,employee morale, quality control, supply sources, and administrative systems andstructures to achieve the Company's long-term strategic goals.

2) Ter'm and Extension:

A) Employee's employment shall be for a term of five (5) years from the date of execution(the "Term") starting September I, 2011 (start date). Employee will receive a signingbonus to reflect one month's salary. If either the Company or Employee issues notice La

terminate this Agreement prior to the expiration of the then-current Term, such Termshall be automatically extended for an additional one (l) year period without furthernotice.

B) If the Company terminates the Employee, the Employee shall be entitled to one (1) year'scompensation (base salary and bonus) and expense reimbursement.

C) For purposes of this Agreement, each of the following shall constitute a valid basis fortermination "for cause";

1) Gross negligence;

2) Professional misconduct;

3) Conviction of a criminal offence;

4) Substance abuse;

harris.corporalc.trent_brown.employmenl_agreemenl1 10831.doc oocx<)/1/2011 IL07:00 AM

5) Failure to comply with The Company's directives and policies including but notlimited to compliance with the Company's Handbook and Policy againstDiscrimination, Harassment and Sexual Harassment;

3) Territorv:

A) The Employee acknowledges that the Company currently has operations in Illinois,Wisconsin and California, with new locations under construction in Arizona and NorthCarolina. and a strategic plan to grow beyond such states, ultimately throughout theUnited States, and therefore the Employee acknowledges and agrees that the "Territory"hereunder shall be defined as the entire United States.

4) Employee Overall Responsibilities:

A) General

1) Employee shall actively engage and cooperate with the Company in aiding in thedevelopment of the Company's strategic plans to expand the Company's business.Employee will lead existing stores and strategically direct new store expansion.Employee will focus on the Company's profitability, customer service and retention,quality reputation, employee morale. quality control, administrative systems andstructures. Employee shall present detailed, written, strategic and tactical plans to theCompany on a regular basis designed to accomplish these goals. Employee also shalltimely implement such plans as approved by the Company.

2) Employee will actively participate as a Board Member of Francesca Midwest,Francesca West, and all Affiliate Boards. (see Exhibit A).

3) Employee will be responsible for developing a Company budget focused onachieving strategic goals.

4) Employee shall report to Scott Harris ("Han-is").

5) Employee will evaluate, propose and develop marketing initiatives and therecruitment of a Marketing Executive based on budget availability.

B) Budgets:

I) Preparation of a written, detailed yearly budget should be broken down by state andstore location and take into consideration:

Historic sales

Planned new store openings

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Existing stores and competition within the state/store location

Economics/demographics of the state/store location

Competition and other pertinent factors

Such other factors/criteria as specified by the Company from time to time.

2) Effectively and timely communicate with Harris on a regular basis. as needed, toreview and analyze actual results versus budget after every quarterly period.

C) Customer Service

I) When necessary, aid in the resolution of any potential customer complaints anddisputes in a timely and cost efficient manner.

2) Satisfy customer/account needs in conjunction with The Company.

D) Brand Development

1) Employee shall provide insight and analysis with respect to the Company's brand andmake recommendations with respect to future development.

2) Employee shall provide insight and analysis with respect to the Company's currentproduct line and make recommendations in order to improve positioning within itsmarket segment.

E) Company Staff

1) Employee shall be responsible for maintaining the Company's proven excellence insecuring, training and retaining qualified and motivated staff. Employee shall followCompany procedures for staff reviews and make recommendations, as appropriate,for promotions and/or staff changes based upon such personnel reviews.

F) Other

I) Employee shall also be responsible for timely providing to Harris all these sameservices and functions on behalf of all of his other restaurants and affiliates.

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5) Compensation:

A) Subject to the terms and conditions hereof, the Company shall pay to Employee ThreeHundred and Seventy Five Thousand Dollars ($375,000) Base Salary as provided inExhibit A, a signing bonus to reflect one month's compensation and the cost of theEmployee's leased/purchased vehicle and the expenses associated upon the terms andconditions set forth therein, as well as the following:

B) The Employee shall have the right to earn a minimum Bonus of two hundred and twentyfive thousand dollars ($225,000) per annum based on Scott Harris' appraisal ofaccomplishment of agreed upon goals between Harris and Employee.

C) If or to the extent that any Bonus is due, it shall be payable on an annual basis, no laterthan the thirtieth (30 Ih

) day of the month following the end of the year. However, that theCompany may agree, by separate instrument only, to advance portions thereof ininstallments to Employee. If or to the extent that any such advance(s) by the Companyexceed the Employee's earned Bonus, the Employee shall return such over-paid advancewithin thirty (30) days of request.

D) Upon execution hereof, the Company shall cause Employee to receive the followingstock/membership ownership interests. The company also agrees to protect Employeefrom any individual tax liabilities associated with equity granted:

(1) The Company: Five (6%) percent ownership:

(2) Francesca's West, Inc.: Two (2%) percent ownership;

(3) Francesca's Management Company, LLC: Five (2%) percent ownership; plus

(4) The "Affiliates" (as defined below): Five (5%) percent ownership.

For purposes hereof, the "Affiliates" include the following:

For purposes hereof, the "Group" shall mean and include the Company, Francesca'sWest, Inc., Francesca's Management Company, LLC and the Affiliates. Employeewill also be granted 5% of any future Scott Harris Affiliates. See exhibit A for list ofAffiJ iates.

E) The Company agrees that Employee shall be entitled to participate in the Company'shealth/medical insurance program, as may be amended or modified from time to time.

F) Employee shall be entitled to three (3) weeks vacation unless agreed upon in writing.Vacation is not transferable from year to year.

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6) Expenses:

A) To the extent provided in Exhibit A, the Company agrees to reimburse Employee for allrelevant reasonable and necessary expenses incurred in connection with the Company'sbusiness. Expense account reports shall be submitted on a timely regular basis. Allexpenses shall be evidenced by receipts, bills and other appropriate evidence requestedby the Company. No expenses shall be reimbursed without supporting documentedevidence or valid explanation in lieu thereof.

7) Confidentiality, Fiduciary Duty and Restrictive Covenants.

A) Employee acknowledges that the Company has committed substantial resources todeveloping the business concepts, restaurant themes, restaurant names (and anyderivations thereof), menu items (whether developed by any employee or by theCompany), recipes, business practices, management practices and management trainingprograms (the "Company's Confidential and Proprietary Materials"). all of which is theexclusive property of the Company and the content of such materials shall be held instrict confidence.

B) Employee acknowledges that the Company's preparation and development of theCompany's Confidential and Proprietary Materials is a costly and a valuable asset of theCompany, including, but without limitation, the Company's cost. effort and investment inpreparing and developing Employee for the demands which will face him/her inachieving the excellence which distinguishes the Company from any other in therestaurant industry.

C) Employee acknowledges that the Company would not al low Employee to becomeemployed by the Company, nor invest the time, effort and expense necessary to trainEmployee, and further would not introduce 01' expose Employee to any of tile Company'sConfidential and Proprietary Materials without Employee's prior express agreement to allof the terms of this Agreement, including, but without limitation, exercising his/herfiduciary duty on behalf of the Company to maintain the confidentiality of theCompany's Confidential and Proprietary Materials, and to not compete with theCompany, as provided herein. For that reason, Employee will not, during or after theterm of this Agreement, directly or indirectly, use, disseminate, or disclose to any person,firm, or other business entity for any purpose whatsoever, any information relating to theCompany's Confidential and Proprietary Materials which were disclosed to, known by,or developed by Employee as part of his affiliation with the Company. Employee shallhold in a fiduciary capacity for the benefit of the Company all of the Company'sConfidential and Proprietary Materials, along with any and all inventions, discoveries.concepts, ideas, improvements or know how, discovered or developed by Employeesolely or jointly with other employees, during the term of this Agreement, which may bedirectly or indirectly useful in or related to the business of any of the Company or itsaffil iates, i f any.

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D) Employee agrees that throughout his affiliation with the Company, Employee shalldevote his full time, attention, and energies to that Company" s business and to use hisbest efforts, skill and abilities in performing the specific duties assigned to him/her. Inaddition, throughout his affiliation with the Company, and continuing for a period of two(2) years thereafter (regardless of whether the Employee leaves of his/her own accord, orotherwise) (the "Restriction Period"), Employee shall not participate (whether as anemployee, agent, officer, director, independent contractor, consultant, stockholder,partner, member, manager or otherwise) in any restaurant located in the Territory servingItalian cuisine or any Italian menu items (a "Competing Company"). In addition,Employee agrees that during the Restriction Period, Employee shall not induce or attemptto induce any employee of the Company or any of its Restaurant Affiliates to leave suchemployment to participate with Employee in any Competing Company.

E) Employee hereby agrees that if, at any time, Employee ceases to be employed by theCompany (whether by resigning or being terminated with or without cause), theCompany and any company in the Group in which the Employee then owns any shares ormembership interests shall have the irrevocable right to purchase Employee's sharesand/or membership interest in such respective company for the then fair-market valuethereof. Employee further agrees that each company in the Group's rights hereunder arecoupled with an interest, and that Employee has received good and valuableconsideration in exchange for such rights.

F) Employee hereby agrees that if, at any time, the Company or any company in the Groupreceives an offer to sell all of the shares and/or membership interests in such Company orany such company in the Group to a non-affiliated third party purchaser upon such termsand conditions (including price) deemed acceptable to the Company (or such othercompany in the Group) in its joint discretion, then the Company (or such other companyin the Group) shall have the right to force the sale of Employee's shares/membershipinterests therein to such purchaser upon said terms and conditions. Employee furtheragrees that if and to the extent that he fails to cooperate in such sale or fails to executeany document reasonably necessary to cause such sale, Employee hereby has granted theCompany (or such other company in the Group) his power of attorney to execute any andall documents or take any other actions reasonable necessary to cause the transfer of suchshares/membership interests. Employee further agrees that the rights of the Company(and the other companies in the Group) hereunder are coupled with an interest, and thatEmployee has received good and valuable consideration for such rights.

G) Employee further agrees and acknowledges that all of the provisions of this section 7 arereasonable in scope and duration, as reasonably necessary to protect the Company'sbusiness, and that Employee's violation of this section would result in irreparable harm tothe Company. If Employee breaches any provision of this section, the Company shall beentitled to any right or remedy available at law or in equity, including, but withoutlimitation, injunctive relief and attorney's fees. In addition, if any court shall decide thatany term. condition, scope or limitation contained in this Section 7 is unreasonable orunenforceable for any reason, Employee hereby agrees that such court is entitled,

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empowered and authorized to circumscribe and/or limit the terms, conditions and/orscope hereof to the extent necessary to enable enforcement hereof to the fullest extentpossible. This section 7 shall survive expiration or termination of this Agreement.

8) Companv's Emplovment Handbook and Policy Against Discrimination, Harassment,Sexual Harassment and Hostile Environment.

A) By signing this Agreement, Employee acknowledges that he has received a copy of theCompany's Employment Handbook and Policy Against Discrimination, Harassment.Sexual Harassment and Hostile Environment, and agrees to comply with their terms andconditions.

9) Miscellaneous:

A) This Agreement (including all Exhibits) contains the full and complete agreement of theparties and shall be governed by the laws of the Illinois, and further agree that the courtsof Illinois shall have sole and exclusive personal jurisdiction over each of the parties, andover the subject matter hereof, including, but without limitation, any disputes, litigationor other legal issues arising from this Agreement. Employee and the Company alsospecifically waive any and all objection to personal jurisdiction in Cook County, lllinoisor to service of process for any claim, cause, action, dispute, litigation or other legal issuearising from or relating to this Agreement. This Agreement contains the entireAgreement between The Company and Employee and supersedes any prior agreementbetween the parties. The Agreement may be executed in counterparts, each of whichtogether comprise a single agreement. No modification of this Agreement is valid unlessit is in writing and signed by the parties. No waiver of any provision hereof shall beeffective unless made in writing and signed by the waiving party. This Agreement is notassignable by EmpJoyee. If any portion of this Agreement is determined invalid, thatinvalidity shall not impair the remaining provisions of this Agreement.

10) Notice:

A) Any notice or other communication required or permitted to be given hereunder shall bein writing and shall be delivered personally or sent by prepaid registered mail and if thusmailed, shall be deemed to have been received on the fifth (5Ih

) business day followingthe date of posting. Such notices or other communications to be given or addressed to theparties at the following addresses:

If to the Company: Francesca's Midwest Holdingsclo Francesca Restaurants, LLC2200 E. Devon Avenue, Suite 250Des Plaines, 1L 60018

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Title:

Salary:

Bonus:

Exhibit A

President and Group Chief Executive Officer

$375.000 annually

Minimum of$225,000 paid quarterly upon agreed upon goals with Scott Harris.

Board Member Company list and Affiliates:

• Francesca Midwest• Francesca West• Davanti• Salantino's• Dough Boys Pizza• Fat Rosies• Glazed and Confused• Future Scott Harris Affiliates

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If to Employee:

IN WlTNESS \V}iEREOF, the parties have caused their authorized agents to execute thisAgreement by signing below on the day and year indicated.

EMPLOYEE:i

----/ / I j_ "r'- / .!I ./"

C . y"~,",'l_ /'--'1--'----Trent Brown Date

'/. 1-- i/

FRANCESCA'S MIDWEST HOLDINGS, INC.

Cj - I - )/Date

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