IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS

COUNTY DEPARTMENT, LAW DIVISION

TRENTON H. BROWN,
Plaintiff,
vs. Case No.
FRANCESCA'S MIDWEST HOLDINGS,
INC.
COMPLAINT
Defendant.
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The Plaintiff, Trenton H. Brown ("Brown"), complains of the Defendant;
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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, ~ 2 B . )
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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 certain
Member Companies and Affiliates in violation of state and federal laws;
(b) the making of false and misleading statements to investors and regulatory
agencies concerning the operations and profitability of certain Member
Companies and Affiliates, in violation of state and federal laws;
(c) failure to fully account for revenues, profits and shareholder distributions
in violation of state and federal laws;
(d) failure to pay taxes on profits and distributions not accounted for, in
violation of state and federal laws;
(e) failure of certain Member Companies and Affiliates to comply with
federal immigration laws governing the employment of workers in their
restaurants;
(f) permitting an unlicensed vendor to supply alcoholic beverages to
Francesca'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 of
state 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 to
participate in an activity that would result in a violation of a state
or 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 deemjust.
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 deemjust.
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 upon
execution of the Agreement;
(b) failed and refused to pay any portion of the annual minimum bonus due
and owing Brown during his employment; and
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(c) failed and refused to pay any portion of the salary, bonus and expense
reimbursement due and payable to Brown at the time of termination, as
required.
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 asthe court may deem just.
Dated: February 13,2013
By:
Elizabeth J. Boddy, Esq.
SHEFSKY & FROELICH LTD.
111 East Wacker Drive, Suite 2800
Chicago, Illinois 60601
312-527-4000
Finn 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 by
and between Francescas Midwest Holdings, Inc., a Delaware corporation (the "Company") and
the 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 which
is hereby acknowledged, the parties agree as follows: .
1) Employment:
A) The Company hereby employs Employee, and Employee accepts employment by The
Company pursuant to the terms and conditions set forth in this Agreement. Employee's
title shall be as designated in Exhibit A.
B) General Description of Responsibilities Required. Employee shall be responsible
for leading the Company's overall businesses to include all Affiliate brands. Employee
will be responsible for managing existing stores and new store expansion. Employee will
focus on the Company's profitability, customer service and retention, quality reputation,
employee morale, quality control, supply sources, and administrative systems and
structures 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 signing
bonus 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 Term
shall be automatically extended for an additional one (l) year period without further
notice.
B) If the Company terminates the Employee, the Employee shall be entitled to one (1) year's
compensation (base salary and bonus) and expense reimbursement.
C) For purposes of this Agreement, each of the following shall constitute a valid basis for
termination "for cause";
1) Gross negligence;
2) Professional misconduct;
3) Conviction of a criminal offence;
4) Substance abuse;
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5) Failure to comply with The Company's directives and policies including but not
limited to compliance with the Company's Handbook and Policy against
Discrimination, 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 North
Carolina. and a strategic plan to grow beyond such states, ultimately throughout the
United 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 the
development 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 and
structures. Employee shall present detailed, written, strategic and tactical plans to the
Company on a regular basis designed to accomplish these goals. Employee also shall
timely 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 on
achieving strategic goals.
4) Employee shall report to Scott Harris ("Han-is").
5) Employee will evaluate, propose and develop marketing initiatives and the
recruitment of a Marketing Executive based on budget availability.
B) Budgets:
I) Preparation of a written, detailed yearly budget should be broken down by state and
store 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, to
review 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 and
disputes 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 and
make recommendations with respect to future development.
2) Employee shall provide insight and analysis with respect to the Company's current
product line and make recommendations in order to improve positioning within its
market segment.
E) Company Staff
1) Employee shall be responsible for maintaining the Company's proven excellence in
securing, training and retaining qualified and motivated staff. Employee shall follow
Company 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 same
services 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 Three
Hundred and Seventy Five Thousand Dollars ($375,000) Base Salary as provided in
Exhibit A, a signing bonus to reflect one month's compensation and the cost of the
Employee's leased/purchased vehicle and the expenses associated upon the terms and
conditions set forth therein, as well as the following:
B) The Employee shall have the right to earn a minimum Bonus of two hundred and twenty
five thousand dollars ($225,000) per annum based on Scott Harris' appraisal of
accomplishment 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 later
than the thirtieth (30
Ih
) day of the month following the end of the year. However, that the
Company may agree, by separate instrument only, to advance portions thereof in
installments to Employee. If or to the extent that any such advance(s) by the Company
exceed the Employee's earned Bonus, the Employee shall return such over-paid advance
within thirty (30) days of request.
D) Upon execution hereof, the Company shall cause Employee to receive the following
stock/membership ownership interests. The company also agrees to protect Employee
from 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's
West, Inc., Francesca's Management Company, LLC and the Affiliates. Employee
will also be granted 5% of any future Scott Harris Affiliates. See exhibit A for list of
AffiJ iates.
E) The Company agrees that Employee shall be entitled to participate in the Company's
health/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 all
relevant reasonable and necessary expenses incurred in connection with the Company's
business. Expense account reports shall be submitted on a timely regular basis. All
expenses shall be evidenced by receipts, bills and other appropriate evidence requested
by the Company. No expenses shall be reimbursed without supporting documented
evidence or valid explanation in lieu thereof.
7) Confidentiality, Fiduciary Duty and Restrictive Covenants.
A) Employee acknowledges that the Company has committed substantial resources to
developing the business concepts, restaurant themes, restaurant names (and any
derivations thereof), menu items (whether developed by any employee or by the
Company), recipes, business practices, management practices and management training
programs (the "Company's Confidential and Proprietary Materials"). all of which is the
exclusive property of the Company and the content of such materials shall be held in
strict confidence.
B) Employee acknowledges that the Company's preparation and development of the
Company's Confidential and Proprietary Materials is a costly and a valuable asset of the
Company, including, but without limitation, the Company's cost. effort and investment in
preparing and developing Employee for the demands which will face him/her in
achieving the excellence which distinguishes the Company from any other in the
restaurant industry.
C) Employee acknowledges that the Company would not al low Employee to become
employed by the Company, nor invest the time, effort and expense necessary to train
Employee, and further would not introduce 01' expose Employee to any of tile Company's
Confidential and Proprietary Materials without Employee's prior express agreement to all
of the terms of this Agreement, including, but without limitation, exercising his/her
fiduciary duty on behalf of the Company to maintain the confidentiality of the
Company's Confidential and Proprietary Materials, and to not compete with the
Company, as provided herein. For that reason, Employee will not, during or after the
term 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 the
Company's Confidential and Proprietary Materials which were disclosed to, known by,
or developed by Employee as part of his affiliation with the Company. Employee shall
hold in a fiduciary capacity for the benefit of the Company all of the Company's
Confidential and Proprietary Materials, along with any and all inventions, discoveries.
concepts, ideas, improvements or know how, discovered or developed by Employee
solely or jointly with other employees, during the term of this Agreement, which may be
directly or indirectly useful in or related to the business of any of the Company or its
affil iates, i f any.
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D) Employee agrees that throughout his affiliation with the Company, Employee shall
devote his full time, attention, and energies to that Company" s business and to use his
best efforts, skill and abilities in performing the specific duties assigned to him/her. In
addition, 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, or
otherwise) (the "Restriction Period"), Employee shall not participate (whether as an
employee, agent, officer, director, independent contractor, consultant, stockholder,
partner, member, manager or otherwise) in any restaurant located in the Territory serving
Italian cuisine or any Italian menu items (a "Competing Company"). In addition,
Employee agrees that during the Restriction Period, Employee shall not induce or attempt
to induce any employee of the Company or any of its Restaurant Affiliates to leave such
employment to participate with Employee in any Competing Company.
E) Employee hereby agrees that if, at any time, Employee ceases to be employed by the
Company (whether by resigning or being terminated with or without cause), the
Company and any company in the Group in which the Employee then owns any shares or
membership interests shall have the irrevocable right to purchase Employee's shares
and/or membership interest in such respective company for the then fair-market value
thereof. Employee further agrees that each company in the Group's rights hereunder are
coupled with an interest, and that Employee has received good and valuable
consideration in exchange for such rights.
F) Employee hereby agrees that if, at any time, the Company or any company in the Group
receives an offer to sell all of the shares and/or membership interests in such Company or
any such company in the Group to a non-affiliated third party purchaser upon such terms
and conditions (including price) deemed acceptable to the Company (or such other
company in the Group) in its joint discretion, then the Company (or such other company
in the Group) shall have the right to force the sale of Employee's shares/membership
interests therein to such purchaser upon said terms and conditions. Employee further
agrees that if and to the extent that he fails to cooperate in such sale or fails to execute
any document reasonably necessary to cause such sale, Employee hereby has granted the
Company (or such other company in the Group) his power of attorney to execute any and
all documents or take any other actions reasonable necessary to cause the transfer of such
shares/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 that
Employee has received good and valuable consideration for such rights.
G) Employee further agrees and acknowledges that all of the provisions of this section 7 are
reasonable in scope and duration, as reasonably necessary to protect the Company's
business, and that Employee's violation of this section would result in irreparable harm to
the Company. If Employee breaches any provision of this section, the Company shall be
entitled to any right or remedy available at law or in equity, including, but without
limitation, injunctive relief and attorney's fees. In addition, if any court shall decide that
any term. condition, scope or limitation contained in this Section 7 is unreasonable or
unenforceable 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/or
scope hereof to the extent necessary to enable enforcement hereof to the fullest extent
possible. 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 the
Company's Employment Handbook and Policy Against Discrimination, Harassment.
Sexual Harassment and Hostile Environment, and agrees to comply with their terms and
conditions.
9) Miscellaneous:
A) This Agreement (including all Exhibits) contains the full and complete agreement of the
parties and shall be governed by the laws of the Illinois, and further agree that the courts
of Illinois shall have sole and exclusive personal jurisdiction over each of the parties, and
over the subject matter hereof, including, but without limitation, any disputes, litigation
or other legal issues arising from this Agreement. Employee and the Company also
specifically waive any and all objection to personal jurisdiction in Cook County, lllinois
or to service of process for any claim, cause, action, dispute, litigation or other legal issue
arising from or relating to this Agreement. This Agreement contains the entire
Agreement between The Company and Employee and supersedes any prior agreement
between the parties. The Agreement may be executed in counterparts, each of which
together comprise a single agreement. No modification of this Agreement is valid unless
it is in writing and signed by the parties. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. This Agreement is not
assignable by EmpJoyee. If any portion of this Agreement is determined invalid, that
invalidity 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 be
in writing and shall be delivered personally or sent by prepaid registered mail and if thus
mailed, shall be deemed to have been received on the fifth (5
Ih
) business day following
the date of posting. Such notices or other communications to be gi ven or addressed to the
parties at the following addresses:
If to the Company: Francesca's Midwest Holdings
clo Francesca Restaurants, LLC
2200 E. Devon Avenue, Suite 250
Des 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 this
Agreement by signing below on the day and year indicated.
EMPLOYEE:
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Trent Brown Date
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FRANCESCA'S MIDWEST HOLDINGS, INC.
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Date
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