1 EXHIBIT 10.12 MANAGEMENT AGREEMENT This AGREEMENT made and entered into as of the 1st day of January 1996, between FAMOUS DAVE'S OF MINNEAPOLIS, INC., a Minnesota corporation ("Manager"), and FAMOUS DAVE'S ENTERPRISES, INC., a Minnesota corporation (the "Owner"), which owns and operates a barbecue restaurant in Hayward, Wisconsin (the "Restaurant"). I. GENERAL 1. The Owner hereby retains the Manager for the purpose of rendering management and administrative services needed for the operation of the Restaurant on the basis hereinafter set forth. 2. The Manager shall perform all services described herein for the account of and as agent of the Owner. All such services shall be rendered subject to the control of the Owner, which shall have final authority in all matters relating to the Restaurant's operations. The Manager shall use reasonable judgment in discharging its duties hereunder. II. MANAGEMENT SERVICES 1. At Owner's request, Manager agrees to provide the following consulting services and management advice to Owner in connection with the operation of the Restaurant, in the same manner as is customary and usual in the operation of comparable facilities, and to consult with the Owner and keep the Owner advised as to all major policy matters affecting the Restaurant. 2. Services specified in subparagraph 1 include, but are not limited to, advice and consultation relating to the following: A. Licensure of the Restaurant with the proper agencies, including the filing of any required local, state and federal reports; B. The purchase by the Owner of hazard, liability and other necessary insurance coverage for the Restaurant; C. Review of the Owner's personnel requirements, consulting with the Owner as to personnel needs and hiring personnel; D. Establishment of staffing schedules, wage structures and personnel policies for all personnel; E. Purchase or lease by the Owner of all food, beverages, supplies and equipment used in the operation of the Restaurant; F. Day-to-day operations of the Restaurant to ensure the operations are conducted in a businesslike manner; G. Developing an ongoing advertising and promotion program; 2 H. Preparation of budgets and operation plans for the Restaurant; I. Accounting and record keeping, internal control, inventory control, and all other financial controls relating to Restaurant operation. 3. The Manager is not authorized to make purchases and enter into contracts relating to the affairs of the Restaurant. III. ACCOUNTING AND BOOKKEEPING SERVICES Manager shall perform the following accounting and bookkeeping services in connection with the operation of the Restaurant: A. Receipt for and deposit in a special bank account selected by the Owner, separate from all other monies of the Manager, all funds received from the operation of the Restaurant and supervise the disbursement of such funds for the operating expenses of the Restaurant; B. Maintain the books of account, including all journals and ledgers, check register and payroll records; C. Process vendors' invoices and other accounts payable; D. Prepare payroll checks from time sheet summaries prepared under the Manager's supervision; E. Prepare payroll and supervise preparation of Owner's tax returns; F. Prepare monthly bank reconciliations; and G. Prepare monthly operating statements in accordance with generally accepted accounting principles and provide them to the Owner. IV. FEE FOR SERVICE 1. Except as provided herein, the Manager shall be reimbursed on a monthly basis for its reasonable direct out-of-pocket expenses incurred in connection with the service prorated hereunder, including legal, accounting, travel, lodging and meal expenses. The Manager shall prepare an itemization of such costs on a monthly basis which shall be submitted to the Owner by the 15th of the subsequent month. The books and records of the Manager pertaining to the services provided hereunder shall be reasonably available to the Owner and its authorized agents for verification of reimbursed costs. 2. The Owner shall pay the Manager for the services rendered hereunder a fee equal to 3% of the gross food sales of the Restaurant per month (the "Service Fee"), payable on the 15th day of the following month. 2 3 V. TAX PARTNERSHIP The Manager and the Owner affirmatively state that they do not have the intention to form a joint venture or partnership, nor have they done so. The Manager is an independent contractor for the Owner, and no employee or agency relationship shall exist. VII. TERM The initial term of this Agreement shall be one year. Either party shall have the option to extend the term of this Agreement for additional one-year renewal terms on the same terms and conditions contained herein if a party gives the other party written notice of its election so to extend at least 30 days prior to the termination of the original or any renewal term and shall continue indefinitely thereafter until terminated by either party as set forth herein. VIII. TERMINATION Notwithstanding any provision hereof to the contrary, the Owner or the Manager shall have the right to terminate this Agreement: A. by the Owner, on 60 days' advance written notice, in the event the Manager ceases to be an affiliate of the Owner; B. by the Company, on 60 days' advance written notice, if the Owner sells or otherwise transfers ownership of the Restaurant to a non-affiliated party; C. by either party without cause after the initial and renewal terms, on 30 days' prior written notice; or D. by either party at any time for cause, if such cause has a material adverse effect on the Restaurant, upon 30 days' prior written notice to the other party, unless such cause is cured as provided herein. Such notice shall describe in detail the basis upon which the terminating party believes such termination is justified. Upon receipt of such notice, the other party shall immediately commence to attempt to cure and shall have 30 days during which to attempt to cure any alleged default under this Agreement, and upon such cure being effected, the terminating party's rights to terminate shall cease, and this Agreement will continue in full force and effect. Furthermore, if the Manager has diligently attempted to effect such a cure within such 30-day period but cannot complete such cure because of the failure of a third party (such as a governmental agency) to act within such period, then the Manager shall have a reasonable time beyond such 30-day period, not to exceed an additional 90 days, to complete its cure of the alleged basis for the Owner's election to terminate. In addition, either party may terminate this Agreement by notice to the other party upon such other party's filing of a voluntary petition in bankruptcy, making of an assignment for the benefit of creditors, adjudication as a bankrupt or insolvent, filing of a petition or answer seeking for itself a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or rule, seeking or consenting to or acquiescence in the appointment of a trustee, receiver or liquidator for all or any part of the party's 3 4 assets or ceasing to be a going concern. For purposes of this Agreement, "cause" shall be gross negligence, malfeasance or breach of this Agreement. VI. NOTICES All notices permitted or required by this Agreement shall be deemed given when in writing and delivered personally or deposited in the United States mail, postage prepaid, return receipt requested, addressed to the other party at the address set forth below or such address as the party may designate in writing: To Manager: Famous Dave's of Minneapolis, Inc. 7016 Antrim Road Edina, MN 55439 To Owner: Famous Dave's Enterprises, Inc. Route 5, Box 5167 Hayward, WI 54843 VIII. MISCELLANEOUS 1. Section headings are for convenience of reference only and shall not be used to construe the meaning of any provision of this Agreement. 2. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which shall together constitute one agreement. 3. Should any part of this Agreement be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity and enforceability of the remaining portions. 4. Each individual signing this Agreement warrants that such execution has been duly authorized by the party for which he is signing. The execution and performance of this Agreement by each party has been duly authorized by all applicable laws and regulations and all necessary corporate action, and this Agreement constitutes the valid and enforceable obligation of each party in accordance with its terms. 5. The Manager shall not assign this Agreement other than to an affiliate corporation or other entity controlled by the Manager. Affiliate shall mean any person directly or indirectly controlling, controlled by or under common control with the applicable party. 6. This Agreement shall be construed in accordance with the laws of the State of Minnesota. 7. This Agreement may not be modified except in writing executed by the party to be charged. 8. This Agreement constitutes the entire agreement of the parties hereto and supersedes all prior agreements and representations with respect to the subject matter hereof. 4 5 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. MANAGER: FAMOUS DAVE'S OF MINNEAPOLIS, INC. By:__________________________ Name: Title: OWNER: FAMOUS DAVE'S ENTERPRISES, INC. By:__________________________ Name: Title: 5