SEPARATION AGREEMENT
Exhibit 10.14
This Separation Agreement (hereinafter “Agreement”) is made and entered into this 31st day of
January, 2006 (hereinafter the “Effective Date”), by and between Kona Grill, Inc., a Delaware
corporation (hereinafter referred to as the “Company”), and C. Xxxxxx Xxxxxxx (hereinafter referred
to as “Employee”).
RECITALS
WHEREAS, Employee is currently employed by the Company as its President and Chief Executive
Officer;
WHEREAS, Employee’s employment with the Company is governed by an “Employment Terms Letter,”
which is Exhibit 10.1(a) to the Company’s Registration Statement on Form S-1 (File No. 333-125506)
filed with the Securities and Exchange Commission on June 3, 2005, as amended by the “Amended
Employment Terms Letter,” which is Exhibit 10.1(b) to the Company’s Registration Statement on Form
S-1 (File No. 333-125506) filed with the Securities and Exchange Commission on June 3, 2005;
WHEREAS, Employee has elected to voluntarily resign his position as an officer of the Company,
as well as his position on the Company’s Board of Directors, effective January 31, 2006;
WHEREAS, Employee’s status with the Company will end, effective April 30, 2006 (hereinafter
the “Separation Date”);
WHEREAS, the Company and Employee, in order to settle, compromise and fully and finally
release any and all claims and potential claims against the Company or Company Releasees (as
defined below), arising out of Employee’s employment and the cessation thereof, have agreed to
resolve these matters on the terms and conditions set forth herein; and
WHEREAS, Employee acknowledges he is waiving rights and claims described herein in exchange
for consideration in addition to anything of value to which he is already entitled;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the
parties agree as follows:
1. Recitals. The recitals set forth above are true, accurate, and correct, and are
incorporated in this Agreement by this reference and made a material part of this Agreement.
2.1 Severance Benefits. Upon expiration of the revocation period referenced in
Paragraph 12 of this Agreement, and provided Employee does not revoke
this Agreement pursuant to Paragraph 12 of this Agreement, Employee shall be entitled to the
following benefits from the Company:
x. Xxxxxxxxx Payment: Pursuant to Section 7 of the Employment Terms Letter, as
amended by the Amended Employment Terms Letter, twelve (12) months’ base salary, in the gross
amount of $360,000 (Three Hundred Sixty Thousand Dollars and 00/100 Cents), minus all statutory
deductions, to be paid to Employee in accordance with the Company’s ordinary payroll practices,
over the period May 1, 2006 to April 30, 2007.
b. Annual Bonus: Notwithstanding any contrary provisions in the Employment Terms
Letter or the Amended Employment Terms Letter, the gross amount of $157,500.00 (One Hundred
Fifty-Seven Five Hundred and No/100 Dollars) in satisfaction of any and all annual bonus
entitlement or obligation. Employee specifically acknowledges and agrees that this amount is an
amount to which he was not otherwise entitled, and that it that it constitutes sufficient
consideration for the additional promises set forth in this Agreement.
c. Stock Options/Bonus Options: Notwithstanding any contrary provisions in the
Employment Terms Letter or the Amended Employment Terms Letter, Employee agrees and acknowledges
that the Company has previously provided him with all Stock Options and Bonus Options to which he
is entitled. To the extent any of those options are not currently vested, all options previously
granted to Employee shall vest as of the Separation Date. The Company and Employee agree that
Employee must exercise all options currently held by him by no later than May 1, 2006.
d. Medical Insurance: Subject to any applicable deductibles or co-payments, the
Company shall provide to the Employee, and Employee’s eligible dependents, medical insurance
benefits under the Company’s Group Medical Plan, or the plan then in effect for similarly situated
employees, as amended from time to time, for a period of up to eighteen (18) months starting May 1,
2006, or until the date on which Employee obtains employment with a new employer that offers
medical coverage for the Employee and Employee’s eligible dependents, which does not exclude
coverage for any pre-existing conditions (regardless of any deductible or co-payments or Employee
contribution requirements for such medical coverage), and becomes eligible for such coverage (“New
Coverage”), whichever is earlier. Employee shall give the Company written notice of New Coverage.
Employee acknowledges that Employee’s COBRA period shall begin on the Separation Date, and that the
foregoing medical insurance coverage under the Company’s Group Medical Plan constitutes
Company-paid COBRA. Coverage provided during this period of Company-paid COBRA shall be at the
same level of coverage previously elected by or provided to Employee during his employment with the
Company, subject to provider modification(s) to the applicable insurance benefits.
2.2 Other Payments. The Company will pay Employee all earned but unpaid compensation
through the Separation Date, as well as accrued but unused
vacation pay to which Employee is entitled through the Separation Date, under the Company’s
vacation pay policy and/or practices, in accordance with applicable law.
2.3 Taxes. All payments and other benefits provided to Employee under this Agreement
shall be subject to any withholding and employment taxes consistent with the character of the
payments in accordance with applicable law.
2.4. Adequate Consideration. Employee acknowledges and agrees that Paragraph 2.1 of
this Agreement includes and provides for substantial consideration to Employee in addition to
anything of value to which he is, as a matter of law, otherwise entitled.
3. Release. In consideration of his receipt of the severance benefits set forth in
Paragraph 2.1 of this Agreement, Employee, for himself, his spouse (if any), and their respective
heirs, estates, representatives, executors, successors and assigns, hereby fully, forever,
irrevocably, and unconditionally release and discharge the Company, including the Company’s past
and present officers, directors, members, stockholders, parent companies, subsidiaries, affiliates,
successors, assigns, agents, employees, representatives, lawyers, administrators, and all persons
acting by, through, under, or in concert with them (collectively, the “Company Releasees”), from
any and all claims which he or they may have against them, or any of them, which could have arisen
out of any act or omission occurring from the beginning of time to the Effective Date of this
Agreement, whether now known or unknown, asserted or unasserted. This release includes, but is not
limited to, any and all claims brought or that could be brought pursuant to or under the Americans
with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Civil Rights Act of 1991, the National Labor Relations Act, the Fair Labor
Standards Act, the Employee Retirement and Income Security Act (ERISA), the Xxxxxxxx-Xxxxx Act, the
Consolidated Omnibus Budget Reconciliation Act (COBRA), the Family and Medical Leave Act, the Equal
Pay Act, the Minnesota Human Rights Act, the Minnesota Fair Labor Standards Act, or any other
statute set forth in the Minnesota Statutes, or any other federal, state or local administrative
statute, law, rule, regulation, ordinance, or order that pertains or relates to, or otherwise
touches upon, the employment relationship between the Company and Employee; and any and all actions
for breach of contract, express or implied, breach of the covenant of good faith and fair dealing,
express or implied, promissory estoppel, wrongful termination in violation of public policy, all
other claims for wrongful termination and constructive discharge, and all other tort claims,
including, but not limited to, assault, battery, false imprisonment, intentional interference with
contractual relations, intentional or negligent infliction of emotional distress, invasion of
privacy, negligence, negligent investigation, negligent hiring, supervision, or retention,
defamation, intentional or negligent misrepresentation, fraud, and any and all other laws and
regulations relating to employment, employment termination, employment discrimination, harassment,
and/or retaliation, wages, hours, employee benefits, compensation, sexual harassment, and any and
all claims for attorneys’ fees and costs, pursuant to or arising under any federal, state, or local
statute, law, rule, regulation, ordinance, or order. This release of claims expressly includes,
but is not limited to, any and all claims arising out of or in any way related to Employee’s
employment with the
Company, or both, whether known by him at the time of execution of this Agreement or not. By
signing this Agreement, however, Employee does not waive any rights or claims that may arise after
the Effective Date of this Agreement.
4. Form 8-K Disclosure. Employee acknowledges that the Company provided him with a
proposed Form 8-K disclosure, a copy of which is attached hereto as Exhibit A. Employee represents
that he reviewed this proposed disclosure, and that agrees with each and every material
representation therein.
5. Covenant Not to Xxx. Employee warrants that he has no pending complaints, charges,
or claims for relief against the Company or Company Releasees, or any of them, with any local,
state, or federal court or administrative agency. Employee understands and agrees that this
Agreement may be pled as a complete bar to any action or suit before any administrative body or
court with respect to any complaint, charge, or claim under federal, state, local, or other law
relating to any possible claim that existed or may have existed against the Company or Company
Releasees, or any of them, arising out of any event occurring from the beginning of time through
the Effective Date of this Agreement.
6. Non-Disparagement. Employee agrees that neither he nor anyone acting on his behalf
will make any derogatory or disparaging statement about the Company or Company Releasees, or any of
them. Employee agrees and understands that the promise of non-disparagement is a material
inducement to the Company in agreeing to provide the benefits set forth in Paragraph 2.1(a) and
2.1(d), and that in the event Employee breaches the provisions of this Paragraph, it shall
constitute a material breach of this Agreement, and that the Company shall be entitled to cease
making any payments to Employee under Paragraph 2.1(a) and to cease to provide Employee with any
Company-paid COBRA under Paragraph 2.1(d), as well as the right to seek all damages caused by such
breach, including, without limitation, reputational damages and punitive damages.
7. Restrictive Covenants. Employee acknowledges and agrees that he is bound and shall
remain bound by the terms of the Confidentiality and Non-Compete Agreement he executed in
connection with and pursuant to Paragraph 8 of the Employment Terms Letter, a copy of which is
attached hereto as Exhibit B and incorporated herein by reference. The terms of that
Confidentiality and Non-Compete Agreement shall survive the termination of his employment with the
Company and remain enforceable. Consistent with the provisions set forth in the Confidentiality
and Non-Compete Agreement, Employee reaffirms, agrees, and acknowledges that, at all times after
the Separation Date, he will not, without the prior written consent of the Company, directly or
indirectly, (i) misappropriate or otherwise make any use of Company trade secrets or Proprietary
Information (as that term is defined in the Confidentiality and Non-Competition Agreement); or (ii)
release or otherwise divulge such trade secrets or any other confidential, secret, or Proprietary
Information of the Company to any third party, except as is reasonably necessary in furtherance of
his employment duties hereunder. Notwithstanding anything set forth in this Paragraph 7, Employee
shall not be deemed to be in breach of this Paragraph if Employee: (i)
discloses information pursuant to express written authorization of the Company; or (ii)
discloses information to any governmental authority or court, pursuant to a duty imposed by law
(provided, however, that Employee shall notify the Company of the disclosure at least five (5)
business days prior to such disclosure).
8. Non-Solicitation of Key Company Employees. Employee agrees that, for a period of
eighteen (18) months immediately following Separation Date, or, in the alternative, in the event
any reviewing court finds eighteen (18) months after the Separation Date to be overbroad in
duration and unenforceable, for a period of twelve (12) months after the Separation Date, or, in
the alternative, in the event any reviewing court finds twelve (12) months to be overbroad in
duration and unenforceable, for a period of nine (9) months after the Separation Date, or, in the
alternative, in the event any reviewing court finds nine (9) months to be overbroad in duration and
unenforceable, for a period of six (6) months after the Separation Date, or, in the alternative, in
the event any reviewing court finds six (6) months to be overbroad in duration and unenforceable,
for a period of three (3) months after the Separation Date, Employee shall not solicit, encourage,
influence, induce, or cause others to solicit, encourage, influence, or induce any executive
employee or management employee of the Company (collectively referred to herein as “Key Company
Employees”) to terminate their employment relationship with the Company, or solicit, induce, seek
to hire, offer employment to and/or hire any Key Company Employee, either as an employee,
consultant, or independent contractor. If Employee violates the obligations contained in this
Section, the time periods hereunder shall be extended by a period of time equal to that period
beginning when the activities constituting such violation commenced and ending when the activities
constituting such violation terminated. Employee agrees that the consideration provided for in
Paragraph 2.1 of this Agreement is adequate and sufficient consideration for the promises provided
in this Paragraph 8.
9. Return of Company Property. Employee agrees to and shall return to the Company all
Company property in his actual or constructive possession prior to or on the Separation Date.
10. Consultation with an Attorney. The Company has advised Employee to consult with an
attorney of his choosing prior to executing this Agreement. Employee represents and agrees that he
has thoroughly discussed all aspects of his rights and this Agreement, including his waiver of
claims under the Age Discrimination in Employment Act, with an attorney, to the extent he wished to
do so, prior to his placing of his signature on this Agreement.
11. Review. A copy of this Agreement was delivered to Employee on January 31, 2006.
Employee has been advised that he has twenty-one (21) days from the date he is presented with this
Agreement to consider this Agreement. If Employee executes this Agreement before the expiration of
twenty-one (21) days, he acknowledges that he has done so for the purpose of expediting the payment
of severance benefits, and that he has expressly waived his right to take twenty-one (21) days to
consider this Agreement.
12. Revocation. Employee may revoke this Agreement for a period of seven (7) days
after he signs it. Employee agrees that if he elects to revoke this Agreement, he will notify
Company (c/o Xxxxx X. Xxxxxxxx, Xxxxxxxxx Xxxxxxx, LLP, 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, Arizona, 85106) in writing, via certified mail, on or before the expiration of the
revocation period. Receipt of proper and timely notice of revocation by the Company cancels and
voids this Agreement. Provided that Employee does not provide notice of revocation, this Agreement
will become effective upon expiration of the revocation period.
13. Confidentiality. Employee agrees that he will keep the terms and fact of this
Agreement confidential. He will not disclose the existence of this Agreement or any of its terms to
anyone except his immediate family, attorneys, or accountants, unless required by law.
14. Amendment. This Agreement shall be binding upon the parties and may not be
amended, supplemented, changed, or modified in any manner, orally or otherwise, except by an
instrument in writing of concurrent or subsequent date signed by both of the parties.
15. Entire Agreement. This Agreement contains and constitutes the entire
understanding and agreement between the parties hereto with respect to the subject matter hereof,
and, except as otherwise provided herein, cancels all prior or contemporaneous oral or written
understandings, negotiations, agreements, commitments, representations, and promises in connection
herewith, including but not limited to any contrary provisions set forth in the Employment Terms
Letter and/or the Amended Employment Terms Letter.
16. Section Headings. The section headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its interpretation.
17. Construction. The parties hereto acknowledge and agree that each party has
participated in the drafting of this Agreement and has had the opportunity to have this document
reviewed by the respective legal counsel for the parties hereto and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the drafting party shall
not be applied to the interpretation of this Agreement. No inference in favor of, or against, any
party shall be drawn from the fact that one party has drafted any portion hereof.
18. Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as the signatories.
19. Choice of Law and Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona. The parties agree that any claim, action,
complaint, lawsuit, or other dispute arising between the parties related to the terms of this
Agreement shall be brought and heard in the federal or state courts located in Maricopa County,
Arizona, and Employee expressly consents to the exercise of personal jurisdiction over him by the
Arizona courts.
20. Severability. Should any provision in this Agreement be declared or determined by
any court to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall
not be affected, and the illegal or invalid part, term, or provision shall be deemed not to be a
part of this Agreement.
21. Effect of this Agreement. It is expressly understood and agreed that this
Agreement shall not in any way be construed at any time or for any purpose as an admission by the
parties that either of them has acted wrongfully with respect to the others.
22. Waiver. The failure of a party to insist upon strict adherence to any obligation
of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement. Any waiver of any
provision of this Agreement must be in a written instrument signed and delivered by the party
waiving the provision.
23. Attorneys’ Fees. Should any legal action be commenced arising out of this
Agreement, the prevailing party in any such action shall be entitled to an award of attorneys’ fees
incurred therein.
[Remainder of Page Intentionally Blank;
Signatures on Following Page]
Signatures on Following Page]
By signing below, the parties acknowledge that they have carefully read and fully understand
all of the provisions of this Agreement and that they are voluntarily entering into this Agreement.
| KONA GRILL, INC., a Delaware corporation | ||||||
Dated:
|
By | |||||
| Its | ||||||
Dated: |
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| C. Xxxxxx Xxxxxxx | ||||||
