Item 1.01 Entry into a Material Definitive Agreement
Reference is made to the information set forth under Item 5.02 of this Current
Report on Form 8-K. The disclosure contained in Item 5.02 and the information
contained in Exhibit 10.26 attached hereto is hereby incorporated by reference
in its entirety into this Item 1.01.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On November 2, 2009, the Board of Directors of Kona Grill, Inc. (the "Company")
appointed Marc A. Buehler to serve as the Company's Chief Executive Officer and
President. Mr. Buehler was also appointed as a member of our Board of Directors.
Prior to joining the Company, Mr. Buehler was the Chief Executive Officer of LS
Management, Inc., the owner and operator of the Lone Star Steakhouse &
Saloon/Texas Land and Cattle Steak House restaurant concepts, as well as Lone
Star Business Solutions, where he served from July 2007 to May 2009. From
July 2002 to July 2007, Mr. Buehler worked at Romacorp, which operates and
franchises more than 200 Tony Roma's casual dining locations, as the Vice
President of Marketing, and was promoted to Chief Executive Officer, President,
and Director of Romacorp during July 2006. Prior to that, Mr. Buehler served as
Vice President of Marketing at Eateries, Inc. from March 1999 to July 2002 and
Marketing Manager at Applebee's International, Inc. from February 1996 to
March 1999. Mr. Buehler also serves as a member of the board of directors of
Share Our Strength and is the Co-Chairperson of the National Restaurant
Association's Marketing Executives Group. He is also a member of the Young
Presidents' Organization.
On November 2, 2009, the Company entered into an employment agreement (the
"Agreement") with Mr. Buehler, pursuant to which the Company agreed to employ
Mr. Buehler on an at-will basis. Under the Agreement, Mr. Buehler will receive
an annual base salary of $350,000. The Agreement also provides for the payment
to Mr. Buehler of annual incentive compensation, subject to the attainment of
certain objectives established by Mr. Buehler and the Company's Board of
Directors, as well as other bonus payments that the Board of Directors
determines are appropriate, if any, in its discretion. Mr. Buehler is also
entitled to receive standard employee benefits made available to the Company's
executive officers, including vacation time. The Company will also reimburse Mr.
Buehler for relocation expenses to assist in his relocation to the Phoenix,
Arizona metropolitan area, including a $1,500 per month (on an after tax basis)
housing allowance until the earlier of his permanent relocation or June 30,
2010. The Company has agreed to include Mr. Buehler in any policies of
directors' and officers' insurance that it maintains from time to time. Subject
to certain conditions and exceptions, the Agreement also imposes a
non-competition and non-solicitation obligation on Mr. Buehler for a period of
12 months following termination of his employment with the Company.
In the event of termination of Mr. Buehler's employment due to his Disability
(as defined in the Agreement), the Company may terminate Mr. Buehler's
employment, but must pay to Mr. Buehler (a) any base salary earned as of the
date of termination and for 180 days after termination; (b) a pro rata amount of
the incentive bonus earned for the year of termination; and (c) any other
payments or benefits due under any Benefit Plans (as defined in the Agreement).
In the event of termination of Mr. Buehler's employment without Cause (as
defined in the Agreement) or by Mr. Buehler for Good Reason (as defined in the
Agreement), which in both cases requires 90 days' prior notice, the Company must
pay or provide to Mr. Buehler (a) any base salary earned as of the date of
termination; (b) any other payments or benefits due under any Benefit Plans;
(c) an amount equal to his base salary for the 12-month period following
termination; (d) continuation of medical and dental benefits in effect under
COBRA for the 12-month period following termination; and (e) a pro rata amount
of the incentive bonus earned for the year of termination, and all unvested
stock options scheduled to vest over the 12 month period following termination
will immediately vest and be immediately exercisable. In the event of
termination of Mr. Buehler's employment for Cause or his resignation without
Good Reason, the Company must pay Mr. Buehler any earned base salary unpaid as
of that date and any accrued and vested payments or benefits due under any
Benefit Plans.
The Agreement provides that if Mr. Buehler terminates his employment on a date
that is more than one year following a Change in Control (as defined in the
Agreement), or if the Company terminates Mr. Buehler's employment at any time
following a Change in Control, he will be entitled to receive (a) any base
salary earned as of the date of termination; (b) any other payments or benefits
due under any Benefit Plans; (c) an amount equal to his base salary for the
15-month period following termination; (d) continuation of medical and dental
benefits in effect under COBRA for the 15-month period following termination;
and (e) the incentive bonus earned for the year of termination, and all unvested
stock options will immediately vest and be immediately exercisable during the
three-month period following termination. The Agreement further provides that if
Mr. Buehler terminates his employment during the one year period following a
Change in Control, other than for Good Reason, then he will not be entitled to
certain compensation and benefits payable upon a Change in Control.
On November 2, 2009, in connection with this appointment as Chief Executive
Officer and President, the Company's Board of Directors granted Mr. Buehler an
initial grant of 200,000 non-qualified stock options with an exercise price
equal to the fair market value of the Company's common stock on the date of
grant. The options vest ratably over a two-year period with 25,000 shares
vesting on February 2, 2010 and each subsequent three-month period thereafter
until November 2, 2011, at which time all options will be fully vested. The
options expire upon certain events, but in any event the options will expire not
later than November 2, 2014.
The foregoing does not constitute a complete summary of the terms of the
Agreement and reference is made to the Agreement that is attached as
Exhibit 10.26 to this report and is hereby incorporated by reference herein.
Effective as of the date of Mr. Buehler's employment with the Company, Mr. Mark
Bartholomay, the Company's interim Chief Executive Officer, resumed his position
as the Company's Chief Operating Officer.
Separately, on October 29, 2009, the Board of Directors appointed Berke Bakay to
serve as a member of the Company's Board of Directors. Mr. Bakay is the founder
and managing member of BBS Capital Management, LP, a Texas limited partnership
that serves as the investment manager to the BBS Capital Fund, LP. BBS Capital
Fund, LP currently focuses its investments mainly in the United States and the
People's Republic of China in the consumer discretionary, education, and media
industries. Prior to forming BBS Capital Management, LP, Mr. Bakay was the
co-founder and co-portfolio manager of Patara Capital Management, LP (an
investment management firm based in Dallas, TX). Prior to co-founding Patara
Capital Management, LP, Mr. Bakay worked as an equity analyst at Southwest
Securities, a division of SWS Group (NYSE: SWS), where he covered the specialty
retail industry.
There is no arrangement or understanding pursuant to which Mr. Bakay was
appointed as a member of the Company's Board of Directors. BBS Capital Fund, LP
owns 1,050,000 shares of our common stock, or approximately 11.49% of the total
outstanding shares. As noted above, Mr. Bakay is the founder and managing member
of BBS Capital Management, LP, the investment manager to BBS Capital Fund, LP,
and thus he may be deemed a beneficial owner of the shares of our common stock
owned by BBS Capital Fund, LP.
For service as a director, Mr. Bakay will receive an annual cash retainer of
$15,000 which will be paid quarterly. In connection with his appointment as a
director, on October 29, 2009 Mr. Bakay was also granted a stock option to
purchase 10,000 shares of the Company's common stock at a price equal to the
fair market value of the Company's common stock on the date of appointment as a
director. Such option award vested immediately.
Effective October 31, 2009, the Board of Directors also accepted the resignation
of W. Kirk Patterson from the Board of Directors. Mr. Patterson had served as
Chairperson of the Compensation Committee, and as a member of both the Audit and
Nominating Committees, since January 2005. There was no disagreement or dispute
between Mr. Patterson and the Company relating to the Company's operations,
policies or practices. The Board appointed an existing director, Douglas
Hipskind, as a member of the Audit Committee and Richard Hauser, also an
existing director, as a member of the Compensation Committee.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
10.26 Employment Agreement, dated as of November 2, 2009, between
the Company and Marc A. Buehler
99.1 Press Release dated November 2, 2009 titled "Kona Grill, Inc.
Appoints Marc Buehler as Chief Executive Officer & President"
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