EXHIBIT 10.1


 


SEPARATION AGREEMENT


 


THIS SEPARATION AGREEMENT
(the “Agreement”) is made and entered into as of January 9, 2006, by and
between Grant Guenther (“Employee”) and Orange 21 Inc., a Delaware
corporation (the “Company”), with reference to the following facts:


 


1.                                       Employee
is employed as Vice President of Marketing; and


 


2.                                       Employee’s
employment with the Company will end as of February 15, 2006 (the “Separation
Date”).


 


NOW, THEREFORE, in
consideration of the mutual promises and covenants contained herein, it is
hereby agreed by and between the parties hereto as follows:


 


1.                                       Consideration.  In consideration of the covenants and
promises contained in this Agreement, and as full and final compensation to
Employee for all services as an employee, Employee shall be entitled to
continued employment with the Company until the Separation Date, unless the
Company determines that Employee’s employment must be terminated for cause at
an earlier time.  As a result, Employee
shall continue to receive salary payments and benefits on the regular paydays
of the Company until the Separation Date. 
Cause is defined as follows: materially breaching this Agreement,
refusing to perform duties as assigned, committing any act of dishonesty,
knowingly violating any applicable law or regulation in the course of his
duties, violating a Company policy which violation has or may have a material
adverse impact on the Company, failing to perform his duties in a timely manner
(resulting in a significant loss to or impairment of the Company’s interests),
becoming disabled such that he cannot perform his essential duties with or
without reasonable accommodation, or dying. 
Additionally, cause, as defined above, is deemed to exist if the Company
makes a determination that cause exists in good faith after a reasonable
investigation.  On or about the
Separation Date, Employee will receive a second Severance Agreement which will
entitle him, should he properly execute the second Severance Agreement, to
further consideration.  The details of
the second Severance Agreement are set forth in a letter attached hereto and
incorporated by reference herein.


 


2.                                       Accrued
Salary and Vacation.  Employee
acknowledges and understands that as of the Separation Date, the Company will have
paid Employee the following amounts, subject to standard withholdings for tax
and social security purposes:  (i) all
accrued salary and bonus through the Separation Date; and (ii) all unused
and accrued vacation pay Employee earned prior to the Separation Date.  Employee acknowledges and agrees that such
amounts will be all that he is entitled to receive as salary, bonus, and
vacation pay.  All applicable taxes and
required withholdings shall be deducted from the Separation Payment.


 





















 


3.                                       Stock
Options.


 


Employee
acknowledges that the vested 24,062 stock options he currently holds to
purchase shares of the Company’s common stock will lapse ninety (90) days after
the Separation Date.


 


4.                                       Non-solicitation
of Employees.


 


Employee agrees that for
the term of his employment with the Company and for one year and six months
after the Separation Date, Employee, will not encourage or solicit any employee
or consultant of the Company to leave the Company for any reason or to devote
less than all of any such employee’s or consultant’s efforts to the affairs of the
Company.  The restriction set forth in
this section is considered by the parties to be reasonable for the
purposes of protecting the business of the Company.  However, if any such restriction is found by
any court of competent jurisdiction to be unenforceable because its duration,
range of activities or geographic area is too extensive, this section shall
be interpreted to extend for the maximum period of time, range of activities or
geographic area enforceable by law.


 


5.                                       Non-disparagement.  The Parties agree that they shall not,
directly or indirectly, by any manner or means, in public or in private,
disparage, demean, insult, or defame each other, or any of the officers,
employees, agents or any other person associated with either party at any time.
 This provision, however, does not
prohibit any party, if required under oath, to provide truthful and accurate
testimony.


 


6.                                       Company
Property; Reimbursement for Business Expenses.  Employee shall, as of the Separation Date,
return to the Company all Company property which he had in his possession at
any time, including, but not limited to: computer recorded information,
tangible property, credit cards, entry cards, identification badges and
keys.  Additionally, Employee shall, as of
the Separation Date, submit all vouchers for reasonable business expenses
incurred by Employee in the course of his employment.  Such expenses shall be reimbursed in
accordance with the Company’s policies therefor.  Subsequent to the Separation Date, Employee
shall no longer be authorized to incur any expense on behalf of the Company.


 


7.                                       Release
of Claims.  In consideration of the
above described payments, Employee and the Company do hereby unconditionally,
irrevocably and absolutely release and discharge each other, and all related
holding, parent or subsidiary entities, and their affiliates, directors,
officers, employees, agents, attorneys, stockholders, insurers, successors
and/or assigns, from any and all liability, claims, demands, causes of action,
or suits of any type, whether in law and/or in equity, known or unknown,
related directly or indirectly or in any way connected with any transaction,
affairs or occurrences between them to date, including, but not limited to,
Employee’s employment with the Company and the separation of said employment.
This release shall include but not be limited to a release of claims arising
under any state or federal statute or common law regulating or affecting
employment, including Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with


 


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Disabilities Act, the Equal Pay Act, the Fair Labor
Standards Act, the California Labor Code, the California Fair Employment and Housing
Act, and any other statutory or common law provision relating to or affecting
Employee’s employment by the Company, including any federal or state statutory
provision covering any age discrimination in any form by the Company against
Employee, except any claim for worker’s compensation or unemployment insurance.


 


8.                                       Section 1542
Waiver.  Employee and the Company acknowledge
that they have read and understand Section 1542 of the Civil Code of the
State of California (“Section 1542”) which reads as follows:


 


A general release does not extend to claims which
the creditor does not know or suspect to exist in his or her favor at the time
of executing the release, which if known by him or her must have materially
affected his or her settlement with the debtor.


 


Employee and the Company hereby
expressly waive and relinquish all rights and benefits under Section 1542
and any law or legal principle of similar effect in any jurisdiction with
respect to the release granted in this Agreement, including, but not limited
to, any jurisdiction in the United States. 
The parties acknowledge that they have separately bargained for the
waiver of Section 1542.


 


9.                                       Dispute
Resolution.  Except as prohibited by
law, any disputes arising from the interpretation, breach, or enforcement of
this Agreement, which cannot first be resolved by negotiation between the
parties, shall be resolved through final and binding arbitration in San Diego,
California, or within the County where the Employee is or was last employed by
the Company.  The law applicable to any
controversy to be arbitrated shall be the law of the state where the Employee
is or was employed, or applicable federal law, except that the Federal
Arbitration Act shall apply to the issue of arbitrability.  The arbitration shall be conducted by a
single neutral arbitrator selected by the parties from a list maintained and
provided by the American Arbitration Association (“AAA”) or Judicial
Arbitration and Mediation Services (“JAMS”). 
The arbitrator shall have no power to award costs and attorneys’ fees
except as provided by statute or by separate written agreement between the
parties.  This arbitration provision
shall supersede any and all prior agreements between the Company and Employee
on the subject of arbitration of employment-related claims.


 


10.                                 Costs
and Fees.  Other than as set forth
specifically herein, the parties will bear their own costs, expenses, and
attorneys’ fees incurred in or arising out of or in any way related to the
matters released herein.


 


11.                                 Entire
Agreement.  Except for any term or
condition of an employment agreement between the parties which survives the
expiration or termination of such agreement, and is not inconsistent with this
Agreement, this Agreement, including all attachments hereto, contains the
entire agreement between the parties and constitutes the complete, final, and
exclusive embodiment of their agreement with respect to the subject matter
hereof.  This Agreement is executed
without reliance upon any promise,


 


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warranty or representation, written or oral, by any
party or any representative of any party other than those expressly contained
herein, and it supersedes any other such promises, warranties or
representations.  Each party has had sufficient
time to read, and has carefully read this Agreement, has been advised to
consult with an attorney regarding its meaning and consequences, consents to
all of its terms voluntarily after taking sufficient time to think about the
advantages and disadvantages of signing this Agreement, and signed the same of
his or its own free will.  This Agreement
may not be amended or modified except in a writing signed by both Employee and
the Chief Executive Officer of the Company. 
Nothing in this Agreement is intended to relieve the parties of their
obligations under the Employee’s Indemnity Agreement or any confidential or
proprietary information agreements with the Company.


 


12.                                 Applicable
Law.  This Agreement shall be deemed
to have been entered into and shall be construed and enforced in accordance
with the laws of the State of California, except that as provided in Section 9,
the law applicable to any controversy to be arbitrated shall be the law of the
state where the Employee is or was employed, or applicable federal law, except
that the Federal Arbitration Act shall apply to the issue of arbitrability.


 


13.                                 Successors
and Assigns.  This Agreement shall
bind the heirs, personal representatives, successors, assigns, executors, and
administrators of each party, and inure to the benefit of each party, and his
or its heirs, successors and assigns.


 


14.                                 No
Admission.  It is understood and
agreed by the parties that this Agreement represents a compromise settlement of
various matters, and shall not be construed to be an admission of any liability
or obligation by either party to the other party or to any other person.


 


15.                                 Section Headings.  The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.


 


16.                                 Severability.  If any provision of this Agreement is
determined to be invalid or unenforceable, in whole or in part, this
determination will not affect any other provision of this Agreement.


 


17.                                 Counterparts.  This Agreement may be executed in two
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.


 


18.                                 Drafting.                                                 None
of the parties hereto shall be considered to be the drafter of this Agreement
or any provision hereof for the purpose of any statute, case law or rule of
interpretation or construction that might cause any provision to be construed
against the drafter hereof.


 


19.                                 Notices.  All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed by registered or certified mail, return receipt
requested, addressed to the


 


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Company at 2070 Las Palmas Drive, Carlsbad,
California, 92009 attention: Chief Executive Officer, and to Employee at the
address set forth below his signature.


 


20.                                 Confidentiality.  The parties hereto agree not to divulge or
publicize the existence of this Agreement or the terms hereof except to their
accountants, lawyers, and if necessary, their licensed health care
professionals and as may be necessary to enforce this Agreement or as may be
required by law.


 


21.                                 Counsel.  Employee acknowledges that he fully
understands his right to discuss this Agreement with independent counsel of his
choice, that he is encouraged to do so, that he has carefully read and fully
understands this entire Agreement and that he is voluntarily entering into this
Agreement.


 


IN WITNESS WHEREOF,
the parties have duly authorized and caused this Agreement to be executed as
follows:


 


	
  EMPLOYEE:

  	
   

  	
  THE COMPANY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ORANGE 21 INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Grant Guenther

  	
   

  	
  By:

  	
  /s/ Barry Buchholtz

  	
   

  
	
  Grant Guenther

  	
   

  	
  Barry
  Buchholtz

  	
   

  
	
   

  	
   

  	
  Chief Executive Officer

  	
   

  
	
  2070 Las Palmas Drive

  	
   

  	
   

  	
   

  
	
  Carlsbad, CA 92009

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date of Execution: January 9,
  2006

  	
   

  	
  Date of Execution: January 9,
  2006

  	
   

  
					



 


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Orange 21 Inc.


2070 Las Palmas Drive


Carlsbad, CA 
92009


PH:  (760) 804-8420


FX:  (760) 804-8442


NASDAQ:  [ORNG]


www.orangetwentyone.com


 


January 9, 2006


 


 


Mr. Grant
Guenther 

2070 Las Palmas


Carlsbad,
CA  92009


 


Re:                               Separation Agreement


 


Dear Mr. Guenther:


 


Included with this letter is a Separation Agreement (“Agreement”).  If you choose to sign the Agreement, your
employment with Orange 21 Inc. (“O21”) will continue until February 15,
2006, unless O21 determines that your employment should be terminated for cause
at an earlier time (the definition of cause is set forth in the Agreement).


 


Shortly before the date of your separation from O21, in February 2006,
O21 will provide you with a subsequent release. 
The subsequent release will cover the time-period from the date you sign
the Agreement mentioned above, until the date of your separation from O21.  If you choose to sign this subsequent
release, you will receive three months of severance pay amounting to $37,803.00
and will be provided a three-month consulting agreement for your
signature.  If you and O21 sign the consulting
agreement, your monthly pay under the three-month consulting agreement will be
$13,601.00.  If O21 elects not to sign
the consulting agreement, you will be paid six months of severance pay in the
amount of $78,606.00 in lieu of the severance payment of $37,803 described
above (note: for the avoidance of doubt, in no event shall the severance
payment and the payments under the consulting agreement exceed $78,606.00
unless expressly agreed to by O21).  To
receive the severance pay and the consulting agreement you must sign the
release provided to you by O21.


 


Please sign below to indicate your acceptance of the substance of this
letter.


 


Very truly yours,


 


	
  /s/ Barry Buchholtz

  	
   

  	
   

  
	
  Barry Buchholtz

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:  1/9/2006

  	
   

  	
  /s/ Grant Guenther

  	
   

  
	
   

  	
   

  	
  Grant Guenther