EXHIBIT 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT
OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
JULY 23, 2004
KONA GRILL, INC.
Warrant for the Purchase of Shares of Common Stock
For value received, Kona MN, a Delaware limited liability company, its
successors or assigns ("Holder"), is entitled to purchase from Kona Grill, Inc.,
a Delaware corporation (the "Company"), up to 1,000,000 fully paid and
nonassessable shares of the Company's Common Stock, $.01 par value per share
(the "Common Stock") at the price of $1.00 per share, subject to adjustments as
noted below (the "Exercise Price"). This Warrant amends and restates that
certain Warrant issued by the Company on July 23, 2004.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
1. Exercise of Warrant. Subject to the terms and conditions set forth
herein, this Warrant may be exercised in whole or in part, pursuant to the
procedures provided below, at any time on or before 7:00 p.m., Eastern time, on
July 30, 2009 (the "Expiration Date") or, if such day is a day on which banking
institutions in New York are authorized by law to close, then on the next
succeeding day that shall not be such a day. To exercise this Warrant the Holder
shall present and surrender this Warrant to the Company at its principal office,
with the Warrant Exercise Form attached hereto duly executed by the Holder and
accompanied by payment (either (a) in cash or by check, payable to the order of
the Company, (b) by cancellation by the Holder of indebtedness or other
obligations of the Company to the Holder, or (c) by a combination of (a) or
(b)), of the aggregate Exercise Price for the total aggregate number of shares
for which this Warrant is exercised. Upon receipt by the Company of this
Warrant, together with the executed Warrant Exercise Form and payment of the
Exercise Price for the shares to be acquired, in proper form for exercise, and
subject to the Holder's compliance with all requirements of this Warrant for the
exercise hereof, the Holder shall be deemed to be the holder of record of the
shares of Common Stock (or Other Securities) issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
2. Net Issue Exercise. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of Common Stock is greater than
the Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such
election in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
3. Reservation of Shares. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and Other Securities) from time
to time receivable upon exercise of this Warrant. All such shares (and Other
Securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid, and non-assessable and free of all preemptive
rights.
4. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the Fair Market Value (as
defined below) of such fractional share of Common Stock in lieu of each fraction
of a share otherwise called for upon any exercise of this Warrant.
5. Fair Market Value. For purposes of this Warrant, the Fair Market Value
of one share of Common Stock (or Other Security) shall be determined as of any
date (the "Value Date") by the Company's Board of Directors in good faith;
provided, however, that where there exists a public market for the Company's
Common Stock on the Value Date, the fair market value per share shall be either:
(a) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ system, the Fair Market Value shall be the last reported sale
price of the security on such exchange or system on the last business day prior
to the Value Date or if no such sale is made on such day, the average of the
closing bid and asked prices for such day on such exchange or system; or
(b) If the Common Stock is not so listed or so admitted to unlisted
trading privileges, the Fair Market Value shall be the mean of the last reported
bid and asked prices reported by the National Quotation Bureau, Inc. on the last
business day prior to the Value Date.
6. Assignment or Loss of Warrant. Subject to the transfer restrictions
herein (including Section 9), upon surrender of this Warrant to the Company or
at the office of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and of reasonably satisfactory indemnification by the Holder, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a replacement Warrant of like tenor and date.
7. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
8. Adjustments.
8.1 Adjustment for Recapitalization. If the Company shall at any
time after the date of this Warrant subdivide its outstanding shares of Common
Stock (or Other Securities at the time receivable upon the exercise of the
Warrant) by recapitalization, reclassification or split-up thereof, or if the
Company shall declare a stock dividend or distribute shares of Common Stock to
its shareholders, the
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number of shares of Common Stock (or Other Securities) subject to this Warrant
immediately prior to such subdivision shall be proportionately increased, and if
the Company shall at any time after the date of this Warrant combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of shares of Common Stock subject to this
Warrant immediately prior to such combination shall be proportionately
decreased. Any such adjustment and adjustment to the Exercise Price pursuant to
this Section 8.1 shall be effective at the close of business on the effective
date of such subdivision or combination or if any adjustment is the result of a
stock dividend or distribution then the effective date for such adjustment based
thereon shall be the record date therefor.
8.2 [Intentionally Omitted]
8.3 Adjustment in number of shares of Common Stock. Upon each
adjustment of the Exercise Price pursuant to Section 8.1, the Holder shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
8.4 Adjustment for Reorganization, Consolidation, Merger, Etc. In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the date of this Warrant or in case after such date the Company (or any
such other corporation) shall consolidate with or merge into another corporation
or convey all or substantially all of its assets to another corporation, then,
and in each such case, the Holder of this Warrant upon the exercise thereof as
provided in Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property receivable upon the exercise of this
Warrant after such consummation.
8.5 Certificate as to Adjustments. The adjustments provided in this
Section 8 shall be interpreted and applied by the Company in such a fashion so
as to reasonably preserve the applicability and benefits of this Warrant (but
not to increase or diminish the benefits hereunder). In each case of an
adjustment in the number of shares of Common Stock receivable on the exercise of
the Warrant, the Company at its expense will promptly compute such adjustment in
accordance with the terms of the Warrant and prepare a certificate executed by
two executive officers of the Company setting forth such adjustment and showing
in detail the facts upon which such adjustment is based. The Company will
forthwith mail a copy of each such certificate to each Holder.
8.6 Notices of Record Date, Etc. In the event that:
(a) the Company shall declare any dividend or other
distribution to the holders of Common Stock, or authorizes the granting to
Common Stock holders of any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities; or
(b) the Company authorizes any capital reorganization of the
Company, any reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another corporation, or any
conveyance of all or substantially all of the assets of the Company to another
corporation or entity; or
(c) the Company authorizes any voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
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(d) the Company shall have filed, or shall have entered into
an understanding with an underwriter to prepare, a registration statement that
would, once declared effective, cause termination of this Warrant in accordance
with clause (ii) of Section 1,
then, and in each such case, the Company shall mail or cause to be mailed to the
holder of this Warrant at the time outstanding a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up is to take place, and the time, if any is to be fixed, as to which
the holders of record of Common Stock (or such other securities at the time
receivable upon the exercise of the Warrant) shall be entitled to exchange their
shares of Common Stock (or such Other Securities) for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding up. Such notice shall be
mailed at least 20 days prior to the date therein specified.
8.7 No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 8 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
9. Transfer to Comply with the Securities Act. This Warrant and any Common
Stock acquired upon exercise (the "Warrant Stock") may not be sold, transferred,
pledged, hypothecated, or otherwise disposed of except as follows: (a) to a
person who, in the opinion of counsel to the Company, is a person to whom this
Warrant or the Warrant Stock may legally be transferred without registration and
without the delivery of a current prospectus under the Securities Act of 1933,
as amended (the "Securities Act") with respect thereto; or (b) to any person
upon delivery of a prospectus then meeting the requirements of the Securities
Act relating to such securities and the offering thereof for such sale or
disposition, and thereafter to all successive assignees.
10. Legend. Unless the issuance of the shares of Warrant Stock has been
registered under the Securities Act, or, in the case of a cashless exercise in
accordance with Section 2, two years have elapsed since the purchase of this
Warrant by the Holder, upon exercise of any of the Warrants and the issuance of
any of the shares of Warrant Stock, all certificates representing shares shall
bear on the face thereof substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT
ACT OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION IS OBTAINED
STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION.
11. Notices. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two days after
mailing when mailed by certified or registered mail, return receipt requested,
to the Company or the Holder, as the case may be, for whom such notice is
intended, if to the Holder, at the address of such party shown on the books of
the Company, or if to the Company, to the president thereof, at the address set
forth on the signature page hereof, or at such other address of which the
Company or the Holder has been advised by notice hereunder.
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12. Applicable Law. The Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the state of
Arizona, without regard to the conflict of laws provisions of such State.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
KONA GRILL, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Xxxx X. Xxxxxxx, Chief Financial Officer
Address: Kona Grill, Inc.
0000 X. Xxxxxxxxxx Xxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
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WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to (i) exercise the within
Warrant to purchase __________ shares of the Common Stock of Kona Grill, Inc.,
Delaware corporation, pursuant to the provisions of Section 1 of the attached
Warrant, and hereby makes payment of $__________ in payment therefor, or (ii)
exercise this Warrant for the purchase of _______ shares of ____________ Stock,
pursuant to the provisions of Section 2 of the attached Warrant. The
undersigned's execution of this form constitutes the undersigned's agreement to
all the terms of the Warrant and to comply therewith.
____________________________________________
Signature
Print Name: ________________________
____________________________________________
Signature, if jointly held
Print Name:
____________________________________________
Date
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ASSIGNMENT FORM
FOR VALUE RECEIVED_____________________________ ("Assignor") hereby sells,
assigns and transfers unto _______________________________ ("Assignee") all of
Assignor's right, title and interest in, to and under Warrant No. W-____ issued
by ____________________________, dated ______________.
DATED: _________________
ASSIGNOR:
____________________________________________
Signature
Print Name:
____________________________________________
Signature, if jointly held
Print Name:
ASSIGNEE:
The undersigned agrees to all of the terms of the Warrant and to comply
therewith.
____________________________________________
Signature
Print Name:
____________________________________________
Signature, if jointly held
Print Name:
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