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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
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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 Recapit
