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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 Recap
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