Exhibit 4.2
THESE SECURITIES AND THE UNDERLYING
SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
STOCK PURCHASE WARRANT
To Purchase up to 600,000 Shares of
Common Stock of Grill Concepts, Inc.
THIS STOCK PURCHASE
WARRANT CERTIFIES that, for value received, Charles N. Mathewson,
Trustee of the Charles N. Mathewson Trust dtd. 7/22/92 (the “
Holder ”), is entitled, upon the terms and subject to
the limitations on exercise and the conditions hereinafter set
forth, at any time on or after the date hereof (the “
Initial Exercise Date ”) and on or prior to the close
of business on the seventh (7 th ) anniversary of the
Initial Exercise Date (the “ Termination Date ”)
but not thereafter, to subscribe for and acquire from Grill
Concepts, Inc., a Delaware corporation (the “ Company
”), 600,000 shares of common stock of the Company, par value
$0.00004 per share (“ Common Stock ” or the
“ Warrant Shares ”). The purchase price of
one share of Common Stock (the “ Exercise Price
”) under this Warrant shall be $4.00, subject to adjustment
in accordance with Section 10. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall
be subject to adjustment as provided herein.
Section 1. Authorization of
Shares . The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant in accordance with the
provisions of this Warrant, be duly authorized, validly issued,
fully paid and non assessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).
Section 2. Exercise of
Warrant .
(a) Except as provided in
Section 3 herein, exercise of the purchase rights represented
by this Warrant may be made at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by the
surrender of this Warrant and delivery of the Notice of Exercise
form annexed hereto duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such
Holder appearing on the books of the Company) and upon payment of
the Exercise Price of the Warrant Shares thereby purchased by wire
transfer or cashier’s check drawn on a United States bank,
the Holder shall be entitled to receive a certificate for the
number of Warrant Shares so purchased. Certificates for shares
purchased hereunder shall be delivered to the Holder within three
(3) business days after the date on which this Warrant shall
have been exercised as aforesaid. This Warrant shall be deemed to
have been
exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any
other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by
the Holder, if any, pursuant to Section 4 prior to the
issuance of such shares, have been paid. If the Company fails
to deliver to the Holder a certificate or certificates representing
the Warrant Shares pursuant to this Section 2(a) by the fifth
business day after the date of exercise, then the Holder will have
the right to rescind such exercise.
(b) Notwithstanding the foregoing,
at any time as the Warrant is exercisable, in lieu of the payment
methods set forth in Section 2(a) above, the Holder may
exchange all or some of the Warrant for Warrant Shares equal to the
value of the amount of the Warrant being exchanged on the date of
exchange. If the Holder makes such a request, the Holder shall
tender to the Company the Warrant for the amount being exchanged,
along with written notice of the Holder’s election to
exchange some or all of the Warrant, and the Company shall issue to
the Holder the number of Warrant Shares computed using the
following formula:
X = Y (A-B)
A
Where:
X = the number of Warrant Shares to
be issued to the Holder;
Y = the total number of Warrant
Shares as to which this Warrant is being exercised;
A = the Fair Market Value (as
defined below) of one share of Common Stock; and
B = the Exercise Price of one
Warrant Share (as adjusted to the date of such
calculation).
All references herein to an
“exercise” of the Warrant shall include an exchange
pursuant to this Section 2(b).
For purposes of this Warrant, the
“ Fair Market Value ” of a share of Common Stock
as of any date (the “ Value Date ”) shall be the
price per share as follows:
(i) 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 average of the last
reported sale price of the security on such exchange or system over
the five business days prior to the Value Date or if no such sale
is made on any such days, the average of the closing bid and asked
prices for such days on such exchange or system;
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(ii) 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 average
of the reported best bid and best asked prices reported by the Pink
Sheets LLC or the mean of the last reported bid and asked price
quoted on the OTC Bulletin Board ® over the five business days
prior to the Value Date; or
(iii) If neither (i) nor
(ii) are applicable, then the Fair Market Value shall be
determined by the Board of Directors of the Company in good faith;
provided, however, that if the Holder disagrees with such valuation
by the Company’s Board of Directors and provides notice of
such disagreement to the Company requesting an independent
valuation, the Company shall select an Independent Financial Expert
(as defined below) who shall determine the value of such Common
Shares. For purposes hereof, “ Independent Financial
Expert ” shall mean an investment banking firm selected
by the Board of Directors of the Company (A) that does not
(and whose directors, officers, employees and affiliates do not)
have a direct or indirect financial interest in the Company or any
of its affiliates, (B) that has not been, and, at the time it
is called upon to serve as an Independent Financial Expert under
this Warrant is not (and none of whose directors, officers,
employees or affiliates is) a promoter, director or officer of the
Company, (C) that has not been retained by the Company or any
of its affiliates for any purpose, other than to perform an equity
valuation, within the preceding 12 months, and (D) that, in
the good faith judgment of the Board of Directors of the Company,
is otherwise qualified to serve as an independent financial
advisor.
(c) If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Shares,
provided that this Warrant has been surrendered to the Company,
deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant. Notwithstanding the foregoing, any failure by
the Company to deliver a new warrant in accordance with this
Section shall not impair in any way the Holder’s exercise or
other rights hereunder, and any requirement that Holder deliver a
Warrant for exercise shall be waived until such time as the Company
delivers such Warrant.
(d) The Company’s obligations
to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other person of
any obligation to the Company or any violation or alleged violation
of law by the Holder or any other person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
Warrant Shares upon exercise of the Warrant as required pursuant to
the terms hereof.
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(e) Notwithstanding anything to the
contrary herein, unless and until the shareholders of the Company
shall have approved such issuances, no shares of Warrants shall be
exercisable by a single Holder, and no shares of Common Stock shall
be issued on exercise of the Warrants to that Holder if, as a
result of such exercise and issuance, the Holder would own 20% or
more of the outstanding shares of Common Stock of the Company
following such exercise and issuance (the “ Exercise
Cap ”). The Company undertakes and agrees to submit to
its shareholders for vote, and to recommend approval of such vote,
a proposal to approve exercises of Warrants in excess of the
Exercise Cap at a meeting of shareholders to be held no later than
July 31, 2009.
Section 3. No Fractional
Shares or Scrip . No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant.
Section 4. Charges, Taxes
and Expenses . Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance
of such certificate to the Holder, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued
in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto.
Section 5. Closing of
Books . The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
Section 6. Transfer,
Division and Combination .
(a) Subject to compliance with any
applicable securities laws and the conditions set forth in
Section 6(e) hereof, this Warrant and all rights hereunder are
transferable, in whole or, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment
of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of
such transfer. Upon such surrender and, if required, such
payment, the Company shall promptly (but in any event, within 5
business days) execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall
promptly (but in any event, within 5 days) issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
(b) This Warrant may be divided or
combined with other Warrants upon presentation hereof at the
aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to
be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 6(a), as to
any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
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(c) The Co
