def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary Proxy
Statement
o Confidential, For Use
of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive Additional
Materials
o Soliciting Material
Under
Rule 14a-12
Kona Grill, Inc.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
þ
|
No fee required.
|
|
o
|
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
|
|
|
|
|
1)
|
Title of each class of securities to which transaction applies:
|
|
|
|
|
2)
|
Aggregate number of securities to which transaction applies:
|
|
|
|
|
3)
|
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
|
|
|
|
|
4)
|
Proposed maximum aggregate value of transaction:
|
|
|
o
|
Fee paid previously with preliminary materials:
|
|
o
|
Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
|
|
1)
|
Amount previously paid:
|
|
|
|
|
2)
|
Form, Schedule or Registration Statement No.:
|
KONA
GRILL, INC.
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
May 4, 2006
The Annual Meeting of Stockholders of Kona Grill, Inc., a
Delaware corporation, will be held at 2:00 p.m., on
Thursday, May 4, 2006, at the offices of Greenberg Traurig,
LLP, 2375 East Camelback Road, Suite 700, Phoenix, Arizona,
for the following purposes:
1. To elect one Class I director to serve for a
three-year term expiring in 2009.
2. To approve an amendment to our certificate of
incorporation to decrease the number of authorized shares of
common stock from 40,000,000 to 15,000,000, and to decrease the
number of authorized shares of preferred stock from 20,000,000
to 2,000,000.
3. To ratify the appointment of Ernst & Young LLP
as our independent auditors for the fiscal year ending
December 31, 2006.
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
These items of business are more fully described in the proxy
statement accompanying this notice.
Only stockholders of record at the close of business on
March 20, 2006 are entitled to notice of and to vote at the
meeting.
All stockholders are cordially invited to attend the meeting and
vote in person. To assure your representation at the meeting,
however, you are urged to mark, sign, date, and return the
enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. You may vote in person at
the meeting even if you have previously returned a proxy.
Sincerely,
Mark S. Robinow
Executive Vice President, Chief Financial Officer, and
Secretary
Scottsdale, Arizona
March 19, 2006
TABLE OF CONTENTS
KONA
GRILL, INC.
7150 East Camelback Road, Suite 220
Scottsdale, Arizona 85251
PROXY
STATEMENT
VOTING
AND OTHER MATTERS
General
The enclosed proxy is solicited on behalf of Kona Grill, Inc., a
Delaware corporation, by our Board of Directors for use at our
Annual Meeting of Stockholders to be held at 2:00 p.m. on
Thursday, May 4, 2006, or at any adjournment thereof, for
the purposes set forth in this proxy statement and in the
accompanying notice. The meeting will be held at the offices of
Greenberg Traurig, LLP, at 2375 East Camelback Road,
Suite 700, Phoenix, Arizona.
These proxy solicitation materials were first mailed on or about
April 4, 2006 to all stockholders entitled to vote at the
meeting.
Voting
Securities and Voting Rights
Stockholders of record at the close of business on
March 20, 2006, are entitled to notice of and to vote at
the meeting. On the record date, there were issued and
outstanding 5,791,578 shares of our common stock. Each holder of
common stock voting at the meeting, either in person or by
proxy, may cast one vote per share of common stock held on all
matters to be voted on at the meeting.
The presence, in person or by proxy, of the holders of a
majority of the total number of shares of common stock entitled
to vote constitutes a quorum for the transaction of business at
the meeting. Assuming that a quorum is present, a plurality of
the votes properly cast in person or by proxy will be required
to elect the director; and the affirmative vote of a majority of
the shares of common stock outstanding and entitled to vote is
required (1) to approve the amendment to our certificate of
incorporation, and (2) to ratify the appointment of
Ernst & Young LLP as our independent auditor for the
fiscal year ending December 31, 2006.
Votes cast by proxy or in person at the meeting will be
tabulated by the election inspectors appointed for the meeting
who will determine whether a quorum is present. The election
inspectors will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval
of any matter submitted to the stockholders for a vote. If a
broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter.
Voting of
Proxies
When a proxy is properly executed and returned, the shares it
represents will be voted at the meeting as directed. If no
specification is indicated, the shares will be voted
(1) for the election of the nominee set forth
in this proxy statement, (2) for the approval
of the amendment to our certificate of incorporation, and
(3) for the ratification of the appointment of
Ernst & Young LLP as our independent auditor for the
fiscal year ending December 31, 2006.
Revocability
of Proxies
Any person giving a proxy may revoke the proxy at any time
before its use by delivering to us either a written notice of
revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
1
Solicitation
We will bear the cost of this solicitation. In addition, we may
reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding
solicitation materials to such beneficial owners. Proxies also
may be solicited by certain of our directors and officers,
personally or by telephone or
e-mail,
without additional compensation.
Annual
Report and Other Matters
Our 2005 Annual Report to Stockholders, which was mailed to
stockholders with or preceding this proxy statement, contains
financial and other information about our company, but is not
incorporated into this proxy statement and is not to be
considered a part of these proxy soliciting materials or subject
to Regulations 14A or 14C or to the liabilities of
Section 18 of the Securities Exchange Act of 1934, as
amended. The information contained in the Compensation
Committee Report on Executive Compensation, Report
of the Audit Committee, and Performance Graph
below shall not be deemed filed with the Securities
and Exchange Commission, or the SEC, or subject to Regulations
14A or 14C or to the liabilities of Section 18 of the
Exchange Act.
We will provide, without charge, additional copies of our
Annual Report on
Form 10-K
for the year ended December 31, 2005 as filed with the SEC
to each stockholder of record as of the record date that
requests a copy in writing. Any exhibits listed in the
Form 10-K
report also will be furnished upon request at the actual expense
we incur in furnishing such exhibit. Any such requests should be
directed to our companys secretary at our executive
offices set forth in this proxy statement.
ELECTION
OF DIRECTORS
Nominees
Our certificate of incorporation and bylaws provide that the
number of directors shall be fixed from time to time by
resolution of our Board of Directors. Our certificate of
incorporation and bylaws provide for a Board of Directors
consisting of three classes, with one class standing for
election each year for a three-year staggered term.
Mr. Marcus Jundt currently serves as our Class I
director whose term of office will expire at the annual meeting.
Our Board of Directors has nominated Mr. Marcus Jundt for
election as our Class I director for a three-year term
expiring in 2009. In the event that Mr. Jundt is unable or
declines to serve as a director at the time of the meeting, the
proxies will be voted for any nominee designated by our current
Board of Directors to fill the vacancy. It is not expected that
Mr. Jundt will be unable or will decline to serve as a
director.
The Board of Directors recommends a vote for the
nominee named herein.
The following table sets forth certain information regarding our
directors:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
Marcus E. Jundt
|
|
|
40
|
|
|
Chairman of the Board, and Interim
President and Chief Executive Officer
|
Frank B. Bennett(1)(2)(3)
|
|
|
49
|
|
|
Director
|
Richard J. Hauser
|
|
|
43
|
|
|
Director
|
Douglas G. Hipskind
|
|
|
37
|
|
|
Director
|
W. Kirk Patterson(1)(2)(3)
|
|
|
48
|
|
|
Director
|
Anthony L. Winczewski(1)(2)(3)
|
|
|
49
|
|
|
Director
|
Mark L. Bartholomay(1)(2)
|
|
|
46
|
|
|
Director
|
|
|
|
(1) |
|
Member of the Audit Committee |
|
(2) |
|
Member of the Compensation Committee |
|
(3) |
|
Member of the Nominating Committee |
2
Marcus E. Jundt has served as our interim President and
Chief Executive Officer since January 2006, as Chairman of the
Board since March 2004, and as a director of our company since
September 2000. Mr. Jundt serves as Vice Chairman and
Portfolio Manager of the investment advisory firm of Jundt
Associates, Inc. and has served in this capacity since 1992.
From November 1988 to March 1992, Mr. Jundt served as a
research analyst for Victoria Investors covering the technology,
health care, financial services, and consumer industries. From
July 1987 until October 1988, Mr. Jundt served in various
capacities on the floor of the Chicago Mercantile Exchange with
Cargill Investor Services. Mr. Jundt also serves as a
director of Minnetonka Capital Investment, a private company.
Frank B. Bennett has served as a director of our company
since January 2005. Mr. Bennett has served as President of
Artesian Management, Inc. since April 1994, which manages
Artesian Capital, a private equity investment firm based in
Minneapolis. Mr. Bennett served as President of Artesian
Capital Management, Inc. from 1989 until April 1994. Prior to
founding Artesian Capital, Mr. Bennett served as a Vice
President of Corporate Finance of Piper Jaffray &
Hopwood and a Vice President of Piper Jaffray Ventures, Inc.
Mr. Bennett currently serves as a director of Northbridge
Financial Corporation and as a director and audit committee
member of Fairfax Financial Holdings Limited, Odyssey Re
Holdings Corp., Multiband Corporation, and Crum &
Forster Holdings Corp.
Richard J. Hauser has served as a director of our company
since December 2004. Mr. Hauser serves as the President and
owner of Capital Real Estate, Inc., a commercial real estate
development company based in Minneapolis, Minnesota, which he
founded in 2001. In addition, Mr. Hauser is the Manager and
owner of Net Lease Development, LLC, which is a controlled
operating company under Capital Real Estate, Inc. Prior to
founding Capital Real Estate, Inc. and Net Lease Development,
LLC, Mr. Hauser served as a partner with Reliance
Development Company, LLC from 1992 to 2001, where he was
responsible for the management, development, and sale of retail
properties.
Douglas G. Hipskind has served as a director of our
company since November 2003. Mr. Hipskind has served as a
Principal and Chief Operating Officer of Vail Development, LLC,
a hotel development company which is designing and developing
the Four Seasons Resort in Vail, Colorado, since June 2004.
Mr. Hipskind also serves as a Managing Director of Jundt
Associates, Inc., where from January 2001 to June 2004, he was
responsible for marketing the firms public and private
investment products. From August 1999 to January 2001 he served
as Controller of Jundt Associates, Inc. From December 1993 to
August 1999, Mr. Hipskind served in the Financial Services
practice of KPMG LLP, where he was responsible for tax and
consulting matters for his mutual fund and investment
partnership clients. Mr. Hipskind is a certified public
accountant.
W. Kirk Patterson has served as a director of our
company since January 2005. Mr. Patterson has served as
Vice President and Chief Financial Officer of Staktek Holdings,
Inc., a provider of high-density memory solutions, since
November 2003. From July 2003 to November 2003,
Mr. Patterson served as Acting Chief Financial Officer,
Vice President of Finance, and Corporate Controller of Cirrus
Logic, Inc., a developer of mixed-signal integrated circuits.
From February 2000 to November 2003, he served in a variety of
roles at Cirrus Logic, including Vice President of Finance and
Corporate Controller, Treasurer, and Director of Financial
Planning and Analysis. From November 1999 to February 2000,
Mr. Patterson served as Regional Manager of Accounting
Services of PricewaterhouseCoopers LLP, a public accounting
firm. From June 1980 to November 1999, Mr. Patterson served
in several positions with BP Amoco Corporation, a provider of
energy and petrochemicals, most recently as Manager, Planning
and Economics, for the Amoco Energy Group North America.
Anthony L. Winczewski has served as a director of our
company since April 2005. Mr. Winczewski has served as
President and Chief Executive Officer of Commercial Partners
Title, LLC, a midwestern title insurance agency engaged in
providing commercial, residential, and tax deferred exchange
solutions since January 1995. Prior to forming Commercial
Partners in 1995, Mr. Winczewski served as a manager and
sales officer for Chicago Title Insurance Company from May
1984 until January 1995. Mr. Winczewski served as a Vice
President and Principal of Winona County Abstract and Title,
Inc. from July 1975 until May 1984, and as a paralegal for
Title Insurance Company of Minnesota from June 1974 until
July 1975.
Mark L. Bartholomay has served as a director of our
company since January 2006. Since July 2005,
Mr. Bartholomay has served as President and Founder of GBG
Consulting, LLC, a private consulting firm. From July 2000 to
June 2005, he served as Vice President of Business Development
at Famous Daves of America, Inc., a
3
publicly traded owner, operator, and franchisor of restaurants.
Prior to that, Mr. Bartholomay served as Senior Vice
President of International Development and Operations at
Rainforest Cafe, Inc., a publicly traded restaurant company.
There are no family relationships among any of our directors or
executive officers.
Classification
of our Board of Directors
Our certificate of incorporation provides for a Board of
Directors consisting of three classes serving three-year
staggered terms. Mr. Marcus E. Jundt serves as our
Class I director, with the term of office of the
Class I directors expiring at the annual meeting of
stockholders in 2006. The Class II directors consist of
Messrs. Mark L. Bartholomay, Anthony L. Winczewski, and
Douglas G. Hipskind, with the term of office of the
Class II directors expiring at the annual meeting of
stockholders in 2007. Class III directors consist of
Richard J. Hauser, W. Kirk Patterson, and Frank B. Bennett, with
the term of office of Class III directors expiring at the
annual meeting of stockholders in 2008. Officers serve at the
pleasure of the Board of Directors.
Information
Relating to Corporate Governance and the Board of
Directors
Our Board of Directors has determined, after considering all the
relevant facts and circumstances, that Messrs. Bartholomay,
Bennett, Patterson, and Winczewski are independent directors, as
independence is defined by NASDAQ and the SEC,
because they have no relationship with us that would interfere
with their exercise of independent judgment.
Our bylaws authorize our Board of Directors to appoint among its
members one or more committees, each consisting of one or more
directors. Our Board of Directors has established an Audit
Committee, a Compensation Committee, and a Nominating Committee,
each consisting entirely of independent directors.
Our Board of Directors has adopted charters for the Audit,
Compensation, and Nominating Committees describing the authority
and responsibilities delegated to each committee by our Board of
Directors. Our Board of Directors has also adopted a Code of
Business Conduct and Ethics, and a Code of Ethics for the CEO
and Senior Financial Officers. We post on our website at
www.konagrill.com, the charters of our Audit,
Compensation, and Nominating Committees; our Code of Business
Conduct and Ethics, and Code of Ethics for the CEO and Senior
Financial Officers, and any amendments or waivers thereto; and
any other corporate governance materials contemplated by SEC or
NASDAQ National Market regulations. In addition, the charter of
the Audit Committee as currently in effect is attached as
Appendix A to this proxy statement. These documents
are also available in print to any stockholder requesting a copy
in writing from our corporate secretary at our executive offices
set forth in this proxy statement.
We regularly schedule executive sessions at which independent
directors meet without the presence or participation of
management. The presiding director of such executive session
rotates among the Chairs of the Audit Committee, Compensation
Committee, and the Nominating Committee.
Interested parties may communicate with our Board of Directors
or specific members of our Board of Directors, including our
independent directors and the members of our various board
committees, by submitting a letter addressed to the Board of
Directors of Kona Grill, Inc. c/o any specified individual
director or directors at the address listed herein. Any such
letters are sent to the indicated directors.
The
Audit Committee
The purpose of the Audit Committee is to oversee the financial
and reporting processes of our company and the audits of the
financial statements of our company and to provide assistance to
our Board of Directors with respect to the oversight of the
integrity of the financial statements of our company, our
companys compliance with legal and regulatory matters, the
independent auditors qualifications and independence, and
the performance of our companys independent auditor. The
primary responsibilities of the Audit Committee are set forth in
its charter. The Audit Committee also selects the independent
auditor to conduct the annual audit of the financial statements
of our company; reviews the proposed scope of such audit;
reviews accounting and financial controls of our company
4
with the independent auditor and our financial accounting staff;
and reviews and approves transactions between us and our
directors, officers, and their affiliates.
The Audit Committee currently consists of Messrs. Bennett,
Bartholomay, Patterson, and Winczewski, each of whom is an
independent director of our company under the NASDAQ rules as
well as under rules adopted by the SEC pursuant to the
Sarbanes-Oxley Act of 2002. The Board of Directors has
determined that each of Messrs. Bartholomay, Bennett, and
Patterson (whose backgrounds are detailed above) qualifies as an
audit committee financial expert in accordance with
applicable rules and regulations of the SEC. Mr. Bennett
serves as the Chairman of the Audit Committee.
The
Compensation Committee
The purpose of the Compensation Committee includes determining,
or recommending to our Board of Directors for determination, the
compensation of the Chief Executive Officer and other executive
officers of our company and discharging the responsibilities of
our Board of Directors relating to compensation programs of our
company. The Compensation Committee currently consists of
Messrs. Patterson, Bennett, Bartholomay, and Winczewski,
with Mr. Patterson serving as Chairman.
The
Nominating Committee
The purposes of the Nominating Committee include the selection
or recommendation to the Board of Directors of nominees to stand
for election as directors at each election of directors, the
oversight of the selection and composition of committees of the
Board of Directors, the oversight of the evaluations of the
Board of Directors and management, and the development and
recommendation to the Board of Directors of a set of corporate
governance principles applicable to our company. The Nominating
Committee currently consists of Messrs. Winczewski,
Bennett, and Patterson, with Mr. Winczewski serving as
Chairman.
The Nominating Committee will consider persons recommended by
stockholders for inclusion as nominees for election to our Board
of Directors if the names, biographical data, and qualifications
of such persons are submitted in writing in a timely manner
addressed and delivered to our companys secretary at the
address listed herein. The Nominating Committee identifies and
evaluates nominees for our Board of Directors, including
nominees recommended by stockholders, based on numerous factors
it considers appropriate, some of which may include strength of
character, mature judgment, career specialization, relevant
technical skills, diversity, and the extent to which the nominee
would fill a present need on our Board of Directors. As
discussed above, the members of the Nominating Committee are
independent, as that term is defined by NASDAQ.
Board and
Committee Meetings
Our Board of Directors held a total of five meetings during the
fiscal year ended December 31, 2005. During the fiscal year
ended December 31, 2005, the Audit Committee held two
meetings, the Compensation Committee held one meeting, and the
Nominating Committee held no meetings. No director attended
fewer than 75% of the aggregate of (i) the total number of
meetings of our Board of Directors, and (ii) the total
number of meetings held by all Committees of our Board of
Directors on which he was a member. Except for Mr. Jundt,
none of our directors attended our 2005 annual meeting of
stockholders. We have adopted a policy encouraging our directors
to attend our annual meetings of stockholders. Accordingly, and
to the extent reasonably practicable, in the future we will
regularly schedule a meeting of the Board of Directors on the
same day as the annual meeting of stockholders.
Director
Compensation and Other Information
We grant annually to each independent director options to
purchase 10,000 shares of our common stock. In addition, we
grant annually options to purchase an additional
5,000 shares of common stock to the Chairman of the Audit
Committee. In addition to the grant of stock options,
independent directors receive an annual retainer of $10,000, and
the Chairman of the Audit Committee receives an additional
$5,000. Non-employee directors also are eligible to receive
grants of stock options or awards pursuant to the discretion of
the Compensation Committee or the entire Board of Directors. We
will also reimburse each non-employee director for travel and
related expenses
5
incurred in connection with attendance at board and committee
meetings. Employees who also serve as directors will receive no
additional compensation for their services as a director.
During January 2005, in consideration for his service as
Chairman of the Board of Directors, we granted to Mr. Jundt
options to purchase 20,000 shares of common stock at an
exercise price of $6.00 per share.
EXECUTIVE
COMPENSATION
Summary
of Cash and Other Compensation
The following table sets forth, for the periods indicated, the
total compensation for services in all capacities to us for the
fiscal years ended December 31, 2005, 2004, and 2003
received by our Chief Executive Officer and our two other
executive officers whose aggregate compensation exceeded
$100,000 during the fiscal year ended December 31, 2005.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Securities
|
|
|
|
|
|
|
Annual Compensation
(1)
|
|
|
Stock
|
|
|
Underlying
|
|
|
All Other
|
|
Name and Principal
Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Options
|
|
|
Compensation
|
|
|
C. Donald Dempsey
|
|
|
2005
|
|
|
$
|
315,000
|
|
|
$
|
157,500
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Former President and Chief
|
|
|
2004
|
|
|
$
|
175,549
|
|
|
$
|
89,600
|
|
|
|
|
|
|
|
177,722
|
|
|
$
|
|
|
Executive Officer (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason J. Merritt
|
|
|
2005
|
|
|
$
|
250,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Executive Vice President
|
|
|
2004
|
|
|
$
|
193,131
|
|
|
$
|
135,000
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
and Chief Operating
|
|
|
2003
|
|
|
$
|
101,717
|
|
|
|
|
|
|
$
|
48,000
|
(3)
|
|
|
60,000
|
|
|
$
|
11,192
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Robinow
|
|
|
2005
|
|
|
$
|
225,000
|
|
|
$
|
90,000
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Executive Vice President,
|
|
|
2004
|
|
|
$
|
43,269
|
|
|
$
|
22,500
|
|
|
|
|
|
|
|
71,089
|
|
|
$
|
|
|
Chief Financial Officer, and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(l) |
|
Certain executive officers also received certain perquisites,
the value of which did not exceed 10% of the annual salary and
bonus. |
|
(2) |
|
Mr. Dempsey became our President and Chief Executive
Officer effective May 1, 2004 and resigned as our President
and Chief Executive Officer effective January 31, 2006. |
|
(3) |
|
Represents a grant of restricted common stock to
Mr. Merritt as of December 1, 2003. Fair market value
at December 1, 2003 was based on the fair market value of
our common stock on such date of $6.00 per share. As of
December 31, 2005, Mr. Merritt held 8,000 of such
shares that were the subject of the award. At December 31,
2005, the value of the shares was $68,000 based on
$8.50 per share, which was the closing price of our common
stock on December 30, 2005. |
|
(4) |
|
Mr. Robinow became our Executive Vice President, Chief
Financial Officer, and Secretary effective October 18, 2004. |
Option
Grants
During fiscal 2005, we did not grant any stock options to any of
the individuals listed on the Summary Compensation Table above.
6
Option
Values and Holdings
The following table sets forth the number and value of stock
options exercised in fiscal 2005 by the executive officers and
former executive officer listed and the number and value of each
such officers unexercised options as of December 31,
2005.
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Underlying
|
|
|
Values of Unexercised
|
|
|
|
Shares
|
|
|
|
|
|
Unexercised Options
|
|
|
In-the Money Options
|
|
|
|
Acquired
|
|
|
Value
|
|
|
at Fiscal Year-End
|
|
|
At Fiscal Year-End (1)
|
|
Name
|
|
on Exercise
|
|
|
Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
C. Donald Dempsey
|
|
|
|
|
|
|
|
|
|
|
177,722
|
|
|
|
|
|
|
$
|
622,027
|
|
|
|
|
|
Jason J. Merritt
|
|
|
10,000
|
|
|
$
|
32,400
|
|
|
|
85,000
|
|
|
|
|
|
|
$
|
185,000
|
|
|
|
|
|
Mark S. Robinow
|
|
|
|
|
|
|
|
|
|
|
71,089
|
|
|
|
|
|
|
$
|
248,812
|
|
|
|
|
|
|
|
|
(1) |
|
Calculated based on $8.50, which was the closing price of our
common stock as quoted on the NASDAQ National Market on
December 30, 2005, multiplied by the number of applicable
shares
in-the-money
less the total exercise price. |
Employment
and Separation Agreements
C.
Donald Dempsey
Effective May 1, 2004, we entered into an employment
agreement with Mr. Dempsey to serve as our President and
Chief Executive Officer. The agreement provided for
Mr. Dempsey to receive a base salary of $250,000 per
annum, which increased by 20% per annum during the second
and third years of employment. During October 2005, the Board
increased Mr. Dempseys salary to $360,000 per
annum. Effective January 31, 2006, Mr. Dempsey
resigned as our President and Chief Executive Officer and as a
member of our Board of Directors, and entered into a separation
agreement with us on January 31, 2006. Pursuant to the
separation agreement, we agreed to pay Mr. Dempsey his base
salary through April 30, 2006, and an aggregate amount of
$360,000, to be paid in accordance with our ordinary payroll
practices between May 1, 2006 and April 30, 2007. We
will also provide Mr. Dempsey and his eligible dependents
medical insurance benefits for a period of up to 18 months
after May 1, 2006 or until the date on which
Mr. Dempsey obtains employment with a new employer that
offers comparable medical coverage. In addition, the separation
agreement provides that Mr. Dempsey must exercise all of
his stock options no later than May 1, 2006, in accordance
with our stock option plans. During February 2006,
Mr. Dempsey effected a net exercise of his options and
received 85,158 shares of common stock.
Jason
J. Merritt
Effective October 1, 2003, we entered into an employment
agreement with Mr. Merritt to serve as our Chief Operating
Officer. The agreement has an initial five-year term that
expires October 1, 2008. The agreement provides for
Mr. Merritt to receive an annual base salary of $175,000,
which is to be reviewed annually by the Board and which
increased to $250,000 effective October 1, 2004.
Thereafter, Mr. Merritts base salary will not be
reduced. During October 2003, we granted to Mr. Merritt
8,000 shares of our common stock and options to purchase an
additional 60,000 shares of our common stock at an exercise
price per share of $6.00.
The employment agreement provides for Mr. Merritt to
receive his fixed compensation, accrued vacation, and a pro rata
portion of his bonus earned for the applicable fiscal year
through the date of termination of his employment by reason of
death or as a result of termination of employment by us for
cause, or by Mr. Merritt without good
reason, each as defined in the agreement. If we terminate
the employment of Mr. Merritt by reason of disability, the
agreement provides for the payment of fixed compensation,
accrued vacation, pro rata bonus through the date of termination
of employment, as well as a severance payment equal to nine
months of Mr. Merritts base salary then in
effect. If we terminate Mr. Merritts employment
without cause, if we do not
7
renew the agreement at the end of any term, or if he terminates
his employment for good reason, as defined in the
agreement, we will pay Mr. Merritt his fixed compensation,
accrued vacation, pro rata bonus through the date of
termination, and we will continue to pay to Mr. Merritt his
base salary for a
12-month
period following the date of termination. In addition, during
the severance period, Mr. Merritt will be entitled to
receive all medical, dental, life insurance, and other benefits
otherwise available to him during his employment. If we
terminate Mr. Merritts employment without cause, any
stock options held by Mr. Merritt will continue to vest
through the end of the severance period.
In the event of a change of control of our company,
as defined in the agreement, the successor to our business will
be required to notify us or Mr. Merritt within five days
prior to the effective date of the change of control
whether or not the successor will assume and agree to perform
our obligations under the agreement. In the event that such
successor does not so notify us or Mr. Merritt, the change
of control will be deemed a termination of
Mr. Merritts employment under the agreement without
cause, and the severance provisions described above
will apply. In the event the successor company agrees to assume
the employment agreement, then Mr. Merritt may terminate
his employment by providing 30 days written notice at
any time following the one-year anniversary of the effective
date of the change of control. Upon such termination following
the one-year anniversary of the change of control,
Mr. Merritt will be entitled to receive the severance
benefits described above as if his employment was terminated by
us without cause.
Mark
S. Robinow
Effective October 15, 2004, we entered into an employment
agreement with Mr. Robinow to serve as our Vice President
and Chief Financial Officer. The agreement provides for
Mr. Robinow to receive an annual base salary of $225,000.
During October 2004, we granted to Mr. Robinow options to
purchase 71,089 shares of our common stock at an exercise
price per share of $5.00. Mr. Robinow is entitled to
receive all benefits, including health insurance, as offered to
our other senior executive officers.
If we terminate Mr. Robinows employment without
cause, or if he terminates his employment for good reason, we
will pay Mr. Robinow his fixed compensation and pro rata
bonus through the date of termination of his employment, as well
as a severance payment equal to 12 months of
Mr. Robinows base salary then in effect, in addition,
the stock options that would have vested during the year in
which such termination without cause occurs will vest and become
exercisable. If we terminate Mr. Robinows employment
with cause, Mr. Robinow will receive his fixed compensation
through the date of termination.
Management
Bonus Program
During January 2005, we approved a management bonus program
pursuant to which each of Messrs. Merritt and Robinow are
each eligible to receive 40% of his respective base salary upon
successfully achieving certain specified goals. Prior to his
resignation in January 2006, Mr. Dempsey was eligible to
receive 50% of his base salary pursuant to the management bonus
program. During January 2006, we paid Messrs. Dempsey,
Merritt, and Robinow bonuses in the amount of $157,500,
$100,000, and $90,000, respectively, in connection with their
performance during fiscal 2005.
2002
Stock Plan
During November 2002, our Board of Directors adopted and the
stockholders approved the Kona Grill, Inc. 2002 Stock Plan.
During January 2005, our Board of Directors adopted, and our
stockholders approved, an amendment to the 2002 Plan. The 2002
Plan provides for the grant of incentive and nonqualified stock
options to acquire our common stock, the direct grant of common
stock or restricted stock units, the grant of stock appreciation
rights, or SARs, and the grant of other cash awards to key
personnel, directors, advisors, consultants, and others
providing valuable services to our company. The purpose of the
2002 Plan is to promote the interests of our company and our
stockholders by providing such individuals with an opportunity
to acquire a proprietary interest in our company and receive
competitive performance-related incentives so as to develop a
stronger incentive to put forth maximum effort for the continued
success and growth of our company. We believe that the 2002 Plan
8
represents an important factor in attracting and retaining
qualified personnel. Upon approval by our stockholders of our
2005 Plan described below, we discontinued grants of awards
under our 2002 Plan.
Awards or portions of awards that terminate, expire, or are
otherwise forfeited will again be available for further awards
under the 2005 Plan. As of March 20, 2006, options to
purchase approximately 298,157 shares of common stock were
outstanding under the 2002 Plan, 97,358 shares of common
stock had been issued upon exercise of options granted under the
2002 Plan, and there were no shares of common stock remaining
available for grant under the 2002 Plan.
The power to administer the 2002 Plan rests exclusively with our
Board of Directors or a committee consisting of two or more
non-employee directors who are appointed by the Board of
Directors. The committee has the power to determine the timing
and recipients of awards, the form and amount of each award, and
the terms and conditions for the grant or exercise. The
committee may delegate its authority under the 2002 Plan to one
or more officers of our company for purposes of granting and
administering awards to persons other than executive officers.
The Board of Directors determines the granting of awards, and
the terms, conditions, and eligibility of such awards with
respect to non-employee directors.
In the event of a fundamental change of our company, which means
a merger or consolidation of our company with or into any other
corporation, regardless of whether our company is the surviving
corporation, a sale of substantially all of the assets of our
company, a statutory share exchange involving our capital stock,
or a dissolution or liquidation of our company, the committee
may make appropriate provision for the protection of the
outstanding options and SARs by substitution of options, SARs,
and appropriate voting common stock of the corporation surviving
any merger or consolidation in lieu of options, SARs, and
capital stock of our company. At least 30 days prior to the
occurrence of the fundamental change, our Board of Directors
will declare and notify each holder of an option or SAR whether
each option or SAR will be cancelled at the time of or
immediately prior to the fundamental change in exchange for an
equivalent cash payment. At such time, each option and SAR will
become immediately exercisable in full and each person holding
an option or SAR will have the right to exercise the option or
SAR in whole or in part. If declared, each unexercised option or
SAR remaining outstanding prior to the fundamental change will
be cancelled.
The 2002 Plan will remain in effect until all shares subject to
it are distributed, or until all awards have expired or lapsed,
or until otherwise terminated by our Board of Directors. The
plan is not intended to be the exclusive means by which we may
issue options or warrants to acquire our common stock, stock
awards, or any other type of award. To the extent permitted by
applicable law and NASDAQ requirements, we may issue any other
options, warrants, or awards other than pursuant to the 2002
Plan with or without stockholder approval.
2005
Stock Award Plan
During June 2005, our Board of Directors adopted our 2005 Stock
Award Plan, or 2005 Plan, and the 2005 Plan was approved by our
stockholders during July 2005. As of March 20, 2006, there
were 386,157 options outstanding under the 2005 Plan, no shares
of common stock issued upon exercise of awards granted under the
2005 Plan, and 416,485 shares remaining available for grant.
Background
and Purpose
The terms of the plan provide for grants of stock options, stock
appreciation rights, restricted stock, deferred stock, bonus
stock, dividend equivalents, other stock related awards and
performance awards that may be settled in cash, stock, or other
property.
The purpose of the 2005 Plan is to assist us in attracting,
motivating, retaining, and rewarding high-quality executives and
other employees, officers, directors, and consultants by
enabling such persons to acquire or increase a proprietary
interest in our company in order to strengthen the mutuality of
interests between such persons and our stockholders, and
providing such persons with annual and long-term performance
incentives to expend their maximum efforts in the creation of
stockholder value.
9
General
Terms of the 2005 Plan; Shares Available for
Issuance
The 2005 Plan provides for the granting of awards in the form of
incentive stock options, nonqualified stock options, stock
appreciation rights, shares of restricted common stock, bonus
stock in lieu of obligations, or other stock-based awards to
employees, directors, and independent contractors who provide
valuable services to our company. The total number of shares of
our common stock that may be subject to awards under the 2005
Plan is equal to 250,000 shares, plus (i) the number
of shares with respect to which awards previously granted under
the 2002 Plan that terminate without the issuance of the shares
or where the shares are forfeited or repurchased; (ii) any
shares available for grant in the share reserve of the 2002 Plan
as of July 18, 2005, the date this proposal was approved by
the stockholders; (iii) with respect to awards granted
under the plans, the number of shares which are not issued as a
result of the award being settled for cash or otherwise not
issued in connection with the exercise or payment of the award;
and (iv) the number of shares that are surrendered or
withheld in payment of the exercise price of any award or any
tax withholding requirements in connection with any award
granted under the existing plans. If any award previously
granted under the 2005 Plan is forfeited, terminated, canceled,
surrendered, does not vest, or expires without having been
exercised in full, stock not issued under such award will again
be available for grant for purposes of the 2005 Plan. If any
change is made in the stock subject to the 2005 Plan, or subject
to any award granted under the 2005 Plan (through consolidation,
spin-off, recapitalization, stock dividend, split-up,
combination of shares, exchange of shares, or otherwise), the
2005 Plan provides that appropriate adjustments will be made as
to the aggregate number and type of shares available for awards,
the maximum number and type of shares that may be subject to
awards to any individual, the number and type of shares covered
by each outstanding award, the exercise price grant price, or
purchase price relating to any award, and any other aspect of
any award that the Board of Directors or Compensation Committee
determines appropriate.
The 2005 Plan provides that it is not intended to be the
exclusive means by which we may issue options to acquire our
common stock or any other type of award. To the extent permitted
by applicable law and the rules and regulations of the NASDAQ
National Market, we may issue other options, warrants, or awards
other than pursuant to the 2005 Plan without stockholder
approval.
Limitations
on Awards
In the event that a dividend or other distribution (whether in
cash, shares of our common stock, or other property),
recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, share
exchange, or other similar corporate transaction or event
affects our common stock so that an adjustment is appropriate in
order to prevent dilution or enlargement of the rights of
participants, the plan administrator is authorized to
substitute, exchange, or adjust any of all of (1) the
number and kind of shares that may be delivered under the plan,
(2) the per person limitations described in the preceding
paragraph, and (3) all outstanding awards, including
adjustments to exercise prices of options and other affected
terms of awards. The plan administrator is authorized to adjust
performance conditions and other terms of awards in response to
these kinds of events or in response to changes in applicable
laws, regulations, or accounting principles.
Eligibility
The persons eligible to receive awards under the plan consist of
directors, officers, employees, and independent contractors of
our company and those of our affiliates. However, incentive
stock options may be granted under the plan only to our
employees, including officers, and those of our affiliates. An
employee on leave of absence may be considered as still in our
employ or in the employ of an affiliate for purposes of
eligibility under the plan.
Administration
Our Board of Directors administers the plan, unless the Board
delegates administration to a Committee, which we expect to be
the Compensation Committee. However, the Compensation Committee
of our Board of Directors administers the plan with respect to
our senior officers. Together, our Board of Directors and the
Compensation Committee are referred to as the plan
administrator. The Compensation Committee members must be
non-employee directors as defined by
Rule 16b-3
of the Securities Exchange Act, outside directors
for purposes of
10
Section 162(m), and independent as defined by Nasdaq or any
other national securities exchange on which any of our
securities may be listed for trading in the future. Subject to
the terms of the plan, the plan administrator is authorized to
select eligible persons to receive awards, determine the type
and number of awards to be granted and the number of shares of
our common stock to which awards will relate, specify times at
which awards will be exercisable or may be settled (including
performance conditions that may be required as a condition
thereof), set other terms and conditions of awards, prescribe
forms of award agreements, interpret and specify rules and
regulations relating to the plan, and make all other
determinations that may be necessary or advisable for the
administration of the plan.
Stock
Options and Stock Appreciation Rights
The plan administrator is authorized to grant stock options,
including both incentive stock options, which we refer to as
ISOs, and nonqualified stock options. In addition, the plan
administrator is authorized to grant stock appreciation rights,
which entitle the participant to receive the appreciation in our
common stock between the grant date and the exercise date of a
stock appreciation right. The plan administrator determines the
exercise price per share subject to an option and the grant
price of a stock appreciation fight. However, the per share
exercise price of an ISO and the per share grant price of a
stock appreciation right must not be less than the fair market
value of a share of our common stock on the grant date and the
per share exercise price of an ISO must not be less than 100% of
the fair market value of a share of our common stock on the
grant date. The plan administrator generally will fix the
maximum term of each option or stock appreciation right, the
times at which each stock option or stock appreciation right
will be exercisable, and provisions requiring forfeiture of
unexercised stock options or stock appreciation rights on or
following termination of employment or service, except that no
stock option or stock appreciation fight may have a term
exceeding 10 years. Stock options may be exercised by
payment of the exercise price in cash, shares that have been
held for at least six months (or that the plan administrator
otherwise determines will not cause us a financial accounting
charge), and outstanding awards or other property having a fair
market value equal to the exercise price, as the plan
administrator may determine from time to time. The plan
administrator determines methods of exercise and settlement and
other terms of the stock appreciation rights. Stock appreciation
rights under the plan may include limited stock
appreciation rights exercisable for a stated period of
time after we experience a change in control or upon the
occurrence of some other event specified by the plan
administrator, as discussed below.
Restricted
and Deferred Stock
The plan administrator is authorized to grant restricted stock
and deferred stock. Restricted stock is a grant of shares of our
common stock, which may not be sold or disposed of and which may
be forfeited in the event of certain terminations of employment
or service, prior to the end of a restricted period specified by
the plan administrator. A participant granted restricted stock
generally has all of the rights of one of our stockholders,
unless otherwise determined by the plan administrator. An award
of deferred stock confers upon a participant the right to
receive shares of our common stock at the end of a specified
deferral period, and may be subject to possible forfeiture of
the award in the event of certain terminations of employment
prior to the end of a specified restricted period. Prior to
settlement, an award of deferred stock carries no voting or
dividend fights or other rights associated with share ownership,
although dividend equivalents may be granted, as discussed below.
Dividend
Equivalents
The plan administrator is authorized to grant dividend
equivalents conferring on participants the right to receive,
currently or on a deferred basis, cash, shares of our common
stock, other awards, or other property equal in value to
dividends paid on a specific number of shares of our common
stock or other periodic payments. Dividend equivalents may be
granted alone or in connection with another award, may be paid
currently or on a deferred basis and, if deferred, may be deemed
to have been reinvested in additional shares of our common
stock, awards, or otherwise as specified by the plan
administrator.
11
Bonus
Stock and Awards in Lieu of Cash Obligations
The plan administrator is authorized to grant shares of our
common stock as a bonus free of restrictions for services
performed for us or to grant shares of our common stock or other
awards in lieu of our obligations to pay cash under the plan or
other plans or compensatory arrangements, subject to such terms
as the plan administrator may specify.
Federal
Income Tax Consequences of Awards
The information set forth below is a summary only and does not
purport to be complete. In addition, the information is based
upon current federal income tax rules, and therefore is subject
to change when those rules change. Moreover, because the tax
consequences to any recipient may depend on his particular
situation, each recipient should consult the recipients
tax adviser regarding the federal, state, local, and other tax
consequences of the grant or exercise of an award or the
disposition of stock acquired as a result of an award. The plan
is not qualified under the provisions of Section 401
(a) of the Code and is not subject to any of the provisions
of the Employee Retirement Income Security Act of 1974.
Nonqualified
Stock Options
Generally, there is no taxation upon the grant of a nonqualified
stock option. On exercise, an optionee will recognize ordinary
income equal to the excess, if any, of the fair market value on
the date of exercise of the stock over the exercise price. If
the optionee is our employee or an employee of an affiliate,
that income will be subject to withholding tax. The
optionees tax basis in those shares will be equal to their
fair market value on the date of exercise of the option, and the
optionees capital gain holding period for those shares
will begin on that date.
Subject to the requirement of reasonableness, the provisions of
Section 162(m), and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction
equal to the taxable ordinary income realized by the optionee.
Incentive
Stock Options
The plan provides for the grant of stock options that qualify as
incentive stock options, which we refer to as ISOs,
as defined in Section 422 of the Code. Under the Code, an
optionee generally is not subject to ordinary income tax upon
the grant or exercise of an ISO. In addition, if the optionee
holds a share received on exercise of an ISO for at least two
years from the date the option was granted and at least one year
from the date the option was exercised, which we refer to as the
Required Holding Period, the difference, if any, between the
amount realized on a sale or other taxable disposition of that
share and the holders tax basis in that share will be
long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on
exercise of an ISO before the end of the Required Holding
Period, which we refer to as a Disqualifying Disposition, the
optionee generally will recognize ordinary income in the year of
the Disqualifying Disposition equal to the excess, if any, of
the fair market value of the share on the date the ISO was
exercised over the exercise price. However, if the sales
proceeds are less than the fair market value of the share on the
date of exercise of the option, the amount of ordinary income
recognized by the optionee will not exceed the gain, if any,
realized on the sale. If the amount realized on a Disqualifying
Disposition exceeds the fair market value of the share on the
date of exercise of the option, that excess will be short-term
or long-term capital gain, depending on whether the holding
period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which
the fair market value of a share of stock acquired on exercise
of an ISO exceeds the exercise price of that option generally
will be an adjustment included in the optionees
alternative minimum taxable income for the year in which the
option is exercised. If, however, there is a Disqualifying
Disposition of the share in the year in which the option is
exercised, there will be no adjustment for alternative minimum
tax purposes with respect to that share. If there is a
Disqualifying Disposition in a later year, no income with
respect to the Disqualifying Disposition will be included in the
optionees alternative minimum taxable income for that
year. In computing alternative minimum taxable income, the tax
basis of a share acquired on exercise of an ISO is increased by
the amount of the adjustment taken into account with respect to
that share for alternative minimum tax purposes in the year the
option is exercised.
12
We are not allowed an income tax deduction with respect to the
grant or exercise of an ISO or the disposition of a share
acquired on exercise of an ISO after the Required Holding
Period. However, if there is a Disqualifying Disposition of a
share, we are allowed a deduction in an amount equal to the
ordinary income includible in income by the optionee, provided
that amount constitutes an ordinary and necessary business
expense for us and is reasonable in amount, and either the
employee includes that amount in income or we timely satisfy our
reporting requirements with respect to that amount.
Stock
Awards
Generally, the recipient of a stock award will recognize
ordinary compensation income at the time the stock is received
equal to the excess, if any, of the fair market value of the
stock received over any amount paid by the recipient in exchange
for the stock. If, however, the stock is not vested when it is
received (for example, if the employee is required to work for a
period of time in order to have the right to sell the stock),
the recipient generally will not recognize income until the
stock becomes vested, at which time the recipient will recognize
ordinary compensation income equal to the excess, if any, of the
fair market value of the stock on the date it becomes vested
over any amount paid by the recipient in exchange for the stock.
A recipient may, however, file an election with the Internal
Revenue Service, within 30 days of his or her receipt of
the stock award, to recognize ordinary compensation income, as
of the date the recipient receives the award, equal to the
excess, if any, of the fair market value of the stock on the
date the award is granted over any amount paid by the recipient
in exchange for the stock.
The recipients basis for the determination of gain or loss
upon the subsequent disposition of shares acquired as stock
awards will be the amount paid for such shares plus any ordinary
income recognized either when the stock is received or when the
stock becomes vested.
Subject to the requirement of reasonableness, the provisions of
Section 162(m), and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction
equal to the taxable ordinary income realized by the recipient
of the stock award.
Stock
Appreciation Rights
We may grant stock appreciation rights separate from any other
award, which we refer to as standalone stock appreciation
rights, or in tandem with options, which we refer to as tandem
stock appreciation rights, under the plan.
With respect to stand-alone stock appreciation rights, if the
recipient receives the appreciation inherent in the stock
appreciation rights in cash, the cash will be taxable as
ordinary compensation income to the recipient at the time that
the cash is received. If the recipient receives the appreciation
inherent in the stock appreciation rights in shares of stock,
the recipient will recognize ordinary compensation income equal
to the excess of the fair market value of the stock on the day
it is received over any amounts paid by the recipient for the
stock.
With respect to tandem stock appreciation rights, if the
recipient elects to surrender the underlying option in exchange
for cash or shares of stock equal to the appreciation inherent
in the underlying option, the tax consequences to the recipient
will be the same as discussed above relating to the stand-alone
stock appreciation rights, if the recipient elects to exercise
the underlying option, the recipient will be taxed at the time
of exercise as if he or she had exercised a nonqualified stock
option (discussed above).
Subject to the requirement of reasonableness, the provisions of
Section 162(m), and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction
equal to the taxable ordinary income realized by the recipient
of the stock appreciation right.
Dividend
Equivalents
Generally, the recipient of a dividend equivalent award will
recognize ordinary compensation income at the time the dividend
equivalent award is received equal to the fair market value
dividend equivalent award received. Subject to the requirement
of reasonableness, the provisions of Section 162(m), and
the satisfaction of a tax reporting obligation, we will
generally be entitled to a tax deduction equal to the taxable
ordinary income realized by the recipient of the dividend
equivalent.
13
Section 162
Limitations
Section 162(m) denies a deduction to any publicly held
corporation for compensation paid to certain covered
employees in a taxable year to the extent that
compensation to such covered employee exceeds $1 million.
It is possible that compensation attributable to stock awards,
when combined with all other types of compensation received by a
covered employee from us, may cause this limitation to be
exceeded in any particular year. For purposes of
Section 162(m), the term covered employee means
our Chief Executive Officer and our four highest compensated
officers as of the end of a taxable year as disclosed in our
filings with the SEC.
Certain kinds of compensation, including qualified
performance-based compensation, are disregarded for
purposes of the Section 162 (m) deduction limitation.
In accordance with Treasury regulations issued under
Section 162(m), compensation attributable to certain stock
awards will qualify as performance-based compensation if the
award is granted by a committee of the Board of Directors
consisting solely of outside directors and the stock
award is granted (or exercisable) only upon the achievement (as
certified in writing by the committee) of an objective
performance goal established in writing by the committee while
the outcome is substantially uncertain, and the material terms
of the plan under which the award is granted is approved by
stockholders. A stock option or stock appreciation right may be
considered performance-based compensation as
described in the previous sentence or by meeting the following
requirements: the incentive compensation plan contains a
per-employee limitation on the number of shares for which stock
options and stock appreciation rights may be granted during a
specified period, the material terms of the plan are approved by
the stockholders, and the exercise price of the option or right
is no less than the fair market value of the stock on the date
of grant.
The regulations under Section 162(m) require that the
directors who serve as members of the committee must be
outside directors. The plan provides that directors
serving on the committee must be outside directors
within the meaning of Section 162(m). This limitation would
exclude from the committee directors who are (i) our
current employees or those of one of our affiliates,
(ii) our former employees or those of one of our affiliates
who receive compensation for past services (other than benefits
under a tax-qualified pension plan), (iii) our current and
former officers or those of one of our affiliates,
(iv) directors currently receiving direct or indirect
remuneration from us or one of our affiliates in any capacity
other than as a director, and (v) any other person who is
not otherwise considered an outside director for
purposes of Section 162(m). The definition of an
outside director under Section 162(m) is
generally narrower than the definition of a non-employee
director under
Rule 16b-3
of the Exchange Act.
2005
Employee Stock Purchase Plan
We adopted our 2005 Employee Stock Purchase Plan, or ESPP,
during June 2005 and our stockholders approved the ESPP during
July 2005.
Principal
Reasons for the Plan; General Terms
The purpose of the ESPP is to provide a means by which our
employees may be given an opportunity to purchase shares of
common stock through payroll deductions, to assist us in
retaining the services of our employees, to secure and retain
the services of new employees, and to provide incentives for
such persons to exert maximum efforts for our success.
The rights to purchase common stock granted under the ESPP are
intended to qualify as options issued under an employee
stock purchase plan as that term is defined in
Section 423(b) of the Internal Revenue Code of 1986, as
amended, or the Code.
We have reserved for issuance 210,596 shares of common
stock under the ESPP. Many of our approximately 1100 employees
are eligible to participate in the ESPP, as described below. As
of March 20, 2006, there were 17,610 shares of common
stock issued under the ESSP and 192,986 shares remaining
available for issuance.
Administration
Our Board of Directors administers the ESPP and has the final
power to construe and interpret both the ESPP and the rights
granted under it. Our Board of Directors has the power, subject
to the provisions of the ESPP, to
14
determine when and how rights to purchase common stock will be
granted, the provisions of each offering of such rights (which
need not be identical), whether employees of our company will be
eligible to participate in the ESPP.
The Board has the power to delegate administration of the ESPP
to a committee composed of not fewer than one member of the
Board of Directors, which we expect to be the Compensation
Committee. As used herein with respect to the ESPP, the
Board refers to any committee the Board of Directors
appoints or to the Board of Directors.
Stock
Subject to ESPP
Originally, an aggregate of 125,000 shares of common stock
was reserved for issuance under the ESPP, subject to annual
increases equal to the lesser of (a) 1.5% of the shares of
our common stock outstanding on the first day of the fiscal
year, or (b) 100,000 shares of common stock. As a
result, as of January 1, 2006, an aggregate of
210,596 shares of common stock were reserved for issuance
under the ESPP. If rights granted under the ESPP expire, lapse,
or otherwise terminate without being exercised, the shares of
common stock not purchased under such rights again become
available for issuance under the ESPP.
Offerings
The ESPP is implemented by offerings of rights to all eligible
employees from time to time by the Board. The maximum length for
an offering under the plan is 27 months. A participant with
more than one purchase right outstanding will be deemed to fully
exercise the purchase right with a lower exercise price (or an
earlier-granted date if the rights have the same exercise
price), unless otherwise indicated by the participant.
Eligibility
Any person who is customarily employed by us at least
20 hours per week and five months per calendar year on the
first day of an offering is eligible to participate in that
offering, provided such person has been employed by us for a
period determined by the Board, such period not to exceed two
years. Officers of our company may be eligible to participate in
the ESPP, however, the Board may provide that highly
compensated employees are not eligible to participate in
the ESPP.
However, no employee is eligible to participate in the ESPP if,
immediately after the grant of purchase rights, the employee
would own, directly or indirectly, stock representing 5% or more
of the total combined voting power or value of all classes of
stock of our company (including any stock which such employee
may purchase under all outstanding rights and options). In
addition, no employee may purchase shares of our common stock
worth more than $25,000 (determined at the fair market value of
the shares at the time such rights are granted) under all of our
employee stock purchase plans in any calendar year. The ESPP is
the only employee stock purchase plan adopted by the Board.
Participation
in the Plan
Eligible employees enroll in the ESPP by delivering to us, prior
to the date selected by the Board as the offering date for the
offering, an agreement authorizing payroll deductions during the
offering, not to exceed fifteen percent (15%) of such
employees eligible earnings during the offering period.
Purchase
Price
Commencing on the effective date of the ESPP through
December 31, 2005, the purchase price per share at which
shares of common stock were sold in an offering under the ESPP
was not less than the lesser of (i) 85% of the fair market
value of one share of common stock on first day of the offering,
or (ii) 85% of the fair market value of one share of common
stock on the last day of the offering. Following
December 31, 2005, the purchase price per share at which
shares of common stock are sold in an offering under the ESPP
will not be less than 95% of the fair market value of one share
of common stock on the last day of the applicable offering
period.
15
Payment
of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll
deductions during the offering period. At any time during the
offering, a participant may reduce, increase, or terminate his
or her payroll deductions as the Board provides in the offering.
All payroll deductions made for a participant are credited to
his or her account under the ESPP and deposited with the general
funds of our company. To the extent specifically provided in the
offering, a participant may make additional payments into such
account.
Purchase
of Stock
By executing an agreement to participate in the ESPP, the
employee is entitled to purchase shares under the ESPP. In
connection with offerings made under the ESPP, the Board
specifies a maximum number of shares of common stock an employee
may be granted the right to purchase and the maximum aggregate
number of shares of common stock that may be purchased pursuant
to such offering by all participants. If the aggregate number of
shares to be purchased upon exercise of rights granted in the
offering would exceed the maximum aggregate number of shares of
common stock available, the Board would make a pro rata
allocation of available shares in a uniform and equitable
manner. Unless the employees participation is
discontinued, his or her right to purchase shares is exercised
automatically on each purchase date during an offering at the
applicable price.
Withdrawal
While each participant in the ESPP is required to sign an
agreement authorizing payroll deductions, the participant may
withdraw from a given offering by terminating his or her payroll
deductions and by delivering to us a notice of withdrawal from
the ESPP.
Upon any withdrawal from an offering by the employee, we will
distribute to the employee his or her accumulated payroll
deductions without interest, less any accumulated deductions
previously applied to the purchase of shares of common stock on
the employees behalf during such offering, and such
employees interest in the offering will be automatically
terminated. The employee is not entitled to again participate in
that offering. However, an employees withdrawal from an
offering will not have any effect upon such employees
eligibility to participate in subsequent offerings under the
ESPP.
Termination
of Employment or other Lack of Eligibility
Rights granted pursuant to any offering under the ESPP terminate
immediately upon cessation of an employees employment for
any reason or no reason (subject to any post-employment
participation period required by law) or other lack of
eligibility for any reason, and we will distribute to such
employee all of his or her accumulated payroll deductions,
without interest, less any accumulated deductions previously
applied to the purchase of shares of common stock on the
employees behalf during such offering.
Restrictions
on Transfer
Rights granted under the ESPP are not transferable and may be
exercised only by the person to whom such rights are granted.
Adjustment
Provisions
Transactions not involving receipt of consideration by us, such
as a merger, consolidation, reorganization, stock dividend, or
stock split, may change the type, class, and number of shares of
common stock subject to the ESPP and to outstanding purchase
rights. In that event, the ESPP will be appropriately adjusted
in the type, class, and maximum number of shares subject to the
ESPP and the outstanding purchase rights granted under the ESPP
will be appropriately adjusted in the type, class, number of
shares, and purchase limits of such purchase rights.
Effect
of Certain Corporate Transactions
In the event of (i) the sale, lease, license, or other
disposition of all or substantially all of our consolidated
assets, (ii) the sale or other disposition of at least
ninety percent (90%) of our outstanding securities, or
(iii) certain
16
specified types of merger, consolidation, or similar
transactions (collectively, corporate transaction),
any surviving or acquiring corporation may continue or assume
rights outstanding under the ESPP or may substitute similar
rights. If any surviving or acquiring corporation does not
assume such rights or substitute similar rights, then the
participants accumulated payroll deductions will be used
to purchase shares of common stock within twenty
(20) business days prior to the corporate transaction under
the ongoing offering and the participants rights under the
ongoing offering will terminate immediately after such purchase.
Duration,
Amendment, and Termination
The Board may suspend or terminate the ESPP at any time. Unless
terminated earlier, the ESPP will terminate at that time that
all of the shares of common stock reserved for issuance under
the ESPP, as increased or adjusted from time to time, have been
issued under the terms of the ESPP.
The Board may amend the ESPP at any time. Any
amendment of the ESPP, except amendments relating solely to
(i) benefit the administration of the ESPP, (ii) take
account of a change in legislation, or (iii) exchange
control or regulatory treatment for participants or us, must be
approved by the stockholders after its adoption by the Board if
the amendment is necessary for the ESPP to satisfy
Sections 423 of the Code or other applicable laws and
regulations.
Rights granted before amendment or termination of the ESPP will
not be altered or impaired by any amendment or termination of
the ESPP, except (i) with consent of the employee to whom
such rights were granted; or (ii) as necessary to comply
with any laws or governmental regulations (including, without
limitation the provisions of the Code and the regulations
thereunder relating to employee stock purchase plans).
Federal
Income Tax Information
Rights granted under the ESPP are intended to qualify for
favorable federal income tax treatment associated with rights
granted under an employee stock purchase plan which qualifies
under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase
of shares of common stock as if such amounts were actually
received. Other than this, no income will be taxable to a
participant until disposition of the acquired shares, and the
method of taxation will depend upon the holding period of the
acquired shares.
If the stock is disposed of more than two years after the
beginning of the offering period and more than one year after
the stock is transferred to the participant, then the lesser of
(i) the excess of the fair market value of the stock at the
time of such disposition over the exercise price, or
(ii) the excess of the fair market value of the stock as of
the beginning of the offering period over the exercise price
(determined as of the beginning of the offering period) will be
treated as ordinary income. Any further gain or any loss will be
taxed as a long-term capital gain or loss. At present, such
capital gains generally are subject to lower tax rates than
ordinary income.
If the stock is sold or disposed of before the expiration of
either of the holding periods described above, then the excess
of the fair market value of the stock on the exercise date over
the exercise price will be treated as
ordinary income at the time of such disposition. The balance of
any gain will be treated as capital gain. Even if the stock is
later disposed of for less than its fair market value on the
exercise date, the same amount of ordinary income is attributed
to the participant, and a capital loss is recognized equal to
the difference between the sales price and the fair market value
of the stock on such exercise date. Any capital gain or loss
will be short-term or long-term, depending on how long the stock
has been held.
There are no federal income tax consequences to us by reason of
the grant or exercise of rights under the ESPP. We are entitled
to a deduction to the extent amounts are taxed as ordinary
income to a participant (subject to the requirement of
reasonableness and the satisfaction of tax reporting
obligations).
17
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth information with respect to our
common stock that may be issued upon the exercise of stock
options under our stock option plans and under our ESPP as of
December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities Remaining
|
|
|
|
Number of
|
|
|
Weighted
|
|
|
Available for Future
|
|
|
|
Securities to be
|
|
|
Average Exercise
|
|
|
Issuance Under
|
|
|
|
Issued Upon Exercise
|
|
|
Price of
|
|
|
Equity Compensation
|
|
|
|
of Outstanding
|
|
|
Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Options, Warrants,
|
|
|
Options, Warrants,
|
|
|
Securities Reflected
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
in Column (a))
|
|
|
Equity Compensation Plans Approved
by Stockholders
|
|
|
493,489
|
|
|
$
|
5.61
|
|
|
|
604,907
|
|
Equity Compensation Plans Not
Approved by Stockholders
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
493,489
|
|
|
$
|
5.61
|
|
|
|
604,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The responsibilities of the Compensation Committee include
determining, or recommending to our Board of Directors for
determination, the compensation of the Chief Executive Officer
and other executive officers of our company and discharging the
responsibilities of our Board of Directors relating to
compensation programs of our company. The Compensation Committee
held one meeting during fiscal 2005. The committee reviews base
salary levels for executive officers of our company at the
beginning of each fiscal year and recommends actual bonuses at
the end of each fiscal year based upon our companys and
individual performance.
Mr. Patterson is the Chairman of the committee, and
Messrs. Bennett and Winczewski are committee members.
Philosophy
The executive compensation program of our company seeks to
provide a level of compensation that is competitive with
companies similar in both size and industry. The committee
obtains the comparative data used to assess competitiveness from
a variety of resources. Actual total compensation levels may
differ from competitive levels in surveyed companies as a result
of annual and long-term performance of our company, as well as
individual performance. The committee uses its discretion to
determine or recommend executive compensation when, in its
judgment, external, internal, or an individuals
circumstances warrant.
Compensation
Program
The primary components of the executive compensation program of
our company consists of base salary, annual incentive bonuses,
stock option grants, and executive health benefit and perquisite
programs.
Base
Salary
The committee reviews salaries recommended by the Chief
Executive Officer for executive officers other than the Chief
Executive Officer. In formulating these recommendations, the
Chief Executive Officer considers the overall performance of our
company and conducts an informal evaluation of individual
officer performance. The committee makes, or recommends that the
Board of Directors make, final determinations on any adjustments
to the base salary for executives other than the Chief Executive
Officer. The committees evaluation of the recommendations
by the Chief Executive Officer considers the same factors
outlined above and is subjective with no particular weight
assigned to any one factor.
18
Management
Bonus Program
Annual bonuses are intended to provide incentive compensation to
key officers and employees who contribute substantially to the
success of our company. The granting of such awards is based
upon the achievement of our companys performance
objectives and predefined individual performance objectives.
Individual performance objectives are developed for senior level
managers and key employees early in each fiscal year. Upon the
close of each fiscal year, executive management and the
committee conducts an assessment of individual performance
achieved versus individual performance objectives. This
assessment includes individual responsibility, performance, and
compensation level. Simultaneously, the board conducts an
assessment of our companys overall performance, which
includes the achievement of operating results and other
performance criteria. The combination of these factors
determines any incentive bonuses to be paid.
Stock
Option Grants
We grant stock options periodically to our employees to provide
additional incentive to work to maximize long-term total return
to stockholders. Under our 2005 Plan, the Board of Directors or
a committee appointed by the Board is specified to act as the
plan administrator. The Board has authorized the Compensation
Committee to determine or make recommendations to the board
regarding grants of options to senior officers of our company.
In general, stock options are granted to employees at the onset
of employment. If, in the opinion of the committee, the
outstanding service of an existing employee merits an increase
in the number of options held, the committee may elect to issue
additional stock options to that employee. The vesting period of
option grants is determined at the time of option grant. During
fiscal 2005 we did not grant options to our executive officers.
Benefits
We provide various employee benefit programs to our executive
officers, including medical, dental, life, and long-term
disability insurance benefits. These benefits are generally
available to all employees of our company.
Chief
Executive Officer Compensation
In determining the compensation of our former Chief Executive
Officer, Mr. Dempsey, the Committee considered the terms of
his employment agreement, his prior employment history,
knowledge of our industry, performance, and projected
performance during the fiscal year. The Committee set
Mr. Dempseys salary at an annual rate of $360,000.
The Committee approved the payment of management bonus
compensation to Mr. Dempsey for fiscal 2005 in accordance
with his employment agreement and our management bonus program.
Compliance
with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction to public companies for compensation
in excess of $1.0 million paid to each of any publicly held
corporations chief executive officer and four other most
highly compensated executive officers. Qualifying
performance-based compensation is not subject to the deduction
limit if certain requirements are met. We currently intend to
continue to structure the performance-based portion of the
compensation of our executive officers in a manner that complies
with Section 162(m).
This report has been furnished by the Compensation Committee of
our Board of Directors.
W. Kirk Patterson, Chairman
Frank B. Bennett
Anthony L. Winczewski
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2005, our
Compensation Committee consisted of Messrs. Patterson,
Bennett, and Winczewski, all non-employee directors (as defined
in
Rule 16b-3
under the Securities Exchange Act). None of these committee
members had any contractual or other relationships with our
company during such fiscal year. During fiscal 2005, and prior
to our company becoming a public company, Mr. Marcus Jundt,
the Chairman of
19
the Board of Directors, served on the Compensation Committee of
the Board. Mr. Jundt resigned from the Compensation
Committee immediately prior to our company becoming a public
company.
REPORT OF
THE AUDIT COMMITTEE
Our Board of Directors has appointed an Audit Committee,
consisting of three directors. All of the members of the
committee are independent of our company and
management, as independence is defined in applicable rules of
NASDAQ and the SEC.
The purpose of the Audit Committee is to assist the oversight of
our Board of Directors in the integrity of the financial
statements of our company, our companys compliance with
legal and regulatory matters, the independent auditors
qualifications and independence, and the performance of our
companys independent auditor. The primary responsibilities
of the committee include overseeing our companys
accounting and financial reporting process and audits of the
financial statements of our company on behalf of the Board of
Directors.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal controls. The independent auditor is responsible for
auditing the financial statements and expressing an opinion on
the conformity of those audited financial statements with
generally accepted accounting principles.
In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements with management and
the independent auditor. The committee discussed with the
independent auditor the matters required to be discussed by
Statement on Auditing Standards (SAS) No. 61,
Communication with Audit Committees, as
amended by SAS 89 and SAS 90, and
Rule 2-07,
Communication with Audit Committees, of
Regulation S-X.
This included a discussion of the auditors judgments as to
the quality, not just the acceptability, of our companys
accounting principles and such other matters as are required to
be discussed with the committee under generally accepted
auditing standards. In addition, the committee received from the
independent auditor written disclosures and the letter required
by Independence Standards Board Standard No. 1. The
committee also discussed with the independent auditor the
auditors independence from management and our company,
including the matters covered by the written disclosures and
letter provided by the independent auditor.
The committee discussed with the independent auditor the overall
scope and plans for its audit. The committee met with the
independent auditor, with and without management present, to
discuss the results of the examinations, its evaluations of our
company, the internal controls, and the overall quality of the
financial reporting. The committee held two meetings during the
fiscal year ended December 31, 2005.
Based on the reviews and discussions referred to above, the
committee recommended to the Board of Directors, and the Board
approved, that the audited financial statements be included in
the Annual Report on
Form 10-K
for the year ended December 31, 2005 for filing with the
Securities and Exchange Commission.
Our Board of Directors has adopted a written charter for the
Audit Committee that reflects, among other things, requirements
of the Sarbanes-Oxley Act of 2002, rules adopted by the SEC, and
rules of NASDAQ. A copy of the Audit Committee charter is
included as Appendix A to this proxy statement.
The report has been furnished by the Audit Committee of our
Board of Directors.
Frank B. Bennett, Chairman
W. Kirk Patterson
Anthony L. Winczewski
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors,
officers, and persons that own more than 10 percent of a
registered class of our companys equity securities to file
reports of ownership and changes in ownership with the SEC.
Officers, directors, and greater than 10% stockholders are
required by SEC regulations to furnish our company with copies
of all Section 16(a) forms they file.
20
Based solely upon our review of the copies of such forms
received by us during the fiscal year ended December 31,
2005, and written representations that no other reports were
required, we believe that each person who, at any time during
such fiscal year, was a director, officer, or beneficial owner
of more than 10 percent of our common stock complied with
all Section 16(a) filing requirements during such fiscal
year, except for Mr. Merritt, who filed one late
Form 4 relating to the exercise of options.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During January 2005, in consideration for his prior service to
our company, including providing capital to our company and his
personal guaranty of company obligations, we granted to
Mr. Jundt options to purchase 40,000 shares of our
common stock at an exercise price of $6.00 per share. In
addition, in consideration for his service as our Chairman of
the Board, during January 2005 we granted to Mr. Jundt
options to purchase 20,000 shares of our common stock at an
exercise price of $6.00 per share.
21
PERFORMANCE
GRAPH
The following line graph compares cumulative total stockholder
returns for the period from August 16, 2005 through
December 31, 2005 for (1) our common stock;
(2) the NASDAQ Stock Market (U.S.) Index; and (3) a
restaurant peer group. We do not believe that an index exists
with companies comparable to those of our company. We have
therefore elected to include a peer group consisting of P.F.
Changs China Bistro, Inc.; Cheesecake Factory
Incorporated; McCormick & Schmicks Seafood
Restaurants, Inc.; Benihana, Inc.; BJs Restaurants, Inc.;
Granite City Food & Brewery Ltd.; and J.
Alexanders Corporation. The graph assumes an investment of
$100 on August 16, 2005, which was the first day on which
our stock was listed on the NASDAQ National Market. The
calculations of cumulative stockholder return on the NASDAQ
Stock Market (U.S.) Index and the restaurant peer group include
reinvestment of dividends, but the calculation of cumulative
stockholder return on our common stock does not include
reinvestment of dividends because we did not pay dividends
during the measurement period. The performance shown is not
necessarily indicative of future performance.
22
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock on March 20, 2006,
except as indicated, by (1) each director and each named
executive officer of our company, (2) all directors and
executive officers of our company as a group, and (3) each
person known by us to own more than 5% of our common stock.
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Beneficially
|
|
|
|
|
Name of Beneficial
Owner
|
|
Owned(1)
|
|
|
Percent(2)
|
|
|
Directors and Executive
Officers:
|
|
|
|
|
|
|
|
|
Marcus E. Jundt (3)
|
|
|
905,934
|
|
|
|
15.0
|
%
|
C. Donald Dempsey
|
|
|
87,658
|
|
|
|
1.5
|
%
|
Jason J. Merritt (4)
|
|
|
103,600
|
|
|
|
1.8
|
%
|
Mark S. Robinow (5)
|
|
|
73,589
|
|
|
|
1.3
|
%
|
Mark L. Bartholomay
|
|
|
|
|
|
|
|
|
Frank B. Bennett (6)
|
|
|
25,600
|
|
|
|
*
|
|
Richard J. Hauser (7)
|
|
|
871,466
|
|
|
|
14.5
|
%
|
Douglas G. Hipskind (8)
|
|
|
8,000
|
|
|
|
*
|
|
W. Kirk Patterson (9)
|
|
|
16,400
|
|
|
|
*
|
|
Anthony L. Winczewski(10)
|
|
|
14,800
|
|
|
|
*
|
|
All directors and executive
officers as a group (10 persons)
|
|
|
1,407,047
|
|
|
|
22.4
|
%
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
Kona MN, LLC(11)
|
|
|
700,000
|
|
|
|
11.7
|
%
|
Mary Joann Jundt Irrevocable
Trust(12)
|
|
|
540,731
|
|
|
|
9.3
|
%
|
James R. Jundt(13)
|
|
|
303,333
|
|
|
|
5.2
|
%
|
Cortina Asset Management, LLC(14)
|
|
|
318,293
|
|
|
|
5.5
|
%
|
|
|
|
|
(1)
|
Except as otherwise indicated, each person named in the table
has sole voting and investment power with respect to all common
stock beneficially owned, subject to applicable community
property law. Except as otherwise indicated, each person may be
reached as follows:
c/o Kona
Grill, Inc., 7150 East Camelback Road, Suite 220,
Scottsdale, Arizona 85251.
|
|
|
(2)
|
The percentages shown are calculated based on
5,791,578 shares of common stock outstanding on
March 20, 2006. The numbers and percentages shown include
the shares of common stock actually owned as of March 20,
2006 and the shares of common stock that the identified person
or group had the right to acquire within 60 days of such
date. in calculating the percentage of ownership, all shares of
common stock that the identified person or group had the right
to acquire within 60 days of March 20, 2006 upon the
exercise of options or warrants are deemed to be outstanding for
the purpose of computing the percentage of the shares of common
stock owned by that person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the
shares of common stock owned by any other person or group.
|
|
|
(3)
|
Mr. Marcus Jundt is the son of Mr. James R. Jundt, and
Mr. Marcus Jundt is a beneficiary of the Mary Joann Jundt
Irrevocable Trust. The number of shares of common stock
beneficially owned by Mr. Jundt includes
(a) 10,800 shares held in trust by his children, of
which Mr. Marcus Jundt is not a trustee;
(b) 500,000 shares of common stock beneficially owned
by Kona MN, LLC, of which Mr. Marcus Jundt is a control
person; (c) 200,000 shares of common stock issuable
upon exercise of outstanding warrants held by Kona MN, LLC; and
(d) 60,000 shares of common stock issuable upon
exercise of vested stock options. The number of shares of common
stock beneficially owned by Mr. Jundt does not include
(i) 540,731 shares beneficially owned by the Mary
Joann Jundt Irrevocable Trust; or (ii) 303,333 shares
held by Mr. James R. Jundt. All shares of
|
23
|
|
|
|
|
common stock held by Kona MN, LLC are included in the beneficial
ownership for both Messrs. Jundt and Hauser.
|
|
|
|
|
(4)
|
Includes 85,000 shares of common stock issuable upon
exercise of vested stock options.
|
|
|
(5)
|
Includes 71,089 shares of common stock issuable upon
exercise of vested stock options.
|
|
|
(6)
|
Includes 24,600 shares of common stock issuable upon
exercise of vested stock options.
|
|
|
(7)
|
Mr. Hauser is a control person of Kona MN, LLC. The number
of shares of common stock beneficially owned by Mr. Hauser
includes (a) 166,666 shares of common stock held by
his spouse; (b) 500,000 shares of common stock held by
Kona MN, LLC; (c) 200,000 shares of common stock
issuable upon exercise of outstanding warrants held by Kona MN,
LLC; and (d) 4,800 shares of common stock issuable
upon exercise of vested stock options. All shares of common
stock held by Kona MN, LLC are included in the beneficial
ownership for both Messrs. Jundt and Hauser.
|
|
|
(8)
|
Includes 8,000 shares of common stock issuable upon
exercise of vested stock options.
|
|
|
(9)
|
Includes 16,400 shares of common stock issuable upon
exercise of vested stock options.
|
|
|
(10)
|
Includes 14,800 shares of common stock issuable upon
exercise of vested stock options.
|
|
(11)
|
Includes 500,000 shares of common stock and
200,000 shares of common stock issuable upon exercise of
outstanding warrants. Mr. Jundt and Mr. Hauser are
both control persons of Kona MN, LLC and all shares of common
stock held by Kona MN, LLC are included in the beneficial
ownership for both Messrs. Jundt and Hauser.
|
|
(12)
|
All of such shares are held by the Mary Joann Jundt Irrevocable
Trust, of which Mrs. Mary Joann Jundt, the mother of
Mr. Marcus Jundt, is trustee. The address of the Mary Joann
Jundt Irrevocable Trust is 301 Carlson Parkway, Suite 120,
Minnetonka, Minnesota 55305.
|
|
(13)
|
Mr. James Jundt is the father of Mr. Marcus Jundt and
has sole voting and dispositive power over all such shares.
|
|
(14)
|
Represents 318,293 shares of common stock owned by Cortina
Asset Management, LLC. The address of Cortina Asset Management,
LLC is 330 East Kilbourn Avenue, Suite 850, Milwaukee,
Wisconsin 53202.
|
PROPOSAL TO
APPROVE THE AMENDMENT TO OUR
CERTIFICATE OF INCORPORATION
Our Board of Directors has approved a proposal to amend our
certificate of incorporation to decrease the number of
authorized shares of common stock from 40,000,000 to 15,000,000,
and to decrease the number of authorized shares of preferred
stock from 20,000,000 to 2,000,000. Our Board of Directors
recommends a vote for the proposed amendment to our
certificate of incorporation. The full text of the proposed
amendment to our certificate of incorporation is attached as
Appendix B to this proxy statement. If approved by
our stockholders, the proposed amendment will become effective
upon the filing of the articles of amendment to our certificate
of incorporation with the Secretary of State of the state of
Delaware Division of Corporations, which will occur as soon as
reasonably practicable.
Reasons
for the Proposed Amendment
Delaware corporations pay a franchise tax based upon the number
of authorized and unissued shares of stock that are permitted
under the certificate of incorporation. Our number of currently
authorized and unissued shares results in us approaching the
maximum franchise tax of $150,000 each year. Amending our
certificate of incorporation to reduce the number of authorized
shares of common stock will reduce this franchise tax and save
us approximately $50,000 in franchise tax each year. The
amendment would (i) reduce the current amount of authorized
and unissued shares to an amount our Board believes is
consistent with our currently anticipated needs, and
(ii) reduce the franchise tax that we pay to the state of
Delaware.
24
Potential
Effects of the Proposed Amendment
In the event that our stockholders approve the proposed
amendment, we believe that we will have a sufficient number of
authorized but unissued shares of our stock for issuance in
connection with the exercise of employee stock options, the
grant of shares under our stock plans, or in connection with
future equity offerings. Accordingly, our Board of Directors
will be able to act quickly in the event our company proposes to
issue capital stock in the event of future equity offerings. In
the meantime, by reducing the amount of authorized but unissued
capital stock we will be able to achieve savings in franchise
tax during periods in which we do not need the additional
authorized shares.
Approval
by Stockholders of the Proposed Amendment
Approval of the proposed amendment to our certificate of
incorporation will require the affirmative vote of the holders
of a majority of the total number of the issued and outstanding
shares of our common stock. Upon approval by our stockholders,
the proposed amendment will become effective upon filing of
articles of amendment to our certificate of incorporation with
the Secretary of State of the state of Delaware, which will
occur as soon as reasonably practicable following the meeting.
In the event that the proposed amendment is not approved by our
stockholders at the meeting, our current certificate of
incorporation will remain in effect and we will continue to pay
the current levels of annual franchise tax imposed in the state
of Delaware.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, an independent
registered public accounting firm, has audited the financial
statements of our company for the fiscal years ended
December 31, 2004 and 2005. We have appointed
Ernst & Young LLP to audit our consolidated financial
statements for the fiscal year ending December 31, 2006 and
recommend that the stockholders vote in favor of the
ratification of such appointment. In the event of a negative
vote on such ratification, the Board of Directors will
reconsider its selection. The Board of Directors anticipates
that representatives of Ernst & Young LLP will be
present at the meeting, will have the opportunity to make a
statement if they desire, and will be available to respond to
appropriate questions.
Aggregate fees billed to our company for the fiscal years ended
December 31, 2004 and 2005 by Ernst & Young LLP,
are as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2004
|
|
|
Fiscal 2005
|
|
|
Audit Fees (1)
|
|
$
|
55,750
|
|
|
$
|
144,950
|
|
Audit-Related Fees (2)
|
|
|
|
|
|
|
452,600
|
|
Tax Fees (3)
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
55,750
|
|
|
$
|
597,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents fees associated with the annual audits, reviews of
our quarterly reports on
Form 10-Q,
assistance with the review of documents filed with the SEC, and
accounting consultations. |
|
(2) |
|
Represents fees associated with our initial public offering, and
review of our documentation of internal control policies and
procedures over financial reporting. |
|
(3) |
|
Represents fees associated with assistance in tax compliance and
tax-related consultation. |
Audit
Committee Pre-Approval Policies
The charter of our Audit Committee provides that the duties and
responsibilities of our Audit Committee include the approval in
advance of any significant audit or non-audit engagement or
relationship with the independent auditor, and other services
permitted by law or applicable SEC regulations (including fee
and cost ranges) to be performed by our independent auditor. All
of the services provided by Ernst & Young LLP described
above under the captions Audit-Related Fees,
Tax Fees, and All Other Fees were
approved by our Audit Committee pursuant to our Audit
Committees pre-approval policies.
25
DEADLINE
FOR RECEIPT OF STOCKHOLDER PROPOSALS
Any stockholder that wishes to present any proposal for
stockholder action at our annual meeting of stockholders to be
held in 2007 must notify us at our principal offices no later
than February 3, 2007 in order for the proposal to be
included in our proxy statement and form of proxy relating to
that meeting. Under our bylaws, stockholders must follow certain
procedures to nominate persons for election as director or to
introduce an item of business at an annual meeting of
stockholders.
Pursuant to
Rule 14a-4
under the Exchange Act, we intend to retain discretionary
authority to vote proxies with respect to stockholder proposals
for which the proponent does not seek inclusion of the proposed
matter in our proxy statement for the annual meeting to be held
during calendar 2007, except in circumstances where (i) we
receive notice of the proposed matter no later than
February 13, 2007 and (ii) the proponent complies with
the other requirements set forth in Rule 14a 4.
OTHER
MATTERS
We know of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy card to
vote the shares they represent as our Board of Directors may
recommend.
Dated: March 19, 2006
26
APPENDIX A
KONA GRILL, INC.
CHARTER OF THE AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS
Organization
The Audit Committee (the Committee) of Kona Grill,
Inc. (the Company) shall be established by the
Companys Board of Directors (the Board) to
assist the Board in fulfilling its responsibilities to oversee
the accounting and financial reporting processes of the Company
and audits of the financial statements of the Company.
Members
This charter governs the operations of the Committee. The Board
shall annually appoint a Committee of at least three members
(each a Member), consisting entirely of independent
directors of the Board, and shall designate one Member as
chairperson (the Chair) or delegate the authority to
designate a Chair to the Committee. For purposes hereof, members
shall be considered independent as long as they satisfy all of
the independence requirements for Board Members as set forth in
all applicable Nasdaq and U.S. Securities and Exchange
Commission (SEC) rules.
Qualifications
Each Member of the Committee shall be financially literate, or
become financially literate within a reasonable period of time,
and at least one Member shall be an audit committee
financial expert, as defined by SEC rules.
Removal
and Replacement
The Members of the Committee shall be appointed by the Board and
shall serve until their successors are duly elected and
qualified or until their earlier resignation or removal. The
Members of the Committee may be removed, with or without cause,
and any vacancies filled by a majority vote of the Board.
Meetings
The Committee shall meet at least quarterly. The Committee shall
meet separately, periodically, with management and the
independent auditors in executive session.
Agenda
The Chair shall develop and set the Committees agenda, in
consultation with other Members, the Board and management. The
agenda and information concerning the business to be conducted
at each Committee meeting shall, to the extent practical, be
communicated to the Members sufficiently in advance of each
meeting to permit meaningful review. The Committee shall report
quarterly to the entire Board and shall submit to the Board the
minutes of its meetings.
Self-Evaluation
and Assessment
The Committee shall perform an evaluation of its performance at
least annually to determine whether it is functioning
effectively and report to the Board the results of the
self-evaluation.
The Committee shall review and reassess the charter at least
annually and obtain the approval of the Board.
Purpose
The primary purpose of the Committee is to:
|
|
|
|
|
Assist the Board in its oversight responsibilities as they
relate to the Companys accounting policies and internal
controls, financial reporting practices and legal and regulatory
compliance, including, among other
|
A-1
|
|
|
|
|
things: (i) the quality and integrity of the Companys
financial statements; (ii) the Companys compliance
with legal and regulatory requirements; (iii) review of the
independent auditors qualifications and independence; and
(iv) the performance of the Companys independent
auditors;
|
|
|
|
|
|
Prepare the Audit Committee report that the SEC proxy rules
require to be included in the Companys annual proxy
statement; and
|
|
|
|
Approve quarterly and annual financial statements
(Form 10-Q
and 10-K).
|
The Committee shall retain and compensate at the Companys
expense, with appropriate funding, such outside legal,
accounting, or other advisors, as it considers necessary in
discharging its oversight role.
In fulfilling its purpose, it is the responsibility of the
Committee to maintain free and open communication between the
Committee, independent auditors and management of the Company,
and to determine that all parties are aware of their
responsibilities. In discharging its oversight responsibilities,
the Committee shall have unrestricted access to the
Companys management, books, records, facilities and
personnel.
Duties
and Responsibilities
The Committee has the responsibilities and powers set forth in
this Charter. Management is responsible for the preparation,
presentation, and integrity of the Companys financial
statements in accordance with generally accepted accounting
principles, for the appropriateness of the accounting principles
and reporting policies that are used by the Company and for
implementing and maintaining internal control over financial
reporting. The independent auditors are responsible for auditing
the Companys financial statements and internal control
over financial reporting, and for reviewing the Companys
unaudited interim financial statements. The Committees
responsibility is one of oversight and in carrying out its
responsibility, the Committee is not providing any expert or
other special assurance as to the Companys financial
statements. Therefore, each Member of the Committee shall be
entitled to rely, to the fullest extent permitted by law, on the
integrity of those persons and organizations within and outside
the Company from whom he or she receives information, and the
accuracy of the financial and other information provided to the
Committee by such persons or organizations.
The Committee, in carrying out its responsibilities, believes
its policies and procedures should remain flexible, in order to
best react to changing conditions and circumstances. The
Committee will take appropriate actions to set the overall
corporate tone for quality financial reporting,
sound business risk practices, and ethical behavior.
The following shall be the principal duties and responsibilities
of the Committee. These are set forth as a guide with the
understanding that the Committee may supplement them as
appropriate.
Independent
Auditors Qualifications and Independence
|
|
|
|
|
The Committee shall be directly responsible for the appointment,
compensation, retention, and oversight of the work of the
independent auditors (including resolution of disagreements
between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit
report or performing other audit, review, or attest services for
the listed issuer, and the independent auditors must report
directly to the Committee.
|
|
|
|
At least annually, the Committee shall obtain and review a
report by the independent auditors with at least the lead audit
partner describing: (i) the firms internal quality
control procedures; (ii) any material issues raised by the
most recent internal quality control review, or peer review, of
the firm, or by inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues; and
(iii) all relationships between the independent auditors
and the Company (to assess the auditors independence).
|
|
|
|
After reviewing the foregoing report and the independent
auditors work throughout the year, the Committee shall
evaluate the auditors qualifications, performance and
independence. Such evaluation should include the review and
evaluation of the senior members of the independent auditors and
take into account the opinions of management.
|
A-2
|
|
|
|
|
The Committee shall determine that the independent audit firm
has a process in place to address the rotation of the lead audit
partner and other audit partners serving the account as required
under the SEC independence rules. The Committee shall also
consider, and advise the Board, whether there should be regular
rotation of the independent auditor.
|
|
|
|
The Committee shall have the authority to pre-approve all audit
and non-audit services to be provided by the independent
auditors and the related fees for such services other than
prohibited non-auditing services as promulgated under rules and
regulations of the SEC. The Committee shall review with the lead
audit partner whether any member of the audit team receives any
discretionary compensation from the audit firm with respect to
non-audit services performed by the independent auditor.
|
|
|
|
The Committee shall, at least annually, discuss with the
independent auditors the overall scope and plans for their
audit, including the adequacy of staffing and budget or
compensation.
|
|
|
|
The Committee shall regularly review with the independent
auditors any audit problems or difficulties encountered during
the course of the audit work, including any restrictions on the
scope of the independent auditors activities or access to
requested information, and managements response. The
Committee should review any accounting adjustments that were
noted or proposed by the auditors but were passed
(as immaterial or otherwise); any communications between the
audit team and the audit firms national office relating to
problems or difficulties encountered with respect to significant
auditing or accounting issues; and any management or
internal control letter issued, or proposed to be
issued, by the audit firm to the Company.
|
|
|
|
The Committee shall: (i) annually review the experience,
qualifications and performance of the senior members of the
audit team; and (ii) pre-approve the hiring of any
employee, or former employee, of the independent auditor who was
a member of the Companys audit team in the preceding two
fiscal years.
|
Financial
Statements and Financial Review
|
|
|
|
|
The Committee shall review and discuss the quarterly financial
statements, including Managements Discussion and
Analysis of Financial Condition and Results of Operations,
with management and the independent auditors prior to the filing
of the Companys Quarterly Report on
Form 10-Q.
Also, the Committee shall discuss the results of the quarterly
review and any other matter required to be communicated to the
Committee by the independent auditors under generally accepted
auditing standards.
|
|
|
|
The Committee shall review and discuss the annual audited
financial statements, including Managements
Discussion and Analysis of Financial Condition and Results of
Operations, with management and the independent auditors
prior to the filing of the companys Annual Report on
Form 10-K.
The committees review of the financial statements shall
include: (i) major issues regarding accounting principles
and financial statement presentations, including any significant
changes in the companys selection or application of
accounting principles, and major issues as to the adequacy of
the companys internal controls and any specific remedial
actions adopted in light of material control deficiencies;
(ii) discussions with management and the independent
auditors regarding significant financial reporting issues and
judgments made in connection with the preparation of the
financial statements and the reasonableness of those judgments;
(iii) consideration of the effect of regulatory accounting
initiatives, as well as off-balance sheet structures on the
financial statements; (iv) consideration of the judgment of
both management and the independent auditors about the quality,
not just the acceptability of accounting principles; and
(v) the clarity of the disclosures in the financial
statements. Also, the Committee shall discuss the results of the
annual audit and any other matters required to be communicated
to the Committee by the independent auditors under professional
standards.
|
|
|
|
The Committee shall receive and review a report from the
independent auditors, prior to the filing of the Companys
Annual Report on
Form 10-K,
on (i) all critical accounting policies and practices of
the Company; (ii) all material alternative treatments of
financial information within generally accepted accounting
principles that have been discussed with management, including
the ramifications of the use of such alternative treatments and
disclosures and the treatment preferred by the independent
auditor; and
|
A-3
|
|
|
|
|
(iii) other material written communications between the
independent auditors and management. In addition, the Committee
shall review with the independent auditors any audit problems or
difficulties and managements responses.
|
|
|
|
|
|
The Committee shall review and approve all related party
transactions.
|
|
|
|
The Committee shall review and discuss the nature and types of
presentation and information to be included in earnings press
releases, and any additional financial information and earnings
guidance generally provided to analysts and rating agencies with
management. However, the Committee need not discuss in advance
each earnings release or each instance in which the Company may
provide earnings guidance.
|
|
|
|
The Committee shall review managements assessment of the
effectiveness of internal control over financial reporting as of
the end of the most recent fiscal year and the independent
auditors report on managements assessment.
|
|
|
|
The Committee shall discuss with management and the independent
auditors the adequacy and effectiveness of internal control over
financial reporting, including any significant deficiencies or
material weaknesses identified by management of the Company in
connection with its required quarterly certifications under
Section 302 of the Sarbanes-Oxley Act. In addition, the
Committee shall discuss with management and the independent
auditors any significant changes in internal control over
financial reporting that are disclosed, or considered for
disclosures, in the Companys periodic filings with the
SEC. The Committee shall prepare the report required by the SEC
for inclusion in the Companys proxy statement.
|
|
|
|
The Committee shall review with management and the independent
auditor the scope, planning and staffing of the proposed audit
for the current year. The Committee shall review with management
and the independent auditor the quality, adequacy and
effectiveness of the Companys internal controls and any
significant deficiencies or material weaknesses in the internal
controls.
|
|
|
|
The Committee shall review with management, and any internal or
external counsel as the Committee considers appropriate, any
legal matters (including the status of pending litigation) that
may have a material impact on the Company and any material
reports or inquiries from regulatory or governmental agencies.
The Committee shall review with the Companys counsel and
Chief Financial Officer the adequacy and effectiveness of the
Companys procedures to ensure compliance with its legal
and regulatory responsibilities.
|
|
|
|
The Committee shall meet with management to discuss guidelines
and policies governing the process by which the Company assesses
and manages exposure to risk and to discuss the Companys
major financial risk exposures and the steps management has
taken to monitor and control such exposures.
|
|
|
|
The Committee shall establish procedures for (i) the
receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or
auditing matters, and (ii) the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
|
The Committee shall determine the appropriate funding needed by
the Committee for payment of: (i) compensation to the
independent audit firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review, or
attest services for the Company; (ii) compensation to any
advisers employed by the Committee; and (iii) ordinary
administrative expenses of the Committee that are necessary or
appropriate in carrying out its duties.
The foregoing are the general responsibilities of the Committee
and are set forth only for its guidance. The Committee may
diverge and may assume such other responsibilities, as it deems
necessary or appropriate in carrying out its oversight
functions. The Committee shall have the power to delegate its
authority and duties to subcommittees or individual Members of
the Committee, as it deems appropriate.
A-4
APPENDIX B
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KONA GRILL, INC.
Kona Grill, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of
Delaware (the Corporation), does hereby certify:
FIRST: That the Board of Directors of the
Corporation adopted a resolution proposing and declaring
advisable a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, amending the
first paragraph of Article 4 thereof in its entirety to
read as follows:
The Corporation shall have the authority to issue an
aggregate of 15,000,000 shares of Common Stock, each with a
par value of $.01 per share (the Common Stock),
and an aggregate of 2,000,000 shares of preferred stock,
each with a par value of $.01 per share, undesignated as to
terms and preferences (the Preferred Stock).
SECOND: That the aforesaid amendment was
approved by the stockholders of the Corporation at a meeting
duly held on May 4, 2006.
THIRD: That the aforesaid amendment was duly
adopted in accordance with the applicable provisions of
Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Kona Grill, Inc. has caused this
Certificate of Amendment to be signed by Mark S. Robinow, its
Executive Vice President, Chief Financial Officer, and
Secretary, as of
the
day of May, 2006.
KONA GRILL, INC.
Executive Vice President, Chief
Financial Officer, and Secretary
B-1
6 FOLD AND DETACH HERE AND READ THE REVERSE SIDE 6
KONA GRILL, INC.
2006 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of KONA GRILL, INC., a Delaware corporation (the Company), hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement of the
Company, each dated March 19, 2006, and hereby appoints Marcus E. Jundt and Mark S. Robinow, and
each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and
in the name of the undersigned, to represent the undersigned at the 2006 Annual Meeting of
Stockholders of the Company, to be held on Thursday, May 4, 2006, at 2:00 p.m., local time, at the
offices of Greenberg Traurig, LLP, at 2375 E. Camelback Road, Suite 700, Phoenix, Arizona, and at
any adjournment or adjournments thereof, and to vote all shares of the Companys Common Stock that
the undersigned would be entitled to vote if then and there personally present, on the matters set
forth on the reverse side.
This Proxy will be voted as directed or, if no contrary direction is indicated, will be voted FOR
the election of one Class I director to serve for a three-year term expiring in 2009; FOR approval
of the amendment to the Companys Certificate of Incorporation to decrease the number of authorized
shares of common stock from 40,000,000 to 15,000,000, and to decrease the number of authorized
shares of preferred stock from 20,000,000 to 2,000,000; FOR the ratification of the appointment of
Ernst & Young LLP as the Companys independent auditors for the fiscal year ending December 31,
2006; and as said proxies deem advisable on such other matters as may come before the meeting.
A majority of such proxies or substitutes as shall be present and shall act at the meeting or any
adjournment or adjournments thereof (or if only one shall be present and act, then that one) shall
have and may exercise all of the powers of said proxies hereunder.
(Continued and to be signed on the other side)
KONA GRILL, INC.
Voting by Internet is quick, easy and immediate. As a KONA GRILL, INC. stockholder, you have
the option of voting your shares electronically through the Internet, eliminating the need to
return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card. Votes submitted
electronically over the Internet must be received by 7:00 p.m., Eastern Time, on May 3, 2006.
To Vote Your Proxy by Internet
www.continentalstock.com
Have your proxy card available when you access the above website. Follow the directions on the
website to vote your shares.
PLEASE DO NOT RETURN THE BELOW CARD IF YOU ARE VOTING ELECTRONICALLY.
To Vote Your Proxy by Mail
Mark, sign and date your proxy card below, detach it and return it in the postage-paid envelope
provided.
6 FOLD AND DETACH HERE AND READ THE REVERSE SIDE 6
|
|
|
|
|
|
|
Please mark
your votes
like this
|
|
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
|
|
WITHHOLD AUTHORITY |
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
ELECTION OF DIRECTORS
|
|
nominee
|
|
|
|
to vote for |
|
|
|
|
|
|
|
|
|
|
|
|
01
|
|
Marcus E. Jundt
|
|
listed
|
|
|
|
nominee listed
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
|
|
|
|
o
|
|
|
|
o
|
|
|
3. |
|
|
Proposal to approve the ratification of the
appointment of
Ernst & Young LLP as the Companys
independent auditors
for the fiscal year ending December 31, 2006
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
|
|
|
|
2.
|
|
Proposal to approve the amendment to the
Companys Certificate of Incorporation to
decrease the number of authorized shares of
common stock from 40,000,000 to 15,000,000,
and to decrease the number of authorized
shares of preferred stock from
20,000,000 to 2,000,000
|
|
o
|
|
o
|
|
o
|
|
|
|
and upon such matters which may properly come before the meeting or any adjournment thereof. |
To make comments, mark here. o To change your address, please mark this box. o
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
Signature
|
|
|
|
Date
|
|
|
|
, 2006. |
|
|
|
|
|
|
|
|
|
|
|
|
|
(This proxy should be dated, signed by the stockholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity
should so indicate. If shares are held by joint tenants or as community properly, both stockholders
should sign.)