EXHIBIT 4(b)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. THIS WARRANT (THIS
"WARRANT") AND THE WARRANTS OF EVEN DATE HEREWITH (TOGETHER WITH THIS WARRANT,
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THE "WARRANTS") ARE ISSUED SUBJECT TO THE TERMS OF (A) A SECURITIES PURCHASE
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AGREEMENT, DATED AS OF DECEMBER 17, 1997 ("PURCHASE AGREEMENT"), BY AND BETWEEN
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INTERACTIVE ENTERTAINMENT LIMITED AND THE HOLDER OF THIS WARRANT AND (B) A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF DECEMBER 17, 1997 ("REGISTRATION
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RIGHTS AGREEMENT"), BY AND BETWEEN INTERACTIVE ENTERTAINMENT LIMITED AND THE
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HOLDER OF THIS WARRANT.
WARRANT TO PURCHASE
_______ SHARES
WARRANT TO PURCHASE COMMON STOCK
OF
INTERACTIVE ENTERTAINMENT LIMITED
THIS CERTIFIES that CC INVESTMENTS, LDC or its registered assigns (the
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"Holder"), has the right to purchase from INTERACTIVE ENTERTAINMENT LIMITED, a
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Bermuda exempted company (the "Company"), up to fully paid and nonassessable
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shares of the Company's Common Shares (the "Common Stock"), subject to
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adjustment as provided herein, at a price equal to the Exercise Price (as
defined below), at any time beginning on _______,______ (the "Inital Exercise
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Date") and ending at 5:00 p.m., eastern time, on_______,______ (the "Expiration
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Date"). This Warrant is issued, and all rights hereunder shall be, subject to
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all of the conditions, limitations and provisions set forth herein.
9. Exercise.
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(i) Right to Exercise; Exercise Price. The Holder shall have the
right to exercise this Warrant at any time and from time to time following the
expiration of six (6) months from December 17, 1997 (the "Issue Date") up to and
including the Expiration Date as to all or any part of the shares of Common
Stock covered hereby (the "Warrant Shares"). The "Exercise Price" payable by
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the Holder in connection with the exercise of this Warrant shall be equal to the
lesser of (i) $4.25 and (ii) one hundred and ten percent (110%) of the average
of the Closing Bid Prices (as defined below) for the Common Stock on the five
(5) Trading Days (as defined below) occurring immediately prior to (but not
including) the Tranche A Closing Date (as defined in the Purchase Agreement).
"Trading Day" shall mean any day on which the Common Stock is traded for any
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period on the Nasdaq SmallCap Market or on the principal securities exchange or
market on which the Common Stock is then traded. "Closing Bid Price" means, with
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respect to a security, the closing bid price of such security on the Nasdaq
SmallCap Market or on the principal securities exchange or market where such
security is listed or traded as reported by The Nasdaq Stock Market, Inc. or, if
The Nasdaq Stock Market, Inc. is not then reporting closing bid prices of such
security, Bloomberg Financial Markets or a comparable reporting service of
national reputation selected by the Company and reasonably acceptable to the
Holders (collectively, "Bloomberg"), or if the foregoing does not apply, the
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last reported sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined by an investment banking firm selected by the Holder
(which may be the Holder or an affiliate thereof), and reasonably acceptable to
the Company, with the costs of such appraisal to be borne by the Company.
(ii) Exercise Notice. In order to exercise this Warrant, the Holder
shall send by facsimile transmission, at any time prior to 6:00 p.m., eastern
time, on the date on which the Holder wishes to effect such exercise (the
"Exercise Date"), to the Company and to its designated transfer agent for the
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Common Stock (the "Transfer Agent") (i) a copy of the notice of exercise in the
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form attached hereto as Exhibit A (the "Exercise Notice") stating the number of
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Warrant Shares as to which such exercise applies and the calculation therefor
and (ii) a copy of this Warrant. The Holder shall thereafter deliver to the
Company the original Exercise Notice, the original Warrant and the Exercise
Price. In the case of a dispute as to the calculation of the Exercise Price or
the number of Warrant Shares issuable hereunder, the Company shall promptly
issue to the Holder the number of Warrant Shares that are not disputed and shall
submit the disputed calculations to its independent accountant within one (1)
business day following the Exercise Date. The Company shall cause such
accountant to calculate the Exercise Price and/or the number of Warrant Shares
issuable hereunder and to notify the Company and the Holder of the results in
writing no later than two (2) business days following the day on which it
received the disputed calculations. Such accountant's calculation shall be
deemed conclusive absent manifest error. The fees of any such accountant shall
be borne by the party whose calculations were most at variance with those of
such accountant.
(iii) Cancellation of Warrant/Reduction of Warrant Shares. This
Warrant shall be cancelled upon its exercise and the Holder shall be entitled to
receive, as soon as practicable after the Exercise Date, a new Warrant or
Warrants (containing terms identical to this Warrant) representing any
unexercised portion of this Warrant. If the Holder shall have, prior to the
Initial Exercise Date, sold or otherwise disposed of any portion of the
Preferred Shares acquired pursuant to the Purchase Agreement (or Common Stock
into which such Preferred Shares have been converted (the "Converted Common
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Stock")) the number of Warrant Shares into which this Warrant is exercisable
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shall be automatically reduced on a pro rata basis in the same proportion as (A)
the number of Preferred Shares which have been so sold or otherwise disposed of
plus the number of Preferred Shares represented by the shares of Converted
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Common Stock which have been so sold or otherwise disposed of bears to (B) the
number of Preferred Shares originally purchased by the Holder pursuant to the
Purchase Agreement. In such event, the Holder shall be entitled to receive (on
the later of the Initial Exercise Date or the day which is five (5) days
following the date of the delivery of written notice to the Company of such sale
or disposition) a new Warrant or Warrants (containing terms identical to this
Warrant) exercisable into such reduced number of Warrant Shares.
10. Delivery of Warrant Shares Upon Exercise. Upon receipt of a Exercise
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Notice pursuant to paragraph 1 above, the Company shall, (A) in the case of a
Cashless Exercise (as defined below), no later than the close of business on the
third (3rd) business day following the Exercise Date set forth in such Exercise
Notice, and (B) in the case of a Cash Exercise (as defined below) no later than
the close of business on the earlier to occur of (i) the third (3rd) business
day following the Exercise Date set forth in such Exercise Notice and (ii) such
later date on which the Company shall have received payment of the Exercise
Price (the "Delivery Date"), issue and deliver or caused to be delivered to the
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Holder the number of Warrant Shares as shall be determined as provided herein.
Warrant Shares delivered to the Holder shall not contain any restrictive legend
as long as the sale of such Warrant Shares is covered by an effective
Registration Statement (as defined in the Registration Rights Agreement) or may
be made pursuant to Rule 144(k) under the Securities Act of 1933, as amended, or
any successor rule or provision.
11. Failure to Deliver Warrant Shares.
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(i) Exercise Default. In the event that the Company fails for any
reason (other than by operation of paragraph 4 below) to deliver to a Holder
certificates representing the number of Warrant Shares in accordance with
subparagraph (a) above on or before the Delivery Date therefor (an "Exercise
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Default"), such Holder shall notify the Company by facsimile of such Exercise
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Default (a "Default Notice"). If, after the Holder has sent a Default Notice to
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the Company, the Company has not delivered such certificates and such failure
continues for three (3) business days following the Delivery Date, the Company
shall pay to such Holder payments ("Exercise Default Payments") in the amount of
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(i) (N/365) multiplied by (ii) the aggregate Exercise Price for the Warrant
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Shares which are the subject of such Conversion Default on the five (5) Trading
Days occurring immediately prior to (but not including) the applicable Exercise
Date multiplied by (iii) the lower of twenty-four percent (24%) and the maximum
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rate permitted by applicable law, where "N" equals the number of days elapsed
between the original Delivery Date for such Warrant Shares and the date on which
all of such Warrant Shares are issued and delivered to such Holder. Amounts
payable under this subparagraph 3(a) shall be paid to the Holder in immediately
available funds on or before the fifth (5th) business day of the calendar month
immediately following the calendar month in which such amount has accrued.
(ii) Buy-in. Nothing herein shall limit a Holder's right to pursue
actual damages for the Company's failure to issue and deliver Warrant Shares in
connection with an exercise on the applicable Delivery Date (including, without
limitation, damages relating to any purchase of shares of Common Stock by such
Holder to make delivery on a sale effected in anticipation of receiving Warrant
Shares upon exercise, such damages to be in an amount equal to (A) the aggregate
amount paid by such Holder for shares of Common Stock so purchased minus (B) the
aggregate amount of net proceeds, if any, received by such Holder from the sale
of the Warrant Shares issued by the Company pursuant to such exercise, and such
Holder shall have the right to pursue all remedies available to it at law or in
equity (including, without limitation, a decree of specific performance and/or
injunctive relief)).
(iii) Withdrawal of Exercise. In the event that a Holder has not
received certificates representing the Warrant Shares by the tenth (10th)
business day following an Exercise Default, such Holder may, upon written notice
to the Company, regain on such business day the rights of a Holder of this
Warrant, or part thereof, with respect to the Warrant Shares that are the
subject of such Exercise Default. In such event, such Holder shall retain all
of such Holder's rights and remedies with respect to the Company's failure to
deliver such Warrant Shares (including without limitation the right to receive
the cash payments specified in subparagraph 3(a) above).
(iv) Holder of Record. Each Holder, for all purposes, shall be
deemed to have become the holder of record of Warrant Shares on the Exercise
Date of this Warrant, irrespective of the date of delivery of such Warrant
Shares. Nothing in this Warrant shall be construed as conferring upon the Holder
hereof any rights as a shareholder of the Company.
12. Exercise Limitations. In no event shall a Holder be permitted to
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exercise this Warrant, or part thereof, with respect to Warrant Shares in excess
of the number of such shares, upon the issuance of which, (x) the number of
shares of Common Stock beneficially owned by such Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned except
for being subject to a limitation on conversion or exercise analogous to the
limitation contained in this Section 4) plus (y) the number of shares of Common
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Stock issuable upon such exercise, would be equal to or exceed (z) 4.99% of the
number of shares of Common Stock then issued and outstanding. Nothing contained
herein shall be deemed to restrict the right of a Holder to exercise this
Warrant, or part thereof, at such time as such exercise will not violate the
provisions of this Section 4.
13. Payment of the Exercise Price. The Holder may pay the Exercise Price
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in either of the following forms or, at the election of Holder, a combination
thereof:
(a) Cash Exercise: by delivery of immediately available funds.
(b) Cashless Exercise: by surrender of this Warrant to the
Company together with a notice of cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the Closing Bid Prices of the Common
Stock for the five (5) Trading Days immediately prior to
(but not including) the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 under the Securities Act of 1933, as amended, it
is intended, understood and acknowledged that the Warrant Shares issued in
a cashless exercise transaction shall be deemed to have been acquired by
the Holder, and the holding period for the Warrant Shares shall be deemed
to have been commenced, on the Issue Date.
14. Anti-Dilution Adjustments.
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(i) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then the Holder hereof, upon
exercise of this Warrant after the record date for the determination of Holders
of Common Stock entitled to receive such dividend, shall be entitled to receive,
in addition to the number of shares of Common Stock as to which this Warrant is
exercised, such additional shares of Common Stock as such Holder would have
received had this Warrant been exercised immediately prior to such record date
and the Exercise Price will be proportionately adjusted.
(ii) Recapitalization or Reclassification. If the Company shall at
any time effect a recapitalization, reclassification or other similar
transaction of such character that the shares of Common Stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof, the number of shares of Common Stock which the
Holder hereof shall be entitled to purchase upon exercise of this Warrant shall
be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason of such
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give the Warrant Holder the same
notice at the same time it provides such notice to holders of Common Stock of
any transaction described in this Section 6(b).
(iii) Distributions. If the Company shall at any time distribute to
Holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned surplus
or net profits for the current or a preceding year) then, in any such case, the
Holder of this Warrant shall be entitled to receive, upon exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which such Holder would have been entitled to receive with respect to each such
share of Common Stock as a result of the happening of such event had this
Warrant been exercised immediately prior to the record date or other date fixing
shareholders to be affected by such event (the "Determination Date") or, in lieu
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thereof, if the Board of Directors of the Company should so determine at the
time of such distribution, a reduced Exercise Price determined by multiplying
the Exercise Price on the Determination Date by a fraction, the numerator of
which is the difference between (x) such Exercise Price and (y) the value of
such distribution applicable to one share of Common Stock (such value to be
determined by the Board in its discretion), and the denominator of which is such
Exercise Price.
(iv) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
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class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given ten (10) business days' notice to the Holder
hereof of any Corporate Change.
(v) Exercise Price as Adjusted. As used in its Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in paragraph
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1 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this paragraph 6, and thereafter shall mean said price as adjusted
from time to time in accordance with the provisions of said subsection. No such
adjustment under this paragraph 6 shall be made unless such adjustment would
change the Exercise Price at the time by $.01 or more; provided, however, that
all adjustments not so made shall be deferred and made when the aggregate
thereof would change the Exercise Price at the time by $.01 or more.
(vi) Adjustments: Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 6, the Holder of this Warrant shall, upon exercise of this Warrant,
become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of
Common Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions of
this paragraph 6.
15. Fractional Interests. No fractional shares or scrip representing
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fractional shares shall be issuable upon the exercise of this Warrant, but on
exercise of this Warrant, the Holder hereof may purchase only a whole number of
shares of Common Stock. If, on exercise of this Warrant, the Holder hereof
would be entitled to a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon exercise shall be the next
higher number of shares.
16. Transfer of this Warrant. The Holder may sell, transfer, assign,
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pledge or otherwise dispose of this Warrant, in whole or in part, as long as
such sale or other disposition is made pursuant to pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act of 1933, as amended, and applicable state laws. Upon such
transfer or other disposition, the Holder shall deliver a written notice to
Company, substantially in the form of the Transfer Notice attached hereto as
Exhibit B (the "Transfer Notice"), indicating the person or persons to whom this
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Warrant shall be transferred and, if less than all of this Warrant is
transferred or this Warrant is transferred in parts, the number of Warrant
Shares to be covered by the part of this Warrant to be transferred to each such
person. Within three (3) business days of receiving a Transfer Notice and the
original of this Warrant, the Company shall deliver to the each transferee
designated by the Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of Warrant Shares.
17. Benefits of this Warrant. Nothing in this Warrant shall be construed
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to confer upon any person other than the Holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Holder of this Warrant.
18. Loss, theft, destruction or mutilation of Warrant. Upon receipt by
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the Company of evidence of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of indemnity or
security reasonably satisfactory to the Company, and upon surrender of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date.
19. Notice or Demands. Except as otherwise provided herein, any notice,
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demand or request required or permitted to be given pursuant to the terms of
this Warrant shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not a
business day, on the next succeeding business day, (ii) on the next business day
after timely delivery to a nationally-recognized overnight courier and (iii) on
the third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed as follows:
If to the Company:
Interactive Entertainment Limited
000 Xxxxxxxxx Xxxx
Xxxxx X-000
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxx
Fax: (000) 000-0000
With a copy to:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxx
Fax: (000) 000-0000
and if to the Holder, to such address as shall be designated by the Holder
in writing to the Company.
20. Applicable Law. This Warrant is issued under and shall for all
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purposes be governed by and construed in accordance with the laws of the state
of New York, without giving effect to conflict of law provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
____ day of __________, 1997.
INTERACTIVE ENTERTAINMENT LIMITED
By: _________________________________________
Name:
Title:
EXHIBIT A TO WARRANT
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EXERCISE NOTICE
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The undersigned Holder hereby irrevocably exercises the right to purchase
__________ of the shares of Common Stock ("Warrant Shares") of INTERACTIVE
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ENTERTAINMENT LIMITED, a Bermuda exempted company (the "Company"), evidenced by
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the attached Warrant (the "Warrant"). Capitalized terms used herein and not
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otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
________________ a Cash Exercise with respect to ________________ Warrant
Shares; and/or
________ a Cashless Exercise with respect to ________________ Warrant
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Shares.
2. Payment of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the sum of $_________________ to the Company in
accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the Holder
____________ Warrant Shares in accordance with the terms of the Warrant.
Date:_____________________________
__________________________________
Name of Registered Holder
By:_______________________________
Name:
Title:
EXHIBIT B TO WARRANT
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TRANSFER NOTICE
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FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers unto the person or persons named below the right to
purchase _______ shares of the Common Stock of INTERACTIVE ENTERTAINMENT LIMITED
evidenced by the attached Warrant.
Date:_____________________________
__________________________________
Name of Registered Holder
By:_______________________________
Name:
Title:
Transferee Name and Address:
__________________________________
__________________________________
__________________________________
