EXHIBIT 3
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NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OR EXCHANGE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO
IS DECLARED EFFECTIVE UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT IS AVAILABLE.
W-1 January 14, 1998
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT VALUE PARTNERS, LTD. (the "Holder", and
together with the holders of other Warrants issued pursuant to the Note
Purchase Agreement herein described, the "Holders") is entitled to purchase
from The Texas Individualized Television Network, Inc., a Delaware
corporation (the "Company"), such number of shares (the "Shares") of the
Company's common stock, $.01 par value per share (the "Common Stock"),
which shall, at the time of and giving effect to such exercise, equal
15.75% (the "Exercise Percentage") of the fully diluted number of shares of
Common Stock of the Company then outstanding, after giving effect to the
exercise or conversion of all then outstanding options, warrants and other
rights to purchase or acquire shares of the Company's Common Stock, at a
purchase price of $.01 per Share (the "Exercise Price").
This Warrant along with the Warrants granted to certain
investors, pursuant to the Note Purchase Agreement dated January 13, 1998,
grants to the Holders the right to acquire upon exercise of all of the
Warrants, 17.5% of the outstanding Common Stock of the Company at the time
of and giving effect to the exercise of said Warrants on a fully-diluted
basis. Notwithstanding that upon exercise of the Warrants there may be an
increase in the aggregate number of shares of the Company's Common Stock
issuable upon exercise of the Warrants as compared to the aggregate number
of shares of the Company's Common Stock that would be issuable if the
Warrants were exercised as of the date hereof, there shall be no change in
the aggregate amount paid upon exercise of the Warrants.
This Warrant also grants certain alternative rights to the Holder
to exchange this Warrant for common stock of ACTV, Inc., a Delaware
corporation ("ACTV"), of which the Company is an indirect wholly owned
subsidiary, as set forth in Section 12 herein.
1. TERM. The rights represented by this Warrant shall be
exercisable at the Exercise Price, subject to adjustment in accordance with
Section 7 hereof, and during the periods from the date hereof to June 30,
2003 (the "Expiration Date"). After the Expiration Date, the Holder shall
have no right to purchase any Common Stock hereunder.
2. EXERCISE. The rights represented by this Warrant may be
exercised at any time within the period above specified, in whole or in
part, by (i) the written consent of the Majority Holders, as such term is
defined in the Note Purchase Agreement which consent will not be required
after the earlier of (x) the date the Majority Holders exercise any of its
Warrants or (y) the expiration of the ACTV Option under Section 12 herein,
(ii) the surrender of the Warrant (with the exercise form at the end hereof
properly executed) at the principal executive office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books
of the Company); and (iii) payment to the Company of the Exercise Price
then in effect for the number of shares of Common Stock specified in the
above-mentioned exercise form together with applicable stock transfer
taxes, if any. The Warrant shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date the Warrant is surrendered and payment is made in
accordance with the foregoing provisions of this Section 2, and the person
or persons in whose name or names the certificates for Common Stock shall
be issuable upon such exercise shall become the holder or holders of record
of such Common Stock at that time and date. Certificates representing the
Common Stock so purchased shall be delivered to the Holder within a
reasonable time, not exceeding three (3) business days, after the rights
represented by this Warrant shall have been so exercised. In the event
that the Warrant is exercised in respect of less than all of the Shares
specified herein at any time prior to the Expiration Date, a new
certificate evidencing the remaining portion of the Warrant will be issued
by the Company.
3. RESTRICTIONS ON TRANSFER. Except for transfers to
successors of the Holder, to any officer, partner or director of the
Holder, or by will or pursuant to the laws of descent and distribution, the
Warrant shall not be transferred, sold, assigned, or hypothecated, without
(i) the written consent of the Company and ACTV, which consent shall not be
unreasonably withheld, and (ii) compliance with the right of first offer
pursuant to Section 13 hereof. Any assignment shall be effected by the
Holder by (i) executing the form of assignment at the end hereof and (ii)
surrendering the Warrant for cancellation at the office or agency of the
Company referred to in Section 2 hereof, accompanied by a certificate
(signed by an officer of the Holder if the Holder is a corporation),
stating that each transferee is a permitted transferee under this Section
3; whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder) a new Warrant or Warrants of like tenor and
representing in the aggregate rights to purchase the same number of
securities as are purchasable hereunder.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees:
(a) That all shares of Common Stock which may be purchased
hereunder will, upon issuance against payment of the Purchase Price
therefor, be duly and validly issued, fully paid and nonassessable, and no
personal liability will attach to the holder thereof;
(b) That during the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise
of the Warrant, or at the time of exercise shall amend its certificate of
incorporation to authorize and reserve a sufficient number of shares of its
Common Stock to provide for the exercise of the Warrant;
(c) That so long as any of the Warrants or shares of the
Company's Common Stock are held by a Holder, the Company shall provide the
reports to such Holder as provided in Section 5.14 of the Note Purchase
Agreement;
(d) That upon the reasonable request of any Holder, the
Company shall inform the Holder of the number of shares of the Company's
then outstanding Common Stock on a fully diluted basis; and
(e) That upon exercise of the Warrant and the consequent
issuance of the Company's Common Stock to Holder, the Holder shall receive
the entire legal and beneficial interest in such Common Stock free and
clear of any liens, claims and encumbrances.
5. RIGHTS OF STOCKHOLDER. The Warrant shall not entitle the
Holder to any voting rights or other rights as stockholders of the Company
or ACTV, except as provided for in the articles of incorporation and by-
laws of the Company or ACTV.
6. FRACTIONAL SHARES. Neither the Company nor ACTV shall be
required to issue certificates representing fractions of shares of Common
Stock or ACTV Common Stock upon the exercise or exchange of the Warrant,
nor shall the Company or ACTV be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock or ACTV Common Stock as the
case may be.
7. APPLICABLE LAW. This Agreement shall be governed by and in
accordance with the internal laws of the State of New York.
8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS CERTIFICATES.
If the certificate representing this Warrant (the "Warrant Certificate")
shall be mutilated, lost, stolen or destroyed, the Company shall execute
and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant Certificate, or in lieu of or in substitution for a lost,
stolen or destroyed Warrant Certificate, a new Certificate for the number
of Warrants represented by the Warrant Certificate so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft
or destruction of such Warrant Certificate, and of the ownership thereof,
and indemnity, if requested, all reasonably satisfactory to the Company.
9. [Reserved]
10. MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS.
(a) In case of any consolidation of the Company with, or
merger of the Company with, or merger of the Company into, or the sale,
transfer or other disposition of all, substantially all or a significant
portion of the assets, property or business of the Company to or into
another corporation, other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock,
and pursuant to the terms of such merger, consolidation, or disposition of
assets, the corporation formed by such consolidation, or the surviving
corporation of such merger, or the corporation acquiring such assets, then
such corporation shall execute and deliver to the Holder a supplemental
warrant agreement providing (i) that the Holder shall have the right
thereafter, until the Expiration Date, to receive, upon exercise of the
supplemental warrant, the kind and amount of shares of securities and
property receivable upon such consolidation, merger, or disposition of
assets by a holder of the number of shares of Common Stock of the Company
for which such warrant might have been exercised immediately prior to such
consolidation, merger, or other disposition of assets, and (ii) that such
corporation will assume each and every other covenant and condition of this
Warrant and all liabilities and obligations hereunder, including the same
anti-dilution protection as provided hereunder.
(b) For the purposes of this Section 10, "securities and
other property" of the corporation shall include capital stock of such
corporation of any class, evidences of indebtedness, other securities which
are convertible into or exchangeable for any such capital stock, and any
warrants or other rights to subscribe for or purchase any such capital
stock. The above provision of this subsection shall similarly apply to
successive consolidations, mergers or other disposition of assets.
(c) If any merger, consolidation or other disposition of
assets, described in Section 10(a) herein occurs on or after the ACTV
Expiration Date (as defined in Section 12(a) herein), then the Company
shall have the option to convert this Warrant into such number of shares of
Common Stock as if the Holder elected to exercise this Warrant on the date
immediately prior to the date of closing such merger, consolidation or
disposition of assets. The Company shall exercise this option by giving
notice to the Holder in writing at the address of the Holder appearing on
the books of the Company at least ten (10) days prior to such closing.
11. PUT OPTION.
(a) TERM. From January 14, 2003, (five years from the date
of this Warrant), until April 14, 2003 (three months thereafter) (the "Put
Option Period"), if (i) the Company's Common Stock is not registered under
Section 12 of the Securities Exchange Act of 1934, as amended, and (ii) the
Holder has not exercised all of this Warrant under Section 1 herein and/or
under Section 12 herein, then, upon the exercise of this Put Option in
accordance with Section 11(b) herein, the Holder shall have the right to
put the unexercised portion of this Warrant to the Company for the Put
Option Amount, as determined under Section 11(c) herein. Upon the Holder's
exercise of the Put Option, the Company shall be under no obligations to
the Holder under this Warrant except as provided in this Section 11.
(b) EXERCISE. At any time within the Put Option Period,
the Holder may exercise, with the consent of the Holders of the majority of
the then outstanding Warrants, the Put Option by the surrender of the
Warrant (with the Exercise Form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company). The Put
Option shall be deemed to have been exercised immediately prior to the
close of business on the date the Exercise Form and Warrant is received by
the Company in accordance with the foregoing provisions of this Section
11(b) ("Put Option Date"). The Company shall pay the Put Option Amount to
the Holder within six (6) calendar months of the final determination of the
Put Option Amount as defined in Section 11(c) herein.
(c) PUT OPTION AMOUNT. The Put Option Amount to be paid to
the Holder upon exercise of the Put Option shall be equal to the greater
of:
(i) (A) six and one-half (6.5), multiplied by (B) the
total of (I) the consolidated net income of the Company and its wholly-
owned subsidiaries, if any, plus all interest, income taxes, depreciation,
and amortization, as determined under U.S. Generally Accepted Accounting
Principles consistently applied with the Company's past practices ("GAAP")
for the last twelve (12) full months immediately prior to the Put Option
Date; plus (II) the Company's cash on hand as of the Put Option Date, as
determined under GAAP; minus (III) the Company's liabilities as of the Put
Option Date, as determined under GAAP; multiplied by (C) the Exercise
Percentage as in effect on the Put Option Date; or
(ii) the fair market value of the Warrants determined
by an appraisal which shall be conducted by an appraiser (the "Appraiser")
jointly appointed by the Company and the Holders of the majority of the
outstanding Warrants and paid by the Company. If the Company and the
Holders of the majority of the outstanding Warrants do not agree on an
Appraiser, then the appraisal shall be conducted by two appraisers (the
"Appraisers"), one of whom shall be appointed and paid by the Company and
one shall be appointed and paid by the Holders of the outstanding Warrants
in proportion to the number of Warrants to be repurchased pursuant to the
Put Option. Such Appraisers shall be experienced in making appraisals of
company's engaged in the Company's business. The Appraisers shall attempt
to mutually agree as to such fair market value. If they are unable to
mutually agree within thirty (30) days after their appointment, the Company
and the Holders of the majority of the outstanding Warrants shall select a
third appraiser. Upon determination of an appraisal by the third
Appraiser, the Appraisers shall immediately submit in writing to the
Company and the Holders their respective appraisals of the fair market
value for the Warrants. The average of the two closest appraisals shall be
designated the fair market value, which determination shall be final and
binding upon the parties. The cost of obtaining such third appraisal shall
be divided equally between the Company and the Holders of the outstanding
Warrants in proportion to the number of Warrants to be repurchased pursuant
to the Put Option.
12. ACTV OPTION.
(a) EXCHANGE OF ACTV STOCK. This Warrant is one of the
warrants issued in connection with the sale of 13% Senior Secured Notes by
the Company pursuant to Note Purchase Agreements, the closing of which
occurred on January 14, 1998 ("Warrants"). Until July 14, 1999 (the "ACTV
Expiration Date"), eighteen (18) months from the date of this Warrant,
provided no part of any of the Warrants have been exercised to purchase the
Company's Common Stock, the Holders of the Warrants shall be entitled to
receive from ACTV upon the exchange of all of the Warrants, such number of
shares (the "ACTV Shares") of ACTV's common stock, $.10 par value per share
(the "ACTV Common Stock"), at the time of and giving effect to such
exchange, equal to 5.5% of the fully diluted number of shares of ACTV
Common Stock outstanding ("ACTV Option"), after giving effect to the
exercise or conversion of all then outstanding options, warrants and other
rights to purchase or acquire shares of ACTV Common Stock, (including, but
not limited to, the then outstanding ACTV Holdings, Inc. exchangeable
preferred stock) pro rated among each Holder in accordance with each
Holder's right to exercise the warrant into a percentage of the Company's
Common Stock divided by 17.5%. After the ACTV Expiration Date, the Holder
shall have no right to acquire any ACTV Common Stock hereunder.
Notwithstanding that upon exchange of the Warrants there may be an increase
in the aggregate number of shares of ACTV Common Stock issuable upon
exchange of the Warrants as compared to the aggregate number of shares of
ACTV Common Stock that would be issuable if the Warrants are exchanged as
of the date hereof, the aggregate consideration upon exchange of the
Warrants shall be the same.
(b) METHOD OF EXCHANGE. The ACTV Option may be exercised
prior to the ACTV Expiration Date, in its entirety, by the surrender of the
Warrants held by the majority of the Holders of the Warrants, with the ACTV
Option Exchange Form(s) at the end hereof properly executed by the
tendering Holders, at the principal executive office of ACTV, or such other
office or agency of ACTV as it may designate by notice in writing to the
Holders, with a copy of such executed Exchange Form to the Company as
provided in Section 2 hereof and ACTV shall notify the other Holders of
such exchange. The ACTV Option shall be deemed to have been exercised, in
whole, immediately prior to the close of business on the date the Warrants
are surrendered in accordance with the foregoing provisions of this Section
12(b), and the person or persons in whose name or names the certificates
for ACTV Common Stock shall be issuable upon such exercise shall become the
Holder or holders of record of such ACTV Common Stock at that time and
date. Nontendering Holders of the Warrants shall be deemed to have
exchanged their Warrants and shall be issued certificates of ACTV Common
Stock to the persons in whose names such Warrants were registered, and each
holder of the Warrants shall no longer have any rights with respect to any
provision of the Warrants. Certificates representing the ACTV Common Stock
so purchased shall be delivered within a reasonable time, not exceeding
three (3) business days, after the rights represented by the ACTV Option
shall have been so exercised. Except for the surrender of the Warrants by
the tendering Holders and the deemed surrender of the Warrants as to
nontendering Holders, no additional consideration shall be required to
exchange the Warrants for ACTV Common Stock.
(c) ACTV COVENANTS. ACTV covenants and agrees
(i) That all ACTV Shares which may be acquired upon
exchange of the Warrants will, upon issuance against delivery of the
Warrants as provided above, be duly and validly issued, fully paid and
nonassessable, and no personal liability will attach to the holder thereof;
(ii) That during the period within which the ACTV
Option may be exercised, ACTV will at all times have authorized and
reserved a sufficient number of shares of ACTV Common Stock to provide for
the exercise of the ACTV Option;
(iii) That so long as any of the Warrants are held
by a Holder, ACTV shall provide the reports to such Holder as provided in
Section 5.25 of the Note Purchase Agreement;
(iv) That upon the reasonable request of any Holder,
ACTV shall inform the Holder of the number of shares of ACTV's outstanding
Common Stock on a fully diluted basis; and
(v) That upon exchange of the Warrant and the
consequent issuance of ACTV's Common Stock to Holder, the Holder shall
receive the entire legal and beneficial interest in such Common Stock free
and clear of any liens, claims and encumbrances.
(d) MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. In
case of any consolidation of ACTV with, or merger of ACTV with, or merger
of ACTV into, or the sale, transfer or other disposition of all,
substantially all or a significant portion of the assets, property or
business of ACTV to or into another corporation, other than a consolidation
or merger which does not result in any reclassification or change of the
outstanding ACTV Common Stock, and pursuant to the terms of such merger,
consolidation, or disposition of assets, the corporation formed by such
consolidation, or the surviving corporation of such merger, or the
corporation acquiring such assets, then such corporation shall execute and
deliver to the Holder a supplemental warrant agreement providing (i) that
the Holder shall have the right thereafter, until the ACTV Expiration Date,
to receive, upon exercise of the supplemental warrant, the kind and amount
of shares of securities and property receivable upon such consolidation,
merger, or disposition of assets by a holder of the number of shares of
ACTV Common Stock for which such warrant might have been exercised
immediately prior to such consolidation, merger, or other disposition of
assets, and (ii) that such corporation will assume each and every other
covenant and condition of this Warrant and all liabilities and obligations
hereunder, including the same anti-dilution protection as provided
hereunder. The term "securities and other property" of the corporation
shall include capital stock of such corporation of any class, evidences of
indebtedness, other securities which are convertible into or exchangeable
for any such capital stock, and any warrants or other rights to subscribe
for or purchase any such capital stock. The above provision of this
subsection shall similarly apply to successive consolidations, mergers or
other disposition of assets.
13. RIGHT OF FIRST OFFER. In the event the Holder desires to
sell any or all of the Warrant or the shares of the Company's Common Stock
issuable upon exercise of the Warrant, the Holder hereby grants, and shall
give notice to, ACTV of the right of ACTV or a subsidiary of ACTV
designated by ACTV to acquire such securities, which notice shall include
the terms and conditions as offered by the Holder, which offer shall remain
irrevocable for thirty (30) days from the date of notice. If ACTV or the
subsidiary designated by ACTV accepts the offer, the Holder shall be
obligated to sell the securities on such terms and conditions to ACTV or
the subsidiary designated by ACTV. ACTV or the subsidiary designated by
ACTV shall have sixty (60) days to close the purchase of the securities.
If ACTV or the subsidiary designated by ACTV does not accept the offer, the
Holder may sell to a third person, subject to such other restrictions as
are imposed by federal and state securities laws, this Warrant and the Note
Purchase Agreement, provided, however, that the Holder shall be obligated
to make a subsequent offer(s) to ACTV if, and each time, the Holder changes
the terms and conditions of the offer which would be more favorable to the
purchaser. This Section 13 shall not apply to the sale of ACTV Common
Stock.
14. MERGER. This Warrant constitutes the entire understanding
and supercedes any other prior agreements and understandings, both written
and oral, between the Holder, the Company and ACTV with respect to the
subject matter hereof.
15. AMENDMENT. This Warrant may only be amended with the
written consent by the Company, ACTV and all of the Holders.
[Signatures on following page]
IN WITNESS WHEREOF, The Texas Individualized Television Network,
Inc. and ACTV, Inc. have each caused this Warrant to be signed by their
duly authorized officers, and this Warrant to be dated as of the date first
above written.
THE TEXAS INDIVIDUALIZED TELEVISION
NETWORK, INC.
/S/XXXXX XXXXX
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Xxxxx Xxxxx
President
ACTV, INC.
/S/XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
Chief Executive Officer
EXERCISE FORM
(To be signed only upon exercise of Warrant or Put Option)
------- The undersigned, the holder of the foregoing Warrant, hereby
irrevocably elects to exercise the purchase rights represented by
such Warrant for, and to purchase thereunder, ______________
shares of Common Stock of The Texas Individualized Televison
Network, Inc., par value $.01 per share, and herewith makes
payment of $_____________________ therefor, and requests that the
certificates for shares of Common Stock be issued in the name(s)
of, and delivered to _____________________, whose address(es) is
(are):
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------- The undersigned, the holder of the foregoing Warrant, hereby
irrevocably elects to exercise the Put Option in Section 11 of
such Warrant and requests that such cash consideration be
delivered to _____________________, whose address(es) is (are):
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Dated:
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Signature
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(Print name under signature)
(Signature must conform in all respects to the
name of holder as specified on the face of the
Warrant).
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(Insert Social Security or other identifying
number of Holder)
ACTV OPTION EXCHANGE FORM
(To be signed only upon exercise of the ACTV Option)
The undersigned, the holder of the foregoing Warrant, hereby
irrevocably elects to exchange the purchase rights represented by such
Warrant for, and to acquire thereunder, ______________ shares of Common
Stock of ACTV, Inc., par value $.10 per share, and requests that the
certificates for shares of ACTV Common Stock be issued in the name(s) of,
and delivered to _____________________, whose address(es) is (are):
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Dated: , 19
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Signature
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(Print name under signature)
(Signature must conform in all respects to the
name of holder as specified on the face of the
Warrant).
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(Insert Social Security or other identifying
number of Holder)
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant)
FOR VALUE RECEIVED _____________________________________________
hereby sells, assigns and transfers unto _________________________________
(Please print name and address of transferee)
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this Warrant, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ________________________________
Attorney, to transfer the within Warrant on the books of THE TEXAS
INDIVIDUALIZED TELEVISION NETWORK, INC., with full power of substitution.
Dated:
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Signature
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(Print name under signature)
(Signature must conform in all respects to the
name of holder as specified on the face of the
Warrant).
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(Insert Social Security or other identifying
number of Holder)
