<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended July 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File No. 0-25668
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 11-319748
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of organization) Identification Number)
4041 NORTH CENTRAL AVENUE
SUITE 2000
PHOENIX, ARIZONA 85012
(Address of Principal Executive Offices)
(602) 200-8900
(Issuer's Telephone Number, Including Area Code)
3070 WEST POST ROAD
LAS VEGAS, NEVADA 89118
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No ___
---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at August 31, 1996
----- ------------------------------
Class A Common Stock, $.01 par value 8,063,329 shares
Class B Common Stock, $.01 par value 3,960,000 shares
Transitional Small Business Disclosure Format
Yes ___ No X
---
<PAGE>
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as at July 31, 1996 and 1995
(unaudited)....................................... 3
Statement of Operations for the Three and Nine
Months ended July 31, 1996 and 1995 (unaudited)... 4
Statement of Cash Flows for the Nine Months
ended July 31, 1996 and 1995 (unaudited).......... 5
Notes to Financial Statements.......................... 6
Item 2. Results of Operations......................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................. 11
Item 5. Other Information............................. 11
Item 6. Exhibits and Reports on Form 8-K.............. 11
SIGNATURES............................................. 12
</TABLE>
Page 2 of 14
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
July 31, July 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents 22,684,009 7,765,454
Accounts receivable 1,860,115 -
Inventory 1,983,442 1,964,932
Prepaid expenses and other current
assets 336,180 341,089
----------- -----------
Total current assets 26,863,746 10,071,475
Machinery and equipment net of
accumulated depreciation of $334,585
and $32,564 1,770,223 461,858
Deferred costs of securities
registration - -
Deposits 385,611 155,449
----------- -----------
TOTAL 29,019,580 10,688,782
=========== ===========
LIABILITIES
-----------
Current Liabilities:
Accounts payable 1,568,790 739,400
Accrued expenses 249,702 76,170
----------- -----------
Total current liabilities 1,818,492 815,570
Commitments/Contingencies (Note B)
STOCKHOLDERS' EQUITY (NOTE A)
-----------------------------
Preferred stock, par value $0.01 per
share, 5,000,000 shares authorized,
none issued - -
Class B common stock, six votes per
share, par value $0.01 per share,
3,960,000 shares authorized, issued
and outstanding including
3,200,000 shares placed in escrow 39,600 40,000
Class A common stock, one vote per
share, par value $0.01 per share,
40,000,000 shares authorized, 8,046,610
issued and outstanding 80,466 32,200
Capital in excess of par value 40,395,426 14,230,432
Accumulated Deficit (13,314,404) (4,429,420)
----------- -----------
Total stockholders' equity 27,201,088 9,873,212
----------- -----------
TOTAL 29,019,580 10,688,782
=========== ===========
</TABLE>
Page 3 of 14
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Nine Months Three Months
Ended July 31, Ended July 31,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Sales 2,813,754 - 1,200,378 -
Video service fees 107,081 - 52,052 -
---------- ---------- ---------- ----------
Total 2,920,835 - 1,252,430 -
COSTS AND EXPENSES
Cost of goods sold 2,870,961 - 1,132,958 -
Research and development expenses 2,910,603 1,836,607 1,248,602 837,263
Marketing and administrative expenses 5,051,234 1,571,485 2,477,616 762,957
Interest and amortization of debt issue
costs - 851,218 - -
---------- ---------- ---------- ----------
Total 10,832,798 4,259,310 4,859,176 1,600,220
OTHER INCOME
Interest income 331,116 232,172 255,980 144,347
---------- ---------- ---------- ----------
NET LOSS 7,580,847 4,027,138 3,350,766 1,455,873
========== ========== ========== ==========
Net loss per share of common stock $ (1.42) $ (1.64) $ (0.43) $ (0.36)
========== ========== ========== ==========
Weighted average shares outstanding 5,325,487 2,448,205 7,866,028 4,020,000
========== ========== ========== ==========
</TABLE>
Page 4 of 14
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Nine Months
Ended July 31,
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss (7,580,847) (4,027,138)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation 264,488 30,598
Amortization of Debt Discount and
Deferred Costs Financing - 741,168
Changes in operating assets and
liabilities:
Increase in accounts receivable (1,825,202) -
(Increase)/decrease in inventory 62,782 (1,964,932)
Decrease in deferred costs 270,147 -
Increase in prepaid expenses (155,386) (323,515)
Increase in accounts payable 983,093 739,400
Increase/(decrease) in accrued
expenses 89,668 (37,861)
----------- ----------
Net cash used in operating
activities (7,891,256) (4,842,280)
Cash flows from investing activities:
Capital expenditure (397,539) (482,546)
Increase in deposits (276,639) (140,551)
----------- ----------
Net cash used in investing
activities (674,178) (623,097)
Cash flows from financing activities:
Net proceeds from issuance of common stock 26,212,861 13,824,634
Proceeds from bridge notes - (2,025,000)
----------- ----------
Net cash provided by financing
activities 26,212,861 11,799,634
Net increase in cash 17,647,427 6,334,257
Cash - beginning of period 5,036,582 1,431,197
----------- ----------
Cash - end of period 22,684,009 7,765,454
=========== ==========
</TABLE>
Page 5 of 14
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
The financial statements of Interactive Flight Technologies, Inc. included
herein have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for Form 10-QSB and reflect all adjustments
(consisting of normal recurring accruals) and disclosures which, in the opinion
of management, are necessary for a fair statement of results for the interim
period presented. It is suggested that these financial statement be read in
conjunction with the financial statements and notes thereto for the fiscal year
ended October 31, 1995, included in the Company's Annual Report on Form 10-KSB
and amendment No. 1 to the Annual Report on Form 10-KSB/A for the fiscal year
ended October 31, 1995.
The results of operations for the nine months ended July 31, 1996 are not
necessarily indicative of the results to be expected for the entire fiscal year.
NOTE A - CLASS A WARRANT EXERCISE OFFER:
The Company filed a registration statement with the SEC with respect to an
Exercise Offer on April 12, 1996 pursuant to which the Company offered the
holders of the Company's Class A Redeemable Stock Purchase Warrants who exercise
their Class A Warrants pursuant to the Exercise Offer, (i) to issue an extra 1/2
Class B Redeemable Stock Purchase Warrant (in addition to the securities
currently underlying the Class A Warrants) for each Class A Warrant so exercised
and (ii) to reduce the exercise price of Class A Warrants to $5.75 per share
(from $7.00 per share) for each Class A Warrant exercised.
The Company completed its exercise offer on May 17, 1996 and received net
proceeds of approximately $25,223,000 net of the underwriter's commissions and
expenses of approximately $1,600,000.
The Company called all of its outstanding Redeemable Class A Warrants for
redemption on July 25, 1996 at a price of $.05 per Warrant. There were 114,680
Class A Warrants outstanding at the time of the call. On July 25, 1996, 96,422
Class A Warrants had been exercised for a share of Class A Common Stock at a
price of $7.00 per share. The Company received approximately $635,000 net of
expenses of approximately $40,000.
NOTE B - COMMITMENTS/CONTINGENCIES
The Company is a defendant in an action entitled Andrew Maxon v.
Interactive Flight Technologies, Inc. brought in the United States District
Court for the Eastern District of New York. The action was filed in February
1995 by an individual who performed certain services for the Company and with
whom the Company had been engaged in negotiations to become an officer of the
Company. The plaintiff claims breach of an alleged contract and wrongful
discharge and is seeking damages of approximately $250,000 plus options to
purchase 25,000 shares of the Company's stock. The Company believes that the
claims are without merit and intends to defend them vigorously.
Page 6 of 14
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ITEM 2: RESULTS OF OPERATIONS
GENERAL
Interactive Flight Technologies, Inc. (the "Company") is engaged in
the development, manufacture, installation and operation of a computer-based
network in-flight entertainment network (the "Entertainment Network"), which
provides aircraft passengers the opportunity to view movies, to purchase goods
and services, to play computer games and, in certain cases where permitted by
applicable law, to gamble through a high-resolution video touch screen.
The Company entered into its first airline contract (the "Alitalia
Contract") with Alitalia Airlines S.p.S. ("Alitalia") in 1995, and Alitalia
accepted the contract following early completion of a trial period on February
1, 1996. The Alitalia Contract provides for the delivery of The Entertainment
Network for installation on five MD-11 aircraft and the operation of The
Entertainment Network on those aircraft over a period of approximately eight
years. However, the Alitalia Contract does not presently provide for, and is
not expected to provide for, passenger use of The Entertainment Network
gambling features. In February 1996, an agreement was also signed with Debonair
(the "Debonair Contract") to install and operate The Entertainment Network
(including video casino style gambling) on Debonair's entire fleet, which
consists of six RJ-146 aircraft.
In July 1996, an agreement was signed with Swissair (the "Swissair
Contract") to install and operate the second generation of The Entertainment
Network (the "IFEN-2") on Swissair's entire [LONGHAUL] fleet, which consists of
sixteen MD-11 aircraft and five 747's. Subject to the execution of an agreement
with Interkantonale Landeslotterie ("ILL"), the operator of the Swiss lottery
based in Zurich, Switzerland, the IFEN-2 systems installed on Swissair aircraft
will allow passengers to participate in various Swiss lottery games, but are not
expected to allow use of the traditional casino style gaming features such as
slots or poker. However, under current U.S. law, these lottery games cannot be
operated on flights which depart or land in the United States. In the event
that no agreement is reached with ILL, either Swissair or the Company may
terminate the Swissair agreement.
Under the Swissair Contract, the Company will receive an aggregate of
approximately $72 Million for the IFEN-2 hardware, plus the costs of
installation and certain upgrades. The Company will also be reimbursed for its
projected costs in connection with maintaining and operating the systems.
However, the hardware purchase price and the operating expenses are payable only
out of net revenues received from passenger participation in the aforementioned
lottery games. Further, the Company may receive such amounts only after
Swissair is first reimbursed from the net lottery revenues for certain expenses
incurred in connection with the installation and operation of the IFEN-2
systems. Any amounts remaining after payment of the Company's operating costs
and the IFEN-2 purchase price will be paid over to ILL. The Company will also
receive a percentage of revenues and commissions from advertising and shopping
services available on the installed IFEN-2 systems.
In August 1996, a nonbinding letter of intent was signed with PetrolAir
S.A. ("Petrol") to install The Entertainment Network (including video casino
style gambling) on two PetrolAir aircraft. There can be no assurance that the
Company will successfully negotiate definitive agreements with PetrolAir.
Revenues during the first nine months ended July 31, 1996 were
$2,920,835, comprised of sales revenue of $2,813,756 for Entertainment Networks
delivered under the Alitalia Contract. Revenues also included $107,081 of Video
service fees.
Page 7 of 14
<PAGE>
The Company incurred a net loss of $3,350,766 during the quarter ended
July 31, 1996, an increase of $1,894,893 (or 130%) from a net loss of $1,455,873
for the quarter ended July 31, 1995. The Company incurred a net loss of
$7,580,847 during the nine months ended July 31, 1996, an increase of $3,553,709
(or 88%) from a net loss of $4,027,138 for the nine months ended July 31, 1995.
The increased losses were due to increasing of staff and building of facilities
to fulfill the Company's requirements under the Alitalia Contract, the Debonair
Contract, the Swissair Contract and other contracts under negotiation, and also
were due to increased professional, administrative fees and research and
development expenses. The Company expects to continue to incur losses for the
foreseeable future. At July 31, 1996, the Company's accumulated deficit was
$13,314,404.
Costs of goods sold were $2,870,961 (98% of sales) and $1,132,958 (90%
of sales), respectively, for the nine month and three month periods ended July
31, 1996. Although the Company hopes to reduce the cost of goods sold as a
percentage of sales for future periods, these percentages are likely to remain
high over the next few quarters since the Company's business plan is to derive a
substantial portion of its revenues from future passenger use of The
Entertainment Network.
Research and development expenses during the quarter ended July 31,
1996 were $1,248,602, an increase of $411,339 (or 49%) from $837,263 during the
quarter ended July 31, 1995. Research and development expenses during the nine
months ended July 31, 1996 were $2,910,603, an increase of $1,073,996 (or 59%)
from $1,836,607 during the nine months ended July 31, 1995. These increases
reflect expenses incurred in the continuing development of The Entertainment
Network. The Company anticipates that research and development expenses will
increase during the remainder of fiscal 1996.
Marketing and administrative expenses during the quarter ended July
31, 1996 were $2,477,616, an increase of $1,714,659 (or 225%) from $762,957 for
the quarter ended July 31, 1995. Marketing and administrative expenses during
the nine months ended July 31, 1996 were $5,051,234, an increase of $3,479,749
or (221%) from $1,571,485 for the nine months ended July 31, 1995. These
increases were primarily due to substantially increased marketing activities
(such as attendance at trade shows and travel relating to sales to airlines),
increased sales commissions and increased administrative staff and related
expenses.
The Company incurred no interest expense during the quarter and the
nine months ended July 31, 1996, as compared to interest expense of $0 and
$851,218, respectively, for the three months and nine months ended July 31,
1995. The elimination of interest expense was due to the repayment by the
Company in February 1995 of the remaining indebtedness under its 1994 $3,100,000
bridge financing.
The Company received interest income of $255,980 during the quarter
ended July 31, 1996, an increase of $111,633 (or 77%) from interest income of
$144,347 for the quarter ended July 31, 1995. The Company received interest
income of $331,116 during the nine months ended July 31, 1996, an increase of
$98,944 (or 43%) from interest income of $232,172 for the nine months ended July
31, 1995. This interest income arose principally out of short term investments
of working capital, and the increase was primarily attributable to increased
funds available for such investments as a consequence of the Company's Class A
Warrant Exercise Offer in May 1996 and the subsequent redemption of remaining
Class A Warrants in July 1996.
The Company relocated its principal executive offices and its design
and assembly facilities to Phoenix, Arizona and, in connection with this move,
executed three separate three-year leases for office and industrial space in
Phoenix during the current quarter. Under these leases, the Company occupies
24,781 sq. ft., 17,524 sq. ft. and 15,591 sq. ft., respectively (or an aggregate
of approximately 57,900 square feet), in exchange for monthly rents of $31,952,
$23,453 and
Page 8 of 14
<PAGE>
$8,677, respectively (or an aggregate of approximately $64,000).
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1996 the Company had working capital of approximately
$25.0 Million and has incurred losses since that date. The Company increased
its working capital in May 1996 from the proceeds of its Class A Warrant
Exercise Offer, its third financing, from which the Company received proceeds
(net of expenses of $1.6 Million) of approximately $25.2 Million. The Company
further increased its working capital in July 1996 from Class A Warrant
exercises (prompted by the Company's notice of redemption of the remaining Class
A Warrants), from which the Company received proceeds of approximately $635,000
(net of expenses of approximately $40,000). The Company expects that losses will
continue for the foreseeable future and, as a result, unless funds are received
from additional financing, working capital is expected to decrease again
following the initial increase attributable to receipt of proceeds from the
aforementioned Exercise Offer. The Company's principal sources of funds to date
have been through debt and equity financing.
At August 29, 1996, the Company's only material capital commitments
were purchase orders of approximately $14.0 Million relating primarily to
inventory purchases.
The Company's revenues have been generated, and are anticipated to be
generated in the future, from sales, installation and servicing of The
Entertainment Network aboard commercial and charter aircraft. The contracts the
Company has executed and is currently negotiating generally provide for the
Company to install The Entertainment Network on an aircraft and to be paid for
the equipment and for its installation and maintenance out of revenue generated
by passenger use of the installed network on the aircraft. As a result, the
Company must expend significant capital amounts for the assembly, installation
and maintenance of The Entertainment Network on each aircraft, but revenue as
payment for the system will be received, if at all, only as a result of the use
of the system over a potentially significant period of time. Moreover, the
Company may also enter into commitments to purchase equipment necessary for
additional installations, even in the absence of a purchase commitment from an
airline, if such action is determined to be necessary or desirable to pursue
business opportunities. The Company also expects its cash requirements to
increase in future periods due to higher expenses associated with increased
sales and marketing activities and financing of inventory purchases,
installations and accounts receivable.
As a consequence, the Company will need additional financing to
perform under its existing contracts (i.e., the Alitalia Contract, the Debonair
Contract and the Swissair Contract) in addition to any future contracts that it
may enter into, including those it is currently negotiating. Although the
Company has been in discussions with a number of external sources of capital to
raise portions of the funds needed, there can be no assurances that such funds
will be available in the near future when it will be needed for the contracts
involved. Without additional funding from external capital sources or from
exercise of the Company's outstanding warrants, the Company will not have
sufficient cash to complete all of its existing and pending contracts.
Moreover, although the Company's model of being paid out of revenues from the
operation of The Entertainment Network provides it with substantial potential
upside if such revenues are high, it also subjects the Company to substantial
risk if passengers fail to make sufficient use of The Entertainment Network.
The Company intends to use a substantial portion of its cash resources
to fund its plan of operations, which includes the following elements, for
approximately the next 12 months:
. Completing the development of The Entertainment Network, including
reconfiguring hardware components to meet the requirements of the FAA
and airlines with which the Company has contracts, and developing
certain software interfaces.
. Performing under the Debonair Contract, including manufacturing,
assembling and
Page 9 of 14
<PAGE>
delivering the balance of The Entertainment Network for the six
RJ-146 aircraft.
. Performing under the Swissair Contract, including manufacturing,
assembling and delivering The Entertainment Network for sixteen MD-11
and five 747 aircraft.
. Finalizing and performing under a contract (if executed) with
PetrolAir to install The Entertainment Network on PetrolAir's two
aircraft.
. Marketing The Entertainment Network to additional airlines, primarily
to international carriers, and performing under any contracts which
the Company may execute with such airlines.
. Updating and enhancing the programming software initially included in
The Entertainment Network and developing or acquiring from third
parties new programming software. Because the technology
incorporated in The Entertainment Network is rapidly developing,
the Company will also continue to develop hardware and software
enhancements to meet market and customer demand.
The foregoing represents the Company's current plan of operation for
the next 12 months. Future events, including changes in technological,
economic, regulatory or competitive conditions or the results of the Company's
sales and marketing activities, may require changes in the Company's plans.
FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-QSB are forward-looking statements
that are subject to certain risks and uncertainties that could cause actual
results to differ materially from those set forth in such forward-looking
statements. Such risks and uncertainties include, without limitation, the
failure of passenger use of The Entertainment Network to generate sufficient
revenues, the failure to execute definitive agreements with ILL (and,
consequently, Swissair) and/or PetrolAir on favorable terms or at all, the
failure of the Company to receive sufficient financing to perform its
obligations under its existing and contemplated agreements, the impact of
competition and downward pricing pressures, the effect of changing economic
conditions, risks in technology development, the risks involved in currency
fluctuations, and the other risks and uncertainties detailed from Registration
Statement on Form SB-2 dated March 7, 1995, the Company's Annual Report on Form
10-KSB and amendment No. 1 to the Annual Report on Form 10-KSB/A for the fiscal
year ended October 31, 1995.
Page 10 of 14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Reference is made to the information set forth under "Legal Proceedings" in
the Company's Annual Report on Form 10-KSB and amendment No. 1 to the Annual
Report on Form 10-KSB/A for the fiscal year ended October 31, 1995.
ITEM 5: OTHER INFORMATION
During the quarter, the Company entered into commitments to issue an
aggregate of 275,000 of its Class B Warrants to Banner Aerospace, Inc.
("Banner") and Leonard Toboroff ("Toboroff"), with Banner to receive 187,500
Class B Warrants and Toboroff to receive 87,500 Class B Warrants. The Company
also issued to Banner and Toboroff an aggregate of 165,000 of its newly-
designated Class C Warrants and 165,000 of its newly-designated Class D
Warrants, with 112,500 of each such class being issued to Banner and 52,500 of
each such class being issued to Toboroff. Each Class C Warrant entitles the
holder thereof to purchase one share of Class A Common Stock for an exercise
price of $11.00, and each Class D Warrant entitles the holder thereof to
purchase one share of Class A Common Stock for an exercise price of $14.00.
Banner and Toboroff received the Class C and Class D Warrants, and the
commitment to issue the Class B Warrants, in exchange for certain services
rendered to the Company in connection with the Company's proposals to Swissair,
leading up to the execution of the Swissair Agreement.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3.2* - Amended and Restated Certificate of Incorporation of the Registrant
3.3* - Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Registrant
3.4* - By-laws of the Registrant
4.5 - Form of Class C Warrant
4.6 - Form of Class D Warrant
27 - Financial Data Schedules
___________________
* Incorporated by Reference from the Registrant's Registration Statement
on Form SB-2, Registration No. 33-86928.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ending July 31, 1996.
Page 11 of 14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: September 14, 1996 INTERACTIVE FLIGHT TECHNOLOGIES, INC.
By: /s/ Michail Itkis
----------------------------------
Michail Itkis
Chief Executive Officer
By: /s/ Robert J. Aten
----------------------------------
Robert J. Aten
Chief Financial Officer
Page 12 of 14
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<C> <S> <C>
3.2 Amended and Restated Certificate of *
Incorporation of the Registrant
3.3 Certificate of Amendment of Amended and *
Restated Certificate of Incorporation
of Registrant
3.4 By-laws of the Registrant *
4.5 Form of Class C Warrant 14
4.6 Form of Class D Warrant 32
27 Financial Data Schedule 50
</TABLE>
___________________________
* Incorporated by Reference from the Registrant's Registration Statement on
Form SB-2, Registration No. 33-86928.
Page 13 of 14
<PAGE>
EXHIBIT 4.5
-----------
No. __ ________ Class C Warrants
THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO INTERACTIVE FLIGHT TECHNOLOGIES, INC., SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. NO TRANSFER OF ANY SUCH WARRANT
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
VOID AFTER MARCH 6, 2000
CLASS C WARRANTS FOR
PURCHASE OF CLASS A COMMON STOCK
This certifies that FOR VALUE RECEIVED ____________________ or registered
assigns (the "REGISTERED HOLDER") is the owner of the number of Class C Warrants
specified above. Each Class C Warrant represented hereby initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Certificate, one fully paid and nonassessable share of Class A
Common Stock, $.01 par value ("CLASS A COMMON STOCK"), of Interactive Flight
Technologies, Inc., a Delaware corporation (the "COMPANY"), at any time prior to
or on the Expiration Date (as hereinafter defined), upon the presentation and
surrender of this Warrant Certificate with a duly completed and executed
Subscription Form in the form attached hereto as Exhibit A, at the corporate
---------
office the Company, accompanied by payment of Eleven Dollars ($11.00) (the
"PURCHASE PRICE") in lawful money of the United States of America in cash or by
official bank or certified check made payable to "Interactive Flight
Technologies, Inc." The Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of the Warrants are subject to
modification or adjustment as set forth herein.
The term "EXPIRATION DATE" shall mean 5:00 P.M. (New York time) on March 6,
2000. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
<PAGE>
SECTION 1. DEFINITIONS. As used herein, the following terms shall have the
-----------
following meanings, unless the context shall otherwise require:
(a) "COMMON STOCK" shall mean stock of the Company of any class, whether
now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of the Company's Class A Common
Stock, $.01 par value, and the Company's Class B Common Stock, $.01 par value.
(b) "CORPORATE OFFICE" shall mean the office of the Company at which, at
any particular time, its principal business shall be administered, which office
is currently located at 3070 West Post Road, Las Vegas, Nevada 89118.
(c) "EXERCISE DATE" shall mean, as to any Warrant, the date on which the
Company shall have received both (a) this Warrant Certificate with the
Subscription Form attached hereto as Exhibit A hereto executed by the Registered
---------
Holder hereof, or his attorney duly authorized in writing, and indicating that
the Registered Holder is thereby exercising such Warrant, and (b) payment in
cash, or by official bank or certified check made payable to the Company, of an
amount in lawful money of the United States of America equal to the applicable
Purchase Price.
(d) "PURCHASE PRICE" shall mean the purchase price to be paid upon
exercise of each Class C Warrant in accordance with the terms hereof, which
price shall be Eleven Dollars ($11.00), subject to adjustment from time to time
pursuant to the provisions of Section hereof.
(e) "REGISTERED HOLDER" shall mean, as to any Warrant and as of any
particular date, the person in whose name the Warrant Certificate representing
such Warrant shall be registered on that date on the books maintained by the
Company pursuant to Section 4.
(f) "WARRANTS" shall mean the Class C Warrants represented hereby and all
other Class C Warrants issued by the Company.
(g) "WARRANT CERTIFICATE" shall mean any certificate (including this
certificate) representing Class C Warrants.
SECTION 2. EXERCISE.
--------
(a) Each Warrant evidenced hereby may be exercised by the Registered
Holder hereof at any time on or prior to the Expiration Date, upon the terms and
subject to the conditions set forth herein. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date.
Promptly following, and in any event within ten (10) business
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<PAGE>
days after the Exercise Date, the Company shall cause to be issued and delivered
to the person or persons entitled to receive the same, a certificate or
certificates for the securities deliverable upon such exercise (plus a Warrant
Certificate for any remaining unexercised Warrants of the Registered Holder),
subject to first receiving clearance of checks received in payment of the
Purchase Price pursuant to such Warrants.
(b) Upon the exercise of the Warrants represented hereby, if the Company
so requests, Holder shall certify to the Company that it is not exercising such
Warrants with a view to distribute the Class A Common Stock received pursuant to
such exercise in violation of the Securities Act of 1933, as amended (the
"SECURITIES ACT").
SECTION 3. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
-----------------------------------------------------
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Class A Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Class A Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Class A Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery, be duly
and validly issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, (other than those which the Company
shall promptly pay or discharge) and that upon issuance such shares shall be
listed on each national securities exchange, on which the other shares of
outstanding Class A Common Stock of the Company are then listed or shall be
eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap
Market if the other shares of outstanding Class A Common Stock of the Company
are so included.
(b) In the event that this Warrant Certificate represents Class C Warrants
which have been transferred by an initial holder of Class C Warrants, the
Company shall not be obligated to deliver any securities pursuant to the
exercise of the Class C Warrants represented hereby unless a registration
statement under the Securities Act with respect to such securities is effective,
or an exemption from such registration is available to the Company. The Company
covenants that if any securities to be reserved for the purpose of exercise of
Warrants hereunder require registration with, or approval of, any governmental
authority under any federal securities law before such securities may be validly
issued or delivered upon such exercise, then the Company will in good faith and
as expeditiously as reasonably possible, endeavor to secure such registration or
approval. The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws. However, in
the event that this Warrant Certificate represents Class C Warrants which have
been transferred by an initial holder of Class C Warrants, the Warrants
represented hereby may not be exercised by, or shares of Class A Common Stock
issued to, the Registered Holder hereof in any state in which such exercise
would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
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<PAGE>
Warrants, or the issuance or delivery of any shares of Class A Common Stock upon
exercise of the Warrants; provided, however, that if the shares of Class A
Common Stock are to be delivered in a name other than the name of the Registered
Holder hereof, then no such delivery shall be made unless the person requesting
the same has paid to the Company the amount of transfer taxes or charges
incident thereto, if any.
SECTION 4. EXCHANGE AND REGISTRATION OF TRANSFER.
-------------------------------------
(a) This Warrant Certificate may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or, subject to
the restrictions set forth on Page 1 hereof, may be transferred in whole or in
part. To effect such an exchange, this Warrant Certificate shall be surrendered
to the Company at its Corporate Office, and upon satisfaction of the terms and
provisions hereof, the Company shall execute, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
hereof shall be entitled to receive.
(b) The Company shall keep at its office books in which, subject to such
reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof. Subject to the restrictions set forth on
Page 1 hereof, upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute, issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the Subscription Form and/or the
Assignment Form (as applicable) attached hereto as Exhibit A and Exhibit B,
--------- ---------
respectively, shall be duly endorsed or shall be accompanied by a written
instrument or instruments of transfer and/or subscription, in form satisfactory
to the Company, duly executed by the Registered Holder or his attorney-in-fact
duly authorized in writing.
(d) A service charge may be imposed by the Company for any exchange or
registration of transfer of Warrant Certificates. In addition, the Company may
require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly cancelled by the
Company and thereafter retained by the Company until the Expiration Date.
(f) Prior to due presentment for registration of transfer thereof, the
Company may deem and treat the Registered Holder of any Warrant Certificate as
the absolute owner thereof and of each Warrant represented thereby
(notwithstanding any notations of ownership or writing thereon made by anyone
other than a duly authorized officer of the Company) for all purposes and shall
not be affected by any notice to the contrary.
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<PAGE>
SECTION 5. LOSS OR MUTILATION. Upon receipt by the Company of evidence
------------------
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of this Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to the Company, and (in the case of
mutilation) upon surrender and cancellation hereof, the Company shall execute
and deliver to the Registered Holder in lieu thereof a new Warrant Certificate
of like tenor representing an equal aggregate number of Class C Warrants.
Applicants for a substitute Warrant Certificate shall comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF CLASS A
------------------------------------------------------------
COMMON STOCK OR WARRANTS.
- ------------------------
(a) Subject to the exceptions referred to in Section 6(g) below, in the
event the Company shall, at any time or from time to time after the date hereof,
sell any shares of Common Stock for a consideration per share less than the
Market Price of the Class A Common Stock (as defined below) on the date of the
sale or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "CHANGE OF SHARES"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Class A
Common Stock which the aggregate consideration received (determined as provided
in subsection 6(f)(F) below) for the issuance of such additional shares would
purchase at the Market Price and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
"MARKET PRICE", as of any date, shall mean (i) the average closing bid
price, for the thirty (30) consecutive business days immediately preceding such
date, of the Class A Common Stock as reported by Nasdaq, if the Class A Common
Stock is traded on the Nasdaq SmallCap Market, or (ii) the last reported sale
price, for the thirty (30) consecutive business days immediately preceding such
date, of the Class A Common Stock as reported by the primary exchange on which
the Class A Common Stock is traded, if the Class A Common Stock is traded, on a
national securities exchange, or by Nasdaq, if the Class A Common Stock is
traded on the Nasdaq National Market.
Upon each adjustment of the Purchase Price pursuant to this Section 6, the
total number of shares of Class A Common Stock purchasable upon the exercise of
each Class C Warrant shall (subject to the provisions contained in Section 6(b)
hereof) be
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<PAGE>
such number of shares (calculated to the nearest tenth) purchasable at the
Purchase Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class C Warrants outstanding, in lieu of the
adjustment in the number of shares of Class A Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Class C Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Class A Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 6, the Company
shall, as promptly as practicable, cause to be distributed to each Registered
Holder of Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Section 8 hereof, the number of additional
Warrants to which such Registered Holder shall be entitled as a result of such
adjustment or, at the option of the Company, cause to be distributed to such
Registered Holder in substitution and replacement for the Warrant Certificates
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrant Certificates evidencing the number of
Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been purchased upon exercise of such Warrant immediately prior
to such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The Company shall not effect any
such consolidation, merger or sale without the written consent of Registered
Holders of a majority of the Warrants then outstanding, unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such
-6-
<PAGE>
consolidation or merger or the corporation purchasing assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company, the obligation to deliver to the holder of each
Warrant such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and the other
obligations of the Company under this Agreement. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Class A Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 7 hereof, continue to express the Purchase Price per share,
the number of shares purchasable thereunder and the Redemption Price therefor as
the Purchase Price per share, and the number of shares purchasable and the
Redemption Price therefor were expressed in the Warrant Certificates when the
same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this Section
6, the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so
adjusted, (ii) the number of shares of Class A Common Stock purchasable upon
exercise of each Warrant after such adjustment and, if the Company shall have
elected to adjust the number of Warrants, the number of Warrants to which the
Registered Holder of each Warrant shall then be entitled, and the adjustment in
Redemption Price resulting therefrom, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder of
Warrants at his last address as it shall appear on the registry books of the
Company. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of the Secretary or an Assistant Secretary
of the Company that such notice has been mailed shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
(f) For purposes of Section 6(a) and 6(b) hereof, the following provisions
(A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or
the distribution of any such treasury shares shall not be considered a
Change of Shares for purposes of said sections.
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<PAGE>
(B) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.10 in the
Purchase Price; provided that any adjustments which by reason of this
clause (B) are not required to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment
which, together with any adjustment(s) so carried forward, shall require an
increase or decrease of at least $.10 in the Purchase Price then in effect
hereunder.
(C) In case of (1) the sale by the Company for cash (or as a
component of a unit being sold for cash) of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common Stock
or any securities convertible into or exchangeable for Common Stock without
the payment of any further consideration other than cash, if any (such
securities convertible, exercisable or exchangeable into Common Stock being
herein called "CONVERTIBLE SECURITIES"), or (2) the issuance by the
Company, without the receipt by the Company of any consideration therefor,
of any rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or Convertible Securities, in each case, if
(and only if) the consideration payable to the Company upon the exercise of
such rights, warrants or options shall consist of cash, whether or not such
rights, warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the minimum aggregate consideration
payable to the Company upon the exercise of such rights, warrants or
options, plus the consideration, if any, received by the Company for the
issuance or sale of such rights, warrants or options, plus, in the case of
such Convertible Securities, the minimum aggregate amount of additional
consideration, other than such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less
than the Market Price of the Class A Common Stock on the date of the
issuance or sale of such rights, warrants or options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 6(a) and 6(b) hereof and shall be
deemed to have been sold for cash in an amount equal to such price per
share.
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<PAGE>
(D) In case of the sale by the Company for cash of any Convertible
Securities, whether or not the right of conversion or exchange thereunder
is immediately exercisable, and the price per share for which Common Stock
is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by
the Company for the sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than the
Market Price of the Class A Common Stock on the date of the sale of such
Convertible Securities, then the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of such Convertible
Securities (as of the date of the sale of such Convertible Securities)
shall be deemed to be outstanding shares of Common Stock for purposes of
Sections 6(a) and 6(b) hereof and shall be deemed to have been sold for
cash in an amount equal to such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or (D)
above or any other securities of the Company convertible, exchangeable or
exercisable for shares of Common Stock, for any reason other than an event
that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is
less than the Market Price on the date prior to such modification, the
Purchase Price to be in effect after such modification shall be determined
by multiplying the Purchase Price in effect immediately prior to such event
by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date prior to the modification plus the
number of shares of Common Stock which the aggregate consideration
receivable by the Company for the securities affected by the modification
would purchase at the Market Price and of which the denominator shall be
the number of shares of Common Stock outstanding on such date plus the
number of shares of Common Stock to be issued upon conversion, exchange or
exercise of the modified securities at the modified rate. Such adjustment
shall become effective as of the date upon which such modification shall
take effect. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such Convertible
Securities referred to in Paragraph (C) or (D) above, the Purchase Price
then in effect hereunder shall forthwith be readjusted to such Purchase
Price as would have obtained (a) had the adjustments made upon the issuance
or sale of such rights, warrants, options or Convertible Securities been
made upon the basis of the issuance of only the number of shares of Common
Stock theretofore actually delivered (and the total consideration received
therefor) upon the exercise
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<PAGE>
of such rights, warrants or options or upon the conversion or exchange of
such Convertible Securities and (b) had adjustments been made on the basis
of the Purchase Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Purchase Price) made after the
issuance or sale of such rights, warrants, options or Convertible
Securities.
(F) In case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the number
of shares of Class A Common Stock purchasable upon the exercise of each Warrant
will be made, however,
(i) upon the exercise of any of the options presently outstanding
under the Company's Stock Option Plan (the "PLAN") for officers, directors
and certain other key personnel of and consultants to the Company; or
(ii) upon the issuance or exercise of any other securities which may
hereafter be granted or exercised under the Plan or under any other
employee benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants comprising the Unit
Purchase Option or upon the sale or exercise of the Unit Purchase Option;
or
(iv) upon the sale of any shares of Class A Common Stock or
Convertible Securities in a firm commitment underwritten public offering,
including, without limitation, shares sold upon the exercise of any
overallotment option granted to the underwriters in connection with such
offering; or
(v) upon the issuance or sale of Class A Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Class A Common Stock or
Convertible Securities, whether or not such rights, warrants or options
were outstanding on the date of the original sale of the Warrants or were
thereafter issued or sold; or
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<PAGE>
(vi) upon the issuance or sale of Class A Common Stock upon
conversion or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made upon the
issuance or sale of such Convertible Securities and whether or not such
Convertible Securities were outstanding on the date of the original sale
of the Warrants or were thereafter issued or sold.
(h) As used in this Section 6, the term "COMMON STOCK" shall mean and
include the Company's Common Stock authorized on the date hereof and shall also
include any capital stock of any class of the Company thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or winding up of the Company;
provided, however, that the shares issuable upon exercise of the Warrants shall
include only shares of such class designated in the Company's Certificate of
Incorporation as Class A Common Stock on the date hereof or (i) in the case of
any reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 6(c) hereof, the stock, securities or property
provided for in such section or (ii) in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase Price in
effect hereunder is required pursuant to Section 6, or as to the amount of any
such adjustment, if required, shall be binding upon the holders of the Warrants
and the Company if made in good faith by the Board of Directors of the Company.
(j) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Class A Common
Stock then issuable upon exercise of his Warrants. Such grant by the Company to
the holders of the Warrants shall be in lieu of any adjustment which otherwise
might be called for pursuant to this Section 6.
SECTION 7. ISSUANCE OF WARRANT CERTIFICATES. From time to time, up to the
--------------------------------
Expiration Date, the Company shall execute and deliver Warrant Certificates in
required whole number denominations to the persons entitled thereto in
connection with any transfer or exchange permitted under this Agreement;
provided that no Warrant Certificates shall be issued except (i) this Warrant
Certificate and those issued
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<PAGE>
concurrently herewith, (ii) those issued on or after the date hereof upon the
exercise of fewer than all Warrants represented by any Warrant Certificate, to
evidence any unexercised Warrants held by the exercising Registered Holder,
(iii) those issued upon any transfer or exchange pursuant to Section 4, (iv)
those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 5 and (v) at the option of the Company, in such
form as may be approved by the its Board of Directors, to reflect any adjustment
or change in the Purchase Price, the number of shares of Common Stock
purchasable upon exercise of the Warrants made pursuant to Section 6 hereof.
SECTION 8. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
-----------------------------------------
(a) If the number of shares of Class A Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 6 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon the
exercise of any Warrant, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(1) If the Class A Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or is
traded on the Nasdaq National Market, the current market value shall be the
last reported sale price of the Class A Common Stock on such exchange or
market on the last business day prior to the date of exercise of such
Warrant or if no such sale is made on such day, the average of the closing
bid and asked prices for such day on such exchange or market; or
(2) If the Class A Common Stock is not listed or admitted to unlisted
trading privileges on a national securities exchange or is not traded on
the Nasdaq National Market, the current market value shall be the mean of
the last reported bid and asked prices reported by the Nasdaq SmallCap
Market or, if not traded thereon, by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of such Warrant; or
(3) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported,
the current market value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
SECTION 9. RESTRICTIVE LEGEND.
------------------
(a) Except as otherwise provided in this Section 9, each certificate for
Class A Common Stock initially issued upon the exercise of any Warrant, and each
certificate for
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<PAGE>
Class A Common Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS
QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS
OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO INTERACTIVE FLIGHT
TECHNOLOGIES, INC., SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. NO
TRANSFER OF ANY SUCH SHARE SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED."
(b) Except as otherwise provided in this Section 9, each Warrant
Certificate shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. SUCH WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS
QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS
OR UNLESS, IN THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO INTERACTIVE
FLIGHT TECHNOLOGIES, INC., SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED. NO TRANSFER OF ANY SUCH WARRANT SHALL BE VALID OR EFFECTIVE
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED."
(c) The legend requirements of Sections 9(a) and 9(b) above shall terminate
as to any particular Warrant or share of Class A Common Stock (i) when and so
long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when Company shall have
received an opinion of counsel reasonably satisfactory to it that such shares
may be sold to the public without registration thereof under the Securities Act.
Whenever the legend requirements imposed by this Section 9 shall terminate as to
any share of Class A Common Stock purchased pursuant to a Warrant represented
hereby, as hereinabove provided, the holder hereof shall be entitled to receive
from Company, at Company's expense, a new certificate representing such Class A
Common Stock not bearing the restrictive legend set forth in paragraph 9(a).
SECTION 10. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of Warrants
---------------------------------------
shall, as such, be entitled to vote or to receive dividends or be deemed the
-13-
<PAGE>
holder of Class A Common Stock that may at any time be issuable upon exercise of
such Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
holder shall have exercised such Warrants and been issued shares of Class A
Common Stock in accordance with the provisions hereof.
SECTION 11. RIGHTS OF ACTION. All rights of action with respect to the
----------------
Warrants are vested in the Registered Holders of the Warrants, and any
Registered Holder of a Warrant, without consent of the holder of any other
Warrant, may, in his own behalf and for his own benefit, enforce against the
Company his right to exercise his Warrants for the purchase of shares of Class A
Common Stock in the manner provided in this Warrant Certificate.
SECTION 12. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by
----------------------------
his acceptance thereof, consents and agrees with the Company and every other
holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Company by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Company, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Company in
its sole discretion, together with payment of any applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name the Warrant
Certificate is registered as the holder and as the absolute, true and lawful
owner of the Warrants represented thereby for all purposes, and the Company
shall not be affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in Section 5 hereof.
SECTION 13. MODIFICATION OF WARRANTS. This Agreement may be modified,
------------------------
supplemented or altered in any respect only with the consent in writing of the
Registered Holders of Warrants representing not less than 50% of the Class C
Warrants then outstanding; provided, that no change in the number or nature of
--------
the securities purchasable upon the exercise of any Warrant, or the Purchase
Price therefor, or the acceleration of the Expiration Date, shall be made
without the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed by this Agreement as originally executed or are made in
compliance with applicable law.
-14-
<PAGE>
SECTION 14. NOTICES. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Company; if to the Company, at 3070 West Post Road, Las Vegas, Nevada 89118,
attention: Michail Itkis, Chief Executive Officer, or at such other address as
may have been furnished to the Registered Holders in writing by the Company.
SECTION 15. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by two of its officers thereunto duly
authorized.
Interactive Flight Technologies, Inc.
Dated: July 20, 1996 By: ___________________________
Michail Itkis
Chief Executive Officer
By: ___________________________
Robert Aten
Chief Financial Officer
<PAGE>
Exhibit A
---------
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
___________ Class C Warrants represented by the enclosed Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Class C
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
and be delivered to
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
and if such number of Class C Warrants shall not be all the Class C Warrants
evidenced by the enclosed Warrant Certificate, that a new Warrant Certificate
for the balance of such Class C Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
A-1
<PAGE>
Dated: ____________________ X _____________________________
________________________________
________________________________
Address
________________________________
Taxpayer Identification Number
________________________________
Signature Guaranteed
________________________________
THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THE ENCLOSED WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
MEMBER OF THE MEDALLION STAMP PROGRAM.
A-2
<PAGE>
Exhibit B
---------
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
______________ of the Class C Warrants represented by the enclosed Warrant
Certificate, and hereby irrevocably constitutes and appoints ___________
___________________________ Attorney to transfer the enclosed Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated: ____________________ X _____________________________
Signature Guaranteed
________________________________
THE SIGNATURE TO THIS ASSIGNMENT FORM MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THE ENCLOSED WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
MEMBER OF THE MEDALLION STAMP PROGRAM.
B-1
<PAGE>
EXHIBIT 4.6
-----------
No. __ ________ Class D Warrants
THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO INTERACTIVE FLIGHT TECHNOLOGIES, INC., SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. NO TRANSFER OF ANY SUCH WARRANT
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
VOID AFTER MARCH 6, 2000
CLASS D WARRANTS FOR
PURCHASE OF CLASS A COMMON STOCK
This certifies that FOR VALUE RECEIVED ____________________ or registered
assigns (the "REGISTERED HOLDER") is the owner of the number of Class D Warrants
specified above. Each Class D Warrant represented hereby initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Certificate, one fully paid and nonassessable share of Class A
Common Stock, $.01 par value ("CLASS A COMMON STOCK"), of Interactive Flight
Technologies, Inc., a Delaware corporation (the "COMPANY"), at any time prior to
or on the Expiration Date (as hereinafter defined), upon the presentation and
surrender of this Warrant Certificate with a duly completed and executed
Subscription Form in the form attached hereto as Exhibit A, at the corporate
---------
office the Company, accompanied by payment of Fourteen Dollars ($14.00) (the
"PURCHASE PRICE") in lawful money of the United States of America in cash or by
official bank or certified check made payable to "Interactive Flight
Technologies, Inc." The Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of the Warrants are subject to
modification or adjustment as set forth herein.
The term "EXPIRATION DATE" shall mean 5:00 P.M. (New York time) on March 6,
2000. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
<PAGE>
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
-----------
the following meanings, unless the context shall otherwise require:
(a) "COMMON STOCK" shall mean stock of the Company of any class, whether
now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of the Company's Class A Common
Stock, $.01 par value, and the Company's Class B Common Stock, $.01 par value.
(b) "CORPORATE OFFICE" shall mean the office of the Company at which, at
any particular time, its principal business shall be administered, which office
is currently located at 3070 West Post Road, Las Vegas, Nevada 89118.
(c) "EXERCISE DATE" shall mean, as to any Warrant, the date on which the
Company shall have received both (a) this Warrant Certificate with the
Subscription Form attached hereto as Exhibit A hereto executed by the Registered
---------
Holder hereof, or his attorney duly authorized in writing, and indicating that
the Registered Holder is thereby exercising such Warrant, and (b) payment in
cash, or by official bank or certified check made payable to the Company, of an
amount in lawful money of the United States of America equal to the applicable
Purchase Price.
(d) "PURCHASE PRICE" shall mean the purchase price to be paid upon
exercise of each Class D Warrant in accordance with the terms hereof, which
price shall be Fourteen Dollars ($14.00), subject to adjustment from time to
time pursuant to the provisions of Section 6 hereof.
(e) "REGISTERED HOLDER" shall mean, as to any Warrant and as of any
particular date, the person in whose name the Warrant Certificate representing
such Warrant shall be registered on that date on the books maintained by the
Company pursuant to Section 4.
(f) "WARRANTS" shall mean the Class D Warrants represented hereby and all
other Class D Warrants issued by the Company.
(g) "WARRANT CERTIFICATE" shall mean any certificate (including this
certificate) representing Class D Warrants.
SECTION 2. EXERCISE.
--------
(a) Each Warrant evidenced hereby may be exercised by the Registered
Holder hereof at any time on or prior to the Expiration Date, upon the terms and
subject to the conditions set forth herein. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date.
Promptly following, and in any event within ten (10) business
-2-
<PAGE>
days after the Exercise Date, the Company shall cause to be issued and delivered
to the person or persons entitled to receive the same, a certificate or
certificates for the securities deliverable upon such exercise (plus a Warrant
Certificate for any remaining unexercised Warrants of the Registered Holder),
subject to first receiving clearance of checks received in payment of the
Purchase Price pursuant to such Warrants.
(b) Upon the exercise of the Warrants represented hereby, if the Company
so requests, Holder shall certify to the Company that it is not exercising such
Warrants with a view to distribute the Class A Common Stock received pursuant to
such exercise in violation of the Securities Act of 1933, as amended (the
"SECURITIES ACT").
SECTION 3. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
-----------------------------------------------------
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Class A Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Class A Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Class A Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery, be duly
and validly issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, (other than those which the Company
shall promptly pay or discharge) and that upon issuance such shares shall be
listed on each national securities exchange, on which the other shares of
outstanding Class A Common Stock of the Company are then listed or shall be
eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap
Market if the other shares of outstanding Class A Common Stock of the Company
are so included.
(b) In the event that this Warrant Certificate represents Class D Warrants
which have been transferred by an initial holder of Class D Warrants, the
Company shall not be obligated to deliver any securities pursuant to the
exercise of the Class D Warrants represented hereby unless a registration
statement under the Securities Act with respect to such securities is effective,
or an exemption from such registration is available to the Company. The Company
covenants that if any securities to be reserved for the purpose of exercise of
Warrants hereunder require registration with, or approval of, any governmental
authority under any federal securities law before such securities may be validly
issued or delivered upon such exercise, then the Company will in good faith and
as expeditiously as reasonably possible, endeavor to secure such registration or
approval. The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws. However, in
the event that this Warrant Certificate represents Class D Warrants which have
been transferred by an initial holder of Class D Warrants, the Warrants
represented hereby may not be exercised by, or shares of Class A Common Stock
issued to, the Registered Holder hereof in any state in which such exercise
would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
-3-
<PAGE>
Warrants, or the issuance or delivery of any shares of Class A Common Stock upon
exercise of the Warrants; provided, however, that if the shares of Class A
Common Stock are to be delivered in a name other than the name of the Registered
Holder hereof, then no such delivery shall be made unless the person requesting
the same has paid to the Company the amount of transfer taxes or charges
incident thereto, if any.
SECTION 4. EXCHANGE AND REGISTRATION OF TRANSFER.
-------------------------------------
(a) This Warrant Certificate may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or, subject to
the restrictions set forth on Page 1 hereof, may be transferred in whole or in
part. To effect such an exchange, this Warrant Certificate shall be surrendered
to the Company at its Corporate Office, and upon satisfaction of the terms and
provisions hereof, the Company shall execute, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
hereof shall be entitled to receive.
(b) The Company shall keep at its office books in which, subject to such
reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof. Subject to the restrictions set forth on
Page 1 hereof, upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute, issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the Subscription Form and/or the
Assignment Form (as applicable) attached hereto as Exhibit A and Exhibit B,
--------- ---------
respectively, shall be duly endorsed or shall be accompanied by a written
instrument or instruments of transfer and/or subscription, in form satisfactory
to the Company, duly executed by the Registered Holder or his attorney-in-fact
duly authorized in writing.
(d) A service charge may be imposed by the Company for any exchange or
registration of transfer of Warrant Certificates. In addition, the Company may
require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly cancelled by the
Company and thereafter retained by the Company until the Expiration Date.
(f) Prior to due presentment for registration of transfer thereof, the
Company may deem and treat the Registered Holder of any Warrant Certificate as
the absolute owner thereof and of each Warrant represented thereby
(notwithstanding any notations of ownership or writing thereon made by anyone
other than a duly authorized officer of the Company) for all purposes and shall
not be affected by any notice to the contrary.
-4-
<PAGE>
SECTION 5. LOSS OR MUTILATION. Upon receipt by the Company of evidence
------------------
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of this Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to the Company, and (in the case of
mutilation) upon surrender and cancellation hereof, the Company shall execute
and deliver to the Registered Holder in lieu thereof a new Warrant Certificate
of like tenor representing an equal aggregate number of Class D Warrants.
Applicants for a substitute Warrant Certificate shall comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF CLASS A
------------------------------------------------------------
COMMON STOCK OR WARRANTS.
- ------------------------
(a) Subject to the exceptions referred to in Section 6(g) below, in the
event the Company shall, at any time or from time to time after the date hereof,
sell any shares of Common Stock for a consideration per share less than the
Market Price of the Class A Common Stock (as defined below) on the date of the
sale or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "CHANGE OF SHARES"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Class A
Common Stock which the aggregate consideration received (determined as provided
in subsection 6(f)(F) below) for the issuance of such additional shares would
purchase at the Market Price and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
"MARKET PRICE", as of any date, shall mean (i) the average closing bid
price, for the thirty (30) consecutive business days immediately preceding such
date, of the Class A Common Stock as reported by Nasdaq, if the Class A Common
Stock is traded on the Nasdaq SmallCap Market, or (ii) the last reported sale
price, for the thirty (30) consecutive business days immediately preceding such
date, of the Class A Common Stock as reported by the primary exchange on which
the Class A Common Stock is traded, if the Class A Common Stock is traded, on a
national securities exchange, or by Nasdaq, if the Class A Common Stock is
traded on the Nasdaq National Market.
Upon each adjustment of the Purchase Price pursuant to this Section , the
total number of shares of Class A Common Stock purchasable upon the exercise of
each Class D Warrant shall (subject to the provisions contained in Section 6(b)
hereof) be
-5-
<PAGE>
such number of shares (calculated to the nearest tenth) purchasable at the
Purchase Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class D Warrants outstanding, in lieu of the
adjustment in the number of shares of Class A Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Class D Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Class A Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 6, the Company
shall, as promptly as practicable, cause to be distributed to each Registered
Holder of Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Section 8 hereof, the number of additional
Warrants to which such Registered Holder shall be entitled as a result of such
adjustment or, at the option of the Company, cause to be distributed to such
Registered Holder in substitution and replacement for the Warrant Certificates
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrant Certificates evidencing the number of
Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been purchased upon exercise of such Warrant immediately prior
to such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The Company shall not effect any
such consolidation, merger or sale without the written consent of Registered
Holders of a majority of the Warrants then outstanding, unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such
-6-
<PAGE>
consolidation or merger or the corporation purchasing assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Company, the obligation to deliver to the holder of each
Warrant such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and the other
obligations of the Company under this Agreement. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Class A Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 7 hereof, continue to express the Purchase Price per share,
the number of shares purchasable thereunder and the Redemption Price therefor as
the Purchase Price per share, and the number of shares purchasable and the
Redemption Price therefor were expressed in the Warrant Certificates when the
same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this Section
6, the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so
adjusted, (ii) the number of shares of Class A Common Stock purchasable upon
exercise of each Warrant after such adjustment and, if the Company shall have
elected to adjust the number of Warrants, the number of Warrants to which the
Registered Holder of each Warrant shall then be entitled, and the adjustment in
Redemption Price resulting therefrom, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder of
Warrants at his last address as it shall appear on the registry books of the
Company. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of the Secretary or an Assistant Secretary
of the Company that such notice has been mailed shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
(f) For purposes of Section 6(a) and 6(b) hereof, the following provisions
(A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or
the distribution of any such treasury shares shall not be considered a
Change of Shares for purposes of said sections.
-7-
<PAGE>
(B) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.10 in the
Purchase Price; provided that any adjustments which by reason of this
clause (B) are not required to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment
which, together with any adjustment(s) so carried forward, shall require an
increase or decrease of at least $.10 in the Purchase Price then in effect
hereunder.
(C) In case of (1) the sale by the Company for cash (or as a
component of a unit being sold for cash) of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common Stock
or any securities convertible into or exchangeable for Common Stock without
the payment of any further consideration other than cash, if any (such
securities convertible, exercisable or exchangeable into Common Stock being
herein called "CONVERTIBLE SECURITIES"), or (2) the issuance by the
Company, without the receipt by the Company of any consideration therefor,
of any rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or Convertible Securities, in each case, if
(and only if) the consideration payable to the Company upon the exercise of
such rights, warrants or options shall consist of cash, whether or not such
rights, warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the minimum aggregate consideration
payable to the Company upon the exercise of such rights, warrants or
options, plus the consideration, if any, received by the Company for the
issuance or sale of such rights, warrants or options, plus, in the case of
such Convertible Securities, the minimum aggregate amount of additional
consideration, other than such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less
than the Market Price of the Class A Common Stock on the date of the
issuance or sale of such rights, warrants or options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 6(a) and 6(b) hereof and shall be
deemed to have been sold for cash in an amount equal to such price per
share.
-8-
<PAGE>
(D) In case of the sale by the Company for cash of any Convertible
Securities, whether or not the right of conversion or exchange thereunder
is immediately exercisable, and the price per share for which Common Stock
is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by
the Company for the sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than the
Market Price of the Class A Common Stock on the date of the sale of such
Convertible Securities, then the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of such Convertible
Securities (as of the date of the sale of such Convertible Securities)
shall be deemed to be outstanding shares of Common Stock for purposes of
Sections 6(a) and 6(b) hereof and shall be deemed to have been sold for
cash in an amount equal to such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or (D)
above or any other securities of the Company convertible, exchangeable or
exercisable for shares of Common Stock, for any reason other than an event
that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is
less than the Market Price on the date prior to such modification, the
Purchase Price to be in effect after such modification shall be determined
by multiplying the Purchase Price in effect immediately prior to such event
by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date prior to the modification plus the
number of shares of Common Stock which the aggregate consideration
receivable by the Company for the securities affected by the modification
would purchase at the Market Price and of which the denominator shall be
the number of shares of Common Stock outstanding on such date plus the
number of shares of Common Stock to be issued upon conversion, exchange or
exercise of the modified securities at the modified rate. Such adjustment
shall become effective as of the date upon which such modification shall
take effect. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such Convertible
Securities referred to in Paragraph (C) or (D) above, the Purchase Price
then in effect hereunder shall forthwith be readjusted to such Purchase
Price as would have obtained (a) had the adjustments made upon the issuance
or sale of such rights, warrants, options or Convertible Securities been
made upon the basis of the issuance of only the number of shares of Common
Stock theretofore actually delivered (and the total consideration received
therefor) upon the exercise
-9-
<PAGE>
of such rights, warrants or options or upon the conversion or exchange of
such Convertible Securities and (b) had adjustments been made on the basis
of the Purchase Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Purchase Price) made after the
issuance or sale of such rights, warrants, options or Convertible
Securities.
(F) In case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the number
of shares of Class A Common Stock purchasable upon the exercise of each Warrant
will be made, however,
(i) upon the exercise of any of the options presently outstanding
under the Company's Stock Option Plan (the "PLAN") for officers, directors
and certain other key personnel of and consultants to the Company; or
(ii) upon the issuance or exercise of any other securities which may
hereafter be granted or exercised under the Plan or under any other
employee benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants comprising the Unit
Purchase Option or upon the sale or exercise of the Unit Purchase Option;
or
(iv) upon the sale of any shares of Class A Common Stock or
Convertible Securities in a firm commitment underwritten public offering,
including, without limitation, shares sold upon the exercise of any
overallotment option granted to the underwriters in connection with such
offering; or
(v) upon the issuance or sale of Class A Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Class A Common Stock or
Convertible Securities, whether or not such rights, warrants or options
were outstanding on the date of the original sale of the Warrants or were
thereafter issued or sold; or
-10-
<PAGE>
(vi) upon the issuance or sale of Class A Common Stock upon conversion
or exchange of any Convertible Securities, whether or not any adjustment in
the Purchase Price was made or required to be made upon the issuance or
sale of such Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold.
(h) As used in this Section 6, the term "COMMON STOCK" shall mean and
include the Company's Common Stock authorized on the date hereof and shall also
include any capital stock of any class of the Company thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or winding up of the Company;
provided, however, that the shares issuable upon exercise of the Warrants shall
include only shares of such class designated in the Company's Certificate of
Incorporation as Class A Common Stock on the date hereof or (i) in the case of
any reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 6(c) hereof, the stock, securities or property
provided for in such section or (ii) in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase Price in
effect hereunder is required pursuant to Section 6, or as to the amount of any
such adjustment, if required, shall be binding upon the holders of the Warrants
and the Company if made in good faith by the Board of Directors of the Company.
(j) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Class A Common
Stock then issuable upon exercise of his Warrants. Such grant by the Company to
the holders of the Warrants shall be in lieu of any adjustment which otherwise
might be called for pursuant to this Section 6.
SECTION 7. ISSUANCE OF WARRANT CERTIFICATES. From time to time, up to the
--------------------------------
Expiration Date, the Company shall execute and deliver Warrant Certificates in
required whole number denominations to the persons entitled thereto in
connection with any transfer or exchange permitted under this Agreement;
provided that no Warrant Certificates shall be issued except (i) this Warrant
Certificate and those issued
-11-
<PAGE>
concurrently herewith, (ii) those issued on or after the date hereof upon the
exercise of fewer than all Warrants represented by any Warrant Certificate, to
evidence any unexercised Warrants held by the exercising Registered Holder,
(iii) those issued upon any transfer or exchange pursuant to Section 4, (iv)
those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 5 and (v) at the option of the Company, in such
form as may be approved by the its Board of Directors, to reflect any adjustment
or change in the Purchase Price, the number of shares of Common Stock
purchasable upon exercise of the Warrants made pursuant to Section 6 hereof.
SECTION 8. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
-----------------------------------------
(a) If the number of shares of Class A Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 6 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon the
exercise of any Warrant, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(1) If the Class A Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or is
traded on the Nasdaq National Market, the current market value shall be the
last reported sale price of the Class A Common Stock on such exchange or
market on the last business day prior to the date of exercise of such
Warrant or if no such sale is made on such day, the average of the closing
bid and asked prices for such day on such exchange or market; or
(2) If the Class A Common Stock is not listed or admitted to unlisted
trading privileges on a national securities exchange or is not traded on
the Nasdaq National Market, the current market value shall be the mean of
the last reported bid and asked prices reported by the Nasdaq SmallCap
Market or, if not traded thereon, by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of such Warrant; or
(3) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported,
the current market value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
SECTION 9. RESTRICTIVE LEGEND.
------------------
(a) Except as otherwise provided in this Section 9, each certificate for
Class A Common Stock initially issued upon the exercise of any Warrant, and each
certificate for
-12-
<PAGE>
Class A Common Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS
QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS
OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO INTERACTIVE FLIGHT
TECHNOLOGIES, INC., SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. NO
TRANSFER OF ANY SUCH SHARE SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED."
(b) Except as otherwise provided in this Section 9, each Warrant
Certificate shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. SUCH WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS
QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS
OR UNLESS, IN THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO INTERACTIVE
FLIGHT TECHNOLOGIES, INC., SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED. NO TRANSFER OF ANY SUCH WARRANT SHALL BE VALID OR EFFECTIVE
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED."
(c) The legend requirements of Sections 9(a) and 9(b) above shall terminate
as to any particular Warrant or share of Class A Common Stock (i) when and so
long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when Company shall have
received an opinion of counsel reasonably satisfactory to it that such shares
may be sold to the public without registration thereof under the Securities Act.
Whenever the legend requirements imposed by this Section 9 shall terminate as to
any share of Class A Common Stock purchased pursuant to a Warrant represented
hereby, as hereinabove provided, the holder hereof shall be entitled to receive
from Company, at Company's expense, a new certificate representing such Class A
Common Stock not bearing the restrictive legend set forth in paragraph 9(a).
SECTION 10. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of Warrants
---------------------------------------
shall, as such, be entitled to vote or to receive dividends or be deemed the
-13-
<PAGE>
holder of Class A Common Stock that may at any time be issuable upon exercise of
such Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
holder shall have exercised such Warrants and been issued shares of Class A
Common Stock in accordance with the provisions hereof.
SECTION 11. RIGHTS OF ACTION. All rights of action with respect to the
----------------
Warrants are vested in the Registered Holders of the Warrants, and any
Registered Holder of a Warrant, without consent of the holder of any other
Warrant, may, in his own behalf and for his own benefit, enforce against the
Company his right to exercise his Warrants for the purchase of shares of Class A
Common Stock in the manner provided in this Warrant Certificate.
SECTION 12. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by
----------------------------
his acceptance thereof, consents and agrees with the Company and every other
holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Company by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing
such Warrants are surrendered at the office of the Company, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to the
Company in its sole discretion, together with payment of any applicable
transfer taxes; and
(b) The Company may deem and treat the person in whose name the
Warrant Certificate is registered as the holder and as the absolute, true
and lawful owner of the Warrants represented thereby for all purposes, and
the Company shall not be affected by any notice or knowledge to the
contrary, except as otherwise expressly provided in Section 5 hereof.
SECTION 13. MODIFICATION OF WARRANTS. This Agreement may be modified,
------------------------
supplemented or altered in any respect only with the consent in writing of the
Registered Holders of Warrants representing not less than 50% of the Class D
Warrants then outstanding; provided, that no change in the number or nature of
--------
the securities purchasable upon the exercise of any Warrant, or the Purchase
Price therefor, or the acceleration of the Expiration Date, shall be made
without the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed by this Agreement as originally executed or are made in
compliance with applicable law.
-14-
<PAGE>
SECTION 14. NOTICES. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Company; if to the Company, at 3070 West Post Road, Las Vegas, Nevada 89118,
attention: Michail Itkis, Chief Executive Officer, or at such other address as
may have been furnished to the Registered Holders in writing by the Company.
SECTION 15. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by two of its officers thereunto duly
authorized.
Interactive Flight Technologies, Inc.
Dated: July 20, 1996 By: ___________________________
Michail Itkis
Chief Executive Officer
By: ___________________________
Robert Aten
Chief Financial Officer
-15-
<PAGE>
Exhibit A
---------
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
___________ Class D Warrants represented by the enclosed Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Class D
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
and be delivered to
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
and if such number of Class D Warrants shall not be all the Class D Warrants
evidenced by the enclosed Warrant Certificate, that a new Warrant Certificate
for the balance of such Class D Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
A-1
<PAGE>
Dated: ____________________ X _____________________________
________________________________
________________________________
Address
________________________________
Taxpayer Identification Number
________________________________
Signature Guaranteed
________________________________
THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THE ENCLOSED WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
MEMBER OF THE MEDALLION STAMP PROGRAM.
A-2
<PAGE>
Exhibit B
---------
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
______________ of the Class D Warrants represented by the enclosed Warrant
Certificate, and hereby irrevocably constitutes and appoints ___________
___________________________ Attorney to transfer the enclosed Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated: ____________________ X _____________________________
Signature Guaranteed
________________________________
THE SIGNATURE TO THIS ASSIGNMENT FORM MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THE ENCLOSED WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
MEMBER OF THE MEDALLION STAMP PROGRAM.
B-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> OCT-31-1996 OCT-31-1996
<PERIOD-START> NOV-01-1995 MAY-01-1996
<PERIOD-END> JUL-31-1996 JUL-31-1996
<CASH> 2,684,009 7,765,454
<SECURITIES> 0 0
<RECEIVABLES> 1,860,115 0
<ALLOWANCES> 0 0
<INVENTORY> 1,983,442 1,964,932
<CURRENT-ASSETS> 26,863,747 10,071,475
<PP&E> 1,770,223 461,858
<DEPRECIATION> 334,585 32,564
<TOTAL-ASSETS> 29,019,580 10,688,782
<CURRENT-LIABILITIES> 1,818,492 815,570
<BONDS> 0 0
0 0
0 0
<COMMON> 120,066 72,200
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 29,019,580 10,688,782
<SALES> 2,813,756 1,200,378
<TOTAL-REVENUES> 2,920,835 1,252,430
<CGS> 2,870,961 1,132,958
<TOTAL-COSTS> 10,832,798 4,859,176
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (7,580,847) (3,350,766)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,580,847) (3,350,763)
<EPS-PRIMARY> (1.42) (0.43)
<EPS-DILUTED> (1.42) (0.43)
</TABLE>
