<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No.__)*
ACTV, INC.
(Name of Issuer)
Common Stock, $.10 par value
----------------------------
(Title of Class of Securities)
Common Stock 000 88E 10 4
-------------------------
(CUSIP Number)
Stephen M. Brett, Esq., Executive Vice President and General Counsel,
Tele-Communications, Inc.
Terrace Tower II, 5619 DTC Parkway, Englewood, CO 80111 (303-267-5500)
-----------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 21, 1998
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box: [_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Exhibit Index is on Page: 10
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Common Stock CUSIP No. 000 88E 10 4
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above
Persons (entities only)
TELE-COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [_]
(b) [_]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 5,000,000 Shares of Common Stock*
Shares Bene- --------------------------------------------------------------
ficially (8) Shared Voting Power 0 Shares
Owned by --------------------------------------------------------------
Each Report- (9) Sole Dispositive Power 5,000,000 Shares of Common Stock*
ing Person --------------------------------------------------------------
With (10) Shared Dispositive Power 0 Shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
5,000,000 Shares of Common Stock*
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
[_]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)*
Common Stock, Par Value $.10 17.4%
- --------------------------------------------------------------------------------
(14) Type of Reporting Person
HC, CO
- ----------------------
* Includes 2,500,000 shares of Common Stock issuable upon exercise of a
Warrant beneficially owned by the Reporting Person, which Warrant is
exercisable, in accordance with the provisions specified therein, at any time
prior to 5:00 p.m. Denver, Colorado time on September 22, 2008. (See Item 6
herein.)
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Amendment No. __)
Statement of
TELE-COMMUNICATIONS, INC.
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
ACTV, INC.
(Commission File No. 001-10377)
ITEM 1. Security and Issuer
-------------------
Tele-Communications, Inc., a Delaware corporation ("TCI"), is filing
this Statement on Schedule 13D (this "Statement") with respect to the Common
Stock, par value $.10 per share (the "Common Stock"), of ACTV, Inc., a Delaware
corporation (the "Issuer"). The Issuer's principal executive offices are located
at 1270 Avenue of the Americas, New York, New York, 10020.
ITEM 2. Identity and Background
-----------------------
The reporting person is TCI, whose principal business address is 5619
DTC Parkway, Englewood, Colorado 80111.
TCI, through its subsidiaries and affiliates, is principally engaged in
the construction, acquisition, ownership, and operation of cable television
systems and the provision of satellite-delivered video entertainment,
information and home shopping programming services to various video distribution
media, principally cable television systems. TCI also has investments in cable
and telecommunications operations and television programming in certain
international markets as well as investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies. TCI is a Delaware corporation and was
incorporated in 1994. TCI Communications, Inc. ("TCIC"), a majority owned
subsidiary of TCI, and its predecessors have been engaged in the cable
television business since the early 1950's. Prior to August 1994, TCI was named
TCI/Liberty Holding Company and TCIC was named Tele-Communications, Inc.
Schedule 1 attached to this Statement contains the following
information concerning each director, executive officer and controlling person
of TCI: (i) name and residence or business address, (ii) principal occupation or
employment; and (iii) the name, principal business and address of any
corporation or other organization in which such employment is conducted.
Schedule 1 is incorporated herein by reference.
To the knowledge of TCI, each of the persons named on Schedule 1 (the
"Schedule 1 Persons") is a United States citizen. During the last five years,
neither TCI nor any of the Schedule 1 Persons (to the knowledge of TCI) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, neither TCI nor any of the Schedule 1
Persons (to the knowledge of
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TCI) has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and, as a result of such proceeding, is or was subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
TCI currently beneficially owns, through its wholly-owned subsidiary
Liberty Media Corporation ("LMC"), a total of 5,000,000 shares of Common Stock.
LMC acquired such shares of Common Stock pursuant to the terms of a Securities
Purchase Agreement, dated as of September 11, 1998 (the "Agreement"), between
LMC and the Issuer. In accordance with the Agreement, the Issuer issued, to LMC,
2,500,000 shares of Common Stock and a warrant (the "Warrant"), exercisable
pursuant to the terms thereof at any time prior to 5:00 p.m. Denver, Colorado
time on September 22, 2008, for the purchase of up to an additional 2,500,000
shares of Common Stock (the "Warrant Stock"). As consideration for the Common
Stock and the Warrant, LMC paid to the Issuer the sum of $5,000,000. Also in
accordance with the terms of the Agreement, LMC and the Issuer caused their
respective subsidiaries, Liberty IATV Events, Inc. and ACTV Entertainment, Inc.,
to form a Delaware limited liability company, LMC IATV Events, LLC (the "LLC"),
pursuant to an operating agreement, dated September 21, 1998 (the "Operating
Agreement"), for the purpose of providing, through a sub-license agreement with
ACTV Entertainment, Inc. (the "Sub-license Agreement"), for the LLC's use of
Issuer-owned individualized programming technologies currently licensed to ACTV
Entertainment, Inc. The initial term of the Sub-license Agreement is five years.
As a result of the purchase of the Common Stock and the Warrant, on September
21, 1998 TCI became a greater than 5% beneficial owner of the Common Stock of
the Issuer.
The foregoing summary of the terms of the Agreement is qualified in its
entirety by reference to the text of the Agreement, filed as Exhibit 7(a) to
this Statement, and the Warrant, filed as Exhibit 7(b) to this Statement, which
Exhibits are incorporated herein by this reference.
ITEM 4. Purpose of Transaction
----------------------
TCI currently holds its interest in the Issuer for investment purposes.
Neither TCI nor, to the best of its knowledge, any of its executive officers,
directors or controlling persons has any present plans or proposals which relate
to or would result in: (i) any acquisition by any person of additional
securities of the Issuer, or any disposition of securities of the Issuer (except
as may be acquired pursuant to terms of the Warrant described in Item 6 below);
(ii) any extraordinary corporate transaction, such as a merger, reorganization
or liquidation, involving the Issuer or any of its subsidiaries; (iii) any sale
or transfer of a material amount of assets of the Issuer or any of its
subsidiaries; (iv) any change in the present board of directors or management of
the Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; (v) any material
change in the present capitalization or dividend policy of the Issuer; (vi) any
other material change in the Issuer's business or corporate structure; (vii) any
changes in the Issuer's charter, by-laws, or other instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Issuer by any person; (viii) any delisting from a national securities exchange
or any loss of authorization for quotation in an inter-dealer quotation system
of a registered national securities association of a class of securities of the
Issuer; (ix) any termination of registration pursuant to section 12(g)(4) of the
Securities Exchange Act of 1934, as amended, of a class of equity securities of
the Issuer; or (x) any action similar to any of those enumerated above.
Notwithstanding the foregoing, TCI may determine to change its
investment intent with respect to the Issuer at any time in the future. In
reaching any conclusion as to its future course of action, TCI will take into
consideration various factors, such as the Issuer's business and prospects,
other developments concerning the Issuer, other business opportunities available
to TCI, developments with respect to the business of TCI, and
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general economic and stock market conditions, including, but not limited to, the
market price of the Common Stock of the Issuer. TCI reserves the right,
depending on other relevant factors, to acquire additional shares of the Common
Stock of the Issuer upon exercise of the Warrant described in Item 6 below or in
open market or in privately negotiated transactions, to dispose of all or a
portion of its holdings of shares of the Common Stock of the Issuer, or to
change its intention with respect to any or all of the matters referred to in
this Item.
ITEM 5. Interest in Securities of the Issuer
------------------------------------
(a) TCI presently beneficially owns, through its wholly-owned
subsidiary LMC, 5,000,000 shares of Common Stock. The 5,000,000 shares of Common
Stock beneficially owned by TCI represent 17.4% of the sum of such shares and
the shares of the Common Stock outstanding on September 21, 1998.
To the knowledge of TCI, none of the Schedule 1 Persons has any
interest in any securities of the Issuer.
(b) TCI, through its subsidiary, LMC, has sole power to vote or to
direct the voting of the shares of the Common Stock that TCI beneficially owns
and sole power to dispose of, or to direct the disposition of, such shares of
Common Stock.
(c) Except for the securities of the Issuer acquired in connection
with the transaction described in Item 3 hereof, neither TCI nor, to the
knowledge of TCI, any of the persons named on Schedule 1, has executed
transactions in the Common Stock of the Issuer during the past sixty (60) days.
(d) There is no person that has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
Common Stock beneficially owned by TCI.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect
---------------------------------------------------------------------
to Securities of the Issuer
---------------------------
LMC acquired 2,500,000 shares of Common Stock and a Warrant for the
purchase of up to an additional 2,500,000 shares of Common Stock pursuant to the
Agreement. LMC acquired ownership of the Common Stock and the Warrant from the
Issuer on September 21, 1998.
The Warrant may be exercised by LMC on any business day at any time or
from time to time for all or any part, including a fractional part, of the
number of shares of Warrant Stock purchasable at such exercise time; provided,
however, that such exercises must be made prior to 5:00 p.m. Denver, Colorado
time on September 22, 2008. The Warrant provides for the adjustment of the
purchase price and the number of shares of Warrant Stock upon the occurrence of
certain events. A copy of the Warrant is attached hereto as Exhibit 7(b).
Pursuant to the Agreement, the Issuer granted LMC registration rights
for the outstanding Common Stock purchased pursuant thereto, the Warrant Stock,
and any other Common Stock held by LMC (collectively, the "Registrable
Securities"). The registration rights are exercisable, on demand, as to any of
the Registrable Securities as LMC specifies in its demand, on a maximum of three
occasions; provided, however, that LMC shall have no right to demand
registration if all of the Registrable Securities are either freely tradeable in
a single transaction under Rule 144(k) of the Securities Act of 1933 (the "1933
Act") or are then subject to an
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effective registration statement under the 1933 Act. The Agreement restricts the
transfer of the Common Stock and the Warrant Stock unless such transfer is made
pursuant to an effective registration statement under the 1933 Act or an opinion
of counsel to LMC that no such registration is required under the 1933 Act. A
copy of the Agreement is attached hereto as Exhibit 7(a). In addition, LMC and
its affiliates must retain the beneficial ownership of a Warrant or Warrants
representing the right to purchase at least 500,000 shares of Warrant Stock (as
adjusted in accordance with the terms of the Warrant) until September 21, 2000.
That restriction will not affect LMC's right to exercise any or all of the
Warrants or to transfer any or all of the Warrant Stock.
Pursuant to the Agreement, for so long as LMC owns, in its own name or
in the name of one or more subsidiaries, at least 10% of the outstanding shares
of Common Stock of Issuer, and thereafter so long as LMC owns, in its own name
or in the name of one or more subsidiaries, at least 5% of the outstanding
shares of Common Stock of Issuer and the shares of Common Stock so owned number
at least 2,500,000, LMC shall have the right, upon request, to have its designee
nominated to the Board of Directors of Issuer. Issuer shall use reasonable
effort to cause LMC's designee to be nominated and elected to the Board of
Directors including, but not limited to, expansion of the number of directors on
the Board.
Except as described above and in Item 3 hereof, there are no other
contracts, arrangements, understandings or relationships among LMC and other
persons with respect to the Common Stock of the Issuer.
ITEM 7. Material to be Filed as Exhibits
--------------------------------
(a) Securities Purchase Agreement, dated as of September 11, 1998, by
and between ACTV, Inc. and Liberty Media Corporation
(b) Warrant No. LMC-1 to Purchase Common Stock of ACTV, Inc., granted
to Liberty Media Corporation on September 21, 1998
[Signature on following page]
6
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
September 30, 1998 TELE-COMMUNICATIONS, INC.
/s/ Stephen M. Brett
--------------------
Stephen M. Brett
Executive Vice President and
Secretary
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SCHEDULE 1
----------
Directors, Executive Officers and Controlling Persons
of
Tele-Communications, Inc. ("TCI")
<TABLE>
<CAPTION>
DIRECTORS
---------
<S> <C> <C>
Name Principal Occupation & Principal Business or Organization in
- ---- Business Address Which such Employment Is Conducted
---------------------- -------------------------------------
Donne F. Fisher Consultant & Director of TCI; Business Cable television & telecommunications
Executive & programming services
5619 DTC Parkway
Englewood, CO 80111
John W. Gallivan Director of TCI; Director of Newspaper publishing
Kearns-Tribune Corporation
400 Tribune Building
Salt Lake City, UT 84111
Paul A. Gould Director of TCI; an Executive Vice President Investment banking services
& a Managing Director of
Allen & Company Incorporated
711 5th Avenue
New York, New York 10022
Leo J. Hindery, Jr. President, Chief Operating Officer & Director Cable television & telecommunications
of TCI & programming services
5619 DTC Parkway
Englewood, CO 80111
Jerome H. Kern Vice Chairman of the Board & a Director of Business Consulting; Law
TCI; Consultant; Special Counsel
to Baker & Botts, L.L.P.
5619 DTC Parkway
Englewood, CO 80111
Kim Magness Director of TCI; Business Executive Management of various business
4000 E. Belleview enterprises
Englewood, CO 80111
John C. Malone Chairman of the Board, Chief Executive Officer Cable television & telecommunications
& Director of TCI & programming services
5619 DTC Parkway
Englewood, CO 80111
Robert A. Naify Director of TCI; President & Chief Executive Provider of services to the motion
Officer of Todd-AO Corporation picture industry
172 Golden Gate Avenue
San Francisco, CA 94102
</TABLE>
8
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<TABLE>
<CAPTION>
Name Principal Occupation & Principal Business or Organization in
- ---- Business Address Which such Employment Is Conducted
---------------------- -------------------------------------
<S> <C> <C>
J.C. Sparkman Consultant & Director of TCI Cable television & telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
EXECUTIVE OFFICERS
------------------
Robert R. Executive Vice President of TCI Cable television & telecommunications
Bennett 5619 DTC Parkway & programming services
Englewood, CO 80111
Stephen M. Executive Vice President, Secretary Cable television & telecommunications
Brett & General Counsel of TCI & programming services
5619 DTC Parkway
Englewood, CO 80111
Gary S. Howard Executive Vice President of TCI Cable television & telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
Marvin L. Executive Vice President of TCI Cable television & telecommunications
Jones 5619 DTC Parkway & programming services
Englewood, CO 80111
Ann M. Koets Executive Vice President of Cable television & telecommunications &
TCI Communications, Inc. programming services
5619 DTC Parkway
Englewood, CO 80111
Larry E. Executive Vice President of TCI Cable television & telecommunications
Romrell 5619 DTC Parkway & programming services
Englewood, CO 80111
Bernard W. Senior Vice President & Treasurer of TCI Cable television & telecommunications
Schotters, II 5619 DTC Parkway & programming services
Englewood, CO 80111
</TABLE>
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EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
EXHIBIT EXHIBIT PAGE
NUMBER
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
7(a) SECURITIES PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 11, 1998, BY AND 11
BETWEEN ACTV, INC. AND LIBERTY MEDIA CORPORATION
7(b) WARRANT NO. LMC-1 TO PURCHASE COMMON STOCK OF ACTV, INC. ISSUED TO LIBERTY 27
MEDIA CORPORATION
</TABLE>
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EXHIBIT 7(A)
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made as of the 11th day
of September, 1998, by and among ACTV, Inc., a Delaware corporation ("ACTV"),
located at 1270 Avenue of the Americas, New York, New York 10020, and Liberty
Media Corporation, a Delaware corporation (the "Investor"), located at 8101 E.
Prentice Avenue, Suite 500, Englewood, Colorado 80111.
1. PURCHASE AND SALE OF STOCK.
---------------------------
1.1 SALE AND ISSUANCE OF COMMON STOCK. Subject to the terms and
---------------------------------
conditions of this Agreement, the Investor agrees to purchase and ACTV agrees to
sell and issue to the Investor (i) 2,500,000 shares (the "Shares") of ACTV's
Common Stock, $.10 par value (the "Common Stock"), and (ii) a Warrant (as
defined in Section 3.1) to purchase 2,500,000 shares of the Common Stock (the
"Warrant Shares"). The Shares, the Warrant and the Warrant Shares are referred
to in this Agreement as the "Securities."
1.2. PURCHASE PRICE. The price payable to ACTV by the Investor for
--------------
the Shares and the Warrant purchased and sold pursuant to Section 1.1 hereof
shall be $5,000,000 (the "Purchase Price").
1.3 CLOSING. The closing for the purchase and sale of the Shares and
-------
the Warrant (the "Closing") shall take place on the fifth business day after the
execution of this Agreement at such time and place as the parties shall agree
or, if they cannot agree, at 11:00 a.m. local time at the address for ACTV set
forth above. At the Closing, ACTV shall deliver against delivery to ACTV by the
Investor of the Purchase Price by wire transfer to the account specified by
ACTV, in immediately available funds, a certificate in the name of the Investor
representing the Shares and the Warrant to Purchase Common Stock substantially
in the form attached as Exhibit A with such changes thereto as the parties agree
---------
upon (the "Warrant"), pursuant to which the Investor will have the right to
acquire 2,500,000 shares of ACTV's Common Stock at an exercise price of $2.00
per share exercisable for a period terminating ten years from the Closing. At
the Closing, (a) ACTV (or a subsidiary of ACTV) and the Investor (or a
subsidiary of the Investor) shall enter into an Operating Agreement
substantially in the form attached as Exhibit B with such changes thereto as the
---------
parties agree upon (the "LLC Agreement"), governing the rights and obligations
as a member of LMC/ACTV Events, LLC, a Delaware limited liability company (the
"LLC"), and (b) the LLC will enter into a Sub-License Agreement with ACTV
Entertainment, Inc., a wholly owned subsidiary of ACTV, substantially in the
form attached as Exhibit C with such changes thereto as the parties agree upon
---------
(the "Sub-License Agreement").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACTV. ACTV hereby
-------------------------------------------------
represents, warrants and covenants to the Investor that, as of the date of this
Agreement and as of the Closing:
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2.1 ORGANIZATION AND GOOD STANDING. ACTV and each of its
------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority under its Certificate (or Articles) of
Incorporation and Bylaws to own and operate its properties and assets and to
carry on its business as now conducted. ACTV and each subsidiary of ACTV is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
business, properties or financial condition of ACTV and its subsidiaries, taken
as a whole.
2.2 AUTHORIZATION. ACTV and each of its subsidiaries has the
-------------
corporate power and authority to execute, deliver and perform this Agreement and
the Warrant, the LLC Agreement, the Sub-License Agreement, and the other
instruments and agreements contemplated by this Agreement (the "Additional
Agreements"), to the extent ACTV or such subsidiary is a party thereto, and ACTV
has the corporate power and authority to issue and sell the Securities. The
execution, delivery and performance of this Agreement and the Additional
Agreements by ACTV or one or more of its subsidiaries, as appropriate, and the
issuance and delivery of the Securities have been duly authorized by all
necessary corporate actions. This Agreement and each of the Additional
Agreements constitutes a valid and legally binding obligation of ACTV, or each
subsidiary of ACTV that is a party thereto, as appropriate, enforceable against
ACTV or such subsidiary in accordance with its terms, except as such may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and by general principles of equity.
2.3 VALID ISSUANCE OF SHARES. The Securities, when issued, sold and
------------------------
delivered in accordance with the terms hereof and the terms of the Warrant with
respect to the Warrant Shares, will be duly and validly issued, fully paid and
nonassessable, and will not be subject to restrictions on transfer arising
through ACTV other than under applicable state and federal securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, order or
----------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of ACTV or any of its subsidiaries in connection with the valid
execution, delivery or performance of this Agreement or any of the Additional
Agreements by ACTV or any of its subsidiaries that is a party thereto and the
issuance and sale of the Securities, except for any filings under any applicable
state securities laws. The filings under state securities laws, if any, will be
effected by ACTV at its cost within the applicable stipulated statutory period
after the sale of the Securities hereunder.
2.5 LITIGATION. There is no action, suit, proceeding or
----------
investigation pending or currently threatened against ACTV or any of its
subsidiaries which questions the validity of this Agreement or any of the
Additional Agreements or the right of ACTV to enter into it or to consummate the
transactions contemplated hereby or thereby. There is no action, suit,
proceeding or investigation pending or currently threatened which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially adversely affect the
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business, properties, operations, financial condition, income or business
prospects of ACTV and its subsidiaries, taken as a whole.
2.6 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The execution,
------------------------------------------
delivery and performance of this Agreement and the Additional Agreements and the
consummation of the transactions contemplated therein will not result in any
violation of or constitute, with or without the passage of time and giving of
notice, either a default under any provision of ACTV's or any of its
subsidiaries' Certificate (or Articles) of Incorporation or Bylaws or of any
law, rule, regulation, instrument, judgment, order, writ, decree or contract or
any rule or regulation of the National Association of Securities Dealers, Inc.
or an event which results in the creation of any lien, charge or encumbrance
upon any assets of ACTV or any of its subsidiaries. Neither ACTV or any of
subsidiaries is in violation of its Certificate (or Articles) of Incorporation
or Bylaws. Neither ACTV nor any of its subsidiaries is in default in the
performance or observance of any provision of any instrument or contract to
which it is bound or to which it or any of its assets is subject, or in
violation of any law, order, rule, regulation, writ, injunction, or decree of
any government, governmental instrumentality, or court applicable to it, except
where such default or violation would not have a material adverse effect on the
business, properties, operations, financial condition, income or business
prospects of ACTV and its subsidiaries, taken as a whole.
2.7 DISCLOSURE. ACTV has made available to the Investor all public
----------
filings made by ACTV with the Securities and Exchange Commission ("SEC Filings")
including the audited financial statements of ACTV and its consolidated
subsidiaries for the years ending December 31, 1997, December 31, 1996 and
December 31, 1995 ("Financial Statements"). All filings required to be filed
with the Securities and Exchange Commission ("SEC") by ACTV have been made in a
timely manner. The SEC Filings (including all documents incorporated by
reference therein) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except, in the case of any SEC Filing, any statement or
omission therein which has been corrected or otherwise disclosed or updated in a
subsequent SEC Filing. The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the periods indicated and with each other,
except as may be indicated therein, and fairly present the financial position of
ACTV as at the dates thereof and the results of its operations and statements of
cash flows for the periods then ended, subject to normal year-end adjustments
and recognizing that the results of operations for interim periods are not
necessarily indicative of ACTV's operations for any other interim period or full
fiscal year.
2.8. PERMITS. ACTV and each of its subsidiaries has all governmental
-------
franchises, permits, licenses, and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties or financial condition
of ACTV and its subsidiaries, taken as a whole. Neither ACTV nor any of its
subsidiaries is in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
13
<PAGE>
2.9. CHANGE. Except as set forth in the SEC Filings, since December
------
31, 1997 to the date hereof, there has not been:
(a) any material change in the assets, liabilities, financial
condition or operating results of ACTV from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse, (except that ACTV expects to
continue to incur substantial operating losses, which may be material);
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties or
financial condition of ACTV, (except that ACTV expects to continue to incur
substantial operating losses, which may be material);
(c) any waiver or compromise by ACTV of a material right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation owed or securing an obligation owned to
ACTV, except in the ordinary course of business and which is not material to the
business, properties or financial condition of ACTV and its subsidiaries, taken
as a whole;
(e) any material change to a material contract or arrangement by
which ACTV or any of its subsidiaries or any assets of ACTV or any of its
subsidiaries is bound or subject;
(f) any sale, assignment or transfer by ACTV or any of its
subsidiaries of any material patents, trademarks, copyrights, trade secrets or
other intangible assets for compensation which is less than fair value;
(g) any mortgage, pledge, transfer of a security interest in, or
lien, created by ACTV or any of its subsidiaries, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable; or
(h) any event or condition of any type that has materially and
adversely affected the business, properties or financial condition of ACTV and
its subsidiaries taken as a whole.
2.10. CAPITALIZATION; OPTIONS AND WARRANTS. The authorized capital
------------------------------------
stock of ACTV consists of 65,000,000 shares of Common Stock, par value $.10 per
share, and 1,000,000 shares of Preferred Stock, par value $.10 per share, of
which 120,000 has been designated Series A 7% Convertible Preferred. As of the
date hereof, 72,600 shares of Series A Convertible Preferred Stock, 185,449
shares of ACTV Holdings, Inc. exchangeable preferred stock, the warrants to
purchase exchangeable preferred stock as set forth on Schedule 2.10 hereto
(which Schedule identifies each warrant and the holder thereof and the number,
type and rights of such
14
<PAGE>
exchangeable preferred stock, and the number of shares of Common Stock which
would be issuable if such preferred stock were exchanged for Common Stock as of
the date hereof) and 23,674,565 shares of Common Stock are issued and
outstanding, and approximately 5,991,538 shares of Common Stock are issuable
upon conversion or exchange of such outstanding shares of Series A Convertible
Preferred and ACTV Holdings, Inc. exchangeable preferred stock (exclusive of any
ACTV Holdings, Inc. exchangeable preferred stock described on Schedule 2.10).
Except for outstanding options and warrants as described in the SEC Filings and
except for transactions contemplated by this Agreement, ACTV has not granted any
option, warrants, rights (including conversion or preemptive rights), or similar
right, to any person or entity to purchase or acquire any rights with respect to
any shares of capital stock of ACTV, other than (a) options to purchase
1,442,817 shares that were granted to employees under ACTV's existing incentive
stock option plan and (b) options and warrants to purchase 411,926 shares that
were granted to non-employees since the respective disclosures in ACTV's most
recent 10-K filed with the SEC.
2.11. TITLE TO ASSETS. ACTV or one or more of its subsidiaries has
---------------
good and marketable title to all material property and assets reflected in the
Financial Statements. Except where the failure to do so would not have a
material adverse effect on the business, properties or financial condition of
ACTV and its subsidiaries, taken as a whole, ACTV occupies its leased properties
under valid and binding leases conforming to the description thereof.
2.12. INTELLECTUAL PROPERTY. ACTV (or one or more of its
---------------------
subsidiaries) owns or possesses adequate rights to use all of the patents,
patent rights, trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names and copyrights
owned or used by it or which are necessary for the conduct of its business as
presently conducted, except where the failure to own or possess such trade
secrets, service marks, trade names and copyrights would not have a material
adverse effect on the business, properties, operations, condition or income of
ACTV and its subsidiaries, taken as a whole. Neither ACTV nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights, trade
secrets, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
materially adversely affect the business, properties, operations, financial
condition, income or business prospects of ACTV and its subsidiaries, taken as a
whole. ACTV or ACTV Entertainment, Inc. owns the ITP Rights (as defined in the
Sub-License Agreement), and neither ACTV nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to the ITP Rights.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR. The
---------------------------------------------------------
Investor hereby represents, warrants and covenants to ACTV that, as of the date
of this Agreement and as of the Closing:
3.1. AUTHORIZATION. The Investor and any subsidiary which
-------------
executes any Additional Agreement has the corporate power and authority to
execute, deliver and perform this Agreement and the Additional Agreements and to
deliver the Purchase Price upon the Closing
15
<PAGE>
hereof. The execution, delivery and performance of this Agreement and the
Additional Agreements by the Investor and such subsidiary, as appropriate, and
the delivery of the Purchase Price for the Shares and Warrant have been duly
authorized by all necessary corporate action. This Agreement and each of the
Additional Agreements to which the Investor or such subsidiary is a party
constitutes a valid and legally binding obligation of the Investor or such
subsidiary, as the case may be, enforceable against the Investor in accordance
with its terms, except as such may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general and by
general principles of equity.
3.2. PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
---------------------------------
the Investor in reliance upon the Investor's representation to ACTV, which by
the Investor's execution of this Agreement the Investor hereby confirms, that
the Securities will be acquired for the Investor's own account, not as a nominee
or agent, and not with a view to the sale or distribution of any part thereof,
and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same except in compliance with
the registration requirements of the Securities Act of 1933, as amended, (the
"1933 Act"). By executing this Agreement, the Investor further represents that
the Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant a participation to such person or to
any third person with respect to any Securities. The Investor shall not transfer
any Securities unless (i) such transfer is pursuant to an effective registration
statement under the 1933 Act, and the rules and regulations in effect thereunder
or (ii) ACTV shall have been furnished with an opinion of counsel for Investor,
reasonably satisfactory in form and substance to ACTV, that no such registration
is required because of the availability of an exemption from registration under
the 1933 Act.
3.3. DISCLOSURE OF INFORMATION. The Investor believes it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. The Investor further represents that it has
had an opportunity to ask questions and receive answers from ACTV regarding the
terms and conditions of the offering of the Securities. The foregoing, however,
does not limit or modify the representations and warranties of ACTV in Section 2
hereof or the right of the Investor to rely thereon.
3.4. INVESTMENT EXPERIENCE. The Investor acknowledges that it can
---------------------
bear the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities. The Investor also represents it has
not been organized for the purpose of acquiring the Securities.
3.5 ACCREDITED INVESTOR. The Investor is an "accredited investor"
-------------------
within the meaning of SEC Rule 501 of Regulation D promulgated under the 1933
Act.
3.6 RESTRICTED SECURITIES. The Investor understands that the
---------------------
Securities are "restricted securities" under the federal securities laws and
that under such laws and applicable regulations such Securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
In this connection, the Investor represents that it is familiar with SEC Rule
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<PAGE>
144 promulgated under the 1933 Act ("Rule 144"), as presently in effect, and
understands the resale limitations imposed thereby and by the Act. The
certificates representing the Shares and the Warrant Shares shall bear the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, HYPOTHECATION OR OTHER
ASSIGNMENT IS AVAILABLE UNDER SUCH ACT.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT THE CLOSING. The obligations
---------------------------------------------------
of the Investor to ACTV at the Closing are subject to the fulfillment on or
before the Closing of each of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of ACTV contained in Section 2 hereof shall be true on and as of the
Closing.
4.2 PERFORMANCE. ACTV shall have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed, or complied with, by it on or before the Closing.
4.3 DELIVERIES. The Investor shall have received from ACTV at or
----------
prior to Closing:
(a) a copy of the Certificate of Incorporation of ACTV, including
all amendments, certified by the appropriate official of ACTV's state of
incorporation, together with a certificate of good standing issued by the
appropriate official of ACTV's state of incorporation, both issued as of a date
not more than ten days before the date of the Closing;
(b) a copy of the Bylaws of ACTV, including all amendments,
certified by the President, any Vice President or the Secretary of ACTV to be a
true and complete copy as of the Closing;
(c) a copy of resolutions of the Board of Directors of ACTV
approving and authorizing the execution and delivery of this Agreement and the
Warrant, the issuance of the Shares and the Warrant Shares and the reservation
of shares for issuance upon exercise of the Warrant, certified by the President
or any Vice President of ACTV to be a true and complete copy of duly adopted
resolutions;
17
<PAGE>
(d) stock certificates in proper form representing the Shares to
be issued at the Closing and the Warrant to be issued at the Closing, in each
case duly executed by ACTV;
(e) a certificate dated the date of the Closing signed by the
President or any Vice President of ACTV stating that the conditions specified in
this Section 4 are satisfied;
(f) the Sub-License Agreement, duly executed by ACTV and ACTV
Entertainment, Inc., as licensor; and
(g) the LLC Agreement, duly executed by ACTV or a subsidiary of
ACTV.
ACTV will use commercially reasonable efforts to cause all the conditions stated
in this Section to be satisfied at or before the date set for the Closing,
except only such conditions as may have been waived by the Investor. The
conditions stated in this Section are provided solely for the benefit of the
Investor and may be waived only by the Investor. Any waiver will be effective
only if stated expressly in writing by the Investor.
5. CONDITIONS OF ACTV'S OBLIGATIONS AT THE CLOSING. The obligations of
-----------------------------------------------
ACTV to the Investor at the closing are subject to the fulfillment on or before
the Closing of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Investor contained in Section 3 hereof shall be true on and as
of the Closing.
5.2 DELIVERIES. ACTV shall have received from the Investor:
----------
(a) the Purchase Price for the Securities;
(b) the Sub-License Agreement, duly executed by the LLC; and
(c) The LLC Agreement, duly executed by the Investor or a
subsidiary of the Investor.
The Investor will use commercially reasonable efforts to cause all the
conditions stated in this Section to be satisfied at or before the date set for
the Closing, except only such conditions as may have been waived by ACTV. The
conditions stated in this Section are provided solely for the benefit of ACTV
and may be waived only by ACTV. Any waiver will be effective only if stated
expressly in writing by ACTV.
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<PAGE>
6. REGISTRATION RIGHTS.
-------------------
6.1 DEMAND REGISTRATION.
-------------------
(a) The Investor shall have the opportunity on three (3)
occasions to have ACTV register such of (i) the Shares , (ii) the Warrant Stock
(as defined in the Warrant) and (iii) any other Common Stock held by the
Investor (collectively the "Registrable Securities") as are specified in the
demand for registration delivered by the Investor to ACTV (the "Demand"), and
ACTV shall, as soon as practicable, but not later than 30 days after the date of
the Demand, file with the Securities and Exchange Commission (the "Commission")
a registration statement under the 1933 Act covering the registration thereunder
of the Registrable Securities specified in the Demand (the "Registration
Statement"). ACTV is required to exercise commercially reasonable efforts to
cause such Registration Statement to become effective. No securities other than
those specified in the Demand shall be included in such registration.
(b) If so requested by the Investor, the Registration
Statement shall provide for a delayed or continuous offering of Registrable
Securities pursuant to Rule 415 promulgated under the 1993 Act or any similar
rule then in effect. If so requested by the Investor, the public offering or
distribution of Registrable Securities under this Agreement shall be pursuant to
a firm commitment underwriting, the managing underwriter of which shall be a
recognized investment banking firm selected and engaged by the Investor and
approved by ACTV, which approval shall not be unreasonably withheld. ACTV shall
enter into the same underwriting agreement as shall the Investor, containing
representations, warranties and agreements not substantially different from
those customarily made by an issuer in underwriting agreements with respect to
secondary distributions. ACTV, as a condition to fulfilling its obligations
under this Section 6 may require the underwriters to enter into an agreement in
customary form indemnifying ACTV against any Losses (as defined in Section 6.2
hereof) that arise out of or are based upon an untrue statement or an alleged
untrue statement or omission or alleged omission in the Disclosure Documents (as
defined in Section 6.2 hereof) made in reliance upon and in conformity with
written information furnished to ACTV by the underwriters specifically for use
in the preparation thereof.
(c) The Investor may, before such a Registration Statement
becomes effective, withdraw its Registrable Securities from sale, should the
terms of sale not be reasonably satisfactory to such Investor; however, such
registration shall be deemed to have occurred for the purposes of Section 6.1(a)
hereof, unless the Investor pays within 20 days after any such withdrawal, all
of the out-of-pocket expenses of ACTV incurred in connection with such
registration.
(d) If and whenever ACTV is obligated by the provisions of
this Section 6 to effect the registration of any Registrable Securities under
the 1993 Act, ACTV shall:
(i) prepare and file with the Commission any amendments
and supplements to the Registration Statement and to the prospectus used in
connection therewith as
19
<PAGE>
may be necessary to keep the Registration Statement effective and to comply with
the provisions of the 1933 Act and the rules and regulations promulgated
thereunder with respect to the disposition of all Registrable Securities covered
by the Registration Statement for the period required to effect the distribution
of such Securities, but in no event shall ACTV be required to do so for a period
of more than 180 days following the effective date of the Registration
Statement;
(ii) notify the Investor and its underwriter, and
confirm such advice in writing, (A) when a Registration Statement becomes
effective, (B) when any post-effective amendment to a Registration Statement
becomes effective, and (C) of any request by the Commission for any amendment of
or supplement to a Registration Statement or any prospectus relating thereto or
for additional information:
(iii) furnish at ACTV's expense to the Investor such
number of copies of a preliminary, final, supplemental or amended prospectus, in
conformity with the requirements of the 1993 Act and the rules and regulations
promulgated thereunder, as may reasonably be required in order to facilitate the
disposition of the Registrable Securities covered by a Registration Statement,
but only while ACTV is required under the provisions hereof to cause a
Registration Statement to remain effective;
(iv) register or qualify the Registrable Securities
covered by a Registration Statement under such other securities or blue sky laws
of such jurisdictions in the United States as the Investor shall reasonably
request, and do any and all other acts and things which may be necessary to
enable the Investor to consummate the disposition in such jurisdictions of such
Securities; provided, however, that ACTV shall in no event be required to
qualify to do business as a foreign corporation or a dealer in any jurisdiction
where it is not so qualified, to conform the composition of its assets at the
time to the securities or blue sky laws of such jurisdiction, to execute or file
any general consent to service of process under the laws of any jurisdiction, to
take any action that would subject it to service of process in suits other than
those arising out of the offer and sale of the Registrable Securities covered by
the Registration Statement, or to subject itself to taxation in any jurisdiction
where it has not theretofore done so.
(e) ACTV's obligations under this Section 6.1 shall be
conditioned upon the Investor's compliance with the following:
(i) The Investor shall cooperate with ACTV in
connection with the preparation of the Registration Statement, and for so long
as ACTV is obligated to file and keep effective the Registration Statement,
shall provide to ACTV, in writing, for use in the Registration Statement, all
such information regarding the Investor and its plan of distribution of the
Registrable Securities as may be necessary to enable ACTV to prepare the
Registration Statement and prospectus covering the Registrable Securities, to
maintain the currency and effectiveness thereof and otherwise to comply with all
applicable requirements of law in connection therewith.
20
<PAGE>
(ii) During such time as the Investor may be engaged in
a distribution of the Registrable Securities, the Investor will comply with all
applicable provisions of state and federal securities laws, including Regulation
M promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(f) The Investor shall have no right to demand registration
under this Section 6 if all of the Registrable Securities are (i) freely
tradable in a single transaction under Rule 144(k) promulgated under the 1933
Act, as determined by an opinion of counsel reasonably satisfactory to the
Investor, or (ii) are then subject to an effective Registration Statement on
Form S-3 (or other applicable form) which ACTV may file at any time and which
may include securities other than the Registrable Securities.
(g) All expenses incurred in any registration of the
Registrable Securities under this Agreement shall be paid by ACTV, including,
without limitation, printing expenses, fees and disbursements of counsel for
ACTV, expenses of any audits which shall be necessary to comply with
governmental requirements in connection with any such registration, all
registration and filing fees for the Registrable Securities under federal and
state securities laws, and expenses of complying with the securities or blue sky
laws of any jurisdictions; provided, however, ACTV shall not be liable for (i)
any discounts or commissions to any underwriter with respect to the Registrable
Securities; (ii) any stock transfer taxes incurred with respect to Registrable
Securities sold in such offering or (iii) the fees and expenses of counsel for
Investor.
6.2 INDEMNIFICATION. In the event any Registrable Securities are
---------------
included in a Registration Statement under this Section 6:
(a) To the extent permitted by law, ACTV will indemnify and
hold harmless the Investor, any underwriter (as defined in the 1933 Act) for the
Investor and each other person, if any, who controls the Investor or such
underwriter within the meaning of Section 15 of the 1933 Act, against any
losses, claims, damages, or liabilities, joint or several, or actions in respect
thereof ("Losses"), to which such indemnified party may become subject under the
1933 Act, the Exchange Act, any other federal or state law or otherwise, insofar
as such Losses arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus (if used prior to the effective
date of such Registration Statement) or final prospectus contained therein or in
any post-effective amendments or supplements thereto (if used during the period
ACTV is required to keep the Registration Statement effective) (the "Disclosure
Documents"), (ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, or (iii) any violation or alleged violation by ACTV of the 1933
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the 1933 Act, the Exchange Act or any state securities law
committed by ACTV in connection with the performance of its obligations under
Section 6.1; and ACTV will reimburse each such indemnified party for all legal
or other expenses reasonably incurred by such party in connection with
investigating or defending any such claims, including, subject to such
indemnified party's compliance with the provisions of the last sentence of
subsection (c) of this Section 6.2, any
21
<PAGE>
amounts paid in settlement of any litigation, commenced or threatened; provided,
however, that ACTV shall not be liable to an indemnified party in any such case
to the extent that any such Losses arise out of or are based upon (A) an untrue
statement or alleged untrue statement or omission or alleged omission (1) made
in any such Disclosure Documents in reliance upon and in conformity with written
information furnished to ACTV by or on behalf of such indemnified party
specifically for use in the preparation thereof, or (2) made in any preliminary
or summary prospectus if a copy of the final prospectus was not delivered to the
person alleging any loss, claim, damage or liability for which Losses arise at
or prior to the written confirmation of the sale of such Registrable Shares to
such person and the untrue statement or omission concerned had been corrected in
such final prospectus or (3) made in any prospectus used by such indemnified
party if a court of competent jurisdiction finally determines that at the time
of such use such indemnified party had actual knowledge of such untrue statement
or omission; or (B) the use of any prospectus after such time as ACTV has
advised such indemnified party in writing that the filing of a post-effective
amendment or supplement thereto is required, except the prospectus as so amended
or supplemented, or the use of any prospectus after such time as the obligation
of ACTV to keep the same current and effective has expired.
(b) To the extent permitted by law, the Investor will
indemnify and hold harmless ACTV, each of its directors, each of its officers
who has signed the Registration Statement, and each person, if any, who controls
ACTV within the meaning of Section 15 of the 1933 Act, against any Losses, joint
or several, to which any of the foregoing persons may become subject, under the
1933 Act, the Exchange Act or other federal or state law, insofar as such Losses
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any of the Disclosure Documents or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements made therein not misleading, if the statement or omission was in
reliance upon and in conformity with written information furnished to ACTV by
such indemnifying party (defined below) specifically for use in the preparation
thereof; (ii) the use by such indemnifying party of any prospectus after such
time as ACTV has advised such indemnifying party in writing that the filing of a
post-effective amendment or supplement thereto is required, except the
prospectus as so amended or supplemented, or after such time as the obligation
of ACTV to keep the Registration Statement effective and current has expired, or
(iii) any violation by such indemnifying party of its obligations under Section
6.1(e) hereof; and will reimburse each such indemnified party for all legal or
other expenses reasonably incurred by such party in connection with
investigating or defending any such claim, including, subject to such
indemnified party's compliance with the provisions of the last sentence of
subsection (c) of this Section 6.2, any amounts paid in settlement of any
litigation, commenced or threatened.
(c) Promptly after the receipt by any party hereto of notice
of any claim, action, suit or proceeding by any person who is not a party to
this Agreement (collectively, an "Action") which is subject to indemnification
hereunder, such party (the "Indemnified Party") shall give reasonable written
notice to the party from whom indemnification is claimed (the "Indemnifying
Party"). The Indemnified Party shall be entitled, at the sole expense and
liability of the Indemnifying Party, to exercise full control of the defense,
compromise or settlement of any
22
<PAGE>
such Action unless the Indemnifying Party, within a reasonable time after the
giving of such notice by the Indemnified Party, shall: (i) admit in writing to
the Indemnified Party, the Indemnifying Party's liability to the Indemnified
Party for such Action under the terms of this Section 6.2, (ii) notify the
Indemnified Party in writing of the Indemnifying Party's intention to assume the
defense thereof, and (iii) retain legal counsel reasonably satisfactory to the
Indemnified Party to conduct the defense of such Action. The Indemnified Party
and the Indemnifying Party shall cooperate with the party assuming the defense,
compromise or settlement of any such Action in accordance herewith in any manner
that such party reasonably may request. If the Indemnifying Party so assumes the
defense of any such Action, the Indemnified Party shall have the right to employ
separate counsel and to participate in (but not control) the defense, compromise
or settlement thereof, but the fees and expenses of such counsel shall be the
expense of the Indemnified Party unless (i) the Indemnifying Party has agreed to
pay such fees and expense, (ii) any relief other than the payment of money
damages is sought against the Indemnified Party or (iii) the Indemnified Party
shall have been advised by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case the fees and expenses
of such separate counsel shall be borne by the Indemnifying Party. No
Indemnifying Party shall settle or compromise any such Action in which any
relief other than the payment of money damages is sought against any Indemnified
Party unless the Indemnified Party consents in writing to such compromise or
settlement. No Indemnified Party shall settle or compromise any such Action for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, unless the Indemnifying Party shall have
failed, after reasonable notice thereof, to undertake control of such Action in
the manner provided above in this Section 6.2(c).
(d) If the indemnification provided for in subsections (a) or
(b) of this Section 6.2 is unavailable to or insufficient to hold the
indemnified party harmless under subsections (a) or (b) above in respect of any
Losses referred to therein for any reason other than as specified therein, then
the indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and such indemnified party on the other in connection with the statements
or omissions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by (or omitted to be supplied by) ACTV or the
Investor (or underwriter) and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by an indemnified party as a result of the Losses
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1993
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
23
<PAGE>
(e) The obligations of ACTV and the Investor under this
Section 6.2 shall survive the completion of any offering of the Registrable
Securities in a Registration Statement under this Section 6, and otherwise.
7. NOMINATION AND ELECTION OF DIRECTOR. So long as the Investor owns, in
-----------------------------------
its own name or in the name of one or more subsidiaries, at least 10% of the
outstanding shares of Common Stock of ACTV, and thereafter so long as the
Investor owns, in its own name or in the name of one or more subsidiaries, at
least 5% of the outstanding shares of Common Stock of ACTV and the shares of
Common Stock so owned number at least 2,500,000, the Investor shall have the
right upon request to have its designee nominated to the Board of Directors of
ACTV. ACTV shall take use reasonable efforts to cause the Investor's designee
to be nominated and elected to the Board of Directors, including, but not
limited to, expansion of the number of directors on the Board.
8. MISCELLANEOUS.
--------------
8.1 SURVIVAL OF WARRANTIES. The warranties and representations of
----------------------
ACTV and the Investor contained in or made pursuant to this Agreement shall
survive the Closing until the second anniversary of the date of the Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investor or ACTV. The period of survival of the
representations and warranties prescribed by this Section 8.1 are referred to as
the "Survival Period." The liabilities of the parties under their respective
representations and warranties will expire as of the expiration of the Survival
Period; provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been asserted
by ACTV or the Investor, as the case may be, in a written notice before such
expiration indicating that facts or conditions exist that, with the passage of
time or otherwise, can reasonably be expected to result in a breach (and
describing such potential breach in reasonable detail).
8.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement, other than rights conferred upon indemnified persons under
Section 6.
8.3 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
under the internal laws of the State of New York.
8.4 COUNTERPARTS. This Agreement shall become binding when any one
------------
or more counterparts hereof, individually or taken together, shall bear the
signatures of the parties. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, but all of which together shall constitute one
and the same instrument.
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8.5 TITLES AND SUBTITLES. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 NOTICES. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be in writing and shall be made by personal
delivery to the party to be notified, by reputable overnight courier, with
acknowledgment of receipt, upon facsimile to the number indicated on the
signature page hereof or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days, advance
written notice to the other parties. Any such notice shall be effective upon
the sending of such notice except that any notice given by facsimile
transmission shall be deemed effective upon receipt.
8.7 FINDERS' FEE. Each party agrees to indemnify and to hold
------------
harmless the other party from any liability for any commission or compensation
in the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the indemnifying party or any of
its officers, partners, employees, or representatives is responsible.
8.8 EXPENSES. Each party shall pay all costs and expenses that it
--------
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
8.9 PUBLICITY. The parties shall cooperate in determining the
---------
format, date and time of day of the announcement of the execution and terms of
this Agreement, giving consideration to the requirements of all applicable laws
and regulations. Each party may disclose the existence of this Agreement and
its subject matter in order to comply, in the opinion of such party's counsel,
with applicable securities laws.
8.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively
but only if so expressly stated), only with the written consent of ACTV and the
Investor. Any amendment or waiver effected in accordance with this Section 8.10
shall be binding upon each party and its permitted assigns.
8.11 SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
25
<PAGE>
[Signatures on following page]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ACTV, INC.
By: /s/ William C. Samuels
-----------------------------------------
William C. Samuels
President and Chief Executive Officer
1270 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 459-9548
LIBERTY MEDIA CORPORATION
By: /s/ David Jensen
-----------------------------------------
David Jensen
Vice President
8101 E. Prentice Avenue, Suite 500
Englewood, Colorado 80111
26
<PAGE>
EXHIBIT 7(B)
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
No. of Stock Units: 2,500,000 Warrant No. LMC-1
Grant Date: September 21, 1998
WARRANT
To Purchase Common Stock of
ACTV, INC.
THIS IS TO CERTIFY THAT
For value received, ACTV, Inc., a Delaware corporation (the
"Company"), grants to Liberty Media Corporation ("Liberty") the right to
purchase, prior to the Expiration Date (as defined below) 2,500,000 Stock Units
(as defined below), in whole or in part, at a purchase price of $2.00 per Stock
Unit. The price per Stock Unit and the number of Stock Units that may be
purchased are subject to adjustment under the terms and conditions of this
Warrant.
ARTICLE 1. DEFINITIONS
-----------
As used in this Warrant, unless the context otherwise requires, the
following terms have the respective means set forth below:
"Business Day" shall mean any day that is not Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the authorized common stock, $.10 par value
per share, of the Company as constituted on the Closing Date, and any capital
stock into which such common stock may thereafter be changed, and shall also
include (i) capital stock of the Company of any other class (regardless of how
described or denominated) issued to the holders of shares of
27
<PAGE>
common stock upon any reclassification thereof which is also not preferred as to
dividends or assets over any other class of stock of the Company and which is
not subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.2) received by or distributed to
the holders of common stock of the Company in the circumstances contemplated by
Section 4.2.
"Company" shall mean ACTV, Inc., a Delaware corporation.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable for
shares of Common Stock, with or without payment of additional consideration in
cash or property, either immediately or upon the occurrence of a specified date
or a specified event.
"Current Market Price" per share of Common Stock on any date herein
specified shall be deemed to be the Appraised Value per share of Common Stock as
at such date or, if there shall then be a public market for the Common Stock,
the average of the daily market prices for 20 consecutive Business Days
commencing 25 Business Days before such date. The daily market price of each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange on which such Common Stock is then listed or admitted to trading
(including the NASDAQ Small Cap Market System if such Common Stock is admitted
to trading thereon), (ii) if no sale takes place on such date on any such
exchange, the average of the reported closing bid and asked prices on such day
as officially noted on any such exchange, or (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the average of the
reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the National Quotation Bureau, Inc., or if such
corporation is not at that time engaged in the business of reporting such
prices, as furnished by any similar firm then engaged in such business and
selected by the Company; provided, however, that if during such 20-day period
-------- -------
there occurs a stock dividend, stock split or other transaction affecting the
daily market price, then the Current Market Price shall be appropriately
adjusted. "Appraised Value" per share of Common Stock on any date herein
specified shall be the fair salable value of such Common Stock, computed as the
total value of the Company divided by the number of shares of Common Stock
outstanding as of the last day of the first fiscal month to end within 60 days
prior to such date, as determined, in good faith and in the exercise of
reasonable business judgment, by the Board of Directors of the Company.
"Excepted Securities" shall mean (i) all shares of Common Stock issued
or issuable pursuant to the stock options, warrants and other securities
convertible or exchangeable into Common Stock which are
28
<PAGE>
outstanding on the date hereof and set forth on Exhibit A (which disclosure on
Exhibit A shall identify each such option, warrant and other security and the
issuer and holder, number thereof, the exercise, conversion or exchange rights
relating thereto, and the number of shares of Common Stock issuable thereunder
as of the date hereof); provided, however, that any amendment after the date of
-------- -------
this Warrant of the terms of such outstanding options, warrants or other
securities that decreases the price per share of Common Stock to be received by
the Company upon exercise, conversion or exchange thereof shall constitute the
issuance or sale of a new Convertible Security for purposes of this Warrant; and
(ii) any Common Stock issued pursuant to this Warrant and the Warrant
Agreement.
"Exercise Price" shall mean the price per share at which the Stock
Units may be purchased pursuant to this Warrant.
"Existing Percentage Securities" shall mean those options and other
securities set forth on Exhibit A which are exercisable, convertible or
exchangeable into a percentage, rather than a number of shares, of Common Stock
and which are so noted on Exhibit A by appropriate footnote or otherwise.
"Expiration Date" shall mean 5:00 p.m. Denver, Colorado time on
September 22, 2008.
"fair market value" shall mean, as to any securities or other
property, the price at which a willing seller would sell and a willing buyer
would buy such property having full knowledge of the factors, in an arm's-length
transaction without time constraints, and without being under any compulsion to
buy or sell.
"Holder" shall mean the Person in whose name the Warrant set forth
herein is registered on the books of the Company maintained for such purpose.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
29
<PAGE>
"Restricted Common Stock" shall mean shares of Common Stock that are
or, that upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 6.2. The
Holder of this Warrant shall be deemed to be the holder of the Restricted Common
Stock consisting of Common Stock issuable upon the exercise in full or in part
of any such Warrant.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Stock Unit" shall mean one share of Common Stock as such stock was
constituted on the Closing Date, and thereafter shall mean such number of shares
(including any fractional share) of Common Stock as shall result from the
adjustments specified in Article 4.
"Subsidiary" shall mean (i) any corporation more than 50% of the
voting stock of which is owned by the Company (directly or indirectly through
one or more Subsidiaries) and (ii) any partnership, joint venture or other
entity (other than a corporation) more than 50% of the profits interests in
which is at the time owned by the Company directly or indirectly through one or
more Subsidiaries.
"Transfer," as used in Article 6, shall include any sale, transfer or
other disposition (whether gratuitous or upon giving of any consideration) of
any Warrant or Warrant Stock or of any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section 6.3.
"Warrant" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of Stock Units for which they may be exercised.
"Warrant Stock" shall mean the shares of Common Stock or other
securities issued or subject to issuance upon exercise of this Warrant.
ARTICLE 2. EXERCISE OF WARRANT
-------------------
2.1 Time and Manner of Exercise. This Warrant may be exercised by Holder
---------------------------
on any Business Day at any time or from time to time for all or any part,
including a fractional part, of the number of Stock Units purchasable at
30
<PAGE>
such exercise time; provided, however, that this Warrant shall be void and all
-----------------
rights represented hereby shall cease unless exercised on or before the
Expiration Date. In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of Stock Units to
be purchased, (ii) a bank wire transfer of good funds or a bank cashier's check
payable to the order of the Company in an amount equal to the aggregate purchase
price for all Stock Units as to which this Warrant is exercised and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription form
attached as Exhibit B to this Warrant, duly executed by Holder or Holder's agent
or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within 5 Business Days thereafter, execute or
cause to be executed and delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, as hereinafter provided. Unless otherwise requested by Holder in
the notice, the stock certificate or certificates so delivered shall be
registered in the name of Holder or, subject to Article 6, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of the Warrant Stock for which
exercise is made for all purposes, as of the date the notice, the bank wire
transfer or cashier's check and this Warrant are received by the Company as
described above and all taxes required to be paid by Holder pursuant to Section
2.3 prior to the issuance of such shares have been paid. If this Warrant shall
have been exercised in part or if the Holder desires to transfer a portion of
the Warrant in accordance with the provisions of this Warrant, the Company
shall, at the time of delivery of the certificate or certificates, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the Stock Units
as to which this Warrant has not been exercised under the terms of this Warrant,
and, in the case of transfer, a certificate evidencing the rights of the
transferee to purchase the transferred Stock Units, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder.
2.2 Validity. All shares of Common Stock issuable upon the exercise of
--------
this Warrant shall be validly issued, fully paid and nonassessable. From and
after the date of this Warrant, the Company shall at all times reserve and keep
available for issue upon an exercise of Warrants such number of its authorized
but unissued shares of Common Stock as will be sufficient to permit the exercise
in full of all outstanding Warrants.
31
<PAGE>
2.3 Taxes. The Company shall pay all expenses in connection with, and all
-----
taxes and other governmental charges that may be imposed with respect to, the
issue or delivery of this Warrant or the issuance of any Warrant Shares upon the
exercise of this Warrant, unless such tax or charge is imposed by law upon
Holder, in which case such taxes or charges shall be paid by Holder. The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with the issuance of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of Holder,
and in such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the reasonable satisfaction of the Company that no such tax or
other charge is due.
2.4 No Fractional Warrants or Fractional Shares of Warrant Stock. No
------------------------------------------------------------
fractional shares of Common Stock shall be issued upon the exercise of this
Warrant. The Company shall pay to the Holder an amount of cash equal to such
fraction multiplied by the Current Market Price of a share of Common Stock, in
lieu of issuance of any such fractional share of Common Stock.
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION
----------------------------------
3.1 Transfer. Subject to Article 6, any transfer of this Warrant and all
--------
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant to the
Company together with a written assignment of this Warrant substantially in the
form of Exhibit C hereto duly executed by Holder or Holder's agent or attorney
and funds sufficient to pay any stock transfer taxes payable upon the making of
such transfer. Upon such surrender and, if required, such payment, the Company
shall, subject to Article 6, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with
Article 6, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to Article 6, this Warrant may be
------------------------
divided or combined with other Warrants upon presentation hereof to the Company,
together with a written notice specifying the names and
32
<PAGE>
denominations in which new Warrants are to be issued, signed by Holder or
Holder's agent or attorney. Subject to compliance with Section 3.1 and with
Article 6, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
--------
expense (other than stock transfer taxes) the new Warrant or Warrants under this
Article 3.
3.4 Maintenance of Books. The Company agrees to maintain, at its
--------------------
aforesaid office or agency, books for the registration of transfers of the
Warrants.
ARTICLE 4. ADJUSTMENTS
-----------
The number of shares of Common Stock comprising a Stock Unit, and the price
at which a Stock Unit may be purchased upon exercise of this Warrant, shall be
subject to adjustment from time to time as set forth in this Article 4.
4.1 Stock Dividends, Subdivisions and Combinations. If at any time the
----------------------------------------------
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then the number of shares of Common Stock
comprising a Stock Unit immediately after the happening of any such event shall
be adjusted to consist of the number of shares of Common Stock which a record
holder of the number of shares of Common Stock comprising a Stock Unit
immediately prior to the happening of such event would own or be entitled to
receive after the happening of such event.
4.2 Reorganization, Reclassification, Dividends or Distributions, Merger,
---------------------------------------------------------------------
Consolidation or Disposition of Assets. If the Company shall
- --------------------------------------
33
<PAGE>
reorganize its capital or reclassify its capital stock (except as set forth in
Section 4.1), pay any dividend or make any distribution to holders of Common
Stock (whether of cash, stock of any class, evidence of indebtedness, or other
securities, rights or property) (except as set forth in Section 4.1(a)),
consolidate with or merge with or into another corporation (whether or not the
Company is the surviving corporation), or sell, transfer or otherwise dispose of
all or substantially all its property, assets, or business and, pursuant to the
terms of such reorganization, reclassification, dividend or distribution,
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock, evidence of
indebtedness, or other securities, rights or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation or payable on
account of Common Stock of the Company ("Other Property"), are to be received
by or distributed to the holders of Common Stock of the Company, then the Holder
shall have the right thereafter to receive, upon exercise of this Warrant, the
number of shares of common stock of the successor or acquiring corporation or
Other Property receivable upon or as a result of reorganization,
reclassification, dividend or distribution, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock comprising a Stock
Unit immediately prior to such event. The Company shall not effect any such
reorganization, reclassification, dividend or distribution, merger,
consolidation or disposition of assets where the Company is not the surviving
corporation, unless prior to or simultaneously with the consummation thereof,
the successor or acquiring corporation or entity, or the corporation or entity
to which such assets are transferred, shall expressly assume, by written
agreement duly executed and delivered to Holder, the obligation to deliver the
Other Property in accordance with the foregoing provisions. For purposes of
this Section 4.2, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The provisions of this
Section 4.2 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.3 Adjustment of Price and Number of Warrant Shares. The number of
------------------------------------------------
shares of Common Stock comprising a Stock Unit shall be subject to adjustment
from time to time as hereinafter provided. Whenever the number of
34
<PAGE>
shares of Warrant Stock purchasable upon the exercise of this Warrant is
adjusted pursuant to Section 4.4 through 4.9, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Warrant Stock purchasable upon the exercise of this Warrant immediately prior
to such adjustment, and the denominator of which shall be the number of shares
of Warrant Stock purchasable immediately thereafter.
4.4 Adjustment of Number of Stock Units upon Issuance of Common Stock. If
----------------------------------------------------------- -----
and whenever after the date hereof, the Company shall issue or sell any shares
of Common Stock for a consideration per share less than the Current Market Price
at the time of such issue or sale (except for issuances of Excepted Securities)
then, forthwith upon the date of such issue or sale (the "Record Date"), the
number of shares of Common Stock comprising a Stock Unit shall be adjusted in
accordance with the following formula:
O + A x M
-------
P
W/2/ = W/1/ x
------------------------
O + A
where:
W/2/ = the adjusted number of shares of Common Stock comprising a Stock
Unit.
W/1/ = the current number of shares of Common Stock comprising a Stock
Unit.
O = the number of shares of Common Stock Outstanding on the Record
Date.
A = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares of Common
Stock offered.
M = the Current Market Price per share of Common Stock on the Record
Date.
"Outstanding" as used in this Section 4.4 shall mean, at any date as of
which the number of shares thereof is to be determined, (i) all issued shares of
Common Stock, except shares then owned or held by or for the account of the
Company, (ii) all shares issuable in respect of outstanding scrip or any
35
<PAGE>
certificates representing fractional interests in shares of Common Stock; (iii)
all Excepted Securities; (iv) all shares of Common Stock then issuable upon the
exercise of any rights granted by the Company (whether directly or by assumption
in a merger or otherwise) to subscribe for or to purchase, or any options for
the purchase of, Common Stock or Convertible Securities or upon conversion or
exchange of any Convertible Securities issued or sold by the Company, whether or
not the rights to exchange or convert thereunder are immediately exercisable (as
of the date of granting of such rights or options or the date of such issue or
sale of such Convertible Securities); provided, however, that all shares of
-------- -------
Common Stock issuable upon exercise, conversion or exchange of any Existing
Percentage Securities or of any other options or securities which are then
exercisable, convertible or exchangeable into a percentage, rather than a number
of shares, of Common Stock (the Existing Percentage Securities and such other
options and securities are referred to collectively as the "Percentage
Securities") shall be deemed Outstanding for purposes of making the adjustment
required by this Section 4.4, but any additional shares of Common Stock (the
"Additional Percentage Securities Shares") thereafter issuable in respect of the
Percentage Securities due solely to the increase pursuant to this Section 4.4 in
the number of shares of Common Stock comprising a Stock Unit shall not
constitute the issuance or sale of shares of Common Stock for purposes of making
further increases in the number of shares of Common Stock comprising a Stock
Unit that would otherwise be required by this Section 4.4 as a result of the
Additional Percentage Securities Shares.
4.5 Issuance of Rights or Options. In case at any time the Company shall
-----------------------------
grant (whether directly or by assumption in a merger or otherwise) any rights
(other than the Excepted Securities) to subscribe for or to purchase, or any
options for the purchase of, Common Stock or Convertible Securities whether or
not such rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such rights or options or
upon conversion or exchange of such Convertible Securities (determined as
provided below) shall be less than the Current Market Price determined as of the
date of granting such rights or options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall (as of the
date of granting of such rights or options) be deemed to be outstanding and to
have been issued for such price per share. Except as provided in Section 4.7, no
further adjustments of the number of shares of Common Stock comprising a Stock
Unit shall be made upon the
36
<PAGE>
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities. For the purposes of
this Section 4.5, the price per share for which Common Stock is issuable upon
the exercise of any such rights or options or upon conversion or exchange of any
such Convertible Securities shall be determined by dividing (x) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of all such
rights or options, plus, in the case of such rights or options which relate to
Convertible Securities, the minimum aggregate amount or additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options.
4.6 Issuance of Convertible Securities. In case the Company shall issue
----------------------------------
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon conversion or exchange of such Convertible Securities
(determined as provided below) shall be less than the Current Market Price,
determined as of the date of such issue or sale of such Convertible Securities,
then the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall (as of the date of the
issue or sale of such Convertible Securities) be deemed to be outstanding and to
have been issued for such price per share, provided that (i) except as provided
in Section 4.7, no further adjustments of the number of shares of Common Stock
comprising a Stock Unit shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (ii) if such
issue or sale of such Convertible Securities is made upon exercise of any rights
to subscribe for or to purchase or any option to purchase any such Convertible
Securities for which adjustments have been or are to be made pursuant to other
provisions of this Article 4, no further adjustment of the number of shares of
Common Stock comprising a Stock Unit shall be made by reason of such issue or
sale. For the purposes of this Section 4.6, the price per share for which Common
Stock is issuable upon conversion or exchange of Convertible Securities shall be
determined by dividing (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
37
<PAGE>
payable to the Company upon the conversion or exchange thereof, by (y), the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities.
4.7 Change in Option Price or Conversion Rate. If the purchase price
-----------------------------------------
provided for in any rights or options referred to in Section 4.5, or the
additional consideration, if any, payable upon the conversion or exchange of
Convertible Securities referred to in Sections 4.5 and 4.6, or the rate at which
any Convertible Securities referred to in Sections 4.5 and 4.6 are convertible
into or exchangeable for Common Stock, shall change (other than under or by
reason of provisions designed to protect against dilution), then the number of
shares of Common Stock comprising a Stock Unit at the time of such event shall
forthwith be readjusted to the number of shares of Common Stock which would have
comprised a Stock Unit at such time had such rights, options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold; and on the expiration of any such option or
right or the termination of any such right to convert or exchange such
Convertible Securities, the number of shares of Common Stock comprising a Stock
Unit shall forthwith be decreased to the number of shares of Common Stock which
would have comprised a Stock Unit at the time of such expiration or termination
had such right, option or Convertible Security, to the extent outstanding
immediately prior to such expiration or termination, never been issued, and the
Common Stock issuable thereunder shall no longer be deemed to be outstanding.
If the purchase price provided for in any such right or option referred to in
Section 4.5 or the rate at which any Convertible Securities referred to in
Sections 4.5 or 4.6 are convertible into or exchangeable for Common Stock shall
decrease at any time under or by reason of provisions with respect thereto
designed to protect against dilution, then in case of the delivery of Common
Stock upon the exercise of any such right or option or upon conversion or
exchange of any such Convertible Security, the number of shares of Common Stock
then comprising a Stock Unit then shall forthwith be adjusted to such respective
amount as would have comprised a Stock Unit had such right, option or
Convertible Security never been issued as to such Common Stock and had
adjustments been made upon the issuance of the shares of Common Stock delivered
as aforesaid, but only if as a result of such adjustment the number of shares of
Common Stock comprising a Stock Unit is thereby increased.
4.8 Consideration for Stock. In case any shares of Common Stock or
-----------------------
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
38
<PAGE>
consideration received therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair market value of such consideration as determined,
in good faith and in the exercise of reasonable business judgment, by the Board
of Directors of the Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase such shares of Common Stock or
Convertible Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation (other than any
consolidation or merger in which the previously outstanding shares of Common
Stock of the Company shall be changed into or exchanged for the stock or other
securities of another corporation), the amount of consideration therefor shall
be deemed to be the fair market value as determined, in good faith and in the
exercise of reasonable business judgment, by the Board of Directors of the
Company of such portion of the assets and business of the non-surviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or options, as the case may be. In
the event of any consolidation or merger of the Company in which the Company is
not the surviving corporation or in which the previously outstanding shares of
Common Stock of the Company shall be changed into or exchanged for the stock or
other securities of another corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other securities of
any corporation, the Company shall be deemed to have issued a number of shares
of its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or other
property of the other corporation, and if any such calculation results in
adjustment of the number of shares of Common Stock comprising a Stock Unit, the
determination of the adjusted Exercise Price, for purposes of Section 4.3 shall
be made after giving effect to such adjustment.
4.9 Certain Events. If any event occurs as to which in the reasonable
--------------
opinion of the Company, in good faith, the other provisions of this Article 4
are not strictly applicable but the lack of any adjustment would not in the
opinion
39
<PAGE>
of the Company fairly protect the purchase rights of the Holder of this
Warrant in accordance with the basic intent and principles of such provisions,
or if strictly applicable would not fairly protect the purchase rights of the
Holder of this Warrant in accordance with the basic intent and principles of
such provisions, then the Company, by action of its Board of Directors, shall
make an adjustment, on a basis consistent with the basic intent and principles
established in the other provisions of this Article 4, as may be necessary to
preserve, without dilution, the exercise rights of the registered Holder of this
Warrant.
4.10 Minimum Adjustment of Exercise Price. Regardless of anything to the
------------------------------------
contrary in this Article 4, no adjustment of any Exercise Price, however, shall
be made in an amount less than $.0l per share, but any such lesser adjustment
shall be carried forward and shall be made at the time of, and together with,
the next subsequent adjustment which together with any adjustments so carried
forward shall amount to $.0l per share or more.
4.11 No Reduction of Exercise Price Below Par Value Per Share.
--------------------------------------------------------
Notwithstanding anything herein to the contrary, the Holder agrees that upon any
actual exercise of this Warrant, the Holder shall pay an exercise price per
share of Common Stock purchased at least equal to the par value per share of
Common Stock in effect as of the date of exercise.
4.12 Limitation on Current Market Price Adjustments. Notwithstanding
----------------------------------------------
anything herein to the contrary, no adjustment of the Exercise Price shall be
made pursuant to Section 4.4, Section 4.5 or Section 4.6 if, on the date of an
event that otherwise would require an adjustment to the Exercise Price pursuant
to any of those Sections, the Current Market Price is higher than $10.00 (as it
may be adjusted pursuant to this Section 4.12, the ACeiling Market Price@).
The Ceiling Market Price shall be adjusted from time to time as may be
appropriate to reflect (a) any stock dividend or any subdivision or combination
affecting the Common Stock that requires an adjustment in the number of shares
comprising a Stock Unit pursuant to Section 4.1 or (b) any reorganization,
reclassification, dividend, distribution, merger, consolidation or disposition
of assets described in Section 4.2.
ARTICLE 5 NOTICES TO WARRANT HOLDERS
--------------------------
5.1 Notice of Adjustments. Whenever the numbers of shares of Common Stock
---------------------
comprising a Stock Unit, or the price at which a Stock Unit may be purchased
upon exercise of the Warrants, shall be adjusted or the composition of a Stock
Unit is changed pursuant to Article 4, the Company shall prepare a certificate
to be executed by the chief financial officer of the
40
<PAGE>
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated, specifying the number of
shares of Common Stock comprising a Stock Unit and (if such adjustment was made
pursuant to Section 4.2, describing the number and kind of any other shares of
stock or Other Property comprising a Stock Unit) any change in the purchase
price or prices thereof, after giving effect to such adjustment or change. The
Company shall as promptly as practicable, but in any case within 7 Business Days
of the event requiring the adjustment, cause a signed copy of such certificate
to be delivered to each Holder. The Company shall keep at its principal office
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder.
5.2 Advance Notice of Certain Corporate Action. In case the Company shall
------------------------------------------
propose (a) to pay any dividend (whether payable in cash, in stock of any class,
evidence of indebtedness, or other securities, rights or property) to the
holders of its Common Stock or to make any other distribution of cash, evidence
of indebtedness, securities, rights or property to the holders of its Common
Stock, (b) to effect any capital reorganization, (c) to effect any
consolidation, merger, sale, transfer or other disposition of all or
substantially all its or any material Subsidiary's property, assets or business,
(d) to effect the liquidation, dissolution or winding up of the Company, (e) to
effect any issuance of, or to register under the Securities Act, shares of
Common Stock or securities exercisable for or convertible into shares of Common
Stock, which shares represent more than 2% of the shares of Common Stock
outstanding as of the date the Company proposes to take such action, or (f) to
effect any event not specified above requiring an adjustment pursuant to Article
4, which adjustment would cause the Exercise Price to be changed by an amount
exceeding 2% of the Exercise Price in effect immediately prior to such event,
then, in each such case, the Company shall give to each Holder a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such dividend or distribution, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution or winding up is to take place and the
date of participation therein by the holders of Common Stock, if any such date
is to be fixed, and shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action on the
Common Stock and any Other Property or any property that will comprise a Stock
Unit, after giving effect to any adjustment which will be required as a result
of such action. The Company shall promptly amend such notice upon the occurrence
of any change to the information specified therein or to disclose any additional
41
<PAGE>
material information as it arises. Any notice required to be given
pursuant to this Section 5.2 shall be given in the case of any action for which
a record date is to be fixed at least 20 days prior to the record date for
determining holders of the Common Stock for purposes of such action and, in the
case of any other such action, at least 20 days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
Common Stock, whichever shall be the earlier.
ARTICLE 6. RESTRICTIONS ON TRANSFERABILITY
-------------------------------
6.1 Restricted Transferability. The Warrants and the Warrant Stock shall
--------------------------
not be transferred, hypothecated or assigned except after satisfaction of the
conditions specified in this Article 6, which conditions are intended to insure
compliance with the provisions of the Securities Act with respect to the
Transfer of any Warrant or any Warrant Stock. Holder, by acceptance of this
Warrant, agrees to be bound by the provisions of this Article 6 and to indemnify
and hold harmless the Company against loss resulting from the Transfer of the
Warrant Stock in violation of the restrictions on transferability set forth in
this Article 6.
6.2 Restrictive Legend. Except as otherwise provided in this Article 6,
------------------
each certificate for Warrant Stock initially issued upon the exercise of this
Warrant, and each certificate for Warrant 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, and are subject to the conditions
specified in a certain warrant, dated as of September 21, 1998 originally
issued by ACTV, Inc. (the "Company") to Liberty Media Corporation. No
transfer of the shares represented by this certificate shall be valid or
effective until such conditions have been fulfilled. A copy of the form of
said warrant is on file with the Secretary of the Company. The holder of
this certificate, by acceptance of this certificate, agrees to be bound by
the provisions of said warrant."
Except as otherwise provided in this Article 6, each Warrant shall be stamped or
otherwise imprinted with a legend in substantially the following form:
42
<PAGE>
"This Warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended, and may not be
transferred in violation of such Act, the rules and regulations thereunder
or the provisions of this Warrant."
6.3 Notice of Proposed Transfers. Prior to any Transfer or attempted
----------------------------
Transfer of any Warrants or any shares of Restricted Common Stock, the holder of
such Warrants or Restricted Common Stock shall give 10 days' prior written
notice (a "Transfer Notice") to the Company of such holder's intention to effect
such Transfer, describing the manner and circumstances of the proposed Transfer,
and obtain from counsel to such holder, who shall be reasonably satisfactory to
the Company, and deliver to the Company an opinion whether registration of the
Warrants or Restricted Common Stock is required under the Securities Act in
connection with such Transfer. After receipt of the Transfer Notice and opinion
by the Company:
(a) if in the opinion of such counsel (which opinion shall be
reasonably satisfactory to the Company and its counsel) the proposed Transfer of
such Warrants or such Restricted Common Stock may be effected without
registration under the Securities Act of such Warrant or such Restricted Common
Stock (and in the case of a Transfer of such Warrants, without registration of
the underlying shares of Common Stock), the Company shall, as promptly as
practicable, but in any event within 3 Business Days of receipt of the Transfer
Notice and such opinion, so notify the holder of such Warrant or such Restricted
Common Stock and such holder shall thereupon be entitled to Transfer such
Warrant or such Restricted Common Stock, in accordance with the terms of the
Transfer Notice. Each certificate, if any, evidencing such shares of Restricted
Common Stock issued upon such Transfer shall bear the appropriate restrictive
legend set forth in Section 6.2, and each Warrant issued upon such Transfer
shall bear the appropriate restrictive legend set forth in Section 6.2, unless
in the opinion of such counsel (which opinion shall be reasonably satisfactory
to the Company and its counsel) such legend is not required in order to ensure
compliance with the Securities Act.
(b) If in the opinion of such counsel the proposed Transfer of such
Warrant or such Restricted Common Stock may not be effected without registration
under the Securities Act of such Warrant (and in the case of a Transfer of such
Warrants, registration of the underlying shares of Common Stock) or such
Restricted Common Stock, the holder giving the Transfer Notice shall not so
transfer such Warrant or such Restricted Common Stock unless a registration of
the Transfer of such Warrant or such Restricted Common Stock
43
<PAGE>
or of the underlying shares of Common Stock, as the case may be, under the
Securities Act has become effective.
The holder of the Warrant or the Restricted Common Stock, as the case may be,
giving the Transfer Notice shall not be entitled to Transfer such Warrant or
such Restricted Common Stock until receipt of the opinion from the Company under
Section 6.3(a) or until registration of such securities under the Securities Act
has become effective.
6.4 Termination of Restrictions. Notwithstanding the foregoing provisions
---------------------------
of this Article 6, the restrictions imposed by this Article 6 upon the
transferability of the Warrants (except the restriction imposed by Section 6.5),
the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon
the exercise of the Warrants) shall cease and terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) when such security shall have been
effectively registered under the Securities Act and sold by the holder thereof
in accordance with such registration or when the Company shall have received an
opinion of counsel reasonably satisfactory to the Company and its counsel that
such legend is not required in order to insure compliance with the Securities
Act. Whenever the restrictions imposed by this Article 6 shall terminate as to
this Warrant, as hereinabove provided, the holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant bearing
the following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
ARTICLE 6 HEREOF TERMINATED ON ______________ __, 19__ AND ARE OF NO
FURTHER FORCE AND EFFECT"
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Article 6 shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 6.2.
6.5 Additional Restriction on Transfer of Warrants. Notwithstanding any
----------------------------------------------
other provision hereof, until September 21, 2000, Liberty and its affiliates
(within the meaning of Rule 405 under the Securities Act) shall retain
beneficial ownership of a Warrant or Warrants
44
<PAGE>
representing the right to purchase, in the aggregate, at least 500,000 Stock
Units (as that number of Stock Units may be adjusted in accordance with the
provisions of Article 4). Without the prior written consent of the Company
(which consent may be withheld in the sole discretion of the Company), Holder
shall not Transfer any Warrant (or any portion thereof) if such Transfer would
cause the requirement set forth in the preceding sentence not to be satisfied.
Until September 21, 2000, any Warrant or Warrants representing the right to
purchase Stock Units that are subject to the foregoing restriction shall bear a
legend referring to such restriction, it being acknowledged that the legend set
forth at the end of Section 6.2 is sufficient for that purpose. The foregoing
provisions of this Section 6.5 shall not affect Holder's right to exercise
Warrants as to all or any portion of the Warrant Stock that Holder has the right
to purchase or to Transfer any shares of Warrant Stock so purchased.
ARTICLE 7. MISCELLANEOUS
-------------
7.1 No Impairment. The Company shall not by any action, including,
-------------
without limitation, through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, (b) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant and (c) not undertake any reverse stock split,
combination, reorganization or other reclassification of its capital stock which
would have the effect of making this Warrant exercisable for less than one share
of Common Stock. Upon the request of Holder, the Company will, at any time
during the period this warrant is outstanding, acknowledge in writing, in form
reasonably satisfactory to Holder, the continued validity of this Warrant and
the obligations of the Company hereunder.
7.2 Reservation and Authorization of Common Stock; Registration or
--------------------------------------------------------------
Approval of any Governmental Authority. Before taking any action which would
- --------------------------------------
result in an adjustment in the number of shares of Common Stock comprising a
Stock Unit or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction
45
<PAGE>
thereof. If any shares of Common Stock required to be reserved for issue upon
exercise of Warrants require registration or qualification with any governmental
authority under any federal or state law before such shares may be issued, the
Company will in good faith and as expeditiously as possible and at its expense
endeavor to cause such shares to be duly registered.
7.3 Taking of Record: Stock and Warrant Transfer Books. In the case of
--------------------------------------------------
all dividends or other distributions by the Company to the holders of its Common
Stock with respect to which any provision of Article 4 refers to the taking of a
record of such holders, the Company will in each such case take such a record
and will take such record as of the close of business on a Business Day. The
Company will not at any time, except upon dissolution, liquidation or winding up
of the Company, close its stock transfer books or Warrant transfer books so as
to result in preventing or delaying the exercise or transfer of any Warrant.
7.4 Supplying Information. The Company shall cooperate with each Holder
---------------------
of a Warrant or holder of Restricted Common Stock in supplying such information
as may be reasonably necessary for such Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
7.5. No Stock Rights. No Holder of this Warrant, as such, shall be deemed
---------------
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise of this Warrant, nor shall anything
contained herein be construed to confer upon the Holder of this Warrant, as
such, any of the rights of a stockholder of the Company, at law or equity, or
otherwise, until this Warrant shall have been exercised as provided in Section
2.1.
7.6 Loss or Mutilation. Upon receipt by the Company from Holder of
------------------
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, indemnity reasonably satisfactory to it or, in case of mutilation,
the surrender of this Warrant for cancellation, the Company will execute and
deliver to Holder a new Warrant of like denomination.
7.7 Limitation of Liability. No provisions hereof, in the absence of
-----------------------
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the purchase price of any Common Stock
46
<PAGE>
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7.8 Successors and Assigns. This Warrant and the rights evidenced hereby
----------------------
shall inure to the benefit of and be binding upon the successors of the Company
and Holder. The provisions of this Warrant are intended to be for the benefit
of all Holders from time to time of this Warrant, and shall be enforceable by
any such Holder.
7.9 Notice Generally. Any notice, demand, request, consent, approval,
----------------
waiver, declaration, other communication or delivery to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or sent by registered or
certified mail, return receipt requested, postage prepaid, or by telecopier or
facsimile addressed as follows:
(a) If to Liberty, to:
Liberty Media Corporation
8108 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Attn: Mr. David Jensen
Facsimile: (303) 721-5443
With a copy to:
Charles Y. Tanabe, Esq.
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Facsimile: (303) 298-0940
(b) If to any other Holder or holder of shares of Warrant Stock, at
its last known address appearing on the books of the Company maintained for such
purpose.
(c) If to the Company, at:
ACTV, Inc.
1270 Avenue of the Americas
New York, New York 10020
47
<PAGE>
Attn: Mr. William C. Samuels
Facsimile: (212) 459-9548
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, waiver, declaration, other communication or delivery
hereunder shall be deemed to have been only given or served on the date on which
personally delivered, with receipt acknowledged, or five Business Days after the
same shall have been deposited in the United States mail or upon receipt of
confirmation of delivery if sent by telecopier or facsimile.
7.10 Amendment. This Warrant may not be modified or amended except by
---------
written Agreement of the parties.
7.11 Governing Law. This Warrant shall be governed by the law of the
-------------
State of Delaware.
7.12 Headings. The Article and Section headings contained in this Warrant
--------
are for convenience only and do not constitute a part of this Warrant and shall
not affect the interpretation thereof.
7.13 Hart-Scott. (a) If in the reasonable judgment of Liberty or the
-----------
Company, Liberty's holding of Warrant Stock or other securities of the Company
or its acquisition of Warrant Stock or other securities of the Company upon
exercise or conversion of this Warrant or any other security convertible into,
or any warrant, option or other right to acquire, Warrant Stock or other
securities of the Company (this Warrant, the Warrant Stock and such other
convertible securities, warrants, options and rights being referred to
individually as a "Derivative Security" and collectively as "Derivative
Securities") would require a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Company and Liberty
each will take such actions as may be required promptly to comply with the
requirements of the HSR Act relating to the filing and furnishing of information
(an "HSR Report") to the Federal Trade Commission ("FTC") and the Antitrust
Division of the Department of Justice ("DOJ"), such actions to include (i)
preparing and cooperating with each other in preparing the HSR Report to be
filed by or on behalf of each of them so as to avoid errors or inconsistencies
between their HSR Reports in the description of the reported transaction and to
permit the filing of their HSR Reports in a timely fashion, (ii) complying with
any request for additional documents or information made by the FTC or the DOJ
or by any court and assisting the other in so complying and (iii) causing all
persons which are part of the same "person" (as defined for purposes of the HSR
Act) as such party to cooperate and assist in such compliance. The Company and
Liberty each will pay any costs that it incurs in complying with the obligations
set forth in this Section 7.13, except that each will bear one-half of any fee
payable in connection with the filing of an
48
<PAGE>
HSR Report. It will be a condition precedent to the effectiveness of the
exercise or conversion of any Derivative Security held by Liberty or any of its
successors or assigns that either (i) no filing under the HSR Act by the holder
of such Derivative Security would be required in connection with its acquisition
of Warrant Stock or other voting securities upon such exercise or conversion or
(ii) any applicable waiting period under the HSR Act has expired or been
terminated. If an acquisition of securities of the Company by Liberty upon
exercise or conversion of a Derivative Security requires the filing of an HSR
Report, then any time period within which Liberty is required to exercise or
convert such Derivative Security will be deemed extended, up to a maximum of 90
days, to permit compliance with the HSR Act, including filing of the requisite
HSR Reports and expiration or termination of the applicable waiting period. If
the waiting period has not so expired or been terminated prior to the end of
such period of extension and of the period within which Liberty is required to
exercise or convert such Derivative Security or if Liberty determines to
withdraw its HSR Report, then the Company will use its best efforts to afford to
Liberty the benefits intended to be provided by the Derivative Security by (i)
granting to Liberty the right to acquire other securities of the Company having
the same rights, privileges and preferences as the securities originally to be
acquired, except that such other securities will not possess voting rights, on
the same terms as the securities originally to be acquired or (ii) if such
replacement right cannot be granted, providing to Liberty such other right as
may reasonably represent the value of the conversion or exercise right required
to be foregone.
(b) If Liberty, in its sole opinion, considers a request from a
governmental agency for additional data and information in connection with the
HSR Act to be unduly burdensome, Liberty may withdraw its HSR Report and rescind
its exercise or conversion of the affected Derivative Security, in which case
its rights will be the same as existed immediately before such attempted
exercise or conversion and, in addition, Liberty will have the rights described
in the last sentence of Section 7.13(a).
(c) The provisions of this Section 7.13 will (i) survive the exercise
of this Warrant, (ii) apply to any Derivative Security now held by Liberty and,
absent any provision expressly to the contrary set forth therein, to each
Derivative Security hereafter acquired by Liberty and (iii) inure to the benefit
of, and be binding on, Liberty, the Company and their respective successors and
assigns, including, in the case of Liberty, any transferee of a Derivative
Security.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of the date below.
Dated as of September 21, 1998.
ACTV, INC.
By: /s/ William C. Samuels
-----------------------
Name: William C. Samuels
-----------------------
Title: Chief Executive Officer
-----------------------
49
<PAGE>
EXHIBIT A
EXCEPTED SECURITIES
(under clause (i) of the definition thereof)
A - 1
<PAGE>
EXHIBIT B
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______________ Stock Units of ACTV, Inc., and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
___________________________________________________ whose address is
__________________________________ and, if such Stock Units shall not include
all of the Stock Units issuable pursuant to this Warrant, that a new Warrant of
like denomination and date for the balance of the Stock Units issuable hereunder
be delivered to the undersigned at the address stated below.
-------------------------------------------
(Signature of Registered Owner)
-------------------------------------------
(Street Address)
--------------------------------------------
(City) (State) (Zip Code)
Note: The above signature must correspond with
the name as written upon the face of this Warrant
in every particular, without alteration or
enlargement or any change whatsoever.
B - 1
<PAGE>
EXHIBIT C
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of Stock Units
set forth below:
Name and Address of Assignee No. of Stock Units
- ---------------------------- ------------------
and does hereby irrevocably constitute and appoint ___________________________
attorney-in-fact to register such transfer on the books of ACTV, Inc.,
maintained for the purpose, with full power. of substitution in the premises.
Dated:______________________________ Signature:______________________________
Witness:________________________________
NOTICE: The above signature must correspond with the name as written upon the
face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
C - 1
