-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BN4UsuYRBfA4xUzAZCGjGb15TDDbY9RQGryZuVCx/rdu5IFaSGPnolbYd0F3O6zj lwD/SwCZ4rNRgCGNSW2pgw== 0000927356-98-001594.txt : 19981001 0000927356-98-001594.hdr.sgml : 19981001 ACCESSION NUMBER: 0000927356-98-001594 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980930 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ACTV INC /DE/ CENTRAL INDEX KEY: 0000854152 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 942907258 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-41394 FILM NUMBER: 98718448 BUSINESS ADDRESS: STREET 1: 1270 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2122622571 MAIL ADDRESS: STREET 1: 12270 AVE OF THE AMERICAS #2401 STREET 2: 12270 AVE OF THE AMERICAS #2401 CITY: NEW YORK STATE: NY ZIP: 10020 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TELE COMMUNICATIONS INC /CO/ CENTRAL INDEX KEY: 0000925692 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841260157 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 5619 DTC PARKWAY CITY: ENGLEWOOD STATE: CO ZIP: 80111-3000 BUSINESS PHONE: 3032675500 MAIL ADDRESS: STREET 1: 5619 DTC PARKWAY CITY: ENGLEWOOD STATE: CO ZIP: 80111-3000 FORMER COMPANY: FORMER CONFORMED NAME: TCI LIBERTY HOLDING CO DATE OF NAME CHANGE: 19940620 SC 13D 1 SCHEDULE 13D 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 1 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.) 2 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 3 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 4 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 5 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 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 7 SCHEDULE 1 ---------- Directors, Executive Officers and Controlling Persons of Tele-Communications, Inc. ("TCI")
DIRECTORS --------- 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
8
Name Principal Occupation & Principal Business or Organization in - ---- Business Address Which such Employment Is Conducted ---------------------- ------------------------------------- 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
9 EXHIBIT INDEX -------------
- ---------------------------------------------------------------------------------------------------------- EXHIBIT EXHIBIT PAGE NUMBER - ---------------------------------------------------------------------------------------------------------- 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
10 EX-7.A 2 SECURITIES PURCHASE AGREEMENT 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: 11 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 12 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 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 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 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 16 144 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 (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. 18 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 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 (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 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 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 (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. 24 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 [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 EX-7.B 3 WARRANT TO PURCHASE COMMON STOCK FROM ACTV, INC. 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 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 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 "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 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 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 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 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 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 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 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 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 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 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 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 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 "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 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 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 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 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 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 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 EXHIBIT A EXCEPTED SECURITIES (under clause (i) of the definition thereof) A - 1 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 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 -----END PRIVACY-ENHANCED MESSAGE-----