-----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, KqzDIetmD0u7W61+zYK4YyZhdI0y9QrtgcO/ueA+0evSnnhNJx3ES0Ey99ot1I53 HsU3TeCyX8l5I0cme31MWA== 0000950112-95-002595.txt : 19951005 0000950112-95-002595.hdr.sgml : 19951005 ACCESSION NUMBER: 0000950112-95-002595 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19951004 EFFECTIVENESS DATE: 19951023 SROS: BSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTV INC /DE/ CENTRAL INDEX KEY: 0000854152 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 942907258 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 033-63181 FILM NUMBER: 95578514 BUSINESS ADDRESS: STREET 1: 1270 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2122622571 MAIL ADDRESS: STREET 2: 12270 AVE OF THE AMERICAS #2401 CITY: NEW YORK STATE: NY ZIP: 10020 S-8 1 ACTV, INC. AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1995 Registration Statement No. 33- ----------------------------------- SECURITIES AND EXCHANGE COMMISSION ---------------------------------- Washington, D.C. 20549 ---------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------- ACTV, INC. (Exact name of Registrant as specified in its charter) DELAWARE 4894 94-2907258 --------------------------------------------------------------------------- (State or other (Primary Standard (IRS Employer jurisdiction of Industrial Classification Identification incorporation or Code) No.) organization) 1270 Avenue of the Americas New York, New York 10020 (212) 262-2570 ----------------------- (Address, including zip code and telephone number, including area code, of Registrant's principal executive offices) Option Agreement, as amended August 1, 1989 -------------------------------------------- (Full Title of the Plan) WILLIAM C. SAMUELS President ACTV, INC. 1270 Avenue of the Americas New York, New York 10020 (212) 262-2570 ------------------------------ (Name, address, including zip code and telephone number, including area code, of agent for service) ------------------------------ Copies To: JAY M. KAPLOWITZ, ESQ. Gersten, Savage, Kaplowitz & Curtin, LLP 575 Lexington Avenue New York, New York 10022 (212) 752-9700 If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box [x] CALCULATION OF REGISTRATION FEE Title of Amount Being Proposed Maximum Proposed Amount of Securities To Registered(1) Offering Price Per Maximum Registration Be Registered Security(2) Aggregate Fee Offering Price - ------------- ------------- ------------------ --------------- ------------ Common 20,000(3) $5.72(5) $114,400 $394.49 Stock, par value $.10 per share 80,0004(4) $2.50 $200,000 $689.66 Total Registration Fee $1,084.15 (1) Pursuant to Rule 416, the Registration Statement also relates to an indeterminate number of additional shares of Common Stock issuable in respect of stock splits, stock dividends and similar transactions and upon the anti-dilution provisions contained in the outstanding options. (2) The price is estimated in accordance with Rule 457(h)(i) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee. (3) Issued upon the exercise of options issued to William C. Samuels pursuant to the Option Agreement, as amended August 1, 1989 (the "Option Agreement"). (4) Issuable upon the exercise of options issued to William C. Samuels pursuant to the Option Agreement. (5) Based on the average of the closing bid and asked prices per share of the Common Stock as quoted by the National Association of Securities Dealers Automated Quotation System on September 25, 1995. (ii) ACTV, INC. ------------ Cross-Reference Sheet (Between Items of Form S-3 and Prospectus) ------------ Form S-3 Item and Caption Prospectus Captions ------------------------- ------------------- 1. Forepart of Registration Front Cover Page Statement and Cover Page of Prospectus 2. Inside Front and Outside Inside Front and Outside Back Cover Back Cover Pages of Prospectus Page; Additional Information, Incorporation of Certain Documents by Reference 3. Summary Information and Risk The Company; Risk Factors Factors 4. Use of Proceeds Use of Proceeds 5. Determination of Offering Price Inside Front Cover 6. Dilution * 7. Selling Security Holders Selling Stockholder 8. Plan of Distribution Plan of Distribution 9. Description of Securities * to be Registered 10. Interests of Named Experts Legal Matters, Experts and Counsel 11. Material Changes Risk Factors 12. Incorporation of Certain Incorporation of Certain Information Information by Reference by Reference 13. Disclosure of Commission Indemnification of Officers Position on Indemnification and Directors for Securities Act Liabilities * Not Applicable (iii) EXPLANATORY NOTE This Registration Statement on Form S-8 relates to the registration of 100,000 shares (the "Shares") of Common Stock, par value $.10 per share (the "Common Stock") of ACTV, Inc., a Delaware Corporation ("ACTV" or the "Company") by William C. Samuels, the President of the Company (the "Selling Stockholder"). Of such Shares (i) 20,000 shares have been acquired by the Selling Stockholder upon the exercise of options issued pursuant to the Option Agreement, as amended August 1, 1989 (the "Option Agreement"), between the Company and the Selling Stockholder and (ii) 80,000 shares are issuable upon the exercise of options granted to the Selling Stockholder pursuant to the Option Agreement. A Prospectus has been prepared in accordance with the requirements of Form S-3 pursuant to General Instruction C of Form S-3 relating to the Shares. This Registration Statement on Form S-8, which includes a Prospectus prepared in accordance with General Instruction C of Form S-3, may be referred to herein as a Registration Statement on Form S-8/S-3. PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS Pursuant to the Note to Part I of the Form S-8, the information required by Part I is not required to be filed with the Securities and Exchange Commission (the "Commission"). The Company will provide without charge to each person to whom a copy of a Section 10(a) Prospectus hereunder is delivered, upon the oral or written request of such person, a copy of any document incorporated in this Registration Statement by reference, except exhibits to such documents. Requests for such information should be directed to ACTV, Inc., 1270 Avenue of Americas, New York, New York 10020, Attention: Secretary, telephone number (212) 262-2570. (iv) PROSPECTUS ACTV, INC. ---------- 100,000 SHARES OF COMMON STOCK Par Value, $.10 Per Share ----------- This Prospectus relates to the offer and sale of 100,000 shares (the "Shares") of Common Stock, par value $.10 per share (the "Common Stock"), of ACTV, Inc., a Delaware corporation ("ACTV" or the "Company"), by William C. Samuels, the President of the Company (the "Selling Stockholder"). The Shares have been or may be acquired by the Selling Stockholder upon exercise of options (the "Options") granted pursuant to the Option Agreement, as amended August 1, 1989 (the "Option Agreement"), between the Company and the Selling Stockholder. The Company's Common Stock is traded on the over-the-counter market on the NASDAQ Small Cap Market ("NASDAQ") and the Boston Stock Exchange ("BSE"). On September 25, 1995, the closing bid and asked quotations for the Common Stock as reported on NASDAQ were $5 5/8 and $5 13/16 per share, respectively. The Shares covered by this Prospectus may be offered and sold from time to time directly by the Selling Stockholder or through brokers in the over- the-counter market or otherwise at market prices prevailing at the time of such sales or in one or more negotiated transactions at prices acceptable to the Selling Stockholder. No specified brokers or dealers have been designated by the Selling Stockholder and no agreement has been entered into in respect of brokerage commissions or for the exclusive or coordinated sale of any securities which may be offered pursuant to this Prospectus. The net proceeds to the Selling Stockholder will be the proceeds received by him upon such sales, less brokerage commissions, if any. The Company will pay all expenses of preparing and reproducing this Prospectus. The Company will receive proceeds from the exercise of the Options, but will not receive any other proceeds from any sales by the Selling Stockholder. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THIS SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. No dealer, salesman or any other person has been authorized to give any information or to make any representation other than as contained or incorporated by referenced herein and if given or made, such information or representation must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy securities by anyone in any jurisdiction in which such offering may not be lawfully be made. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company or the information herein since the date hereof. See "Risk Factors." ------------------------------------------------------ The date of this Prospectus is October 4, 1995 TABLE OF CONTENTS Page ---- Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Incorporated of Certain Documents by Reference . . . . . . . . . . . . . 4 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Selling Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Indemnification of Officers and Directors . . . . . . . . . . . . . . . 28 Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 29 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports and other information with the Commission. Such reports, proxy statements, registration statements and other information can be examined without charge at the public reference section maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and, upon payment of the fees prescribed by the Commission, copies may be obtained therefrom and at certain of the Commission's Regional Offices located at 7 World Trade Center, New York, New York 10048, 5757 Wilshire Boulevard, Los Angeles, California 90024; and 500 West Madison Street, Northeastern Atrium Center, Suite 1400, Chicago, Illinois 60661-2511. The Company's Common Stock is quoted on The Nasdaq Stock Market ("NASDAQ") Reports, proxy statements, information statements, and other information concerning the Company can be inspected at the office of the National Association of Securities Dealers, Inc., located at 1735 K Street, N.W., Washington, DC 20006. This Prospectus is part of a registration statement on Form S-8/S-3 (the "Registration Statement") under the Securities Act of 1933 (the "Securities Act") which the Company has filed with the Commission for the registration of the securities offered by this Prospectus. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to the Company, reference is hereby made to such Registration Statement, exhibits and schedules, which may be obtained from the Commission's principal office in Washington, D.C., upon payment of the fees prescribed by the Commission. 3 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: (1) The Company's Registration Statement on Form S-1 (File No. 33- 34618) which became effective on May 4, 1990. (2) Annual Report on Form 10-K for the year ended December 31, 1994. (3) Annual Report on Form 10-K/A-1 for the year ended December 31, 1994. (4) Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995. (5) Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995. In addition to the foregoing, all documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment indicating that all of the securities offered hereunder have been sold or deregistering all securities then remaining unsold shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this Prospectus shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. All information appearing in this Prospectus is qualified in its entirety by the information and financial statements (including notes thereto) appearing in the documents incorporated herein by reference, except to the extent set forth in the immediately preceding statement. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the oral or written request of such person, a copy of any document incorporated in this Prospectus by reference, except exhibits to such information, unless such exhibits are also expressly incorporated by reference herein. Requests for such information should be directed to ACTV, Inc., 1270 Avenue of the Americas, New York, New York 10020, Attention: Secretary, telephone number (212) 262-2570. 4 THE COMPANY General ACTV, Inc. ("ACTV" or the "Company") has developed the proprietary Programming Technologies (the "Programming Technology") for the emerging field of interactive television. ACTV's Programming Technology permits the delivery of individualized television, which, in the Company's view, significantly enhances the quality of most genres of television programming. ACTV's Programming Technology provides instant and seamless changes in the TV or video picture and/or audio in response to the various inputs or selections supplied by each viewer. A specially prepared ACTV program (the "ACTV Program" or "ACTV Programming") is like a linear TV program, except that it appears to be individualized for each interactive viewer. (Linear programs are standard television programs that can be viewed only as created and do not offer the viewer the option to make choices as to the content of the program or to respond to the contents of the program in an individualized way.) There is no limit to the number of viewers who can interact simultaneously with an ACTV Program. ACTV's individualized programming is designed to work with both single and multiple channels of 6MHz bandwidth and with different modes of transmission: distance learning networks, closed circuit televisions systems, cable, direct broadcast satellite ("DBS"), broadcast systems, and multi-microwave distribution systems ("MMDS"). It is compatible with commonly available existing systems (one-way, analog) as well as systems envisioned for the future of television (two-way, compression, fiber, video, server, and copper pairs with asynchronous digital subscriber logs ("ADSL"). ACTV's strategy is to generate revenues from the sale of ACTV Programming that it either owns, has licensed or that has been created by a third party under a license from ACTV, including fees paid by subscribers to premium cable networks in which the Company has an ownership interest. The Company's mission is to improve the quality of entertainment and education television programming. The Company also believes that the Programming Technology can enhance the quality of television advertising by enabling the advertiser to customize each commercial for various audience segments, such as parents or sports enthusiasts. It is the Company's objective to seek major advertiser support for its individualized home entertainment networks. The chief markets presently targeted by the Company for the ACTV Programming Technology are in-home entertainment and education (with an emphasis on distance learning). The Company seeks to exploit these markets, principally in the U.S. through licensing the Programming Technology by creating joint venture relationships, and by direct sales. The Company has three operating subsidiaries, ACTV Entertainment Inc., a New York corporation ("ACTV Entertainment") incorporated on March 9, 1988, ACTV Interactive, Inc., a Delaware corporation incorporated on July 8, 1992, and The Los Angeles Interactive Network Inc., a Delaware corporation incorporated on March 7, 1995, which is a subsidiary of ACTV Entertainment. Unless otherwise indicated, all references in this Prospectus to the Company or ACTV include ACTV and its three subsidiaries. 5 ACTV was incorporated under the laws of the State of Delaware on July 24, 1989. The Company is the successor, by merger effective November 1, 1989, to ACTV, Inc., a California corporation, organized on July 11, 1983. The Company's executive offices are located at 1270 Avenue of the Americas, New York, New York 10020, telephone number (212) 262-2570. Entertainment ACTV first introduced its individualized programming applications for entertainment outside the United States. The Company is now in its fifth year of regional commercialization in Montreal, Edmonton, and London through a license with Le Groupe Videotron, Ltee. ("LGV"), the second largest Canadian cable/broadcast television company and a major cable operator in London where it is building and operating combined cable/telephone networks. LGV has been a pioneer in the deployment of interactive cable television services. ACTV's Programming Technology is part of LGV's Videoway systems, which includes a premium interactive cable channel, video games and various videotext offerings ("Videoway"). LGV reports that Videoway at 1994 year end has enrolled over 240,000 Canadian subscribers, who receive a set-top terminal with compatible ACTV Programming functionality. According to LGV, Videoway subscribers use on average 13 hours per week of interactive services: 5.5 hours of video games; 2.5 hours of information services, and 5 hours of ACTV Programming -- primarily consisting of sports, game shows, children's shows and news. In addition, LGV offers Videoway on its cable systems in London, England where it reports nearly 80,000 users. Under the LGV license, which as modified on June 8, 1993, LGV has a 20- year, non-exclusive, royalty-free license to manufacture Videoway terminals that incorporate ACTV's Programming Technology. The agreement also allows LGV to produce ACTV Programming itself for a certain number of potential Videoway subscribers in Canada (1,300,000), Europe (500,000), and the United States (500,000). The license is subject to the condition that neither LGV nor its sub-licensees receive any royalty or other fees with respect to ACTV Programming, except for promotion and direct production expenses paid by LGV. Any royalties from third parties will be paid exclusively to ACTV. See "Reorganization of ACTV Entertainment and the LGV Agreements." The Company and LGV entered into their original agreement during the infancy of the development of interactive television. LGV had developed its Videoway TV set-top converter, which, among other things, enabled it to provide its subscribers with interactive capacity. The arrangement provided the Company with an outlet for its ACTV Programming while providing LGV with interactive product for its Videoway converter. As both companies developed, however, their missions began to diverge: LGV wanted to market its Videoway converter in the United States, and was less interested in the actual production of ACTV Programming, while the Company was interested in expanding its programming capacity and in making its ACTV Programming available for use with set-top converters manufactured and distributed by others. The restructuring of the relationship with LGV enabled both companies to focus on their respective goals, in that LGV now has the non-exclusive right to market the Videoway converter in the United States, and the Company has control of ACTV Programming development. See "Reorganization of ACTV Entertainment and the LGV Agreements." ACTV's strategy is to take the regional experience gained in the last five years in Canada and London and apply it to the U.S. The Company anticipates that its individualized programming will be launched through regional premium cable programming services that are advertiser- 6 supported. Monthly subscription prices are anticipated to be comparable to other U.S. premium channels. In May 1995, the Company introduced its InTV Regional Individualized Network (the "InTV Network") in the Los Angeles area. The Company believes that the InTV Network is the first programming service in the U.S. to both enhance existing programming and offer new individualized content. Joining ACTV in the InTV Network is Prime Sports - West, a unit of TCI's Liberty Sports ("TCI"), which has 4.2 million subscribers in the Southwest region of the U.S., Cable News Network, Inc. ("CNN") and Ventura County Cablevision, currently a subsidiary of Western Communications, whose ownership is scheduled to be transferred to TCI in early 1996. Prime Sports - West is providing the Company with access to all its regional sports programming at no cost to the Company. Similarly, CNN plans to provide, at no cost, access to Prime News, Sports Tonight, Calling on All Sports, Inside Politics and other selected shows. In both cases, the Company is responsible for its incremental content, transmission, delivery and master control costs incurred in connection with the enhancement of the Prime Sports - West and CNN programming. Assuming future commercialization of a regional network in the footprint of Prime Sports - West no later than December 31, 1996, Prime Sports - West would receive an exclusive in its footprint for sports programming and the companies will pursue a business understanding of revenue sharing anticipated to include a license fee paid to Prime Sports - West for each subscribing household on a monthly basis. Upon commercialization, CNN and ACTV will negotiate a royalty agreement and/or advertising slip for use of CNN programming. In addition, CNN shall receive protection until December 31, 1997 to become ACTV's exclusive provider of national and international news. CNN will also be given the opportunity to be an equity investor in any new regional networks created by ACTV. Initial marketing is being directed toward Ventura County Cablevision's 90,000 subscribers in the Los Angeles and Ventura County areas, with 1,000 homes expected to participate, on a trial basis. InTV Network viewers are able to individualize both CNN programs and L.A. Lakers basketball, L.A. Kings hockey, California Angels baseball and other Prime Sports - West offerings. In addition, to sports and news events, InTV Network is transmitting other individualized programming, including game shows, children's and education programs. The Company plans, assuming a successful test phase, to offer the InTV Network to a majority of Ventura City Cablevision's subscribers. In addition, expansion could follow in other Prime Sports - West markets and, in stages, in other regional markets within the U.S. There can be no assurance that any such expansion will occur, or that it will generate significant revenues for the Company. 7 Education ACTV's principal strategy in education is to become the leading individualized programming technology in the developing field of distance learning, in which ACTV Programming, both live and pre-recorded, can be transmitted simultaneously to multiple sites in a satellite, fiber or microwave network. ACTV is currently developing new two-way analog and digital programming technologies for distance learning. This is a point to multipoint interactive broadcast system that can deliver prerecorded interactive lessons or integrate interactive segments into live distance learning lessons. By using a simple remote control, the student is able to alter program content to suit specific needs and interests. Students receive individualized responses to their input, and at the end of the lesson, the classroom teacher receives a printout of the performance of each class member. ACTV's new distance learning system is scheduled for commercial introduction by the end of 1995, with an installation in Georgia that the Company believes will represent one of the industry's most advanced distance learning projects. ACTV and the State of Georgia have entered into an agreement through which ACTV's distance learning system and software will be integrated into the Georgia Statewide Academic and Medical System ("GSAMS"), an existing fully interactive service providing audio, video and data to classrooms. In addition, 123 interactive television titles have been produced and introduced into the kindergarten to 12th grade market. The programs focus on reading, math, and vocational education. To date, programs have been sold to approximately 300 different schools across the U.S., along with an ACTV classroom system -- a terminal with compatible ACTV Programming functionality that currently permits up to 24 students in a classroom to view single channel ACTV Programs simultaneously. Education products are marketed through a direct and distributor sales force. Individualized programming is produced jointly through license agreements with educational publishers, including Turner Educational Services, Inc. ("Turner"), Phoenix, Bergwall, AIT, AIMS, Pasty Pudding and TakeOff. In 1995, the Company also signed a distance learning agreement with General Instrument Corporation ("GI"). ACTV's Programming Technology for distance learning will be integrated with GI's DigiCipher(R) system. The new digital system will be called "DigiCipher/ACTV Distance Learning System" and will allow programming networks to develop individualized programming and distribute it digitally to their customers. The Company markets its products through its wholly owned subsidiary ACTV Interactive, Inc., which was formed in 1992. Originally a joint venture general partnership with the Washington Post Company (the "Post Company") in which the Company owned a 49% interest and the Post Company a 51% interest, ACTV Interactive became a wholly owned subsidiary of the Company in March 1994. 8 ACTV Programming Technology The ACTV Programming Technology provides instant and seamless changes in the TV or video picture and/or audio based on various inputs or selections made by viewers. The program appears to be a standard TV program, as if it were individualized for each viewer. Viewer inputs are made through a remote control (usually four buttons), thereby limiting the viewer's number of choices when inputting each response to four answers previously anticipated by the program's creators. ACTV's process of creating individualized television programming involves viewer selection from a multiple number of frame-synchronized video, graphics, and/or audio signals delivered at one time. The viewer sees and/or hears only one of the signals at a given moment; the other signals are transparent. Using a remote control, the viewer interacts with the television by making selections or decisions called for by the specially prepared programming. In response to viewer's inputs, the ACTV Programming Technology, which uses a microprocessor, automatically switches at pre- determined intervals between various segments of the multiple signals. In one-way analog transmission, this switching will occur in the viewer's cable box, such as LGV's Videoway, while with two way transmission, it may occur at the source of the transmission. The viewer cannot detect when such a switch takes place because it occurs instantly and with frame accuracy. The results appear seamless and uninterrupted -- for the viewer the programming is completely individualized. Although an individualized program and its associated branches are taped in a normal linear fashion, the program, when shown, has thousands of possible permutations and combinations available for each viewer to experience. The particular version seen is based on each viewer's individually selected preferences and inputs. An unlimited number of independent viewers can interact with an ACTV Program simultaneously. The ACTV microprocessor receives digital information from codes embedded into the video program material. It thus maintains "memory" on the progress of the viewer and provides automatic branching. At appropriate times during the program, the microprocessor circuitry will make branch switches automatically, accumulate data, recall information, create graphics and/or implement a pre-programmed set of instructions. In single channel (6MHz of bandwidth) applications, ACTV's Programming Technology individualizes audio and/or graphics, based on multiple signals. When additional channels of bandwidth are available, video can be individualized as well. To develop individualized programming the Company generally seeks to form joint ventures or licensing agreements with producers of standard linear shows or with networks that have rights to such shows. ACTV Programming can be created in a number of ways: enhancing existing programs that have been produced in a standard linear format, adding "piggy-back" branch alternatives during the shooting of ongoing shows, or creating entirely original productions that are solely for ACTV's purposes. The cost of ACTV original productions has been on average approximately 20% higher than a linear version of the same program of comparative length. However, production costs are significantly lower than regular linear television shows when existing material can be enhanced, or when productions are "piggy-backed." Production costs vary significantly based upon the nature and type of programming to be produced. An advantage of individualized programming 9 is its higher repeatability, as compared to standard programming, since an individualized program's cost can be amortized over a greater number of showings. The types of entertainment programs that the Company plans to emphasize are sports, news, education, game shows, children's programs and music. The Company envisions that its in-home services will be supported by individualized advertising. The programming focus for education is reading, math and vocational education. Examples of ACTV Programming are: 1) Sports The InTV Network regularly produces Prime Sports - West ------ sporting events in the ACTV individualized format, thereby allowing viewers, in essence, to become directors of the program -- selecting close- ups, wide angle shots and other camera angles as may be provided. In multiple event programs, viewers are able to select one of four concurrent events and to switch from one event to another using their remote controls. In this instance, advertisers can target their commercials to viewers of a particular event. For example, ice skating fans might see a commercial for skate equipment, while viewers who choose to watch skiing could see a commercial for ski equipment and accessories. Viewers may select various overlays that provide statistics on the event, or on athletes of their choice. 2) News After the first ten minutes of the nightly news, viewers can ---- select from among a group of the day's top stories to receive more in-depth information on a desired topic. 3) Game Shows The Programming Technology allows game show viewers to ---------- participate at home. They can press in answers to questions, decide which celebrity team to play on, and receive their own scores. Each viewer's input prompts a response from the host or from celebrity team mates (e.g., "You really think English is the most widely spoken language -- well, let's see if your team mates agree with you."). 4) Music Video Viewers are able to select the order in which certain ----------- music videos are performed. Alternatively, viewers can select from up to four different camera angles for live or prerecorded performances. 5) Casino Games Viewers can participate in games of chance, such as ------------ blackjack, in which they are able to play individually with an on-screen dealer. With an individualized blackjack program, for example, a viewer can decide whether to "stand" (receive no more cards for that hand) or "hit" (receive additional cards). The on-screen dealer responds to each decision. 6) Advertising With ACTV's Programming Technology, television ----------- commercials can take on two entirely new forms. First, commercials can be demographically targeted to the specific audience watching. Men, women, and children, for example, can all see different commercials based on their interests. ACTV's Programming Technology automatically selects the most appropriate commercial for each viewer's particular demographic group. Second, ACTV can provide individualized commercials. In this application, the commercial is altered to meet the desires of the person watching. The announcer may ask viewers one or two questions about the type of automobile they may be interested in buying; the commercial might then present this type of vehicle. 7) Live Distance Learning A teacher broadcasting live via satellite, ---------------------- fiber or microwave can effect two-way communication with students in an unlimited number of remote sites. After covering a section of material, the distance learning teacher can ask multiple choice questions 10 about the material to all students on the network. As each student responds to a question, he or she receives immediate personal feedback in the teacher's voice, which has been pre-recorded. At the same time, the distance learning teacher receives a report showing how all students on the network as a group answered each question. Consequently, the teacher can measure the results of the lesson to that point, and make any adjustments to the lesson plan that seem appropriate. 8) Reading and Math Students in a classroom learn basic reading and ---------------- math skills through specially prepared interactive television programs. As the television lesson progresses, just as in the case of interactive distance learning programming, the on-screen teacher poses questions regarding the material presented. Students respond to these questions and receive individual feedback based on their answers. At the end of the lesson, the classroom teacher can request a report showing the progress made by each student. Research and Development The Company is engaged in a field characterized by extensive research efforts and rapid, significant technological change. During 1993, the Company began its current research and development projects, relating primarily to the development of a new analog/digital two-way distance learning system. The Company believes that it may be required to expend approximately $140,000 through the end of fiscal 1995 to complete the development of this system. There can be no assurance that research or development by others will not render the Programming Technology obsolete or that the limited research and development performed by the Company and/or its licensees and joint venture partners will continue or will be successful. Government Regulation The Company believes, on the basis of its review of current legislation and regulations that neither its present nor any proposed commercial implementation of the ACTV Programming Technology on distance learning networks, closed circuit television systems, cable, DBS or MMDS will require governmental license or approval. Certain broadcast applications and copper pairs with ADSL may require governmental approval. No assurance can be given that applicable laws will not change. In the event such approval were to be required, there can be no assurance that the Company would be able to obtain such approval or the licenses required for the further implementation of the ACTV Programming Technology. Marketing and Program Production The primary markets targeted by the Company for the ACTV Programming Technology are in-home entertainment and education (with an emphasis on distance learning). The Company seeks to exploit these markets principally in the US through licensing the Programming Technology, by creating joint venture relationships, and by direct sales. To date, the Company's capital requirements to develop the Programming Technology, produce ACTV Programming, develop marketing approaches and strategic alliances, and to cover costs of sales and general and administrative expenses, have been significant, resulting in an accumulated deficit as of June 30, 1995 of approximately $26.9 million. The Company will continue to implement a marketing program consisting of the employment of sales and marketing personnel, contracting with sales and marketing consultants, and the use of promotional efforts, including product demonstrations and participation in trade shows and 11 conferences. The Company currently has two entertainment marketing executives, five educational sales people and several educational distributors. In entertainment, the Company has licensed the Programming Technology to LGV, and is seeking other licensees and joint venture partners both in and outside the United States. The Company is and will continue to be dependent upon the ability of licensees and joint venture partners to offer products and services that are commercially viable, and to actively promote and distribute the Programming Technology. According to LGV, Videoway subscribers use an average of 13 hours per week of interactive services: 5.5 hours of video games, 2.5 hours of information services, and 5 hours of ACTV Programming -- primarily consisting of sports, news, game shows, and children's shows. In addition, focus group testing in Los Angeles that preceded the Prime Sports - West and CNN agreements indicated interest in ACTV sports, news, game shows, and in its educational and children's programming. In May 1995, the Company introduced its InTV Network in the Los Angeles area. The Company believes that the InTV Network is the first programming service in the U.S. to both enhance existing programming and offer new individualized content. Joining ACTV in the InTV Network is Prime Sports - West, a unit of TCI's Liberty Sports, which has 4.2 million subscribers in the Southwest region of the U.S., CNN and Ventura County Cablevision, currently a subsidiary of Western Communications, whose ownership is scheduled to be transferred to TCI in early 1996. The Company, its licensees or joint venture partners must produce and/or provide individualized programming for the Company to continue commercial entertainment operations in the U.S. For the most part, the Company, its licensees and joint venture partners are dependent upon third parties as sources for the linear programming that is to be enhanced into ACTV Programming. For the entertainment market, all programming to date has been produced either through LGV or by the Company itself. With respect to the education market, the Company has executed non- exclusive agreements with seven entities to obtain linear programming that it can enhance to create ACTV Programs. Linear programs are standard television programs that can be viewed only as created and do not offer the viewer the option to make choices as to the content of the program or to respond to the program in an individualized way. The Company has entered into agreements with Turner Educational Services, Inc., Phoenix Learning Group, Bergwall Productions, Inc., The Hasty Pudding Puppet Co., AIMS Media, Agency for Instructional Technology ("AIT") and Takeoff/Video Educational Excellence. Each of these agreements gives ACTV worldwide, perpetual marketing rights (except for the AIT agreement, which limits the rights to 15 years) to the programming produced. The companies are to receive quarterly royalties, based on the number of units of ACTV Programs sold. There can be no assurance that the Company will be successful in reaching agreements with licensees and joint venture partners, that the Company's strategy of marketing the Programming Technology through its licensees and joint venture partners will be successful, or that the methods that its licensees and joint venture partners choose to market the Programming Technology will be successful. Further, the Company may be adversely affected by the financial 12 and business considerations of its licensees and joint venture partners. Future joint venture and license agreements may provide that the licensees and joint venture partners will receive equity interest in the Company and/or its subsidiaries. Set-Top Converters, Terminals, and Other Interactive Devices The Company does not intend to manufacture set-top converters, terminals, video servers, or other interactive devices. In the entertainment market, ACTV signed, on June 8, 1993, a 20-year, non- exclusive, royalty-free manufacturing license with LGV. Today, the Videoway terminal manufactured through LGV is the only ACTV-compatible set- top converter available to potential distributors of ACTV Programming. The Company intends to grant licensees similar to the one granted to LGV to other manufacturers that are selected by the future distributors of ACTV Programming. ACTV's Programming Technology can work with different modes of transmission (cable, DBS, broadcast, and MMDS), and is compatible with commonly available one-way, analog systems. In addition, it is compatible with systems envisioned for the future of television (two-way, compression, fiber, video servers, and copper pairs with ADSL). Therefore, there are many ways to design a distribution system that is compatible with ACTV's Programming functionality. The Company believes that the incremental cost of adding ACTV Programming functionality will not be significant. There can be no assurance that the Company will be successful in developing additional manufacturing licenses. In the education market, the Company consummated a contract with General Instrument Corporation ("GI"). ACTV's Programming Technology for distance learning will be integrated with GI's DigiCipher(R) system. The new digital system will be called "DigiCipher/ACTV Distance Learning System," and will allow programming networks to develop individualized programming and distribute it digitally to their customers. The Company executed a non-exclusive agreement in June 1992 with KDI Precision Products, Inc. ("KDI") to manufacture ACTV's classroom and distance learning systems, with compatible ACTV Programming functionality. KDI sells the systems to ACTV at prices and in accordance with a delivery schedule agreed upon from time to time. KDI also is a distributor of components such as television monitors, VCRs, remote controls, printers and cabinets used in conjunction with the systems. The agreement is subject to automatic renewal for additional one-year terms unless terminated by either party on six-months' written notice. KDI is currently the only manufacturer of the classroom and distance learning systems. The Company believes that KDI can produce sufficient systems to meet the anticipated needs of ACTV in the education marketplace. In the event that KDI were unable to supply the systems, there can be no assurance that the Company could produce sufficient systems or obtain sufficient systems from another manufacturer at an acceptable price. The inability of ACTV to obtain systems would have a material adverse affect on the business of the Company. 13 Consolidation of Educational Partnership into ACTV On July 14, 1992, ACTV Interactive, Inc. entered into a partnership agreement with Post-Newsweek Education, Inc., a wholly-owned subsidiary of the Post Company, pursuant to which ACTV Interactive was formed as a Delaware general partnership, for the purpose of selling products and services incorporating the ACTV Programming Technology to the education market. The Post Company received a 51% interest in ACTV Interactive; ACTV Interactive, Inc., a wholly-owned subsidiary of the Company, received a 49% interest in ACTV Interactive. In connection with the formation of the partnership, the Company entered into a license agreement (the "License Agreement") with ACTV Interactive. Pursuant to the License Agreement, ACTV Interactive was given licenses to exploit certain of the Company's patents and related technology (collectively the "Patents") in the creation and distribution of educational programming. The License Agreement provided that the Company receive five percent (5%) of all revenues generated by ACTV Interactive. On March 11, 1994, the Company purchased the Post Company's full 51% interest in ACTV Interactive for consideration of $4.5 million, consisting of $2.5 million in cash at closing and a $2 million promissory note (the "New Note"). The principal value of the New Note has been paid in full as of the date of this Prospectus, but the Company continues to accrue approximately $229,000 of interest payable as of October 1, 1995. Payment of interest is due December 31, 1996. The interest payable under the New Note is secured pursuant to a security agreement through which the Post Company acquired a security interest in and lien with respect to all of the Company's existing United States patents and pending applications. In the event of a default by the Company under the New Note and foreclosure by the Post Company of the collateral pledged under the security agreement, the Company will be materially and adversely affected. Reorganization of ACTV Entertainment and the LGV Agreements In March 1988, the Company formed ACTV Entertainment (formerly ACTV Domestic Corporation) as equal stockholders with a subsidiary of LGV, Videotron Technologies Ltd. The Company granted to ACTV Entertainment the exclusive right to use the Company's Programming Technology in the United States DBS, cable and broadcast television markets. On June 8, 1993, LGV withdrew from its ownership in ACTV Entertainment, and the Company became the sole shareholder in ACTV Entertainment under the terms of an agreement with the subsidiary of LGV, thereby settling all outstanding legal disputes between the companies. While ACTV gained full ownership and control of ACTV Entertainment in the settlement, it did agree to give up the royalty income it was receiving from its Videoway terminal license with LGV for Canada and Europe ($3.00 per user per year). Simultaneously with the June 8, 1993 change in ownership of ACTV Entertainment, the 1987 LGV exclusive foreign license for Canada, Europe and the Soviet Union was renegotiated. The new license provides LGV with a 20-year, non-exclusive, royalty-free license to manufacture its Videoway terminal with compatible ACTV Programming functionality. Videoway is a cable converter box capable of providing a variety of advanced services, including standard cable tuning and decoding capabilities, access to videotext, closed-captioning, data banks, video games, software 14 downloading and electronic mail. LGV has informed the Company that it has installed Videoway converter boxes in approximately 240,000 homes in Canada. In addition, the new modified license agreement allows LGV to produce ACTV Programming for a certain number of potential Videoway subscribers in the United States, Canada and in selected European countries. The license is limited to the condition that neither LGV nor its sublicensees receive any royalty or other fees with respect to ACTV Programming, except for promotion and direct production expenses paid by LGV. Any royalties or profits from third party programmers will be paid exclusively to ACTV. Patents, Applications, and Proprietary Technology The Company has sought to protect the proprietary features of the Programming Technology it employs through patents, copyrights, confidentiality agreements, and trade secrets both in the United States and overseas. As of the present time, the United States Patent and Trademark Office has issued eight patents, with five additional patents pending, three of which name Dr. Michael Freeman, the Company's Advanced Product Development Liaison, as an inventor thereof, and two of which name Dr. Freeman and Gregory Harper, former President - Technology Consulting Group, as inventors thereof. The patents, which deal with different aspects of the ACTV Programming Technology, expire at various dates from 1998 to 2007. The patents have been pledged as collateral in connection with the Company's acquisition of the Post Company's interest in ACTV Interactive. See "Consolidation of Educational Partnership into ACTV." Corresponding patents for some of the above U.S. patents have been granted or are pending in Canada, Japan, Australia and the European Patent Office. When a patent is granted by the European Patent Office, and upon the filing of appropriate translations, protection will be available in the designated European countries. The Company believes such patents will strengthen its competitive position in the aforementioned countries. Dr. Freeman and Mr. Harper have assigned to the Company all right, title, and interest in and to the above US patents and any corresponding foreign patents or applications based thereon. In addition, Dr. Freeman and Mr. Harper have agreed to assign to the Company the rights and title in and to all future patents and applications, and any corresponding foreign patents or application relating to the ACTV Programming Technology. The patents have been assigned to collateralize certain obligations of the Company. There can be no assurance that the patents held by the Company are enforceable, particularly in view of the high cost of patent litigation, nor can there be any assurance that the Company will derive any competitive advantages therefrom. To the extent that patents are not issued for any other products developed by the Company, the Company would be subject to more competition. The issuance of patents may be insufficient to prevent competitors from essentially duplicating the Company's products by designing around the patented aspects. In addition, there can be no assurance that the Company's products will not infringe on patents owned by others, licenses to which may not be available to the Company, nor that competitors will not develop functionally similar products outside the protection of any patents the Company has or may obtain. The Company requires each of its employees, consultants and advisors to execute a confidentiality and assignment of proprietary rights agreement upon the commencement of 15 employment or a consulting relationship with the Company. These arrangements generally provide that all inventions, ideas, and improvements made or conceived by the individual arising out of the employment or consulting relationship shall be the exclusive property of the Company. This information shall be kept confidential and not disclosed to third parties, except by consent of the Company or in other specified circumstances. There can be no assurance, however, that these agreements will provide effective protection for the Company's proprietary information in the event of unauthorized use or disclosure of such information. Competition The development of interactive television applications is highly competitive. The Company competes within the television industry with many other applications which may be considered interactive. Moreover, the Company also competes with other forms of entertainment and educational programming, many of which are much more established, including standard television programming and the rapidly growing CD-ROM market. Among the Company's competitors in both the area of interactive television and in other media are companies that have greater financial, technical and marketing resources than the Company. At the present time, there are a number of different interactive television applications that have been developed or are under development by others which might be considered to be competitive with the Company's Programming Technology. These other interactive applications in general are delivered via cable television, or through play-along devices that are attached to the television. To the best of the Company's knowledge, none of the point to multi-point systems based on these technologies allow the viewer to affect what is seen on the television in the same manner or to the extent of the ACTV Programming Technology. The new interactive television applications principally fit in six primary categories: (1) information and channel guide services, (2) transactional services, (3) quantity/video-on-demand, (4) separate device play-along, (5) video games and (6) individualized TV. ACTV fits in the individualized TV category. Only individualized television allows every television viewer to interact personally with and change the TV program itself. Within the limits of the programmed choices, each sports fan can watch the action the way he or she chooses, and each child receives individual instructions based on his or her own response to the on-screen teacher. Individualized television technology is the only technology that uses traditional filmed entertainment where the program itself is interactive. ACTV's process of creating individualized television programming involves viewer selection from a multiple number of frame-synchronized video, graphics, and/or audio signals delivered at one time. The viewer sees and/or hears only one of the signals at a given moment; the other signals are transparent. Using a remote control, the viewer interacts with the television by making selections or decisions called for by the specially- prepared programming. Based on a viewer's inputs, the ACTV Programming Technology, which uses a microprocessor, automatically switches at pre- determined intervals between various segments of the multiple signals. The viewer cannot detect when such a switch takes place because it occurs instantly and with frame accuracy. The results appear seamless and uninterrupted -- for the viewer the programming is completely individualized. Although an individualized program and its associated branches are taped in a normal linear fashion, the program, when shown, has thousands of possible segment 16 combinations available for each viewer to experience. The particular version one sees is based on individually selected preferences and inputs. An unlimited number of independent viewers can interact with an ACTV Program simultaneously. See "ACTV Programming Technology." A summary of each of the other interactive application follows: 1) Information and Channel Guide Services This form of interactivity -------------------------------------- enables the television to serve as a tool for information accessibility and retrieval. The most immediate application is for channel guide services, which allow viewers to easily determine the locations of programs in an expanded channel universe. Information services include access to large external text and graphic information databases, such as those provided by America On-Line and Prodigy. 2) Transactional Services This application allows the television ---------------------- viewer to purchase merchandise displayed on-screen by pressing a button on his or her remote control. Transactional services could be in the form of a home shopping program or an addendum to a commercial. Through their television sets, viewers may receive video, still pictures, text or audio about the selected products. 3) Quantity/Video on Demand Cable systems that incorporate digital ------------------------ television delivery may be able to offer as many as 500 or more channels. Programs transmitted digitally can be randomly accessed through menu selection items. Extensive pay-per-view movies could be made available, popular shows might be aired at many different starting times, and the viewer could purchase, on an a la carte basis, television shows following their initial air date on broadcast or cable TV. 4) Separate Device Play-Along This application allows viewers to play -------------------------- along with television programs such as game shows or sporting events. The viewer has a separate controller that receives information about the show in progress, and either displays it on the controller itself, as in the example of Interactive Network, or overlays television pictures with text and/or graphics, like EON or Zing. Players can compete with the on-screen contestants for prizes. Although the TV programming itself is unchanged, game players at home see their results displayed on the play-along device's screen. 5) Video Games Interactive television services will allow a user to ----------- call up video games, like those now marketed by Nintendo and Sega, through the cable TV box. Historically, video games have been delivered on cartridges inserted into special-purpose terminals attached to a television set. Since the Company's business strategy depends in large part on its ability to attract joint venture partners and/or licensees, the Programming Technology must be more appealing to potential joint venture partners or licensees than other technologies which currently exist or are now under development or may be developed in the future. 17 RISK FACTORS The purchase of the securities being offered hereby involves a number of significant risks that include, but may not be limited to, those described below. Each prospective investor should carefully consider the following risk factors inherent in and affecting the business of the Company and this Offering before making an investment decision. 1. Operating Losses to Date. The Company has operated at a loss through the date of this Prospectus. The Company's net losses for the six months ended June 30, 1995 and 1994 (the "June 1995 period" and the "June 1994 period," respectively) were $3,348,699 and $2,336,105, respectively. The June 1995 Period includes an extraordinary gain of $94,117 while the June 1994 period includes an extraordinary gain of $231,845. The Company had net losses of $4,465,240 in the fiscal year ended December 31, 1994 ("Fiscal 1994"), $4,156,955 in the fiscal year ended December 31, 1993 ("Fiscal 1993"), and $2,778,085 in the fiscal year ended December 31, 1992 ("Fiscal 1992"). Through June 30, 1995, the Company had an accumulated deficit of approximately $26,900.000. To date, the Company has had limited revenues, including revenues of $541,552 in the June 1995 period, $938,416 in Fiscal 1994, $164,602 in Fiscal 1993, and $532,596 in Fiscal 1992. The increase in revenues in Fiscal 1994 was partially the result of the Company's including for the period March 11 to December 31 of Fiscal 1994 all education sales, which were reported for Fiscal 1993 by ACTV Interactive, a partnership in which ACTV held a 49% interest from July 14, 1992 to March 11, 1994. ACTV Interactive's gross sales were $839,165 in Fiscal 1993, compared with $348,473 for the period from July 14, 1992, the partnership formation date, to December 31, 1992. ACTV Interactive's results were accounted for under the equity method of accounting. There can be no assurance that the Company will generate significant revenues or achieve profitability in the future. 2. Unproven Business Strategy. Other than the activities of ACTV Interactive, the Company's prior activities in the education market and the arrangement with LGV in the entertainment market, the Company has not had significant sales of the Programming Technology. While ACTV has recently consummated its first sale of the new distance learning technology, there can be no assurance that the results of this project will support the continuation of the project or lead to other sales. Also, while the Company has recently entered into agreements with a large regional cable sports network, a national news service, and a cable operator to create a Los Angeles-based programming service, which was launched in mid-1995, there can be no assurance that these agreements will result in the development of a commercially successful programming service. In addition, the Company is dependent on co-ventures or licenses with third parties to produce ACTV Programs and the Company will be required to demonstrate a market for such programs. There can be no assurance that co-venturers or licensees, or ACTV's direct sales force will succeed in marketing the ACTV Programs. See "THE COMPANY - Entertainment." Furthermore, the likelihood of the success of the Company must be considered in light of the problems, costs, difficulties and delays encountered in connection with the operation of a business, the operations of which consist of the development and commercialization of new and 18 unproven technologies, and the competitive environment in which the Company operates. Accordingly, there can be no assurance that the Company will successfully market the Programming Technology or operate on a profitable basis. See "THE COMPANY." 3. Possible Need for Additional Financing. To date, the Company's capital requirements to develop the Programming Technology, produce ACTV Programming, develop marketing approaches and strategic alliances, and to cover costs of selling and general and administrative expenses, have been significant, resulting in an accumulated deficit as of June 30, 1995 of approximately $26,900,000. The Company could receive proceeds of up to $200,000 if the Options underlying shares that are being registered hereby are exercised, however there can be no assurance that the Options will be exercised. The Company believes it has sufficient resources to fund its operations at least through the next twelve month period. However, if the Company's assumptions and beliefs prove to be incorrect, the Company may require additional financing during this period. In the event that the Company does require additional financing, the Company has no agreements, arrangements or understanding to obtain such additional financing. 4. Patents and Proprietary Information. The Company has obtained patents covering certain aspects of the Programming Technology and has patents pending with respect to other developments or enhancements thereof. However, there can be no assurance (i) that patents applied for will be granted, (ii) that the patents the Company owns or has rights to or that may be granted or obtained by the Company in the future will be enforceable or will provide the Company with meaningful protection from competition, (iii) that any products developed by the Company will not infringe any patent or rights of others, or (iv) that the Company will possess the financial resources necessary to enforce any patent rights which it holds. See "THE COMPANY -- Patents, Applications and Proprietary Information." The Company requires each of its employees, consultants and advisors to execute a confidentiality and assignment of proprietary rights agreement upon the commencement of employment or a consulting relationship with the Company. These arrangements generally provide that all inventions, ideas and improvements made or conceived by the individual arising out of the employment or consulting relationship shall be the exclusive property of the Company. This information shall be kept confidential and not disclosed to third parties except by consent of the Company or in other specified circumstances. There can be no assurance, however, that these arrangements will provide effective protection of the Company's proprietary information in the event of unauthorized use or disclosure of such information. 5. Technological Obsolescence; Research and Development. The Company is engaged in a field characterized by extensive research efforts and rapid, significant technological change. There can be no assurance that research or development by others will not render the Programming Technology obsolete or that the limited research and development performed by the Company will continue or will be successful. In 1994, research and development costs totaled $476,155 and were primarily related to development of a new analog/digital two-way distance learning system. The Company believes that it may be required to expend approximately $140,000 during the remainder of 1995 to facilitate the completion of current research and development projects, relating primarily to development of the distance learning system. There can be no assurance that the new distance learning system can be deployed on a timely basis, or that once deployed, it will function satisfactorily. If the Company determines that additional research and development is required, there can be no assurance that the 19 Company will have sufficient funds or access to additional funds to engage in substantial additional research and development. See "THE COMPANY -- Research and Development." 6. Possible Shortage of Available Channels for In-Home Cable Applications. In order for the ACTV Programming Technology to be used over cable TV for the in-home market, it must compete for channel space on cable systems, many of which have limited available channel capacity. Although a simpler form of interactivity can be achieved by the Company's using one channel of band-width, the more sophisticated applications of ACTV Programming currently require four channels of band-width. There is no assurance that cable operators will devote a sufficient number of channels of band-width to the Programming Technology in the future. Nor is there any assurance that the Company will be able to expand, unless cable systems continue to upgrade and increase their channel capacity by using a form of "compression technology," whereby the digitalization of the information required to produce a television picture reduces the channel capacity required for programming that incorporates the Programming Technology. Presently proposed compression technology under development would enable the Company to use the more complex applications of the Programming Technology on one or two channels of band-width. The costs associated with such compression technology may result in substantial additional costs to cable operators. The Company believes, although there can be no assurance, that the cable industry is, in general, moving in the direction of increasing channel capacity; however, the Company's management cannot currently quantify such additional costs, which may adversely affect the Company's future operations. The Company is continuing its investigation of various compression techniques. See "THE COMPANY." 7. Dependence Upon Licensees and Joint Venturers. The Company has adopted as a business strategy the exploitation of the Programming Technology through licensing, the arrangement of joint ventures and by means of a direct sales force. While the Company has established a direct sales force of five employees and several distributors, and intends to increase its direct sales forces, the Company will continue to be, in substantial part, dependent upon the ability of its licensees and prospective joint venture partners to offer products and services that are commercially viable. In addition, the Company, its licensees or joint venture partners will need to provide individualized programming to continue commercial cable operations, and they are dependent upon third parties for such programming. The Company will be dependent upon its ability, and that of its licensees and joint venture partners, to actively promote and distribute the Programming Technology and the products. There is no assurance that the Company's marketing strategy will be successful. Further, the Company may be adversely affected by the financial and business considerations of its licensees and joint venture partners. The Company is engaged in an ongoing program designed to evaluate the Programming Technology as applied to the cable television market. The results of such programs cannot yet be determined. No assurance can be given that the results of the evaluation will be positive or that one or more of the markets which the Company is evaluating may prove to be viable for the Programming Technology. There is a possibility that in the structuring of future joint ventures and license agreements that the licensees and joint venture partners may be granted interests in the Company, and or any of its subsidiaries, in the form of equity securities or options to acquire equity securities. See "THE COMPANY -- Marketing and Program Production." 20 8. Dependence upon Suppliers of Programming. The Company is dependent upon the producers of linear programming that can be enhanced using the Programming Technology to create individualized ACTV Programs. To date, the Company has entered into agreements with eight such producers, but there can be no assurance that such agreements will provide the Company with sufficient programming appropriate for enhancement, that the Company will be able to develop additional sources of programming, or that the enhanced programs can be successfully marketed in an individualized format. See "THE COMPANY - Marketing and Program Production." 9. Government Regulation. The Company believes that neither its present nor any proposed commercial implementation of the ACTV Programming Technology on cable, DBS or MMDS will require governmental license or approval. Certain broadcast application and copper pairs with ADSL may require governmental approval. No assurance can be given that applicable laws will not change. In the event such approval were to be required, there can be no assurance that the Company would be able to obtain such approval or the licenses required for the further implementation of the ACTV Programming Technology. See "THE COMPANY - Government Regulation." 10. Dependence Upon Key Personnel. The Company has been largely dependent upon the efforts of William C. Samuels in his roles as Chairman of the Board, President, Chief Executive Officer and Director of the Company, and David Reese as President of ACTV Entertainment and a Director of the Company. The Company has entered into five-year employment agreements with Mr. Samuels and Mr. Reese. The Company currently does not maintain "key employee" insurance on the lives of Messrs. Samuels or Reese, and there can be no assurance that such insurance would be available at an acceptable cost to the Company, should it seek to acquire such insurance in the future. In order to compete in a marketplace with rapidly changing and expanding technology, the Company requires employees not only with extensive management experience, but also with certain technical abilities to direct the Company's continuing research and development efforts. While the Company believes that it currently employs such personnel, and that other persons could be retained in such capacities, there can be no assurance that if the Company were required to replace such personnel, it could readily do so, or that, even if such qualified replacements were retained, the development of the Company's business would not be delayed. See "THE COMPANY -- Research and Development." 11. Competition. The Programming Technology competes with many other forms of entertainment, education and information dissemination, many of which are significantly more established, including the standard television industry, the movie industry, cable television, programming services and other forms of entertainment. There can be no assurance that products and services incorporating the Programming Technology will ever be established in the marketplace in a significant enough manner to make the Company profitable. In addition, the Programming Technology may compete with other technologies described as interactive television, some of which may be developed or promoted by companies with resources significantly greater than the Company's. See "THE COMPANY -- Competition." 21 12. Dependence on Equipment Suppliers. The Company does not intend itself to manufacture set-top converters, terminals, video servers, or other interactive devices. Currently, in the entertainment market, the Videoway terminal manufactured through LGV is the only ACTV-compatible set- top converter available to potential distributors of ACTV Programming. The Company intends to grant licenses similar to the one granted to LGV to other manufacturers that are selected by the future distributors of ACTV Programming. All of the ACTV classroom and distance learning systems which incorporate the Programming Technology and are sold by ACTV in the education market are manufactured by KDI Precision Products, Inc. ("KDI"). While the Company believes that KDI can produce sufficient systems to meet the anticipated needs of ACTV in the education marketplace, in the event that KDI were unable to supply the systems, there can be no assurance that the Company could produce sufficient systems or obtain sufficient systems from another manufacturer at an acceptable price. The inability of ACTV to obtain systems would have a material adverse effect on the business of the Company. There is no assurance that the Company will be successful in developing additional manufacturing licenses for the entertainment and education markets; the failure of the Company to do so would have a material adverse effect on the business of the Company. See "THE COMPANY - Set Top Converters, Terminals and Other Interactive Devices." 13. Potential Effect of Default Under Promissory Note. On March 11, 1994, in partial payment for the Company's purchase of the Post Company's 51% interest in ACTV Interactive for consideration of $4.5 million, the Company issued to the Post Company a $2 million promissory note (the "New Note"). The principal value of the New Note has been paid in full as of the date of this Prospectus, but the Company continues to accrue approximately $229,000 of interest payable as of October 1, 1995. Payment of interest is due December 31, 1996. The interest payable under the New Note is secured pursuant to a security agreement through which the Post Company acquired a security interest in and lien with respect to all of the Company's existing United States patents and pending applications. In the event of a default by the Company under the New Note and foreclosure by the Post Company of the collateral pledged under the security agreement, the Company will be materially and adversely affected. 14. No Assurance of Public Market for Securities. Although the Company's Common Stock is quoted on NASDAQ and listed on the Boston Stock Exchange, there can be no assurance that the Company will be able to maintain such quotation or listing, or that, if maintained, a significant public market will be sustained. For continued listing on NASDAQ, the Company is required to maintain a minimum stockholders' equity of $1,000,000 and assets of $2,000,000. The Boston Stock Exchange's maintenance criteria require the Company to have total assets of at least $1,000,000 and total stockholders' equity of at least $500,000. At June 30, 1995, the Company had stockholders' equity of $4,131,249 and assets of $7,938,488. The Company has continued to operate at a loss through the date of this Prospectus. In the event the Common Stock were delisted from NASDAQ, trading, if any, would be conducted on the Boston Stock Exchange and in the over-the-counter market on the NASD's electronic bulletin board, in what are commonly referred to as the "pink sheets." As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company's securities. In addition, the Common Stock would be subject to Rules 15g1-15g6 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") that 22 impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally, a person with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with his or her spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, these rules may affect the ability of broker-dealers to sell the Company's securities and may affect the ability of purchasers in the Offering to sell their securities in the secondary market. The Commission has also recently adopted regulations that define a "penny stock" to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the regulations require the delivery, prior to the transaction, of a disclosure schedule prepared by the Commission relating to the penny stock market. The broker-dealer must also disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker- dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. While many NASDAQ-listed securities are covered by the definition of penny stock, transactions in a NASDAQ-listed security are exempt from all but the sole market-maker provision for (i) issuers who have $2,000,000 in tangible assets ($5,000,000 if the issuer has not been in continuous operation for three years), (ii) transactions in which the customer is an institutional accredited investor, or (iii) transactions that are not recommended by the broker-dealer. In addition, transactions in a NASDAQ security directly with a NASDAQ market-maker for such security are subject only to the sole market-maker disclosure, and the disclosure with respect to commissions to be paid to the broker-dealer and the registered representative. Finally, all NASDAQ securities would be exempt from the recently-adopted regulations regarding penny stocks if NASDAQ raised its requirements for continued listing so that any issuer with less than $2,000,000 in net tangible assets or stockholders' equity would be subject to delisting. These criteria are more stringent than the current NASDAQ maintenance requirements. 15. No Dividends. The Company has not paid any cash dividends on its Common Stock since inception and does not intend to pay cash dividends on its Common Stock for the foreseeable future. Although there are no restrictions on the Company's ability to pay dividends, the Company intends to follow a policy of retaining earnings, if any, to finance the development and expansion of its business. In addition, the Company is obligated to apply 10% of cash flow in excess of $1,000,000 generated in any given year to repay certain obligations. 16. Preferred Stock Authorized. The Company's Board of Directors has the authority, without further action of the stockholders, to issue shares of preferred stock which have conversion, dividend, liquidation and voting rights that could adversely affect holders of Common Stock or could be used to restrict the Company's ability to merge with or sell its assets to a third party, thereby preserving control of the Company by its present owners. Although 23 the Company has no present intention to issue any shares of preferred stock, there can be no assurance that the Company will not do so in the future. 17. Rule 144 Sales. Of the shares of the Company's Common Stock presently outstanding, approximately 3,357,491 are "restricted securities" as that term is defined by Rule 144 promulgated under the Securities Act and in the future may be sold only in compliance with Rule 144 or pursuant to registration under the Securities Act or pursuant to another exemption therefrom. For so long as the Registration Statement of which the Concurrent Prospectus is a part is current and effective, the shares owned by the selling security holders thereunder and offered thereby (approximately 35,000) and the shares covered by the Concurrent Prospectus that are issuable upon the exercise of options, warrants and SARs (approximately 85,000) may be sold without regard to the volume limitations, described below, set forth in Rule 144. Generally, under Rule 144, each person having held restricted securities for a period of two years may, every three months, sell in ordinary brokerage transactions an amount of shares which does not exceed the greater of one percent (1%) of the Company's then outstanding shares of Common Stock, or the average weekly volume of trading of such shares of Common Stock as reported during the preceding four calendar weeks. A person who has not been an affiliate of the Company for at least the three months immediately proceeding the sale and who has beneficially owned shares of the Common Stock for at least three years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. Of the restricted shares, a substantial number have been held by non-affiliates of the Company for more than three years or have been held by affiliates of the Company for more than two years. Actual sales, or the prospect of sales by the present stockholders of the Company or by future holders of restricted securities under Rule 144, or otherwise, may, in the future, have a depressive effect upon the price of the Company's shares of Common Stock in any market that may develop therefor, and also could render difficult sales of the Company's securities purchased by investors herein. 18. Control by Officers, Directors and Principal Stockholders. The Company's officers and directors own, of record, 287,244 outstanding shares of Common Stock, of which 36,818 are being offered pursuant to the Concurrent Prospectus (not including 463,948 shares, which are being offered pursuant to the Concurrent Prospectus, issuable upon the exercise of options). In addition, William C. Samuels, Chairman, President, Chief Executive Officer and a director of the Company, pursuant to a voting agreement, has voting control of the 2,341,334 shares of Common Stock owned of record by the Post Company. In addition, pursuant to a separate voting agreement, Mr. Samuels has voting control of the shares owned by Dr. Freeman. Consequently, Mr. Samuels has voting control over 3,170,874 shares of Common Stock, or approximately 27.20% of the outstanding shares of Common Stock, assuming issuance of 352,948 shares of Common Stock upon exercise of options. Accordingly, Mr. Samuels could have substantial influence over the affairs of the Company, including the election of directors. 19. Possible Acquisition of Control by The Washington Post Company. Beginning March 17, 1995, and for two years thereafter (subject to adjustment in certain circumstances), the Post Company shall have the right to purchase from the Company, at a price to be determined, the amount of shares of Common Stock necessary to bring its percentage ownership of the total then outstanding shares of Common Stock to 51%. If such option is exercised, the right, pursuant to agreement, of William C. Samuels, Chairman, President and Chief Executive 24 Officer of the Company, to vote the shares owned of record by the Post Company will terminate, and the Post Company will be able to control the affairs of the Company. 20. Outstanding Options and Warrants. As of the date of this Prospectus, the Company had granted options and warrants to purchase an aggregate of 1,458,828 shares of Common Stock that had not been exercised. Of the shares of Common Stock subject to these unexercised options and warrants, 12,000 may be purchased for between $1.00 and $2.00 per share; 673,995 may be purchased for between $2.00 and $3.00 per share (46,000 of which are being offered pursuant to the Concurrent Prospectus); 365,500 may be purchased for between $3.00 and $4.00 per share (13,333 of which are being offered pursuant to the Concurrent Prospectus); 25,000 may be purchased for between $4.00 and $5.00 per share; and 382,333 may be purchased for between $5.00 to $6.00 per share (7,500 of which are being offered pursuant to the Concurrent Prospectus). To the extent that the outstanding stock options and warrants are exercised, dilution to the interests of the Company's stockholders will occur. Moreover, the terms upon which the Company will be able to obtain additional equity capital may be affected adversely, since the holders of the outstanding options and warrants can be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain any needed capital on terms more favorable to the Company than those provided in the outstanding options and warrants. 21. Possible Volatility of Securities Prices. The market price of the Company's securities may be highly volatile, as has been the case with the securities of other companies engaged in high technology research and development. Factors such as announcements by the Company or its competitors concerning technological innovations, new commercial products or procedures, proposed government regulations and developments or disputes relating to patents or proprietary rights may have a significant impact on the market price of the Company's securities. 25 USE OF PROCEEDS The Company will not receive any proceeds from the Selling Stockholder's sale of shares of Common Stock, but will receive the proceeds of the exercise of the Options. Such proceeds will be used by the Company for working capital purposes. 26 SELLING STOCKHOLDER The Selling Stockholder acquired the Shares upon exercise of Options granted pursuant to the Option Agreement between the Selling Stockholder and the Company. The Selling Stockholder has served as President and a Director of the Company since August 1, 1989, and became the Chief Executive Officer in 1993. He also served as Chairman of ACTV Interactive, a partnership with the Post Company, from July 1992 through March 1994, when the Company acquired the Post Company's interest in ACTV Interactive. The Selling Stockholder currently serves as Chairman of the Board, President, Chief Executive Officer and a Director of the Company. The following table sets forth the (a) the name of the Selling Stockholder, (b) the number of shares of Common Stock beneficially owned by the Selling Stockholder as of September , 1995 (c) the number of shares of Common ---- Stock available to be acquired by the Selling Stockholder pursuant to the Option Agreement that is the subject of the Registration Statement of which this Prospectus is a part, some of which shares are being registered hereby, and some of which shares may be sold pursuant to this Prospectus, and (d) the number of shares of Common Stock and the percentage, of the total class of Common Stock outstanding to be beneficially owned by the Selling Stockholder following this offering, assuming the sale pursuant to this offering or otherwise of all shares of Common Stock acquired or acquirable by such Selling Stockholder pursuant to the Option Agreement that is the subject of the Registration Statement of which this Prospectus is a part, which shares are being registered. There is no assurance, however, that the Selling Stockholder will sell any or all of the shares of Common Stock offered hereunder or owned by the Selling Stockholder.
Number of Shares of Common Stock Beneficially Owned After this Offering ---------------------------------- Selling Stockholder Beneficially Owned Offered Hereby Number Percent - ------------------- ------------------ -------------- ------ ------- William C. Samuels 3,170,874(1) 100,000 3,070,874 26.53%
------------------- (1) Includes (a) 240,950 shares of Common Stock owned by Mr. Samuels, (b) 352,948 shares of Common Stock issuable to Mr. Samuels upon the exercise of stock options, and (c) 2,341,334 shares of Common Stock owned by The Washington Post Company (the "Post Company") and 235,642 shares owned by Dr. Freeman, respectively, which are subject to a voting agreement with Mr. Samuels. Does not include shares that may be issued by the Company upon the exercise of SARs. 27 INDEMNIFICATION OF OFFICERS AND DIRECTORS Reference is made to paragraph "Twelfth" of the Restated Certificate of Incorporation of the Company (Exhibit 4.1.1), which contains a provision, as permitted by Section 145 of the Delaware General Corporation Law, that eliminates the personal liability of directors to the Company and its stockholders for monetary damages for unintentional breach of a director's fiduciary duty to the Company. This provision does not permit any limitation on, or elimination of the liability of a director for disloyalty to the Company or its stockholders, for failing to acting good faith, for engaging in intentional misconduct or a knowing violation of law, for obtaining an improper personal benefit or for paying a dividend or approving a stock repurchase that was illegal under the Delaware General Corporation Law. The Restated Certificate of Incorporation and By-Laws of the Company require the Company to indemnify directors and officers against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation (a "derivative action") if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action. Moreover, the Delaware General Corporation Law requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) in connection with the securities being registered, the Company will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 28 PLAN OF DISTRIBUTION The Shares offered hereby are being sold by the Selling Stockholder as a principal for his own account. The distribution of the Shares by the Selling Stockholder may be effected from time to time in ordinary brokerage transactions in the over-the-counter market at market prices prevailing at the time of sale or in one or more negotiated transactions at prices acceptable to the Selling Stockholder. The brokers or dealers through or to whom the Shares may be sold may be deemed underwriters of the Shares within the meaning of the Securities Act, in which event all brokerage commissions or discounts and other compensation received by such brokers or dealers may be deemed to be underwriting compensation. The Company will bear all expenses of the offering, except that the Selling Stockholder will pay any applicable brokerage fees or commissions and transfer taxes. In order to comply with the securities laws of certain states, if applicable, the Shares will be sold only through registered or licensed brokers or dealers. In addition, in certain states, the Shares may not be sold unless they have been registered or qualified for sale in such state or an exemption from such registration or qualification requirement is available and is complied with. 29 LEGAL MATTERS Certain legal matters, including the legality of the issuance of the shares of Common Stock offered by the Company, are being passed upon for the Company by Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue, New York, New York 10022. Jay M. Kaplowitz, a member of Gersten, Savage, Kaplowitz & Curtin, LLP has been a director of the Company since 1989. Mr. Kaplowitz owns 2,000 shares of the Company's Common Stock and other options to purchase 25,000 shares, and Sheila Kaplowitz, his wife, owns 22,500 shares of Common Stock. Edward Curtin, a member of the firm of Gersten, Savage, Kaplowitz & Curtin, LLP, owns 2,000 shares of Common Stock of the Company and Jill Curtin, his wife, also owns 2,000 shares of Common Stock of the Company. 30 EXPERTS The consolidated financial statements of ACTV and its subsidiaries incorporated in this Prospectus by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 31 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT -------------------------------------------------- Item 3. Incorporation of Documents by Reference ------ The following documents filed by the Company with the Commission are incorporated herein by reference: (1) The Company's Registration Statement on Form S-1 (File No. 33- 34618) which became effective on May 4, 1990. (2) Annual Report on Form 10-K for the year ended December 31, 1994. (3) Annual Report on Form 10-K/A-1 for the year ended December 31, 1994. (4) Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995. (5) Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995. In addition to the foregoing, all documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment indicating that all of the securities offered hereunder have been sold or deregistering all securities then remaining unsold shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this Prospectus shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. All information appearing in this Prospectus is qualified in its entirety by the information and financial statements (including notes thereto) appearing in the documents incorporated herein by reference, except to the extent set forth in the immediately preceding statement. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the oral or written request of such person, a copy of any document incorporated in this Prospectus by reference, except exhibits to such information, unless such exhibits are also expressly incorporated by reference herein. Requests for such information should be directed to ACTV, Inc., 1270 Avenue of the Americas, New York, New York 10020, Attention: Secretary, telephone number (212) 262-2570. II-1 Item 4. Description of Securities ------ The Common Stock of the Company is registered under Section 12 of the Securities Exchange Act of 1934. Item 5. Interests of Named Experts and Counsel ------ Certain legal matters, including the legality of the issuance of the shares of Common Stock offered by the Company, are being passed upon for the Company by Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue, New York, New York 10022. Jay M. Kaplowitz, a member of Gersten, Savage, Kaplowitz & Curtin, LLP has been a director of the Company since 1989. Mr. Kaplowitz owns 2,000 shares of the Company's Common Stock and other options to purchase 25,000 shares, and Sheila Kaplowitz, his wife, owns 22,500 shares of Common Stock. Edward Curtin, a member of the firm of Gersten, Savage, Kaplowitz & Curtin, LLP, owns 2,000 shares of Common Stock of the Company and Jill Curtin, his wife, also owns 2,000 shares of Common Stock of the Company. Item 6. Indemnification of Directors of Officer ------ Reference is made to paragraph "Twelfth" of the Restated Certificate of Incorporation of the Company (Exhibit 4.1.1), which contains a provision, as permitted by Section 145 of the Delaware General Corporation Law, that eliminates the personal liability of directors of the Company and its stockholders for monetary damages for unintentional breach of a director's fiduciary duty to the Company. This provision does not permit any limitation on, or elimination of the liability of a director for disloyalty to the Company or its stockholders, for failing to acting good faith, for engaging in intentional misconduct or a knowing violation of law, for obtaining an improper personal benefit or for paying a dividend or approving a stock repurchase that was illegal under the Delaware General Corporation Law. The Restated Certificate of Incorporation and By-Laws of the Company require the Company to indemnify directors and officers against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation (a "derivative action") if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action. Moreover, the Delaware General Corporation Law requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities II-2 (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) in connection with the securities being registered, the Company will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 7. Exemption from Registration Claimed ------ Not Applicable. Item 8. Exhibits ------ 4.1.1 Restated Certificate of Incorporation(1) 4.1.2 Amendment to Certificate of Incorporation(1) 4.2.1 By-Laws(1) 4.3 Option Agreement, as amended August 1, 1989, by and between the Company and William C. Samuels(2) 5. Opinion of Gersten, Savage, Kaplowitz & Curtin, LLP(2) 10.1 Employment Agreement, dated August 1, 1995, between the Company and William C. Samuels(2) 10.2 Employment Agreement, dated August 1, 1995, between the Company and David Reese(2) 10.3 Agreement, dated August 16, 1995, between the Company and Cable News Network, Inc.(2) 24.1 Consent of Deloitte & Touche LLP(2) 24.2 Consent of Gersten, Savage, Kaplowitz & Curtin, LLP (included in Exhibit 5)(2) _______________ (1) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 33-34618) which became effective on May 4, 1990. (2) Filed herewith. II-3 Item 9. Undertakings ------ The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or in the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer, or controlling person of the Company in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Company will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8/S-3 has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York on the 4th day of October, 1995. ACTV, INC. By: /s/ William C. Samuels ------------------------- William C. Samuels President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Act of 1933, this Form S- 8/S-3 registration statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- /s/ William C. Samuels Chairman of the Board, President October 4, 1995 ------------------------- Chief Executive Officer and Director William C. Samuels /s/ David Reese President, ACTV Entertainment, Inc. and October 4, 1995 ------------------------- Director David Reese /s/ Christopher C. Cline Vice President Chief Financial October 4, 1995 ------------------------- Officer and Secretary Christopher C. Cline /s/ Jay M. Kaplowitz Director October 4, 1995 ------------------------- Jay M. Kaplowitz /s/ Richard Hyman Director October 4, 1995 ------------------------- Richard Hyman Director , 1995 ------------------------- ------- Howard Squadron *By: /s/ William C. Samuels October 4, 1995 ------------------------- William C. Samuels Attorney-in-fact
EXHIBIT INDEX 4.3 Option Agreement, as amended August 1, 1989, by and between the Company and William C. Samuels. 5. Opinion of Gersten, Savage, Kaplowitz & Curtin, LLP 10.1 Employment Agreement, dated August 1, 1995, between the Company and William C. Samuels 10.2 Employment Agreement, dated August 1, 1995, between the Company and David Reese 10.3 Agreement, dated August 16, 1995, between the Company and Cable News Network, Inc. 24.1 Consent of Deloitte & Touche LLP 24.2 Consent of Gersten, Savage, Kaplowitz & Curtin, LLP (included in Exhibit 5) EX-4.3 2 EXHIBIT 4.3 OPTION AGREEMENT ---------------- OPTION AGREEMENT, as amended, dated as of August 1, 1989 between ACTV, Inc. a Delaware corporation (the "Corporation"), and WILLIAM C. SAMUELS, having a residence at 1 West 67th Street, New York, New York 10023 (the "Optionee"). The Corporation desires to grant to the Optionee three options, which in the aggregate would give optionee the right and option to purchase up to 400,000 shares of the outstanding shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation on the date hereof, on the terms and subject to the conditions hereinafter set forth. This Option Agreement supersedes any prior option agreements, which prior option agreements are hereby canceled. NOW, THEREFORE, in consideration of the receipt of $1.00, and other-good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. Option to Purchase Common Stock. ------------------------------- (a) Option A for 120,000 of the outstanding shares of ------------------------------------------------- Common Stock. Subject to Section 7 hereof, (i) commencing on the - ------------ date hereof and on the first day of each month hereafter until January 1, 1991, the Corporation grants to the Optionee the fully vested right and option (collectively, the "Option A") to purchase from the Corporation 6,666 shares ("Option A Shares") at a purchase price of $2.50 per Option A Share (the "Option A Price") and (ii) commencing on February 1, 1991, the Corporation grants to the Optionee the Option A to purchase from the Corporation 6,678 Option A Shares, at the Option A Price. Said rights shall be cumulative so that as of February 1, 1991, Optionee shall have the right to purchase 120,000 Option A Shares, which shares are subject to adjustment pursuant to Section 4(a) and (b) hereof. (b) Option B for 140,000 of the outstanding shares of ------------------------------------------------- Common Stock. Subject to Section 7 hereof, commencing on the date - ------------ hereof, and vesting on July 1, 1992, the Corporation grants to the Optionee the fully vested right and option (collectively, the "Option B") to purchase from the Corporation 140,000 shares ("Option B Shares"), at a purchase price of $2.50 per Option B Share (the "Option B Price"). The Option B Shares are subject to adjustment pursuant to Section 4(a) hereof. (c) Option C for 140,000 of the outstanding shares of ------------------------------------------------- Common Stock. Subject to Section 7 hereof, (i) commencing on the - ------------ date hereof and on the first day of each month from July 1, 1992 through May 1, 1993, the Corporation grants to the Optionee the fully vested right and option (collectively, the "Option C") (the Option A, Option B and Option C are collectively referred to hereinafter as the "Option") to purchase from the Corporation 11,666 shares ("Option C Shares"), at a purchase price of $2.50 per option C Share (the "Option C Price"), (ii) commencing on June 1, 1993, the Corporation grants to the Optionee the Option C to purchase from the Corporation 11,674 Option C Shares at the Option C Price. Said rights shall be cumulative so that as of June 1, 1993, Optionee shall have the right to the purchase of 140,000 Option C Shares, which shares are subject to adjustment pursuant to Section 4(a) hereof. (d) Exercise Option. The Option may be exercised by the --------------- holder of this Option, in whole or in part, by delivery to the Corporation, at any time during the respective Option Period (as defined below in subsection (a) and (b) of Section 7 hereof) of a written notice (the "Option Notice"), which Option Notice shall state such holder's intention to exercise the Option, the date on which the holder proposes to purchase the Option Shares (the "Closing Date") and the number of Option Shares to be purchased on the Closing Date, which Closing Date shall be no later than 30 days nor earlier than 10 days following the date of the Option Notice. Upon receipt by the Corporation of an Option Notice from the holder of this Option, the Corporation shall be obligated to sell, and the holder of this Option shall be obligated to purchase, that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. (e) Delivery of Shares. The purchase and sale of Option ------------------ Shares acquired pursuant to the terms of this Agreement shall be made on the Closing Date at the offices of the Corporation. Delivery of the stock certificate or other instrument registered in the name of the holder of this Option, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the holder of this Option on the Closing Date against the delivery to the Corporation of a check in the full amount of the aggregate purchase price therefor. SECTION 2. Representations and Warranties of the ------------------------------------- Holder. The holder of this Option hereby represents and warrants - ------ to the Corporation that in the event he acquires any Option Shares, such Option Shares will be acquired for his own account, for investment and not with a view to the distribution thereof. The holder of this Option understands that the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and that they must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or the transaction is exempt from registration. SECTION 3. Reorganizations; Mergers; Sales; Etc. ------------------------------------ (a) Reorganization, Reclassification, Merger and Sale in ---------------------------------------------------- connection with ACTV, Inc., a Delaware corporation. If, at any - -------------------------------------------------- 2 time during the Option Period, there shall be any capital reorganization in connection with the merger with or into ACTV, Inc., a Delaware corporation ("ACTV-Delaware"), reclassification of Common Stock, in connection with the merger with ACTV-Delaware, the consolidation or merger of the Corporation with or into ACTV- Delaware or the sale of all or substantially all of the properties and assets of the Corporation as an entirety to ACTV-Delaware, this Option shall, after such reorganization, reclassification, consolidation, merger or sale, be exercisable for the kind and number of shares of stock or other securities or property of the Corporation or of ACTV-Delaware resulting from properties and assets shall have been sold to which such holder would have been entitled if such holder had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. For purposes of this Agreement references to the Corporation shall include ACTV- Delaware. (b) Capital Reorganizations and Reclassifications in ------------------------------------------------ General. If, at any time during the Option Period, thee shall be - ------- any reorganization or reclassification of Common Stock (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), this Option shall, after such reclassification be exercisable for the kind and number of shares of stock or other securities or property of the Corporation result from such reorganization or reclassification to which such holder would have been entitled if such holder had held shares of Common Stock issuable upon the exercise hereof immediately prior to such capital reorganization or reclassification. (c) Mergers or Sale of substantially all of the capital --------------------------------------------------- stock and/or assets. If, at any time during the Option Period, - ------------------- there shall be any consolidation or merger of the Corporation with or into another corporation or of sale of fifty percent or more of the properties and assets of the Corporation as an entirety to another corporation or person in one transaction or a series of related transactions, this Option shall, after such consolidation, merger or sale, be immediately exercisable, without reference to any conditions described in Section 1(b) hereof, for the balance of the Option Period for the kind and number of shares of stock or other securities or property of the Corporation or of the surviving corporation resulting from such properties and assets shall have been sold, to which such holder would have been entitled if such holder had held shares of Common Stock issuable upon the exercise hereof immediately prior to such consolidation, merger or sale. SECTION 4. Adjustment of Option Shares and Option Price. -------------------------------------------- 3 The Option Price shall be subject to adjustment from time to time as follows: (a) If, at any time during the Option Period, the number of shares of Common Stock outstanding is altered by a stock dividend payable in shares of Common Stock or by a subdivision or split-up or combination of shares of Common Stock, then, immediately following the record date fixed for the determination of holders of shares of Common Stock, entitled to receive such subdivision or split-up or combination, the Option Price shall be appropriately increased or decreased and the number of shares of Common Stock issuable upon the exercise hereof shall be increased or decreased, all in proportion to such increase or decrease in outstanding shares. (b) If, at any time during the first 48 months of the Option Periods, the Corporation issues any previously unissued Common Stock as the result of any financing, acquisition, joint venture or other business transaction, then, during such period the number of shares subject to the Option shall be adjusted such that the holder thereof shall have the right to exercise the Option for the same percentage of the issued and outstanding Common Stock of the Corporation after giving effect to such transaction (including the future conversion or exercise of any option or warrants issued in such transaction during the term of the Option, but converted thereafter) as he held options for immediately prior to such transaction. SECTION 5. Piggyback Registration. If, at any time ---------------------- commencing after the date hereof and expiring seven (7) years thereafter, the Corporation proposes to register any of its securities under the Act (other than in connection with a merger securities under the Act (other than in connection with a merger or pursuant to Form S-8 or other comparable Form) it will give written notice by registered mail, at least thirty (30) days prior to the filing of each such registration statement, to the Optionee of its intention to do so. If the Optionee notifies the Corporation within twenty (20) days after receipt of any such notice of his desire to include any Common Stock owned by him in such proposed registration Statement, the Corporation shall afford the Optionee the opportunity to have any of his of Common Stock registered under such registration statement; provided that (i) that in the opinion of counsel for the Corporation such inclusion does not pose any significant legal problem and (ii) that if such Registration Statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion; provided that if the underwriter does not approve of the inclusion of any or all such securities, that no principal shareholder is permitted to include a higher percentage of shares of common stock owned by him in such Registration Statement. 4 The Optionee shall bear his proportional exercise of any such registration. Notwithstanding the provisions of this Section 5, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 5 (irrespective of whether a written request for inclusion of any such securities shall have been made) to elect not to file any such proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. SECTION 6 Transfer of Option; Successors and Assigns. ------------------------------------------ This Agreement (including the Option) and all rights hereunder shall not be transferable to at any time without the prior written consent of the Corporation. This Agreement and all the rights hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and transferees. SECTION 7. Termination. Options A, B and C shall ----------- terminate shall no longer be exercisable on the date eight (8) years from the date each allotment is granted. SECTION 8. Notices. All notices or other communications ------- which are required or permitted hereunder shall be in writing and sufficient if delivered personally or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If the Corporation, to: ACTV, Inc. 1270 Avenue of the Americas - Suite 2401 New York, New York 10020 Attention: Michael J. Freeman, Chairman With a copy to: Jay Kaplowitz, Esquire Gersten, Savage, Kaplowitz & Curtin 575 Lexington Avenue New York, New York 10022 If to the Optionee, to: William C. Samuels 1 West 67th Street New York, New York 10023 or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. If mailed as aforesaid, any such communication shall be 5 deemed to have been given on the third business day following the day on which the piece of mail containing such communication is posted. SECTION 9. Governing Law. This Agreement shall be ------------- governed by, and construed in accordance with the laws of the State of New York. SECTION 10. Entire Agreement. This Agreement contains ---------------- the entire agreement between the parties hereto with respect to the transactions contemplated herein an supersedes all previously written or oral negotiations, commitments, representations and agreements. SECTION 11. Execution in Counterpart. This Agreement ------------------------ may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. SECTION 12. Amendments and Modifications. This ---------------------------- Agreement, or any provision hereof, may not be amended, changed or modified without the prior written consent of each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement to be executed and delivered as of the date first above written. ACTV, INC. By: /s/ Michael Freeman, Phd., --------------------------- Michael Freeman, Phd., Chairman, CEO /s/ William C. Samuels --------------------------- William C. Samuels 6 EX-5 3 EXHIBIT 5 [ "LETTERHEAD OF GERSTEN, SAVAGE, KAPLOWITZ & CURTIN, LLP" ] September 29, 1995 ACTV, Inc. 1270 Avenue of the Americas New York, New York 10020 Gentlemen: You have requested our opinion, as counsel for ACTV, Inc., a Delaware corporation (the "Company"), in connection with a registration statement on Form S-8/S-3 (the "Registration Statement"), under the Securities Act of 1933 (the "Act"), being filed by the Company with the Securities and Exchange Commission. The Registration Statement relates to the registration of 100,000 shares of Common Stock, par value $.10 per share ("Common Stock"), of the Company. We have examined such records and documents and made such examinations of law as we have deemed relevant in connection with this opinion. We have relied upon representations of officers of the Company as to matters of fact. It is our opinion that, assuming the accuracy of the foregoing and due compliance with the Act, 20,000 shares of Common Stock, when issued and delivered, were legally issued and are fully paid and non-assessabie and 80,000 shares of Common Stock, when issued and delivered, will be legally issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Registration Statement. In so doing, we do not admit that we are in the category of persons whose consent is required under Section 3 of the Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, /s/ GERSTEN, SAVAGE, KAPLOWITZ & CURTIN ----------------------------------------- GERSTEN, SAVAGE, KAPLOWITZ & CURTIN, LLP EX-10.1 4 EXHIBIT 10.1 ACTV, INC. EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995 by and between ACTV, INC., a Delaware corporation, having an office at 1270 Avenue of the Americas, New York, New York 10020 (hereinafter referred to as "Employer") and WILLIAM C. SAMUELS, an individual residing at One West 67th Street, New York, New York 10023 (hereinafter referred to as "Employee"); W I T N E S S E T H: WHEREAS, Employer employs, and desires to continue to employ, Employee as Chairman of the Board of Directors, President and Chief Executive Officer of Employer; and WHEREAS, Employee is willing to continue to be employed as the Chairman of the Board of Directors, President and Chief Executive Officer of Employer in the manner provided for herein, and to perform the duties of the Chairman of the Board of Directors, President and Chief Executive Officer of Employer upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the promises and mutual covenants herein set forth it is agreed as follows: 1. Employment of Chairman of the Board of Directors, ------------------------------------------------- President and Chief Executive Officer. - ------------------------------------- Employer hereby employs Employee as Chairman of the Board of Directors, President and Chief Executive Officer of Employer. 2. Term. ---- a. Subject to Section 10 below and further subject to Section 2(b) below, the term of this Agreement shall commence on August 1, 1995 and end on December 31, 2000. Each 12 month period from January 1 through December 31 during the term hereof shall be referred to as an "Annual Period." During the term hereof, Employee shall devote substantially all of his business time and efforts to Employer and its subsidiaries and affiliates. b. Subject to Section 10 below, unless the Board of Directors of the Company (the "Board") of Employer shall determine to the contrary and shall so notify Employee in writing on or before the end of any Annual Period, then at the end of each Annual Period, the term of this Agreement shall be automatically extended for one (1) additional Annual Period to be added at the end of the then current term of this Agreement. EXHIBIT A --------- 3. Duties. The Employee shall perform those functions ------ generally performed by persons of such title and position, shall attend all meetings of the stockholders and the Board, shall perform any and all related duties and shall have any and all powers as may be prescribed by resolution of the Board, and shall be available to confer and consult with and advise the officers and directors of Employer at such times that may be required by Employer. Employee shall report directly and solely to the Board. 4. Compensation. ------------ a. (i) Employee shall be paid a minimum of $190,000 through and including December 31, 1995 and for each Annual Period thereafter; provided, however, that Employee's salary shall be increased annually at the beginning of each Annual Period commencing January 1, 1996 by an amount equal to the amount of his annual salary for the immediately preceding Annual Period times the percentage increase in the CPIW (New York) then in effect as compared to the previous period for which the CPIW (New York) is available. Employee shall be paid periodically in accordance with the policies of the Employer during the term of this Agreement, but not less than monthly. (ii) Employee is eligible for semi-annual bonuses, if any, which will be determined and paid in accordance with policies set from time to time by the Board. b. (i) In the event of a "Change of Control" whereby (A) A person (other than the Washington Post Company or a person who is an officer or a Director of Employer on the effective date hereof), including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes, or obtains the right to become, the beneficial owner of Employer securities having 30% or more of the combined voting power of then outstanding securities of the Employer that may be cast for the election of directors of the Employer; (B) At any time, a majority of the Board- nominated slate of candidates for the Board is not elected; (C) Employer consummates a merger in which it is not the surviving entity; (D) Substantially all Employer's assets are sold; or (E) Employer's stockholders approve the dissolution or liquidation of Employer; then -2- (ii) (A) All stock options, warrants and stock appreciation rights ("Rights") granted by Employer to Employee under any plan or otherwise prior to the effective date of the Change of Control, shall become vested, accelerate and become immediately exercisable; at an exercise price of 10 cents per share if applicable, adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof. In the event Employee owns or is entitled to receive any unregistered securities of Employer, then Employer shall use its best efforts to effect the registration of all such securities as soon as practicable, but no later than 120 days after the effective date of the registration statement; provided, however, that such period may be extended or delayed by Employer for one period of up to 60 days if, upon the advice of counsel at the time such registration is required to be filed, or at the time Employer is required to exercise its best efforts to cause such registration statement to become effective, such delay is advisable and in the best interests of Employer because of the existence of non-public material information, or to allow Employer to complete any pending audit of its financial statements; (B) Any outstanding principle and interest on loans to Employee pursuant to Section 4.g.(ii), below, shall be recalculated and reconstituted as if the exercise price of the Rights financed thereby were, ab initio, 10 cents per share. -- ------ (C) If upon said Change of Control, Employee is not retained as Chief Executive Officer or substantially similar position of Employer or the surviving entity, as applicable, under terms and conditions substantially similar to those herein, then in addition, Employee shall be eligible to receive a one-time bonus, equal on an after-tax basis to two times his then current annual base salary. To effectuate this provision, the bonus shall be "grossed-up" to include the amount necessary to reimburse Employee for his federal, state and local income tax liability on the bonus and on the "gross-up" at the respective effective marginal tax rates. In no event shall this bonus exceed 2.7 times Employee's then current base salary. Said bonus shall be paid within thirty (30) days of the Change of Control. c. Employer shall include Employee in its health insurance program available to Employer's executive officers. d. Employer shall maintain a life, accidental death and dismemberment insurance policy on Employee for the benefit of a beneficiary named by Employee in an amount not less than $750,000. Ownership of the policy shall be assigned to Employee upon termination of Employee's employment under this Agreement. -3- e. (i) A bonus plan shall be instituted for Employee which shall take account of the efforts of Employee in generating value to Employer's shareholders. Under said plan, Employee shall be entitled to an annual bonus payable for each 12 month period commencing April 1, 1995 in cash and/or unregistered securities of Employer, at the option of the Compensation Committee of the Board, equal to 2% of the increase for said 12 month period in the total market capitalization of Employer calculated upon the excess of the total of the average daily closing bid (if applicable) price of each class of Employer's shares for the last 90 days of the 12 month period, multiplied by the number of shares of each class outstanding as reported by Employer's Certified Public Accountants, (the "90 Day Average") over the Base, which shall be the greater of $50,000,000 or the highest previous 90 Day Average against which a bonus was paid under this bonus plan, if any. Should the Compensation Committee elect hereunder to pay Employee in unregistered securities, said securities shall be valued at 60% of the most recent 90 Day Average. Should Employer's shares no longer be publicly traded, the current 90 Day Average shall be determined by a 3 person panel, 1 person appointed each by Employer and Employee and 1 appointed by the former 2. Employee shall be entitled to receive compensation under this plan for five fiscal years following expiration or termination of this employment contract, except that if Employee is terminated for cause as defined in Section 10.a.(i) hereof or resigns other than for reasons of disability, then said compensation shall continue for three fiscal years. (ii) Employee shall also be entitled to participate pari passu in any other program established by Employer pursuant to which any executive officers receive a share of the profits of Employer. f. Employee shall have the right to participate in any other employee benefit plans established by Employer. g. Unless a pro-existing plan of Employer expressly forbids it, all Rights which may become exercisable during the term hereof shall be paid for in cash only if Employee so elects, otherwise they may be paid for (i) by the transfer by Employee to Employer of so much of Employee's Rights which, when valued at the highest trading price of the underlying securities of Employer during the previous six months, will offset the price of the Rights then being exercised; (ii) by means of a non-recourse Note with interest at the lowest rate, if any, required to be charged by any governmental authority, to accrue and become due and payable with -4- the principle, in an amount no greater than the exercise price, given by Employee to Employer and secured solely by the shares of stock being paid for thereby, which Note shall become due and payable at the earlier of the expiration hereof or, on a pro rata basis, the sale by Employee of all or part of the Rights or underlying stock which constitute security for the Note; or (iii) by any combination of cash and (ii) or (iii), above. 5. Board of Directors. Employer agrees that so long as ------------------ this Agreement is in effect, Employee will be nominated to the Board as part of management's slate of Directors. 6. Expenses. Employee shall be reimbursed for all of -------- his actual out-of-pocket expenses incurred in the performance of his duties hereunder, provided such expenses are acceptable to Employer, which approval shall not be unreasonably withheld, for business related travel and entertainment expenses, and that Employee shall submit to Employer reasonably detailed receipts with respect thereto. 7. Vacation. Employee shall be entitled to receive -------- four (4) weeks paid vacation time after each year of employment upon dates agreed upon by Employer. Upon separation of employment, for any reason, vacation time accrued and not used shall be paid at the salary rate of Employee in effect at the time of employment separation. 8. Secrecy. At no time shall Employee disclose to ------- anyone any confidential or secret information (not already constituting information available to the public) concerning (a) internal affairs or proprietary business operations of Employer or (b) any trade secrets, new product developments, patents, programs or programming, especially unique processes or methods. 9. Covenant Not to Compete. Subject to, and limited ----------------------- by, Section 11(b), Employee will not, at any time, anywhere in the world, during the term of this Agreement, and for one (1) year thereafter, either directly or indirectly, engage in, with or for any enterprise, institution, whether or not for profit, business, or company, competitive with the business (as identified herein) of Employer as such business may be conducted on the date thereof, as a creditor, guarantor, or financial backer, stockholder, director, officer, consultant, advisor, employee, member, inventor, producer, director, or otherwise of or through any corporation, partnership, association, sole proprietorship or other entity; provided, that an investment by Employee, his spouse or his children is permitted if such investment is not more than four percent (4%) of the total debt or equity capital of any such competitive enterprise or -5- business and further provided that said competitive enterprise or business is a publicly held entity whose stock is listed and traded on a national stock exchange or through the NASDAQ Stock Market. As used in this Agreement, the business of Employer shall be deemed to include the development and implementation of interactive television technology or programs. 10. Termination. ----------- a. Termination by Employer (i) Employer may terminate this Agreement upon written notice for Cause. For purposes hereof, "Cause" shall mean (A) engaging by the Employee in conduct that constitutes activity in competition with Employer; (B) the conviction of Employee for the commission of a felony; and/or (C) the habitual abuse of alcohol or controlled substances. Notwithstanding anything to the contrary in this Section 10 (a)(i), Employer may not terminate Employee's employment under this Agreement for Cause unless Employee shall have first received notice from the Board advising Employee of the specific acts or omissions alleged to constitute Cause, and such acts or omissions continue after Employee shall have had a reasonable opportunity (at least 10 days from the date Employee receives the notice from the Board) to correct the acts or omissions so complained of. In no event shall alleged incompetence of Employee in the performance of Employee's duties be deemed grounds for termination for Cause. (ii) Employer may terminate Employee's employment under this Agreement if, as a result of any physical or mental disability, Employee shall fail or be unable to perform his duties under this Agreement for any consecutive period of 90 days during any twelve-month period. If Employee's employment is terminated under this Section 10(a)(ii): (A) for the first six months after termination, Employee shall be paid 100% of his full compensation under Section 4(a) of this Agreement an the rate in effect on the date of termination, and in each successive 12 month period thereafter Employee shall be paid an amount equal to 67% of his compensation under Section 4(a) of this agreement at the rate in effect on the date of termination; (B) Employer's obligation to pay life insurance premiums on the policy referred to in Section 4(d) shall continue in effect until five years after the date of termination; and (C) Employee shall continue to be entitled, insofar as is permitted under applicable insurance policies or plans, to such general medical and employee benefit plans (including profit sharing or pension plans) as Employee had been entitled to on the date of termination. Any amounts payable by Employer to Employee under this paragraph shall be reduced by the amount of any disability payments payable by or pursuant to plans provided by Employer and actually paid to Employee. -6- (iii) This agreement automatically shall terminate upon the death of Employee, except that Employee's estate shall be entitled to receive any amount accrued under Section 4(a) and the pro-rata amount payable under Section 4(e) for the period prior to Employee's death and any other amount to which Employee was entitled of the time of his death. b. Termination by Employee (i) Employee shall have the right to terminate his employment under this Agreement upon 30 days' notice to Employer given within 90 days following the occurrence of any of the following events (A) through (F) or within three years following the occurrence of event (G): (A) Employee is not elected or retained as Chairman of the Board of Directors, President and Chief Executive Officer of Employer. (B) Employer acts to materially reduce Employee's duties and responsibilities hereunder. Employee's duties and responsibilities shall not be deemed materially reduced for purposes hereof solely by virtue of the fact that Employer is (or substantially all of its assets are) sold to, or is combined with, another entity, provided that Employee shall continue to have the same duties and responsibilities with respect to Employer's interactive business, and Employee shall report directly to the chief executive officer and/or board of directors of the entity (or individual) that acquires Employer or its assets. (C) Employer acts to change the geographic location of the performance of Employee's duties from the New York Metropolitan area. For purposes of this Agreement, the New York Metropolitan area shall be deemed to be the area within 30 miles of midtown Manhattan. (D) A Material Reduction (as hereinafter defined) in Employee's rate of base compensation, or Employee's other benefits. "Material Reduction" shall mean a ten percent (10%) differential; (E) A failure by Employer to obtain the assumption of this Agreement by any successor; (F) A material breach of this Agreement by Employer, which is not cured within thirty (30) days of written notice of such breach by Employer; (G) A Change of Control. -7- (ii) Anything herein to the contrary notwithstanding, Employee may terminate this Agreement upon thirty (30) days written notice. c. If Employer shall terminate Employee's employment other than due to his death or disability or for Cause (as defined in Section 10(a)(i) of this Agreement), or if Employee shall terminate this Agreement under Section 10(b)(i), Employer's obligations under Section 4 shall be absolute and unconditional and not subject to any offset or counterclaim and Employee shall continue to be entitled to receive all amounts provided for by Section 4 and all additional employee benefits under Section 4 regardless of the amount of compensation he may earn with respect to any other employment he may obtain. 11. Consequences of Breach by Employer; Employment Termination ----------------------------------- a. If this Agreement is terminated pursuant to Section 10 (b)(i) hereof, or if Employer shall terminate Employee's employment under this Agreement in any way that is a breach of this Agreement by Employer, the following shall apply: (i) Employee shall receive as a bonus, and in addition to his salary continuation pursuant to Section 10.c., above, a cash payment equal to the Employee's total base salary as of the date of termination hereunder for the remainder of the term plus an additional amount to pay all federal, state and local income taxes thereon on a grossed-up basis as heretofore provided, payable within 30 days of the date of such termination; except that if this Agreement is terminated pursuant to Section 10(b)(i)(G), then Employee shall not be entitled to receive a bonus under this Section 11.a.(i) but shall instead receive a lump-sum payout of Employee's total base salary for the remainder of the term plus an additional amount to pay all federal, state and local income taxes thereon on a grossed-up basis as heretofore provided, payable within 30 days of the date of such termination. (ii) Employee shall be entitled to payment of any previously declared bonus and additional compensation as provided in Section 4 (a), (b) and (e) above. b. In the event of termination of Employee's employment pursuant to Section 10(b)(i) of this Agreement, the provisions of Section 9 shall not apply to Employee. 12. Remedies -------- Employer recognizes that because of Employee's special talents, stature and opportunities in the interactive -8- television industry, and because of the special creative nature of and compensation practices of said industry and the material impact that individual projects can have on an interactive television company's results of operations, in the event of termination by Employer hereunder (except under Section 10 (a)(i) or (iii), or in the event of termination by Employee under Section 10(b)(i) before the end. of the agreed term, Company acknowledges and agrees that the provisions of this Agreement regarding further payments of base salary, bonuses and the exercisability of Rights constitute fair and reasonable provisions for the consequences of such termination, do not constitute a penalty, and such payments and benefits shall not be limited or reduced by amounts' Employee might earn or be able to earn from any other employment or ventures during the remainder of the agreed term of this Agreement. 13. Excise Tax. In the event that any payment or ---------- benefit received or to be received by Employee in connection with a termination of his employment with Employer would constitute a "parachute payment" within the meaning of Code Section 280G or any similar or successor provision to 280G and/or would be subject to any excise tax imposed by Code Section 4999 or any similar or successor provision then Employer shall assume all liability for the payment of any such tax and Employer shall immediately reimburse Employee on a "grossed-up" basis for any income taxes attributable to Employee by reason of such Employer payment and reimbursements. 14. Arbitration. Any controversies between Employer and ----------- Employee involving the construction or application of any of the terms, provisions or conditions of this Agreement, save and except for any breaches arising out of Sections 8 and 9 hereof, shall on the written request of either party served on the other be submitted to arbitration. Such arbitration shall comply with and be governed by the rules of the American Arbitration Association. An arbitration demand must be made within one (1) year of the date on which the party demanding arbitration first had notice of the existence of the claim to be arbitrated, or the right to arbitration along with such claim shall be considered to have been waived. An arbitrator shall be selected according to the procedures of the American Arbitration Association. The cost of arbitration shall be born by the losing party or in such proportions as the arbitrator shall decide. The arbitrator shall have no authority to add to, subtract from or otherwise modify the provisions of this Agreement, or to award punitive damages to either party. 15. Attorneys' Fees and Costs. 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 -9- attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. 16. Entire Agreement; Survival. This Agreement contains -------------------------- the entire agreement between the parties with respect to the transactions contemplated herein and supersedes, effective as of the date hereof any prior agreement or understanding between Employer and Employee with respect to Employee's employment by Employer. The unenforceability of any provision of this Agreement shall not effect the enforceability of any other provision. This Agreement may not be amended except by an agreement in writing signed by the Employee and the Employer, or any waiver, change, discharge or modification as sought. Waiver of or failure to exercise any rights provided by this Agreement and in any respect shall not be deemed a waiver of any further or future rights. b. The provisions of Sections 4, 8, 9, 10(a)(ii), 10 (a)(iii), 10 (c), 11, 12, 13, 14, 15, 18, 19 and 20 shall survive the termination of this Agreement. 17. Assignment. This Agreement shall not be assigned to ---------- other parties. 18. Governing Law. This Agreement and all the ------------- amendments hereof, and waivers and consents with respect thereto shall be governed by the internal laws of the state of New York, without regard to the conflicts of laws principles thereof. 19. Notices. All notices, responses, demands or other ------- communications under this Agreement shall be in writing and shall be deemed to have been given when a. delivered by hand; b. sent be telex or telefax, (with receipt confirmed), provided that a copy is mailed by registered or certified mail, return receipt requested; or c. received by the addressee as sent be express delivery service (receipt requested) in each case to the appropriate addresses, telex numbers and telefax numbers as the party may designate to itself by notice to the other parties: (i) if to the Employer: ACTV, Inc. 1270 Avenue of the Americas New York, New York, 10020 Attention: William C. Samuels -10- Telefax: (212) 459-9548 Telephone: (212) 262-2570 Gersten, Savage, Kaplowitz & Curtin 575 Lexington Avenue 27th Floor New York, New York 10022 Attention: Jay M. Kaplowitz, Esq. Telefax: (212) 980-5i92 Telephone: (212) 752-9700 (ii) if to the Employee: William C. Samuels One West 67th Street New York, New York 10023 20. Severability of Agreement. Should any part of this ------------------------- Agreement for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining provisions shall remain in full force and effect as if this Agreement had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties that they would have executed the remaining portions of this Agreement without including any such part, parts or portions which may, for any reason, be hereafter declared invalid. IN WITNESS WHEREOF, the undersigned have executed this agreement as of the day and year first above written. ACTV, INC. By: /s/ CHRISTOPHER C. CLINE ----------------------------- CHRISTOPHER C. CLINE Chief Financial officer /s/ WILLIAM C. SAMUELS ----------------------------- WILLIAM C. SAMUELS -11- EX-10.2 5 EXHIBIT 10.2 ACTV, INC. EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995 by and between ACTV, INC., a Delaware corporation, having an office at 1270 Avenue of the Americas, New York, New York 10020 (hereinafter referred to as "Employer") and DAVID REESE, an individual residing at 30 Maclay Road, Montville, New Jersey 07045 (hereinafter referred to as "Employee"); W I T N E S S E T H: WHEREAS, Employer employs, and desires to continue to employ, Employee as its Executive Vice President and President of ACTV Entertainment, Inc.; and WHEREAS, Employee is willing to continue to be employed as the Executive Vice President of Employer and President of ACTV Entertainment, Inc. in the manner provided for herein, and to perform the duties of the Executive Vice President of Employer and President of ACTV Entertainment, Inc. upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the promises and mutual covenants herein set forth it is agreed as follows: 1. Employment of Executive Vice President of Employer -------------------------------------------------- and President of ACTV Entertainment, Inc. Employer hereby employs - ----------------------------------------- Employee as its Executive Vice President and as President of ACTV Entertainment, Inc. 2. Term. Subject to Section 9 below, the term of this ---- Agreement shall commence on August 1, 1995 and end on December 31, 2000. Each 12 month period from January 1 through December 31 during the term hereof shall be referred to as an "Annual Period." During the term hereof, Employee shall devote substantially all of his business time and efforts to Employer and its subsidiaries and affiliates. 3. Duties. The Employee shall perform any and all ------ duties and shall have any and all powers as may be prescribed by the President and Chief Executive Officer and shall be available to confer and consult with and advise the officers and directors of Employer at such times that may be required by Employer. Employee shall report directly and solely to the President and Chief Executive Officer or his designee. 4. Compensation. ------------ a. (i) Employee shall be paid a minimum of $150,000 through and including December 31, 1995 and for each Annual Period thereafter; provided, however, that Employee's salary shall be increased annually at the beginning of each Annual Period commencing January 1, 1996 by an amount equal to no less than the amount of his annual salary for the immediately preceding Annual Period times the percentage increase in the CPIW (New York) then in effect as compared to the previous period for which the CPIW (New York) is available. Employee shall be paid periodically in accordance with the policies of the Employer during the term of this Agreement, but not less than monthly. (ii) Employee is eligible for semi-annual bonuses, if any, which will be determined and paid in accordance with policies set from time to time by the Board. b. (i) In the event of a "Change of Control" whereby (A) A person (other than the Washington Post Company or a person who is an officer or a Director of Employer on the effective date hereof), including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes, or obtains the right to become, the beneficial owner of Employer securities having 30% or more of the combined voting power of then outstanding securities of the Employer that may be cast for the election of directors of the Employer; (B) At any time, a majority of the Board- nominated slate of candidates for the Board is not elected; (C) Employer consummates a merger in which it is not the surviving entity; (D) Substantially all Employer's assets are sold; or (E) Employer's stockholders approve the dissolution or liquidation of Employer; then (ii) (A) All stock options, warrants and stock appreciation rights ("Rights") granted by Employer to Employee under any plan or otherwise prior to the effective date of the Change of Control, shall become vested, accelerate and become immediately exercisable; at an exercise price of 10 cents per share if applicable, adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof. In the event Employee owns or is entitled -2- to receive any unregistered securities of Employer, then Employer shall use its best efforts to effect the registration of all such securities as soon as practicable, but no later than 120 days after the effective date of the registration statement; provided, however, that such period may be extended or delayed by Employer for one period of up to 60 days if, upon the advice of counsel at the time such registration is required to be filed, or at the time Employer is required to exercise its best efforts to cause such registration statement to become effective, such delay is advisable and in the best interests of Employer because of the existence of non-public material information, or to allow Employer to complete any pending audit of its financial statements; (B) Any outstanding principle and interest on loans to Employee pursuant to Section 4.g.(ii), below, shall be recalculated and reconstituted as if the exercise price of the Rights financed thereby were, ab initio, 10 cents per share. (C) If upon said Change of Control, (i) a new Chief Executive Officer of Employer is appointed and (ii) Employee is not retained in his immediately prior position or a substantially similar position with Employer or the surviving entity, as applicable, then in addition, Employee shall be eligible to receive a one-time bonus, equal on an after-tax basis to two times his then current annual base salary. To effectuate this provision, the bonus shall be "grossed-up" to include the amount necessary to reimburse Employee for his federal, state and local income tax liability on the bonus and on the "gross-up" at the respective effective marginal tax rates. In no event shall this bonus exceed 2.7 times Employee's then current base salary. Said bonus shall be paid within thirty (30) days of the Change of Control. c. Employer shall include Employee in its health insurance program available to Employer's executive officers. d. Employer shall maintain a life, accidental death and dismemberment insurance policy on Employee for the benefit of a beneficiary named by Employee in an amount not less than $750,000. Ownership of the policy shall be assigned to Employee upon termination of Employee's employment under this Agreement. e. Employee shall also be entitled to participate pari passu in any other program established by Employer pursuant to which any executive officers receive a share of the profits of Employer. f. Employee shall have the right to participate in any other employee benefit plans established by Employer. -3- g. Unless a pre-existing plan of Employer expressly forbids it, all Rights which may become exercisable during the term hereof shall be paid for in cash only if Employee so elects, otherwise they may be paid for. (i) by the transfer by Employee to Employer of so much of Employee's Rights which, when valued at the highest trading price of the underlying securities of Employer during the previous six months, will offset the price of the Rights then being exercised; (ii) by means of a non-recourse Note with interest at the lowest rate, it any, required to be charged by any governmental authority, to accrue and become due and payable with the principle, in an amount no greater than the exercise price, given by Employee to Employer and secured solely by the shares of stock being paid for thereby, which Note shall become due and payable at the earlier of the expiration hereof or, on a pro rata basis, the sale by Employee of all or part of the Rights or underlying stock which constitute security for the Note; or (iii) by any combination of cash and (ii) or (iii), above. 5. Expenses. Employee shall be reimbursed for all of -------- his actual out-of-pocket expenses incurred in the performance of his duties hereunder, provided such expenses are acceptable to Employer, which approval shall not be unreasonably withheld, for business related travel and entertainment expenses, and that Employee shall submit to Employer reasonably detailed receipts with respect thereto. 6. Vacation. Employee shall be entitled to receive -------- four (4) weeks paid vacation time after each year of employment upon dates agreed upon by Employer. Upon separation of employment, for any reason, vacation time accrued and not used shall be paid at the salary rate of Employee in effect at the time of employment separation. 7. Secrecy. At no time shall Employee disclose to ------- anyone any confidential or secret information (not already constituting information available to the public) concerning (a) internal affairs or proprietary business operations of Employer or (b) any trade secrets, new product developments, patents, programs or programming, especially unique processes or methods. 8. Covenant Not to Compete. Subject to, and limited ----------------------- by, Section 10 (b), Employee will not, at any time, anywhere in the world, during the term of this Agreement, and for one (1) year thereafter, either directly or indirectly, engage in, with or for -4- any enterprise, institution, whether or not for profit, business, or company, competitive with the business (as identified herein) of Employer as such business may be conducted on the date thereof, as a creditor, guarantor, or financial backer, stockholder, director, officer, consultant, advisor, employee, member, inventor, producer, director, or otherwise of or through any corporation, partnership, association, sole proprietorship or other entity; provided, that an investment by Employee, his spouse or his children is permitted if such investment is not more than four percent (4%) of the total debt or equity capital of any such competitive enterprise or business and further provided that said competitive enterprise or business is a publicly held entity whose stock is listed and traded on a national stock exchange or through the NASDAQ Stock Market. As used in this Agreement, the business of Employer shall be deemed to include the development and implementation of interactive television technology or programs. 9. Termination. ----------- a. Termination by Employer (i) Employer may terminate this Agreement upon written notice for Cause. For purposes hereof, "Cause" shall mean (A) engaging by the Employee in conduct that constitutes activity in competition with Employer; (B) the conviction of Employee for the commission of a felony; and/or (C) the habitual abuse of alcohol or controlled substances. Notwithstanding anything to the contrary in this Section 9(a)(i), Employer may not terminate Employee's employment under this Agreement for Cause unless Employee shall have first received notice from the Board advising Employee of the specific acts or omissions alleged to constitute Cause, and such acts or omissions continue after Employee shall have had a reasonable opportunity (at least !0 days from the date Employee receives the notice from the Board) to correct the acts or omissions so complained of. (ii) Employer may terminate Employee's employment under this Agreement if, as a result of any physical or mental disability, Employee shall fail or be unable to perform his duties under this Agreement for any consecutive period of 90 days during any twelve-month period. If Employee's employment is terminated under this Section 9(a) (ii): (A) for the first six months after termination, Employee shall be paid 100% of his full compensation under Section 4(a) of this Agreement at the rate in effect on the date of termination, and in each successive 12 month period thereafter Employee shall be paid an amount equal to 67% of his compensation under Section 4(a) of this agreement at the rate in effect on the date of termination; (B) Employer's obligation to -5- pay life insurance premiums on the policy referred to in Section 4(d) shall continue in effect until five years after the date of termination; and (C) Employee shall continue to be entitled, insofar as is permitted under applicable insurance policies or plans, to such general medical and empicyee benefit plans (including profit sharing or pension plans) as Employee had been entitled to on the date of termination. Any amounts payable by Employer to Employee under this paragraph shall be reduced by the amount of any disability payments payable by or pursuant to plans provided by Employer and actually paid to Employee. (iii) This agreement automatically shall terminate upon the death of Employee, except that Employee's estate shall be entitled to receive any amount accrued under Section 4(a) and the pro-rata amount payable under Section 4(e) for the-period prior to Employee's death and any other amount to which Employee was entitled of the time of his death. b. Termination by Employee (i) Employee shall have the right to terminate his employment under this Agreement upon 30 days' notice to Employer given within 90 days following the occurrence of any of the following events (A) through (D) or within three years following the occurrence of event (E): (A) Employer acts to change the geographic location of the performance of Employee's duties from the New York Metropolitan area. For purposes of this Agreement, the New York Metropolitan area shall be deemed to be the area within 30 miles of midtown Manhattan. (B) A Material Reduction (as hereinafter defined) in Employee's rate of base compensation, or Employee's other benefits. "Material Reduction" shall mean a ten percent (10%) differential; (C) A failure by Employer to obtain the assumption of this Agreement by any successor; (D) A material breach of this Agreement by Employer, which is not cured within thirty (30) days of written notice of such breach by Employer; (E) A Change of Control. (ii) Anything herein to the contrary notwithstanding, Employee may terminate this Agreement upon thirty (30) days written notice. -6- c. If Employer shall terminate Employee's employment other than due to his death or disability or for Cause (as defined in Section 9(a)(i) of this Agreement), or if Employee shall terminate this Agreement under Section 9(b)(i), Employer's obligations under Section 4 shall be absolute and unconditional and not subject to any offset or counterclaim and Employee shall continue to be entitled to receive all amounts provided for by Section 4 and all additional employee benefits under Section 4 regardless of the amount of compensation he may earn with respect to any other employment he may obtain. 10. Consequences of Breach by Employer; Employment Termination ----------------------------------- a. If this Agreement is terminated pursuant to Section 9(b)(i) hereof, or if Employer shall terminate Employee's employment under this Agreement in any way that is a breach of this Agreement by Employer, the following shall apply: (i) Employee shall receive as a bonus, and in addition to his salary continuation pursuant to Section 9.c., above, a cash payment equal to the Employee's total base salary as of the date of termination hereunder for the remainder of the term plus an additional amount to pay all federal, state and local income taxes thereon on a grossed-up basis as heretofore provided, payable within 30 days of the date of such termination; except that if this Agreement is terminated pursuant to Section 9.(b)(i)(E), then Employee shall not be entitled to receive a bonus under this Section 10.a.(i) but shall instead receive a lump-sum payout of Employee's total base salary for the remainder of the term plus an additional amount to pay all federal, state and local income taxes thereon on a grossed-up basis as heretofore provided, payable within 30 days of the date of such termination. (ii) Employee shall be entitled to payment of any previously declared bonus and additional compensation as provided in Section 4(a), (b) and (e) above. b. In the event of termination of Employee's employment pursuant to Section 9(b)(i) of this Agreement, the provisions of Section 8 shall not apply to Employee. 11. Remedies -------- Employer recognizes that because of Employee's special talents, stature and opportunities in the interactive television industry, and because of the special creative nature of and compensation practices of said industry and the material impact that individual projects can have on an interactive television company's results of operations, in the event of termination by -7- Employer hereunder (except under Section 9 (a)(i) or (iii), or in the event of termination by Employee under Section 9 (b)(i) before the end of the agreed term, Company acknowledges and agrees that the provisions of this Agreement regarding further payments of base salary, bonuses and the exercisability of Rights constitute fair and reasonable provisions for the consequences of such termination, do not constitute a penalty, and such payments and benefits shall not be limited or reduced by amounts' Employee might earn or be able to earn from any other employment or ventures during the remainder of the agreed term of this Agreement. 12. Excise Tax. In the event that any payment or ---------- benefit received or to be received by Employee in connection with a termination of his employment with Employer would constitute a "parachute payment" within the meaning of Code Section 280G or any similar or successor provision to 280G and/or would be subject to any excise tax imposed by Code Section 4999 or any similar or successor provision then Employer shall assume all liability for the payment of any such tax and Employer shall immediately reimburse Employee on a "grossed-up" basis for any income taxes attributable to Employee by reason of such Employer payment and reimbursements. 13. Arbitration. Any controversies between Employer and ----------- Employee involving the construction or application of any of the terms, provisions or conditions of this Agreement, save and except for any breaches arising out of Sections 7 and 8 hereof, shall on the written request of either party served on the other be submitted to arbitration. Such arbitration shall comply with and be governed by the rules of the American Arbitration Association. An arbitration demand must be made within one (1) year of the date on which the party demanding arbitration first had notice of the existence of the claim to be arbitrated, or the right to arbitration along with such claim shall be considered to have been waived. An arbitrator shall be selected according to the procedures of the American Arbitration Association. The cost of arbitration shall be born by the losing party or in such proportions as the arbitrator shall decide. The arbitrator shall have no authority to add to, subtract from or otherwise modify the provisions of this Agreement, or to award punitive damages to either party. 14. Attorneys' Fees and Costs. 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 he may be entitled. 15. Entire Agreement; Survival. This Agreement contains -------------------------- the entire agreement between the parties with respect to the -8- transactions contemplated herein and supersedes, effective as of the date hereof any prior agreement or understanding between Employer and Employee with respect to Employee's employment by Employer. The unenforceability of any provision of this Agreement shall not effect the enforceability of any other provision. This Agreement may not be amended except by an agreement in writing signed by the Employee and the Employer, or any waiver, change, discharge or modification as sought. Waiver of or failure to exercise any rights provided by this Agreement and in any respect shall not be deemed a waiver of any further or future rights. b. The provisions of Sections 4, 7, 8, 9(a) (ii), 9(a)(iii), 9(c), 10, 11, 12, 13, 14, 17, 18 and 19 shall survive the termination of this Agreement. 16. Assignment. This Agreement shall not be assigned to ---------- other parties. 17. Governing Law. This Agreement and all the ------------- amendments hereof, and waivers and consents with respect thereto shall be governed by the internal laws of the state of New York, without regard to the conflicts of laws principles thereof. 18. Notices. All notices, responses, demands or other ------- communications under this Agreement shall be in writing and shall be deemed to have been given when a. delivered by hand; b. sent be telex or telefax, (with receipt confirmed), provided that a copy is mailed by registered or certified mail, return receipt requested; or c. received by the addressee as sent be express delivery service (receipt requested) in each case to the appropriate addresses, telex numbers and telefax numbers as the party may designate to itself by notice to the other parties: (i) if to the Employer: ACTV, Inc. 1270 Avenue of the Americas New York, New York, 10020 Attention: William C. Samuels Telefax: (212) 459-9548 Telephone: (212) 262-2570 -9- Gersten, Savage, Kaplowitz & Curtin 575 Lexington Avenue 27th Floor New York, New York 10022 Attention: Jay M. Kapiowitz, Esq. Telefax: (212) 980-5192 Telephone: {212) 752-9700 (ii) if to the Employee: David Reese 30 Maclay Road Montville, New Jersey 07045 19. Severability of Agreement. Should any part of this ------------------------- Agreement for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining provisions shall remain in full force and effect as if this Agreement had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties that they would have executed the remaining portions of this Agreement without including any such part, parts or portions which may, for any reason, be hereafter declared invalid. IN WITNESS WHEREOF, the undersigned have executed this agreement as of the day and year first above written. ACTV, Inc. By: /S/ William C. Samuels -------------------------------- WILLIAM C. SAMUELS President /S/ David Reese ------------------------------ DAVID REESE -10- EX-10.3 6 EXHIBIT 10.3 ONE CNN CENTER, Box 105366. Atlanta. GA 30348-5366 (404) 827-1500 August 15, 1995 Mr. Bruce J. Crowley ACTV, Inc. 1270 Avenue of the Amedcas Suite 2401 Rockefeller Center New York, New York 10020 Re: LA Project Dear Bruce: Subject to your acceptance of the terms and conditions set forth in this letter, Cable News Network, Inc. ("CNN") is pleased to permit ACTV, Inc. and its wholly-owned subsidiary ACTV Entertainment, Inc. and the Los Angeles Interactive Network (collectively, "ACTV") to institute a test of ACTV's interactive television system technology utilizing interactive versions of certain CNN programs listed on Exhibit A, attached hereto, (the "Programs") in the LA Project consumer evaluation (the "Evaluation") being conducted by ACTV in no more than ten thousand (10,000) subscriber households served by Western Communication's Ventura County Cablevision (the "Test Area"). CNN will make the Programs interactive utilizing ACTV technology with all expenses incurred in such process being borne by ACTV. The purpose of the Evaluation is to more fully understand the commercial viability and potential applications of the ACTV Programming Technology as it applies to the Programs. ACTV and CNN will use the resulting research to consider the further development of regional interactive networks. In connection with the initiation of the Evaluation, please sign this letter below to acknowledge your agreement to and acceptance of the terms and conditions contained herein and return one (1) fully executed copy to me for our files. CNN and ACTV agree as follows: 1. Background. ---------- (a) ACTV is the owner of certain interactive television system technologies ("ACTV Programming Technology"), which includes patents, pending patent applications, and inventions owned by ACTV, proprietary technologies, programming methods, a programming language used to achieve functionality in ACTV programming, software programs used to detect and convert ACTV programming for display, and other trade secrets and know-how and proprietary technology relating to the ACTV Programming Technology. (b) CNN is involved in the production and delivery of television news programs and specifically produces the Programs. (c) ACTV and CNN desire to investigate the feasibility of delivering the Programs in an interactive format. The Evaluation in the Test Area provides a unique opportunity to explore such possibilities. 2. CNN and ACTV agree to test the feasibility of producing the Programs in an interactive format using the ACTV Programming Technology. The parties agree to work together to explore and analyze the costs and benefits of enhancing the Programs in an interactive format. 3. Term. This Agreement shall commence upon the signing hereof by both ---- parties and shall continue until December 31, 1996, or unless earlier terminated in accordance with the provisions set forth herein. 4. CNN Signal and Participation. CNN shall retain exclusive control ---------------------------- over the Cable News Network television signal and the distribution thereof, including the vertical blanking interval (the "VBI lines") to be used in the Evaluation. Subject to CNN's absolute right of withdrawal from the Evaluation at any time in its sole judgment without liability or penalty, CNN agrees to make available for the Evaluation those VBI lines necessary for delivery of the ACTV Programming Technology The foregoing rights shall be conditional on the following: (a) CNN agrees to use reasonable efforts to provide notice to ACTV of the withdrawal of the use of such VBI lines whenever possible; and (b) Although the parties intend to discuss the feasibility of expanding the distribution of the ACTV enhanced Programs should the Evaluation determine that the production and distribution of the Programs in an interactive format is feasible and economical, CNN shall have no obligation to ACTV to expand the distribution or to continue the delivery to the Test Area beyond the term of this Agreement. - 2 - 5. Editorial Control. CNN shall have complete editorial control over ----------------- the Programs and the enhanced information delivered on the VBI lines. ACTV shall procure at its cost all the necessary equipment for CNN so that CNN may produce and monitor all such text before and during telecast. 6. Program Production ------------------ (a) CNN, with the technical assistance of ACTV, will develop interactive versions of the Programs. The interactive versions of the Programs may be: (i) enhanced versions of the Programs; (ii) interactive programs or segments produced simultaneously with the Programs; or (iii) originally produced material. (b) ACTV shall be solely responsible for all of CNN's incremental costs incurred in producing the interactive versions of the Programs and delivering such Programs to the Test Area. This shall include, but not be limited to, the complete cost (salary and benefits) of CNN news staff assigned to this project, all hardware and software costs necessary to enhance the Programs and all incremental Program delivery costs. (c) The delivery schedule and the initial budgets for the creation of the interactive versions of the Programs shall be as mutually agreed upon by the parties hereto with the parties planning to complete design discussions by September 15, 1995. It is the intention of the parties that CNN shall initially produce one (1) hour of enhanced Programs, the "Phase I" Programs," as described on Exhibit A, seven (7) days a week. Should such programming prove successful, the parties, upon mutual consent, may expand such programming to the "Phase II" Programs and further to the "Phase III" Programs, each as described on Exhibit A. The parties will consult as to the appropriateness of expanding the number of enhanced Programs during each phase. ACTV acknowledges that it shall be responsible for all additional incremental costs, including, but not limited to, production and delivery costs associated with each additional Program in each phase which is enhanced for the Evaluation. 7. Cooperation. ----------- (a) Each of the parties undertakes to the other that it will use its best endeavors to cooperate in the Evaluation. - 3 - (b) Each of the parties undertakes to the other that it will promptly, fairly, reasonably and positively respond to the other's request for information and assistance and that it will keep the other informed at all times as to the progress of the Evaluation and any contingent, anticipated or present problems concerns or other matters. (c) Each party shall share technical information with the other concerning Evaluation results and anticipated technical changes which may affect the other in the performance of its duties hereunder as soon as possible. 8. LA Project Research and Regional Network Roll Out ------------------------------------------------- (a) In consideration for making the Programs available and for producing the interactive versions of the Programs thereof for use in the Evaluation, CNN, ACTV will provide to CNN all its research and evaluation information concerning the development of the market for the ACTV interactive television service and on the reception of the Programs, on a periodic basis. CNN shall have the opportunity to work directly with ASI Market Research to design research relating to the Evaluation and specific to the business needs of CNN. This shall include, but not be limited to, CNN's right to submit questions for ASI Market Research to include in its research efforts related to the Evaluation and CNN shall have access to the results of those questions (in tabulated and raw data form). Without limiting the foregoing, ACTV agrees, to allow CNN to participate in focus group testing and have the results of those tests to the same extent as the other participants in the Evaluation. In addition, if CNN specifically requests, ACTV will use reasonable efforts to work with CNN to organize one CNN-sponsored focus group, with the understanding that CNN would share all costs associated with the focus groups with ACTV. (b) Should the production and distribution of the ACTV enhanced Programs prove feasible and economical and should ACTV expand the Evaluation or a similar service into additional regional networks, then CNN shall receive protection until December 31, 1997 in the form of a right of last refusal to be ACTV's exclusive provider of national and international news to all such networks. (c) If CNN decides to participate with ACTV in the roll out of regional interactive networks, ACTV and CNN shall agree to negotiate, in good faith, a royalty agreement and/or advertising split for use of CNN programming. (d) CNN will be given the opportunity to be an equity investor in any new regional interactive networks created by ACTV. -4 - 9. Confidentiality. --------------- (a) Each of the parties undertakes to the other that it will not directly or indirectly at any time make use of or disclose for its own benefit or for or to or on behalf of any person, firm or company any information which it or they may possess or be aware of or otherwise have acquired by reason of this Agreement and/or each party's performance of its respective obligations hereunder and relating to the technology processes, finances or business of either party or of any other person having dealings with any of them ("Confidential Information"). Notwithstanding the foregoing, the aforementioned restrictions on use and disclosure shall not apply to: (i) information developed independently by either party without reliance on Confidential Information of the other party; (ii) information generally available to the public; (iii) information rightly received from a third party without knowledge that such information is confidential; and (iv) information known prior to disclosure. (b) it shall not be deemed breach of this provision for either party to disclose Confidential Information if such disclosure is compelled or otherwise required by law or a court of competent jurisdiction. 10. Publication Responsibility. CNN shall procure and maintain, at -------------------------- all times during the production of the interactive versions of the Programs, insurance policies of the type customarily procured and maintained by producers of original material, including, but not limited to, workmen's compensation insurance and producers liability (errors and omissions) insurance. ACTV shall procure and maintain, at all times during the production of the interactive versions of the Programs, insurance policies of the type customarily procured and maintained by providers of original technology including, but not limited to, workmen's compensation insurance and producer's (errors and omissions) liability insurance. 11. Technological Responsibility. ACTV warrants that it has all ---------------------------- necessary patents, rights, licenses and consents for all hardware and software developed by it for use in the Evaluation and that the use of the same will not infringe the rights of any third party. ACTV agrees to indemnify CNN against all costs, claims, proceedings and demands in respect thereof. - 5 - 12. Termination. ----------- In addition to any other rights and remedies at law either party by giving written notice to the other may immediately terminate this Agreement where the other party has failed within three (3) days to remedy a material breach of this Agreement of which written notice was given. 13. Expenses. -------- (a) In addition to any other obligations assigned hereunder, ACTV shall bear all the implementation costs related to the Evaluation, including, but not limited to, the master control, headend distribution, convertes boxes and basic research. (b) Except as otherwise set forth herein, each party shall bear its own "indirect costs" in support of creating and producing the interactive versions of the Programs. "Indirect costs" as to each party hereto shall include, but not be limited to, administrative and general overhead costs. 14. Standards --------- The physical appearance, content, format and overall quality of the ACTV enhanced information shall be of first class, professional quality equivalent to the information reported in the Programs similar to that contained in other programs being provided in the Evaluation. 15. Copyright --------- (a) ACTV expressly acknowledges that the copyright and title to the Programs belongs to and remains vested in CNN or its parent, subsidiaries or affiliates. (b) ACTV will at all times act to preserve and protect CNN's copyright in the Programs. (c) ACTV shall cooperate fully and in good faith with CNN for the purpose of securing and preserving the rights of CNN in and to all CNN programming, including but not limited to the Programs. CNN may commence or prosecute any claims or suits in its own name or in the name of ACTV or join ACTV as a party thereto. ACTV shall immediately notify CNN in writing of any infringements or imitations by others of such programming or articles similar to those covered by this Agreement, and CNN shall have the sole right to determine whether or not any action shall be taken on account of any such infringements or imitations. ACTV shall not institute any suit or - 6 - take any actions on account of any such infringements or imitations without first obtaining the written consent of the CNN so to do. 16. Imprints, Corporate Names, Trademarks and Service Marks ------------------------------------------------------- Except as otherwise expressly provided in this Agreement, ACTV shall not use in any manner whatsoever any logo, trademark, service mark or other designation of CNN, its parent, subsidiaries or affiliated companies, without CNN's prior written consent. 17. License and use of ACTV Programming Technology ---------------------------------------------- (a) ACTV shall disclose the ACTV Programming Technology to CNN and hereby grants CNN a royalty-free and paid up license to produce and distribute programming which utilizes the ACTV Programming Technology to enhance the Programs solely for purposes of the Evaluation in the Test Area. CNN's license to utilize the ACTV Programming Technology and to distribute the Programs enhanced by the ACTV Programming Technology shall commence as of the date hereof and shall terminate upon the termination of this Agreement. (b) After the termination of the Evaluation, the license granted in Paragraph 17(a) above shall terminate. 18. Assignment. ACTV shall not assign any of its rights or obligations ---------- hereunder in whole or in part to any other party, whether voluntarily or by operation of law, without the prior written consent of CNN, which consent shall not be unreasonably withheld. Any purported assignment without such prior written consent shall be null and void and of no force and effect. 19. Notices ------- Except as may be otherwise expressly provided herein, any notices required or permitted hereunder shall be sufficient in writing and shall be deemed given if personally delivered or sent by telegram or by telecopy, or mailed by certified or registered mail, return receipt requested, at the respective addresses of the parties - 7 - hereinabove set forth, or such other addresses as may be designated in writing by either party. If to ACTV: ACTV, Inc. 1270 Avenue of the Americas New York, New York 10020 Attention: William C. Samuels Telephone: (212) 262-2570 Facsimile: (212) 459-9548 with a copy to: Gersten, Savage, Kaplowitz & Curtin 575 Lexington Avenue New York, New York 10022 Attention: Jay M. Kaplowitz, Esq. Telephone: (212) 752-9700 Facsimile: (212) 980-5192 if to CNN: Cable News Network, Inc. One CNN Center Box 105366 Atlanta, Georgia 30348-5366 Attention: Jon Petrovich Telephone: (404) 827-2608 Facsimile: (404) 827-3181 With a copy to: Turner Broadcasting System, Inc. One CNN Center Box 105366 Atlanta, Georgia 30348-5366 Attention: General Counsel Telephone: (404) 827-4390 Facsimile: (404) 827-1995 All notices by telegram shall be sent charges prepaid and shall be deemed effectively given upon delivery; all notices by telecopy shall be deemed effectively given upon confirmation of delivery. Any notice sent as provided herein, if by mail, shall be sent -8- via certified or registered mail, return receipt requested or the local equivalent thereof. All notices mailed shall be deemed effectively given on the fifth (5th) day after mailing. 20. Representations, Warranties and Indemnification ----------------------------------------------- (a) CNN represents and warrants that it has the right to enter into this Agreement and perform its obligations hereunden. (b) ACTV represents and warrants that it has the right to enter into this Agreement and fully perform its obligations hereunder, and that the ACTV information furnished in the Evaluation, except with respect to those portions that are supplied by CNN, and any promotional materials for the Evaluation created by or on behalf of ACTV, shall not violate or infringe upon the rights of any other person or entity or cause CNN to be subject to any liability whatsoever. (c) Each party hereby forever indemnifies and holds the other and its parent, sibling, and subsidiary corporations and all of their directors, officers, employees, agents, and assignees harmless from and against and releases them from any and all claims, actions, demands, costs, damages, liabilities and expenses (including, without limitation, costs of litigation and reasonable counsel fees, including an allocable portion of in-house attorney costs) resulting or arising from or incurred in connection with any breach or alleged breach by the other party of any representation or warranty contained in this Agreement or any material provision of this Agreement, provided that the party seeking indemnification gives the other party: (i) prompt written notice of any claim or litigation to which indemnification applies, and (ii) the opportunity to participate in and fully control the disposition (by compromise, settlement, or other resolution but excluding any admission of wrongdoing by the indemnified party) of such claim or litigation. (d) Any approvals given by CNN pursuant to this Agreement shall not be construed as an assumption of responsibility on the part of CNN for the content of or other matters related to, any item approved and shall not in any way limit CNN's right to indemnification hereunder. 21. Relationship of the Parties --------------------------- The status of the parties to this Agreement shall be that of independent contractors and nothing herein shall create any association, partnership, joint venture, or agency relationship between them. -9- 22. Survival of Representations, Warranties and Indemnities ------------------------------------------------------- All representations, warranties, and indemnities set forth in this Agreement shall survive the termination or expiration of this Agreement. 23. Headings -------- The headings contained in this Agreement are inserted solely for convenience purposes and shall not affect the meaning or construction of this Agreement. 24. Waiver ------ No waiver or failure by a party to enforce or insist upon strict compliance with any provision in this Agreement shall be deemed to constitute a waiver of the rights of said party to demand strict compliance with the terms hereof. No waiver by a party of any of the terms or conditions of this Agreement in any instance shall be deemed or construed to be a waiver of such term or condition in the future, or of any subsequent breach of said provision or any other provision in this Agreement. All rights and remedies contained in this Agreement shall be cumulative and shall not limit any other right or remedy to which a party may be entitled. 25. Governing Law ------------- Regardless of the place of execution hereof, this Agreement, all amendments hereto, and any and all issues or controversies arising herefrom or related hereto, shall be governed by and construed exclusively in accordance with the laws and decisions of the State of Georgia applicable to contracts made, entered into and performed entirely therein. ACTV hereby consents to personal jurisdiction in and service of process by any competent state of federal court in the State of Georgia. Additionally, the parties hereto agree that the State of Georgia shall be the exclusive forum and situs for the resolution of any and all disputes, controversies or matters arising herefrom or related hereto. ACTV agrees that service of process by mail shall be effective service of same and such service shall have the same effect as personal service with the State of Georgia and result in jurisdiction over ACTV in the appropriate forum in the State of Georgia. 26. Severability ------------ If any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof and this Agreement shall remain in full force and effect and shall in no way be affected, unless to so continue this Agreement would unjustly prejudice any party hereto. -10- 27. Construction ------------ This Agreement shall be construed and interpreted without regard to any presumption or other rule requiring construction or interpretation against the party causing this Agreement to be drafted and the parties hereto acknowledge that all parties were equal in the drafting and wording of this Agreement. 28. Force Majeure ------------- The parties hereto shall not be held liable or responsible for delay or failure to take any actions called for under this Agreement occasioned by force majeure or any cause beyond the control of the parties including, but not limited to, war; civil disturbances; fire; flood; earthquake; windstorm; unusually severe weather; acts or defaults of common carriers; accidents; strike or other labor trouble; lack of or inability to obtain raw materials, transportation, labor, fuel or supplies; governmental laws, acts, regulations, embargoes or orders (whether or not such later prove to be invalid); or any other cause, contingency or circumstance within or without the United States; any of which shall release the parties from the performance of this Agreement. 29. Modifications and Amendments ---------------------------- This Agreement may not be modified, changed or supplemented, nor may any obligations hereunder be waived or extentions of time for performance be granted, except by written instrument signed by both parties. CNN looks forward to working with ACTV in the continuance of our mutually beneficial relationship. Sincerely, CABLE NEWS NETWORK, INC. /s/ Jon Petrovich ---------------------------------- Jon Petrovich Executive Vice President ACCEPTED AND AGREED ACTV, INC. By: /s/ William C. Samuels ------------------------------------ Its: Chairman, CEO ----------------------------------- Date: August 16, 1995 ---------------------------------- -11- EXHIBIT A PROGRAMS -------- Phase I - ------- 1. NFL on Sunday 2. Prime News Phase II - -------- 1. Prime News 2. Sports Tonight 3. Calling On All Sports 4. Inside Politics Phase III - --------- 1. Moneyline 2. Showbiz Today 3. Talkback Live -12- EX-24.1 7 EXHIBIT 24.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of ACTV, Inc. on Form S-8/S-3 of our report dated March 15, 1995, appearing in the Annual Report on Form 10-K of ACTV, Inc. for the year ended December 31, 1994 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP New York, New York October 2, 1995 -----END PRIVACY-ENHANCED MESSAGE-----