-----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, LQWrE9jkGbAlLd2voQ87+ZrLUVgIRfihJnJxsbgZqv171lLU7tipjJbTmFmzbSF1 6DNo762BHzCq+IEsiaU8uw== 0000950146-98-000517.txt : 19980401 0000950146-98-000517.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950146-98-000517 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 45 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTV INC /DE/ CENTRAL INDEX KEY: 0000854152 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 942907258 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-10377 FILM NUMBER: 98581632 BUSINESS ADDRESS: STREET 1: 1270 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2122622571 MAIL ADDRESS: STREET 1: 12270 AVE OF THE AMERICAS #2401 STREET 2: 12270 AVE OF THE AMERICAS #2401 CITY: NEW YORK STATE: NY ZIP: 10020 10-K 1 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 ACTV, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 94-2907258 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1270 Avenue of the Americas New York, New York 10020 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 262-2570 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: Title of each class Name of exchange on which registered Common Stock, Par Value $0.10 Boston Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par value $0.10 per share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No _ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 25, 1998, the aggregate market value of the voting stock held by non-affiliates of the registrant (based on The Nasdaq Stock Market closing price on March 24, 1998) was $21,748,026. As of March 25, 1997, there were 16,904,024 shares of the registrant's common stock outstanding. 1 PART I Item 1. BUSINESS General The corporate structure of ACTV, Inc. ("Company") is as follows: ACTV, Inc. owns 100% of the common shares of ACTV Holdings, Inc. ("Holdings"), which wholly owns (i) ACTV Entertainment, Inc. and (ii) ACTV Net, Inc. ACTV Entertainment, Inc., in turn, wholly owns The Texas Individualized Television Network, Inc. and a number of regional subsidiaries that are currently inactive. The Company and Holdings have granted the appropriate operating subsidiaries exclusive, perpetual licenses to use the Company's proprietary technologies for individualized television programming and for on-line learning software within their respective business areas and have given such subsidiaries the right to sublicense the respective technologies. Under the licenses, each subsidiary will pay the Company royalties on net revenues if the subsidiary is no longer majority owned by the Company, and royalties on the net sales of any sublicensee. Unless otherwise indicated, all references in this Form 10-K to the Company or ACTV include ACTV, Inc. and all of its subsidiaries. This document includes certain forward looking statements about the Company and its industry that are based on management's current expectations. Actual results may differ materially as a result of any one or more of the risks identified in the Company's filings under the Securities Exchange Act of 1934. Board Policy and Corporate Structure of Subsidiaries The policy of the Company is and has been, as set forth in the prospectus relating to its initial public offering in May 1990, "to license [the Company's] technology and arrange joint ventures for its use in a number of different industries." The Board of Directors has previously adopted and reaffirmed in 1998 a plan to take effect in the event that an entity deemed not likely to further such policy or to act inconsistently with the best interests of all the Company's shareholders seeks to acquire or has acquired 20% or more of the Company. The text of the Board resolution relating to this issue is as follows: "Resolved, that it being in the best interests of the Corporation and the shareholders of the Corporation, the Board of Directors hereby approves and adopts a plan that, in the event that the Board of Directors determines that an acquirer has acquired, or seeks to acquire, 20% or more of the Corporation and that such acquirer is not a suitable acquirer since such acquirer will not further the Corporation's policy of acting as a broad licensor of the ACTV proprietary technologies, or is otherwise likely to act inconsistently with the best interests of all the Corporation's shareholders, the Board is authorized to take all necessary action (including the hiring of an investment banking firm), to offer, by invitation, non-exclusive licenses to use and exploit the ACTV proprietary technologies. The terms of such licenses may include the payment of royalties consisting of a significant initial advance, minimum annual payments and/or a percentage of annual net sales, and shall be consistent with, and no less favorable than, the terms of existing licenses. The Board is authorized, in its discretion, to employ an independent investment banking firm for the purpose of evaluating the terms of such licenses. In the event that an acquirer is identified and an auction is commenced, the 2 Board reserves the right to terminate the auction at any time prior to the Corporation's entering into the non-exclusive license agreement." The Board has authorized that each of the Company's direct and indirect subsidiaries (except Holdings) have two classes of common stock and one class of preferred stock. The second class of common stock, which is equivalent in the number authorized to 20% of the total common stock authorized, carries "super-voting" powers. It is the Board's policy that up to 20% of the equity of the Company's direct and indirect subsidiaries (except Holdings) may be allocated to executive officers, directors and employees of the Company and its subsidiaries in consideration of services rendered and to reward and motivate executives." The foregoing may have anti-takeover effect and may be used to delay, discourage or prevent a change in control of the Company. Pursuant to such policy, certain employees, including Messrs. Samuels, Reese, Crowley and Cline, have been granted options to purchase Class B Common Stock, at fair value as of the date of grant, of certain of the Company's subsidiaries; such common stock, if issued, will have majority voting rights in such subsidiaries. The Company The Company has developed proprietary technologies for individualized television programming ("Individualized Programming") and for Internet learning systems ("eSchool"). The Company's products, in general, are tools for the creation of programming that allows viewer participation for both television and Internet platforms. The chief market presently targeted by the Company for its Individualized Programming is in-home entertainment, particularly sports programming, while for the Internet the Company's market focus is education, with an emphasis on schools and universities in the United States. The Company operates directly and through wholly-owned subsidiaries. The principal subsidiaries are ACTV Entertainment, Inc., which will be primarily responsible for the Company's activities in the United States entertainment market, its subsidiary, The Texas Individualized Television Network, Inc., which will operate the Company's first individualized regional sports network, and ACTV Net, Inc., which is responsible for the Company's Internet and education business. The Company 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 Individualized Programming significantly enhances the quality of most varieties of television programming by giving the viewer the ability to make instant and seamless changes within the live or pre-recorded television programming being viewed. Individualized Programming is a multi-path broadcast of several elements of programming material, such as instant replay, isolation cameras, statistical data, or additional features. There is no limit to the number of viewers who can interact simultaneously with a program enhanced with the Company's Individualized Programming ("ACTV Program" or "ACTV Programming"). 3 A viewer of Individualized Programming chooses among the various options and features offered by using a remote control device with a minimum of four keys programmed for ACTV functionality. These keys allow access to the appropriate path to be selected. In a live hockey telecast, for example, the Company's Individualized Programming allows a viewer to select features like "Hit Parade," a recap of the game's hardest checks; "Saving Grace," a compilation of the game's best saves; "Star Cam," which provides an isolated view of a featured player; "Goals-On-Demand," a compilation of all the scores in the contest; plus, the viewer can call up in-depth statistics and instant replays at any time. Individualized Programming gives television advertisers unique opportunities to target their message demographically. By asking the viewer basic questions at the beginning of the program, the Individualized Programming can recall this information during a commercial break and send the viewer an appropriate advertisement. Alternatively, before a commercial break, viewers can be asked the type of product for which they would like to see an advertisement. The Company's Individualized Programming records this choice, then sends the requested commercial to each viewer. This same choice can be recalled at a later commercial break to provide additional information. Individualized Programming stores the responses in the system memory, and can trigger branches based on the accumulated responses at the end of the program, offering premiums, additional information, or better targeted commercial messages to each viewer. The Company's initial emphasis is to deploy its programming over cable systems that have upgraded their signal origination facilities (referred to in the industry as "headends") for digital delivery. Operators of upgraded systems will distribute the Company's Individualized Programming to viewers who have a digital set-top terminal into which the Company's software application has been downloaded. The Company is emphasizing digital delivery over analog primarily because the channel capacity in digital transmission systems is greater and because Individualized Programming can be integrated into digital systems with no incremental hardware cost. The Company believes that the differentiation afforded by the Company's Individualized Programming will allow distributors to offer their customers Individualized Programming on a subscription basis. The Company, working with The Sarnoff Corporation ("Sarnoff"), a world leader in the development of digital platforms, has developed software that integrates the Company's Individualized Programming into digital set-top terminals at no incremental manufacturing cost. The Company has completed the integration of its Individualized Programming software into the MPEG-2 digital set-top terminal manufactured by General Instrument Corporation ("GI"). The Company is seeking to launch regionally-based entertainment networks ("Regional Networks"), featuring sports programming provided through the Company's strategic alliance with FOX Sports Net. FOX Sports Net is a service of "National Sports Partners," a joint venture between Cablevision's Rainbow Media Holdings, Inc. and FOX/Liberty Networks, which is a 50/50 partnership between News Corp. and Tele-Communications, Inc.'s Liberty Media Corporation. Equally owned by FOX/Liberty Networks and Cablevision's Rainbow Media Holdings, Inc., the new venture now reaches more than 58 million homes nationwide. The Company has the rights to license FOX Sports Net programming from each of FOX Sports Net's regional sports affiliates and to offer enhanced FOX Sports Net programming to any distributor that carries the corresponding regional FOX Sports Net channel. The FOX Sports Net agreement extends through June 2003. The Company plans to launch its first Regional Network in 1998 in the territory served by FOX Sports Southwest (the "Southwest Regional Network"). FOX Sports Southwest distributes 4 programming to 5.1 million households in Texas, Louisiana, Arkansas, Oklahoma and nine New Mexico counties. The Southwest Regional Network will feature individualized telecasts of professional basketball (Houston Rockets, Dallas Mavericks, San Antonio Spurs), hockey (Dallas Stars), and baseball (Texas Rangers, Houston Astros), along with college sports events from the Southeastern, Southland and Western Athletic conferences. The Company has entered into an agreement with Tele-Communications Inc. ("TCI"), under which TCI will initially distribute the Southwest Regional Network to its digital subscribers in the Dallas, Texas area. The agreement also contemplates distribution throughout the region served by FOX Sports Southwest, with the potential for nationwide distribution by TCI of the Company's future regional sports networks. The Company's plan is to produce and distribute entertainment programs within each Regional Network from a master control facility in the region; the facility will include the necessary production and transmission equipment to both create and distribute Individualized Programming. For example, for the Southwest Regional Network the Company has constructed a state-of-the-art master control in the facility used by FOX Sports Southwest in Irving, Texas. During a live sports production, the Southwest Regional Network's master control receives multiple video/audio feeds from Fox Sports Southwest via fiber lines. The Company's production team creates and adds individualized programming elements, digitally encodes the Individualized Programming and distributes it via fiber to cable operators. The Company expects also to offer satellite transmission of its Southwest Regional Network programming. Business Strategies Cable television is currently available for purchase by more than 90% of the approximately 98 million U.S. television households. The cable television industry is an established provider of multi-channel programming, with subscriptions from approximately 65% of total U.S. television households. Cable systems typically offer 25 to 78 channels of programming at an average monthly subscription price of $35. The development of digital transmission and compression allows for the transmission of a greater number of channels with better audio and video quality. With digital compression technology, each 6MHz of bandwidth (the amount required for an analog channel) can be converted on average into five or more channels of programming, thereby enabling the distributor to offer a broader variety of programming choices than analog systems. Once a cable operator has upgraded its headend for digital distribution, a cable home needs only a digital set-top terminal with ACTV software to receive Individualized Programming. GI has announced orders for approximately 15 million digital set-top terminals to date. The Company's business strategies for the U.S. entertainment market are as follows: Target regions where the cable operators' headends are being upgraded to digital. For the launch of Regional Networks, the Company has specifically targeted certain regions of the United States where the Company believes a greater proportion of cable operators are upgrading their headends and are currently offering or have indicated they will soon be offering digital converter boxes to their cable subscribers. The Southwest Regional Network is the Company's first planned Regional Network. 5 Negotiate and sign affiliate agreements with cable operators to offer Regional Network programming to their subscribers. The Company has entered into an agreement with TCI, under which TCI will initially distribute Southwest Regional Network programming to its digital subscribers in the Dallas area. The agreement also contemplates distribution throughout the region served by FOX Sports Southwest, with the potential for nationwide distribution by TCI of the Company's future Regional Networks. The Company is in discussions with a number of other cable operators to sign affiliate agreements to carry the Southwest Regional Network. The Company believes that its Regional Networks will provide cable operators with uniquely differentiated programming that can help them attract customers to their new digital services, as well as offer a potentially significant source of new revenues. Through a focused marketing effort, educate both cable operators and potential subscribers about the benefits of Individualized Programming. The Company believes that as cable operators become better educated about the benefits of Individualized Programming and understand the additional revenues that can be earned by providing it to their subscribers, the Company's revenues and penetration rates will increase. As consumers and cable operators understand that the Company can provide a significantly better way of viewing a sporting event (as well as other types of traditional programming), the Company believes its penetration rates will grow. Key marketing efforts will include: (1) possibly offering Individualized Programming on a free trial basis to potential new subscribers; (2) cross-promotional activities with FOX Sports Net; (3) cross-promotional activities with cable operators and (4) traditional print media, television advertising, and other marketing strategies. Keep programming costs low during the Company's first few years of operation and expand its penetration, through sports programming. The Company believes that sports is the most popular programming genre for attracting new subscribers to the Southwest Regional Network and to Individualized Programming in general. In addition, a focus on sports programming by the Company is more cost-efficient than a programming line-up with greater variety. Therefore, it is Company's intention initially to keep programming costs low by primarily focusing on just sports programming. Individualized Programming The Company's process of creating Individualized Programming involves viewer selection from a multiple number of frame-synchronized video, graphics, and/or audio signals delivered at one time. Viewers see and/or hear only one of the signals at a given moment; the others remain transparent. Each viewer interacts with the programming individually by making selections or decisions using a remote control device. In response to these keyed inputs, the Individualized Programming seamlessly switches from one signal to another, giving each viewer his or her appropriate response. The viewer cannot detect when such a switch takes place because it occurs 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 variations 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. Individualized Programming can also be effectively employed for live telecasts, particularly sports events such as those to be produced by the Southwest Regional Network. For live events, Individualized Programming allows a viewer to have a choice of simultaneous options like instant 6 replay on demand, feature packages that are created and made available as the event progresses, alternative camera angles and in-depth statistics. Individualized Programming allows a television set-top terminal to receive information from codes either embedded into the video program material or delivered in a data packet. It maintains "memory" on the progress of the viewer and provides automatic branching. At appropriate times during the program, the set-top will make branch switches automatically, accumulate data, recall information, create graphics and/or implement a pre-programmed set of instructions. In digital systems, multiple video, audio and graphics can be individualized in 6MHz of band-width. The Company's software enables the implementation of Individualized Programming into digital television systems. Individualized Programming can be delivered through any digital video system and received by a standard digital set-top terminal, such as GI's DCT 1000. The Company's software application can be installed during the manufacturing process or can be later downloaded into each set-top terminal. There is no additional memory or hardware necessary to upgrade a digital set-top terminal to deliver the Company's Individualized Programming to subscribers. Individualized Programming can be transmitted through any service provider's channel, and can even be broadcast under the new digital television standard recently approved by the FCC. Individualized Programming uses one 6MHz channel with 64 OAM, or 8VSB modulation techniques providing adequate data rates to support the Company's programming. Individualized Programming is channel independent and can be transmitted over any 6MHz channel using any practical modulation scheme. The content will be created in each of the Company's regional production facilities and then distributed to operators throughout the region via a number of different delivery options, including land lines and satellite. The distribution method will be determined by the geographical nature of the region and the economic viability of the different delivery techniques available in each specific region. The Company delivers to the service provider a complete MPEG-2 compatible transport stream containing all of the necessary information for the application to run properly in its system. The Company's signal is received at the cable operator's distribution facility by an appropriate receiver. The service provider will simply have to pass the signal through its CA (Conditional Access) system and send the signal out to its customers. Utilizing standard MPEG-2 compression techniques at a 4:1 compression ratio, the Company will provide its service through a single 6MHz channel. The Company does not require any back channel capability to support the programming. Individualized Programming creates an individualized look and feel by using relational database management and a very small amount of local memory in order to create millions of possible variations. The Company's application software uses approximately 25 Kilobytes of code space, either ROM (Read Only Memory), PROM (Programmable Read Only Memory) or EEPROM (Electrical Erasable PROM). The application requires a small amount of scratch pad memory, RAM (Random Access Memory) up to 2KB. While the application does not require any NVRAM (Non-Volatile RAM), up to 1KB of NVRAM is desirable for future back channel applications. Individualized Programming seamlessly switches the user through multiple channels of video and audio in response to the user's inputs throughout the program. The switch may be delayed as long as the producer/writer chooses. The seamless switch is accomplished by utilizing a subset of the MPEG-2 syntax for splicing. Individualized Programming switching is much simpler than 7 creating a seamless splice between two unrelated video streams because the video and audio encoders are co-located. The Company's Individualized Programming employs a command language that is used to configure the set-top converter and control the information that the user sees under specific conditions. The command language requires a small amount of additional bandwidth in the channel and approximately 2 Kilobytes/sec of additional data must be sent in a digital system. When commands are received by the application software running in the set-top converter, they are processed by the software and the correct information is presented. Education The Company has developed eSchool Online(TM) ("eSchool"), a Java-based software suite that permits a teacher to use the Internet as an accompanying instructional tool during a lesson. (Java is a programming language developed for the Internet by Sun Microsystems.) eSchool integrates Web content and a chat application with educational video effectively to create a "virtual" classroom. eSchool software can be used for pre-recorded as well as live programming, while the video can come from any source. With eSchool software, a student can receive a traditional video lesson through a frame in his or her Web browser, or from a television in the classroom. Simultaneously, eSchool provides separate frames in the Web browser that display 1) Web sites with supporting information/examples; 2) dialogue with teacher and/or other students during a live lesson; and 3) a "playlist" of Web sites received to permit navigation from one to another. eSchool content creation software allows an instructor to easily select and order the addresses of the Web sites and related questions to be included in the playlist. The Web site addresses and questions can be assigned times and sent automatically to students during a pre-recorded program, or in a live lesson. The instructor can trigger any Web site address or question to be sent to the students at any time. eSchool's components include instructor and student user software, authoring software and database assessment software. The Company expects to continue to refine and upgrade its eSchool software in the future. In addition, the Company provides Internet content development assistance, hosting of eSchool programs on its computer servers, and consulting to schools and universities. The Company recorded its first eSchool sale in mid-1997 with the School District of Philadelphia. The Philadelphia City Schools are using eSchool to create and deliver new instructional and staff development programs. Since that time, the Company has entered into contracts to deliver eSchool to educational institutions in Nebraska, New York, Massachusetts, and Georgia. The Company has also developed two-way analog and digital programming technologies for distance learning. The Company offers a point-to-multipoint broadcast system that can deliver pre-recorded individualized lessons or can integrate individualized segments into live distance learning lessons. Students receive individualized responses to their input made with a simple remote control. At the end of the lesson, the system's memory component can recall each student's performance throughout the lesson, giving the local facilitator a detailed accounting of the results. Distance learning ("DL") networks typically involve a teacher at a central telecasting site distributing a lesson to multiple remote classroom sites. The Company's individualized DL tools allow the teacher to create questions or offer choices relating to the lesson and pre-record individualized responses. At selected points in the lesson, the DL teacher can initiate the questions 8 and interactions, with each student across the network receiving individualized responses. In addition, the teacher receives immediate feedback on the classes' responses, allowing the teacher to pace the lesson accordingly. The major components of the Company's DL television product are authoring software, which permits the development of individualized education programming, and hardware installed at the receiving site, which connects the student to the system. The authoring software is designed to enable the teacher, using a standard personal computer, video camera and other standard ancillary hardware to produce the lessons to be telecast. The Company provides training and support in the use of the authoring software, so that programming can be produced by the customer in its own facilities. The Company has an agreement with GI to allow its individualized distance learning functionality to be integrated with GI's DigiCipher(R) and Magnitude systems. The new systems will allow programming networks to develop individualized programming and distribute it digitally to their customers. Business Strategies A recent independent survey found that approximately 70% of public schools in the U.S. currently have Internet access, up from approximately 30% one year ago. According to the survey, the number of computers used for instructional purposes rose approximately 24%, to over 6 million during the 1996-97 school year. Statistics show that the nation's 85,000 public schools are nearing the U.S. Department of Education's recommended ratio of five students per computer. The current ratio is 7.3 students per computer, compared to 19.2 to one just five years ago. Education industry observers expect that spending for educational technology infrastructure will continue to increase substantially for each of the next several years. The wiring of the country's classrooms for Internet connectivity is an established priority of the United States Government. The Federal Communications Commission has mandated a $2.25 billion Internet subsidy fund (of which $675 million was funded in 1997), and has chartered a not-for-profit corporation, Schools and Libraries Corp., to administer it. Public schools and libraries in the United States can use the fund for Internet connection charges, internal wiring, and Internet network hardware (excluding computers). Funding is from telecommunications companies, who are required by the Telecommunications Act of 1996 to make yearly payments to the fund. Thus far, schools that are connected to the Internet have principally used it for research purposes, rather than as a tool for the delivery of on-line learning. The growth of the Internet itself and of school connectivity have outpaced both the training of teachers on the Internet's functionality and the availability of on-line curriculum. As a result, it is expected that school spending for Internet teacher training and on-line learning will show marked growth in the future. The on-line learning industry is widely reported as growing at 100% per year, while industry experts predict that the total on-line learning market may reach $3 billion by the year 2000. The Company's education business strategies are as follows: Focus on Internet teacher training and on-line curriculum development. The Company has developed and adapted eSchool to target on-line learning curriculum development. To date, the Company's eSchool contracts with schools and universities have all included, in addition to the 9 provision of eSchool application and database management software, Internet educational content development jointly by the Company and its clients. A significant focus of such content development has been the creation of on-line lessons for teacher training. Create joint ventures with customers to market the customer's content to other users. The educational programming developed by customers using the Company's education products in many instances has application for others. The Company intends, jointly with customers who develop programs, to market such programs to other potential users. Develop proprietary programming content. The Company believes that programming content can be developed that will have application for many existing and potential clients. The Company intends to develop such programming content either entirely itself or by acquiring rights to existing education content and subsequently adapting it for Internet application. Government Regulation The Company believes that neither its planned implementation of Individualized Programming nor eSchool is subject to any substantial government regulation. However, the broadcast industry in general, and cable television in particular, are subject to substantial government regulation. Pursuant to an Act of Congress passed in 1992 ("1992 Cable Act"), the Federal Communications Commission ("FCC") substantially re-regulated the cable television industry in various areas including rate regulation, competitive access to programming, "must carry," and retransmission consent for broadcast stations. These rules, among other things, restrict the extent to which a cable system may profit from, or recover costs associated with, adding new program channels, impose certain carriage requirements with respect to television broadcast stations, limit exclusivity provisions in programming contracts and require prior notice for channel additions, deletions and changes. The United States Congress and the FCC also have under consideration, and may in the future adopt new laws, regulations and policies regarding a wide variety of matters which could, directly or indirectly, materially adversely affect the operations of the Company. Set-Top Converters, Terminals, and Other Devices The Company does not intend to manufacture set-top converters, terminals, video servers, or other devices that provide Individualized Programming. This equipment will be supplied to the Company pursuant to agreements between the Company and equipment suppliers. In 1996, the Company and GI signed a non-exclusive, royalty-free manufacturing agreement for GI's MPEG-2 digital set-top terminal. Working with the Company and GI, Sarnoff has facilitated the integration of Individualized Programming into this terminal. In August 1997, GI invested $1 million in the common stock of the ACTV, Inc. (the "Common Stock"). The companies also agreed to jointly market the Company's individualized television application that operates with GI's current generation digital systems and consumer set-top terminals. The Company intends to grant licenses similar to that granted to GI to other manufacturers that are selected by the future distributors of Individualized Programming. ACTV does not anticipate deploying its programming service with other digital set-top box manufacturers until early 1999. 10 In the education market, the Company has entered into an arrangement with GI pursuant to which its individualized functionality for distance learning will be integrated with GI's DigiCipher and Magnitude systems. The new digital systems will allow programming networks to develop the individualized content and distribute it digitally to their customers. The Company has a non-exclusive agreement with KDI Precision Products, Inc. ("KDI") to manufacture the Company's distance learning systems that incorporate individualized functionality. KDI sells the systems to the Company 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. KDI is currently the only manufacturer of the distance learning systems. The Company believes that KDI can produce sufficient systems to meet the anticipated needs of the Company 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 the Company to obtain systems could have a material adverse effect on the distance learning business of the Company. There can be no assurance that the Company will be successful in developing additional manufacturing licenses. Patents and Other Intellectual Property The Company has sought to protect the proprietary features of its Individualized Programming 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 fifteen patents, with additional patents pending. The patents, which deal with different aspects of Individualized Programming, expire at various dates from 1998 to 2015. 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. The inventors named on all of the patents issued have assigned to the Company all right, title, and interest in and to the above U.S. patents and any corresponding foreign patents or applications based thereon. In addition, Dr. Michael Freeman, the principal inventor of Individualized Programming and a current employee of the Company, has 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 Individualized Programming. 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 from them. 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. 11 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 agreements will provide effective protection for the Company's proprietary information in the event of unauthorized use or disclosure of such information. Product Development The Company's current research and development efforts for the entertainment market are focused primarily on digital application of its Individualized Programming. The Company has worked with Sarnoff to develop digital applications of its Individualized Programming. The Company, Sarnoff, and General Instrument Corp. have completed the project to incorporate the Company's Individualized Programming into GI's MPEG-2 digital set-top cable terminal. The Company is also in the process of expanding and further refining its Individualized Programming to incorporate additional functionalities that can be used in the digital cable platform and to adapt its application software for use in digital converters manufactured by other companies. For the education market, the Company plans to continue to refine and upgrade its eSchool software programs. Competition The business of providing subscription and pay television programming is highly competitive. The Company faces competition from numerous other companies offering video, audio and data products and services. The Company's existing and potential competitors comprise a broad range of entities engaged in communications and entertainment, including cable programming providers, cable premium pay programming providers (such as HBO, Cinemax etc.), premier multiplex pay channels under the digital format, pay-per-view movies and special event offerings, television networks, home video products companies, as well as companies developing new technologies and programming concepts. Many of the Company's competitors have greater financial, marketing and programming resources than the Company. The Company expects that quality, uniqueness and variety of programming, quality of picture and service and cost will be the key bases of competition. The Company may also experience competition from other programming alternatives that may provide new sources of revenue to cable operators. At the present time, there are a number of different new television technologies, often labeled as interactive television, that have been developed or are under development by others that might be considered competitive with the Company's Individualized Programming. These new technologies, in general, are delivered via cable television, or through devices that are attached to the television set. To the best of the Company's knowledge, none of the point-to-multipoint systems based on these technologies allows the viewer to affect what is seen on the television in the same manner or to the extent of Individualized Programming, which is unique in its approach and function. In education, the market for Internet products and services is one characterized by rapid technological change and heavy competition from firms with a wide range of size and resources. The 12 Company also competes with providers of traditional education products; nearly all of such companies have greater financial, and other, resources than the Company. Employees At December 31, 1997, the Company employed 33 full-time employees. The Company believes that its relationships with its employees are generally satisfactory. Item 2. PROPERTY - OFFICES AND FACILITIES The Company maintains its principal and executive offices at Rockefeller Center, 1270 Avenue of the Americas, New York, New York, where it leases approximately 8,000 square feet at a rent of approximately $22,200 per month pursuant to a lease that expires in January 2001. The Company maintains an engineering staff and an editing studio at 1600 Broadway, New York, New York, where it leases approximately 2,500 square feet at a rent of $3,450 per month, pursuant to a lease that expires in December 1999. In addition, the Company leases a facility in Dallas of 2,972 square feet for a monthly rent of approximately $5,950, pursuant to a lease that expires in October 1998, and maintains an office at 9454 Wilshire Boulevard, Beverly Hills, California, which is leased on a month-to-month basis for approximately $1,350 per month. The Company believes its current facilities are suitable and adequate, and that they provide the productive capacity necessary for the performance of the operations of the Company. None of the Company's properties is leased from affiliated persons. Item 3. LEGAL PROCEEDINGS There are no pending material legal proceedings to which the Company is a party. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 16, 1997 the Company held an Annual Meeting of Shareholders for which it solicited votes by proxy. The following is a brief description of the matters voted upon at the meeting and a statement of the number of votes cast for and against, and the number of abstentions as to each matter. 13 1. Election of directors: For Withheld Bruce Crowley 11,032,580 149,495 Richard Hyman 10,866,478 315,597 Jess Ravich 11,034,780 147,295 2. To approve an amendment to the Company's Restated Certificate of Incorporation that would increase the authorized shares of the Company's Common Stock to 65,000,000. For Against Abstain 10,341,965 794,355 45,755 3. To approve an amendment to the Company's Restated Certificate of Incorporation that would convert Series A and Series B Convertible Preferred Stock into 1,000,000 shares of preferred stock without designations. For Against Abstain 6,219,526 651,722 74,675 4. To ratify appointment of Deloitte & Touche, LLP as independent auditors of the Company. For Against Abstain 11,103,450 46,925 31,700 14 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on The Nasdaq Stock Market ("Nasdaq") and the Boston Stock Exchange under the symbols "IATV" and "IAT", respectively. The following table sets forth the high and low sale prices for Common Stock as reported by Nasdaq. Common Stock 1997 Quarter High Low -------------------- First 3 3/4 2 1/16 Second 2 1/4 1 7/16 Third 1 15/16 1 11/32 Fourth 2 1/32 1 5/16 1996 Quarter High Low -------------------- First 5 1/8 3 11/16 Second 4 9/16 3 1/2 Third 4 5/16 3 1/16 Fourth 3 27/32 2 11/16 On March 25, 1998, there were approximately 300 holders of record of the Company's 16,904,024 outstanding shares of Common Stock. On March 24, 1998, the closing bid and asked prices of the Common Stock as reported by Nasdaq were $1 19/32 and $1 11/16, respectively. The Company has not paid cash dividends since its organization. The Company plans to use earnings, if any, to fund growth and does not anticipate the declaration or the payment of cash dividends in the foreseeable future. 15 Item 6. SELECTED FINANCIAL DATA
Years Ended December 31, ------------------------------------------------------------------------------ 1993 1994 1995 1996 1997 ---------- --------- --------- --------- --------- Statement of Operations: Revenues(1) $ 164,602 $ 938,416 $ 1,311,860 $ 1,476,329 $ 1,650,955 Operating Expenses(1) 3,443,513 5,734,132 8,272,884 10,240,158 9,120,267 Equity in Net Loss of ACTV Interactive(2) 506,303 143,500 -- -- -- Loss Before Extraordinary Item(3) 4,156,955 5,122,010 6,920,906 8,605,097 7,352,441 Net Loss(3) 4,156,955 4,465,240 6,826,789 8,605,097 7,352,441 Loss Applicable to Common Stock Shareholders 4,156,955 4,465,240 6,826,789 8,800,481 7,858,683 Weighted Average Shares Outstanding 5,800,134 7,897,278 10,162,128 11,739,768 12,883,848 Loss Per Common Share Before Extraordinary Item(3) .72 .65 .68 .75 .61 Net Loss Per Common Share(3) .72 .57 .67 .75 .61 Balance Sheet Data: 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 ---------- --------- --------- --------- --------- Working Capital 2,263,225 1,503,703 2,397,027 5,093,859 (1,082,097) Total Assets 5,920,720 7,733,314 8,551,128 11,692,624 7,901,918 Long Term Obligations 2,220,794 2,325,061 -- -- -- Stockholders' Equity(4) 1,910,603 3,972,543 6,893,853 9,201,068 5,416,290 Total Capitalization 4,131,397 6,297,604 6,893,853 9,201,068 5,416,290
(1) For the period between January 1, 1993, and March 11, 1994, all education sales and expenses were reported separately by the Company's 49% affiliate, ACTV Interactive, and were not consolidated with the Company's statements of operations. For the remainder of 1994, operational results related to education were included with those of the Company, as a result of the Company's March 11, 1994 purchase of the Washington Post Company's 51% interest in ACTV Interactive. (2) The results of ACTV Interactive are accounted for under the equity method of accounting for 1993 and for the period January 1, 1994 to March 11, 1994. (3) Includes for the year ended 12/31/94 an extraordinary gain of $656,770, ($.08 per share) related to the extinguishment of debt and equipment lease obligations. Includes for the year ended 12/31/95 an extraordinary gain of $94,117 ($.01 per share) related to the extinguishment of debt obligations. (4) No cash or non-cash dividends on Common Stock have been paid or granted and the Company does not anticipate the declaration or payment of dividends on Common Stock in the foreseeable future. 16 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE COMPANY To the extent that the information presented in this Form 10-K discusses financial projections, information or expectations about the Company's products or markets, or otherwise makes statements about future events, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These include, among others, the successful and timely development and acceptance of new products and markets and the availability of sufficient funding to effect such product and/or market development. ACTV, Inc. ("the Company") has developed proprietary technologies for individualized television programming ("Individualized Programming") and for Internet learning systems ("eSchool"). The Company's products, in general, are tools for the creation of programming that allows viewer participation for both television and Internet platforms. The chief market presently targeted by the Company for its Individualized Programming is in-home entertainment, particularly sports programming, while for the Internet the market focus is education, with an emphasis on schools and universities in the United States. For entertainment applications, the Company's Individualized Programming gives the viewer the ability to make instant and seamless changes within the live or pre-recorded television programming being viewed. Individualized Programming is a multi-path broadcast of several elements of programming material, such as instant replay, isolation cameras, statistical data, or additional features. There is no limit to the number of viewers who can interact simultaneously with a program enhanced with the Company's Individualized Programming ("ACTV Program" or "ACTV Programming"). For education applications, the Company has developed eSchool Online(TM) ("eSchool"), a Java-based software suite that permits a teacher to use the Internet as an accompanying instructional tool during a lesson. (Java is a programming language developed for the Internet by Sun Microsystems.) eSchool integrates Web content and a chat application with educational video effectively to create a "virtual" classroom. In addition, the Company markets analog and digital systems for televised distance learning applications that permit point-to-multi-point telecasts that can deliver pre-recorded individualized lessons as well as integrate individualized lessons into live distance learning class sessions. Since its inception, the Company has incurred operating losses approximating $47 million related directly to the development and marketing of the Individualized Programming and eSchool. The Company is seeking to exploit the entertainment market, principally in the U.S., through the launch of regionally based entertainment networks ("Regional Networks"). Programming for the Regional Networks is provided through the Company's strategic alliance with FOX Sports Net. The Company has the rights to license FOX Sports Net programming from each of FOX Sports Net's regional sports affiliates and to offer enhanced FOX Sports Net programming to any distributor that carries the corresponding regional FOX Sports Net channel. The FOX Sports Net agreement extends through June 2003. FOX Sports Net is a service of "National Sports Partners," a joint venture between Cablevision's Rainbow Media Holdings, Inc. and FOX/Liberty Networks, which is a 50/50 17 partnership between News Corp. and Tele-Communications Inc.'s Liberty Media Corporation. Equally owned by FOX/Liberty Networks and Cablevision's Rainbow Media Holdings, Inc., the new venture now reaches more than 58 million homes nationwide. The Company's business plan is to develop Regional Networks in regions served by Fox Sports Net, with distribution to be provided by cable operators that are currently upgrading their service from analog to digital transmission. Initially, the Regional Networks will feature sports programming, with the possible introduction of other types of programming in the future. The Company believes that the differentiation afforded by the Company's Individualized Programming will allow distributors to offer their customers Individualized Programming on a subscription basis. The Company plans to launch its first Regional Network in 1998 in the regions served by FOX Sports Southwest (the "Southwest Regional Network"). FOX Sports Southwest distributes programming to 5.1 million households in Texas, Louisiana, Arkansas, Oklahoma and nine New Mexico counties. The Southwest Regional Network will feature individualized telecasts of professional basketball (Houston Rockets, Dallas Mavericks, San Antonio Spurs), hockey (Dallas Stars), and baseball (Texas Rangers, Houston Astros), along with college sports events from the Soutneastern, Southland and Western Athletic conferences. The Company has entered into an agreement with Tele-Communications Inc. ("TCI") under which TCI will distribute and market the Southwest Regional Network to its digital subscribers in Texas. The agreement also contemplates potential nationwide distribution by TCI of the Company's regional sports networks. The Company also plans to launch additional individualized networks in regions served by FOX Sports Net. The planned Regional Networks will feature FOX Sports Net regional programming enhanced by the Company's Individualized Programming. The Company will be responsible for the incremental content, transmission, delivery and master control costs incurred in connection with the product enhancement of the Individualized Programming to be presented through its Regional Networks. In August 1997, General Instrument Corp. ("GI") invested $1 million in common stock of ACTV, Inc. (the "Common Stock") and agreed to market, jointly with the Company, Individualized Programming applications. GI is the leading supplier of digital television headend systems and digital set-top terminals. The Company and GI had previously announced that the Company's Individualized Programming would be incorporated into GI's new MPEG-2 digital set-top cable and wireless terminals. It is the Company's belief that it has adequate funding to launch the Southwest Regional Network in 1998. However, there is no assurance that it will secure the funding necessary to effect additional launches in other regions, or that other factors might not delay or prohibit the successful implementation of the Company's Regional Network strategy. The projected Southwest Regional Network and additional network expansion are part of the Company's plan to develop the entertainment division of its business, which to date, does not generate any revenue for the Company. There can be no assurance that the Southwest Regional Network or other Regional Networks, if launched, will generate significant revenues for the Company. The target market for the Company's education products includes schools, state and local agencies, universities and private business. eSchool consists of a suite of integrated software 18 products, including content creation software, student and teacher user software, and database assessment software. In addition, the Company provides Internet content development assistance, hosting of eSchool programs on its computer servers, and consulting to schools and universities. To date, nearly all of the Company's revenues have been derived from sales to the education market of eSchool and individualized educational programs and products. There is no assurance that the Company will be able to successfully compete in this market, where many of its current and potential competitors are companies with significantly greater resources than those of the Company. RESULTS OF OPERATIONS Comparison of the Years Ended December 31, 1996 and December 31, 1997 During the year ended December 31, 1997 ("Fiscal 1997"), the Company's revenues increased 12%, to $1,650,955, from $1,476,329 for the year ended December 31, 1996 ("Fiscal 1996"). All revenues during Fiscal 1997 were derived from the education market, while in Fiscal 1996, the Company's revenues derived from education sales as well as from license and executive producer fees. The revenue increase in the more recent period was the result of the inclusion of sales from eSchool, which was introduced during Fiscal 1997, and higher sales of distance learning products and services when compared to Fiscal 1996. Cost of sales decreased 27% in Fiscal 1997, to $471,956 , from $647,488 in Fiscal 1996, and cost of sales as a percentage of sales revenue decreased to 29% in the more recent year, from 44% in 1996. The relatively lower cost of sales in Fiscal 1997 was due to a greater proportion of educational programming revenues and the inclusion of eSchool sales in 1997. Both eSchool and educational programming have higher gross margins than the Company's other sources of revenue. Total expenses excluding cost of sales and interest expense in Fiscal 1997 decreased 10%, to $8,648,310, from $9,592,670 in the comparable period in 1996. The decrease was partially attributable to lower operating expenses and depreciation and amortization expense in the more recent period, which more than offset an increase in selling and administrative expense. Also, the Company recorded a gain of $346,892 in Fiscal 1997, compared to an expense of $183,634 related to stock appreciation rights. The difference was the result of a lower market price for the Company's Common Stock at the end of Fiscal 1997, when compared to the end of Fiscal 1996. Finally, during Fiscal 1996 the Company incurred a valuation allowance of $274,325 related to an investment in an affiliated company and, as a component of Fiscal 1996 selling and administrative expense, reserved $82,746 against license fee and production service receivables from this affiliate. During Fiscal 1997, the Company incurred no valuation allowance. In Fiscal 1997, direct expenses related to the entertainment and education markets were approximately $2.7 million and $2.9 million, respectively. Depreciation and amortization expense for Fiscal 1997 decreased 11%, to $754,053, from $846,351 for Fiscal 1996. This decrease was due primarily to the recognition during Fiscal 1996 of amortization expense for programming assets that were fully amortized during that year. The Company's had no interest expense for either Fiscal 1997 or Fiscal 1996. Interest income for Fiscal 1997 decreased 26%, to $116,870, compared with $158,732 in Fiscal 1996. The decrease resulted from lower available average cash balances in the more recent year. 19 For the Fiscal 1997 and 1996, the Company paid and/or accrued $506,242 and $195,384, respectively, for dividends on convertible preferred stock issuances. All dividend payments were made in the Company's Common Stock. The increase during Fiscal 1997 is the result of the Company's having preferred stock outstanding for less than half of the year during Fiscal 1996. For Fiscal 1997, the Company's net loss applicable to common shareholders was $7,858,683, or $.61 per share, a decrease of 11% over the net loss of $8,800,481 or $.75 per share, incurred in Fiscal 1996. The decrease in net loss was due principally to higher gross margins, lower operating expenses, and lower depreciation and amortization and stock appreciation rights expenses during the more recent year. Comparison of the Years Ended December 31, 1995 and December 31, 1996 During the year ended December 31, 1996 ("Fiscal 1996"), the Company's revenues increased 13%, to $1,476,329, from $1,311,860 for the year ended December 31, 1995 ("Fiscal 1995"). The increase was the result of significantly higher education revenues from distance learning and the recognition of production revenues in the more recent period (compared to no production revenues in 1995), which more than offset a small decline in non-distance learning education sales. Cost of sales increased 94% in Fiscal 1996, to $647,488 , from $334,136 in Fiscal 1995, and cost of sales as a percentage of sales revenue increased to 44% in the more recent year, from 25% in 1995. The relatively higher cost of sales in Fiscal 1996 was due to a greater proportion of total revenues generated from lower margin equipment products and production services, as compared to Fiscal 1995's sales mix. Total expenses excluding cost of sales and interest expense in Fiscal 1996 increased 21%, to $9,592,670, from $7,938,748 in the comparable period in 1995. The increase was attributable to higher operating expenses (principally resulting from the Company's regional individualized network trial in Southern California), greater research and development expenditures, higher selling and administrative expenses, and a valuation allowance of $274,325 for the full amount of the Company's investment in The Greenwich Group. As a component of Fiscal 1996 selling and administrative expenses the Company also reserved $82,746 against license fee and production service receivables from The Greenwich Group. The Greenwich Group has experienced difficulty in raising sufficient capital to fund its operations and growth and has been unable to pay the Company for its services and license. In Fiscal 1996, direct expenses related to the entertainment and education markets were approximately $2.5 million and $2.6 million, respectively. Depreciation and amortization expense for Fiscal 1996, decreased 24%, to $846,351, from $1,113,278 for Fiscal 1995. This decrease was due primarily to the relatively higher depreciation expense incurred in Fiscal 1995 that related to set-top converters purchased for the California trial. The Company's interest expense for Fiscal 1996, decreased to zero, compared to $98,392 in the prior year. The decrease was due to the repayment of in full of the Company's debt obligations during 1995. Interest income for Fiscal 1996 increased 15%, to $158,732, compared with $138,510 in Fiscal 1995. The increase resulted from higher available average cash balances in the more recent year. 20 For the year ended December 31, 1996, the Company accrued $195,384 for the payment of dividends to holders of convertible preferred stock issued in August 1996 by one of its wholly-owned subsidiaries. For Fiscal 1996, the Company's net loss applicable to common shareholders was $8,800,481 or $.75 per share, an increase of 29% over the net loss of $6,826,789 or $.67 per share, incurred in Fiscal 1995. Included in the Fiscal 1995 net loss is an extraordinary gain of $94,117, or $.01 per share as the result of the extinguishment of certain obligations for value that was less than the amounts recorded on the Company's books for such obligations. The increase in net loss was due to increased operating, selling and administrative expenses and lower operating margins during the more recent year, as noted above. Liquidity and Capital Resources Since its inception, the Company (including its operating subsidiaries) has not generated revenues sufficient to fund its operations, and has incurred operating losses. Through December 31, 1997, the Company had an accumulated deficit of approximately $47 million. The Company's cash position on December 31, 1997, was $554,077, compared to $6,520,756 on December 31, 1996. During the year ended December 31, 1997, the Company used $6,603,499 in cash for its operations, compared with $7,560,486 for the year ended December 31, 1996. The decrease in the more recent year was due to lower operating expenses and higher gross margins, which more than offset higher selling and administrative expenses. The Company met its cash needs in the year ended December 31, 1997 from a series of private placements of Common Stock (approximately $1.5 million in net proceeds, including the $1 million placement with GI) and Series A Convertible Preferred Stock (approximately $2.0 million in net proceeds). The Company met its cash needs in the year ended December 31, 1996 from the proceeds of a private placement of Common Stock ($1.9 million in net proceeds) and of convertible preferred stock issued by its wholly-owned subsidiary ($9.1 million in net proceeds). With respect to investing activities in the year ended December 31, 1997, the Company used cash of $2,895,803, related principally to the purchase of equipment for a television master control facility in Dallas, Texas and for the systems development related to the incorporation of Individualized Programming into the GI cable set-top terminal and to eSchool. During the year ended December 31, 1996, the Company used cash of $444,189 related to the purchase of television production equipment and office improvements. All of the Company's operating subsidiaries have been dependent on advances from the Company to meet their obligations. The Company's subsidiary, The Texas Individualized Television Network, Inc., raised funds directly for its operations in January 1998 and expects to fund its operations for the forseeable future from the proceeds of this financing (see description below). During the year ended December 31, 1997, the Company advanced approximately $2.6 million to ACTV Net, $3 million to The Texas Individualized Television Network, Inc., and $2 million to ACTV Entertainment, Inc. and its other subsidiaries. Advances are based upon budgeted expenses and revenues for each respective subsidiary. Adjustments are made during the course of the year based upon the subsidiary's performance versus the projections made in the budget. As compared to the Company's balance sheet as of December 31, 1996, the Company's balance sheet as of December 31, 1997, reflects an increase of $408,085 in preferred dividends 21 payable, resulting from the issuance of additional convertible preferred stock during 1997 and the payment of dividends in kind rather than in cash. In January 1998, the Company's subsidiaries, ACTV Entertainment, Inc., (the "Issuer") and The Texas Individualized Television Network, Inc., a wholly-owned subsidiary of the Issuer ("Texas Network"), entered into a Note Purchase Agreement, dated as of January 13, 1998 (the "Agreement") with certain private investors (the "Purchasers"). Pursuant to the Agreement, the Purchasers purchased $5.0 million aggregate principal amount notes from the Issuer and Texas Network. The notes bear interest at a rate of 13.0% per annum, payable semi-annually, with principal repayment in one installment on June 30, 2003. During the term of the note, the Issuer may, at its option, pay any four semi-annual interest payments in kind rather than in cash, with an increase in the rate applicable to such payments in kind to 13.75% per annum. The Note is secured by the assets of the Texas Network, and is guaranteed by ACTV, Inc. In connection with the purchase of such note, the Purchasers received on January 14, 1998 a common stock purchase warrant (the "Warrant") of Texas Network that grants the Purchasers the right to purchase up to 17.5% of the fully-diluted shares of common stock of Texas Network. The Warrant expires on June 30, 2003. The Warrant also grants the Purchasers the right, through July 14, 1999, to exchange the Warrant for such number of shares of the Company's Common Stock, at the time of and giving effect to such exchange, equal to 5.5% of the fully diluted number of shares of Common Stock outstanding, after giving effect to the exercise or conversion of all then outstanding options, warrants and other rights to purchase or acquire shares of Common Stock. After five years from the date of issuance, the Purchasers have the right to put the warrants to the Texas Network for a value based on a multiple of its operating income. Prior to June 30, 1998, should the Company form and capitalize an entity with the intent to commence operations for a second Regional Network in one of the ten FOX Sports Net owned and operated regions, the Purchasers have a one time option to purchase notes from such entity on the same terms and conditions as the Texas Network financing. During the first three months of 1998, the Company has raised a total of $1.4 million from a series of private placements of its Common Stock. In January 1998, the Company entered into an agreement with certain holders of 5% Cumulative Convertible Preferred Stock ("Preferred Shares") of ACTV Holdings, Inc., a wholly owned subsidiary of ACTV, Inc. The agreement provides that the Company, at its sole discretion, may purchase from certain holders of the Preferred Shares up to an aggregate of 150,000 Preferred Shares based on a predetermined schedule through June 30, 1998. If the Company chooses to purchase the Preferred Shares, the Company may, at its sole discretion, pay in cash or a combination of cash, the Company's Common Stock, and warrants to purchase the Common Stock. Management of the Company believes that its current funds (taking into account the approximately $6.4 million raised during the first three months of 1998) will enable the Company to finance its entertainment and corporate operations at their present level for at least the next twelve months. Such belief is based on assumptions that could prove to be incorrect, in which case the Company may require additional capital to finance such operations during this period. In addition, if the Company is not successful at raising additional funds, it may be required to significantly reduce its education operations. While the Company believes that it has adequate funds to launch and operate its planned Southwest Regional Network, it will need additional funding for Regional Network expansion. While the Company has engaged an investment bank for assistance in securing such financing, the Company has no commitments from lenders or investors at this time and there is no assurance that it will be able to raise the necessary capital to effect additional Regional Network 22 launches or to maintain its education operations at current levels. Such belief is based on assumptions that could prove to be incorrect, in which case the Company may require additional financing during this period. The Company does not have any material contractual commitments for capital expenditures, although the Company believes that the Southwest Regional Network may need to acquire approximately $750,000 in equipment for a second master control facility. Impact of Inflation Inflation has not had any significant effect on the Company's operating costs. New Accounting Pronouncements Statement of Financial Accounting Standards No. 130. SFAS No. 130, Reporting Comprehensive Income establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This statement is effective for fiscal years beginning after December 15, 1998. The Company has determined that the adoption of this statement will have no effect on the financial statements. Statement of Financial Accounting Standards No. 131. The Company is required to adopt SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information during the year ending December 31, 1997. The Statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. This Statement supersedes FASB Statement No. 14, Financial Reporting for Segments of a Business Enterprise, but retains the requirement to report information about major customers. It amends FASB Statement No. 94, Consolidation of All Majority-Owned Subsidiaries, to remove the special disclosure requirements for previously unconsolidated subsidiaries. The Company has not yet determined what effect the adoption of this statement will have on the financial statements. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Financial Statements are listed under Item 14 in this report. Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. MANAGEMENT 23 Executive Officers and Directors The Company intends to file with the Securities and Exchange Commission within 120 days of the end of the fiscal year covered by this Report on Form 10-K a definitive proxy statement (the "Proxy Statement"), pursuant to Regulation 14A pertaining to the Annual Meeting of Stockholders to be held in June 1998. Information regarding directors and executive officers of the Company will appear under the caption "Election of Directors" in the Proxy Statement and is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION Information regarding executive compensation will appear under the caption "Executive Compensation" in the Proxy Statement and is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management will appear under the caption "Ownership of Securities" in the Proxy Statement and is incorporated herein by reference. Item 13. CERTAIN TRANSACTIONS Information regarding certain transactions will appear under the caption "Certain Transactions" in the Proxy Statement and is incorporated herein by reference. PART IV Item 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K: (a)1. FINANCIAL STATEMENTS: See the Consolidated Financial Statements beginning on Page F-1 hereafter, which is incorporated by reference. (a)2. FINANCIAL STATEMENT SCHEDULE The following Financial Statement Schedule for the years ended December 31, 1997 and December 31, 1996 is filed as part of this Annual Report. The Company had no activity reportable on this schedule for the year ended December 31, 1995. 24 Schedule II - Valuation and Qualifying Accounts and Reserves Column B Column C Column D Column E ---------- ---------------------- ---------- ---------- Balance at Charged to Charged to Balance at Beginning Costs and Other Deductions End Description of Period Expenses Accounts -Describe of Period - -------------------------------------------------------------------------------- Year ended 12/31/96: Accounts receivable allowance for doubtful accounts....... $82,746 $82,746 Reserve for investment losses......... $274,325 $274,325 Year ended 12/31/97: Accounts receivable allowance for doubtful accounts $82,746 $43,188 XXXXXXX $82,746 $43,188 Reserve for investment losses......... $274,325 $274,325 -- During 1997, the balances of $82,746 for accounts receivable allowance and $274,325 for investment loss reserve were written off as uncollectible and unrecoverable, respectively. 25 (a)3. EXHIBITS (inapplicable items omitted): 3.1.a Restated Certificate of Incorporation of the Company.* 3.1.b Amendment to Certificate of Incorporation of the Company.** 3.2 By-Laws of the Company.* 9.1 Voting Agreement dated November 11, 1994, by and between William C. Samuels and Michael J. Freeman.*** 9.2 Voting Trust Agreement dated March 10, 1994 by and among William C. Samuels, The Washington Post Company and ACTV, Inc.** 10.1 First Amendment to Lease, dated December January 13, 1997 by and between the Registrant, as the Tenant, and Rockefeller Center Properties, as the Landlord.**** 10.2 Form of 1989 Employee Incentive Stock Option Plan.* 10.3 Form of Amendment No. 1 to 1989 Employee Incentive Stock Option Plan.* 10.4 Form of 1989 Employee Non-qualified Stock Option Plan.* 10.5 Form of Amendment No. 1 to 1989 Employee Non-qualified Stock Option Plan.* 10.8 1996 Non-qualified Stock Option Plan. **** 10.9 1992 Stock Appreciation Rights Plan. **** 10.10 1996 Stock Appreciation Rights Plan. **** 10.11 Employment Agreement dated August 1, 1995, as amended January 1, 1997 between the Company and William Samuels. 10.12 Employment Agreement dated August 1, 1995, as amended January 1, 1997 between the Company and David Reese. 10.13 Employment Agreement dated 15th day of December, 1995, as amended January 1, 1997 between the Company and Bruce Crowley. 10.14 Master Programming License Agreement dated December 2, 1996, by and between the Company and Liberty/Fox Sports, LLC. **** 10.15 Enhancement License Agreement dated December 4, 1996, by and between the Company and Prime Ticket Networks, L.P., d/b/a Fox Sports West.******, **** 10.16 Enhancement License Agreement dated February 28, 1997, by and between the Company and ARC Holding, Ltd., d/b/a Fox Sports Southwest.******, **** 10.17 Agreement dated march 30, 1995 between General Instrument Corporation and the Company.*** 10.18 Technical Services Agreement dated May 1995 between the David Sarnoff Research Center, Inc. and the Company.*** 10.19 Option Agreement dated December 4, 1995 between the David Sarnoff Research Center and the Company. **** 10.21(a) deleted 10.21(b) deleted 10.21(c) Option Agreement dated September 29, 1995 between the Company and Richard H. Bennett.*** 10.21(d) Assignment dated September 29, 1995 between the Company and Richard H. Bennett.*** 10.21(e) Stock Option Agreement between the Registrant and William Samuels dated December 1, 1995 and amended July 29, 1997. 10.21(f) Stock Option Agreement, dated March 24, 1997, by and between the Registrant and William C. Samuels. **** 10.21(h) Stock Option Agreement between the Registrant and David Reese dated December 1, 1995 and amended July 29, 1997. 10.21(j) Stock Option Agreement between the Registrant and Bruce Crowley dated December 1, 1995 and amended July 29, 1997. 10.22 Option Agreement, dated March 11, 1997, by and between the Registrant and The Washington Post Company.**** 10.23(a) Stock Option Agreement between the Registrant and William Samuels dated February 21, 1998. 10.23(b) Stock Option Agreement between the Registrant and Bruce Crowley dated February 21, 1998. 10.23(c) Stock Option Agreement between the Registrant and David Reese dated February 21, 1998. 10.23(d) Stock Option Agreement between the Registrant and William Samuels dated March 24, 1997 and amended July 29, 1997. 10.23(e) Stock Option Agreement between the Registrant and Christopher Cline dated March 24, 1997 and amended July 29, 1997. 10.23(f) Stock Option Agreement between the Registrant and David Reese dated March 24, 1997 and amended July 29, 1997. 10.23(g) Stock Option Agreement between the Registrant and Bruce Crowley dated March 24, 1997 and amended July 29, 1997. 10.24(a) Stock Option Agreement, dated March 14, 1997, by and between ACTV Net, Inc. and William C. Samuels. 26 10.24(b) Stock Option Agreement, dated March 14, 1997, by and between ACTV Net, Inc. and Bruce Crowley 10.24(c) Stock Option Agreement, dated October 1, 1997, by and between ACTV Net, Inc. and William Samuels 10.24(d) Stock Option Agreement, dated October 1, 1997, by and between ACTV Net, Inc. and Bruce Crowley 10.25(a) Stock Option Agreement by and between ACTV Entertainment, Inc. and William Samuels dated March 14, 1997 and amended January 14, 1998. 10.25(b) Stock Option Agreement by and between ACTV Entertainment, Inc. and David Reese dated March 14, 1997 and amended January 14, 1998. 10.26(a) Stock Option Agreement by and between Florida Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(b) Stock Option Agreement by and between Northwest Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(c) Stock Option Agreement by and between New York Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(d) Stock Option Agreement by and between San Francisco Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(e) Stock Option Agreement by and between Los Angeles Individualized Television Network, Inc. and William Samuels dated March 14, 1997 and amended January 14, 1998. 10.26(f) Stock Option Agreement by and between Texas Individualized Television Network, Inc. and William Samuels dated March 14, 1997 and amended January 14, 1998. 10.26(g) Stock Option Agreement by and between Florida Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(h) Stock Option Agreement by and between Northwest Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(i) Stock Option Agreement by and between New York Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(j) Stock Option Agreement by and between San Francisco Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(k) Stock Option Agreement by and between Los Angeles Individualized Television Network, Inc. and David Reese dated March 14, 1997 and amended January 14, 1998. 10.26(l) Stock Option Agreement by and between Texas Individualized Television Network, Inc. and David Reese dated March 14, 1997 and amended January 14, 1998. 10.27 ACTV Entertainment Shareholder Agreement dated March 14, 1997 and amended January 14, 1998. 10.28 ACTV Net Shareholder Agreement dated March 14, 1997. 10.29 ACTV Net Additional Shareholder Agreement dated October 1, 1997. 10.30 ACTV Entertainment License dated March 14, 1997 between ACTV Inc., ACTV Holdings and ACTV Entertainment. 10.31 ACTV Net License Agreement dated March 13, 1997 between ACTV Inc., ACTV Holdings and ACTV Net. 10.32 The Los Angeles Individualized Television Network, Inc. Sublicense Agreement dated March 14, 1997 between ACTV Entertainment and The Los Angeles Individualized Television Network, Inc. 10.33 The San Francisco Individualized Television Network, Inc. Sublicense Agreement dated January 1, 1989 between ACTV Entertainment and The San Francisco Individualized Television Network, Inc. 10.34 The Texas Individualized Television Network, Inc. Sublicense Agreement dated March 14, 1997 between ACTV Entertainment and The Texas Individualized Television Network, Inc. 10.35 The Los Angeles Individualized Television Network, Inc. Service Agreement dated March 14, 1997 between ACTV Inc., ACTV Entertainment and The Los Angeles Individualized Television Network, Inc. 10.36 The San Francisco Individualized Television Network, Inc. Service Agreement dated January 1, 1998 between ACTV Inc., ACTV Entertainment and The San Francisco Individualized Television Network, Inc. 10.37 The Texas Individualized Television Network, Inc. Service Agreement dated March 14, 1997 between ACTV Inc., ACTV Entertainment and The Texas Individualized Television Network, Inc. 10.38 Form of Note Purchase Agreement of the Texas Individualized Television Network dated as of January 13, 1998 ***** 10.39 Common Stock Purchase Warrant issued pursuant to the Note Purchase Agreement as of January 14, 1998 ***** 21 Subsidiaries of the Registrant 27 Financial Data Schedule * Incorporated by reference from Form S-1 Registration Statement (File No. 33-34618) ** Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1993. 27 *** Incorporated by reference from Form S-1 Registration Statement (File No. 33-63879) which became effective on February 12, 1996. **** Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1996. ***** Incorporated by reference from the Exhibits to Schedule 13D filed by Value Partners, Ltd. on January 23, 1998. ****** Certain information contained in this exhibit has been omitted and filed separately with the Commission along with an application for non-disclosure of information pursuant to Rule 24b-2 of the Securities Act of 1933, as amended. 28 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of ACTV, Inc.: We have audited the accompanying consolidated balance sheets of ACTV, Inc. and subsidiaries ("the Company") as of December 31, 1997 and 1996 and the related consolidated statements of operations, shareholders' equity and cash flows for the three years ended December 31, 1997. Our audits also included the financial statement schedule listed in the index at Item 14 (a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 1997 and 1996 and the results of its operations and its cash flows for the three years ended December 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP March 18, 1998 New York, New York F-1 ACTV, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS December 31, December 31, 1996 1997 ------------ ------------ Current Assets: Cash and cash equivalents ................... $ 6,520,756 $ 554,077 Accounts receivable-net ..................... 410,193 303,044 Education equipment inventory ............... 337,504 237,757 Other ....................................... 316,962 308,653 ------------ ------------ Total current assets .................... 7,585,415 1,403,531 ------------ ------------ Property and equipment-net ..................... 724,089 2,596,785 ------------ ------------ Other Assets: Patents and patents pending ................. 253,779 279,356 Software development costs .................. -- 669,852 Goodwill .................................... 3,067,560 2,641,188 Other ....................................... 61,781 311,206 ------------ ------------ Total other assets ...................... 3,383,120 3,901,602 ------------ ------------ Total .............................. $ 11,692,624 $ 7,901,918 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses ....... $ 1,594,655 $ 1,882,159 Deferred stock appreciation rights .......... 701,517 -- Preferred dividends payable ................. 195,384 603,469 ------------ ------------ Total current liabilities ............... 2,491,556 2,485,628 Shareholders' equity: Preferred stock, $.10 par value, 1,000,000 shares authorized, issued and outstanding none at December 31, 1996, 86,200 at December 31, 1997 ............. -- 8,620 Convertible preferred stock, no par value, 436,000 shares authorized: issued and outstanding 400,000 at December 31, 1996, 316,944 at December 31, 1997 ...... 9,115,664 7,029,708 Common stock, $.10 par value, 35,000,000 shares authorized: issued and outstanding 11,787,106 at December 31, 1996, 14,614,611 at December 31, 1997 ... 1,178,711 1,461,461 Additional paid-in capital .................. 38,272,205 44,140,596 Notes receivable from stock sales ........... (200,000) (199,900) Accumulated deficit ......................... (39,165,512) (47,024,195) ------------ ------------ Total shareholders' equity .............. 9,201,068 5,416,290 ------------ ------------ Total .............................. $ 11,692,624 $ 7,901,918 ============ ============ See Notes to Consolidated Financial Statements F-2 ACTV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 1995 1996 1997 ----------- ----------- ----------- Revenues: Revenues ....................... $1,311,130 $1,459,540 $1,650,955 License fees from related party 730 16,789 -- ----------- ----------- ----------- Total revenues .............. 1,311,860 1,476,329 $1,650,955 Cost of Sales .................. 334,136 647,488 471,956 ----------- ----------- ----------- Gross profit ................ 977,724 828,841 1,178,999 Expenses: Operating expenses ............. 1,260,134 1,955,601 1,360,838 Selling and administrative ..... 4,998,020 6,332,759 6,880,311 Depreciation and amortization .. 686,906 419,979 327,681 Amortization of goodwill ....... 426,372 426,372 426,372 Loss on investment ............. -- 274,325 -- Stock appreciation rights ...... 567,316 183,634 (346,892) ----------- ----------- ----------- Total expenses .............. 7,938,748 9,592,670 8,648,310 Interest (income) ................. (138,510) (158,732) (116,870) Interest expense--related parties . 98,392 -- -- ----------- ----------- ----------- Interest expense (income) - net (40,118) (158,732) (116,870) Loss before minority interest in equity of investee and extraordinary gain ............. 6,920,906 8,605,097 7,352,441 ----------- ----------- ----------- Net loss before extraordinary gain .............................. 6,920,906 8,605,097 7,352,441 Gain on extinguishment of debt and equipment lease obligations ....... 94,117 -- -- ----------- ----------- ----------- Net loss .......................... 6,826,789 8,605,097 7,352,441 Preferred stock dividend .......... -- 195,384 506,242 Loss applicable to common stock shareholders ...................... $6,826,789 $8,800,481 $7,858,683 =========== =========== =========== Loss per common share before extraordinary gain ................ $.68 $.75 $.61 Loss per common share after extraordinary gain ................ $.67 $.75 $.61 Weighted average number of common shares outstanding ................ 10,162,128 11,739,768 12,883,848 See Notes to Consolidated Financial Statements F-3 ACTV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock Preferred Stock Additional -------------------------- ------------------------- ------------ Paid-In Shares Amount Shares Amount Capital Deficit ----------- ----------- ---------- ----------- ------------ ------------ Balances January 1, 1995 9,019,550 $ 901,955 -- -- $ 26,608,830 $(23,538,242) Issuance of shares in connection with financings 1,990,293 199,029 -- -- 8,730,627 -- Issuance of shares in connection with exercise of stock options 308,247 30,825 -- -- 1,129,924 -- Issuance of shares for services 78,329 7,833 -- -- 217,361 -- Net loss -- -- -- -- -- (6,826,789) ----------- ----------- ---------- ----------- ------------ ------------ Balances December 31, 1995 11,396,419 $ 1,139,642 -- -- $ 36,686,742 $(30,365,031) =========== =========== ========== =========== ============ ============ Issuance of shares in connection with financings 450,000 45,000 400,000 9,115,664 1,832,985 Issuance of shares for services 45,687 4,569 109,478 Reversal of option exercise (105,000) (10,500) (357,000) Net loss -- -- -- -- -- (8,800,481) ----------- ----------- ---------- ----------- ------------ ------------ Balances December 31, 1996 11,787,106 $ 1,178,711 400,000 $ 9,115,664 $ 38,272,205 $(39,165,512) =========== =========== ========== =========== ============ ============ Issuance of shares in connection with financings 733,333 73,333 86,200 8,620 3,447,778 Issuance of shares for services 286,511 28,651 414,473 Issuance of shares in connection with exchange of preferred stock 1,795,661 179,566 (83,056) (2,085,956) 1,994,980 Issuance of shares in connection with exercise of stock options 12,000 1,200 11,160 Net loss -- -- -- -- -- (7,858,683) ----------- ----------- ---------- ----------- ------------ ------------ 14,614,611 1,461,461 403,144 7,038,328 44,140,596 $(47,024,195) =========== =========== ========== =========== ============ ============
See Notes to Consolidated Financial Statements. F-4 ACTV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 1995 1996 1997 --------- --------- --------- Cash flows from operating activities: Net loss applicable to common shareholders ................ $(6,826,789) $(8,800,481) $(7,858,683) ----------- ----------- ----------- Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization ....... 1,220,873 846,354 754,053 Stock appreciation rights ........... (183,309) 134,634 (701,517) Gain on extinguishment of debt obligation ..................... (94,717) -- -- Stock issued in lieu of cash compensation ........................ 563,430 114,047 443,125 Common stock issued for preferred dividends ........................... -- -- 98,156 Loss on investment .................. -- 274,325 -- Bad debt reserve .................... -- 82,746 43,188 Changes in assets and liabilities: Accounts receivable ................. (150,938) (143,648) 63,960 Education equipment inventory ....... 34,065 (225,286) 99,747 Other assets ........................ 80,552 (542,824) (241,117) Accounts payable and accrued expenses .................... 165,023 504,263 287,504 Preferred stock dividends payable ... 93,333 195,384 408,085 ----------- ----------- ----------- Net cash used in operating activities ...................... (5,098,477) (7,560,486) (6,603,499) ----------- ----------- ----------- Cash flows from investing activities: Investment in patents pending ....... -- -- (50,000) Investment in property and equipment ....................... (575,323) (444,189) (2,159,576) Investment in systems ............... -- -- (686,227) ----------- ----------- ----------- Net cash used in investing activities .... (575,323) (444,189) (2,895,803) Cash flows from financing activities: Proceeds from exercise of warrants and options ......................... 122,810 -- 12,360 Proceeds from preferred stock issuances ..................... -- 9,115,664 2,045,163 Proceeds from equity financing ...... 8,951,859 1,877,985 1,475,000 Discounted note prepayment .......... (101,458) -- -- Note repayment ...................... (2,247,469) -- 100 ----------- ----------- ----------- Net cash provided by financing activities 6,725,742 10,993,649 3,532,623 ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents .............................. 1,051,942 2,988,974 (5,966,679) Cash and cash equivalents, beginning of period ................. 2,479,840 3,531,782 6,520,756 ----------- ----------- ----------- Cash and cash equivalents, end of period ....................... 3,531,782 6,520,756 554,077 =========== =========== =========== See Notes to Consolidated Financial Statements. Supplemental disclosure of cash flow information: See Note 15 F-5 ACTV, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 - -------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization ACTV, Inc. was incorporated July 8, 1983. ACTV, Inc. and its subsidiaries (the "Company" or "ACTV"), has developed and markets proprietary technologies for individualized television programming (the "Individualized Programming") and for Internet learning systems. Individualized Programming permits a viewer to experience instantly responsive television. Since its inception, the Company has been engaged in the development of Individualized Programming, the production of programs that use its Individualized Programming and the marketing and sales of the various products and services incorporating the Company's Individualized Programming. In 1997, the Company introduced to the education market eSchool Online ("eSchool"), a suite of software products that permit a teacher to use the Internet as an accompanying instructional tool during a live or pre-recorded video lesson. Principles of Consolidation - The Company's consolidated financial statements include the balances of its wholly-owned operating subsidiaries. In consolidation, all intercompany account balances are eliminated. Property and Equipment - Property and equipment are recorded at cost and depreciated on the straight-line method over their estimated useful lives (generally five years). Depreciation expense for the years ended December 31, 1995, 1996 and 1997 aggregated $70,790, $189,957 and $286,883, respectively. Education Equipment - Education equipment consists of standard personal computers adapted to provide individualized programming functionality, videocassette recorders, television monitors and computer printers that the Company holds in inventory. This inventory is carried on the Company's books at the lower of cost or market. Patents and Patents Pending - The cost of patents, which for patents issued represents the consideration paid for the assignment of patent rights to the Company by an employee and for patents pending represents legal costs related directly to such patents pending, is being amortized on a straight-line basis over the estimated economic lives of the respective patents (averaging 10 years), which is less than the statutory life of each patent. The balances at December 31, 1996, and 1997, are net of accumulated amortization of $116,371 and $141,072, respectively. Software Development Costs - The Company capitalizes costs incurred for product software where economic and technological feasibility has been established. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the respective products (5 years). The balance at December 31, 1997, is net of accumulated amortization of $16,376. Cash Equivalents - The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Revenue Recognition - Sales are primarily recorded as products are shipped and services are rendered, using the completed contract method of accounting. Research and Development - Research and development costs, which represent primarily refinements to the Individualized Programming, were $616,455 for the year ended December 31, 1995, $1,221,362 for the year ended December 31, 1996, and $551,328 for the year ended December 31, 1997. Earnings/(Loss) Per Share - The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share, for the period ended December 31, 1997, which establishes standards for computing and presenting earnings per share ("EPS") and simplifies the standards for computing EPS currently found in Accounting Principles Board ("APB") Opinion No. 15 ("Earnings Per Share"). Common stock equivalents under APB No. 15 are no longer included in the calculation of primary, or basic, EPS. Loss per common share equals net loss divided by the weighted average number of shares of Company's common stock ("Common Stock") outstanding during the period. The Company did not consider the effect of stock options or convertible preferred stock upon the calculation of the loss per common share, as it would be anti-dilutive. F-6 Reclassifications - Certain reclassifications have been made in the December 31, 1995, and 1996, financial statements to conform to the December 31, 1997, presentation. Intangibles - The excess of the purchase cost over the fair value of net assets acquired in an acquisition (goodwill) is being amortized on a straight-line basis over a period of 10 years. On a quarterly basis, the Company evaluates the realizability of goodwill based upon the expected undiscounted cash flows of the acquired business. Impairments, if any, will be recognized through a charge to operation in the period in which the impairment is deemed to exist. Based on such analysis, the Company does not believe that goodwill has been impaired. Other Current Assets - The Company's consolidated balance sheets at December 31, 1996 and December 31, 1997 reflect balances of $343,962 and $224,712, respectively, related to cash advances made to executive officers. New Accounting Pronouncements Statement of Financial Accounting Standards No. 130. SFAS No. 130, Reporting Comprehensive Income establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This statements is effective for fiscal years beginning after December 15, 1998. The Company has determined that the adoption of this statement will have no effect on the financial statements. Statement of Financial Accounting Standards No. 131. The Company is required to adopt SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information during the year ending December 31, 1998. The Statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. This Statement supersedes FASB Statement No. 14, Financial Reporting for Segments of a Business Enterprise, but retains the requirement to report information about major customers. It amends FASB Statement No. 94, Consolidation of All Majority-Owned Subsidiaries, to remove the special disclosure requirements for previously unconsolidated subsidiaries. The Company has not yet determined what effect the adoption of this statement will have on the financial statements. 2. NATURE OF OPERATIONS The principal markets for the Company's products are in-home entertainment and education within the United States. The Company plans to sell individualized entertainment programming (initially professional and college sports programming) to the end user through cable television systems on a subscription basis. The Company sells eSchool and individualized distance learning programming and related hardware to schools, colleges, and private education networks. No single client accounted for more than 10% of the Company's revenues during the year ended December 31, 1997, except for Georgia Public Television, which accounted for approximately 17% and 24% of total revenues in 1996 and 1997, respectively and the Texas Workforce Commission, which accounted for 24% of total revenues in 1997. During 1996, the Company generated no revenues from the Texas Workforce Commission. 3. ESTIMATES USED IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of the Company's financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. 4. PROPERTY AND EQUIPMENT - NET Property and equipment - net at December 31, 1996, and 1997, consisted of the following (at cost): 1996 1997 -------- ---------- Machinery and equipment $636,845 $2,931,682 Office furniture and fixtures 357,373 501,435 -------- ---------- Total 994,218 3,433,117 Less accumulated depreciation 270,129 836,332 -------- ---------- Total $724,089 $2,596,785 ======== ========== F-7 5. EXTRAORDINARY ITEM During 1995, the Company realized an extraordinary gain of $94,117 related to the repayment of an obligation to a former affiliate of the Company at an amount below the value of which such obligation was carried on the books of the Company. 6. FINANCING ACTIVITIES In January 1998, the Company's subsidiaries, ACTV Entertainment, Inc., (the "Issuer") and The Texas Individualized Television Network, Inc., a wholly-owned subsidiary of the Issuer ("Texas Network"), entered into a Note Purchase Agreement, dated as of January 13, 1998 (the "Agreement") with certain private investors (the "Purchasers"). Pursuant to the Agreement, the Purchasers purchased $5.0 million aggregate principal amount notes from the Issuer and Texas Network. The notes bear interest at a rate of 13.0% per annum, payable semi-annually, with principal repayment in one installment on June 30, 2003. During the term of the note, the Issuer may, at its option, pay any four semi-annual interest payments in kind rather than in cash, with an increase in the rate applicable to such payments in kind to 13.75% per annum. The Note is secured by the assets of the Texas Network, and is guaranteed by ACTV, Inc. In connection with the purchase of such note, the Purchasers received on January 14, 1998 a common stock purchase warrant (the "Warrant") of Texas Network that grants the Purchasers the right to purchase up to 17.5% of the fully-diluted shares of common stock of Texas Network. The Warrant expires on June 30, 2003. The Warrant also grants the Purchasers the right, through July 14, 1999, to exchange the Warrant for such number of shares of the Company's Common Stock, at the time of and giving effect to such exchange, equal to 5.5% of the fully diluted number of shares of Common Stock outstanding, after giving effect to the exercise or conversion of all then outstanding options, warrants and other rights to purchase or acquire shares of Common Stock. After five years from the date of issuance, the Purchasers have the right to put the warrants to the Texas Network for a value based on a multiple of its operating income. Prior to June 30, 1998, should the Company form and capitalize an entity with the intent to commence operations for a second Regional Network in one of the ten FOX Sports Net owned and operated regions, the Purchasers have a one time option to purchase notes from such entity on the same terms and conditions as the Texas Network financing. During the first three months of 1998, the Company has raised a total of $1.4 million from a series of private placements of its Common Stock. During 1997, the Company raised approximately $3.5 million from the proceeds of a series of private placements of Common Stock (approximately $1.5 million in net proceeds) and Series A Convertible Preferred Stock (approximately $2.0 million in net proceeds). During 1996, the Company raised approximately $11.0 million net from the proceeds of a private placement of common stock ($1.9 million in net proceeds) and of 5% convertible preferred stock (the "Convertible Preferred Stock") issued by its wholly-owned subsidiary ($9.1 million in net proceeds). The Convertible Preferred Stock is convertible into Common Stock of ACTV, Inc., beginning January 1, 1997, at varying discounts to the market price of Common Stock. After September 1, 1997, holders of the Convertible Preferred Stock have been able to use the lesser of (i) the then current market price of the Company's Common Stock, or (ii) an average market price during the month of August 1997 as the price to which the discount is applied for conversions. In addition, the Company has the right to redeem the Convertible Preferred Stock at a price equal to $25 times the number of shares being purchased, plus accrued and unpaid dividends (the "Redemption Price"). This right may be exercised by the Company only if the closing price of the Company's Common Stock is above $9.00 for thirty consecutive trading days prior to redemption. The Company believes that it is highly likely that the holders of the Convertible Preferred Stock will elect to convert their stock into Common Stock of the Company and, accordingly, has included the Convertible Preferred Stock in its consolidated statement of shareholders' equity. F-8 Management of the Company believes that its current funds (taking into account the approximately $6.4 million raised during the first three months of 1998) will enable the Company to finance its entertainment and corporate operations at their present level for at least the next twelve months. Such belief is based on assumptions that could prove to be incorrect, in which case the Company may require additional capital to finance such operations during this period. In addition, if the Company is not successful at raising additional funds, it may be required to significantly reduce its education operations. While the Company believes that it has adequate funds to launch and operate its planned Southwest Regional Network, it will need additional funding for Regional Network expansion. While the Company has engaged an investment bank for assistance in securing such financing, the Company has no commitments from lenders or investors at this time and there is no assurance that it will be able to raise the necessary capital to effect additional Regional Network launches or to maintain its education operations at current levels. Such belief is based on assumptions that could prove to be incorrect, in which case the Company may require additional financing during this period. 7. SHAREHOLDERS' EQUITY At December 31, 1997, the Company had reserved shares of Common Stock for issuance as follows: 1989 Qualified Stock Option Plan 49,567 1989 Non-Qualified Stock Option Plan 47,250 1996 Qualified Stock Option Plan 380,000 Options granted outside of formal plans 3,062,401 --------- Total 3,539,218 ========= Convertible Preferred Stock At December 31, 1997, the Company was authorized to issue 1,000,000 shares of blank check Preferred Stock, par value $0.10 per share, of which 120,00 shares have been designated Series A Convertible Preferred Stock. At December 31, 1997, 86.200 shares of Series A Convertible Preferred Stock were issued and outstanding. Exchangeable Preferred Stock At December 31, 1997, the Company's wholly-owned subsidiary, ACTV Holdings, Inc. was authorized to issue 436,000 shares of Convertible Preferred Stock, no par value, of which 316,944 shares were issued and outstanding. 8. STOCK OPTIONS During 1989, the Board of Directors approved an Employee Incentive Stock Option Plan (the "Employee Plan"). The Employee Plan provides for the granting of up to 100,000 options to purchase Common Stock to key employees. The Employee Plan stipulates that the option price be not less than fair market value on the date of grant. Options granted will have an expiration date not to exceed ten years from the date of grant. At December 31, 1997, 97,500 options had been granted under this plan, of which 19,000 had been exercised and 28,933 had expired or been canceled. In addition, in August 1989, the Board of Directors approved a Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), to be administered by the Board or a committee appointed by the Board. The Non-Qualified Plan provides for the granting of up to 100,000 options to purchase shares of Common Stock to employees, officers, directors, consultants and independent contractors. The Non-Qualified Plan stipulates that the option price be not less than fair market value at the date of grant, or such other price as the Board may determine. Options granted under this Plan shall expire on a date determined by the committee but in no event later than three months after the termination of employment or retainer. At December 31, 1997, 97,000 options had been granted under this plan, of which 22,250 had been exercised and 27,500 had expired or been canceled. During 1996, the Board of Directors approved the Company's 1996 Stock Option Plan (the "1996 Option Plan"). The 1996 Option Plan provides for option grants to employees and others who provide significant services to the Company. Under the 1996 Option Plan, the Company is authorized to issue options for a total of 500,000 shares of Common Stock. F-9 As of December 31, 1997, the Company had issued 430,000 options under the plan, of which none had been exercised and 50,000 had been canceled. At December 31, 1997, the Company also had outstanding options that were issued to Directors, certain employees and consultants for the purchase of 3,062,401 shares of Common Stock that were not issued pursuant to a formal plan. The prices of these options range from $1.50 to $5.50 per share; they have expiration dates in the years 1998 through 2003. The options granted are not part of the Employee Incentive Stock Option Plan or the Non-Qualified Stock Option Plan discussed above. A summary of the status of the Company's stock options as of December 31, 1997, 1996 and 1995 is as follows: 1997 1996 1995 Wgtd. Wgtd. Wgtd. Avg. Avg. Avg. 1997 Exer 1996 Exer 1995 Exer Shares Price Shares Price Shares Price ---------------------------------------------------- Outstanding at beginning of period 3,328,718 2,747,082 1,605,104 Options granted 339,683 $1.91 887,500 $3.73 1,706,087 $3.41 Options exercised 17,000 $0.73 -- -- 141,833 $2.33 Options terminated 112,183 $4.06 305,864 $3.76 422,276 $5.27 Outstanding at end of period 3,539,218 $1.81 3,328,718 $2.99 2,747,082 $3.27 Options exercisable at end of period 2,363,134 $1.87 1,719,134 $3.19 1,091,083 $3.04 The following table summarizes information about stock options outstanding at December 31, 1997:
Weighted Aver- Weighted Number age Weighted Aver- Outstanding Remaining Aver- Number age Range of at Contractual age Exercise Exercisable at Exercise Exercise Prices 12/31/97 Life Price 12/31/97 Price - ------------------------------------------------------------------------------------------------- 0 to 1.50 2,822,718 5.0 Years $1.50 1,757,053 $1.50 1.51 to 3.50 474,000 1.7 Years $2.52 446,915 $2.52 3.51 to 5.50 242,500 1.7 Years $4.05 159,166 $4.18
The weighted average fair value of options granted during 1996 and 1997 was $1.21 and $.64 per share, respectively, excluding the value of options granted and terminated within the year. In the case of each issuance, options were issued at an exercise price that was higher than the fair market value of the Company's Common Stock on the date of grant. The Company applies Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for its stock option and purchase plans. Accordingly, no compensation cost has been recognized for option issuances. Had compensation cost for the Company's option issuances been determined based on the fair value at the grant dates consistent with the method of FASB Statement 123, the Company's net loss and loss per share for the years ended December 31, 1995, 1996 and 1997 would have been increased to the pro forma amounts indicated below: F-10 Net loss to common shareholders 1995 1996 1997 ---- ---- ---- As reported $6,826,789 $8,800,481 $7,858,683 Pro forma $9,506,556 $9,685,735 $8,074,807 Net loss per common share 1995 1996 1997 ---- ---- ---- As reported $0.67 $0.75 $0.61 Pro forma $0.94 $0.83 $0.63 The Company estimated the fair value of options issued during 1995, 1996 and 1997 on the date of each grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used: no dividend yield, expected volatility for 1995 and 1996 of 61.5%, expected volatility for 1997 of 57.3%, and a risk free interest rate of 6% for all years. Certain employees, including the executive officers Samuels, Reese, Crowley and Cline, have been granted options to purchase Class B Common Stock, at fair value as of the date of grant, of certain of the Company's subsidiaries; such common stock, if issued, will have majority voting rights in such subsidiaries. 9. STOCK APPRECIATION RIGHTS PLANS The Company's 1992 Stock Appreciation Rights Plan (the "1992 SAR Plan") was approved by the Company's stockholders in December 1992. Subject to adjustment as set forth in the 1992 SAR Plan, the aggregate number of Stock Appreciation Rights ("SARs") that may be granted shall not exceed 900,000. The Company's 1996 Stock Appreciation Rights Plan (the "1996 SAR Plan") was adopted by the Board of Directors in April 1996 and approved by the shareholders in July 1996. Subject to adjustment as set forth in the 1996 SAR Plan, the aggregate number of SARs that may be granted pursuant to the 1996 SAR Plan shall not exceed 500,000; provided, however, that at no time shall there be more than an aggregate of 900,000 outstanding, unexercised SARs granted pursuant to both the 1996 SAR Plan and the 1992 SAR Plan. The 1996 SAR Plan imposes no limit on the number of recipients to whom awards may be made. Both the 1992 and 1996 SAR Plans are administered by the Stock Appreciation Rights Committee (the "SAR Committee"). SARs may not be exercised until the six months from the date of grant. SARs issued pursuant to the 1992 SAR Plan vest in five equal annual installments beginning twelve months from the date of grant. SARs issued pursuant to the 1996 SAR Plan vest either in a lump sum or in such installments, which need not be equal, as the Committee shall determine. If a holder of a SAR ceases to be an employee, director or consultant of the Company or one of its subsidiaries or an affiliate, other than by reason of the holder's death or disability, any SARs that have not vested shall become void. Exercise of SARs also will be subject to such further restrictions (including limits on the time of exercise) as may be required to satisfy the requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission and any other applicable law or regulation (including, without limitation, federal and state securities laws and regulations). SARs are not transferable except by will or under the laws of descent and distribution or pursuant to a domestic relations order as defined in the Internal Revenue Code of 1986, as amended. Upon exercise of a SAR, the holder will receive for each share for which a SAR is exercised, as determined by the SAR Committee in its discretion, (a) shares of the Company's Common Stock, (b) cash, or (c) cash and shares of the Company's Common Stock, equal to the difference between (i) the fair market value per share of the Common Stock on the date of exercise of the SAR and (ii) the value of a SAR, which amount shall be no less than the fair market value per share of Common Stock on the date of grant of the SAR. Under the Company's 1992 SAR Plan, as of December 31, 1997, the Company has granted 516,000 outstanding SARs (with an exercise price of $1.50 per share) to ten employees. The SARs expire between 2001 and 2006. Under the Company's 1996 SAR Plan, as of December 31, 1997, the Company has granted 380,000 outstanding SARs (with an F-11 exercise price of $1.50 per share) to six employees. The SARs expire between 2002 and 2006. During 1997, a total of 203,000 SARs were exercised under both plans. 10. INCOME TAXES The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". Deferred income taxes reflect the net tax effects at an effective tax rate of 35.33% of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's net deferred tax asset as of December 31, 1996, and December 31, 1997, are as follows: 1996 1997 ------------ ------------ Deferred tax assets: Operating loss carryforwards $ 13,365,772 $ 16,131,213 Differences between book and tax basis of property 34,019 56,148 ------------ ------------ 13,399,791 16,187,361 Deferred tax liabilities: Differences between book and tax basis of property (106,819) (181,104) ------------ ------------ 13,292,972 16,000,257 Valuation Allowance (13,292,972) (16,000,257) ------------ ------------ Net deferred tax asset $ 0 $ 0 ============ ============ The increase in the valuation allowance for the year ended December 31, 1997, was approximately $2.7 million. There was no provision or benefit for federal income taxes as a result of the net operating loss in the current year. At December 31, 1997, the Company has Federal net operating loss carryovers of approximately $45.7 million. These carryovers may be subject to certain limitations and will expire between the years 1998 and 2012. 11. COMMITMENTS At December 31, 1997, future aggregate minimum lease commitments under non-cancelable operating leases, which expire in 1999 and 2001, were approximately $900,000. The leases contain customary escalation clauses, based principally on real estate taxes. Rent expense related to these leases for the years ended December 31, 1995, 1996 and 1997 aggregated $176,264, $129,600, and $330,430 respectively. The Company has employment agreements with certain key employees. These agreements extend for a period of a maximum of five years and contain non-competition provisions which extend two years after termination of employment with the Company. At December 31, 1997, the Company is committed to expend a total of approximately $2.7 million under these agreements. 12. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and receivables. The Company attempts to mitigate cash investment risks by placing such investments in insured depository accounts and with financial institutions that have high credit ratings. Concentrations of risk with respect to trade receivables exist because of the relatively few companies or other organizations (primarily educational or government bodies) with which the Company currently does business. The Company attempts to limit these risks by closely monitoring the credit of those to whom it is contemplating providing its products, and continuing such credit monitoring activities and other collection activities throughout the payment period. In certain instances, the Company further minimizes concentrations of credit risks by requiring partial advance payments for the products provided. F-12 13. FAIR VALUE OF FINANCIAL INSTRUMENTS For financial instruments, including cash and cash equivalents, accounts receivable and payable, and accruals, the carrying amounts approximated fair value because of their short maturity. 14. INVESTMENT AND ADJUSTMENTS In January 1995, the Company invested $274,325 in the common stock (approximately 15% of ownership interest) of a company (the "Licensee"), which had licensed the Company's Individualized Progrmming for commercialization in special-purpose theaters. The Company also performed executive production services for the Licensee on a fee basis. During 1996, the Company recorded license fee and production service revenue from the Licensee of $16,789 and $199,666, respectively. At December 31, 1996, the Company had unpaid receivables pursuant to such revenues of $82,746. During 1997, the Licensee filed for liquidation under United States Bankruptcy laws. In anticipation of such filing, at December 31, 1996 the Company provided a reserve for the full amount of the receivables outstanding of $82,746 and a valuation allowance for its full investment in the Licensee of $274,325. 15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The consolidated balance sheet at December 31, 1996, reflects non-cash activity during the year ended December 31, 1996, that relates to a reversal of certain of the option exercises and resulting non-recourse loan transactions described above: a credit to shareholders' equity of $367,500. The Company made no cash payments of interest or income taxes during the years ended December 31, 1996 and 1997. F-13 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report 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 27th day of March 1998. ACTV, Inc. By: /s/William C. Samuels --------------------- William C. Samuels Chairman and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the date indicated. Signature Title Date - --------- ----- ---- /s/ William C. Samuels Chairman of the Board, Chief March 27, 1998 - ------------------------ Executive Officer, President William C. Samuels and Director /s/ David Reese Executive Vice President, March 27, 1998 - ------------------------ President - ACTV Entertainment, Inc., David Reese and Director /s/ Bruce Crowley Executive Vice President, March 27, 1998 - ------------------------ President - ACTV Net Inc., Bruce Crowley and Director /s/ Christopher C. Cline Senior Vice President, Chief March 27, 1998 - ------------------------ Financial Officer and Secretary Christopher C. Cline /s/ William Frank Director March 27, 1998 - ------------------------ William A. Frank /s/ Richard Hyman Director March 27, 1998 - ------------------------ Richard Hyman /s/ Jess Ravich Director March 27, 1998 - ------------------------ Jess Ravich /s/ Steven W. Schuster Director March 27, 1998 - ------------------------ Steven W. Schuster UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 ACTV, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) EXHIBITS EXHIBIT INDEX 3.1.a Restated Certificate of Incorporation of the Company.* 3.1.b Amendment to Certificate of Incorporation of the Company.** 3.2 By-Laws of the Company.* 9.1 Voting Agreement dated November 11, 1994, by and between William C. Samuels and Michael J. Freeman.*** 9.2 Voting Trust Agreement dated March 10, 1994 by and among William C. Samuels, The Washington Post Company and ACTV, Inc.** 10.1 First Amendment to Lease, dated December January 13, 1997 by and between the Registrant, as the Tenant, and Rockefeller Center Properties, as the Landlord.**** 10.2 Form of 1989 Employee Incentive Stock Option Plan.* 10.3 Form of Amendment No. 1 to 1989 Employee Incentive Stock Option Plan.* 10.4 Form of 1989 Employee Non-qualified Stock Option Plan.* 10.5 Form of Amendment No. 1 to 1989 Employee Non-qualified Stock Option Plan.* 10.8 1996 Non-qualified Stock Option Plan. **** 10.9 1992 Stock Appreciation Rights Plan. **** 10.10 1996 Stock Appreciation Rights Plan. **** 10.11 Employment Agreement dated August 1, 1995, as amended January 1, 1997 between the Company and William Samuels. 10.12 Employment Agreement dated August 1, 1995, as amended January 1, 1997 between the Company and David Reese. 10.13 Employment Agreement dated 15th day of December, 1995, as amended January 1, 1997 between the Company and Bruce Crowley. 10.14 Master Programming License Agreement dated December 2, 1996, by and between the Company and Liberty/Fox Sports, LLC. **** 10.15 Enhancement License Agreement dated December 4, 1996, by and between the Company and Prime Ticket Networks, L.P., d/b/a Fox Sports West.******, **** 10.16 Enhancement License Agreement dated February 28, 1997, by and between the Company and ARC Holding, Ltd., d/b/a Fox Sports Southwest.******, **** 10.17 Agreement dated march 30, 1995 between General Instrument Corporation and the Company.*** 10.18 Technical Services Agreement dated May 1995 between the David Sarnoff Research Center, Inc. and the Company.*** 10.19 Option Agreement dated December 4, 1995 between the David Sarnoff Research Center and the Company. **** 10.21(a) deleted 10.21(b) deleted 10.21(c) Option Agreement dated September 29, 1995 between the Company and Richard H. Bennett.*** 10.21(d) Assignment dated September 29, 1995 between the Company and Richard H. Bennett.*** 10.21(e) Stock Option Agreement between the Registrant and William Samuels dated December 1, 1995 and amended July 29, 1997. 10.21(f) Stock Option Agreement, dated March 24, 1997, by and between the Registrant and William C. Samuels. **** 10.21(h) Stock Option Agreement between the Registrant and David Reese dated December 1, 1995 and amended July 29, 1997. 10.21(j) Stock Option Agreement between the Registrant and Bruce Crowley dated December 1, 1995 and amended July 29, 1997. 10.22 Option Agreement, dated March 11, 1997, by and between the Registrant and The Washington Post Company.**** 10.23(a) Stock Option Agreement between the Registrant and William Samuels dated February 21, 1998. 10.23(b) Stock Option Agreement between the Registrant and Bruce Crowley dated February 21, 1998. 10.23(c) Stock Option Agreement between the Registrant and David Reese dated February 21, 1998. 10.23(d) Stock Option Agreement between the Registrant and William Samuels dated March 24, 1997 and amended July 29, 1997. 10.23(e) Stock Option Agreement between the Registrant and Christopher Cline dated March 24, 1997 and amended July 29, 1997. 10.23(f) Stock Option Agreement between the Registrant and David Reese dated March 24, 1997 and amended July 29, 1997. 10.23(g) Stock Option Agreement between the Registrant and Bruce Crowley dated March 24, 1997 and amended July 29, 1997. 10.24(a) Stock Option Agreement, dated March 14, 1997, by and between ACTV Net, Inc. and William C. Samuels. 10.24(b) Stock Option Agreement, dated March 14, 1997, by and between ACTV Net, Inc. and Bruce Crowley 10.24(c) Stock Option Agreement, dated October 1, 1997, by and between ACTV Net, Inc. and William Samuels 10.24(d) Stock Option Agreement, dated October 1, 1997, by and between ACTV Net, Inc. and Bruce Crowley 10.25(a) Stock Option Agreement by and between ACTV Entertainment, Inc. and William Samuels dated March 14, 1997 and amended January 14, 1998. 10.25(b) Stock Option Agreement by and between ACTV Entertainment, Inc. and David Reese dated March 14, 1997 and amended January 14, 1998. 10.26(a) Stock Option Agreement by and between Florida Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(b) Stock Option Agreement by and between Northwest Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(c) Stock Option Agreement by and between New York Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(d) Stock Option Agreement by and between San Francisco Individualized Television Network, Inc. and William Samuels dated June 3, 1997 and amended January 14, 1998. 10.26(e) Stock Option Agreement by and between Los Angeles Individualized Television Network, Inc. and William Samuels dated March 14, 1997 and amended January 14, 1998. 10.26(f) Stock Option Agreement by and between Texas Individualized Television Network, Inc. and William Samuels dated March 14, 1997 and amended January 14, 1998. 10.26(g) Stock Option Agreement by and between Florida Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(h) Stock Option Agreement by and between Northwest Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(i) Stock Option Agreement by and between New York Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(j) Stock Option Agreement by and between San Francisco Individualized Television Network, Inc. and David Reese dated June 3, 1997 and amended January 14, 1998. 10.26(k) Stock Option Agreement by and between Los Angeles Individualized Television Network, Inc. and David Reese dated March 14, 1997 and amended January 14, 1998. 10.26(l) Stock Option Agreement by and between Texas Individualized Television Network, Inc. and David Reese dated March 14, 1997 and amended January 14, 1998. 10.27 ACTV Entertainment Shareholder Agreement dated March 14, 1997 and amended January 14, 1998. 10.28 ACTV Net Shareholder Agreement dated March 14, 1997. 10.29 ACTV Net Additional Shareholder Agreement dated October 1, 1997. 10.30 ACTV Entertainment License dated March 14, 1997 between ACTV Inc., ACTV Holdings and ACTV Entertainment. 10.31 ACTV Net License Agreement dated March 13, 1997 between ACTV Inc., ACTV Holdings and ACTV Net. 10.32 The Los Angeles Individualized Television Network, Inc. Sublicense Agreement dated March 14, 1997 between ACTV Entertainment and The Los Angeles Individualized Television Network, Inc. 10.33 The San Francisco Individualized Television Network, Inc. Sublicense Agreement dated January 1, 1989 between ACTV Entertainment and The San Francisco Individualized Television Network, Inc. 10.34 The Texas Individualized Television Network, Inc. Sublicense Agreement dated March 14, 1997 between ACTV Entertainment and The Texas Individualized Television Network, Inc. 10.35 The Los Angeles Individualized Television Network, Inc. Service Agreement dated March 14, 1997 between ACTV Inc., ACTV Entertainment and The Los Angeles Individualized Television Network, Inc. 10.36 The San Francisco Individualized Television Network, Inc. Service Agreement dated January 1, 1998 between ACTV Inc., ACTV Entertainment and The San Francisco Individualized Television Network, Inc. 10.37 The Texas Individualized Television Network, Inc. Service Agreement dated March 14, 1997 between ACTV Inc., ACTV Entertainment and The Texas Individualized Television Network, Inc. 10.38 Form of Note Purchase Agreement of the Texas Individualized Television Network dated as of January 13, 1998 ***** 10.39 Common Stock Purchase Warrant issued pursuant to the Note Purchase Agreement as of January 14, 1998 ***** 21 Subsidiaries of the Registrant 27 Financial Data Schedule * Incorporated by reference from Form S-1 Registration Statement (File No. 33-34618) ** Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1993. *** Incorporated by reference from Form S-1 Registration Statement (File No. 33-63879) which became effective on February 12, 1996. **** Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1996. ***** Incorporated by reference from the Exhibits to Schedule 13D filed by Value Partners, Ltd. on January 23, 1998. ****** Certain information contained in this exhibit has been omitted and filed separately with the Commission along with an application for non-disclosure of information pursuant to Rule 24b-2 of the Securities Act of 1933, as amended. EX-10.11 2 AGREEMENT OF WILLIAM SAMUELS, 12-24-97 ACTV, INC. EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995, and amended December 24th, 1997, 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 171 West 57th Street, #11C, New York, NY 10019 (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 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. 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 $295,000 for each Annual Period, commencing January 1, 1998; provided, however, that Employee's salary shall be increased annually at the beginning of each Annual Period commencing January 1, 1999 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 quarterly bonuses, if any, which will be determined and paid in accordance with policies set from time to time by the Compensation Committee of the Board. b. (i) In the event of a "Change of Control" whereby (A) A person (other than 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(cent) per stock appreciation right if applicable; and in addition the employee, at his option, shall receive a special compensation payment for the exercise cost of all vested options upon exercising those options any time within twelve months after the effective date of the change of control, 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 rights were exercised under 4(b)(ii). (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 -3- the benefit of a beneficiary named by Employee in an amount not less than $2,000,000. Ownership of the policy shall be assigned to Employee upon termination of Employee's employment under this Agreement. 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 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; -4- (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 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 -5- 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 individualized 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 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 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 -6- policies or plans, to such general medical and employee enefit 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 (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; -7- (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. (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. -8- 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 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 -9- 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 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: -10- (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 Gersten, Savage, Kaplowitz & Curtin 575 Lexington Avenue 27th Floor New York, New York 10022 Attention: Jay M. Kaplowitz, Esq. Telefax: (212) 980-5192 Telephone: (212) 752-9700 (ii) if to the Employee: William C. Samuels 171 West 57th Street, 11C New York, NY 10019 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: CHRISTOPHER C. CLINE Chief Financial officer WILLIAM C. SAMUELS -11- EX-10.12 3 AGREEMENT OF DAVID REESE, 12-24-97 ACTV, INC. EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995, and amended December 24, 1997, 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 $245,000 for each Annual Period, commencing January 1, 1998; provided, however, that Employee's salary shall be increased annually at the beginning of each Annual Period commencing January 1, 1999 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 quarterly 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 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(cent) per stock appreciation right if applicable; and in addition the employee, at his option, shall receive a special compensation payment for the exercise cost of all vested options upon exercising those options any time within twelve months after the effective date of the change of control, adjusted for any stock splits and capital reorganizations having a similar effect, 2 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 rights were exercised under 4 (b) (ii). (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 $2,000,000. 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. 3 f. Employee shall have the right to participate in any other employee benefit plans established by Employer. 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. 4 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 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 individualized 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 10 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 5 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. (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. 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 6 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 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 7 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 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. 8 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 Gersten, Savage, Kaplowitz & Curtin 575 Lexington Avenue 27th Floor New York, New York 10022 Attention: Jay M. Kaplowitz, Esq. Telefax: (212) 980-5192 Telephone: (212) 752-9700 (ii) if to the Employee: David Reese 30 Maclay Road Montville, New Jersey 07045 9 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: ------------------------------ WILLIAM C. SAMUELS President DAVID REESE 10 EX-10.13 4 AGREEMENT OF BRUCE CROWLEY, 12-24-97 ACTV, INC. EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995, and amended December 24, 1997, 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 BRUCE CROWLEY, an individual residing at 257 West 17th Street, New York, New York 10011 (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 Net, Inc.; and WHEREAS, Employee is willing to continue to be employed as the Executive Vice President of Employer and President of ACTV Net, Inc. in the manner provided for herein, and to perform the duties of the Executive Vice President of Employer and President of ACTV Net, 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 ACTV, Inc. and President of ACTV Net, Inc. Employer hereby employs Employee as Executive Vice President of ACTV Inc. and as President of ACTV Net, 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 Chairman of ACTV, Inc. and Chairman of ACTV Net, Inc. 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 Chairman or his designee. 4. Compensation. a. (i) Employee shall be paid a minimum of $245,000 for each Annual Period, commencing January 1, 1998; provided, however, that Employee's salary shall be increased annually at the beginning of each Annual Period commencing January 1, 1999 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 quarterly 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 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(cent) per stock appreciation right if applicable; and in addition the employee, at his option, shall receive a special compensation 2 payment for the exercise cost of all vested options upon exercising those options any time within twelve months after the effective date of the change of control, 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 rights were exercised under 4 (b)(ii). (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. After January 1, 1999, 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. 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 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 4 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 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 individualized 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 10 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 5 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 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. (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; 6 (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. 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. 7 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 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 8 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 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 9 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. and ACTV Net, Inc. 1270 Avenue of the Americas New York, New York, 10020 Attention: William C. Samuels Telefax: (212) 459-9548 Telephone: (212) 262-2570 Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 Attention: Wesley C. Fredericks, Esq. Telefax: (212) 980-5192 Telephone: (212) 752-9700 (ii) if to the Employee: Bruce Crowley 257 West 17th Street New York, New York 10011 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: WILLIAM C. SAMUELS President BRUCE CROWLEY 10 EX-10.21(E) 5 OPTION AGREEMENT OF WILLIAM SAMUELS, 12-1-95 OPTION AGREEMENT OPTION AGREEMENT dated December 1, 1995, amended July 29, 1997, between ACTV, Inc., a Delaware corporation (the "Corporation") and William C. Samuels (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 525,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 525,000 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares shall vest annually commencing January 1, 1997 until January 1, 1999, with respect to installments of 175,000 Option Shares at the Option Price, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of January 1, 1999, Optionee shall have the fully vested right to purchase 525,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to January 1 of any year, the Employee shall not have the right or option to purchase any part of the installment of 175,000 Option Shares that would have otherwise vested on such January 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2003. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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 except from registration. SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock b. If, at any time during the first 36 months of the Option Period, 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 2 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. c. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2003 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optionee. In the event that an Employee shall die while he is an employee of the Corporation (or within one (1) year after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. 3 SECTION 6. Piggyback Registration. a. If, at any time commencing January 1, 1997 and expiring December 31, 2003, the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel 4 when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: David Reese, Executive Vice President With a copy to: Jay M. Kaplowitz, Esquire Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 If to the Employee, to: William C. Samuels 171 West 57th Street New York, New York 10019 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 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 5 contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2003. 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: ------------------------------- David Reese Executive Vice President 6 EX-10.21(H) 6 OPTION AGREEMENT OF DAVID REESE, 12-1-95 OPTION AGREEMENT OPTION AGREEMENT dated December 1, 1995, amended July 29, 1997, between ACTV, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 330,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 330,000 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares shall vest annually commencing January 1, 1997 until January 1, 1999, with respect to installments of 110,000 Option Shares at the Option Price, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of January 1, 1999, Optionee shall have the fully vested right to purchase 330,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to January 1 of any year, the Employee shall not have the right or option to purchase any part of the installment of 110,000 Option Shares that would have otherwise vested on such January 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2003. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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 except from registration. SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. If, at any time during the first 36 months of the Option Period, 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 2 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. c. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2003 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optionee. In the event that an Employee shall die while he is an employee of the Corporation (or within one (1) year after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. 3 SECTION 6. Piggyback Registration. a. If, at any time commencing January 1, 1997 and expiring December 31, 2003, the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, 4 provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: William C. Samuels, Chief Executive Officer With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 If to the Employee, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 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 5 entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2003. 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: --------------------------- William C. Samuels Chief Executive Officer 6 EX-10.21(J) 7 OPTION AGREEMENT OF BRUCE CROWLEY, 12-1-95 OPTION AGREEMENT OPTION AGREEMENT dated December 1, 1995, amended July 29, 1997 between ACTV, Inc., a Delaware corporation (the "Corporation") and Bruce Crowley (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 201,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 201,000 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares shall vest annually commencing January 1, 1997 until January 1, 1999, with respect to installments of 67,000 Option Shares at the Option Price, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of January 1, 1999, Optionee shall have the fully vested right to purchase 201,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to January 1 of any year, the Employee shall not have the right or option to purchase any part of the installment of 67,000 Option Shares that would have otherwise vested on such January 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2003. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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 except from registration. SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. If, at any time during the first 36 months of the Option Period, 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 2 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. c. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2003 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optionee. In the event that an Employee shall die while he is an employee of the Corporation (or within one (1) year after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. 3 SECTION 6. Piggyback Registration. a. If, at any time commencing January 1, 1997 and expiring December 31, 2003, the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel 4 when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: William C. Samuels, Chief Executive Officer With a copy to: Jay M. Kaplowitz, Esquire Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 If to the Employee, to: Bruce Crowley 257 West 17th Street, Apt. 4C New York, New York 10011 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 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 and supersedes all previously written or oral negotiations, 5 commitments, representations and agreement. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2002. 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: --------------------------- William C. Samuels Chief Executive Officer 6 EX-10.23(A) 8 OPTION AGREEMENT OF WILLIAM SAMUELS, 2-21-98 OPTION AGREEMENT OPTION AGREEMENT dated February 21, 1998, between ACTV, Inc., a Delaware corporation (the "Corporation") and William C. Samuels (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 525,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 525,000 Option Shares, at a purchase price of $1.60 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares shall vest annually commencing January 1, 2000 until January 1, 2002, with respect to installments of 175,000 Option Shares at the Option Price, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of January 1, 2002, Optionee shall have the fully vested right to purchase 525,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to January 1 of any year, the Employee shall not have the right or option to purchase any part of the installment of 175,000 Option Shares that would have otherwise vested on such January 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2006. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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 except from registration. SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock b. If, at any time through December 31, 2001 of the Option Period, 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 2 issued in such transaction during the term of the Option, but converted thereafter) as he held options for immediately prior to such transaction. c. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2006 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optionee. In the event that an Employee shall die while he is an employee of the Corporation (or within one (1) year after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. 3 SECTION 6. Piggyback Registration. a. If, at any time commencing January 1, 2000 and expiring December 31, 2006, the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. 4 SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: David Reese, Executive Vice President With a copy to: Wesley C. Fredericks, Esquire Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 If to the Employee, to: William C. Samuels 171 West 57th Street New York, New York 10019 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement. 5 SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2006. 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: --------------------------- David Reese Executive Vice President 6 EX-10.23(B) 9 OPTIONS AGREEMENT OF BRUCE CROWLEY, 2-21-98 OPTION AGREEMENT OPTION AGREEMENT dated February 21, 1998, between ACTV, Inc., a Delaware corporation (the "Corporation") and Bruce Crowley (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 201,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 201,000 Option Shares, at a purchase price of $1.60 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares shall vest annually commencing January 1, 2000 until January 1, 2002, with respect to installments of 67,000 Option Shares at the Option Price, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of January 1, 2002, Optionee shall have the fully vested right to purchase 201,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to January 1 of any year, the Employee shall not have the right or option to purchase any part of the installment of 67,000 Option Shares that would have otherwise vested on such January 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2006. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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 except from registration. SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. If, at any time through December 31, 2001 of the Option Period, 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 2 issued in such transaction during the term of the Option, but converted thereafter) as he held options for immediately prior to such transaction. c. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2006 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optionee. In the event that an Employee shall die while he is an employee of the Corporation (or within one (1) year after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. 3 SECTION 6. Piggyback Registration. a. If, at any time commencing January 1, 2000 and expiring December 31, 2006, the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. 4 SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: William C. Samuels, Chief Executive Officer With a copy to: Wesley C. Fredericks, Esquire Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 If to the Employee, to: Bruce Crowley 257 West 17th Street, Apt. 4C New York, New York 10011 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement. 5 SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2006. 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: --------------------------- William C. Samuels Chief Executive Officer 6 EX-10.23(C) 10 OPTION AGREEMENT OF DAVID REESE, 2-21-98 OPTION AGREEMENT OPTION AGREEMENT dated February 21, 1998, between ACTV, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 330,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 330,000 Option Shares, at a purchase price of $1.60 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares shall vest annually commencing January 1, 2000 until January 1, 2002, with respect to installments of 110,000 Option Shares at the Option Price, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of January 1, 2002, Optionee shall have the fully vested right to purchase 330,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to January 1 of any year, the Employee shall not have the right or option to purchase any part of the installment of 110,000 Option Shares that would have otherwise vested on such January 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2006. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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 except from registration. SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. If, at any time through December 31, 2001 of the Option Period, 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 2 issued in such transaction during the term of the Option, but converted thereafter) as he held options for immediately prior to such transaction. c. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2006 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optionee. In the event that an Employee shall die while he is an employee of the Corporation (or within one (1) year after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. 3 SECTION 6. Piggyback Registration. a. If, at any time commencing January 1, 2000 and expiring December 31, 2006, the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. 4 SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: William C. Samuels, Chief Executive Officer With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52nd Street New York, New York 10022 If to the Employee, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement. 5 SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2006. 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: -------------------------------- William C. Samuels Chief Executive Officer 6 EX-10.23(D) 11 OPTION AGREEMENT OF WILLIAM SAMUELS, 3-24-97 OPTION AGREEMENT OPTION AGREEMENT dated March 24, 1997 and amended July 29, 1997 between ACTV, Inc., a Delaware corporation (the "Corporation") and William C. Samuels (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 613,035 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 613,035 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares are fully vested. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2002. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. 2 (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. (3) If, at any time between August 1, 1989 and August 1, 1993 the Corporation issues any previously unissued Common Stock as a result of any financing, acquisition, joint venture or other business transaction, then, during such period the number of shares subject to 120,000 of 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. Termination of the Options. a. Termination of Options in General. The Option granted hereby shall terminate and the Option shall no longer be exercisable after December 31, 2002. b. Death of the Optinee. In the event that an Employee shall die prior to his complete exercise of the Option, the Option may be exercised in whole or in part only by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution. SECTION 6. Piggyback Registration. a. If, at any time the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any 3 Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: William C. Samuels, Chief Executive Officer 4 With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52 Street New York, New York 10022 If to the Employee, to: William C. Samuels 171 West 57th Street New York, New York 10019 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement, specifically the option agreements dated August 1, 1989 and December 31, 1994. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2002. 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: --------------------------- Christopher Cline 5 EX-10.23(E) 12 OPTION AGREEMENT - CHRISOPHER C. CLINE OPTION AGREEMENT OPTION AGREEMENT dated March 24, 1997 and amended July 29, 1997 between ACTV, Inc., a Delaware corporation (the "Corporation") and Christopher C. Cline (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 50,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 50,000 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase 33,332 Option Shares shall vest immediately; 8,333 of the Option Shares shall vest August 15, 1997 and 8,334 shall vest August 15, 1998, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of August 15, 1998, Optionee shall have the fully vested right to purchase 50,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior to August 15 of any year, the Employee shall not have the right or option to purchase any part of the installment of Option Shares that would have otherwise vested on such August 15. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2002. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, 2 immediately following the record date fixed for the determination of holders of shares of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2002 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optinee. In the event that an Employee shall die while he is an employee of the Corporation (or within three (3) months after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. SECTION 6. Piggyback Registration. a. If at any time commencing the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option 3 Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: 4 If the Corporation, to: ACTV, Inc. 1270 Avenue of the Americas - Suite 2401 New York, New York 10020 Attention: William C. Samuels, Chief Executive Officer With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52 Street New York, New York 10022 If to the Employee, to: Christopher C. Cline 176 West 87th Street New York, New York 10024 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement, specifically the option agreements dated October 29, 1994 and August 15, 1995. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2002 5 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: ----------------------- William C. Samuels Chief Executive Officer 6 EX-10.23(F) 13 OPTION AGREEMENT - DAVID REESE OPTION AGREEMENT ---------------- OPTION AGREEMENT dated March 24, 1997 and amended July 29, 1997 between ACTV, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 89,683 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 89,683 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase the Option Shares are fully vested, so long as the Employee is employed by the Corporation . With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2002. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up 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 stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of 2 shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. The Option granted hereby shall terminate and the Option shall no longer be exercisable after December 31, 2002. b. Death of the Optinee. In the event that an Employee shall die prior to his complete exercise of the Option, the Option may be exercised in whole or in part only by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution. b. Death of the Optinee. In the event that an Employee shall die prior to his complete exercise of the Option, the Option may be exercised in whole or in part only by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution. SECTION 6. Piggyback Registration. a. If at any time commencing the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of 3 the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: William C. Samuels, Chief Executive Officer With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52 Street New York, New York 10022 If to the Employee, to: David Reese 30 Maclay Road Montville, New Jersey 07045 4 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement, specifically the option agreements dated March 1, 1989 and October 31, 1994. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2002. 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: ------------------------ William C. Samuels Chief Executive Officer 5 EX-10.23(G) 14 OPTION AGREEMENT - BRUCE CROWLEY OPTION AGREEMENT ---------------- OPTION AGREEMENT dated March 24, 1997 and amended July 29, 1997 between ACTV, Inc., a Delaware corporation (the "Corporation") and Bruce Crowley (the "Employee"). The Corporation desires to grant to the Employee the right and option to purchase up to 100,000 shares (the "Option Shares") of Common Stock (the "Common Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. Subject to Section 12 hereof, the Corporation hereby grants to the Employee an option (the "Option") to purchase from the Corporation 100,000 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Employee's right and option to purchase 67,300 Option Shares are fully vested and 33,000 shall vest on July 1, 1997, so long as the Employee is employed by the Corporation. Said right shall be cumulative so that as of July 1, 1997, Optionee shall have the fully vested right to purchase 100,000 Option Shares. In the event that the Employee's employment with the Corporation terminates prior July 1, 1997, the Employee shall not have the right or option to purchase any part of the installment of Option Shares that would have otherwise vested on such July 1. With respect to the Option, the "Option Period" shall commence on the date hereof and terminate on December 31, 2002. b. The Option may be exercised by the Employee by delivery to the Corporation, at any time commencing one year from the date hereof, of a written notice (the "Option Notice"), which Option Notice shall state the Employee's intention to exercise the Option, the date on which the Employee 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 Employee, the Employee shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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 Employee, 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 Employee hereby represents and warrants to the Corporation that in the event the Employee 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 Employee understands that except as set forth in Section 6 hereof, 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. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of Common Stock (other than a change in par value or from par value to nor 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Employee would have been entitled if the Employee had held shares of Common Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: (1) If, at any time during the Option Period, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, immediately following the record date fixed for the determination of holders of shares 2 of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Option Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such increase in outstanding shares. (2) If, at any time during the Option Period, the number of shares of Common Stock outstanding is decreased by a combination of outstanding shares of Common Stock, then, immediately following the record date for such combination, the Option Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsections (b) - (c) of this Section, the Option granted hereby shall terminate and the Option shall no longer be exercisable after the earlier of December 31, 2002 or one year after the date of termination of employment, except in the case of death or disability. b. Option Rights Upon Disability. If an Employee becomes disabled while employed by the Corporation or any affiliate or subsidiary, the Board of Directors or the Stock Option Committee of the Corporation, in its discretion, may allow the Option to be fully exercised, to the extent that the Employee was entitled to exercise the Option at the date of his disability. c. Death of the Optinee. In the event that an Employee shall die while he is an employee of the Corporation (or within three (3) months after the termination of such employment) and prior to his complete exercise of the Option, the Option may be exercised in whole or in part only: (i) by the Employee's estate or on behalf of such person or persons to whom the Employee's rights pass under his Will or by the laws of descent and distribution, (ii) to the extent that the Employee was entitled to exercise the Option at the date of his death, and (iii) prior to the expiration of the term of the Option, or within one year after the date of death, whichever is earlier. SECTION 6. Piggyback Registration. a. If, at any time the Corporation proposes to register any of its securities under the Securities 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 such registration statement, to the Employee of its intention to do so. If the Employee notifies the Corporation within ten (10) days after receipt of any such notice of his desire to include any Option Shares, owned by him (on a fully vested basis) in such proposed registration statement, the Corporation shall afford the Employee the 3 opportunity to have any of his Option Shares registered under such registration statement, the Corporation shall afford the Employee the opportunity to have any of his Option Shares registered under such registration statement; provided that (i) such inclusion does not pose any significant legal problem and (ii) if such registration statement is filed pursuant to an underwritten public offering, the underwriter approves such inclusion. b. Notwithstanding the provisions of this Section 6, the Corporation shall have the right at any time after it shall have given written notice pursuant to this Section 6 (irrespective of whether a written request for inclusion of any Option Shares 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. c. Employee will cooperate with the Corporation in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Corporation and executing and returning all documents reasonably requested in connection with the registration and sale of the Option Shares. In addition, Employee will comply with all applicable provisions of state and federal securities laws, including rule 10b-6 and will not, during the course of a distribution, purchase any of the securities being distributed. d. All expenses incurred in any registration of the Option Shares under this Agreement shall be paid by the Corporation, including, without limitation, printing expenses, fees and disbursements of counsel for the Corporation, expenses of any audits to which the Corporation shall agree or which shall be necessary to comply with governmental requirements in connection with any such registration, all registration and filing fees for the Option Shares under federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, the Corporation shall not be liable for (a) any discounts or commissions to any underwriter; (b) any stock transfer taxes incurred with respect to Option Shares sold in the offering or (c) the fees and expenses of counsel for Employee, provided that the Corporation will pay, the costs and expenses of Employee's counsel when the Corporation's counsel is representing all selling security holders. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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 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: 4 ACTV, Inc. 1270 Avenue of the Americas - Suite 2401 New York, New York 10020 Attention: William C. Samuels, Chief Executive Officer With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredericks & Curtin 101 East 52 Street New York, New York 10022 If to the Employee, to: Bruce J. Crowley 257 West 17th Street, Apt. 4C New York, New York 10011 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 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 and supersedes all previously written or oral negotiations, commitments, representations and agreement. specifically the option agreement dated July 1, 1994. SECTION 11. 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. SECTION 12. Termination. In addition to the termination provisions set forth in Section 1 hereof, the Option shall terminate and the Option shall no longer be exercisable on December 31, 2002. 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: ------------------------- William C. Samuels Chief Executive Officer 5 EX-10.24(A) 15 OPTION AGREEMENT OF WILLIAM SAMUELS, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997, between, ACTV Net, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 290,000 Option Shares, at a purchase price of $1.90 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 95,000 Option Shares vest on July 1, 1997; (ii) 65,000 vest on January 1, 1998; (iii) 65,000 Option Shares vest on July 1, 1998, and (iv) 65,000 Option Shares vest on January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation. Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5, an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"), which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and above the 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: ACTV Net, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57th Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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 NET, INC. By: AGREED TO AND ACCEPTED BY HOLDER: Signature Print Name EX-10.24(B) 16 OPTION AGREEMENT OF BRUCE CROWLEY, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997, between, ACTV Net, Inc., a Delaware corporation (the "Corporation") and Bruce Crowley (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 290,000 Option Shares, at a purchase price of $1.90 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 95,000 Option Shares vest on July 1, 1997; (ii) 65,000 vest on January 1, 1998; (iii) 65,000 Option Shares vest on July 1, 1998, and (iv) 65,000 Option Shares vest on January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation. Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5, an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"), which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and above the 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: ACTV Net, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: Bruce Crowley 257 West 17th Street New York, New York 10011 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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 NET, INC. By: AGREED TO AND ACCEPTED BY HOLDER: Signature Print Name EX-10.24(C) 17 OPTION AGREEMENT OF WILLIAM SAMUELS, 10-1-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of October 1, 1997, between, ACTV Net, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 60,000 Option Shares, at a purchase price of $1.90 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 30,000 Option Shares vest January 1, 1998, (ii) 30,000 Option Shares vest on July 1, 1998 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation. Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on October 1, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice(the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF OCTOBER 1, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after October 1, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: ACTV Net, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57th 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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 NET, INC. By:_______________________________ AGREED TO AND ACCEPTED BY HOLDER: ____________________________________ Signature ____________________________________ Print Name EX-10.24(D) 18 OPTION AGREEMENT OF BRUCE CROWLEY, 10-1-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of October 1, 1997, between, ACTV Net, Inc., a Delaware corporation (the "Corporation") and Bruce Crowley (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 60,000 Option Shares, at a purchase price of $1.90 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 30,000 Option Shares vest January 1, 1998, (ii) 30,000 Option Shares vest on July 1, 1998 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation. Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on October 1, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice(the "Option Notice"), which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF OCTOBER 1, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and above the 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after October 1, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: ACTV Net, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: Bruce Crowley 257 West 17th Street New York, New York 10011 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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 NET, INC. By:________________________________ AGREED TO AND ACCEPTED BY HOLDER: _________________________________________ Signature _________________________________________ Print Name EX-10.25(A) 19 OPTION AGREEMENT OF WILLIAM SAMUELS, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997, amended January 14, 1998 between, ACTV Entertainment, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 350,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 95,000 Option Shares vest July 1, 1997, (ii) 65,000 Option Shares vest on January 1, 1998, (iii) 65,000 Option Shares vest July 1, 1998; (iv) 125,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation. Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event at the exercisable price of $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and above the 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: ACTV Entertainment, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: Christopher C. Cline If to the Holder, to: William Samuels 171 West 57th Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement, including the original March 14, 1997 option agreement. SECTION 11. 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 ENTERTAINMENT, INC. By: ---------------------------------------- AGREED TO AND ACCEPTED BY HOLDER: - ---------------------------------------- Signature - ---------------------------------------- Print Name EX-10.25(B) 20 OPTION AGREEMENT OF DAVID REESE, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997, amended January 14, 1998 between, ACTV Entertainment, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 350,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 95,000 Option Shares vest July 1, 1997, (ii) 65,000 Option Shares vest on January 1, 1998, (iii) 65,000 Option Shares vest July 1, 1998; (iv) 125,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation. Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event at the exercisable price of $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and above the 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: ACTV Entertainment, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: Christopher C. Cline With a copy to: Wesley C. Fredericks Gersten, Savage, Kaplowitz, Fredreicks & Curtin, LLP 101 East 52 Street New York, New York 10022 If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement, including the original March 14, 1997 option agreement. SECTION 11. 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 ENTERTAINMENT, INC. By: ---------------------------------------- AGREED TO AND ACCEPTED BY HOLDER: - ----------------------------------- Signature - ----------------------------------- Print Name EX-10.26(A) 21 OPTION AGREEMENT OF WILLIAM SAMUELS, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The Florida Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Florida Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57 Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE FLORIDA INDIVIDUALIZED TELEVISION NETWORK, INC. By:_______________________________ AGREED TO AND ACCEPTED BY HOLDER: _____________________________________ Signature _____________________________________ Printed Name EX-10.26(B) 22 OPTION AGREEMENT OF WILLIAM SAMUELS, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The Northwest Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Northwest Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57 Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE NORTHWEST INDIVIDUALIZED TELEVISION NETWORK, INC. By:___________________________ AGREED TO AND ACCEPTED BY HOLDER: - ------------------------- Signature - ------------------------- Printed Name EX-10.26(C) 23 OPTION AGREEMENT OF WILLIAM SAMUELS, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The New York Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The New York Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57 Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE NEW YORK INDIVIDUALIZED TELEVISION NETWORK, INC. By:__________________________________ AGREED TO AND ACCEPTED BY HOLDER: _____________________________________ Signature _____________________________________ Printed Name EX-10.26(D) 24 OPTION AGREEMENT OF WILLIAM SAMUELS, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The San Francisco Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The San Francisco Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57 Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE SAN FRANCISCO INDIVIDUALIZED TELEVISION NETWORK, INC. By:_______________________________ AGREED TO AND ACCEPTED BY HOLDER: - ------------------------- Signature - ------------------------- Printed Name EX-10.26(E) 25 OPTION AGREEMENT OF WILLIAM SAMUELS, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997 and amended on January 14, 1998, between The Los Angeles Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $1.55 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 50,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"), which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option and exchange price per share of ACTV, Inc. common shares shall be at a minimum the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the total of the option exercisable and exchange price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise and exchange price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Los Angeles Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: Christopher C. Cline With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 West 57th Street New York, New York 10019 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE LOS ANGELES INDIVIDUALIZED TELEVISION NETWORK, INC. By:___________________________ AGREED TO AND ACCEPTED BY HOLDER: _________________________________ Signature _________________________________ Print Name EX-10.26(F) 26 OPTION AGREEMENT OF WILLIAM SAMUELS, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997, and amended on January 14, 1998, between The Texas Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and William Samuels (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii)55,000 Option Shares vest on January 1, 1998; (iii) 55,000 Option Shares vest on July 1, 1998; (iv) 55,000 Option Shares vest on January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice(the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the Option may be exchanged, in whole or in part, for an equal number of ACTV, Inc. options at an option price of $1.50 per share over the same Option Period. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Texas Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: Christopher C. Cline With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: William Samuels 171 57th 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE TEXAS INDIVIDUALIZED TELEVISION NETWORK, INC. By: ----------------------- AGREED TO AND ACCEPTED BY HOLDER: - -------------------------------------- Signature - -------------------------------------- Print Name EX-10.26(G) 27 OPTION AGREEMENT OF DAVID REESE, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The Florida Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"), which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Florida Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE FLORIDA INDIVIDUALIZED TELEVISION NETWORK, INC. By: ---------------------------------------- AGREED TO AND ACCEPTED BY HOLDER: - ------------------------------------- Signature - ------------------------------- Printed Name EX-10.26(H) 28 OPTION AGREEMENT OF DAVID REESE, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The Northwest Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Northwest Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE NORTHWEST INDIVIDUALIZED TELEVISION NETWORK, INC. By:____________________________ AGREED TO AND ACCEPTED BY HOLDER: - ------------------------- Signature - ------------------------- Printed Name EX-10.26(I) 29 OPTION AGREEMENT OF DAVID REESE, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The New York Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The New York Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE NEW YORK INDIVIDUALIZED TELEVISION NETWORK, INC. By:__________________________ AGREED TO AND ACCEPTED BY HOLDER: - ------------------------- Signature - ------------------------- Printed Name EX-10.26(J) 30 OPTION AGREEMENT OF DAVID REESE, 6-3-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of June 3, 1997 and amended on January 14, 1998, between The San Francisco Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $.10 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on June 2, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. The total option exchange price per share of ACTV, Inc. common shares shall be the ACTV, Inc. closing price on the date to which the financing referred to in the preceding sentence is consummated. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option shares shall be fully vested at the time of said event and the exchange price shall reduce to $.10 per common share of ACTV, Inc. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF JUNE 3, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after June 2, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time within one year after the date of such death, disability or resignation, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable and the exchange price shall be reduced to $.10 per common share of ACTV, Inc. adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The San Francisco Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: President With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE SAN FRANCISCO INDIVIDUALIZED TELEVISION NETWORK, INC. By:_______________________________ AGREED TO AND ACCEPTED BY HOLDER: _______________________________ Signature _______________________________ Printed Name EX-10.26(K) 31 OPTION AGREEMENT OF DAVID RRESE, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997 and amended on January 14, 1998, between The Los Angeles Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $1.55 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 50,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the option shares may be exchanged, in whole or in part for an equal number of ACTV, Inc. common shares assuming the Corporation has been capitalized with a minimum of $5 million dollars of equity or debt financing and is a subsidiary of ACTV Entertainment. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and abovethe 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"), or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Los Angeles Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: Christopher C. Cline With a copy to: Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 101 East 52 Street New York, NY 10022 Attention: Wesley C. Fredericks If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement. SECTION 11. 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. THE LOS ANGELES INDIVIDUALIZED TELEVISION NETWORK, INC. By: __________________________ AGREED TO AND ACCEPTED BY HOLDER: - --------------------------- Signature - --------------------------- Print Name EX-10.26(L) 32 OPTION AGREEMENT OF DAVID REESE, 3-14-97 OPTION AGREEMENT OPTION AGREEMENT, dated as of March 14, 1997, amended January 14, 1998 between, The Texas Individualized Television Network, Inc., a Delaware corporation (the "Corporation") and David Reese (the "Holder"). WHEREAS, the Corporation desires to grant to the Holder, the right and option to purchase shares (the "Option Shares") of Class B Common Stock, $.01 par value per share (the "Class B Stock"), of the Corporation, on the terms and subject to the conditions hereinafter set forth. 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. The Corporation hereby grants to the Holder an option (the "Option") to purchase from the Corporation 250,000 Option Shares, at a purchase price of $1.50 per Option Share (the "Option Price"). The Holder's right and option to purchase the Option Shares shall vest, subject to subsection 1(d) and Section 6, as follows: (i) 85,000 Option Shares vest July 1, 1997, (ii) 55,000 Option Shares vest on January 1, 1998, (iii) 55,000 Option Shares vest July 1, 1998; (iv) 55,000 Option Shares vest January 1, 1999 (each an "Installment") at the Option Price, so long as the Holder is employed by the Corporation, ACTV, Inc. or any affiliate or subsidiary of ACTV, Inc. (collectively, the "ACTV Group"). Said right shall be cumulative. With respect to each Installment, the "Option Period" shall commence on the date said Installment vests and terminate on March 14, 2007. b. Except as limited by Section 5,an Installment may be exercised, in whole or part, by the Holder by delivery to the Corporation, at any time during the Option Period, of a written notice (the "Option Notice"),which Option Notice shall state the 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, the Holder shall be obligated to purchase that number of Option Shares to be purchased on the Closing Date set forth in the Option Notice. c. The purchase and sale of Option Shares acquired pursuant to the terms of this Option 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, evidencing the Option Shares being purchased on the Closing Date, shall be made by the Corporation to the Holder on the Closing Date against the delivery to the Corporation of a certified or bank check in the full amount of the aggregate purchase price therefor. d. After January 1, 1999, the Option may be exchanged, in whole or in part, for an equal number of ACTV, Inc. options at an option price of $1.50 per share over the same Option Period. e. Should ACTV, Inc. ("ACTV") undergo a Change in Control, as defined below, or should another corporation which can exercise control over the Corporation sell or attempt to sell all or substantially all of the assets of said Corporation, or should more than 50% of its voting power be acquired by a party which is not affiliated with or controlled by ACTV, then all of the Holder's rights to exercise the Option for all the Option Shares shall be accelerated so that the Installments to purchase all Option Shares shall be fully vested at the time of said event and the exercisable price shall reduce to $.10 per share. A Change in Control shall be the occurrence of any one of the following events: (i) A person (other than a person who is an officer or a Director of ACTV 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 ACTV's securities having 30% or more of the combined voting power of then outstanding securities of ACTV that may be cast for the election of directors of ACTV; (ii) At any time, a majority of the Board-nominated slate of candidates for the Board of ACTV is not elected; (iii) ACTV consummates a merger in which it is not the surviving entity; (iv) Substantially all ACTV's assets are sold; or (v) ACTV's stockholders approve the dissolution or liquidation of ACTV. SECTION 2. Representations and Warranties of The Holder. The Holder hereby represents and warrants to the Corporation that in the event the Holder 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 understands the Option Shares will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), 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. The certificate or certificates representing any Option Shares shall bear the following restrictive legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; OR (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAN AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE. IN ADDITION, THIS CERTIFICATE OF STOCK AND SHARES REPRESENTED HEREBY AND HELD SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN AN AGREEMENT BY AND AMONG THE SHAREHOLDERS OF THE CORPORATION AND THE CORPORATION DATED AS OF MARCH 6, 1997, AND ALL AMENDMENTS THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE CORPORATION UPON REQUEST." SECTION 3. Reorganization; Mergers; Sales; Etc. If, at any time during the Option Period, there shall be any capital reorganization, reclassification of the Common Stock (the term "Common Stock" shall mean the Company's Class A Common Stock and/or the Class B 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), the consolidation or merger of the Corporation with or into another corporation or of the sale of all or substantially all the properties and assets of the Corporation as an entirety to any other corporation or person, the unexercised and fully vested portion of 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 the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold to which the Holder would have been entitled if the Holder had held shares of Class B Stock issuable upon the exercise hereof immediately prior to such reorganization, reclassification, consolidation, merger or sale. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers and sales. SECTION 4. Adjustment of Option Shares and Option Price. a. The number of Option Shares subject to this Option during the Option Period shall be cumulative as to all prior dates of calculation and shall be adjusted for any stock dividend, subdivision, split-up or combination of Common Stock. b. The Option Price shall be subject to adjustment from time to time as follows: 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, pursuant to the formula set forth in Section 4.c. c. Upon each adjustment of the Option Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon the exercise hereof shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Option Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable immediately prior to such adjustment and dividing the product so obtained by the adjusted Option Price. d. Should additional shares of Class A Common Stock, $.01 par value, over and above the 4,000,000 shares presently authorized, be issued after the effective date of this Option Agreement, then the number of shares issuable upon exercise of this Option shall be increased by the same percentage that the total number of issued Class A Common Stock has been increased. e. The Corporation will use its best efforts to amend its certificate of incorporation to authorize additional Class B Stock should the number of shares of Class B Stock issuable upon exercise of the Option be increased in accordance with the terms of this agreement. SECTION 5. Termination of the Options. a. Termination of Options in General. Subject to subsection 5(b), the Option granted hereby shall terminate and the Option shall no longer be exercisable after March 14, 2007. b. Option Rights Upon Death, Disability, Resignation. If a Holder dies or becomes disabled while employed by the ACTV Group, or resigns from employment with the ACTV Group prior to his complete exercise of the Option, the Holder (or his heirs) may exercise his Option at any time during the option period, to the extent that the Holder was entitled to exercise the Option at the date such event, and the Class B Stock underlying the Option shall convert into Class A Stock on the second anniversary of the occurrence of such death, disability or resignation. SECTION 6. Termination of Employment. In the event that a Holder is terminated from employment with the ACTV Group for any reason during the Option Period then (i) all Options granted to the Holder hereunder shall become vested and immediately exercisable at an exercise price of $.10 per share adjusted for any stock splits and capital reorganizations having a similar effect, subsequent to the effective date hereof, (ii) all Options may be exercised at any time during the Option Period and (iii) anything herein to the contrary notwithstanding, the Shares underlying the Options, whether exercised prior or subsequent to the termination shall not convert to Class A stock except as set forth in the applicable Shareholder Agreement. SECTION 7. Transfer of Option; Successors And Assigns. This Agreement (including the Option) and all rights hereunder shall not be transferable 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, approved assigns and approved transferees. 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 to the Corporation: The Texas Individualized Television Network, Inc. 1270 Avenue of the Americas New York, NY 10020 Attention: Christopher C. Cline If to the Holder, to: David Reese 30 Maclay Road Montville, New Jersey 07045 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 deemed to have 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 Delaware. SECTION 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and supersedes all previously written or oral negotiations, commitments, representations and agreement, including the original March 14, 1997 option agreement. SECTION 11. 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. THE TEXAS INDIVIDUALIZED TELEVISION NETWORK, INC. By:_________________________________ AGREED TO AND ACCEPTED BY HOLDER: _________________________________ Signature _________________________________ Print Name EX-10.27 33 SHAREHOLDERS AGREEMENT SHAREHOLDERS AGREEMENT AGREEMENT made as of the 14th day of March, 1997,amended January 14, 1998 by and among ACTV Entertainment, Inc, a corporation whose principal address is 1270 Avenue of the Americas, New York, New York 10020 (the "Corporation"), ACTV Holdings, Inc., a corporation whose principal address is 1270 Avenue of the Americas, New York, New York 10020 ("Holdings"), William Samuels, an individual residing 171 West 57th Street, New York, New York 10019 ("Samuels"), Bruce Crowley, an individual residing at 257 West 17th Street, New York, New York 10011 ("Crowley"), Christopher Cline, an individual residing at 176 West 87th Street, New York, New York 10024 ("Cline"), David Reese, an individual residing at 30 Maclay Road, Montville, New Jersey 07045 ("Reese"),and Brent Imai, an individual residing at 100 South Doheny Drive, Los Angeles, California 90048 ("Imai"). Holdings, Samuels, Crowley, Cline, Reese and Imai are sometimes hereinafter collectively referred to as the "Shareholders," and Samuels, Crowley, Cline, Reese and Imai are sometimes hereinafter collectively referred to as the "Employees." R E C I T A L S WHEREAS, the authorized capital stock of the Corporation consists of 4,000,000 shares of Class A Common Stock, $.01 par value (the "Class A Stock") and 1,000,000 shares of Class B Stock (non-voting), $.01 par value (the "Class B Stock" and with the Class A Stock sometimes referred to herein as the "Common Stock"); and WHEREAS, Holdings currently owns all 4,000,000 shares of the Class A Stock, and Samuels, Crowley, Cline, Reese and Imai pursuant to separate option agreements dated March 14, 1997 each have the right to purchase 350,000, 100,000, 20,000, 350,000 and 60,000 of Class B Stock, respectively. WHEREAS, the Shareholders desire to promote their joint interests and the interests of the Corporation by imposing certain restrictions and obligations on themselves and on the Corporation and on the Common Stock held, or hereafter acquired by each of them; WHEREAS, the Shareholders believe it to be in their best interests and in the best interests of the Corporation that the Common Stock owned by the Shareholders be transferable only upon compliance with the provisions of this Agreement; NOW, THEREFORE, in consideration of the mutual obligations between and among the Shareholders and the Corporation contained herein and other good and valuable consideration, the Shareholders and the Corporation hereby agree as follows: 1. Definitions. a. The word "Affiliate" shall mean any person controlling, or controlled by, another person and for purposes hereof shall include all relatives by blood, marriage or adoption. b. The word "Agreement" shall mean this Shareholders Agreement, as it may be amended from time to time pursuant to the terms hereof. c. The term "Bona Fide Offer" shall mean any offer made by a Person not a party to this Agreement to any Employee to purchase Class B Stock; provided, however, that (i) said offer must be accompanied by a bank cashier's or certified check in an amount equal to not less than ten percent (10%) of the purchase price specified in such offer, such amount to serve as liquidated damages forfeitable to the Corporation in connection therewith, and (ii) the identity of the purchaser and all material terms of the offer must be disclosed. In the event a Bona Fide Offer shall provide for the exchange of assets other than cash or cash equivalents, either the Bona Fide Offer shall include the fair market value of said assets if such fair market value is publicly available and readily ascertainable or the Transferor shall submit with the Bona Fide Offer an appraisal prepared by a qualified independent third party evidencing the fair market value of the assets to be exchanged as of the date of the Bona Fide Offer. d. The term "Eligible Shareholder" shall be those persons permitted to hold the Class B Stock by the Corporation=s Articles of Incorporation. Eligible Shareholders are executive officers, directors and employees of the Corporation or affiliated corporations, which shall include parents, subsidiaries or corporations under common control. e. The word "Person" shall mean (and include) an individual, trust, fiduciary, partnership, corporation, association or any other legal entity. f. The term "Offered Shares" shall mean the shares of Common Stock of the Corporation included in an Bona Fide Offer. g. The word "Employee" shall include any original Employee and any Transferee of Class B Stock, as permitted by Section 2(e)(2). h. The word "transfer" shall include the sale, assignment, gift, pledge, encumbrance or other disposition of any Shares, whether absolute or conditional, temporary or permanent, outright or in trust, voluntary or involuntary. i. The word "Transferee" shall refer to any holder of Shares transferred to him by a Shareholder. j. The words "Transferor" or "Selling Shareholder" shall refer to any Shareholder desiring to make a transfer of his Shares. k. The word "Shares" shall mean shares of the Common Stock owned at any time by a Shareholder. 2. Restrictions on Transferability of Shares Held by the Shareholders a. General Restrictions. Each of the Employees hereby agrees not to transfer his Class B Stock, now owned or hereafter acquired, except in accordance with Section 2 or Section 3 of this Agreement. Under the terms of the Corporation=s articles of incorporation, each share of Class B Stock transferred in any other manner shall convert immediately into one share of Class A Stock. b. Transfer. Any sale of shares made under this agreement must be made pursuant to a Bona Fide Offer, regardless of which party initiated the transaction. c. Right of First Refusal. If any of the Employees desires to transfer his or her Class B Stock (a"Selling Shareholder"), during his lifetime, he must first give to the Corporation and to the other Employees the opportunity to purchase such Class B Stock in accordance with the following procedures: (1) The Selling Shareholder must give to the Corporation and the other Employees thirty (30) days written notice of his intent to sell (the "Notice"), along with a copy of the Bona Fide Offer, at the addresses as set forth on the books of the Corporation. The other Employees will thereupon have the option within such thirty (30) day period to purchase all or any portion of the Offered Shares. Should more than one Employee desire to purchase the Offered Shares, the Employees will divide the shares pro rata, based on the amount of Class B Common Stock that they own at the time of receipt of the Notice. (2) If the Employees decline to exercise the option or otherwise fail to exercise such option within such thirty (30) day period, the Offered Shares not purchased by the other Employees will thereupon be deemed to be offered for sale to the Corporation for a period of ten days. The Corporation will have an option, during the ten day period to purchase all or any portion of the Offered Shares. (3) The Selling Shareholder shall not be obligated to sell any of the Offered Shares to the Corporation and/or to the non-selling Employees unless all of the Offered Shares are purchased. d. Determination of Purchase Price Per Share. The Corporation and each Shareholder agree that the purchase price per Share of Class B Stock transferred pursuant to Subsection (c) of this Section 2 shall be equal to the purchase price per share in the Bona Fide Offer. The terms of payment shall be substantially the same as those in the Bona Fide Offer. e. Release from Restrictions. (1) If the Right of First Refusal is not exercised by the non-selling Employees or the Corporation, or in the event that the aggregate acceptances by the purchasing parties are for less than the number of the Shares offered, the Transferor may transfer the Shares not purchased by the other Shareholders or the Corporation to the prospective Transferee named in the Offer to Sell in strict accordance with the terms therein stated or, in the case of a Bona Fide Offer, may reject all of said offers by the other Shareholders or the Corporation, and offer and sell all of the Offered Shares to the purchaser named in the Bona Fide Offer, in either case, at a price not less than, and on terms and conditions not more favorable to such Transferee than, are set forth in the Offer to Sell to Shareholders pursuant to Section 2(c); provided that, except as provided in subsection (e)(2) of this Section 2, such Transferee shall receive one share of Class A Common Stock for each share of Class B Stock sold to him by the Selling Shareholder. (2) Should the proposed Transferee be an Eligible Shareholder, than said Transferee may purchase and receive Class B Stock provided (i) the sale transaction is made in accordance with the terms of this agreement, (ii) holders of 2/3 of the outstanding Class B Stock (excluding those shares which are the subject of the Bona Fide Offer) approve the proposed Transferee=s right to hold Class B Stock, and (iii) the proposed Transferee agrees to be bound by the terms of this agreement. (3) A transfer effected pursuant to this Section 2(g) shall be consummated and the Shares transferred to the Transferee within thirty (30) days after the expiration of the period of acceptance by the non-selling Shareholders prescribed by Section 2(c). If the Transferor shall fail to make such transfer within such thirty (30) day period, or if he shall propose to sell the Offered Shares at a lower price or on more favorable terms to the purchaser, the Offered Shares shall again become subject to all the restrictions contained in this Agreement, and the Selling Shareholder shall again make the Offered Shares available to the Corporation and the remaining Shareholders for purchase in the manner set forth in Section 2(c). f. Invalid Dispositions. Any purported sale, assignment, mortgage, hypothecation, transfer or pledge of, creation of a security interest in, lien or encumbrance on, or gift, non-voting trust or any other disposition of any Shares by any Shareholder or any successor to any Shareholder which violates any provision of this Agreement will result in the conversion of the Class B Stock into Class A Stock. The Corporation and its officers, directors and employees shall not be liable to any person for any action or refusal to act taken under the provisions of this Section 2. 3. Voting Rights, Death, Change in Eligibility Status. So long as Samuels is the Chairman of ACTV, Inc. or an officer or director of the Corporation, each person who is now or may subsequently become a party hereto grants Samuels the right to vote all shares of said person=s Class B Stock and hereby grants Samuels an irrevocable proxy, coupled with an interest, to vote said shares. Should Samuels die, become disabled or resign his employment with the ACTV Group (as hereinafter defined), said voting rights and proxy shall vest in Crowley so long as he is an officer or director of the Corporation or of ACTV, Inc. Upon the death or disability of an Employee, or resignation of an employment with the ACTV Group, which shall include the Corporation, ACTV, Inc., or any affiliate or subsidiary of ACTV, Inc., each share of Class B Stock held by him or her shall convert into one share of Class A stock on the second anniversary of said event. 4. Termination of Employment. Should an Employee be terminated from employment, than his Class B Stock shall not convert into Class A Stock except upon transfer as set forth in section 2. 5. Conversion. With the approval of holders of 70% of the Class B Stock, each share of Class B Stock may be treated in all respects, for the purpose of a transaction, or series of transactions, as one share of Class A Stock. 6. Undertaking. The Corporation warrants that should it be necessary to issue additional Class A Stock under any provision of this agreement, it will use its best efforts to amend its certificate of incorporation to increase the authorized number of shares of Class A Stock. 7. Endorsement on Certificates. Upon execution of this Agreement, the certificates of stock subject thereto shall be surrendered to the Corporation and the stock certificates representing the Shares shall have the following legend printing on them: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under state securities laws and may not be sold or transferred unless registered under said act and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Corporation, the transfer qualifies for an exemption from the registration provisions thereof. In addition, this certificate of stock and the shares represented hereby are held subject to the terms and conditions contained in an agreement by and among the Shareholders of the Corporation and the Corporation dated as of March 14, 1997, and all amendments thereto, and may not be transferred except in accordance with the terms and provisions thereof. A copy of such agreement will be furnished by the Corporation upon request." Upon endorsement, the certificates shall be delivered to the Shareholders, who shall be entitled to exercise all rights of ownership of such stock, subject to the terms of this Agreement. All capital stock of the Corporation hereinafter issued to the Shareholders shall bear the same endorsement. 8. Termination of Agreement. This Agreement shall terminate upon the occurrence of any of the following events: a. The cessation of the Corporation's business; b. Adjudication of the Corporation as a bankrupt, the execution by it of an assignment for the benefit of creditors, or the appointment of a receiver for the Corporation; or c. Voluntary, involuntary or judicial dissolution of the Corporation. Upon the termination of this Agreement, each Shareholder shall surrender to the Corporation the certificates for his stock, and the Corporation shall issue to him in lieu thereof new certificates for an equal number of shares without the last two sentences of the endorsement set forth in Section 7. 9. Equitable Remedy. The parties hereby declare that it is impossible to measure in monetary terms the damages which shall accrue to a party hereto by reason of another party's failure to perform any of the obligations under this Agreement. Therefore, if any party hereto shall institute any action or proceeding to enforce the provisions hereof, any person (including the Corporation) against whom such action or proceeding is brought hereby waives the claim or defense therein that there is an adequate remedy at law, and such person shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. 10. Miscellaneous. a. Any notice or other communication required or permitted to be given to any party hereunder shall be deemed given when delivered personally or by Federal Express or other delivery service providing documentary evidence of delivery, or five (5) days after mailing by certified mail, return receipt requested, to the parties at the addresses as set forth above, or to such other address as the respective parties may designate by notice given pursuant to this Section 10(a). b. This Agreement shall be binding upon the parties hereto and their heirs, executors, administrators, successors and assigns. Each Shareholder in furtherance thereof shall execute a will directing his executor to perform this Agreement and to execute all documents necessary to effectuate its purposes, but the failure to execute such will shall not affect the rights of any Shareholders or the obligations of any estate, as provided in this Agreement. c. This Agreement contains the entire agreement of the parties and supersedes all prior agreements, written or oral. No change in or modification of this Agreement shall be binding unless the same shall be in writing and signed by the parties hereto. d. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. e. Any controversy or claim arising out of or relating to this Agreement shall be determined by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association. The place of arbitration shall be New York City. f. Whenever from the context it appears appropriate, each item stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter genders shall include the masculine, feminine and neuter genders. g. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together constitute one and the same instrument. 11. Severability. It is agreed that in the event any provision of this Agreement or the application thereof to any person or circumstance shall be adjudged to be invalid or unenforceable according to any applicable laws, the remaining provisions of this Agreement and the application thereof to any person or circumstances shall not be affected thereby and shall be enforced to the fullest extent permitted by law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ACTV ENTERTAINMENT, INC. By: ---------------------------- ACTV HOLDINGS, INC. By: ---------------------------- -------------------------- David Reese -------------------------- William Samuels -------------------------- Bruce Crowley -------------------------- Christopher Cline -------------------------- Brent Imai EX-10.28 34 SHAREHOLDERS AGREEMENT SHAREHOLDERS AGREEMENT AGREEMENT made as of the 14th day of March, 1997, by and among ACTV Net, Inc, a corporation whose principal address is 1270 Avenue of the Americas, New York, New York 10020 (the "Corporation"), ACTV Holdings, Inc., a corporation whose principal address is 1270 Avenue of the Americas, New York, New York 10020 (AHoldings@), William Samuels, an individual residing 171 West 57th Street, New York, New York 10023("Samuels"), Bruce Crowley, an individual residing at 257 West 17th Street, New York, New York 10011 (ACrowley@), Christopher Cline, an individual residing at 176 West 87 Street, Apt. 11A, New York, New York 10024 (ACline@), and David Reese, an individual residing at 30 Maclay Road, Montville, New Jersey 07045 (AReese@). Holdings, Samuels, Crowley, Cline and Reese are sometimes hereinafter collectively referred to as the "Shareholders,@ and Samuels, Crowley, Cline and Reese are sometimes hereinafter collectively referred to as the AEmployees." R E C I T A L S WHEREAS, the authorized capital stock of the Corporation consists of 4,000,000 shares of Class A Common Stock, $.01 par value (the "Class A Stock") and 1,000,000 shares of Class B Stock (non-voting), $.01 par value (the "Class B Stock" and with the Class A Stock sometimes referred to herein as the "Common Stock"); and WHEREAS, Holdings currently owns all 4,000,000 shares of the Class A Stock, and Samuels, Crowley, Cline and Reese pursuant to separate option agreements dated March 14, 1997 each have the right to purchase 290,000, 290,000, 20,000, and 100,000 shares of Class B Stock, respectively. WHEREAS, the Shareholders desire to promote their joint interests and the interests of the Corporation by imposing certain restrictions and obligations on themselves and on the Corporation and on the Common Stock held, or hereafter acquired by each of them; WHEREAS, the Shareholders believe it to be in their best interests and in the best interests of the Corporation that the Common Stock owned by the Shareholders be transferable only upon compliance with the provisions of this Agreement; NOW, THEREFORE, in consideration of the mutual obligations between and among the Shareholders and the Corporation contained herein and other good and valuable consideration, the Shareholders and the Corporation hereby agree as follows: 1. Definitions. a. The word "Affiliate" shall mean any person controlling, or controlled by, another person and for purposes hereof shall include all relatives by blood, marriage or adoption. b. The word "Agreement" shall mean this Shareholders Agreement, as it may be amended from time to time pursuant to the terms hereof. c. The term "Bona Fide Offer" shall mean any offer made by a Person not a party to this Agreement to any Employee to purchase Class B Stock; provided, however, that (i) said offer must be accompanied by a bank cashier's or certified check in an amount equal to not less than ten percent (10%) of the purchase price specified in such offer, such amount to serve as liquidated damages forfeitable to the Corporation in connection therewith, and (ii) the identity of the purchaser and all material terms of the offer must be disclosed. In the event a Bona Fide Offer shall provide for the exchange of assets other than cash or cash equivalents, either the Bona Fide Offer shall include the fair market value of said assets if such fair market value is publicly available and readily ascertainable or the Transferor shall submit with the Bona Fide Offer an appraisal prepared by a qualified independent third party evidencing the fair market value of the assets to be exchanged as of the date of the Bona Fide Offer. d. The term AEligible Shareholder@ shall be those persons permitted to hold the Class B Stock by the Corporation=s Articles of Incorporation. Eligible Shareholders are executive officers, directors and employees of the Corporation or affiliated corporations, which shall include parents, subsidiaries or corporations under common control. e. The word "Person" shall mean (and include) an individual, trust, fiduciary, partnership, corporation, association or any other legal entity. f. The term "Offered Shares" shall mean the shares of Common Stock of the Corporation included in an Bona Fide Offer. g. The word "Employee" shall include any original Employee and any Transferee of Class B Stock, as permitted by Section 2(e)(2). h. The word "transfer" shall include the sale, assignment, gift, pledge, encumbrance or other disposition of any Shares, whether absolute or conditional, temporary or permanent, outright or in trust, voluntary or involuntary. i. The word "Transferee" shall refer to any holder of Shares transferred to him by a Shareholder. j. The words "Transferor" or "Selling Shareholder" shall refer to any Shareholder desiring to make a transfer of his Shares. k. The word "Shares" shall mean shares of the Common Stock owned at any time by a Shareholder. 2. Restrictions on Transferability of Shares Held by the Shareholders a. General Restrictions. Each of the Employees hereby agrees not to transfer his Class B Stock, now owned or hereafter acquired, except in accordance with Section 2 or Section 3 of this Agreement. Under the terms of the Corporation=s articles of incorporation, each share of Class B Stock transferred in any other manner shall convert immediately into one share of Class A Stock. b. Transfer. Any sale of shares made under this agreement must be made pursuant to a Bona Fide Offer, regardless of which party initiated the transaction. c. Right of First Refusal. If any of the Employees desires to transfer his or her Class B Stock (a"Selling Shareholder"), during his lifetime, he must first give to the Corporation and to the other Employees the opportunity to purchase such Class B Stock in accordance with the following procedures: (1) The Selling Shareholder must give to the Corporation and the other Employees thirty (30) days written notice of his intent to sell (the "Notice"), along with a copy of the Bona Fide Offer, at the addresses as set forth on the books of the Corporation. The other Employees will thereupon have the option within such thirty (30) day period to purchase all or any portion of the Offered Shares. Should more than one Employee desire to purchase the Offered Shares, the Employees will divide the shares pro rata, based on the amount of Class B Common Stock that they own at the time of receipt of the Notice. (2) If the Employees decline to exercise the option or otherwise fail to exercise such option within such thirty (30) day period, the Offered Shares not purchased by the other Employees will thereupon be deemed to be offered for sale to the Corporation for a period of ten days. The Corporation will have an option, during the ten day period to purchase all or any portion of the Offered Shares. (3) The Selling Shareholder shall not be obligated to sell any of the Offered Shares to the Corporation and/or to the non-selling Employees unless all of the Offered Shares are purchased. d. Determination of Purchase Price Per Share. The Corporation and each Shareholder agree that the purchase price per Share of Class B Stock transferred pursuant to Subsection (c) of this Section 2 shall be equal to the purchase price per share in the Bona Fide Offer. The terms of payment shall be substantially the same as those in the Bona Fide Offer. e. Release from Restrictions. (1) If the Right of First Refusal is not exercised by the non-selling Employees or the Corporation, or in the event that the aggregate acceptances by the purchasing parties are for less than the number of the Shares offered, the Transferor may transfer the Shares not purchased by the other Shareholders or the Corporation to the prospective Transferee named in the Offer to Sell in strict accordance with the terms therein stated or, in the case of a Bona Fide Offer, may reject all of said offers by the other Shareholders or the Corporation, and offer and sell all of the Offered Shares to the purchaser named in the Bona Fide Offer, in either case, at a price not less than, and on terms and conditions not more favorable to such Transferee than, are set forth in the Offer to Sell to Shareholders pursuant to Section 2(c); provided that, except as provided in subsection (e)(2) of this Section 2, such Transferee shall receive one share of Class A Common Stock for each share of Class B Stock sold to him by the Selling Shareholder. (2) Should the proposed Transferee be an Eligible Shareholder, than said Transferee may purchase and receive Class B Stock provided (i) the sale transaction is made in accordance with the terms of this agreement, (ii) holders of 2/3 of the outstanding Class B Stock (excluding those shares which are the subject of the Bona Fide Offer) approve the proposed Transferee=s right to hold Class B Stock, and (iii) the proposed Transferee agrees to be bound by the terms of this agreement. (3) A transfer effected pursuant to this Section 2(g) shall be consummated and the Shares transferred to the Transferee within thirty (30) days after the expiration of the period of acceptance by the non-selling Shareholders prescribed by Section 2(c). If the Transferor shall fail to make such transfer within such thirty (30) day period, or if he shall propose to sell the Offered Shares at a lower price or on more favorable terms to the purchaser, the Offered Shares shall again become subject to all the restrictions contained in this Agreement, and the Selling Shareholder shall again make the Offered Shares available to the Corporation and the remaining Shareholders for purchase in the manner set forth in Section 2(c). f. Invalid Dispositions. Any purported sale, assignment, mortgage, hypothecation, transfer or pledge of, creation of a security interest in, lien or encumbrance on, or gift, non-voting trust or any other disposition of any Shares by any Shareholder or any successor to any Shareholder which violates any provision of this Agreement will result in the conversion of the Class B Stock into Class A Stock. The Corporation and its officers, directors and employees shall not be liable to any person for any action or refusal to act taken under the provisions of this Section 2. 3. Voting Rights, Death, Change in Eligibility Status. So long as Samuels is the Chairman of ACTV, Inc. or an officer or director of the Corporation, each person who is now or may subsequently become a party hereto grants Samuels the right to vote all shares of said person=s Class B Stock and hereby grants Samuels an irrevocable proxy, coupled with an interest, to vote said shares. Should Samuels die, become disabled or resign his employment with the ACTV Group (as hereinafter defined), said voting rights and proxy shall vest in Crowley so long as he is an officer or director of the Corporation or of ACTV, Inc. Upon the death or disability of an Employee, or resignation of an employment with the ACTV Group, which shall include the Corporation, ACTV, Inc., or any affiliate or subsidiary of ACTV, Inc., each share of Class B Stock held by him or her shall convert into one share of Class A stock on the second anniversary of said event. 4. Termination of Employment. Should an Employee be terminated from employment, than his Class B Stock shall not convert into Class A Stock except upon transfer as set forth in section 2. 5. Conversion. With the approval of holders of 70% of the Class B Stock, each share of Class B Stock may be treated in all respects, for the purpose of a transaction, or series of transactions, as one share of Class A Stock. 6. Undertaking. The Corporation warrants that should it be necessary to issue additional Class A Stock under any provision of this agreement, it will use its best efforts to amend its certificate of incorporation to increase the authorized number of shares of Class A Stock. 7. Endorsement on Certificates. Upon execution of this Agreement, the certificates of stock subject thereto shall be surrendered to the Corporation and the stock certificates representing the Shares shall have the following legend printing on them: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under state securities laws and may not be sold or transferred unless registered under said act and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Corporation, the transfer qualifies for an exemption from the registration provisions thereof. In addition, this certificate of stock and the shares represented hereby are held subject to the terms and conditions contained in an agreement by and among the Shareholders of the Corporation and the Corporation dated as of March 14, 1997, and all amendments thereto, and may not be transferred except in accordance with the terms and provisions thereof. A copy of such agreement will be furnished by the Corporation upon request.@ Upon endorsement, the certificates shall be delivered to the Shareholders, who shall be entitled to exercise all rights of ownership of such stock, subject to the terms of this Agreement. All capital stock of the Corporation hereinafter issued to the Shareholders shall bear the same endorsement. 8. Termination of Agreement. This Agreement shall terminate upon the occurrence of any of the following events: a. The cessation of the Corporation's business; b. Adjudication of the Corporation as a bankrupt, the execution by it of an assignment for the benefit of creditors, or the appointment of a receiver for the Corporation; or c. Voluntary, involuntary or judicial dissolution of the Corporation. Upon the termination of this Agreement, each Shareholder shall surrender to the Corporation the certificates for his stock, and the Corporation shall issue to him in lieu thereof new certificates for an equal number of shares without the last two sentences of the endorsement set forth in Section 7. 9. Equitable Remedy. The parties hereby declare that it is impossible to measure in monetary terms the damages which shall accrue to a party hereto by reason of another party's failure to perform any of the obligations under this Agreement. Therefore, if any party hereto shall institute any action or proceeding to enforce the provisions hereof, any person (including the Corporation) against whom such action or proceeding is brought hereby waives the claim or defense therein that there is an adequate remedy at law, and such person shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. 10. Miscellaneous. a. Any notice or other communication required or permitted to be given to any party hereunder shall be deemed given when delivered personally or by Federal Express or other delivery service providing documentary evidence of delivery, or five (5) days after mailing by certified mail, return receipt requested, to the parties at the addresses as set forth above, or to such other address as the respective parties may designate by notice given pursuant to this Section 10(a). b. This Agreement shall be binding upon the parties hereto and their heirs, executors, administrators, successors and assigns. Each Shareholder in furtherance thereof shall execute a will directing his executor to perform this Agreement and to execute all documents necessary to effectuate its purposes, but the failure to execute such will shall not affect the rights of any Shareholders or the obligations of any estate, as provided in this Agreement. c. This Agreement contains the entire agreement of the parties and supersedes all prior agreements, written or oral. No change in or modification of this Agreement shall be binding unless the same shall be in writing and signed by the parties hereto. d. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. e. Any controversy or claim arising out of or relating to this Agreement shall be determined by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association. The place of arbitration shall be New York City. f. Whenever from the context it appears appropriate, each item stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter genders shall include the masculine, feminine and neuter genders. g. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together constitute one and the same instrument. 11. Severability. It is agreed that in the event any provision of this Agreement or the application thereof to any person or circumstance shall be adjudged to be invalid or unenforceable according to any applicable laws, the remaining provisions of this Agreement and the application thereof to any person or circumstances shall not be affected thereby and shall be enforced to the fullest extent permitted by law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ACTV HOLDING, INC. By:__________________________ ACTV NET, INC. By:__________________________ -------------------------- David Reese -------------------------- William Samuels -------------------------- Bruce Crowley -------------------------- Christopher Cline EX-10.29 35 ADDITIONAL SHAREHOLDERS AGREEMENT ADDITIONAL SHAREHOLDERS AGREEMENT AGREEMENT made as of the 1st day of October, 1997, by and among ACTV Net, Inc, a corporation whose principal address is 1270 Avenue of the Americas, New York, New York 10020 (the "Corporation"), ACTV Holdings, Inc., a corporation whose principal address is 1270 Avenue of the Americas, New York, New York 10020 (AHoldings@), William Samuels, an individual residing 171 West 57th Street, New York, New York 10023("Samuels"), Bruce Crowley, an individual residing at 257 West 17th Street, New York, New York 10011 (ACrowley@), Craig Ullman, an individual residing at 112 Willow Street, Brooklyn, New York 11201 (AUllman@), James Crook, an individual residing at 168 Hudson Avenue, Tenafly, New Jersey 07670 (ACrook@), Cindi Baker, an individual residing at 30213 Oak Tree Drive, Georgetown, Texas 78628 (ABaker@). Holdings, Samuels, Crowley, Ullman, Crook and Baker are sometimes hereinafter collectively referred to as the "Shareholders,@ and Samuels, Crowley, Ullman, Crook and Baker are sometimes hereinafter collectively referred to as the AEmployees." R E C I T A L S WHEREAS, the authorized capital stock of the Corporation consists of 4,000,000 shares of Class A Common Stock, $.01 par value (the "Class A Stock") and 1,000,000 shares of Class B Stock (non-voting), $.01 par value (the "Class B Stock" and with the Class A Stock sometimes referred to herein as the "Common Stock"); and WHEREAS, Samuels, Crowley, Ullman, Crook and Baker pursuant to separate option agreements dated October 1, 1997 each have the right to purchase 60,000, 60,000, 100,000, 60,000 and 20,000 of Class B Stock, respectively. WHEREAS, the Shareholders desire to promote their joint interests and the interests of the Corporation by imposing certain restrictions and obligations on themselves and on the Corporation and on the Common Stock held, or hereafter acquired by each of them; WHEREAS, the Shareholders believe it to be in their best interests and in the best interests of the Corporation that the Common Stock owned by the Shareholders be transferable only upon compliance with the provisions of this Agreement; NOW, THEREFORE, in consideration of the mutual obligations between and among the Shareholders and the Corporation contained herein and other good and valuable consideration, the Shareholders and the Corporation hereby agree as follows: 1. Definitions. a. The word "Affiliate" shall mean any person controlling, or controlled by, another person and for purposes hereof shall include all relatives by blood, marriage or adoption. b. The word "Agreement" shall mean this Shareholders Agreement, as it may be amended from time to time pursuant to the terms hereof. c. The term "Bona Fide Offer" shall mean any offer made by a Person not a party to this Agreement to any Employee to purchase Class B Stock; provided, however, that (i) said offer must be accompanied by a bank cashier's or certified check in an amount equal to not less than ten percent (10%) of the purchase price specified in such offer, such amount to serve as liquidated damages forfeitable to the Corporation in connection therewith, and (ii) the identity of the purchaser and all material terms of the offer must be disclosed. In the event a Bona Fide Offer shall provide for the exchange of assets other than cash or cash equivalents, either the Bona Fide Offer shall include the fair market value of said assets if such fair market value is publicly available and readily ascertainable or the Transferor shall submit with the Bona Fide Offer an appraisal prepared by a qualified independent third party evidencing the fair market value of the assets to be exchanged as of the date of the Bona Fide Offer. d. The term AEligible Shareholder@ shall be those persons permitted to hold the Class B Stock by the Corporation's Articles of Incorporation. Eligible Shareholders are executive officers, directors and employees of the Corporation or affiliated corporations, which shall include parents, subsidiaries or corporations under common control. e. The word "Person" shall mean (and include) an individual, trust, fiduciary, partnership, corporation, association or any other legal entity. f. The term "Offered Shares" shall mean the shares of Common Stock of the Corporation included in an Bona Fide Offer. g. The word "Employee" shall include any original Employee and any Transferee of Class B Stock, as permitted by Section 2(e)(2). h. The word "transfer" shall include the sale, assignment, gift, pledge, encumbrance or other disposition of any Shares, whether absolute or conditional, temporary or permanent, outright or in trust, voluntary or involuntary. i. The word "Transferee" shall refer to any holder of Shares transferred to him by a Shareholder. j. The words "Transferor" or "Selling Shareholder" shall refer to any Shareholder desiring to make a transfer of his Shares. k. The word "Shares" shall mean shares of the Common Stock owned at any time by a Shareholder. 2. Restrictions on Transferability of Shares Held by the Shareholders a. General Restrictions. Each of the Employees hereby agrees not to transfer his Class B Stock, now owned or hereafter acquired, except in accordance with Section 2 or Section 3 of this Agreement. Under the terms of the Corporation's articles of incorporation, each share of Class B Stock transferred in any other manner shall convert immediately into one share of Class A Stock. b. Transfer. Any sale of shares made under this agreement must be made pursuant to a Bona Fide Offer, regardless of which party initiated the transaction. c. Right of First Refusal. If any of the Employees desires to transfer his or her Class B Stock (a "Selling Shareholder"), during his lifetime, he must first give to the Corporation and to the other Employees the opportunity to purchase such Class B Stock in accordance with the following procedures: (1) The Selling Shareholder must give to the Corporation and the other Employees thirty (30) days written notice of his intent to sell (the "Notice"), along with a copy of the Bona Fide Offer, at the addresses as set forth on the books of the Corporation. The other Employees will thereupon have the option within such thirty (30) day period to purchase all or any portion of the Offered Shares. Should more than one Employee desire to purchase the Offered Shares, the Employees will divide the shares pro rata, based on the amount of Class B Common Stock that they own at the time of receipt of the Notice. (2) If the Employees decline to exercise the option or otherwise fail to exercise such option within such thirty (30) day period, the Offered Shares not purchased by the other Employees will thereupon be deemed to be offered for sale to the Corporation for a period of ten days. The Corporation will have an option, during the ten day period to purchase all or any portion of the Offered Shares. (3) The Selling Shareholder shall not be obligated to sell any of the Offered Shares to the Corporation and/or to the non-selling Employees unless all of the Offered Shares are purchased. d. Determination of Purchase Price Per Share. The Corporation and each Shareholder agree that the purchase price per Share of Class B Stock transferred pursuant to Subsection (c) of this Section 2 shall be equal to the purchase price per share in the Bona Fide Offer. The terms of payment shall be substantially the same as those in the Bona Fide Offer. e. Release from Restrictions. (1) If the Right of First Refusal is not exercised by the non-selling Employees or the Corporation, or in the event that the aggregate acceptances by the purchasing parties are for less than the number of the Shares offered, the Transferor may transfer the Shares not purchased by the other Shareholders or the Corporation to the prospective Transferee named in the Offer to Sell in strict accordance with the terms therein stated or, in the case of a Bona Fide Offer, may reject all of said offers by the other Shareholders or the Corporation, and offer and sell all of the Offered Shares to the purchaser named in the Bona Fide Offer, in either case, at a price not less than, and on terms and conditions not more favorable to such Transferee than, are set forth in the Offer to Sell to Shareholders pursuant to Section 2(c); provided that, except as provided in subsection (e)(2) of this Section 2, such Transferee shall receive one share of Class A Common Stock for each share of Class B Stock sold to him by the Selling Shareholder. (2) Should the proposed Transferee be an Eligible Shareholder, than said Transferee may purchase and receive Class B Stock provided (i) the sale transaction is made in accordance with the terms of this agreement, (ii) holders of 2/3 of the outstanding Class B Stock (excluding those shares which are the subject of the Bona Fide Offer) approve the proposed Transferee's right to hold Class B Stock, and (iii) the proposed Transferee agrees to be bound by the terms of this agreement. (3) A transfer effected pursuant to this Section 2(g) shall be consummated and the Shares transferred to the Transferee within thirty (30) days after the expiration of the period of acceptance by the non-selling Shareholders prescribed by Section 2(c). If the Transferor shall fail to make such transfer within such thirty (30) day period, or if he shall propose to sell the Offered Shares at a lower price or on more favorable terms to the purchaser, the Offered Shares shall again become subject to all the restrictions contained in this Agreement, and the Selling Shareholder shall again make the Offered Shares available to the Corporation and the remaining Shareholders for purchase in the manner set forth in Section 2(c). f. Invalid Dispositions. Any purported sale, assignment, mortgage, hypothecation, transfer or pledge of, creation of a security interest in, lien or encumbrance on, or gift, non-voting trust or any other disposition of any Shares by any Shareholder or any successor to any Shareholder which violates any provision of this Agreement will result in the conversion of the Class B Stock into Class A Stock. The Corporation and its officers, directors and employees shall not be liable to any person for any action or refusal to act taken under the provisions of this Section 2. 3. Voting Rights, Death, Change in Eligibility Status. So long as Samuels is the Chairman of ACTV, Inc. or an officer or director of the Corporation, each person who is now or may subsequently become a party hereto grants Samuels the right to vote all shares of said person's Class B Stock and hereby grants Samuels an irrevocable proxy, coupled with an interest, to vote said shares. Should Samuels die, become disabled or resign his employment with the ACTV Group (as hereinafter defined), said voting rights and proxy shall vest in Crowley so long as he is an officer or director of the Corporation or of ACTV, Inc. Upon the death or disability of an Employee, or resignation of an employment with the ACTV Group, which shall include the Corporation, ACTV, Inc., or any affiliate or subsidiary of ACTV, Inc., each share of Class B Stock held by him or her shall convert into one share of Class A stock on the second anniversary of said event. 4. Termination of Employment. Should an Employee be terminated from employment, than his Class B Stock shall not convert into Class A Stock except upon transfer as set forth in section 2. 5. Conversion. With the approval of holders of 70% of the Class B Stock, each share of Class B Stock may be treated in all respects, for the purpose of a transaction, or series of transactions, as one share of Class A Stock. 6. Undertaking. The Corporation warrants that should it be necessary to issue additional Class A Stock under any provision of this agreement, it will use its best efforts to amend its certificate of incorporation to increase the authorized number of shares of Class A Stock. 7. Endorsement on Certificates. Upon execution of this Agreement, the certificates of stock subject thereto shall be surrendered to the Corporation and the stock certificates representing the Shares shall have the following legend printing on them: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under state securities laws and may not be sold or transferred unless registered under said act and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Corporation, the transfer qualifies for an exemption from the registration provisions thereof. In addition, this certificate of stock and the shares represented hereby are held subject to the terms and conditions contained in an agreement by and among the Shareholders of the Corporation and the Corporation dated as of March 14, 1997, and all amendments thereto, and may not be transferred except in accordance with the terms and provisions thereof. A copy of such agreement will be furnished by the Corporation upon request." Upon endorsement, the certificates shall be delivered to the Shareholders, who shall be entitled to exercise all rights of ownership of such stock, subject to the terms of this Agreement. All capital stock of the Corporation hereinafter issued to the Shareholders shall bear the same endorsement. 8. Termination of Agreement. This Agreement shall terminate upon the occurrence of any of the following events: a. The cessation of the Corporation's business; b. Adjudication of the Corporation as a bankrupt, the execution by it of an assignment for the benefit of creditors, or the appointment of a receiver for the Corporation; or c. Voluntary, involuntary or judicial dissolution of the Corporation. Upon the termination of this Agreement, each Shareholder shall surrender to the Corporation the certificates for his stock, and the Corporation shall issue to him in lieu thereof new certificates for an equal number of shares without the last two sentences of the endorsement set forth in Section 7. 9. Equitable Remedy. The parties hereby declare that it is impossible to measure in monetary terms the damages which shall accrue to a party hereto by reason of another party's failure to perform any of the obligations under this Agreement. Therefore, if any party hereto shall institute any action or proceeding to enforce the provisions hereof, any person (including the Corporation) against whom such action or proceeding is brought hereby waives the claim or defense therein that there is an adequate remedy at law, and such person shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. 10. Miscellaneous. a. Any notice or other communication required or permitted to be given to any party hereunder shall be deemed given when delivered personally or by Federal Express or other delivery service providing documentary evidence of delivery, or five (5) days after mailing by certified mail, return receipt requested, to the parties at the addresses as set forth above, or to such other address as the respective parties may designate by notice given pursuant to this Section 10(a). b. This Agreement shall be binding upon the parties hereto and their heirs, executors, administrators, successors and assigns. Each Shareholder in furtherance thereof shall execute a will directing his executor to perform this Agreement and to execute all documents necessary to effectuate its purposes, but the failure to execute such will shall not affect the rights of any Shareholders or the obligations of any estate, as provided in this Agreement. c. This Agreement contains the entire agreement of the parties and supersedes all prior agreements, written or oral. No change in or modification of this Agreement shall be binding unless the same shall be in writing and signed by the parties hereto. d. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. e. Any controversy or claim arising out of or relating to this Agreement shall be determined by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association. The place of arbitration shall be New York City. f. Whenever from the context it appears appropriate, each item stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter genders shall include the masculine, feminine and neuter genders. g. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together constitute one and the same instrument. 11. Severability. It is agreed that in the event any provision of this Agreement or the application thereof to any person or circumstance shall be adjudged to be invalid or unenforceable according to any applicable laws, the remaining provisions of this Agreement and the application thereof to any person or circumstances shall not be affected thereby and shall be enforced to the fullest extent permitted by law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ACTV HOLDING, INC. By:__________________________ ACTV NET, INC. By:__________________________ _____________________________ William Samuels _____________________________ Bruce Crowley _____________________________ Craig Ullman _____________________________ James Crook _____________________________ Cindi Baker EX-10.30 36 LICENSE AGREEMENT, 3-14-97 LICENSE AGREEMENT AGREEMENT, made as of the 14th day of March, 1997, by and between ACTV INC. and ACTV HOLDINGS, INC., both Delaware corporations having their corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 (collectively, "Licensor") and ACTV ENTERTAINMENT., a New York corporation, having its corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 ("Licensee"). W I T N E S S E T H: WHEREAS, Licensor is the exclusive owner of certain individualized television programming technologies (the "Intellectual Property"), which Intellectual Property includes the Patents listed on Exhibit A hereto (the "Patents") and proprietary technologies, programming methods, the ACTV Programming and Coding Language, and other trade secrets and know-how, all relating to the Intellectual Property described in the Patents, including applications thereof, regardless of distribution or delivery method; WHEREAS, Licensor wishes to grant to Licensee and Licensee wishes to obtain from Licensor an exclusive license in the Territory to use and exploit the Intellectual Property in the distribution of individualized television directly to home subscribers in the United States for all entertainment programming. NOW, THEREFORE, in consideration of one dollar ($1.00), the foregoing premises and the mutual covenants herein contained, the parties agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "ACTV Programming" shall mean programming that utilizes the Intellectual Property, including any Improvements. (b) "Improvements" shall mean any improvement, refinement, enhancement or other modification of the Intellectual Party. (c) "License" shall mean that exclusive license which the Licensor hereby grants to the Licensee to use and exploit the Intellectual Property, including Improvements as set forth in Paragraph 6 hereof, subject to the terms hereof. (d) Net Sales" shall mean subscriber and advertising revenues by License and its affiliates and sublicensees, if any, less any license fees payable to third party programming providers, less trade discounts allowed, valid credits for claims or allowances, -1- refunds, returns and recalls and less taxes and other governmental charges levied on or measured by sales and included in the billing price. (e) "Territory" shall mean the United States of America and its possessions, territories and associated commonwealths (including Puerto Rico, the Virgin Islands and Guam), including all United States military installations located therein. 2. Grant of Rights (a) Subject to the terms and conditions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, Licensor hereby grants to Licensee, subject to the terms hereof, an exclusive, perpetual License to use, distribute and sublicense the Intellectual Party and Improvements throughout the Territory for individualized television directly to home subscribers through the mass distribution systems of cable broadband distribution system located in the Territory. Not included are the applications granted to ACTV, Net, Inc. under the March 13, 1997 License Agreement from Licensor. Licensor hereby agrees promptly to disclose to Licensee the Intellectual Property licensed hereby. (b) All products, including, without limitation, television programming, which are distributed, sold or utilized in any manner and which incorporate in any manner all or any part of the Intellectual Property contained within the Licensee granted hereunder will bear the proper proprietary rights notice, all as specified in writing by Licensor to Licensee, as shall be sufficient, in Licensor's judgment, to protect its rights and interest in the rights granted by Licensor to Licensee pursuant hereto. Licensee further agrees to give proper notice of trademarks, patents and/or copyright where applicable in connection with the use by Licensee of any rights thereunder, as may be specified from time-to-time Licensor. (c) Licensee agrees that during the term of this Agreement, it will diligently and actively develop, promote, distribute and market ACTV Programming in the Territory. 3. Consideration (a) In consideration for the License granted hereunder, Licensee shall pay Licensor five (5) percent of all Net Sales (as such term is defined in the respective sublicense agreement, or if not so defined, then as defined, herein) by sublicensees of Licensee and five (5) percent of the Net Sales by Licensee at any time that ACTV, Inc. owns directly or through ACTV Holdings, Inc. less than 50 % of the outstanding Common Stock of Licensee. (b) Royalty payments shall be made within thirty (30) days of the end of each calendar quarterly period for sales invoiced by Licensee during such calendar quarterly period. Each commission payment shall be accompanied by a report setting forth in reasonable detail the Net Sales during the calendar quarter and the calculation of royalties based thereon. Licensor shall have the right once a year and with reasonable notice to examine the books and -2- records of Licensee. Such examination shall take place at Licensee's principal place of business during normal business hours. 4. Reservation of Rights. (a) Licensee is only permitted to assign or sublicense the rights hereunder granted to any third party, provided such party agrees in writing to abide by the terms and conditions of this Agreement to the extent applicable to it. (b) All rights not specifically granted to Licensee hereunder are reserved to Licensor. 5. Confidentiality. Licensee shall maintain in strict confidence and shall not at any time whether before or after the termination of this agreement (a) utilize for any purpose other than as permitted under this License, or cause, enable, assist or permit anyone else to utilize, any of the Intellectual Property or Improvements: (b) disclose to anyone any such Intellectual Property, Improvements and/or related information (the "Confidential Information") which is not generally available to the public unless, (i) through no act of Licensee contrary to the obligations imposed hereby, such Confidential Information becomes known to the public prior to the date of Licensee's disclosure, (ii) such Confidential Information is approved for public release by Licensor, (iii) such Confidential Information is rightfully received by Licensee from a third party without restrictions and without breach of Licensee's obligations hereunder, (iv) such Confidential Information is independently developed by Licensee without breach of this Agreement, (v) such Confidential Information is required to be disclosed by judicial or governmental proceeding subject to a protective order or (vi) such disclosure is necessary or appropriate to the exploitation of the License granted hereby and only then after such person or entity to whom disclosure is to be made executes a confidentiality agreement acceptable to Licensor. Notwithstanding the foregoing, Licensee may disclose such Confidential Information to its employees who need to know such information in order for Licensee to use and exploit the Intellectual Property pursuant to the terms of this Agreement if it has taken reasonable steps to impose the aforesaid covenants of confidentiality on said employees and to ensure that said employees will not violate said covenants, including, but not limited to, causing said employees to enter into written agreements in which said covenants of confidentiality are effectively imposed upon them. Licensee will copy Licensor's Confidential Information only to the extent reasonably necessary to enable Licensee to exercise its rights under the License. In making any such copies, Licensee agrees to produce faithfully all notices respecting copyright, trade secrets, and other proprietary rights. Nothing contained herein shall prevent Licensee from disclosing in general terms the nature of its relationship with Licensor. 6. Improvements. Any improvements upon the Intellectual Property made, conceived, invented or wholly acquired by Licensor during the term of this Agreement, shall be included hereunder, and Licensee shall have the right to such improvements (limited, however, by the specific terms hereto) without payment of any additional royalty. Licensee agrees that if during the term of this Agreement it should make, conceive, invent or acquire any improvements on the Intellectual Property, or on any component or portion thereof, it will grant, and hereby does grant, to Licensor a royalty-free, exclusive, paid up, perpetual license to use such improvements on a world-wide basis. Each party agrees to disclose promptly to the other party -3- all improvements so made, conceived, invented or acquired during the term of this Agreement which are based, in whole or in part, on any of the Intellectual Property or Improvements. 7. Representations. Licensor represents and warrants that: (i) it has the right and authority to enter into this Agreement; (ii) to the best of its knowledge, it is the sole owner of licensee of all Intellectual Property and Improvements licensed hereunder and the use thereof will not violate any law or infringe upon or to violate any rights of any person, firm or corporation; and (iii) it is not a party to any other existing agreement which would prevent it from entering into or performing its obligations under the terms of this Agreement, (iv) to the best of its knowledge, the Patents have been validly issued, have not been challenged and no adverse claim has been asserted. 8. Litigation. Licensee shall have the sole responsibility at its sole cost and expense for protecting the rights granted and to be granted herein against any third party infringement. Licensee agrees to promptly and diligently seek to protect all rights granted and to be granted herein from and against any infringement by third parties. 9. Insurance. (a) During the term of this Agreement, Licensee will maintain, at its own expense, in full force and effect, with a responsible insurance carrier, reasonably acceptable to Licensor, such product liability insurance as is customary for a business of the type, nature and size of Licensee. (b) Licensee shall, from time to time upon reasonable request by the other party, promptly furnish or cause to be furnished to Licensor, a certificate evidencing the insurance required hereby. 10. Termination. (a) In the event that Licensee materially defaults or breaches any provision of this Agreement, Licensor reserves the right to terminate this Agreement upon written notice to Licensee; provided, however, that if Licensee, within 30 days of such written notice, cures such default or breach, this Agreement shall continue in full force and effect as if such default or breach had not occurred; and provided, further, should Licensee dispute any such alleged breach of this Agreement and such dispute is either submitted to arbitration in due course pursuant to Paragraph 20 hereof or being resolved by the parties hereto, then there shall be no default hereunder during the period in which the parties are in arbitration or diligently, and in good faith, attempting to resolve such dispute; provided, that after the parties reach an agreement or an arbitrator makes its decision, Licensee shall comply therewith within 15 days thereof. (b) In the event of any adjudication of bankruptcy which is not vacated within 30 days, appointment of a receiver by a court of competent jurisdiction who is not removed within 30 days, assignment for the benefit of creditors or levy of execution directly involving Licensee, this Agreement shall thereupon forthwith terminate and no longer be of any further force and effect. -4- (c) In the event of termination of this Agreement for any reason whatsoever: (i) Licensee shall deliver to Licensor all books, notes, drawings writings and other documents, in the possession of Licensee or the Permitted Parties relating to the Intellectual Property and any Improvements licensed to it under Paragraph 2(a) hereof (except that in connection with any Improvements made by Licensee it may retain copies of all such items delivered to Licensor and may continue to use any such Improvements made by it), together with all copies of any Confidential Information. (ii) All rights granted by Licensor to Licensee shall forthwith revert to Licensor. (iii) Licensor (in the event this Agreement is terminated by reason of Licensee's default hereunder) shall continue to be entitled to use or exploit any exclusive royalty-free license to new developments of Licensee granted pursuant to Paragraph 6 hereof. (d) In the event of termination of this Agreement, Licensee shall assign to Licensor, at the request of Licensor, all of its right, title and interest in and to any contracts or agreements relating, directly or indirectly to the Intellectual Property. 11. Notices. All notices to be given or payments made hereunder shall be in writing and sent by hand, federal express or by registered or certified mail, postage prepaid, addressed to the respective parties at the addresses set forth above. All notices shall be effective upon receipt. Copies of all notices to Licensor or Licensee shall be sent to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street Avenue, New York, New York 10022, attention: Wesley C. Fredericks, Esq. 12. New York Law. This Agreement and all matters or issues collateral thereto shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contacts made and performed entirely therein. 13. Entire Understanding. This Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained, and supersedes any and all prior agreements or understandings relating to the subject matter hereof. This Agreement may not be changed except by a writing signed by the party sought to be charged therewith. 14. No Waiver. No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default by either party, shall constitute a continuing waiver or a waiver of any other provision of this Agreement, and no such waiver by either party shall prevent such party from enforcing any and all provisions of this Agreement or from acting upon the same or any subsequent breach or default of the other party. No waiver of any provision hereunder shall be effective unless it is in writing signed by the against whom enforcement thereof is sought. -5- 15. Separability. The provisions set forth in this Agreement shall be considered to be separable and independent of each other. In the event that any provision of this Agreement shall be determined in any jurisdiction to be unenforceable, such determination shall not be deemed to affect the enforceability of any other remaining provision and the parties agree that any court making such a determination is hereby requested and empowered to modify such provision and to substitute for such unenforceable provision such limitation or provision of maximum scope as the court then deems reasonable and judicially enforceable and the parties agree that such substitute provision shall be as enforceable in said jurisdiction as if set forth initially in this Agreement. Any such substitute provision shall be applicable only in the jurisdiction in which the original provision was determined to be unenforceable. 16. Relationship of the Parties. Nothing contained herein shall be construed to place the parties in the relationship of partners or joint venturers and neither party shall have the power to bind or obligate the other. 17. Survival. Unless otherwise provided, the obligations of the parties hereto shall survive the termination of the term of this Agreement. 18. Arbitration. All claims, demands, disputes, controversies, differences or misunderstandings between or among the parties hereto or any other persons bound hereby arising out of or by virtue of this Agreement, shall be submitted to and determined by arbitration in the City of New York. If the parties to a dispute arising out of this Agreement are unable to agree on an arbitrator within 10 days after any party shall have given written notice to the other that it desires to submit any issue to arbitration, then the American Arbitration Association shall be designated by any party to appoint an arbitrator and to arbitrate the matter under its rules. The award of the arbitrator shall be made in writing, shall be within the scope of this Agreement, shall not change any of its terms or conditions, shall be binding and conclusive on all parties, and shall include a finding for the payment of the costs of the arbitration proceeding (including reasonable attorneys' fees). It is further agreed that judgment of a court having jurisdiction may be entered upon the award of the arbitrator. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ACTV, INC. By: ------------------------------------------------------------ William C. Samuels, Chairman and Chief Executive Officer ACTV, HOLDINGS, INC. By: ------------------------------------------------------------ William C. Samuels, President ACTV ENTERTAINMENT, INC. By: ------------------------------------------------------------ David Reese, President -6- EXHIBIT A ACTV PATENTS Title ----- 1. Interactive Cable Television 2. Dedicated Channel Interactive Cable Television 3. One Way Interactive Multisubscriber Communication System 4. Method For Expanding Interactive ACTV Displayable Choices For A Given Channel Capacity 5. Method For Providing Targeted Profile Interactive ACTV Displays 6. Interactive Television System For Providing Full Motion Synched Compatible Audio/Visual Displays 7. Interactive Television System For Providing Full Motion Synched Compatible Audio/Visual Displays From Transmitted Television Signals 8. Method For Providing An Interactive Full Motion Synched Compatible Audio/Visual Television Display 9. Closed Circuit Television System Having Seamless Interactive Television Programming And Expandable User Participation 10. Multiple Access Television 11. Simulcast of Interactive Signals With A Conventional Video Signal 12. Interactive System and Method for Offering Expert Based Interactive Program 13. Compressed Digital Data Interactive Program System -7- EX-10.31 37 LICENSE AGREEMENT, 3-13-97 LICENSE AGREEMENT AGREEMENT, made as of the 13th day of March, 1997, by and among ACTV INC. and ACTV HOLDINGS, INC., both Delaware corporations having their corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 (collectively, "Licensor") and ACTV NET, a Delaware corporation, having its corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 ("Licensee"). W I T N E S S E T H: WHEREAS, Licensor is the exclusive owner of certain individualized television programming and internet/intranet technologies (the "Intellectual Property"), which Intellectual Property includes the Patents listed on Exhibit A hereto (the "Patents") and proprietary technologies, programming methods, the ACTV Programming and Coding Language, Java-based software tools and other trade secrets and know-how, all relating to the Intellectual Property described in the Patents, including applications thereof, regardless of distribution or delivery method; and WHEREAS, Licensor wishes to grant to Licensee and Licensee wishes to obtain from Licensor an exclusive, worldwide license to use and exploit the Intellectual Property for internet/intranet applications, for distance learning and business television, and in general for educational and training applications. Also specifically included are applications from school(s), universities or business (es), to homes through mass distribution systems such as cable, DBS, or Wireless cable. NOW, THEREFORE, in consideration of one dollar ($1.00), the foregoing premises and the mutual covenants herein contained, the parties agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "ACTV Programming" shall mean programming that utilizes the Intellectual Property, including any Improvements. (b) "Improvements" shall mean any improvement, refinement, enhancement or other modification of the Intellectual Party. (c) "License" shall mean that exclusive license which the Licensor hereby grants to the Licensee to use and exploit the Intellectual Property, including Improvements as set forth in Paragraph 6 hereof, subject to the terms hereof. -1- (d) "Net Sales" shall mean revenues received by License and its affiliates and Sublicensees (as hereinafter defined), if any, less any license fees payable to third party providers of content and materials, less trade discounts allowed, valid credits for claims or allowances, refunds, returns and recalls and less taxes and other governmental charges levied on or measured by sales and included in the billing price. "Net Sales" shall not include revenues derived from services performed basically at cost in connection with hardware installation, repair or maintenance. (e) "Sublicense" shall mean a grant of rights hereunder by Licensee to another entity to develop and exploit the Intellectual Property in defined territories and markets consistent with the terms hereof. "Sublicense" shall not include a grant to an end user or consumer of the Intellectual Property and services provided by Licensee or a Sublicensee. "Sublincensee" shall mean any entity receiving a Sublicense pursuant to the terms hereof. 2. Grant of Rights (a) Subject to the terms and conditions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, Licensor hereby grants to Licensee, subject to the terms hereof, a worldwide, exclusive, perpetual License to exploit the Intellectual Party and Improvements for internet/intranet applications, and also for distance learning and business television, and in general for educational and training applications. Also, specifically included are applications from school(s), universities, business(es), or primarily educational channels such as Knowledge TV or PBS, to homes through mass distribution systems such as cable, DBS, or broadcast. Licensor hereby agrees promptly to disclose to Licensee the Intellectual Property licensed hereby. (b) Excluded from the grant of rights hereunder shall be television programming that is non-fiction entertainment such as the History Channel or the Discovery Channel, which are within the purview of ACTV Entertainment. (c) All products which are distributed, sold or utilized in any manner and which incorporate in any manner all or any part of the Intellectual Property contained within the License granted hereunder will bear the proper proprietary rights notice, all as specified in writing by Licensor to Licensee, as shall be sufficient, in Licensor's judgment, to protect its rights and interest in the rights granted by Licensor to Licensee pursuant hereto. Licensee further agrees to give proper notice of trademarks, patents and/or copyrights where applicable in connection with the use by Licensee of any rights thereunder, as may be specified from time-to-time Licensor. (d) Licensee agrees that during the term of this Agreement, it will diligently and actively develop, promote, distribute and market the Intellectual Property. 3. Consideration (a) In consideration for the License granted hereunder, Licensee shall pay Licensor five (5) percent of all Net Sales (as such term is defined in the respective sublicense agreement, or if not so defined, then as defined, herein) by sublicensees of Licensee and five (5) -2- percent of the Net Sales by Licensee at any time that ACTV, Inc. owns directly or through ACTV Holdings, Inc. less than 50 % of the outstanding Common Stock of Licensee. (b) Royalty payments shall be made within thirty (30) days of the end of each calendar quarterly period for sales invoiced by Licensee during such calendar quarterly period. Each commission payment shall be accompanied by a report setting forth in reasonable detail the Net Sales during the calendar quarter and the calculation of royalties based thereon. Licensor shall have the right once a year and with reasonable notice to examine the books and records of Licensee. Such examination shall take place at Licensee's principal place of business during normal business hours. 4. Reservation of Rights. (a) Licensee is permitted to assign or sublicense the rights hereunder granted to any third party, provided such party agrees in writing to abide by the terms and conditions of this Agreement to the extent applicable to it. (b) All rights not specifically granted to Licensee hereunder are reserved to Licensor. 5. Confidentiality. Licensee shall maintain in strict confidence and shall not at any time whether before or after the termination of this agreement (a) utilize for any purpose other than as permitted under this License, or cause, enable, assist or permit anyone else to utilize, any of the Intellectual Property or Improvements: (b) disclose to anyone any such Intellectual Property, Improvements and/or related information (the "Confidential Information") which is not generally available to the public unless, (i) through no act of Licensee contrary to the obligations imposed hereby, such Confidential Information becomes known to the public prior to the date of Licensee's disclosure, (ii) such Confidential Information is approved for public release by Licensor, (iii) such Confidential Information is rightfully received by Licensee from a third party without restrictions and without breach of Licensee's obligations hereunder, (iv) such Confidential Information is independently developed by Licensee without breach of this Agreement, (v) such Confidential Information is required to be disclosed by judicial or governmental proceeding subject to a protective order or (vi) such disclosure is necessary or appropriate to the exploitation of the License granted hereby and only then after such person or entity to whom disclosure is to be made executes a confidentiality agreement acceptable to Licensor. Notwithstanding the foregoing, Licensee may disclose such Confidential Information to its employees who need to know such information (the "Permitted Parties") in order for Licensee to use and exploit the Intellectual Property pursuant to the terms of this Agreement if it has taken reasonable steps to impose the aforesaid covenants of confidentiality on said employees and to ensure that said employees will not violate said covenants, including, but not limited to, causing said employees to enter into written agreements in which said covenants of confidentiality are effectively imposed upon them. Licensee will copy Licensor's Confidential Information only to the extent reasonably necessary to enable Licensee to exercise its rights under the License. In making any such copies, Licensee agrees to produce faithfully all notices respecting copyright, trade secrets, and other proprietary rights. Nothing contained herein shall prevent Licensee from disclosing in general terms the nature of its relationship with Licensor. -3- 6. Improvements. Any improvements upon the Intellectual Property made, conceived, invented or wholly acquired by Licensor during the term of this Agreement, shall be included hereunder, and Licensee shall have the right to such improvements (limited, however, by the specific terms hereto) without payment of any additional royalty. Licensee agrees that if during the term of this Agreement it or a Sublicensee should make, conceive, invent or acquire any improvements on the Intellectual Property, or on any component or portion thereof, it will grant, and hereby does grant, to Licensor a royalty-free, exclusive, paid up, perpetual license to use such improvements on a world-wide basis. Each party agrees to disclose promptly to the other party all improvements so made, conceived, invented or acquired during the term of this Agreement which are based, in whole or in part, on any of the Intellectual Property or Improvements. 7. Representations. Licensor represents and warrants that: (i) it has the right and authority to enter into this Agreement; (ii) to the best of its knowledge, it is the sole owner of licensee of all Intellectual Property and Improvements licensed hereunder and the use thereof will not violate any law or infringe upon or to violate any rights of any person, firm or corporation; and (iii) it is not a party to any other existing agreement which would prevent it from entering into or performing its obligations under the terms of this Agreement, (iv) to the best of its knowledge, the Patents have been validly issued, have not been challenged and no adverse claim has been asserted. 8. Litigation. Licensee shall have the sole responsibility at its sole cost and expense for protecting the rights granted and to be granted herein against any third party infringement. Licensee agrees to promptly and diligently seek to protect all rights granted and to be granted herein from and against any infringement by third parties. 9. Insurance. (a) During the term of this Agreement, Licensee will maintain, at its own expense, in full force and effect, with a responsible insurance carrier, reasonably acceptable to Licensor, such product liability insurance as is customary for a business of the type, nature and size of Licensee. (b) Licensee shall, from time to time upon reasonable request by the other party, promptly furnish or cause to be furnished to Licensor, a certificate evidencing the insurance required hereby. 10. Termination. (a) In the event that Licensee materially defaults or breaches any provision of this Agreement, Licensor reserves the right to terminate this Agreement upon written notice to Licensee; provided, however, that if Licensee, within 30 days of such written notice, cures such default or breach, this Agreement shall continue in full force and effect as if such default or breach had not occurred; and provided, further, should Licensee dispute any such alleged breach of this Agreement and such dispute is either submitted to arbitration in due course pursuant to Paragraph 20 hereof or being resolved by the parties hereto, then there shall be no default hereunder during the period in which the parties are in arbitration or diligently, and in -4- good faith, attempting to resolve such dispute; provided, that after the parties reach an agreement or an arbitrator makes its decision, Licensee shall comply therewith within 15 days thereof. (b) In the event of any adjudication of bankruptcy which is not vacated within 30 days, appointment of a receiver by a court of competent jurisdiction who is not removed within 30 days, assignment for the benefit of creditors or levy of execution directly involving Licensee, this Agreement shall thereupon forthwith terminate and no longer be of any further force and effect. (c) In the event of termination of this Agreement for any reason whatsoever: (i) Licensee shall deliver to Licensor all books, notes, drawings writings and other documents, in the possession of Licensee or the Permitted Parties relating to the Intellectual Property and any Improvements licensed to it under Paragraph 2(a) hereof (except that in connection with any Improvements made by Licensee it may retain copies of all such items delivered to Licensor it may retain copies of all such items delivered to Licensor, and may continue to use any such Improvements made by it), together with all copies of any Confidential Information. (ii) All rights granted by Licensor to Licensee shall forthwith revert to Licensor. (iii) Licensor (in the event this Agreement is terminated by reason of Licensee's default hereunder) shall continue to be entitled to use or exploit any exclusive royalty-free license to new developments of Licensee granted pursuant to Paragraph 6 hereof. (d) In the event of termination of this Agreement, Licensee shall assign to Licensor, at the request of Licensor, all of its right, title and interest in and to any contracts or agreements relating, directly or indirectly to the Intellectual Property. 11. Notices. All notices to be given or payments made hereunder shall be in writing and sent by hand, federal express or by registered or certified mail, postage prepaid, addressed to the respective parties at the addresses set forth above. All notices shall be effective upon receipt. Copies of all notices to Licensor or Licensee shall be sent to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street Avenue, New York, New York 10022, attention: Wesley C. Fredericks, Esq. 12. New York Law. This Agreement and all matters or issues collateral thereto shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contacts made and performed entirely therein. 13. Entire Understanding. This Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained, and supersedes any and all -5- prior agreements or understandings relating to the subject matter hereof. This Agreement may not be changed except by a writing signed by the party sought to be charged therewith. 14. No Waiver. No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default by either party, shall constitute a continuing waiver or a waiver of any other provision of this Agreement, and no such waiver by either party shall prevent such party from enforcing any and all provisions of this Agreement or from acting upon the same or any subsequent breach or default of the other party. No waiver of any provision hereunder shall be effective unless it is in writing signed by the against whom enforcement thereof is sought. 15. Separability. The provisions set forth in this Agreement shall be considered to be separable and independent of each other. In the event that any provision of this Agreement shall be determined in any jurisdiction to be unenforceable, such determination shall not be deemed to affect the enforceability of any other remaining provision and the parties agree that any court making such a determination is hereby requested and empowered to notify such provision and to substitute for such unenforceable provision such limitation or provision of maximum scope as the court then deems reasonable and judicially enforceable and the parties agree that such substitute provision shall be as enforceable in said jurisdiction as if set forth initially in this Agreement. Any such substitute provision shall be applicable only in the jurisdiction in which the original provision was determined to be unenforceable. 16. Relationship of the Parties. Nothing contained herein shall be construed to place the parties in the relationship of partners or joint venturers and neither party shall have the power to bind or obligate the other. 17. Survival. Unless otherwise provided, the obligations of the parties hereto shall survive the termination of the term of this Agreement. 18. Arbitration. All claims, demands, disputes, controversies, differences or misunderstandings between or among the parties hereto or any other persons bound hereby arising out of or by virtue of this Agreement, shall be submitted to and determined by arbitration in the City of New York. If the parties to a dispute arising out of this Agreement are unable to agree on an arbitrator within 10 days after any party shall have given written notice to the other that it desires to submit any issue to arbitration, then the American Arbitration Association shall be designated by any party to appoint an arbitrator and to arbitrate the matter under its rules. The award of the arbitrator shall be made in writing, shall be within the scope of this Agreement, shall not change any of its terms or conditions, shall be binding and conclusive on all parties, and shall include a finding for the payment of the costs of the arbitration proceeding (including reasonable attorneys' fees). It is further agreed that judgment of a court having jurisdiction may be entered upon the award of the arbitrator. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ACTV, INC. By: ---------------------------------------------- William C. Samuels, Chairman and Chief Executive Officer ACTV, HOLDINGS, INC. By: ---------------------------------------------- William C. Samuels, President ACTV NET, INC. By: ---------------------------------------------- Bruce Crowley, President -6- EXHIBIT A ACTV PATENTS Title ----- 1. Interactive Cable Television 2. Dedicated Channel Interactive Cable Television 3. One Way Interactive Multisubscriber Communication System 4. Method For Expanding Interactive ACTV Displayable Choices For A Given Channel Capacity 5. Method For Providing Targeted Profile Interactive ACTV Displays 6. Interactive Television System For Providing Full Motion Synched Compatible Audio/Visual Displays 7. Interactive Television System For Providing Full Motion Synched Compatible Audio/Visual Displays From Transmitted Television Signals 8. Method For Providing An Interactive Full Motion Synched Compatible Audio/Visual Television Display 9. Closed Circuit Television System Having Seamless Interactive Television Programming And Expandable User Participation 10. Multiple Access Television 11. A Distance Learning System Providing Individual Television Participation, Audio Responses, And Memory For Every Student 12. Simulcast of Interactive Signals With A Conventional Video Signal 13. Interactive System and Method for Offering Expert Based Interactive Program 14. Compressed Digital Data Interactive Program System -7- EX-10.32 38 SUBLICENSE AGREEMENT SUBLICENSE AGREEMENT AGREEMENT, made as of the 14th day of March , 1997, by and between ACTV ENTERTAINMENT, INC., a New York corporation, having its corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 ("Licensor") and THE LOS ANGELES INDIVIDUALIZED TELEVISION NETWORK, INC., a Delaware corporation having its corporate offices at 9454 Wilshire Boulevard, Suite 1010, Los Angeles, California ("Licensee"). W I T N E S S E T H WHEREAS, Licensor is the exclusive licensee, with right to sublicense, of certain individualized television programming technologies (the "Intellectual Property"), which Intellectual Property includes the Patents listed on Exhibit A hereto (the "Patents") and proprietary technologies, programming methods, the ACTV Programming and Coding Language, and other trade secrets and know-how, all relating to the Intellectual Property described in the Patents, including applications thereof, regardless of distribution or delivery method; and WHEREAS, Licensor wishes to grant to Licensee and Licensee wishes to obtain from Licensor an exclusive sublicense in the Territory to use and exploit the Intellectual Property in the distribution of individualized television directly to home subscribers, based on the enhancement license agreement dated December 3, 1996 between Prime Ticket Networks, L.P. (FOX Sports West) and ACTV, Inc. (the "Fox Sports West Agreement"). NOW, THEREFORE, in consideration of one dollar ($1.00), the foregoing premises and the mutual covenants herein contained, the parties agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "ACTV Programming" shall mean programming that utilizes the Intellectual Property, including any Improvements. (b) "Improvements" shall mean any improvement, refinement, enhancement or other modification of the Intellectual Property. (c) "License" shall mean that exclusive sublicense which the Licensor hereby grants to the Licensee to use and exploit the Intellectual Property, including Improvements as set forth in Paragraph 6 hereof, subject to the terms hereof. (d) "Net Sales" shall mean subscriber and advertising revenues received by Licensee and its affiliates and sublicensees, if any, after payment to Fox Sports West of subscriber and advertising fees pursuant to the Fox Sports West Agreement (less trade discounts allowed, valid credits for claims or allowances, refunds, returns and recalls and less taxes and other governmental charges levied on or measured by sales and included in the billing price). (e) "Territory" shall mean the local footprint of FOX Sports West, which is that portion of the state of California which is south of the northern boundaries of Monterey, San Benito, Fresno and Inyo Counties, plus the State of Hawaii and Clark County, Nevada as such may be modified from time-to-time. 2. Grant of Rights. (a) Subject to the terms and conditions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, Licensor hereby grants to Licensee, subject to the terms hereof, an exclusive License to use, distribute and sublicense the Intellectual Property and Improvements throughout the Territory for individualized television based on the FOX Sports Southwest license directly to home subscribers, through the mass distribution systems of cable television, direct-broadcast satellite television, broadcast television, wireless and any future broadband distribution system located in the Territory. Licensor hereby agrees promptly to disclose to Licensee the Intellectual Property licensed hereby. (b) Licensee shall not sell, lease or distribute, and shall take all steps reasonably requested by Licensor to prohibit others from selling, leasing or distributing any television programming related to the Intellectual Property anywhere outside the Territory without the prior written consent of Licensor. (c) All products, including, without limitation, television programming, which are distributed, sold or utilized in any manner and which incorporate in any manner all or any part of the Intellectual Property contained within the License granted hereunder will bear the proper proprietary rights notice, all as specified in writing by Licensor to Licensee, as shall be sufficient, in Licensor's judgment, to protect its rights and interest in the rights granted by Licensor to Licensee pursuant hereto. Licensee further agrees to give proper notice of trademarks, patents and/or copyrights where applicable in connection with the use by Licensee of any rights hereunder, as may be specified from time-to-time by Licensor. (d) Licensee agrees that during the term of this Agreement, it will diligently and actively develop, promote, distribute and market ACTV Programming in the Territory. 2 3. Consideration. (a) In consideration for the License granted hereunder, Licensee shall pay Licensor eight (8) percent of all Net Sales by Licensee, its affiliates or sublicensees (except as otherwise agreed by Licensor in writing). (b) Royalty payments shall be made within thirty (30) days of the end of each calendar quarterly period for sales invoiced by Licensee during such calendar quarterly period. Each commission payment shall be accompanied by a report setting forth in reasonable detail the Net Sales during the calendar quarter and the calculation of royalties based thereon. Licensor shall have the right once a year and with reasonable notice to examine the books and records of Licensee. Such examination shall take place at Licensee's principal place of business during normal business hours. 4. Sublicense and Reservation of Rights. (a) Licensee is only permitted to assign or sublicense the rights hereunder granted to any third party, provided (i) such party agrees in writing to abide by the terms and conditions of this Agreement to the extent applicable to it and (ii) the sublicensee or assignee and the terms and conditions of the assignment or sublicense are approved in writing by Licensor. (b) All rights not specifically granted to Licensee hereunder are reserved to Licensor. 5. Confidentiality. Licensee shall maintain in strict confidence and shall not at any time whether before or after the termination of this agreement (a) utilize for any purpose other than as permitted under this License, or cause, enable, assist or permit anyone else to utilize, any of the Intellectual Property or Improvements; (b) disclose to anyone any such Intellectual Property, Improvements and/or related information (the "Confidential Information") which is not generally available to the public unless, (i) through no act of Licensee contrary to the obligations imposed hereby, such Confidential Information becomes known to the public prior to the date of Licensee's disclosure, (ii) such Confidential Information is approved for public release by Licensor, (iii) such Confidential Information is rightfully received by Licensee from a third party without restrictions and without breach of Licensee's obligations hereunder, (iv) such Confidential Information is independently developed by Licensee without breach of this Agreement, (v) such Confidential Information is required to be disclosed by judicial or governmental proceeding subject to a protective order or (vi) such disclosure is necessary or appropriate to the exploitation of the License granted hereby and only then after such person or entity to whom disclosure is to be made executes a confidentiality agreement acceptable to Licensor. Notwithstanding the foregoing, Licensee may disclose such Confidential Information to its employees who need to know such information in order for Licensee to use and exploit the Intellectual Property pursuant to the terms of this Agreement if it has taken reasonable steps to impose the aforesaid covenants of confidentiality on said employees and to ensure that said employees will not violate said covenants, including, but not 3 limited to, causing said employees to enter into written agreements in which said covenants of confidentiality are effectively imposed upon them. Licensee will copy Licensor's Confidential Information only to the extent reasonably necessary to enable Licensee to exercise its rights under the License. In making any such copies, Licensee agrees to produce faithfully all notices respecting copyright, trade secrets, and other proprietary rights. Nothing contained herein shall prevent Licensee from disclosing in general terms the nature of its relationship with Licensor. 6. Improvements. Any improvements upon the Intellectual Property made, conceived, invented or wholly acquired by Licensor during the term of this Agreement, shall be included hereunder, and Licensee shall have the right to such improvements (limited, however, by the specific terms hereof) without payment of any additional royalty. Licensee agrees that if during the term of this Agreement it should make, conceive, invent or acquire any improvements to the Intellectual Property, or any component or portion thereof, it will grant, and hereby does grant, to Licensor a royalty-free, exclusive, paid up, perpetual license, to use such improvements, on a world-wide basis. Each party agrees to disclose promptly to the other party all improvements so made, conceived, invented or acquired during the term of this Agreement which are based, in whole or in part, on any of the Intellectual Property or Improvements. 7. Representations. Licensor represents and warrants that: (i) it has the right and authority to enter into this Agreement; (ii) to the best of its knowledge, it is the sole owner or licensee of all Intellectual Property and Improvements licensed hereunder and the use thereof will not violate any law or infringe upon or violate any rights of any person, firm or corporation; (iii) it is not a party to any other existing agreement which would prevent it from entering into or performing its obligations under the terms of this Agreement and (iv) to the best of its knowledge, the Patents have been validly issued, have not been challenged and no adverse claim has been asserted. 8. Litigation. Licensee shall have the sole responsibility at its sole cost and expense for protecting the rights granted and to be granted herein against any third party infringement. Licensee agrees promptly and diligently to seek to protect all rights granted and to be granted herein from and against any infringement by third parties. 9. Insurance. (a) During the term of this Agreement, Licensee will maintain, at its own expense, in full force and effect, with a responsible insurance carrier, reasonably acceptable to Licensor, such product liability insurance as is customary for a business of the type, nature and size of Licensee. (b) Licensee shall, from time to time upon reasonable request by the other party, promptly furnish or cause to be furnished to Licensor, a certificate evidencing the insurance required hereby. 4 10. Term and Termination. (a) Unless terminated sooner by the operation of paragraphs 10(b) or (c) hereof, this Agreement shall terminate on June 30, 2003, but shall be extended for successive one (1) year terms so long as the Fox Sports West Agreement, or a successor thereof, is in effect. (b) In the event that the Licensee materially defaults or breaches any provision of this Agreement, Licensor reserves the right to terminate this Agreement upon written notice to Licensee; provided, however, that if Licensee, within 30 days of such written notice, cures such default or breach, this Agreement shall continue in full force and effect as if such default or breach had not occurred; and provided, further, should Licensee dispute any such alleged breach of this Agreement and such dispute is either submitted to arbitration in due course pursuant to Paragraph 18 hereof or being resolved by the parties hereto, then there shall be no default hereunder during the period in which the parties are in arbitration or diligently, and in good faith, attempting to resolve such dispute; provided, that after the parties reach an agreement or an arbitrator makes its decision, Licensee shall comply therewith within 15 days thereof. (c) In the event of any adjudication of bankruptcy which is not vacated within 30 days, appointment of a receiver by a court of competent jurisdiction who is not removed within 30 days, assignment for the benefit of creditors or levy of execution directly involving Licensee, this Agreement shall thereupon forthwith terminate and no longer be of any further force and effect. (d) In the event of termination of this Agreement for any reason whatsoever: (i) Licensee shall deliver to Licensor all books, notes, drawings, writings and other documents, in the possession of Licensee or the Permitted Parties relating to the Intellectual Property and any Improvements licensed to it under Paragraph 2(a) hereof (except that in connection with any Improvements made by Licensee it may retain copies of all such items delivered to Licensor and may continue to use any such Improvements made by it), together with all copies of any Confidential Information. (ii) All rights granted by Licensor to Licensee shall forthwith revert to Licensor. (iii) Licensor (in the event this Agreement is terminated by reason of Licensee's default hereunder) shall continue to be entitled to use or exploit any exclusive royalty-free license to new developments of Licensee granted pursuant to Paragraph 6 hereof. 5 (e) In the event of termination of this Agreement, Licensee shall assign to Licensor, at the request of Licensor, all of its right, title and interest in and to any contracts or agreements relating, directly or indirectly to the Intellectual Property. 11. Notices. All notices to be given or payments made hereunder shall be in writing and sent by hand, federal express or by registered or certified mail, postage prepaid, addressed to the respective parties at the addresses set forth above. All notices shall be effective upon receipt. Copies of all notices to Licensor or Licensee shall be sent to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street, New York, New York 10022, attention: Wesley C. Fredericks, Jr., Esq. 12. New York Law. This Agreement and all matters or issues collateral thereto shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contacts made and performed entirely therein. 13. Entire Understanding. This Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained, and supersedes any and all prior agreements or understandings relating to the subject matter hereof. This Agreement may not be changed except by a writing signed by the party sought to be charged therewith. 14. No Waiver. No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default by either party, shall constitute a continuing waiver or a waiver of any other provision of this Agreement, and no such waiver by either party shall prevent such party from enforcing any and all provisions of this Agreement or from acting upon the same or any subsequent breach or default of the other party. No waiver of any provision hereunder shall be effective unless it is in writing signed by the against whom enforcement thereof is sought. 15. Separability. The provisions set forth in this Agreement shall be considered to be separable and independent of each other. In the event that any provision of this Agreement shall be determined in any jurisdiction to be unenforceable, such determination shall not be deemed to affect the enforceability of any other remaining provision and the parties agree that any court making such a determination is hereby requested and empowered to modify such provision and to substitute for such enforceable provision such limitation or provision of a maximum scope as the court then deems reasonable and judicially enforceable and the parties agree that such substitute provision shall be as enforceable in said jurisdiction as if set forth initially in this Agreement. Any such substitute provision shall be applicable only in the jurisdiction in which the original provision was determined to be unenforceable. 16. Relationship of the Parties. Nothing contained herein shall be construed to place the parties in the relationship of partners or joint venturers and neither party shall have the power to bind or obligate the other. 6 17. Survival. Unless otherwise provided, the obligations of the parties hereto shall survive the termination of the term of this Agreement. 18. Arbitration. All claims, demands, disputes, controversies, differences or misunderstandings between or among the parties hereto or any other persons bound hereby arising out of or by virtue of this Agreement, shall be submitted to and determined by arbitration in the City of New York. If the parties to a dispute arising out of this Agreement are unable to agree on an arbitrator within 10 days after any party shall have given written notice to the other that it desires to submit any issue to arbitration, then the American Arbitration Association shall be designated by any party to appoint an arbitrator and to arbitrate the matter under its rules. The award of the arbitrator shall be made in writing, shall be within the scope of this Agreement, shall not change any of its terms or conditions, shall be binding and conclusive on all parties, and shall include a finding for the payment of the costs of the arbitration proceeding (including reasonable attorneys' fees). It is further agreed that judgment of a court having jurisdiction may be entered upon the award of the arbitrator. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ACTV ENTERTAINMENT, INC. By: ------------------------- David Reese, President THE LOS ANGELES INDIVIDUALIZED TELEVISION NETWORK, INC. By: ------------------------- Christopher C. Cline, Secretary 7 EX-10.33 39 SUBLICENSE AGREEMENT SUBLICENSE AGREEMENT AGREEMENT, made as of the 1st day of January, 1998, by and between ACTV ENTERTAINMENT, INC., a New York corporation, having its corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 ("Licensor") and THE SAN FRANCISCO INDIVIDUALIZED TELEVISION NETWORK, INC., a Delaware corporation having its corporate offices at 9454 Wilshire Boulevard, Suite 1010, Los Angeles, California ("Licensee"). W I T N E S S E T H WHEREAS, Licensor is the exclusive licensee, with right to sublicense, of certain individualized television programming technologies (the "Intellectual Property"), which Intellectual Property includes the Patents listed on Exhibit A hereto (the "Patents") and proprietary technologies, programming methods, the ACTV Programming and Coding Language, and other trade secrets and know-how, all relating to the Intellectual Property described in the Patents, including applications thereof, regardless of distribution or delivery method; and WHEREAS, Licensor wishes to grant to Licensee and Licensee wishes to obtain from Licensor an exclusive sublicense in the Territory to use and exploit the Intellectual Property in the distribution of individualized television directly to home subscribers, based on the proposed agreement between SportsChannel Pacific Associates, d/b/a FOX Sports Bay Area and ACTV, Inc. (the "Fox Sports Bay Area Agreement"). NOW, THEREFORE, in consideration of one dollar ($1.00), the foregoing premises and the mutual covenants herein contained, the parties agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "ACTV Programming" shall mean programming that utilizes the Intellectual Property, including any Improvements. (b) "Improvements" shall mean any improvement, refinement, enhancement or other modification of the Intellectual Property. (c) "License" shall mean that exclusive sublicense which the Licensor hereby grants to the Licensee to use and exploit the Intellectual Property, including Improvements as set forth in Paragraph 6 hereof, subject to the terms hereof. (d) "Net Sales" shall mean subscriber and advertising revenues received by Licensee and its affiliates and sublicensees, if any, after payment to Fox Sports Bay Area of subscriber and advertising fees pursuant to the Fox Sports Bay Area Agreement (less trade discounts allowed, valid credits for claims or allowances, refunds, returns and recalls and less taxes and other governmental charges levied on or measured by sales and included in the billing price). (e) "Territory" shall mean the local footprint of FOX Sports Bay Area which includes selected counties within the State of California and as such may be modified from time-to-time. 2. Grant of Rights. (a) Subject to the terms and conditions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, Licensor hereby grants to Licensee, subject to the terms hereof, an exclusive License to use, distribute and sublicense the Intellectual Property and Improvements throughout the Territory for individualized television based on the Fox Sports Bay Area license directly to home subscribers, through the mass distribution systems of cable television, direct-broadcast satellite television, broadcast television, wireless and any future broadband distribution system located in the Territory. Licensor hereby agrees promptly to disclose to Licensee the Intellectual Property licensed hereby. (b) Licensee shall not sell, lease or distribute, and shall take all steps reasonably requested by Licensor to prohibit others from selling, leasing or distributing any television programming related to the Intellectual Property anywhere outside the Territory without the prior written consent of Licensor. (c) All products, including, without limitation, television programming, which are distributed, sold or utilized in any manner and which incorporate in any manner all or any part of the Intellectual Property contained within the License granted hereunder will bear the proper proprietary rights notice, all as specified in writing by Licensor to Licensee, as shall be sufficient, in Licensor's judgment, to protect its rights and interest in the rights granted by Licensor to Licensee pursuant hereto. Licensee further agrees to give proper notice of trademarks, patents and/or copyrights where applicable in connection with the use by Licensee of any rights hereunder, as may be specified from time-to-time by Licensor. (d) Licensee agrees that during the term of this Agreement, it will diligently and actively develop, promote, distribute and market ACTV Programming in the Territory. 2 3. Consideration. (a) In consideration for the License granted hereunder, Licensee shall pay Licensor eight (8) percent of all Net Sales by Licensee, its affiliates or sublicensees (except as otherwise agreed by Licensor in writing). (b) Royalty payments shall be made within thirty (30) days of the end of each calendar quarterly period for sales invoiced by Licensee during such calendar quarterly period. Each commission payment shall be accompanied by a report setting forth in reasonable detail the Net Sales during the calendar quarter and the calculation of royalties based thereon. Licensor shall have the right once a year and with reasonable notice to examine the books and records of Licensee. Such examination shall take place at Licensee's principal place of business during normal business hours. 4. Sublicense and Reservation of Rights. (a) Licensee is only permitted to assign or sublicense the rights hereunder granted to any third party, provided (i) such party agrees in writing to abide by the terms and conditions of this Agreement to the extent applicable to it and (ii) the sublicensee or assignee and the terms and conditions of the assignment or sublicense are approved in writing by Licensor. (b) All rights not specifically granted to Licensee hereunder are reserved to Licensor. 5. Confidentiality. Licensee shall maintain in strict confidence and shall not at any time whether before or after the termination of this agreement (a) utilize for any purpose other than as permitted under this License, or cause, enable, assist or permit anyone else to utilize, any of the Intellectual Property or Improvements; (b) disclose to anyone any such Intellectual Property, Improvements and/or related information (the "Confidential Information") which is not generally available to the public unless, (i) through no act of Licensee contrary to the obligations imposed hereby, such Confidential Information becomes known to the public prior to the date of Licensee's disclosure, (ii) such Confidential Information is approved for public release by Licensor, (iii) such Confidential Information is rightfully received by Licensee from a third party without restrictions and without breach of Licensee's obligations hereunder, (iv) such Confidential Information is independently developed by Licensee without breach of this Agreement, (v) such Confidential Information is required to be disclosed by judicial or governmental proceeding subject to a protective order or (vi) such disclosure is necessary or appropriate to the exploitation of the License granted hereby and only then after such person or entity to whom disclosure is to be made executes a confidentiality agreement acceptable to Licensor. Notwithstanding the foregoing, Licensee may disclose such Confidential Information to its employees who need to know such information in order for Licensee to use and exploit the Intellectual Property pursuant to the terms of this Agreement if it has taken reasonable steps to impose the aforesaid covenants of confidentiality on said employees and to ensure that said employees will not violate said covenants, including, but not 3 limited to, causing said employees to enter into written agreements in which said covenants of confidentiality are effectively imposed upon them. Licensee will copy Licensor's Confidential Information only to the extent reasonably necessary to enable Licensee to exercise its rights under the License. In making any such copies, Licensee agrees to produce faithfully all notices respecting copyright, trade secrets, and other proprietary rights. Nothing contained herein shall prevent Licensee from disclosing in general terms the nature of its relationship with Licensor. 6. Improvements. Any improvements upon the Intellectual Property made, conceived, invented or wholly acquired by Licensor during the term of this Agreement, shall be included hereunder, and Licensee shall have the right to such improvements (limited, however, by the specific terms hereof) without payment of any additional royalty. Licensee agrees that if during the term of this Agreement it should make, conceive, invent or acquire any improvements to the Intellectual Property, or any component or portion thereof, it will grant, and hereby does grant, to Licensor a royalty-free, exclusive, paid up, perpetual license, to use such improvements, on a world-wide basis. Each party agrees to disclose promptly to the other party all improvements so made, conceived, invented or acquired during the term of this Agreement which are based, in whole or in part, on any of the Intellectual Property or Improvements. 7. Representations. Licensor represents and warrants that: (i) it has the right and authority to enter into this Agreement; (ii) to the best of its knowledge, it is the sole owner or licensee of all Intellectual Property and Improvements licensed hereunder and the use thereof will not violate any law or infringe upon or violate any rights of any person, firm or corporation; (iii) it is not a party to any other existing agreement which would prevent it from entering into or performing its obligations under the terms of this Agreement and (iv) to the best of its knowledge, the Patents have been validly issued, have not been challenged and no adverse claim has been asserted. 8. Litigation. Licensee shall have the sole responsibility at its sole cost and expense for protecting the rights granted and to be granted herein against any third party infringement. Licensee agrees promptly and diligently to seek to protect all rights granted and to be granted herein from and against any infringement by third parties. 9. Insurance. (a) During the term of this Agreement, Licensee will maintain, at its own expense, in full force and effect, with a responsible insurance carrier, reasonably acceptable to Licensor, such product liability insurance as is customary for a business of the type, nature and size of Licensee. (b) Licensee shall, from time to time upon reasonable request by the other party, promptly furnish or cause to be furnished to Licensor, a certificate evidencing the insurance required hereby. 4 10. Term and Termination. (a) Unless terminated sooner by the operation of paragraphs 10(b) or (c) hereof, this Agreement shall terminate on September 30, 2003, but shall be extended for successive one (1) year terms so long as the Fox Sports Bay Area Agreement, or a successor thereof, is in effect. (b) In the event that the Licensee materially defaults or breaches any provision of this Agreement, Licensor reserves the right to terminate this Agreement upon written notice to Licensee; provided, however, that if Licensee, within 30 days of such written notice, cures such default or breach, this Agreement shall continue in full force and effect as if such default or breach had not occurred; and provided, further, should Licensee dispute any such alleged breach of this Agreement and such dispute is either submitted to arbitration in due course pursuant to Paragraph 18 hereof or being resolved by the parties hereto, then there shall be no default hereunder during the period in which the parties are in arbitration or diligently, and in good faith, attempting to resolve such dispute; provided, that after the parties reach an agreement or an arbitrator makes its decision, Licensee shall comply therewith within 15 days thereof. (c) In the event of any adjudication of bankruptcy which is not vacated within 30 days, appointment of a receiver by a court of competent jurisdiction who is not removed within 30 days, assignment for the benefit of creditors or levy of execution directly involving Licensee, this Agreement shall thereupon forthwith terminate and no longer be of any further force and effect. (d) In the event of termination of this Agreement for any reason whatsoever: (i) Licensee shall deliver to Licensor all books, notes, drawings, writings and other documents, in the possession of Licensee or the Permitted Parties relating to the Intellectual Property and any Improvements licensed to it under Paragraph 2(a) hereof (except that in connection with any Improvements made by Licensee it may retain copies of all such items delivered to Licensor and may continue to use any such Improvements made by it), together with all copies of any Confidential Information. (ii) All rights granted by Licensor to Licensee shall forthwith revert to Licensor. (iii) Licensor (in the event this Agreement is terminated by reason of Licensee's default hereunder) shall continue to be entitled to use or exploit any exclusive royalty-free license to new developments of Licensee granted pursuant to Paragraph 6 hereof. 5 (e) In the event of termination of this Agreement, Licensee shall assign to Licensor, at the request of Licensor, all of its right, title and interest in and to any contracts or agreements relating, directly or indirectly to the Intellectual Property. 11. Notices. All notices to be given or payments made hereunder shall be in writing and sent by hand, federal express or by registered or certified mail, postage prepaid, addressed to the respective parties at the addresses set forth above. All notices shall be effective upon receipt. Copies of all notices to Licensor or Licensee shall be sent to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street, New York, New York 10022, attention: Wesley C. Fredericks, Jr., Esq. 12. New York Law. This Agreement and all matters or issues collateral thereto shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contacts made and performed entirely therein. 13. Entire Understanding. This Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained, and supersedes any and all prior agreements or understandings relating to the subject matter hereof. This Agreement may not be changed except by a writing signed by the party sought to be charged therewith. 14. No Waiver. No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default by either party, shall constitute a continuing waiver or a waiver of any other provision of this Agreement, and no such waiver by either party shall prevent such party from enforcing any and all provisions of this Agreement or from acting upon the same or any subsequent breach or default of the other party. No waiver of any provision hereunder shall be effective unless it is in writing signed by the against whom enforcement thereof is sought. 15. Separability. The provisions set forth in this Agreement shall be considered to be separable and independent of each other. In the event that any provision of this Agreement shall be determined in any jurisdiction to be unenforceable, such determination shall not be deemed to affect the enforceability of any other remaining provision and the parties agree that any court making such a determination is hereby requested and empowered to modify such provision and to substitute for such enforceable provision such limitation or provision of a maximum scope as the court then deems reasonable and judicially enforceable and the parties agree that such substitute provision shall be as enforceable in said jurisdiction as if set forth initially in this Agreement. Any such substitute provision shall be applicable only in the jurisdiction in which the original provision was determined to be unenforceable. 16. Relationship of the Parties. Nothing contained herein shall be construed to place the parties in the relationship of partners or joint venturers and neither party shall have 6 the power to bind or obligate the other. 17. Survival. Unless otherwise provided, the obligations of the parties hereto shall survive the termination of the term of this Agreement. 18. Arbitration. All claims, demands, disputes, controversies, differences or misunderstandings between or among the parties hereto or any other persons bound hereby arising out of or by virtue of this Agreement, shall be submitted to and determined by arbitration in the City of New York. If the parties to a dispute arising out of this Agreement are unable to agree on an arbitrator within 10 days after any party shall have given written notice to the other that it desires to submit any issue to arbitration, then the American Arbitration Association shall be designated by any party to appoint an arbitrator and to arbitrate the matter under its rules. The award of the arbitrator shall be made in writing, shall be within the scope of this Agreement, shall not change any of its terms or conditions, shall be binding and conclusive on all parties, and shall include a finding for the payment of the costs of the arbitration proceeding (including reasonable attorneys' fees). It is further agreed that judgment of a court having jurisdiction may be entered upon the award of the arbitrator. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ACTV ENTERTAINMENT, INC. By: -------------------------- David Reese, President THE SAN FRANCISCO INDIVIDUALIZED TELEVISION NETWORK, INC. By: -------------------------- Christopher C. Cline, Secretary EX-10.34 40 SUBLICENSE AGREEMENT SUBLICENSE AGREEMENT AGREEMENT, made as of the 14th day of March, 1997, by and between ACTV ENTERTAINMENT, INC., a New York corporation, having its corporate offices at 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 ("Licensor") and THE TEXAS INDIVIDUALIZED TELEVISION NETWORK, INC., a Delaware corporation having its corporate offices at 9454 Wilshire Boulevard, Suite 1010, Los Angeles, California ("Licensee"). W I T N E S S E T H WHEREAS, Licensor is the exclusive licensee, with right to sublicense, of certain individualized television programming technologies (the "Intellectual Property"), which Intellectual Property includes the Patents listed on Exhibit A hereto (the "Patents") and proprietary technologies, programming methods, the ACTV Programming and Coding Language, and other trade secrets and know-how, all relating to the Intellectual Property described in the Patents, including applications thereof, regardless of distribution or delivery method; and WHEREAS, Licensor wishes to grant to Licensee and Licensee wishes to obtain from Licensor an exclusive sublicense in the Territory to use and exploit the Intellectual Property in the distribution of individualized television directly to home subscribers, based on the enhancement license agreement dated February 28, 1997 between ARC Holding, L.P. (FOX Sports Southwest) and ACTV, Inc. (the "Fox Sports Southwest Agreement"). NOW, THEREFORE, in consideration of one dollar ($1.00), the foregoing premises and the mutual covenants herein contained, the parties agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "ACTV Programming" shall mean programming that utilizes the Intellectual Property, including any Improvements. (b) "Improvements" shall mean any improvement, refinement, enhancement or other modification of the Intellectual Property. (c) "License" shall mean that exclusive sublicense which the Licensor hereby grants to the Licensee to use and exploit the Intellectual Property, including Improvements as set forth in Paragraph 6 hereof, subject to the terms hereof. (d) "Net Sales" shall mean subscriber and advertising revenues received by Licensee and its affiliates and sublicensees, if any, after payment to Fox Sports Southwest of subscriber and advertising fees pursuant to the Fox Sports Southwest Agreement (less trade discounts allowed, valid credits for claims or allowances, refunds, returns and recalls and less taxes and other governmental charges levied on or measured by sales and included in the billing price). (e) "Territory" shall mean the local footprint of FOX Sports Southwest, which is the States of Texas, Arkansas, Louisiana, and Oklahoma, and the following counties in the State of New Mexico: Lea, Eddy, Roosevelt, Curry, Chavez, DeBaca, Dona Ana, Quay and Union, as such may be modified from time-to-time. 2. Grant of Rights. (a) Subject to the terms and conditions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, Licensor hereby grants to Licensee, subject to the terms hereof, an exclusive License to use, distribute and sublicense the Intellectual Property and Improvements throughout the Territory for individualized television based on the FOX Sports Southwest license directly to home subscribers, through the mass distribution systems of cable television, direct-broadcast satellite television, broadcast television, wireless and any future broadband distribution system located in the Territory. Licensor hereby agrees promptly to disclose to Licensee the Intellectual Property licensed hereby. (b) Licensee shall not sell, lease or distribute, and shall take all steps reasonably requested by Licensor to prohibit others from selling, leasing or distributing any television programming related to the Intellectual Property anywhere outside the Territory without the prior written consent of Licensor. (c) All products, including, without limitation, television programming, which are distributed, sold or utilized in any manner and which incorporate in any manner all or any part of the Intellectual Property contained within the License granted hereunder will bear the proper proprietary rights notice, all as specified in writing by Licensor to Licensee, as shall be sufficient, in Licensor's judgment, to protect its rights and interest in the rights granted by Licensor to Licensee pursuant hereto. Licensee further agrees to give proper notice of trademarks, patents and/or copyrights where applicable in connection with the use by Licensee of any rights hereunder, as may be specified from time-to-time by Licensor. (d) Licensee agrees that during the term of this Agreement, it will diligently and actively develop, promote, distribute and market ACTV Programming in the Territory. 2 3. Consideration. (a) In consideration for the License granted hereunder, Licensee shall pay Licensor eight (8) percent of all Net Sales by Licensee, its affiliates or sublicensees (except as otherwise agreed by Licensor in writing). (b) Royalty payments shall be made within thirty (30) days of the end of each calendar quarterly period for sales invoiced by Licensee during such calendar quarterly period. Each commission payment shall be accompanied by a report setting forth in reasonable detail the Net Sales during the calendar quarter and the calculation of royalties based thereon. Licensor shall have the right once a year and with reasonable notice to examine the books and records of Licensee. Such examination shall take place at Licensee's principal place of business during normal business hours. 4. Sublicense and Reservation of Rights. (a) Licensee is only permitted to assign or sublicense the rights hereunder granted to any third party, provided (i) such party agrees in writing to abide by the terms and conditions of this Agreement to the extent applicable to it and (ii) the sublicensee or assignee and the terms and conditions of the assignment or sublicense are approved in writing by Licensor. (b) All rights not specifically granted to Licensee hereunder are reserved to Licensor. 5. Confidentiality. Licensee shall maintain in strict confidence and shall not at any time whether before or after the termination of this agreement (a) utilize for any purpose other than as permitted under this License, or cause, enable, assist or permit anyone else to utilize, any of the Intellectual Property or Improvements; (b) disclose to anyone any such Intellectual Property, Improvements and/or related information (the "Confidential Information") which is not generally available to the public unless, (i) through no act of Licensee contrary to the obligations imposed hereby, such Confidential Information becomes known to the public prior to the date of Licensee's disclosure, (ii) such Confidential Information is approved for public release by Licensor, (iii) such Confidential Information is rightfully received by Licensee from a third party without restrictions and without breach of Licensee's obligations hereunder, (iv) such Confidential Information is independently developed by Licensee without breach of this Agreement, (v) such Confidential Information is required to be disclosed by judicial or governmental proceeding subject to a protective order or (vi) such disclosure is necessary or appropriate to the exploitation of the License granted hereby and only then after such person or entity to whom disclosure is to be made executes a confidentiality agreement acceptable to Licensor. Notwithstanding the foregoing, Licensee may disclose such Confidential Information to its employees who need to know such information in order for Licensee to use and exploit the Intellectual Property pursuant to the terms of this Agreement if it has taken reasonable steps to impose the aforesaid covenants of confidentiality on said employees and to ensure that said employees will not violate said covenants, including, but not 3 limited to, causing said employees to enter into written agreements in which said covenants of confidentiality are effectively imposed upon them. Licensee will copy Licensor's Confidential Information only to the extent reasonably necessary to enable Licensee to exercise its rights under the License. In making any such copies, Licensee agrees to produce faithfully all notices respecting copyright, trade secrets, and other proprietary rights. Nothing contained herein shall prevent Licensee from disclosing in general terms the nature of its relationship with Licensor. 6. Improvements. Any improvements upon the Intellectual Property made, conceived, invented or wholly acquired by Licensor during the term of this Agreement, shall be included hereunder, and Licensee shall have the right to such improvements (limited, however, by the specific terms hereof) without payment of any additional royalty. Licensee agrees that if during the term of this Agreement it should make, conceive, invent or acquire any improvements to the Intellectual Property, or any component or portion thereof, it will grant, and hereby does grant, to Licensor a royalty-free, exclusive, paid up, perpetual license, to use such improvements, on a world-wide basis. Each party agrees to disclose promptly to the other party all improvements so made, conceived, invented or acquired during the term of this Agreement which are based, in whole or in part, on any of the Intellectual Property or Improvements. 7. Representations. Licensor represents and warrants that: (i) it has the right and authority to enter into this Agreement; (ii) to the best of its knowledge, it is the sole owner or licensee of all Intellectual Property and Improvements licensed hereunder and the use thereof will not violate any law or infringe upon or violate any rights of any person, firm or corporation; (iii) it is not a party to any other existing agreement which would prevent it from entering into or performing its obligations under the terms of this Agreement and (iv) to the best of its knowledge, the Patents have been validly issued, have not been challenged and no adverse claim has been asserted. 8. Litigation. Licensee shall have the sole responsibility at its sole cost and expense for protecting the rights granted and to be granted herein against any third party infringement. Licensee agrees promptly and diligently to seek to protect all rights granted and to be granted herein from and against any infringement by third parties. 9. Insurance. (a) During the term of this Agreement, Licensee will maintain, at its own expense, in full force and effect, with a responsible insurance carrier, reasonably acceptable to Licensor, such product liability insurance as is customary for a business of the type, nature and size of Licensee. (b) Licensee shall, from time to time upon reasonable request by the other party, promptly furnish or cause to be furnished to Licensor, a certificate evidencing the insurance required hereby. 4 10. Term and Termination. (a) Unless terminated sooner by the operation of paragraphs 10(b) or (c) hereof, this Agreement shall terminate on June 30, 2003, but shall be extended for successive one (1) year terms so long as the Fox Sports Southwest Agreement, or a successor thereof, is in effect. (b) In the event that the Licensee materially defaults or breaches any provision of this Agreement, Licensor reserves the right to terminate this Agreement upon written notice to Licensee; provided, however, that if Licensee, within 30 days of such written notice, cures such default or breach, this Agreement shall continue in full force and effect as if such default or breach had not occurred; and provided, further, should Licensee dispute any such alleged breach of this Agreement and such dispute is either submitted to arbitration in due course pursuant to Paragraph 18 hereof or being resolved by the parties hereto, then there shall be no default hereunder during the period in which the parties are in arbitration or diligently, and in good faith, attempting to resolve such dispute; provided, that after the parties reach an agreement or an arbitrator makes its decision, Licensee shall comply therewith within 15 days thereof. (c) In the event of any adjudication of bankruptcy which is not vacated within 30 days, appointment of a receiver by a court of competent jurisdiction who is not removed within 30 days, assignment for the benefit of creditors or levy of execution directly involving Licensee, this Agreement shall thereupon forthwith terminate and no longer be of any further force and effect. (d) In the event of termination of this Agreement for any reason whatsoever: (i) Licensee shall deliver to Licensor all books, notes, drawings, writings and other documents, in the possession of Licensee or the Permitted Parties relating to the Intellectual Property and any Improvements licensed to it under Paragraph 2(a) hereof (except that in connection with any Improvements made by Licensee it may retain copies of all such items delivered to Licensor and may continue to use any such Improvements made by it), together with all copies of any Confidential Information. (ii) All rights granted by Licensor to Licensee shall forthwith revert to Licensor. (iii) Licensor (in the event this Agreement is terminated by reason of Licensee's default hereunder) shall continue to be entitled to use or exploit any exclusive royalty-free license to new developments of Licensee granted pursuant to Paragraph 6 hereof. 5 (e) In the event of termination of this Agreement, Licensee shall assign to Licensor, at the request of Licensor, all of its right, title and interest in and to any contracts or agreements relating, directly or indirectly to the Intellectual Property. 11. Notices. All notices to be given or payments made hereunder shall be in writing and sent by hand, federal express or by registered or certified mail, postage prepaid, addressed to the respective parties at the addresses set forth above. All notices shall be effective upon receipt. Copies of all notices to Licensor or Licensee shall be sent to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East 52nd Street, New York, New York 10022, attention: Wesley C. Fredericks, Jr., Esq. 12. New York Law. This Agreement and all matters or issues collateral thereto shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contacts made and performed entirely therein. 13. Entire Understanding. This Agreement contains the entire understanding of the parties hereto relating to the subject matter herein contained, and supersedes any and all prior agreements or understandings relating to the subject matter hereof. This Agreement may not be changed except by a writing signed by the party sought to be charged therewith. 14. No Waiver. No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default by either party, shall constitute a continuing waiver or a waiver of any other provision of this Agreement, and no such waiver by either party shall prevent such party from enforcing any and all provisions of this Agreement or from acting upon the same or any subsequent breach or default of the other party. No waiver of any provision hereunder shall be effective unless it is in writing signed by the against whom enforcement thereof is sought. 15. Separability. The provisions set forth in this Agreement shall be considered to be separable and independent of each other. In the event that any provision of this Agreement shall be determined in any jurisdiction to be unenforceable, such determination shall not be deemed to affect the enforceability of any other remaining provision and the parties agree that any court making such a determination is hereby requested and empowered to modify such provision and to substitute for such enforceable provision such limitation or provision of a maximum scope as the court then deems reasonable and judicially enforceable and the parties agree that such substitute provision shall be as enforceable in said jurisdiction as if set forth initially in this Agreement. Any such substitute provision shall be applicable only in the jurisdiction in which the original provision was determined to be unenforceable. 16. Relationship of the Parties. Nothing contained herein shall be construed to place the parties in the relationship of partners or joint venturers and neither party shall have the power to bind or obligate the other. 6 17. Survival. Unless otherwise provided, the obligations of the parties hereto shall survive the termination of the term of this Agreement. 18. Arbitration. All claims, demands, disputes, controversies, differences or misunderstandings between or among the parties hereto or any other persons bound hereby arising out of or by virtue of this Agreement, shall be submitted to and determined by arbitration in the City of New York. If the parties to a dispute arising out of this Agreement are unable to agree on an arbitrator within 10 days after any party shall have given written notice to the other that it desires to submit any issue to arbitration, then the American Arbitration Association shall be designated by any party to appoint an arbitrator and to arbitrate the matter under its rules. The award of the arbitrator shall be made in writing, shall be within the scope of this Agreement, shall not change any of its terms or conditions, shall be binding and conclusive on all parties, and shall include a finding for the payment of the costs of the arbitration proceeding (including reasonable attorneys' fees). It is further agreed that judgment of a court having jurisdiction may be entered upon the award of the arbitrator. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ACTV ENTERTAINMENT, INC. By: ------------------------ David Reese, President THE TEXAS INDIVIDUALIZED TELEVISION NETWORK, INC. By: ------------------------ Christopher C. Cline, Secretary EX-10.35 41 SERVICES AGREEMENT SERVICES AGREEMENT AGREEMENT made as of the 14th day of March, 1997, by and among ACTV, INC., a Delaware corporation and ACTV ENTERTAINMENT, INC., a New York corporation (collectively, "ACTV"), and THE LOS ANGELES INDIVIDUALIZED TELEVISION NETWORK, INC., a Delaware corporation (the "Company"). Unless the context otherwise requires, the term Company shall be deemed to include the Company's subsidiaries. WITNESSETH: WHEREAS, the Company desires to obtain certain services from ACTV and ACTV is willing to furnish or make such services available to the Company; and WHEREAS, the Company also desires to obtain certain services from ACTV's personnel and ACTV is willing to have such personnel make such services available to the Company; NOW, THEREFORE, in consideration of one dollar ($1.00) and other good and valuable consideration receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Corporate Services. (a) Commencing as of the date hereof (the "Effective Date") and at the request of the Company, ACTV will provide or otherwise make available to the Company certain general corporate services, including but not limited to certain administrative staff functions, electronic data processing services, and the administration of the participation of the Company and the Company's employees in ACTV's insurance programs, such as Group Medical and Life Insurance, and Liability and Property and Casualty Insurance. (b) For performing the aforesaid services, ACTV will charge the Company for the Company's pro rata share of the aggregate costs actually incurred in connection with such services by ACTV. Such charge shall be determined on a quarterly basis commencing with the first full fiscal quarter ending after the Effective Date and shall be payable within 30 days from the date of billing. It is the intent of the parties that the Company shall reimburse ACTV for the costs and expenses (including overhead costs) reasonably incurred by ACTV in furnishing the aforesaid services to the Company. The Company may request a review of the amount of such charge by giving to ACTV written notice of its desire for a review. 2. Overhead Services. It is understood that certain personnel of the Company will be working in office locations maintained by ACTV and, in connection therewith, will be using space and office furniture and equipment owned or leased by ACTV and will be furnished telephone, word processing, receptionist, filing and other related services by ACTV. In order to reimburse ACTV for the foregoing, the Company will pay to ACTV for each month in which it is using ACTV's office facilities a charge equal to the Company's pro rata share of the aggregate costs actually incurred by ACTV in connection with the maintenance and operation of such facilities and the provision of such services (including the costs of any occupancy or similar taxes). Such charge shall be payable within 30 days from the date of billing. It is the intent hereof that the Company shall reimburse ACTV for the cost, including indirect overhead costs (or reasonable rental value) of office space and equipment so utilized and telephone and other services so provided. The Company may request a review of the amount of the charge hereunder (or discontinuance of same if facilities and services of ACTV are no longer being utilized) by giving ACTV written notice of its desire for review (or discontinuance). 2 3. Shared Personnel. It is understood that certain of the senior management of ACTV may provide services to the Company from time-to-time. In order to reimburse ACTV for the foregoing, the Company will pay to ACTV for each month in which it is using such senior management, a charge equal to the Company's pro rata share of the aggregate costs actually incurred by ACTV in connection therewith and the provision of such services. Such charge shall be payable within 30 days from the date of billing. The Company may request a review of the amount of the charge hereunder (or discontinuance of same if senior management services of ACTV are no longer being utilized) by giving ACTV written notice of its desire for review (or discontinuance). 4. Other Transactions. Any other transactions or arrangements which ACTV may enter into with the Company will be on terms at least as favorable to the Company as those that could have been negotiated with unrelated parties for comparable services or products. 5. Miscellaneous. (a) Nothing contained herein shall be construed to relieve the directors or officers of the Company from the performance of their respective duties or to limit the exercise of their powers in accordance with the certificate of incorporation and by-laws of the Company and any applicable legal provisions. It is understood and agreed that the activities of ACTV hereunder shall at all times be subject to the control and direction of the Company's Board of Directors and officers. (b) Neither ACTV, its affiliates or subsidiary companies nor any of their respective officers, directors or employees shall be liable to the Company solely based upon services provided to the Company or its subsidiaries by third parties pursuant to this Agreement. 3 The provisions of this Agreement are for the sole benefit of ACTV and the Company and shall not, except to the extent otherwise expressly stated herein, inure to the benefit of any third party. (c) The term of this Agreement shall be for the period commencing on the Effective Date and shall continue from year to year thereafter, subject to the right of either party to terminate this Agreement (or any of the services being provided hereunder) by giving to the other party at least six months' prior written notice of termination. (d) Any dispute between the parties as to the appropriateness of any charges made hereunder shall be settled by arbitration held in the City of New York, New York under the rules of the American Arbitration Association. (e) This Agreement shall not be assignable except with prior written consent of the parties hereto. (f) This Agreement shall be governed by and construed under the laws of New York applicable to contracts made and to be performed therein. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. ACTV, INC. By: ---------------------------------- William C. Samuels Chairman, Chief Executive Officer ACTV ENTERTAINMENT, INC. By: ---------------------------------- David Reese, President THE LOS ANGELES INDIVIDUALIZED TELEVISION NETWORK, INC. By: ---------------------------------- Christopher C. Cline, Secretary 5 EX-10.36 42 SERVICES AGREEMENT SERVICES AGREEMENT AGREEMENT made as of the 1st day of January, 1998, by and among ACTV, INC., a Delaware corporation and ACTV ENTERTAINMENT, INC., a New York corporation (collectively, "ACTV"), and THE SAN FRANCISCO INDIVIDUALIZED NETWORK, INC., a Delaware corporation (the "Company"). Unless the context otherwise requires, the term Company shall be deemed to include the Company's subsidiaries. WITNESSETH: WHEREAS, the Company desires to obtain certain services from ACTV and ACTV is willing to furnish or make such services available to the Company; and WHEREAS, the Company also desires to obtain certain services from ACTV's personnel and ACTV is willing to have such personnel make such services available to the Company; NOW, THEREFORE, in consideration of one dollar ($1.00) and other good and valuable consideration receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Corporate Services. (a) Commencing as of the date hereof (the "Effective Date") and at the request of the Company, ACTV will provide or otherwise make available to the Company certain general corporate services, including but not limited to certain administrative staff functions, electronic data processing services, and the administration of the participation of the Company and the Company's employees in ACTV's insurance programs, such as Group Medical and Life Insurance, and Liability and Property and Casualty Insurance. (b) For performing the aforesaid services, ACTV will charge the Company for the Company's pro rata share of the aggregate costs actually incurred in connection with such services by ACTV. Such charge shall be determined on a quarterly basis commencing with the first full fiscal quarter ending after the Effective Date and shall be payable within 30 days from the date of billing. It is the intent of the parties that the Company shall reimburse ACTV for the costs and expenses (including overhead costs) reasonably incurred by ACTV in furnishing the aforesaid services to the Company. The Company may request a review of the amount of such charge by giving to ACTV written notice of its desire for a review. 2. Overhead Services. It is understood that certain personnel of the Company will be working in office locations maintained by ACTV and, in connection therewith, will be using space and office furniture and equipment owned or leased by ACTV and will be furnished telephone, word processing, receptionist, filing and other related services by ACTV. In order to reimburse ACTV for the foregoing, the Company will pay to ACTV for each month in which it is using ACTV's office facilities a charge equal to the Company's pro rata share of the aggregate costs actually incurred by ACTV in connection with the maintenance and operation of such facilities and the provision of such services (including the costs of any occupancy or similar taxes). Such charge shall be payable within 30 days from the date of billing. It is the intent hereof that the Company shall reimburse ACTV for the cost, including indirect overhead costs (or reasonable rental value) of office space and equipment so utilized and telephone and other services so provided. The Company may request a review of the amount of the charge hereunder (or discontinuance of same if facilities and services of ACTV are no longer being utilized) by giving ACTV written notice of its desire for review (or discontinuance). 2 3. Shared Personnel. It is understood that certain of the senior management of ACTV may provide services to the Company from time-to-time. In order to reimburse ACTV for the foregoing, the Company will pay to ACTV for each month in which it is using such senior management, a charge equal to the Company's pro rata share of the aggregate costs actually incurred by ACTV in connection therewith and the provision of such services. Such charge shall be payable within 30 days from the date of billing. The Company may request a review of the amount of the charge hereunder (or discontinuance of same if senior management services of ACTV are no longer being utilized) by giving ACTV written notice of its desire for review (or discontinuance). 4. Other Transactions. Any other transactions or arrangements which ACTV may enter into with the Company will be on terms at least as favorable to the Company as those that could have been negotiated with unrelated parties for comparable services or products. 5. Miscellaneous. (a) Nothing contained herein shall be construed to relieve the directors or officers of the Company from the performance of their respective duties or to limit the exercise of their powers in accordance with the certificate of incorporation and by-laws of the Company and any applicable legal provisions. It is understood and agreed that the activities of ACTV hereunder shall at all times be subject to the control and direction of the Company's Board of Directors and officers. (b) Neither ACTV, its affiliates or subsidiary companies nor any of their respective officers, directors or employees shall be liable to the Company solely based upon services provided to the Company or its subsidiaries by third parties pursuant to this Agreement. 3 The provisions of this Agreement are for the sole benefit of ACTV and the Company and shall not, except to the extent otherwise expressly stated herein, inure to the benefit of any third party. (c) The term of this Agreement shall be for the period commencing on the Effective Date and shall continue from year to year thereafter, subject to the right of either party to terminate this Agreement (or any of the services being provided hereunder) by giving to the other party at least six months' prior written notice of termination. (d) Any dispute between the parties as to the appropriateness of any charges made hereunder shall be settled by arbitration held in the City of New York, New York under the rules of the American Arbitration Association. (e) This Agreement shall not be assignable except with prior written consent of the parties hereto. (f) This Agreement shall be governed by and construed under the laws of New York applicable to contracts made and to be performed therein. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. ACTV, INC. By: ---------------------------------- William C. Samuels Chairman, Chief Executive Officer ACTV ENTERTAINMENT, INC. By: ---------------------------------- David Reese, President THE SAN FRANCISCO INDIVIDUALIZED TELEVISION NETWORK, INC. By: ---------------------------------- Christopher C. Cline, Secretary 5 EX-10.37 43 SERVICES AGREEMENT SERVICES AGREEMENT AGREEMENT made as of the 14th day of March, 1997, by and among ACTV, INC., a Delaware corporation and ACTV ENTERTAINMENT, INC., a New York corporation (collectively, "ACTV"), and THE TEXAS INDIVIDUALIZED TELEVISION NETWORK, INC., a Delaware corporation (the "Company"). Unless the context otherwise requires, the term Company shall be deemed to include the Company's subsidiaries. WITNESSETH: WHEREAS, the Company desires to obtain certain services from ACTV and ACTV is willing to furnish or make such services available to the Company; and WHEREAS, the Company also desires to obtain certain services from ACTV's personnel and ACTV is willing to have such personnel make such services available to the Company; NOW, THEREFORE, in consideration of one dollar ($1.00) and other good and valuable consideration receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Corporate Services. (a) Commencing as of the date hereof (the "Effective Date") and at the request of the Company, ACTV will provide or otherwise make available to the Company certain general corporate services, including but not limited to certain administrative staff functions, electronic data processing services, and the administration of the participation of the Company and the Company's employees in ACTV's insurance programs, such as Group Medical and Life Insurance, and Liability and Property and Casualty Insurance. (b) For performing the aforesaid services, ACTV will charge the Company for the Company's pro rata share of the aggregate costs actually incurred in connection with such services by ACTV. Such charge shall be determined on a quarterly basis commencing with the first full fiscal quarter ending after the Effective Date and shall be payable within 30 days from the date of billing. It is the intent of the parties that the Company shall reimburse ACTV for the costs and expenses (including overhead costs) reasonably incurred by ACTV in furnishing the aforesaid services to the Company. The Company may request a review of the amount of such charge by giving to ACTV written notice of its desire for a review. 2. Overhead Services. It is understood that certain personnel of the Company will be working in office locations maintained by ACTV and, in connection therewith, will be using space and office furniture and equipment owned or leased by ACTV and will be furnished telephone, word processing, receptionist, filing and other related services by ACTV. In order to reimburse ACTV for the foregoing, the Company will pay to ACTV for each month in which it is using ACTV's office facilities a charge equal to the Company's pro rata share of the aggregate costs actually incurred by ACTV in connection with the maintenance and operation of such facilities and the provision of such services (including the costs of any occupancy or similar taxes). Such charge shall be payable within 30 days from the date of billing. It is the intent hereof that the Company shall reimburse ACTV for the cost, including indirect overhead costs (or reasonable rental value) of office space and equipment so utilized and telephone and other services so provided. The Company may request a review of the amount of the charge hereunder (or discontinuance of same if facilities and services of ACTV are no longer being utilized) by giving ACTV written notice of its desire for 2 review (or discontinuance). 3. Shared Personnel. It is understood that certain of the senior management of ACTV may provide services to the Company from time-to-time. In order to reimburse ACTV for the foregoing, the Company will pay to ACTV for each month in which it is using such senior management, a charge equal to the Company's pro rata share of the aggregate costs actually incurred by ACTV in connection therewith and the provision of such services. Such charge shall be payable within 30 days from the date of billing. The Company may request a review of the amount of the charge hereunder (or discontinuance of same if senior management services of ACTV are no longer being utilized) by giving ACTV written notice of its desire for review (or discontinuance). 4. Other Transactions. Any other transactions or arrangements which ACTV may enter into with the Company will be on terms at least as favorable to the Company as those that could have been negotiated with unrelated parties for comparable services or products. 5. Miscellaneous. (a) Nothing contained herein shall be construed to relieve the directors or officers of the Company from the performance of their respective duties or to limit the exercise of their powers in accordance with the certificate of incorporation and by-laws of the Company and any applicable legal provisions. It is understood and agreed that the activities of ACTV hereunder shall at all times be subject to the control and direction of the Company's Board of Directors and officers. (b) Neither ACTV, its affiliates or subsidiary companies nor any of their respective officers, directors or employees shall be liable to the Company solely based upon services provided to the Company or its subsidiaries by third parties pursuant to this Agreement. 3 The provisions of this Agreement are for the sole benefit of ACTV and the Company and shall not, except to the extent otherwise expressly stated herein, inure to the benefit of any third party. (c) The term of this Agreement shall be for the period commencing on the Effective Date and shall continue from year to year thereafter, subject to the right of either party to terminate this Agreement (or any of the services being provided hereunder) by giving to the other party at least six months' prior written notice of termination. (d) Any dispute between the parties as to the appropriateness of any charges made hereunder shall be settled by arbitration held in the City of New York, New York under the rules of the American Arbitration Association. (e) This Agreement shall not be assignable except with prior written consent of the parties hereto. (f) This Agreement shall be governed by and construed under the laws of New York applicable to contracts made and to be performed therein. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. ACTV, INC. By: -------------------------------------- William C. Samuels Chairman, Chief Executive Officer ACTV ENTERTAINMENT, INC. By: -------------------------------------- David Reese, President THE TEXAS INDIVIDUALIZED TELEVISION NETWORK, INC. By: -------------------------------------- Christopher C. Cline, Secretary 5 EX-21 44 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 Subsidiaries of the Registrant 3-D Virtual, Inc. ACTV Net, Inc. ACTV Entertainment, Inc. The Florida Individualized Television Network, Inc. The Northwest Individualized Television Network, Inc. The Los Angeles Individualized Television Network, Inc. The New York Individualized Television Network, Inc. The San Francisco Individualized Television Network, Inc. The Texas Individualized Television Network, Inc. The Rocky Mountain Individualized Network, Inc. ACTV Holdings, Inc. EX-27 45 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 12-MOS DEC-31-1997 DEC-31-1997 554,077 0 346,232 43,188 237,757 1,403,531 3,433,117 836,332 7,901,918 2,485,628 0 1,461,461 0 8,620 3,946,206 7,901,918 1,650,955 1,650,955 471,956 8,222,384 888,981 43,188 0 (7,858,683) 0 (7,858,683) 0 0 0 (7,858,683) (0.61) (0.61)
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