Exhibit 10.1
REGISTRATION RIGHTS AND EXCHANGE AGREEMENT
THIS REGISTRATION RIGHTS AND EXCHANGE AGREEMENT ("Exchange
Agreement") entered into as of August ___, 1996 between ACTV, Inc., a Delaware
corporation with offices at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000 ("ACTV"), and each of the entities listed under "Investors" on the
signature page hereto (each an "Investor" and collectively the "Investors"),
each with offices at the address listed under such Investor's name on Schedule I
hereto.
W I T N E S S E T H:
WHEREAS, ACTV Financing, Inc., a Delaware corporation
("Financing"), and ACTV Holdings, Inc., a Delaware corporation ("Holdings", and
together with Financing, the "Subsidiaries"), are wholly-owned subsidiaries of
ACTV;
WHEREAS, pursuant to that certain Preferred Stock Investment
Agreement dated as of the date hereof by and between Financing and the Investors
(the "Financing Investment Agreement"), Financing has agreed to sell and issue
to the Investors, and the Investors have agreed to purchase from Financing, an
aggregate of 240,000 shares of Financing's 5% Cumulative Convertible Preferred
Stock (the "Financing Preferred Shares") on the terms and conditions set forth
therein;
WHEREAS, pursuant to that certain Preferred Stock Investment
Agreement dated as of the date hereof by and between Holdings and the Investors
(the "Holdings Investment Agreement", and together with the Financing Investment
Agreement, the "Investment Agreements"), Holdings has agreed to sell and issue
to the Investors, and the Investors have agreed to purchase from Holdings, an
aggregate of 160,000 shares of Holdings' 5% Cumulative Convertible Preferred
Stock (the "Holdings Preferred Shares", and together with the Financing
Preferred Shares, the "Preferred Shares") on the terms and conditions set forth
therein;
WHEREAS, the Investment Agreements and the certificates of
incorporation for the Subsidiaries contemplate that the Preferred Shares will be
exchangeable into shares ("Common Shares") of common stock, par value $0.10, of
ACTV ("Common Stock") pursuant to the terms and conditions set forth herein; and
WHEREAS, pursuant to the terms of, and in partial consideration
for, the Investors' agreement to enter into the Investment Agreements, ACTV has
agreed to provide the Investors with certain registration rights with respect to
the Common Shares as set forth in this Exchange Agreement;
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NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Investment Agreements and this Exchange Agreement, ACTV and the Investors agree
as follows:
1. Certain Definitions. As used in this Exchange Agreement, the
following terms shall have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to
such terms in the Investment Agreements.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean: (i) the Common Shares issued
to each Holder or its transferee or designee upon exchange of the Preferred
Shares or upon any stock split, stock dividend, recapitalization or similar
event with respect to such Common Shares; and (ii) any securities issued or
issuable to each Holder upon the exchange or conversion of any Preferred Shares
or Common Shares.
The terms "register", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by
ACTV in connection with each Holder's registration rights under this Exchange
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for ACTV, blue sky fees and
expenses, reasonable fees and disbursements of counsel to Holders (using a
single counsel selected by a majority in interest of the Holders) for a "due
diligence" examination of ACTV and review of the Registration Statement and
related documents, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
ACTV, which shall be paid in any event by ACTV).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included with "Registration
Expenses".
"Holder" and "Holders" shall include an Investor or the
Investors, respectively, and any transferee of the Preferred Shares or Common
Shares or Registrable Securities which have not been sold to the public to whom
the registration rights conferred by this Exchange Agreement have been
transferred in compliance with this Exchange Agreement.
"Registration Statement" shall have the meaning set forth in
Section 2(a) herein.
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"Regulation D" shall mean Regulation D as promulgated pursuant to
the Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933,
as amended.
2. Registration Requirements. ACTV shall use its diligent best
efforts to effect the registration of the Registrable Securities (including
without limitation the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as would permit or facilitate the sale or distribution
of all the Registrable Securities in the manner (including manner of sale) and
in all states reasonably requested by the Holder for purposes of maximizing the
proceeds realizable by the Holder from such sale or distribution. Such best
efforts by ACTV shall include without limitation the following:
(a) ACTV shall, as expeditiously as reasonably possible after
the Closing Date:
(i) Prepare and file a registration statement with the
Commission pursuant to Rule 415 under the Securities Act on Form S-3 under the
Securities Act (or in the event that ACTV is ineligible to use such form, such
other form as ACTV is eligible to use under the Securities Act) covering the
Registrable Securities ("Registration Statement"). Thereafter ACTV shall use its
best efforts to have such Registration Statement and other filings declared
effective. ACTV shall provide Holders reasonable opportunity to review any such
Registration Statement or amendment or supplement thereto prior to filing.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such Registration Statement and notify the holders of the filing and
effectiveness of such Registration Statement and any amendments or supplements.
(iii) Furnish to each Holder such numbers of copies of a
current prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder.
(iv) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by each
Holder provided that ACTV shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
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(v) Notify each Holder immediately of the happening of any
event as a result of which the prospectus (including any supplements thereto or
thereof) included in such Registration Statement, as then in effect, includes an
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its best efforts to promptly
update and/or correct such prospectus.
(vi) Use its best efforts to list the Registrable Securities
covered by such Registration Statement with any securities exchange(s) and/or
markets on which the Common Stock is then listed and prepare and file any
required filings with the National Association of Securities Dealers, Inc. or
any exchange or market where the Common Shares are traded.
(b) (i) ACTV agrees that it shall file the Registration Statement
complying with the requirements of this Exchange Agreement within 90 days from
the Closing Date and shall cause such Registration Statement to become effective
by December 31, 1996. In the event that such Registration Statement has not been
declared effective by December 31, 1996, then ACTV shall pay to each Holder
liquidated damages in an amount equal to $0.75 per Preferred Share held by such
Holder for each 30-day period from and after December 31, 1996 that such
Registration Statement is not effective.
(ii) In the event that ACTV fails, refuses or is unable to
cause the Registrable Securities covered by the Registration Statement to be
listed with the securities exchange(s) and markets on which the Common Stock is
traded or at least the NASDAQ Small Capitalization Market at all times on or
after the Registration Statement is declared effective, then ACTV shall pay to
each Holder liquidated damages in an amount equal to $0.75 per Preferred Share
held by such Holder for each 30-day period from and after such failure, refusal
or inability to so list the Registrable Securities until the Registrable
Securities are so listed.
(iii) In the event any Holder's ability to sell Registrable
Securities under the Registration Statement is suspended for more than thirty
(30) days in the first instance or for more than ten (10) days for each
suspension thereafter ("Suspension Grace Period"), including without limitation
by reason of any suspension or stop order with respect to the Registration
Statement or the fact that an event has occurred as a result of which the
prospectus (including any supplements thereto) included in such Registration
Statement then in effect includes an untrue statement of material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
then ACTV shall pay to each Holder liquidated damages in an amount equal to
$0.75 per Preferred Share held by such Holder for each 30-day period from and
after the last day of the Suspension Grace Period until such suspension no
longer exists.
(iv) In the event that ACTV does not have a sufficient number
of Common Shares available to satisfy ACTV's obligations to any Holder upon
receipt of an Exchange Notice (as defined below) or is otherwise unable to issue
such Common Shares (including without limitation by reason of the limits
described in Section 11(n) below) in accordance with the terms of this Exchange
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Agreement upon receipt of an Exchange Notice, then ACTV shall pay to each Holder
liquidated damages in an amount equal to $0.75 per Preferred Share held by such
Holder for each 30-day period from and after the Exchange Date that ACTV fails
or refuses to issue Common Shares in accordance with the terms hereof.
(v) In the event that ACTV fails to authorize and reserve an
additional 20,000,000 shares of Common Stock for issuance upon exchange of
Preferred Shares by the sixtieth (60th) day following a Reserve Increase Event
(as defined below in Section 11.g), then ACTV shall pay to each Holder
liquidated damages in an amount equal to $0.75 per Preferred Share held by such
Holder for each 30-day period from and after such sixtieth (60th) day until such
additional shares are so authorized and reserved.
(vi) Each liquidated damages provision provided for in the
foregoing clauses (i) through (v) shall be in addition to each other liquidated
damages provision; provided, however, that in no event shall ACTV be obligated
to pay to any Holder liquidated damages in an amount greater than $0.75 per
Preferred Share held by such Holder for any 30-day period. All payments required
to be made in connection with the above liquidated damages provisions shall be
paid in cash by the tenth (10th) day of each calendar month (which payments
shall be pro rata on a per diem basis for any period of less than 30 days). In
the event that ACTV fails or refuses to pay such liquidated damages payments at
such time, then at any Holder's request and option, ACTV shall purchase the
Preferred Shares held by such Holder, within five (5) days of such request, at a
purchase price equal to the ACTV Premium Redemption Price (as defined in Section
11.m(2) below), provided that such Holder may revoke such request at any time
prior to receipt of such payment of such purchase price.
(vii) ACTV acknowledges that any failure, refusal or inability
by ACTV described in the foregoing clauses (i) through (v) will cause the
Holders to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Exchange Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provisions set forth above represent the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The liquidated damages provided for above are in addition
to and not in lieu or limitation of any other rights the Holders may have at
law, in equity or under the terms of the Preferred Shares, the Investment
Agreements or this Exchange Agreement, including without limitation the right to
specific performance. Each Holder shall be entitled to specific performance of
any and all obligations of ACTV in connection with the registration rights of
the Holders hereunder. In the event of any of the circumstances described in the
foregoing clauses (i) through (v) above, then each of the ACTV Redemption
Commencement Date (as defined in Section 11.m below) and the Maximum Restrictive
Covenant Date (as defined in Section 11.j below) shall be moved back 1.5 days
for each day that any of the circumstances in clauses (i), (ii), (iii) (without
regard to the applicability of the Suspension Grace Period), (iv) or (v) exist.
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(c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder shall so advise ACTV. Any
such underwriting may only be administered by investment bankers reasonably
satisfactory to ACTV.
(d) ACTV shall enter into such customary agreements (including
a customary underwriting agreement with the underwriter or underwriters, if any)
and take all such other reasonable actions reasonably requested by the Holders
in connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering:
(i) make such representations and warranties to the Holders
and the underwriter or underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of counsel to
ACTV, dated the effective day (or in the case of an underwritten offering, dated
the date of delivery of any Registrable Securities sold pursuant thereto) of the
Registration Statement, which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Holders and the
underwriter(s), if any, and their counsel and covering, without limitation, such
matters as the due authorization and issuance of the securities being registered
and compliance with securities laws by ACTV in connection with the
authorization, issuance and registration thereof, addressed to the Holders and
each underwriter, if any;
(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an underwritten
offering, at the time of delivery of any Registrable Securities sold pursuant
thereto), a "comfort" letter from ACTV's independent certified public
accountants addressed to the Holders and each underwriter, if any, stating that
such accountants are independent public accountants within the meaning of the
Securities Act and the applicable published rules and regulations thereunder,
and otherwise in customary form and covering such financial and accounting
matters as are customarily covered by letters of the independent certified
public accountants delivered in connection with secondary offerings;
(iv) if an underwriting agreement is entered into, the same
shall include customary indemnification and contribution provisions and
procedures for secondary underwritten offerings; and
(v) ACTV shall deliver such documents and certificates as may
be reasonably requested by the Holders of the Registrable Securities being sold
or the managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the underwriting
agreement, if any, or other agreement entered into by ACTV;
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the foregoing in this paragraph 2(d) shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
provided, however, the foregoing in paragraph 2(d) shall not be required on more
than two (2) occasions.
(e) ACTV shall make available for inspection by the Holders, a
representative or representatives of the Holders, any underwriter participating
in any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for such purposes, all SEC Documents (as defined below) filed
subsequent to the Closing, pertinent corporate documents and properties of ACTV,
and cause ACTV's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement.
(f) Subject to Section 2(b) above, ACTV may suspend the
effectiveness of any Registration Statement in the event, and for such period of
time as, such a suspension is required by the rules and regulations of the
Commission. ACTV will use its best efforts to cause such suspension to terminate
at the earliest possible date.
3. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance with
registration pursuant to this Exchange Agreement shall be borne by ACTV, and all
Selling Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3. ACTV shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form or
forms, or in the event that ACTV is ineligible to use such form, such form as
ACTV is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration effected
by ACTV pursuant to this Exchange Agreement, ACTV will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registerable Securities may be sold under Rule 144(k)
(provided that ACTV's transfer agent has accepted an instruction from ACTV to
such effect).
6. Indemnification.
(a) ACTV Indemnity. ACTV will indemnify each Holder, each of
its officers, directors and partners, and each person controlling each Holder,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Exchange Agreement, and each
underwriter, if any, and each person who controls, within the meaning of Section
15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such
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registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
ACTV of the Securities Act or any state securities law or in either case, any
rule or regulation thereunder applicable to ACTV and relating to action or
inaction required of ACTV in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that ACTV will not be liable in any such case to a Holder to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to ACTV by such Holder or the underwriter (if any) therefor and stated
to be specifically for use therein. The indemnity agreement contained in this
Section 6(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of ACTV (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify ACTV, each of its directors, officers, partners, and each underwriter,
if any, of ACTV's securities covered by such a registration statement, each
person who controls ACTV or such underwriter within the meaning of Section 15 of
the Securities Act and the rules and regulations thereunder, each other Holder
(if any), and each of their officers, directors and partners, and each person
controlling such other Holder(s) against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse ACTV and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to ACTV by such Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which such Holder shall be liable under this indemnity shall not exceed the
net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
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any such claim in any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between ACTV on the one hand and any Holder on the other, in such
proportion as is appropriate to reflect the relative fault of ACTV and of such
Holder in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of ACTV on the one hand and of any Holder on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by ACTV or by
such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
ACTV and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities or (ii) in the case of an
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underwriter, the total price at which the Registrable Securities purchased by it
and distributed to the public were offered to the public exceeds, in any such
case, the amount of any damages that such Holder or underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Survival. The indemnity and contribution agreements contained
in Sections 6 and 7 and the representations and warranties of ACTV referred to
in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Exchange Agreement or the Investment
Agreements or any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of ACTV, and (iii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to ACTV such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as ACTV may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Exchange Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Board Positions. So long as any Preferred Stock is
outstanding ACTV shall use its best efforts to nominate and cause the election
of a person designated by the Placement Agent (as defined in the Investment
Agreements) to the Board of Directors of ACTV. In addition, if the Registration
Statement complying with the requirements of this Exchange Agreement has not
been declared effective by December 31, 1996, ACTV shall use its best efforts to
nominate and cause the election of a person designated by the holders of a
majority of the Preferred Stock then outstanding to the Board of Directors of
ACTV. ACTV represents, warrants and covenants that it has the authority and
ability to, and shall, increase the size of the Board of Directors of ACTV if
necessary to comply with the provisions of this paragraph.
11. Exchange Terms. On and after January 1, 1997, each Holder of
the Preferred Shares shall have the right at any time and from time to time, at
the option of such Holder, to exchange any or all Preferred Shares for such
number of fully paid, validly issued and nonassessable Common Shares, free and
clear of any liens, claims or encumbrances, as is determined by dividing (i) the
sum of $25 times the number of Preferred Shares being exchanged plus accrued and
unpaid dividends thereon (with dividends deemed accrued on a per diem basis
through the Exchange Date (as defined below) even if the Exchange Date is not at
the end of a calendar quarter) plus any liquidated damages owing to such Holder
on the Exchange Date, by (ii) the Exchange Price determined as hereinafter
provided in effect on the Exchange Date, on the following terms and conditions.
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a. Mechanics of Exchange. To exchange Preferred Shares into
Common Shares, the Holder shall give written notice ("Exchange Notice") to ACTV
in the form of Exhibit 11(a) hereto (which Exchange Notice may be given by
facsimile transmission) stating that such Holder elects to exchange the same and
shall state therein the number and type of shares to be exchanged and the name
or names in which such Holder wishes the certificate or certificates for Common
Shares to be issued (the date of such Exchange Notice shall be referred to
herein as the "Exchange Date"). Promptly thereafter the Holder shall surrender
the certificate or certificates representing the shares to be exchanged, duly
endorsed, at the office of ACTV or of any transfer agent for such shares. ACTV
shall, immediately upon receipt of such Exchange Notice, issue and deliver to or
upon the order of such Holder, against delivery of the certificates representing
the shares which have been exchanged, a certificate or certificates for the
number of Common Shares to which such Holder shall be entitled (with the number
of and denomination of such certificates designated by such Holder), and ACTV
shall cause Financing and/or Holdings, as the case may be, to immediately issue
and deliver to such Holder a certificate or certificates for the number of
Preferred Shares which such Holder has not yet elected to exchange hereunder but
which are evidenced in part by the certificate(s) delivered to ACTV in
connection with such Exchange Date; ACTV shall effect such issuance within three
(3) trading days (as defined in Section 11(b)(4) below) of the Exchange Date and
shall transmit the certificates by messenger or overnight delivery service to
reach the address designated by such Holder within three (3) trading days after
the receipt of such Exchange Notice ("T+3"). In the alternative to physical
delivery of certificates for Common Shares, if delivery of the Common Shares
pursuant to any exchange hereunder may be effectuated by electronic book-entry
through Depository Trust Company ("DTC"), then delivery of Common Shares
pursuant to such exchange shall be closed and settled on T+3 by book-entry
transfer through DTC, and the Common Shares in connection with such exchange
shall be deemed delivered by such book-entry transfer. In the case of such DTC
book-entry transfer no exchange shall be deemed complete until a book-entry
confirmation is received confirming that the applicable Common Shares have been
transferred to the account of such Holder or its nominee or designee, and the
exchange of the Preferred Shares for such Common Shares shall take place on the
same trading day and as simultaneously as practicable. The parties agree to
coordinate with DTC to accomplish this objective. The exchange pursuant to this
Section 11 shall be deemed to have been made immediately prior to the close of
business on the Exchange Date. The person or persons entitled to receive the
Common Shares issuable upon such exchange shall be treated for all purposes as
the record Holder or Holders of such Common Shares at the close of business on
the Exchange Date.
b. Determination of Exchange Price.
(1) At any date up to and including August 31, 1997, the
Exchange Price shall be equal to:
[1 - Applicable Percentage (as set forth below)] x Agreed Value (as defined
below).
The Agreed Value shall equal the lesser of: (x) the weighted-average (based upon
the number of shares sold) of the actual selling prices at which the Holder
giving an Exchange Notice shall have sold Common Shares during the three (3)
trading days immediately preceding the Exchange Date,
34
but not less than the lowest trading price on the date of such trade as reported
by the principal market on which the Common Stock is traded; (y) the
weighted-average (based upon the number of shares sold) of the actual selling
prices at which the Holder giving an Exchange Notice shall have sold Common
Shares on the Exchange Date; or (z) the average of the daily means between the
low trading price of the Common Stock and the Closing Price of the Common Stock
for the three (3) consecutive trading days immediately preceding such date.
(2) The Applicable Percentage shall be as follows:
14.000% during January 1997
16.375% during February 1997
17.000% during March 1997
20.857% during April 1997
23.000% during May 1997
25.000% during June 1997
26.875% during July 1997
27.375% during August 1997
(3) On and after September 1, 1997, the Exchange Price
shall be the lesser of: (x) 69.625% of the average of the daily means between
the low trading price of the Common Stock and the closing price of the Common
Stock for all the trading days during the month of August 1997; (y) 69.625% of
the weighted-average (based upon the number of shares sold) of the actual
selling prices at which the Holder giving an Exchange Notice shall have sold
Common Shares on the Exchange Date; or (z) 69.625% of the average of the daily
means between the low trading price of the Common Stock and the Closing Price of
the Common Stock during the 3 trading days immediately preceding the Exchange
Date.
(4) The "low trading price" and the "Closing Price",
respectively, of the Common Stock on any day shall be (A) the lowest reported
sale price and the reported Closing Price (last sale price) of the Common Stock
on the New York Stock Exchange or the American Stock Exchange, or (B) if the
Common Stock is not listed on the New York Stock Exchange or the American Stock
Exchange, the lowest reported sale price and the reported Closing Price of the
Common Stock on the principal automated securities price quotation system on
which sale prices of the Common Stock are reported, or (C) if the Common Stock
is not listed on such stock exchanges and sale prices of the Common Stock are
not reported on an automated quotation system, the lowest bid price and the mean
of the final bid and asked prices for the Common Stock as reported by National
Quotation Bureau Incorporated if at least two securities dealers have inserted
both bid and asked quotations for the Common Stock on at least five of the ten
preceding trading days. If none of the foregoing provisions are applicable, the
"mean of the low trading price and the Closing Price" of the Common Stock on a
day will be the fair market value of the Common Stock on that day as determined
by a member firm of the New York Stock Exchange, Inc., selected in good faith by
the Board of Directors of ACTV and reasonably acceptable to the Holders. The
term "trading day" means (x) if the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, a day on which there is trading on the
such stock exchange, (y) if the Common Stock is
35
not listed on either of such stock exchanges but sale prices of the Common Stock
are reported on an automated quotation system, a day on which trading is
reported on the principal automated quotation system on which sales of the
Common Stock are reported, or (z) if the foregoing provisions are inapplicable,
a day on which quotations are reported by National Quotation Bureau
Incorporated.
(5) In the event that during any period of consecutive
trading days provided for above, ACTV shall declare or pay any dividend on the
Common Stock payable in Common Stock or in rights to acquire Common Stock, or
shall effect a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, then the Exchange Price
shall be proportionately decreased or increased, as appropriate, to give effect
to such event.
c. Distributions. In the event ACTV shall at any time or from
time to time make or issue, or fix a record date for the determination of
Holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of ACTV or any of its direct or indirect subsidiaries
other than additional Common Shares, then in each such event, in addition to the
number of shares of Common Stock receivable upon exchange, provision shall be
made so that the Holders of Preferred Shares shall receive, upon the exchange
thereof, the securities of ACTV or such subsidiary which they would have
received had they been the owners on the date of such event of the number of
Common Shares issuable to them upon exchange.
d. Certificate for Exchange Price Adjustment. ACTV shall, upon
the written request at any time of any Holder of Preferred Shares, furnish or
cause to be furnished to such Holder a certificate prepared by ACTV setting
forth (i) any adjustments and readjustments of the Exchange Price pursuant to
this Section 11, and (ii) the number of other securities and the amount, if any,
of other property which at the time would be received upon the exchange of
Preferred Shares with respect to each share of Common Stock received upon such
exchange.
e. Notice of Record Date. In the event of any taking by ACTV of a
record of the Holders of any class of securities for the purpose of determining
the Holders thereof who are entitled to receive any dividend or other
distribution, any security or right convertible into or entitling the holder
thereof to receive additional Common Shares, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, ACTV shall mail to each
Holder of Preferred Shares at least 10 days prior to the date specified therein,
a notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, security or right and the amount and
character of such dividend, distribution, security or right.
f. Issue Taxes. ACTV shall pay any and all issue and other taxes,
excluding any income, franchise or similar taxes, that may be payable in respect
of any issue or delivery of Common Shares on exchange of Preferred Shares
pursuant hereto; provided, however, that ACTV shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any Holder in connection
with any such exchange.
36
g. Reservation of Stock Issuable Upon Exchange. ACTV shall at all
times reserve and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the exchange of the Preferred
Shares, such number of its Common Shares as shall from time to time be
sufficient to effect the exchange of all outstanding Preferred Shares, and if at
any time the number of authorized but unissued Common Shares shall not be
sufficient to effect the exchange of all the then outstanding Preferred Shares,
ACTV will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose, including without limitation
engaging in best efforts to obtain the requisite shareholder approval. Without
in any way limiting the foregoing, ACTV agrees to reserve and at all times keep
available not less than 15,000,000 authorized but unissued Common Shares for
such exchange so long as any Preferred Shares remain outstanding, and such
figure shall be appropriately and equitably adjusted for any stock split,
reverse split, stock dividend or reclassification of the Common Stock. So long
as any Preferred Shares remain outstanding, in the event that at any time the
Post Option (as defined in Section 14.l below) is exercised by Post (as defined
in Section 14.l below) or the Closing Price of the Common Stock as reported in
the Wall Street Journal for any ten (10) trading days after the Closing Date
(whether or not consecutive) is below $2.50 per share (subject to appropriate
and equitable adjustment for stock dividends, stock splits, reverse splits, and
combinations) ("Reserve Increase Event"), then within sixty (60) days following
such Reserve Increase Event, ACTV shall call and hold a shareholders meeting for
the purpose of, and solicit proxies to vote in favor of, increasing the number
of authorized shares of Common Stock by at least 20,000,000 shares, and at least
20,000,000 of such newly authorized but unissued shares shall be reserved and
kept available at all times for the purpose of effecting the exchange of the
Preferred Shares hereunder (in addition to any shares already reserved); such
20,000,000 figure shall be appropriately and equitably adjusted for any stock
splits, reverse splits, stock dividends, combinations or reclassifications of
the Common Stock. Such covenant requiring ACTV to hold a shareholders meeting
may be waived by a majority-in-interest of the holders of outstanding Preferred
Shares in a written waiver referring specifically to such shareholders meeting,
provided that any such waiver shall apply only to the extent specifically
expressed in such waiver and shall not apply to any Reserve Increase Event in
the future. ACTV shall file a Registration Statement with respect to such newly
reserved shares within five (5) days of such shareholders meeting and shall
cause such Registration Statement to become effective within sixty (60) days of
such shareholders meeting. All of the registration rights and remedies hereunder
shall apply to the registration of such newly reserved shares, including without
limitation the liquidated damages provisions contained in Section 2(b) hereof
(with such sixty (60) day deadline replacing "December 31, 1996" in Section
2(b)(i)). In the event any Holder at any time is unable to exchange any
Preferred Shares hereunder due to an insufficient number of Common Shares
available, then ACTV promptly shall, at the request of such Holder, purchase
such Preferred Shares which cannot be exchanged at a purchase price equal to the
ACTV Premium Redemption Price. In addition to the foregoing, in the event that
ACTV fails to authorize and reserve an additional 20,000,000 shares of Common
Stock for issuance upon exchange of Preferred Shares by the sixtieth (60th) day
following any Reserve Increase Event, then at any time thereafter at the request
of any Holder, ACTV shall promptly purchase from such Holder, at a purchase
price equal to the ACTV Premium Redemption Price, the number of Preferred Shares
equal to such Holder's pro rata share of the "Deficiency". The "Deficiency"
shall be equal to the number of Preferred Shares that would not
37
be able to be exchanged for Common Shares, due to an insufficient amount of
Common Shares available, if all the outstanding Preferred Shares on such
sixtieth (60th) day were submitted for exchange hereunder at an Exchange Price
equal to 69.625% of the low trading price during such 60-day period. In addition
to and not in lieu of any of the foregoing for so long as any Preferred Shares
remain outstanding, upon the expiration of the Post Option, ACTV agree to
reserve and at all times keep available, as additional reserved authorized but
unissued Common Shares for exchange of Preferred Shares, 50% of the Common
Shares which are or become available following the expiration of the Post Option
(such figure to be appropriately and equitably adjusted for any stock splits,
reverse splits, stock dividends, combinations or reclassifications of the Common
Stock).
h. Fractional Shares. No fractional shares shall be issued upon
the exchange of any Preferred Shares. All Common Shares (including fractions
thereof) issuable upon exchange of more than one Preferred Share by a Holder
thereof shall be aggregated for purposes of determining whether the exchange
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the exchange would result in the issuance of a
fraction of a share of Common Stock, ACTV shall, in lieu of issuing any
fractional share, pay the Holder otherwise entitled to such fraction a sum in
cash equal to the fair market value of such fraction on the date of exchange (as
determined in good faith by the Board of Directors of ACTV).
i. Notices. Any notice required by the provisions of this Section
11 to be given to the Holders of shares of Preferred Shares shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each Holder of record at its address appearing on the books of ACTV.
j. Merger. In case of any reorganization or any reclassification
of the capital stock of ACTV or any consolidation or merger of ACTV with or into
any other corporation or corporations or a sale of all or substantially all of
the assets of ACTV to any other person, then, as part of such reorganization,
consolidation, merger or sale, provision shall be made so that each Preferred
Share shall thereafter be exchangeable into the number of shares of stock or
other securities or property (including cash) to which a Holder of the number of
Common Shares deliverable upon exchange of such Preferred Share would have been
entitled upon the record date of (or date of, if no record date is fixed) such
event and, in any case, appropriate adjustment (as determined in good faith by
the Board of Directors of ACTV and a majority in interest of the Holders) shall
be made in the application of the provisions herein set forth with respect to
the rights and interests thereafter of the Holders of the Preferred Shares, to
the end that the provisions set forth herein, including without limitation the
method for determination of the Exchange Price, shall thereafter be applicable,
as nearly as equivalent as is practicable, in relation to any shares of stock or
the securities or property (including cash) thereafter deliverable upon the
exchange of the Preferred Shares. Until the date ("Restrictive Covenant
Termination Date") which is the earlier of (1) November 1, 1997 (as adjusted
pursuant to Section 2(b)(vii) above, "Maximum Restrictive Covenant Date"), or
(ii) such date on which at least ninety percent (90%) of the Preferred Shares
have been exchanged for Common Shares, ACTV agrees that there shall be no such
reorganization, consolidation, merger or sale unless such appropriate adjustment
is agreed to in writing in advance
38
by the Board of Directors of ACTV and a majority in interest of the holders of
outstanding Preferred Shares (which agreement will not be unreasonably
withheld).
k. Change in Control. If prior to January 1, 1997 there occurs
any corporate reorganization or any change of control transactions or series of
related transactions in which in excess of 50% of ACTV's Board of Directors
consists of directors not nominated by the prior Board of Directors of ACTV, or
in excess of 50% of ACTV's voting power is transferred through a merger,
consolidation, tender offer or similar transaction, then notwithstanding the
date restriction contained in the first paragraph of this Section 11, each
Holder shall have the right to exchange any or all of its Preferred Shares for
Common Shares at any time prior to January 1, 1997 in accordance with the terms
hereof at an Applicable Percentage equal to 14.000%. ACTV further agrees that it
shall not agree or consent to or enter into any transaction or series of
transactions as a result of which the Common Shares would cease to be publicly
traded unless agreed to in writing in advance by the Board of Directors of ACTV
and a majority in interest of the holders of Preferred Shares. So long as any
Preferred Shares remain outstanding, in the event ACTV desires to effect any of
the transactions described in this paragraph at any time (whether occurring
before or after January 1, 1997), the closing of such transaction shall be
conditioned upon the prior purchase by ACTV of, and payment for, at the request
of any Holder, all (or such portion requested by such Holder) of the outstanding
Preferred Shares held by such Holder at a purchase price equal the ACTV Premium
Redemption Price (as defined below). ACTV shall provide all Holders of Preferred
Shares with 30 days' prior notice of any such transaction, and such notice shall
be deemed an offer to purchase the Preferred Shares pursuant to the preceding
sentence.
l. Limitations on Holder's Right to Convert. Notwithstanding
anything to the contrary contained herein, at any time prior to delivery of a
ACTV Redemption Notice (as defined below) by ACTV, no Preferred Share may be
exchanged by a Holder to the extent that, after giving effect to Common Shares
to be issued pursuant to an Exchange Notice, the total number of Common Shares
deemed beneficially owned by such Holder (excluding shares that might otherwise
be deemed beneficially owned by reason of the exchange right herein), together
with all Common Shares deemed beneficially owned by the Holder's "affiliates" as
defined in Rule 144 of the Act, would exceed 4.9% of the total issued and
outstanding shares of the ACTV's Common Stock, provided that each Holder shall
have the right to waive this restriction, in whole or in part, immediately in
the case of a transaction of the type described in Section 11.k (whether or not
occurring prior to January 1, 1997), and in any other case upon 61 days prior
notice to ACTV. The delivery of an Exchange Notice by any Holder shall be deemed
a representation by such Holder that it is in compliance with this paragraph. A
transferee of the Preferred Shares shall not be bound by this provision unless
it expressly agrees to be so bound.
m. Optional Redemption by ACTV.
(1) Any or all of the Preferred Shares may be purchased by ACTV
from the Holders on a pro rata basis at any time beginning on the date (as
adjusted pursuant to Section 2(b)(vii) above, the "ACTV Redemption Commencement
Date") which is fourteen (14) months after the Closing Date on at least 30 days'
prior written notice ("ACTV Redemption Notice"), at a
39
purchase price equal to the sum of $25 times the number of Preferred Shares
being purchased plus accrued and unpaid dividends thereon plus any liquidated
damages owing to such Holder on such purchase date ("ACTV Redemption Price");
provided, that ACTV may not exercise such right nor issue any ACTV Redemption
Notice unless (i) the average of the Closing Price of the Common Stock of ACTV
as reported in the Wall Street Journal for the 30 consecutive trading days prior
to the ACTV Redemption Notice shall exceed $9.00 per share (subject to
appropriate and equitable adjustment for stock dividends, stock splits, reverse
stock splits and combinations), and (ii) there exists an Effective Registration
(as defined in the Financing Investment Agreement) during such 30 consecutive
trading day period.
(2) Notwithstanding the foregoing paragraph (1) above, any or all
of the Preferred Shares may be purchased by ACTV from the Holders on a pro rata
basis prior to the ACTV Redemption Commencement Date by submitting an ACTV
Redemption Notice at least 30 days' prior to such purchase, at a purchase price
("ACTV Premium Redemption Price") equal to 1.43627 (i.e., 1 _ .69625) times the
ACTV Redemption Price.
(3) At least 30 days prior to the ACTV Redemption Date (as
hereinafter defined), the ACTV Redemption Notice shall be mailed, first class
postage prepaid, by ACTV to each Holder of record of the Preferred Shares, at
the address last shown on the records of ACTV for such Holder, notifying such
Holder of the purchase which is to be effected, specifying the percentage of
shares which is to be purchased from such Holder, the date of the purchase (the
"ACTV Redemption Date"), the place at which payment will be made (which is
subject to the Holder's approval) and calling upon each such Holder to surrender
to ACTV, in the manner and at the place designated, a certificate or
certificates representing the number of shares to be purchased calculated by
multiplying the specified percentage of shares to be purchased by the total
number of Preferred Shares held by such Holder. At any time prior to the ACTV
Redemption Date, any Holder of Preferred Shares may exchange any or all of its
Preferred Shares pursuant to an Exchange Notice in accordance with the terms
hereof.
Subject to the provisions of the following subsection (4), on
or after the ACTV Redemption Date, each Holder of Preferred Shares shall
surrender to ACTV the certificate or certificates representing the specified
percentage of Preferred Shares owned by such Holder as of such date, in the
manner and at the place designated in the ACTV Redemption Notice, and thereupon
the purchase price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are purchased, ACTV shall cause a new
certificate to be issued representing the unpurchased shares.
(4) If after an ACTV Redemption Notice is delivered, there does
not exist an Effective Registration at any time prior to or on the ACTV
Redemption Date, then no shares shall be purchased pursuant to this Section and
the ACTV Redemption Notice shall be deemed to be withdrawn. In such event, any
Exchange Notice given by a Holder of Preferred Shares after the ACTV Redemption
Notice was given shall be deemed to be withdrawn, and any certificates for
Preferred Shares which have been surrendered for exchange or redemption shall be
returned to the
40
persons surrendering the same; provided, however, that if a Holder shall have
received shares of ACTV's Common Stock upon exchange of the Preferred Shares
after the ACTV Redemption Notice was given but before the ACTV Redemption Date,
such Holder may elect either to retain such Common Stock or rescind such
exchange by tendering such shares of Common Stock to ACTV.
(5) From and after the ACTV Redemption Date, unless there shall
have been a default in payment of the ACTV Redemption Price, all rights of the
Holders of Preferred Shares which have been purchased (except the right to
receive the ACTV Redemption Price upon surrender of the certificate or
certificates representing such Preferred Shares) shall cease with respect to
such Preferred Shares, and such Preferred Shares shall not thereafter be
transferred on the books of ACTV or be deemed to be outstanding for any purpose
whatsoever. If ACTV elects to purchase less than all of the Preferred Shares
outstanding on any ACTV Redemption Date, ACTV shall select shares so to be
redeemed as nearly as practicable pro-rata in such manner as the Board of
Directors may in good faith determine. The Preferred Shares not redeemed shall
remain outstanding and be entitled to all the rights and preferences provided to
outstanding Preferred Shares.
n. NASDAQ Limit on Stock Issuances. In the event that ACTV is
unable to issue any Common Shares upon exchange of Preferred Shares hereunder
due to the rules or regulations of any national securities exchange or the NASD
requiring shareholder approval for such issuance, including without limitation
Rule 4460(i)(1)(D) of the NASD, ACTV shall, at the request of any Holder
promptly following such determination, purchase such Preferred Shares of such
Holder which cannot be exchanged at a purchase price equal to the ACTV Premium
Redemption Price.
o. Replacement Certificates. The certificate(s) representing the
Common Shares held by any Investor (or then holder) may be exchanged by such
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Common
Shares, as requested by such Investor (or such holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
12. Representations and Warranties of ACTV. ACTV hereby makes the
following representations and warranties to each of the Investors:
a. Organization and Qualification. ACTV is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. ACTV does not have any direct
subsidiaries other than Financing and Holdings. ACTV has duly transferred all
shares of capital stock in ACTV's operating subsidiaries to Holdings. ACTV is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the business, operations,
properties, prospects, or financial condition of the entity with respect to
which such term is used and which is material to such entity and other entities
controlling or controlled by such entity taken as a whole.
41
b. Authorization; Enforcement. (i) ACTV has the requisite
corporate power and authority to enter into and perform this Exchange Agreement
and to issue the Preferred Shares in accordance with the terms hereof, (ii) the
execution and delivery of this Exchange Agreement by ACTV and the consummation
by it of the transactions contemplated hereby, including the issuance of the
Preferred Shares, have been duly authorized by all necessary corporate action,
and no further consent or authorization of ACTV or its Board of Directors or
stockholders is required, (iii) this Exchange Agreement has been duly executed
and delivered by ACTV, and (iv) this Exchange Agreement constitutes a valid and
binding obligation of ACTV enforceable against ACTV in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
c. Capitalization. The authorized capital stock of ACTV consists
of 35,000,000 shares of common stock and 1,000,000 shares of preferred stock;
there are 11,892,647 shares of common stock and no shares of preferred stock
issued and outstanding. All of the outstanding shares of ACTV's common stock
have been validly issued and are fully paid and nonassessable. No Common Shares
are entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
exchangeable or convertible into, any shares of capital stock of ACTV, or
contracts, commitments, understandings, or arrangements by which ACTV is or may
become bound to issue additional shares of capital stock of ACTV or options,
warrants, scrip, rights to subscribe to, or commitments to purchase or acquire,
any shares, or securities or rights convertible into shares, of capital stock of
ACTV (except as contemplated by this Exchange Agreement or disclosed in the SEC
Documents (as defined below), and except for options for approximately 427,500
shares of Common Stock and approximately 150,000 stock appreciation rights
issued to directors and/or management and/or outside third parties since
December 31, 1995. Attached hereto as Exhibit 12(c) is a true and correct copy
of ACTV's Certificate of Incorporation as in effect on the date hereof (the
"Charter"), and ACTV has furnished or made available to the Investors true and
correct copies of ACTV's By-Laws, as in effect on the date hereof (the
"By-Laws").
d. Issuance of Common Shares. The Common Shares issuable upon
exchange of the Preferred Shares pursuant to the Exchange Agreement are duly
authorized and reserved for issuance and, upon exchange in accordance with this
Exchange Agreement, will be validly issued, fully paid and non-assessable, free
and clear of any and all liens, claims and encumbrances, and listed on NASDAQ,
and the Holders shall be entitled to all rights and preferences accorded to a
holder of Common Shares.
e. No Conflicts. The execution, delivery and performance of this
Exchange Agreement by ACTV and the consummation by ACTV of the transactions
contemplated hereby do not and will not (i) result in a violation of ACTV's
Charter or By-Laws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any
42
agreement, indenture, patent, patent license or instrument to which ACTV or any
of its subsidiaries is a party, or result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to ACTV or any of
its subsidiaries or by which any property or asset of ACTV or any of its
subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect); provided
that, for purposes of such representation as to Federal, state, local or foreign
law, rule or regulation, no representation is made herein with respect to any of
the same applicable solely to the Investors and not to ACTV. The business of
ACTV is not being conducted in violation of any law, ordinance or regulations of
any governmental entity, except for violations which either singly or in the
aggregate do not and will not have a Material Adverse Effect. ACTV is not
required under Federal, state or local law, rule or regulation in the United
States to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Exchange Agreement or issue
and sell the Preferred Shares in accordance with the terms hereof except for the
registration provisions provided herein, provided that, for purposes of the
representation made in this sentence, ACTV is assuming and relying upon the
accuracy of the relevant representations and agreements of the Investors herein.
f. SEC Documents; Financial Statements. The Common Stock of ACTV
is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and ACTV has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission ("SEC") pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by ACTV with the SEC (all of the foregoing
including filings incorporated by reference therein being referred to herein as
the "SEC Documents"). ACTV has delivered or made available to the Investors true
and complete copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration statements) filed with
the SEC since December 31, 1995 and all annual SEC Documents filed with the SEC
since December 31, 1994. ACTV has not provided to the Investor any information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by ACTV but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of ACTV included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may
43
be condensed or summary statements) and fairly present in all material respects
the financial position of ACTV as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
g. Principal Exchange/Market. The principal market on which the
shares of Common Stock are currently traded is the NASDAQ Small Capitalization
Market, and the shares of Common Stock are listed on the Boston Stock Exchange.
h. No Material Adverse Change. Since March 31, 1996, the date
through which the most recent quarterly report of ACTV on Form 10-Q has been
prepared and filed with the SEC, a copy of which is included in the SEC
Documents, no Material Adverse Effect has occurred or exists with respect to
ACTV or its subsidiaries, except as otherwise disclosed or reflected in other
SEC Documents prepared through or as of a date subsequent to March 31, 1996.
i. No Undisclosed Liabilities. ACTV and its subsidiaries have no
liabilities or obligations not disclosed in the SEC Documents, other than those
incurred in the ordinary course of ACTV's or its subsidiaries' respective
businesses since March 31, 1996 or which, individually or in the aggregate, do
not or would not have a Material Adverse Effect on ACTV or its direct or
indirect subsidiaries.
j. No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to ACTV or its direct or
indirect subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by ACTV but which has not
been so publicly announced or disclosed.
k. No General Solicitation. Neither ACTV, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf
(including Libra Investments, Inc. ("Placement Agent")), has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D under the Act) in connection with the offer or sale of the Common Shares.
l. No Integrated Offering. Neither ACTV, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Preferred Shares under the Act.
m. Form S-3. ACTV is eligible to file the Registration Statement
on Form S-3 under the Securities Act and rules promulgated thereunder, and Form
S-3 is permitted to be used for the transactions contemplated hereby under the
Securities Act and rules promulgated thereunder.
n. Intellectual Property. ACTV (and/or its wholly-owned
subsidiaries) owns or has an exclusive perpetual license to use all patents,
copyrights and trademarks ("Intellectual Property") which are necessary to
conduct the business of ACTV and its subsidiaries as it is now being conducted
or as proposed to be conducted as disclosed in the SEC Documents, such
44
Intellectual Property is valid and enforceable and the use of such Intellectual
Property by ACTV and/or its subsidiaries does not infringe upon or conflict with
any rights of any third party and neither ACTV nor any of its subsidiaries has
received notice of any such infringement or conflict, and ACTV has no knowledge
of any infringement of its Intellectual Property by any third party.
o. Subsidiaries Use of ACTV Assets. To the extent any direct or
indirect subsidiary of ACTV uses or exploits or requires the use and/or
exploitation of any assets and/or accommodations of ACTV, including without
limitation any Intellectual Property, licenses, permits, office space, equipment
and the like, each such subsidiary has a valid and enforceable right and license
to use and exploit such assets and/or accommodations in perpetuity free of any
royalties, fees or charges (or if there any royalties, fees or charges they are
payable to Holdings and ACTV has no interest in same).
p. Standoff Commitments. ACTV has received binding assurances
from ACTV's executive officers and directors that none of them will sell any
Common Shares prior to the Restrictive Covenant Termination Date, except that
with the approval of the Chairman of the Board of ACTV, such executive officers
and directors in the aggregate may sell up to ten percent (10%) of their present
holdings of Common Shares (including Common Shares to be received in the future
upon the exercise of any presently held options, warrants, stock appreciation
rights or the like), and may sell amounts in excess of 10% with the approval of
a majority in interest of the holders of the outstanding Preferred Shares. ACTV
represents and warrants that such aggregate 10% amount is equal to approximately
260,000 Common Shares.
13. Representations and Warranties of the Investors. Each
Investor hereby makes the following representations and warranties to ACTV:
a. Organization and Qualification. Such Investor is duly
organized and existing in good standing under the laws of the place of its
organization.
b. Authorization; Enforcement. (i) Such Investor has the
requisite corporate power and authority to enter into and perform this Exchange
Agreement, (ii) the execution and delivery of this Exchange Agreement by such
Investor have been duly authorized by all necessary corporate action, and no
further consent or authorization of such Investor or its Board of Directors or
stockholders is required, (iii) this Exchange Agreement has been duly executed
and delivered by such Investor, and (iv) this Exchange Agreement constitutes a
valid and binding obligation of such Investor enforceable against such Investor
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
c. Sophisticated Investor. Such Investor is purchasing the
Preferred Shares for its own account and not with a view to distribution in
violation of any securities laws. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act. Such Investor has such
knowledge and experience in financial and business matters in general and
45
investments in particular, so that such Investor is able to evaluate the merits
and risks of an investment in the Preferred Shares and to protect its own
interests in connection with such investment.
14. Covenants.
(a) Expenses. ACTV shall pay, at the Closing and promptly
upon receipt of any further invoices relating to same, all reasonable due
diligence fees and attorneys' fees and expenses (using a single counsel)
incurred by the Investors, up to a maximum amount of $85,000, in connection with
the preparation, negotiation, execution and delivery of this Exchange Agreement,
the Investment Agreements and the related agreements and documents and the
transactions contemplated hereunder and thereunder. Such amount may be paid, at
the Investors' option, by each Investor offsetting its pro rata share (based on
the amount of Holdings Preferred Shares purchased) of the estimated amount due
for such fees and expenses from the payment of the purchase price by such
Investor under the Holdings Investment Agreement. In the event such estimate is
ultimately less than the actual fees and expenses, Holdings or ACTV shall
promptly pay such deficiency upon receipt of an invoice regarding same, and in
the event such estimate is ultimately greater than the actual fees and expenses,
each Investor shall promptly pay to Holdings its pro rata share (based on the
amount of Holdings Preferred Shares purchased) of such overage upon a
determination regarding same. ACTV shall pay all fees and/or commissions payable
to the Placement Agent in connection with such transactions. The Placement
Agent's compensation includes a cash payment of $750,000 and the issuance to the
Placement Agent by Holdings of warrants to purchase 36,000 shares of Holdings 5%
Cumulative Exchangeable Preferred Stock (with 40% of such cash payment and such
warrants being paid and issued, respectively, at Closing, and the remaining 60%
of such cash payment and such warrants being paid and issued on the Release Date
(as defined in the Financing Investment Agreement)). All fees, charges and costs
of the escrow agent under the Escrow Agreement (as defined in the Financing
Investment Agreement) shall be paid for by Holdings and/or ACTV, and not by
Financing.
(b) Exchange Act Registration. ACTV will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under Exchange Act. Prior to and during the registration period as
set forth in Section 5 above, ACTV will take all action necessary to continue
the listing and trading of its Common Stock on the exchange(s) or markets where
the Common Shares are traded and will comply in all respects with ACTV's
reporting, filing and other obligations under the bylaws or rules of the NASD
and such exchange.
(c) Subsidiaries of ACTV. ACTV agrees that it shall not
create or enter into, and shall cause its subsidiaries not to create or enter
into, any new subsidiaries or joint ventures unless any ACTV enterprise
ownership of shares or interests in any such new subsidiaries is by Holdings or
a wholly-owned subsidiary of Holdings or such joint ventures are entered into by
46
Holdings or a wholly-owned subsidiary of Holdings, and ACTV may not transfer, or
pledge or in any way encumber, its interest in Financing and Holdings, without
the consent of a majority in interest of the holders of outstanding Preferred
Shares. ACTV agrees to cause any capital stock issuances by Holdings or any of
its direct or indirect subsidiaries to be in a bona fide, arms-length
transaction with such issuances being in exchange for receipt of fair market
value consideration. ACTV shall not transfer any cash or assets to any direct or
indirect subsidiary, or any other entity in which ACTV or any of its direct or
indirect subsidiaries has an interest, to provide any financial or other support
for such subsidiary or other entity (whether by loan of otherwise) unless such
transfers of cash or assets are made to or through Holdings and such transfers
are made as a common stock capital contribution in Holdings.
(d) Legends. Prior to the Registration Statement being
declared effective, any Common Shares issues hereunder shall bear a legend in
the same form as the legend on the Preferred Shares pursuant to the Investment
Agreements. Upon such Registration Statement becoming effective, ACTV agrees to
promptly, but no later than 2 business days, issue new certificates representing
such Common Shares without such legend. Any Common Shares issued hereunder after
the Registration Statement has become effective shall be free and clear of any
legends, transfer restrictions and stop orders.
(e) Securities Compliance. ACTV shall notify the Commission
and NASD, in accordance with their requirements, of the transactions
contemplated by the Investment Agreements and this Exchange Agreement, and shall
take all other necessary action and proceedings as may be required and permitted
by applicable law, rule and regulation, for the legal and valid issuance of the
Preferred Shares and the Common Shares issuable upon exchange thereof to the
Investors or Holders pursuant to the terms of this Exchange Agreement.
(f) Intercompany Transactions. ACTV agrees that, on or prior
to the Closing, all ACTV accounts receivable relating to transactions between
ACTV and any direct or indirect subsidiaries of ACTV occurring prior to Closing,
all cash owned by ACTV and all of ACTV's interest in any subsidiary, joint
venture or investment, including without limitation ACTV's interest in ACTV
Interactive and all shares of capital stock in the Greenwich Entertainment
Group, Inc. ("Greenwich") owned by ACTV, shall be transferred to Holdings as a
capital contribution in exchange for common stock of Holdings, and ACTV shall
use its best efforts to transfer all options for capital stock in Greenwich
owned by ACTV to Holdings as a common stock capital contribution. Until the
Restrictive Covenant Termination Date, any monies or assets paid or transferred
from Holdings or any direct or indirect subsidiary of Holdings to ACTV, or from
Holdings to any direct or indirect subsidiary of Holdings, for any reason
whatsoever, shall be treated and deemed as a loan from Holdings or such
subsidiary to ACTV, or from Holdings to such subsidiary, as the case may be,
provided that Holdings may transfer up to $3,000,000 of the $6,000,000 in funds
received from Financing upon the Merger after the Release Date (as such terms
are defined in the Financing Investment Agreement), to The Los Angeles
Individualized Television Network, Inc., a wholly-owned subsidiary of Holdings
("LA Sub"), as an equity capital contribution by Holdings to LA Sub. So long as
any Preferred Shares remain outstanding, ACTV shall not issue or transfer any of
its shares of Common Stock to any direct or indirect subsidiary, provided,
however, that ACTV may
47
issue up to 5,000,000 shares of Common Stock in the aggregate as an equity
contribution to any direct or indirect subsidiaries of Holdings, provided (1)
such shares may not consist of shares reserved for issuance upon exchange of
Preferred Shares hereunder or for issuance to any third party, and (2) no third
party shall be permitted to foreclose upon or otherwise exercise any security
interest or pledge rights with respect to such shares prior to the Restrictive
Covenant Termination Date. ACTV agrees that, on or prior to the Closing, it and
Holdings shall enter into the License Agreement in the form and substance
satisfactory to the Investors pursuant to which ACTV shall grant to Holdings a
perpetual worldwide exclusive royalty free license to use and exploit all of
ACTV's patents.
(g) Dividends. ACTV agrees that it shall not declare or pay
any dividends or make any distributions to any holder or holders of Common Stock
so long as any Preferred Shares are outstanding.
(h) No Senior Securities. Until the Restrictive Covenant
Termination Date, ACTV agrees that neither Holdings nor ACTV shall (i) create,
incur, assume, guarantee, secure or in any manner become liable in respect of
any indebtedness, other than the obligations specifically referred to herein to
the Holder, or permit any liens, claims or encumbrances to exist against ACTV or
Holdings or any of their assets, except for trade payables incurred in the
ordinary course of business consistent with past practices, or (ii) issue any
shares of its preferred stock or any securities convertible into its preferred
stock (except for warrants and preferred stock issuable upon exercise thereof
given to the Placement Agent as described in Section 14(a) above) without prior
written approval of such preferred stock (or convertible security) issuance by a
majority in interest of the holders of outstanding Preferred Shares.
(i) Merger of Financing and Holdings. ACTV agrees to cause
the Merger (as defined in the Investment Agreements) of Financing and Holdings
in accordance with the terms and conditions contained in and at the times
prescribed in the Investment Agreements. Upon the Merger all Holders of
Financing Preferred Shares shall have all the same rights and remedies under
this Agreement with respect to the Holdings Preferred Shares issued to such
Holders upon the Merger as if such shares were included as, and such shares
shall deemed, "Preferred Shares" herein.
(j) Notices. ACTV agrees to provide all holders of Preferred
Shares with copies of all notices and information, including without limitation
notices and proxy statements in connection with any meetings, that are provided
to the holders of shares of Common Stock, contemporaneously with the delivery of
such notices or information to such Common Stock holders.
(k) Dissolution of Holdings. To the extent ACTV owns any
interest in any subsidiaries other than Financing and Holdings, all of such
interest in such subsidiaries shall be owned by Holdings or a direct or indirect
subsidiary of Holdings so long as any Preferred Shares are outstanding. At such
time as there are no Preferred Shares outstanding, ACTV shall not be required to
continue the existence of Holdings.
48
(l) Post Company. ACTV agrees that it shall not extend or
renew that certain option agreement between ACTV and the Washington Post Company
("Post") dated March 17, 1992 pursuant to which Post has an option to purchase
shares of Common Stock enabling it to own 51% of the outstanding shares of
Common Stock in accordance with the terms therein (as amended, the "Post
Option"), which Post Option expires March 17, 1997.
15. Transfer or Assignment. Except as otherwise provided herein,
this Exchange Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The rights granted to the Investors by
ACTV under this Exchange Agreement to cause ACTV to register Registrable
Securities may be transferred or assigned to a transferee or assignee of not
less than 4,000 Preferred Shares, and all other rights granted to the Investors
by ACTV hereunder may be transferred or assigned to any transferee or assignee
of any Preferred Shares (regardless of the number of Preferred Shares
transferred); provided that ACTV must be given written notice by the such
Investor at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; and provided further that the transferee or
assignee of such rights agrees to be bound by the registration and exchange
provisions of this Exchange Agreement.
16. Miscellaneous.
(a) Remedies. ACTV and the Investors acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Exchange Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Exchange Agreement and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which any
of them may be entitled by law or equity.
(b) Jurisdiction. ACTV (i) hereby irrevocably submits to the
jurisdiction of the United States District Court, the New York State courts and
other courts of the United States sitting in New York County, New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Exchange Agreement and (ii) hereby waives, and agrees not to assert in any such
suit action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. ACTV consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Exchange Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this paragraph shall affect or limit any right to serve process in any other
manner permitted by law.
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated
49
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to Financing: ACTV, Inc.
Attn: Xxxxxxx Xxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
with copies to: Xxxxxx X. Xxxxxxxxxx, Xx., Esq.
Xxxxxxx Xxxxxx Kaplowitz & Xxxxxx
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
to the Investors: To each Investor at the address and/or
fax number set forth on Schedule I of
this Exchange Agreement.
with copies to: Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Exchange Agreement.
(e) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Exchange Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of ACTV and each Investor contained herein shall
survive the Closing.
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(f) Execution. This Exchange Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(g) Publicity. ACTV agrees that it will not disclose, and
will not include in any public announcement, the name of any Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
(h) Entire Agreement. This Exchange Agreement, together with
the Investment Agreements and the agreements and documents contemplated hereby
and thereby, contains the entire understanding and agreement of the parties, and
may not be modified or terminated except by a written agreement signed by both
parties.
(i) Governing Law; Consent of Jurisdiction. This Exchange
Agreement and the validity and performance of the terms hereof shall be governed
by and construed in accordance with the laws of the State of New York, except to
the extent that the law of Delaware regulates ACTV's issuance of securities.
(j) Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(k) Titles. The titles used in this Exchange Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Exchange Agreement. For clarification purposes, the exchange
provisions contained in this Exchange Agreement are the "conversion" terms and
procedures referred to in the Certificate of Incorporation for each of Financing
and Holdings.
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IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be duly executed as of the date first above written.
ACTV:
ACTV, INC.
By:__________________________________
Name:
Its:
INVESTORS:
