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                                                                   Exhibit 10.2

[FINANCING]

PREFERRED STOCK INVESTMENT AGREEMENT

        PREFERRED STOCK INVESTMENT AGREEMENT ("Agreement") dated as of August
___, 1996 between ACTV Financing, Inc., a Delaware corporation ("Financing"),
and each entity listed as an investor on Schedule I attached to this Agreement
(each individually an "Investor" and collectively the "Investors").

W I T N E S S E T H:

        WHEREAS, Financing is a wholly-owned subsidiary of ACTV, Inc. ("ACTV");

        WHEREAS, Financing desires to sell and issue to the Investors, and the
Investors wish to purchase from Financing, an aggregate of 240,000 shares of
Financing's 5% Cumulative Convertible Preferred Stock having the rights,
designations and preferences set forth in the Certificate of Incorporation of
Financing (the "Charter") in the identical form and substance of Exhibit 2.1(c)
attached hereto (the "Preferred Shares"), on the terms and conditions set forth
herein;

        WHEREAS, the Preferred Shares will be exchangeable into shares of common
stock, par value $0.10, of ACTV ("Common Shares") and the Investors will have
registration rights with respect to such Common Shares issuable upon exchange,
pursuant to the terms of that certain Registration Rights and Exchange Agreement
dated the date hereof entered into between ACTV and the Investors ("Exchange
Agreement"), and the Preferred Shares will be subject to certain rights of
redemption of ACTV and the Investors; and

        WHEREAS, pursuant to the terms of that certain Preferred Stock
Investment Agreement ("Holdings Investment Agreement") dated as of the date
hereof entered into between the Investors and ACTV Holdings, Inc., a Delaware
corporation and wholly-owned subsidiary of ACTV ("Holdings"), the Investors have
agreed to purchase 160,000 shares of Holdings' 5% Cumulative Convertible
Preferred Stock (the "Holdings Preferred Shares") which will be exchangeable
into Common Shares and subject to registration rights pursuant to the Exchange
Agreement;

        NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

ARTICLE I

PURCHASE AND SALE OF PREFERRED STOCK



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        Section 1.1 Purchase and Sale of Preferred Stock. Upon the following
terms and conditions, Financing shall issue and sell to each Investor severally,
and each Investor severally shall purchase from Financing, the number of
Preferred Shares indicated next to such Investor's name on Schedule I attached
hereto.

        Section 1.2 Purchase Price. The purchase price for the Preferred Shares
(the "Purchase Price") shall be $25 per share.

        Section 1.3 The Closing. (a) The closing of the purchase and sale of the
Preferred Shares (the "Closing"), shall take place at the offices of the
Investors' counsel, at 10:00 am., local time on the later of the following: (i)
the date on which the last to be fulfilled or waived of the conditions set forth
in Article IV hereof and applicable to the Closing shall be fulfilled or waived
in accordance herewith, or (ii) such other time and place and/or on such other
date as the Investors and Financing may agree. The date on which the Closing
occurs is referred to herein as the "Closing Date."

        (b) On the Closing Date, Financing shall deliver to each Investor
certificates (with the number of and denomination of such certificates
designated by such Investor) representing the Preferred Shares purchased
hereunder by such Investor registered in the name of such Investor or deposit
such Preferred Shares into accounts designated by such Investor, and such
Investor shall deliver to Financing the Purchase Price for the number of
Preferred Shares purchased by such Investor hereunder by wire transfer in
immediately available funds to an escrow account ("Escrow Account") as
designated in writing in that certain Escrow Agreement between Financing and the
escrow agent named therein ("Escrow Agreement"). The Escrow Account shall be
maintained at a financial institution reasonably acceptable to the Investors and
shall be an interest bearing account, and the escrow agent shall be reasonably
acceptable to the Investors. The payment by each Investor of the Purchase Price
applicable to it to the Escrow Account shall constitute a payment delivered to
Financing in satisfaction of such Investor's obligation to pay the Purchase
Price hereunder, and the wire transfer by each Investor to the Escrow Account
shall be deemed to be one transfer from such Investor to Financing and another
transfer from Financing to the Escrow Account in connection with the funding of
the Offer (as defined in Section 3.2(c) below). In addition, each party shall
deliver all documents, instruments and writings required to be delivered by such
party pursuant to this Agreement at or prior to the Closing.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

        Section 2.1 Representations and Warranties of Financing. Financing
hereby makes the following representations and warranties to each of the
Investors:

        (a) Organization and Qualification. Financing 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. Financing was duly





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organized on August 8, 1996 and did not engage and has not engaged in any
activities on or prior to or after such date other than its organization.
Financing does not have any subsidiaries. Financing 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.

               (b) Authorization; Enforcement. (i) Financing has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Preferred Shares in accordance with the terms hereof, (ii) the
execution and delivery of this Agreement by Financing 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 Financing or its Board of Directors or
stockholders is required, (iii) this Agreement has been duly executed and
delivered by Financing, and (iv) this Agreement constitutes a valid and binding
obligation of Financing enforceable against Financing 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 Financing consists
of 100 shares of common stock and 240,000 shares of preferred stock; there are
100 shares of common stock and no shares of preferred stock issued and
outstanding; and, upon issuance of the Preferred Shares in accordance with the
terms hereof there will be 100 shares of common stock and 240,000 shares of
preferred stock issued and outstanding. All of the outstanding shares of
Financing's common stock have been validly issued and are fully paid and
nonassessable and are owned by ACTV free and clear of any liens, claims or
encumbrances. No shares of common stock 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 convertible into, any shares of capital
stock of Financing, or contracts, commitments, understandings, or arrangements
by which Financing is or may become bound to issue additional shares of capital
stock of Financing 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 Financing. The Charter attached
hereto as Exhibit 2.1(c) is true and correct as in effect on the date hereof,
and Financing has furnished or made available to the Investors true and correct
copies of Financing's by-laws, as in effect on the date hereof (the "By-Laws").

        (d) Issuance of Preferred Shares. The issuance of the Preferred Shares
has been duly authorized and, when paid for or issued in accordance with the
terms hereof, the Preferred Shares shall be validly issued, fully paid and
non-assessable, free and clear of any liens, claims or encumbrances, and
entitled to the rights and preferences set forth in the Charter attached hereto.
The Common Shares issuable upon exchange of the Preferred Shares pursuant to the
Exchange Agreement will be duly authorized and reserved for issuance and, upon
exchange in accordance with



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the Exchange Agreement, will be validly issued, fully paid and non-assessable,
free and clear of all liens, claims and encumbrances, 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
Agreement by Financing and the consummation by Financing of the transactions
contemplated hereby do not and will not (i) result in a violation of Financing's
or 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 agreement, indenture or instrument to which Financing or
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 Financing or ACTV or any of its subsidiaries or by which any property or
asset of Financing or 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 Financing. The business of Financing and 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. Neither Financing
nor ACTV is 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 Agreement or issue
and sell the Preferred Shares in accordance with the terms hereof, provided
that, for purposes of the representation made in this sentence, Financing 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"). Financing 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. Financing 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



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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 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) 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 Financing or 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.

        (h) No Undisclosed Liabilities. Financing and 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
subsidiaries.

        (i) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to Financing or ACTV or its 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.

        (j) No General Solicitation. Neither Financing, 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 Securities Act of 1933, as amended (the"Act")) in connection with
the offer or sale of the Preferred Shares.

        (k) No Integrated Offering. Neither Financing, 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.




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        (l) Brokers. Financing has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by any or all of the Investors relating to this Agreement or the transactions
contemplated hereby, except for amounts owing to the Placement Agent, which
amounts shall be paid by ACTV.

        (m) ACTV Representations. All of the representations and warranties of
ACTV set forth in the Exchange Agreement are true and correct.

               Section 2.2 Representations and Warranties of the Investors. Each
of the Investors, severally and not jointly, hereby makes the following
representations and warranties to Financing:

               (a) Authorization; Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Preferred Shares being sold hereunder, (ii) the execution and
delivery of this Agreement by such Investor and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate or partnership action, and (iii) this Agreement constitutes a valid
and binding obligation of such Investor enforceable against the 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.

        (b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by such Investor of the transactions contemplated
hereby do not and will not (i) result in a violation of the Investor's
organizational documents, or (ii) conflict with any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Investor. Such Investor is not required
to obtain any consent or authorization of any governmental agency in order for
it to perform its obligations under this Agreement.

        (c) Investment Representation. 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 has no present intention to sell the
Preferred Shares and such Investor has no present arrangement (whether or not
legally binding) to sell the Preferred Shares to or through any person or
entity; provided, however, that by making the representations herein, such
Investor does not agree to hold the Preferred Shares for any minimum or other
specific term and reserves the right to dispose of the Preferred Shares at any
time in accordance with Federal and state securities laws applicable to such
disposition.

        (d) Accredited Investor. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Act. The Investor has such knowledge
and experience in financial and business matters in general and 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. In addition (but without limiting the effect of
Financing's



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representations and warranties contained herein), such Investor has received
such information as it considers necessary or appropriate for deciding whether
to purchase the Preferred Shares pursuant hereto. Such Investor acknowledges
that no representation or warranty is made by the Placement Agent or any persons
representing the Placement Agent with respect to Financing or the sale of the
Preferred Shares.

        (e) Rule 144. Such Investor understands that there is no public trading
market for the Preferred Shares, that none is expected to develop, and that the
Preferred Shares must be held indefinitely unless such Preferred Shares are
exchanged or registered under the Act or an exemption from registration is
available. Such Investor has been advised or is aware of the provisions of Rule
144 promulgated under the Act.

        (f) Brokers. Such Investor has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by Financing relating to this Agreement or the transactions
contemplated hereby, except for amounts owing to the Placement Agent, which
amounts shall be paid by ACTV.

        (g) Reliance by Financing. Such Investor understands that the Preferred
Shares are being offered and sold in reliance on a transactional exemption from
the registration requirements of Federal and state securities laws and that
Financing is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Investor set
forth herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Preferred Shares.

ARTICLE III

COVENANTS

        Section 3.1 Registration and Listing. Until three (3) years after all
Preferred Shares have been exchanged into Common Shares, Financing will use its
best efforts to cause ACTV to cause the Common Shares to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all
respects with its reporting and filing obligations under the Exchange Act, to
comply with all requirements related to any registration statement filed
pursuant to the Exchange Agreement and to not take any action or file any
document (whether or not permitted by the Act or the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
ACTV's reporting and filing obligations under said acts, except as permitted
herein. Until three (3) years after all Preferred Shares have been exchanged
into Common Shares, Financing will use its best efforts to take all action
within its power to cause ACTV to continue the listing or trading of the Common
Shares on the NASDAQ Small Capitalization Market or National Market and the
Boston Stock Exchange and to comply in all respects with ACTV's reporting,
filing and other obligations under the bylaws or rules of the NASD and NASDAQ
and such exchange or other exchange where the Common Shares are traded.



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        Section 3.2   Actions of Financing.

        (a) Escrow. Upon Closing of the transactions contemplated hereby, the
$6,000,000 aggregate Purchase Price hereunder shall be deposited in the Escrow
Account, and such amount and all interest accruing thereon (collectively, the
"Escrow Funds") shall remain in escrow in the Escrow Account pursuant to the
terms of the Escrow Agreement until the fifth business day after the date
("Release Date") on which all of the following conditions exist: (i) the
Effective Registration (as defined below) has occurred and is continuing, (ii)
the Liberty Sports Contract (as defined below) has been executed and delivered
and is in full force and effect, (iii) the Merger (as defined below) has
occurred and is in effect, and (iv) the Investors have received an opinion of
counsel ("Release Opinion") reasonably acceptable to the Investors that the
conditions contained in clauses (i), (ii), and (iii) above have been satisfied.
"Effective Registration" shall mean that all registration obligations of ACTV
pursuant to the Exchange Agreement have been satisfied, such registration is not
subject to any suspension or stop order, the prospectus for the Common Shares
issuable upon exchange of the Preferred Shares is current and such Common Shares
are listed for trading on the NASDAQ Small Capitalization or National Market,
and none of Financing, Holdings or ACTV is subject to any bankruptcy, insolvency
or similar proceeding. The "Liberty Sports Contract" shall mean that certain
agreement to be entered into by ACTV and/or its subsidiaries and Liberty Sports,
Inc. ("LS") or its wholly-owned subsidiary Prime Sports West ("PSW") providing
for immediate commercial use on economically viable terms by ACTV and/or its
subsidiaries of substantially all major professional sports program content
carried by PSW for a term of at least 3 years in connection with the launch of
ACTV's premium regional network within the entire existing 4,200,000 subscriber
footprint of PSW. LS is to be rebranded "Fox Sports Net" and PSW is to be
rebranded "Fox Sports West."

        (b) Merger. If the date on which both the Effective Registration has
occurred and is continuing and the Liberty Sports Contract has been executed and
delivered and is in full force and effect (the "Contingency Satisfaction Date")
occurs on or before December 31, 1996, then prior to the release of the Escrow
Funds (in addition to the Release Opinion) Financing shall be merged with and
into Holdings with each Preferred Share being exchanged for one Holdings
Preferred Share with the amount of any accrued and unpaid dividends on any
Preferred Shares constituting the amount of accrued and unpaid dividends under
the Holdings Preferred Shares received in such exchange as of the date of the
merger (the "Merger"). If the Contingency Satisfaction Date occurs after
December 31, 1996, then Financing shall cause the Merger to occur after (and not
before) the Offer Period (as defined below) expires. Notwithstanding any of the
foregoing, Financing agrees that Financing and Holdings shall effect the Merger
within five (5) business days of receiving a written request to so merge at any
time by all the then holders of outstanding Preferred Shares, regardless of
whether or when the Contingency Satisfaction Date occurs. Following the Merger,
the Investors (or the then holders of the Preferred Shares) shall have all the
same rights and remedies under the Exchange Agreement with respect to the
Holdings Preferred Shares issued upon the Merger as if such shares were included
as "Preferred Shares" therein.

        (c) Mandatory Redemption Offer. In the event that the Contingency
Satisfaction Date does not occur by December 31, 1996, Financing shall offer
("Offer") to purchase, commencing January 1, 1997, outstanding Preferred Shares
owned by Investors (or the then holders of Preferred



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Shares) at a purchase price equal to $25 per Preferred Share plus any accrued
and unpaid dividends ("Redemption Price"), with the aggregate purchase price
under such Offer equal to the lesser of (i) the aggregate Redemption Price for
all outstanding Preferred Shares and (ii) the amount of Escrow Funds ("Escrowed
Amount"). If the aggregate Redemption Price for all outstanding Preferred Shares
is less than or equal to the Escrowed Amount, then the Offer shall be made
severally to each Investor (or the then holder of the Preferred Shares) for all
Preferred Shares owned by such Investor (or such holder). If the Escrowed Amount
is less than the aggregate Redemption Price for all outstanding Preferred
Shares, then Financing shall severally Offer to purchase from each Investor (or
such holder) on a pro rata basis (based on the number of Preferred Shares held
by such Investor or holder) as many Preferred Shares as can be purchased from
such Investor with a pro rata portion of the Escrowed Amount. The purchase price
for such Offer shall be paid out of the Escrow Funds (plus accrued interest
thereon) to each Investor within three (3) business days of any acceptance of
such Offer by any Investor (or holder), at which time such Preferred Shares
shall be deemed redeemed and such Investor(s) (or holder(s)) shall promptly
return any certificates representing same to Financing. The Escrow Agreement
shall provide that the escrow agent therein shall be required to disburse the
Escrow Funds to the Investors (or holders) selling their Preferred Shares
pursuant to the Offer. If at any time prior to January 1, 1997, Holdings or ACTV
or any subsidiary thereof becomes subject to any bankruptcy, insolvency or
similar proceeding, then Financing shall immediately make the Offer commencing
on the date of such event ("Bankruptcy Date"). Such Offer shall remain open with
respect to each Investor (or each such holder) for the period ("Offer Period")
commencing on January 1, 1997 (or earlier Bankruptcy Date) and terminating
thirty (30) days after such Investor receives written notice that the
Contingency Satisfaction Date has occurred, provided that such notice shall be
null and void (and the Offer Period shall continue to run) if at any time during
such 30-day period the Effective Registration cease to exist or the Liberty
Sports Contract is terminated. Each Investor (or such holder) severally may
accept such Offer in whole or in part at any time and from time to time during
the Offer Period. After the Offer Period terminates, any remaining Escrowed
Amount (other than funds remaining to be disbursed to Investors or holders
accepting the Offer) shall be transferred over to Holdings in connection with
the Merger. Any Preferred Shares owned by the Investors (or holders) after the
Offer Period shall be exchanged upon the Merger in accordance with Section
3.2(b) above. The Offer is hereby deemed made by Financing as of January 1, 1997
(or earlier Bankruptcy Date) in the event Financing fails or refuses to timely
make such Offer on such date.

        (d) Restrictions. Prior to the Release Date, Financing shall not (i)
incur any liabilities or obligations of any kind, except to the Investors (or
holders of Preferred Shares) as set forth herein, (ii) declare any dividends or
make any distributions, (iii) enter into any material agreements, (iv) engage in
any business activity, (v) engage in any other activity except for the holding
of the $6,000,000 aggregate Purchase Price in escrow pursuant to the terms
hereof and in the Escrow Agreement except as contemplated herein, (v) permit any
liens to exist against Financing or any of its assets, (vi) file or permit to be
filed against it any proceedings under any bankruptcy or insolvency law or take
any actions related to insolvency, (vii) merge or consolidate with any other
entity or sell any assets or purchase any assets, (viii) change its capital
structure, (ix) amend its Charter or By-Laws or file any certificate of
designation, or (x) engage in any transactions with any affiliates or any third
parties, in each case without the affirmative vote of both a majority of the


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board of directors of Financing and of the holders of the Preferred Shares (with
each holder entitled to one vote for each Preferred Share owned).

        Section 3.3 Certificates on Exchange. Upon any exchange by an Investor
(or then holder of Preferred Shares) of the Preferred Shares pursuant to the
Exchange Agreement, Financing shall issue and deliver to such Investor (or
holder) within 48 hours of the Exchange Date (as defined in the Exchange
Agreement) a new certificate or certificates for the number of Preferred Shares
which such Investor (or holder) has not yet elected to exchange but which are
evidenced in part by the certificate(s) submitted to ACTV in connection with
such exchange (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).

        Section 3.4 Replacement Certificates. The certificate(s) representing
the Preferred 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 Preferred 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.

ARTICLE IV

CONDITIONS

        Section 4.1 Conditions Precedent to the Obligation of Financing to Sell
the Preferred Shares. The obligation hereunder of Financing to issue and/or sell
the Preferred Shares to the Investors is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. These conditions
are for Financing's sole benefit and may be waived by Financing at any time in
its sole discretion.

        (a) Accuracy of the Investors' Representations and Warranties. The
representations and warranties of each Investor shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).

        (b) Performance by the Investors. Each Investor shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
such Investor at or prior to the Closing.

        (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Exchange Agreement.

        Section 4.2 Conditions Precedent to the Obligation of the Investors to
Purchase the Preferred Shares. The obligation hereunder of each Investor to
acquire and pay for the Preferred Shares is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth



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below. These conditions are for the Investors' sole benefit and may be waived by
the Investors at any time in their sole discretion.

        (a) Accuracy of Financing's Representations and Warranties. The
representations and warranties of Financing shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).

        (b) Performance by Financing. Financing shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
Financing at or prior to the Closing.

        (c) NASDAQ. From the date hereof to the Closing Date, trading in ACTV's
Common Stock shall not have been suspended by the SEC or the NASDAQ Small
Capitalization Market, and trading in securities generally as reported by NASDAQ
shall not have been suspended or limited, and the Common Shares shall not have
been delisted from any exchange or market where they are currently listed.

        (d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Exchange Agreement.

        (e) Opinion of Counsel. At the Closing the Investors shall have received
an opinion of counsel to Financing in form and substance satisfactory to the
Investors and such other opinions, certificates and documents as the Investors
or their counsel shall reasonably require incident to the Closing.

        (f) Registration Rights and Exchange Agreement. ACTV and the Investors
shall have executed and delivered the Exchange Agreement in the form and
substance of Exhibit 4.2(f) attached hereto.

        (g) Escrow Agreement. Financing and the escrow agent named therein shall
have executed and delivered the Escrow Agreement in the form and substance
satisfactory to the Investors.

        (h) License Agreement. ACTV and Holdings shall have executed and
delivered the License Agreement in the form and substance satisfactory to the
Investors pursuant to which ACTV shall grant to Holdings a perpetual worldwide
exclusive license to use and exploit all of ACTV's patents royalty free.

        (i) Full Subscription. Each other Investor hereto shall have
consummated, or simultaneously with such Investor will consummate, the
transactions contemplated hereby at the Closing and the transactions
contemplated by the Holdings Investment Agreement at the Closing thereunder.



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        (j) Adverse Changes. Since March 31, 1996, no event which had or is
likely to have a Material Adverse Effect on Financing or ACTV or any of its
subsidiaries shall have occurred.

        (k) Officer's Certificate. Financing and ACTV shall have delivered to
the Investors a certificate in form and substance reasonably satisfactory to the
Investors, executed by an officer of Financing and ACTV, certifying as to
satisfaction of closing conditions, incumbency of signing officers, charter,
by-laws and authorizing resolutions of Financing and ACTV.

        (l) Charter Filed. The Investors shall have received copies of the filed
Charter.

        (m) Directors. The holders of the Preferred Shares shall have elected
two of the four individuals to the Board of Directors of Financing and such
individuals shall be serving on such Board.

ARTICLE V

LEGEND AND STOCK

        Each certificate representing the Preferred Shares shall be stamped or
otherwise imprinted with a legend substantially in the following form:

        THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.

        Financing agrees to reissue certificates representing the Preferred
Shares without the legend set forth above at such time as (i) the holder thereof
is permitted to dispose of such Preferred Shares pursuant to Rule 144(k) under
the Act, (ii) such Preferred Shares are sold to a purchaser or purchasers who
(in the opinion of counsel to the seller or such purchaser(s), in form and
substance reasonably satisfactory to Financing and its counsel) are able to
dispose of such shares publicly without registration under the Act, or (iii)
such Preferred Shares are registered under the Act.

ARTICLE VI

TERMINATION

        Section 6.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of
Financing and the Investors.

        Section 6.2 Other Termination. This Agreement may be terminated by
action of the Board of Directors or other governing body of any Investor or
Financing at any time if the Closing shall not have been consummated by the
fifth business day following the date of this Agreement.

ARTICLE VII

MISCELLANEOUS




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        Section 7.1 Stamp Taxes; Placement Agent and Escrow Agent Fees.
Financing shall use its best efforts to cause ACTV to pay all stamp and other
taxes and duties levied in connection with the issuance of the Preferred Shares
pursuant hereto and the Common Shares issued pursuant to the Exchange Agreement.
Holdings and/or ACTV shall be responsible for paying at the Closing the
compensation due to the Placement Agent in connection with the transactions
contemplated hereby and under the Holdings Investment Agreement and the Exchange
Agreement. 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 issued and paid on the Release Date). All fees, charges and costs
of the escrow agent under the Escrow Agreement shall be paid for by Holdings
and/or ACTV, and not by Financing.

        Section 7.2   Specific Enforcement; Consent to Jurisdiction.

        (a) Financing and the Investors acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this 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
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) Financing (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 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. Financing 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
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.

        Section 7.3 Entire Agreement; Amendment. This Agreement, together with
the Exchange Agreement and the agreements and documents executed in connection
herewith and therewith, contains the entire understanding of the parties with
respect to the matters covered hereby and thereby and, except as specifically
set forth herein or therein, neither Financing nor any Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment or
waiver is sought.

        Section 7.4 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



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correct answer back received), telecopy or facsimile at the address or number
designated 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 Financing, Inc.
                                  Attn:  William Samuels
                                  1270 Avenue of the Americas
                                  New York, New York 10020
                                  Fax: (212) 459-9548

              with copies to:     Wesley C. Fredericks, Jr., Esq.
                                       Gersten Savage Kaplowitz & Curtin
                                       575 Lexington Avenue, 27th Floor
                                       New York, New York 10022
                                       Fax: (212) 980-5192

              to the Investors:   To each Investor at the address and/or fax
                                  number set forth on Schedule I of this
                                  Agreement.

              with copies to:     Kleinberg, Kaplan, Wolff & Cohen, P.C.
                                       551 Fifth Avenue
                                       New York, New York 10176
                                       Fax:   (212) 986-8866
                                       Attn:  Stephen M. Schultz

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.

        Section 7.5 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 Agreement.

        Section 7.6 Waivers. No waiver by any party of any default with respect
to any provision, condition or requirement of this 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.




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        Section 7.7 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

        Section 7.8 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. Financing may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of all Investors (which consent may be withheld for any reason in their
sole discretion). Any Investor may assign this Agreement or any rights or
obligations hereunder without the consent of Financing in connection with any
sale or transfer of the Preferred Shares held by such Investor.

        Section 7.9 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

        Section 7.10 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to such state's principles of conflict of laws.

        Section 7.11 Survival. The representations and warranties and the
agreements and covenants of Financing and each Investor contained herein shall
survive the Closing.

        Section 7.12 Execution. This 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.

        Section 7.13 Publicity. Financing 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.

        Section 7.14 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.



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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.

                             FINANCING:

                             ACTV FINANCING, INC.

                             By: __________________________
                             Name:
                             Its:

                             INVESTORS:





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