<PAGE>
FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission File Number: 0-17170
TELVUE CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 51-0299879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16000 Horizon Way, Suite 500
Mount Laurel, New Jersey 08054
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 856-273-8888
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Title of Each Class
Common, $0.01 per share par value
Indicate by check mark whether the Issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Issuer was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X
----
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
The Issuer's revenue for the fiscal year ended December 31, 1999 was
$5,619,968.
The Market Value of voting stock held by non-affiliates of the Issuer March
10, 2000, based on a per share average bid and asked price of $.52 was
$5,034,664.
Number of shares of Issuer's common stock outstanding as of
March 10, 2000: 24,539,500 shares.
Transitional Small Business Disclosure Format: Yes No X
_____ _____
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ITEM 1. BUSINESS
GENERAL
TelVue Corporation, a Delaware corporation (the "Company"), was
incorporated on November 26, 1986. Until December 30, 1988, the Company
was a wholly owned subsidiary of Science Dynamics Corporation ("Science").
On that date, the Company's shares of Common Stock were distributed to
Science's shareholders of record as of December 30, 1988, on the basis of
three shares of the Company's Common Stock for each share of Science's
Common Stock then outstanding. The Company is a marketing and operating
company primarily selling automatic number identification ("ANI")
telecommunications services to the cable television industry for the
automated ordering of pay-per-view features and events (the "Service").
ANI permits cable television companies to process special ordering
services without the attendant high-manpower requirements or extensive
physical plant and facilities that are otherwise required. ANI systems
provide an electronic means of recording a subscriber's telephone number
together with information as to what program or service was ordered and by
whom, permitting cable television companies to then unscramble appropriate
signals for viewing by the ordering subscriber, all without any interactive
cable system and without any form of operator intervention. At the time of
dialing the order, the recognition of the subscriber's telephone number is
automatically recorded by the Company's ANI unit, presenting the subscriber
with both a confirmation and acknowledgment of receipt of his order. In
turn, the automatically recorded information regarding placement of an
order is utilized by cable television companies for purposes of billing for
such specialized services.
The Company's equipment for providing the Service nationwide is located
at the Company's home office in Mt. Laurel, New Jersey. The equipment
provides enhanced service features, such as, "Custom Greeting" which
identifies the cable operator by name, "Title Speak" which speaks the movie
or event title, start-time and channel appearance on accepted orders, and
"Call Redirect" which automatically redirects unaccepted order calls to
the cable operator's customer service representative for assistance. The
Company believes these enhanced service features are necessary for it to
remain competitive within the pay-per-view ANI industry. The equipment
also speaks promotional messages for products and services at the time a
cable subscriber is placing an order for a pay-per-view movie or event (the
"PPV+ service"). The Company serves cable television systems across the
United States via trunk lines and data circuits that it currently leases
from MCIWorldcom. The Company believes it receives a favorable trunk usage
rate from MCIWorldcom.
The equipment used to provide the Service is owned and installed by
the Company. As of December 31, 1999, the Company had contracts to provide
service to 704 cable television systems, serving approximately 15.8 million
full-time subscribers and 1.3 million part-time subscribers. Part-time
subscribers are subscribers who only use the Company's ANI service for
major special events, such as boxing, wrestling and concerts. The Company
is marketing and providing service to cable television systems on a part-
time basis because it wants cable television systems who are using
alternate pay-per-view ordering services to become familiar and comfortable
with the Company's ANI service in anticipation that these cable television
systems may choose to use the Company's ANI service on a full-time basis.
The Company's contracts with cable television system operators cover
the provision of ANI order entry services at a specified rate per
subscriber order. Cable television systems are charged, in addition to
their per order fee, installation and setup fees, monthly data circuit
fees, enhanced feature fees and PPV+ service promotion fees. Monthly
charges are due and payable to the Company within twenty days of the end of
each month. Generally, the contracts carry an initial term of three years
with automatic renewal unless a party gives notice of non-renewal prior to
the renewal date. Generally, the contracts are terminable at will upon
ninety days prior notice. Each contract is also terminable upon default by
a party. In addition, the contract is also assignable upon the sale or
transfer of the business or assets of the cable operator.
The Company's business is oriented principally to the provision of
services, and it does not engage in the manufacture of equipment required
to provide its services. During 1999, the Company purchased its required
ANI equipment and software from Telco Solutions, Inc.
For information regarding the Company's revenue, operations and
assets, please refer to the Company's financial statements included at Item
7 of this Report and Management's Discussion and Analysis or Plan of
Operation.
LICENSES
The company has developed and has in service a system that allows
subscribers to order pay-per-view movies and events from their provider
using the Internet. On August 4, 1998, the Company filed a patent
application with the U.S. Patent and Trademark Office related to this system
and subsequently also filed corresponding foreign patent applications.
The patenting process is still in progress at this time.
The Company has previously purchased Switched-access Audio Response
Units ("SARUs") and one communication subsystem ("HP") from Atlas Telecom
(formerly Syntellect). The Company possesses a perpetual, no charge
license for the pay-per-view application software residing on the SARUs it
currently owns and for any future SARUs purchased. The Company purchased no
SARUs from Atlas Telecom during 1999. There is no affiliation between the
Company and Atlas Telecom other than a customer and supplier relationship.
The Company pays Telco Solutions, Inc. a monthly licensing fee for an
exclusive license, within the United States, for use of pay-per-view
application software which resides on two (2) communication subsystems
("HPs") that the Company owns. The Company purchases Link On equipment
("LINK ONs") from Telco Solutions, Inc. The LINK ONs are used to expand
call capacity to accommodate new customers. The LINK ONs work in
conjunction with the SARUs. The Company purchases LINK ONs in place of
SARUs because the LINK ONs are more cost effective. The Company pays Telco
Solutions, Inc. a monthly licensing fee for an exclusive license, within
the United States, for use of the pay-per-view application software
residing on the LINK ONs. The Company purchased two (2) LINK ONs during
1999.
The Company also uses equipment purchased from Science. Science holds
United States Patent No. 4,797,913 (issued January 10, 1989), encompassing
ANI ordering equipment and services employing the use of Feature Group D
services (the "Science Patent"). The Company holds a perpetual, no charge,
nonexclusive license to use the Science Patent.
MARKETING OF SERVICES
Sales of the Company's services to date have been made to operating
cable television companies with a broad geographical distribution.
Relations with all customers are good.
The Company's business is not seasonal in any material respect.
Ordering problems common to all providers of pay-per-view services are the
geographically dispersed points of sale, the high concentration of orders
around the start time of a pay-per-view event and the need to make the
ordering mechanism sufficiently easy to accommodate the impulsive
purchasing patterns of ordering subscribers. The Company believes its
services resolve these pay-per-view ordering problems. As of December 31,
1999, there are four (4) Multi System Operators ("MSOs") who individually
comprise greater than 10% of the Company's annual service revenue. These
percentages may vary as contracts with additional cable companies are
concluded and as cable operators continue to consolidate their systems with
other cable operators.
COMPETITION
The Company uses telephone company grade, feature laden equipment for
its automated pay-per-view order processing service. The Company has a
strong reputation for offering customer friendly features and excellent
customer service. In addition, the Company offers 24-hour customer service
and reliability with near zero down time, particularly under heavy load
during major special events. Although competition is strong from the
Company's major competitor, the Company is attracting significant numbers
of new customers. The Company's aggressive marketing strategies and
reputation allowed it to grow its full-time customer base by 39% to
approximately 15.8 million full-time addressable homes in 1999, which makes
it the largest service provider of ANI pay-per-view ordering service to the
cable industry. The Company plans to continue its marketing approach during
2000 and believes that strategy will provide continued growth in numbers of
subscribers.
EMPLOYEES
At December 31, 1999, the Company had 17 full-time employees.
Additional personnel may be added as the Company's business develops and as
circumstances require.
BACKLOG
The Company's revenues are computed and assessed on the basis of a
fixed charge for every order placed with a subscribing customer for
specialized cable programming service or for other services transmitted
through its equipment. As a result, no form of backlog exists, other than
as represented by accumulated service charge income which has yet to be
paid to the Company.
RESEARCH AND DEVELOPMENT
The Company is principally a sales and marketing company. Therefore,
the Company does not anticipate that it will perform any significant or
material research and development.
ITEM 2. PROPERTIES
The Company leases office space of approximately 8,700 square feet in
the Mt. Laurel, New Jersey, Horizon Way Corporate Center. The lease
expires May 31, 2004. The office space is used to house the equipment used
to provide the Service as well as the Company's present executive, sales,
secretarial and technical support personnel.
ITEM 3. LEGAL PROCEEDINGS
The Company has received notice from a cable operating company
customer asserting its right to be indemnified against claims of patent
infringement made to the cable operator by a third party. The third party
has alleged to the cable operator that portions of the cable operator's
pay-per-view operations infringe one or more patents held by such party.
No notice of alleged infringement has been received by the Company from
such third party. The Company has retained independent patent counsel to
review the terms and the alleged infringement. The Company is unable at
this time to determine the amount or extent of liability, if any, to the
cable operator.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through solicitation
of proxies or otherwise.
ITEM 5. MARKET FOR THE ISSUER'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The Issuer's Common Stock is traded in the Over-the-Counter Market.
Over-the-Counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions. The range of high and low bid prices for the Company's
common stock for the two most recent fiscal years, as reported by The
NASDAQ Stock Market, Inc. is as follows:
QUARTER 1999 HIGH LOW
------------ ---- ---
First $.22 $.10
Second $.08 $.06
Third $.10 $.06
Fourth $.06 $.055
QUARTER 1998
------------
First $.09 $.06
Second $.23 $.08
Third $.10 $.06
Fourth $.11 $.03
As of March 10, 2000, there were 379 holders of record of the Common
Stock of the Company.
The Company has paid no cash dividends since its incorporation. The
Company intends to retain any future earnings for use in its business and
has no present intention to pay cash dividends on its Common Stock in the
foreseeable future. Holders of the Common Stock are entitled to share
ratably in dividends when and as declared by the Board of Directors out of
funds legally available therefore.
Shares of Common Stock which have had the same beneficial owner since
April 21, 1988, or which have had the same beneficial owner for a
continuous period in excess of two years prior to the record date of any
meeting of stockholders, are entitled to 10 votes per share in any matters
submitted for vote, at a meeting of stockholders. All other stockholders
have one vote per share unless this limitation is waived by the Board of
Directors. As of March 10, 2000, 18,257,070 shares of the Company's Common
Stock were entitled to 10 votes per share. The remaining 6,282,430 shares
of Common Stock were entitled to one vote per share. Mr. Lenfest owns
14,557,453 shares of Common Stock which are entitled to ten votes per
share.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Net income before income taxes was $1,011,547 for the year ended
December 31, 1999, compared to $781,158 for the year ended December 31,
1998. The Company experienced a decrease in the average monthly buy rate
from 17.2% for the year ended December 31, 1998, to 12.8% for the year
ended December 31, 1999. The drop in the buy rate caused the pay-per-view
buy revenue to decrease approximately $616,560. The Company believes the
decrease in the buy rates for the year ended December 31, 1999, is
attributable to a somewhat weak movie product, a lack of major special
events and the movement of cable operators to impulse ordering on digital
cable systems. Although the pay-per-view buy revenue decreased, the
Company had an increase in feature revenue of $132,971 as a result of the
Company serving approximately 4,400,000 more full-time subscribers at
December 31, 1999. PPV+ service revenue decreased $51,091 for the year
ended December 31, 1999, also as a result of the buy rate decrease.
The Company had net income of $650,475 for the year ended December 31,
1999 compared to $472,773 for the year ended December 31, 1998. Included
in net income is income tax expense $361,072 for the year ended December
31, 1999 compared to $308,385 for the year ended December 31, 1998. As of
December 31, 1999, the Company's net operating loss carryforward is
approximately $2,700,000 on a tax reporting basis (see Note 7 to the
Company's financial statements).
Service expenses decreased $346,196 for the year ended December 31,
1999. This is primarily a result of a decrease in trunk expense of
$368,213 due to the buy rate decrease (see above) and a reduction in the
telephone rates charged by MCIWorldcom.
As of December 31, 1999, the Company was serving approximately
15,800,000 full-time cable subscribers and 1,300,000 part-time subscribers,
compared to approximately 11,400,000 full-time cable subscribers and
1,300,000 part-time subscribers served as of December 31, 1998. The part-
time subscribers did not significantly contribute to the revenue or service
expenses for the year ended December 31, 1999 and 1998.
During the year ended December 31, 1999, the Company purchased
$254,109 of equipment compared to $303,996 purchased during the year ended
December 31, 1998. Depreciation accounted for 16% of total operating
expenses for the year ended December 31, 1999, compared to 18% for the year
ended December 31, 1998. For the year ended December 31, 1999, both
selling and marketing expenses and general and administrative expenses
remained relatively constant with decreases of less than 1% each.
Total liabilities decreased $1,180,626 and total assets decreased
$951,895 for the year ended December 31, 1999. The decrease in total
liabilities was partially a result of a decrease in accounts payable of
$156,704. The accounts payable at December 31, 1998, was higher than usual
as a result of an $84,000 equipment purchase and DS3 trunk invoices of
approximately $100,000 that were on hold due to incorrect billing. These
invoices were paid during January 1999. There was also a decrease in notes
payable - majority stockholder of $1,161,613 and a decrease in accrued
interest - majority stockholder of $274,663 due to debt repayment.
Partially offsetting the above decreases is an increase in accrued
dividends on preferred stock of $422,244. The decrease in assets is
partially attributable to a decrease in deferred tax asset of $382,057, and
an increase in accumulated depreciation of $660,830. The Company's days
for sales in accounts receivable is 50 days at December 31, 1999 compared
to 51 days at December 31, 1998. The Company does not offer
incentives/discounts to its customers, nor has it changed its credit terms
with its customers.
The Company had positive cash flow from operating activities of
$1,287,601 for the year ended December 31, 1999 compared to $2,212,197 for
the year ended December 31, 1998. Net cash provided by operating
activities decreased as a result of the payment of equipment purchases and
DS3 trunk invoices that were outstanding as of December 31, 1998 (see
above) and as a result of paying interest on the loans to the majority
stockholder during the year ended December 31, 1999. During 1998, no
interest was paid to the majority stockholder. All 1998 payments were
applied to loan principal and are in the cash flows from financing
activities section of the statement of cash flows. Ignoring changes in
operating assets and liabilities that result from timing issues, and
considering only adjustments to reconcile net income to net cash provided
by operating activities, the Company would have positive cash flow from
operating activities of $1,699,684 for the year ended December 31, 1999,
compared to positive cash flow from operating activities of $1,667,593 for
the year ended December 31, 1998.
Since November 2, 1989, the Company has funded its expansion and
operating deficit from the $2,500,000 of proceeds from the sale of shares
of the Company's Common Stock and Preferred Stock to Mr. Lenfest and from
borrowings from Mr. Lenfest. From November 1989 to February 1996, the
Company borrowed an aggregate of $6,128,712 from Mr. Lenfest. The interest
rates on the loans range from a floating rate based on the prime rate of
PNC Bank to a fixed rate of 12%. Interest on one of the loans in the
principal amount of $717,099 as of December 31, 1999, is payable quarterly
and, at the option of the Company may be paid by the delivery of shares of
the Company's Preferred Stock at the rate of one share of Preferred Stock
for each one dollar of accrued interest. Interest due on this loan prior
to 1998, in the amount of $473,682 has been paid with 473,682 shares of
Preferred Stock. No Preferred Stock has been issued for 1998 accrued
interest and the 1999 interest was paid in cash. In addition, during
January 1995, Mr. Lenfest purchased from Science Dynamics Corporation the
Company's non-interest bearing note in the amount of $541,000.
The Company remains dependent upon the deferral of a lump sum
repayment of principal and interest due to Mr. Lenfest to fund operations
and capital expenditures from operating cash flow. Effective as of March
31, 1999, the Company obtained from Mr. Lenfest a written agreement stating
he will not demand repayment of his loans or the cash payment of accrued
interest on the loans through January 1, 2001. Nevertheless, the Company
intends to continue to voluntarily make monthly payments of $125,000 to Mr.
Lenfest during 2000. On January 1, 1999, the Company began to pay current
monthly interest payments to Mr. Lenfest from its monthly loan payment. The
balance of the payment is applied to loan principal. During the year ended
December 31, 1999, the Company made monthly payments to Mr. Lenfest of
$150,000 bringing the total payments for the year to $1,800,000. The
Company intends to make monthly repayments to Mr. Lenfest in the amount of
$125,000 throughout 2000 and management believes it will be able to fund
its core business from operating cash flow through December 31, 2000. The
aggregate outstanding loan balance due to Mr. Lenfest as of December 31,
1999, is $1,258,099 in loan principal and $2,420,174 in accrued interest
(see Note 4 to the Company's financial statements).
The Company's ability to fund its operating expenses primarily depends
on three factors: the continued expansion of the Company's subscriber base,
the cable industry's buy rates, and the continued deferral by Mr. Lenfest
of a lump sum cash repayment of his loans to the Company. Management
believes its present marketing strategies will further increase the
customer base, although there can be no assurances that the Company will be
able to attract any further customers or that it will retain its current
customers. In addition, revenues are affected by the "buy rates" of
subscribers connected to the Service. The Company has no control over the
buy rates and therefore cannot assure that buys rates will increase or will
remain at their current level. As noted above, the Company experienced a
decrease in the average monthly buy rate from 17.2% for the year ended
December 31, 1998, to 12.8% for the year ended December 31, 1999,
respectively, partially as a result of movement of cable operators to
impulse ordering on digital cable systems. Some cable operators have begun
deploying digital services to their customers. These digital services will
allow cable operators to offer additional channels and to offer additional
pay-per-view channels. Where the cable operators have activated two-way
cable plant (i.e. the operator is able to send a signal to and receive a
signal from its customer), the digital service can also allow the cable
operator to process ordering of pay-per-view movies and events directly
from its customers, without using the Company's service. The long-term
effect of the deployment of digital two-way service on the Company is not
clear. The deployment of digital cable and the activation of two-way
service require a significant capital commitment from the cable operator.
In addition, the Company has found that some cable operators with digital
service have chosen to use the Company's single number ordering technology
for pay-per-view ordering. In addition, the Company believes that the
Company's patent pending Internet pay-per-view technology for pay-per-view
order processing may be used by cable operators as an additional method for
the operator's customers to order pay-per-view movies and events. The
Company intends to monitor developments in the rollout of digital services
by its cable operator customers and to attempt to position the Company to
continue to be the cable operator's provider of choice for processing pay-
per-view orders. There can be no assurances that the Company will be
successful in this effort, however.
ITEM 7. FINANCIAL STATEMENTS
See Item 13 for a list of financial statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements of any nature at any time with the
Company's auditors with regard to any aspect of the Company's financial
statements, its financial disclosure or its accounting practices.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF ISSUER
The following table sets forth certain information as of December 31,
1999 with respect to each of the Company's directors and officers.
POSITION(S) WITH DIRECTOR
NAME AGE THE COMPANY SINCE
- ---- --- ---------------- --------
H.F. (Gerry) Lenfest 69 Chairman of the 1989
Board and Director
Frank J. Carcione 59 President, 1990
Chief Executive
Officer, and Director
Joseph M. Murphy 46 Executive Vice 1997
President of Sales
& Operations, and
Director
H. Chase Lenfest 35 Director 1999
Brook J. Lenfest 30 Director 1999
Irene A. DeZwaan 36 Secretary & Treasurer
The directors of the Company receive no compensation.
All directors serve until the next annual meeting of shareholders and
until their successors have been elected and have qualified. All officers
serve at the discretion of the Board of Directors.
BUSINESS EXPERIENCE
H. F. Lenfest has been a director of the Company since 1989. Mr.
Lenfest is currently a member of the Lenfest Group, LLC, a privately owned
holding company for a group of companies owned by the Lenfest family. From
1974 until January 2000, Mr. Lenfest was the President, CEO and a director
of Lenfest Communications, Inc. and each of its subsidiaries. Lenfest
Communications, Inc. and its subsidiaries were engaged in operating cable
television systems, and providing cable advertising and programming.
Frank J. Carcione has been a director of the Company since 1990. He
became the Executive Vice President in May 1990, and was elected President
and Chief Executive Officer in May 1991. From August 1989 to May 1990, he
held the position of Vice President (marketing, sales, pay-per-view and
franchise relations) with Garden State Cablevision, L.P., a New Jersey
cable television operator and an affiliate of The Lenfest Group of
companies. From November 1980 until August 1989, he held the same position
with New York Times Cable TV, the predecessor to Garden State Cablevision,
L.P.
Joseph M. Murphy has been a director of the Company since 1997. He is
the Executive Vice President of Sales and Operations of the Company. Mr.
Murphy was appointed to this position in September 1994. Prior to this
appointment, Mr. Murphy had been Vice President of Sales since joining the
Company in 1986.
H. Chase Lenfest has been a director of the Company since June 1999.
Since January 2000, Mr. Chase Lenfest has been the Vice President of Local
Sales of Starnet, L.P., the successor interest to Starnet, Inc. From December
1998 until January 2000, Chase Lenfest was the Vice President of Local
Sales of Lenfest Advertising, Inc., a subsidiary of Lenfest Communications,
Inc. From January 1996 through January 1997, he was the Regional Photo
Classified Manager of Lenfest Programming Services, Inc., a
subsidiary of Lenfest Communications, Inc. From February 1994 through
January 1996, he was employed by the Company as a Special Projects Manager.
From March 1988 until January 1994, he was a stockbroker with Wheat First
Butcher & Singer. He is the son of H.F. Lenfest.
Brook J. Lenfest has been a director of the Company since June 1999.
Since January 2000, Mr. Brook Lenfest has been the Chairman and CEO of
NetCarrier, Inc., an internet service provider. He was the Vice President-
Business Development for Suburban Cable TV Company, Inc., a subsidiary of
Lenfest Communications, Inc. from May 1997 until January 2000. Mr. Brook
Lenfest was a Vice President and Director of Operations for Starnet, Inc.,
a subsidiary of Lenfest Communications, Inc., and was an officer of Starnet
Inc. from January 1995. He was Vice President-Business Development,
Director of Communications and Product Manager, for Starnet, Inc. from
January 1994 to 1995. From 1993 to 1994 he was a Marketing Manager for
South Jersey Cablevision (now Lenfest Atlantic, Inc.), a subsidiary of
Lenfest Communications, Inc. Prior to 1993, he held various positions at
Garden State Cablevision. He is the son of H.F. Lenfest.
Irene A. DeZwaan, CPA, has been the Secretary and Treasurer of the
Company since in July 1993. Prior to this appointment, Ms. DeZwaan had
been the Manager of Finance and Administration of the Company since
November 1990.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, there are no events of delinquent filing
requiring disclosure under Item 405 of Regulation S-K, except that
each of Frank Carcione, Joseph Murphy and Irene DeZwaan did not timely
file a Form 5 with respect to grant to them on June 29, 1999 of
options to acquire 300,000, 250,000 and 200,000, respectively,
under the Company's 1999 Stock Option Plan.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION OTHER RESTRICTED
NAME AND ANNUAL STOCK OPTIONS/
PRINCIPAL POSITION YEAR SALARY COMMISSIONS COMPENSATION AWARDS SARs (#)
- ---------------------- ------ ----------- ------------ ---------- ---------
Frank J. Carcione 1999 $140,400 - $3,510(1) - 300,000(2)
CEO 1998 135,000 - 3,375(1) $9,219(3)
1997 124,950 - 3,124(1) -
Joseph Murphy 1999 $97,519 $45,799 $2,438(1) - 250,000(4)
Executive Vice 1998 93,767 21,448 2,344(1) $7,375(5)
President of Sales 1997 89,302 44,155 2,233(1) -
& Operations
(1) Company funded contributions to the Company's Simplified Pension Plan
(SEP).
(2) Includes 300,000 shares of common stock granted to Frank J. Carcione
under the 1999 Stock Option Plan at a purchase price of $.07 per share.
(3) Includes 125,000 shares of common stock awarded to Frank J. Carcione at
a value of $.07375 per share.
(4) Includes 250,000 shares of common stock granted to Joseph Murphy
under the 1999 Stock Option Plan at a purchase price of $.07 per share.
(5) Includes 100,000 shares of common stock awarded to Joseph Murphy at a
value of $.07375 per share.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARs EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE($/SH) DATE
- ---------- ------------ ---------------- ----------- ----------
Frank J. Carcione
President & CEO 300,000 18% $.07 6/28/09
Joseph Murphy
Executive Vice
President of Sales
& Operations 250,000 15% $.07 6/28/09
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FY-END OPTION VALUES
----------------------------------------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
NAME ACQUIRED OPTIONS OPTIONS
- ----- ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---------- -------- ------------- -------------
Frank J. Carcione - - 75,000 - (1)
President & CEO exercisable
- - 225,000 - (1)
unexercisable
Joseph Murphy - - 62,500 - (1)
Executive Vice President exercisable
of Sales & Operations - - 187,500 - (1)
unexercisable
(1) Value calculated based upon the average of the bid and ask price on
12/31/99 which is less than the exercise price.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 10, 2000, certain
information with respect to each person who was known to the Company to be
a beneficial owner of more than five percent (5%) of the Company's Common
Stock.
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS (1)
- -------------------- ----------------- ----------
H.F (Gerry) Lenfest 67,931,746 (2) 87.2% (2)
1332 Enterprise Drive
West Chester, PA 19380
Chairman of the Board and Director
(1) As of March 10, 2000, 24,539,500 shares of Common Stock were
outstanding.
(2) Includes 23,459,133 shares of Common Stock issuable upon conversion
of Preferred stock owned by Mr. Lenfest. Includes Warrants to acquire
up to 29,915,160 additional shares of Common Stock. Does not include
undeclared and unpaid dividends on the Preferred Stock as of December
31, 1999, which may be converted into shares of Common Stock. Does not
include accrued but unpaid interest on the subordinated $500,000 Note
which may be converted into shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 10, 2000, certain
information with respect to the Common Stock beneficially owned by the
directors and executive officers of the Company and by all directors and
executive officers as a group. The address of all directors and executive
officers is c/o TelVue Corporation, 16000 Horizon Way, Suite 500, Mt.
Laurel, NJ 08054.
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS (1)
- -------------------- ----------------- ----------
H.F. (Gerry) Lenfest 67,931,746 (2) 87.2% (2)
Chairman of the Board
and Director
Frank Carcione 425,000 (3) 1.7%
Chief Executive Officer,
President and Director
Joseph M. Murphy 350,000 (4) 1.4%
Executive Vice President
of Sales and Operations and
Director
All Directors and 68,981,746(2)(3)(4)(5) 87.7%
Officers as a Group
(6 Persons)
(1) As of March 10, 2000, 24,539,500 shares of Common Stock were
outstanding.
(2) Includes 23,459,133 shares of Common Stock issuable upon conversion
of Preferred stock owned by Mr. Lenfest. Includes Warrants to acquire
up to 29,915,160 additional shares of Common Stock. Does not include
undeclared and unpaid dividends on the Preferred Stock for the period
ended December 31, 1998, which may be converted into shares of Common
Stock. Does not include accrued but unpaid interest on the
subordinated $500,000 Note which may be converted into shares of Common
Stock.
(3) Includes 300,000 shares issuable to Frank J. Carcione upon exercise of
stock options held by Mr. Carcione, of which 75,000 shares are
currently exercisable and have been exercised.
(4) Includes 250,000 shares issuable to Joseph Murphy upon exercise of
stock options held by Mr. Murphy, 62,500 shares are currently
exercisable, of which 60,000 shares have been exercised.
(5) Includes 200,000 shares issuable to Irene DeZwaan upon exercise of
stock options held by Ms. DeZwaan, 50,000 shares are currently
exercisable and have been exercised.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1999, the Company was indebted to Mr. Lenfest in the
principal amount of $1,258,099 and accrued interest of $2,420,174. During
1999, Mr. Lenfest agreed to accept payments at the rate of $150,000 per
month. (See Management's Discussion and Analysis or Plan of Operation and
Note 4 of the 1999 financial statements of the Company).
The Company provided its ANI services to subsidiaries of Lenfest
Communications, Inc. ("LCI"), a company that had operated under the control
of Mr. Lenfest until January 2000. The Company recognized revenues of
approximately $390,000 from the LCI subsidiaries during 1999. (See Note 9
of the 1999 financial statements of the Company).
In May 1999, the Company established a stock option plan. Under this
plan, the Company may grant options for up to 10 million shares of common
stock. As of December 31, 1999, 1,625,000 options have been granted and
367,500 options are vested and exercisable (See Note 6 of the 1999 financial
statements of the Company).
Other related transactions are described in Notes 4, 6 and 9 of the 1999
financial statements of the Company.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES & REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants dated January 31,
2000.
Balance Sheets as of December 31, 1999 and 1998.
Statements of Operations for the years ended December 31, 1999 and
1998.
Statements of Stockholders' Deficit for the years ended December 31,
1999 and 1998.
Statements of Cash Flows for the years ended December 31, 1999 and
1998.
Notes to Financial Statements.
REPORT ON FORM 8-K.
None.
<PAGE>
EXHIBITS
3.1 Certificate of Incorporation of the Company (incorporated by
reference to the Company's Registration Statement on Form S-8, dated
March 30, 1989 (the "Registration Statement")).
3.2 Bylaws of the Company (incorporated by reference to the Company's
Registration Statement).
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company, dated April 11, 1990 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31,
1991, (the "1991 Form 10-K")).
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company, dated March 15, 1991 (incorporated by reference to the 1991
Form 10-K).
3.5 Form of copy of Amendment of Certificate of Incorporation of the
Company, filed September 25, 1995 (incorporated by reference to the
Company's Form 10-QSB for the period ended September 30, 1995, (the
September 30, 1995 Form 10-QSB)).
4.1 Incentive Stock Option Plan (incorporated by reference to the
Company's Registration Statement).
4.2 Form of Stock Option Agreement (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31,
1989, (the "1989 Form 10-K")).
4.3 Warrant Agreement, dated March 15, 1991, between the Company and
H.F. Lenfest (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990, (the "1990
Form 10-K")).
4.4 Certificate of Designation of Class A Preferred Stock (incorporated
by reference to the September 30, 1990 Form 10-Q).
4.5 The TelVue Corporation 1999 Stock Option Plan (incorporated by
reference to Exhibit 99 of the Company's Registration Statement on
Form S-8, dated September 23, 1999), (the "1999 Stock Option Plan")).
4.6 Form of ISO Option Agreement issued pursuant to the 1999 Stock Option
Plan.
4.7 Form of NQSO Option Agreement issued pursuant to the 1999 Stock
Option Plan.
10.1 Distributorship Agreement, dated November 2, 1989, between the
Company and Science (incorporated by reference to the 1989 Form
10-K).
10.2 Stock Purchase Agreement, dated November 2, 1989, between the
Company and H.F. Lenfest (incorporated by reference to the Company's
Report on Form 8-K, dated November 15, 1989, (the "1989 Form 8-K")).
10.3 Shareholders' Agreement, dated November 2, 1989, among the Company
and certain of its stockholders (incorporated by reference to the
Company's 1989 Form 8-K).
10.4 Option Agreement, dated November 2, 1989, among the Company and
certain of its stockholders (incorporated by reference to the 1989
Form 8-K).
10.5 Form of Credit Agreement between the Company and H.F. Lenfest
(incorporated by reference to the 1990 Form 10-K).
10.7 Form of Line of Credit Agreement between the Company and H.F.
Lenfest (incorporated by reference to the 1990 Form 10-K).
10.8 Subordinated Promissory Note, dated November 15, 1994 the principal
amount of $541,000 payable to Science Dynamics Corporation
(incorporated by reference to the 1994 Form 10-KSB).
10.10 Letter Agreement dated November 8, 1990 between Science Dynamics
Corporation and H.F. Lenfest (incorporated by reference to the
Company's Report on Form 8-K for November 16, 1990).
10.11 Loan Agreement dated December 24, 1991, between the Company and H.F.
Lenfest (incorporated by reference to the 1991 Form 10-K).
10.12 Lease Agreement for office space and the First Amendment to Lease
dated March 30, 1994 ("Office Lease Agreement"), between the Company
and Bloom Associates (incorporated by reference to the 1994 Form 10-
KSB).
10.13 Letter effective as of March 31, 1999, from H.F. Lenfest, waiving
the repayment of loans and accrued interest until January 1, 2001
(incorporated by reference to the March 31, 1999, Form 10-QSB).
10.14 Second Amendment to Office Lease Agreement Dated May 5, 1999,
between the Company and Bloom Associates.
11. Statement re: Computation of Per Share Earnings (see the Company's
December 31, 1999 Financial Statements included herein).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
TELVUE CORPORATION
DATED: By: /s/Frank J. Carcione
----------------------------------
Frank J. Carcione
President (Chief Executive Officer)
DATED: By: /s/Irene A. DeZwaan
----------------------------------
Irene A. DeZwaan
Treasurer (Controller)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- -------------------------------- Chairman of the
H.F. Lenfest Board and Director
/s/Frank J. Carcione Director 3/27/00
- --------------------------------
Frank J. Carcione
/s/Joseph Murphy Director 3/27/00
- --------------------------------
Joseph Murphy
/s/H. Chase Lenfest Director 3/27/00
- --------------------------------
H. Chase Lenfest
/s/Brook Lenfest Director 3/27/00
- --------------------------------
Brook Lenfest
<PAGE>
EXHIBIT INDEX
4.6 Form of ISO Option Agreement issued pursuant to the 1999 Stock
Option Plan.
4.7 Form of NQSO Option Agreement issued pursuant to the 1999 Stock
Option Plan.
10.14 Second Amendment to Office Lease Agreement Dated May 5, 1999,
between the Company and Bloom Associates.
<PAGE>
EXHIBIT 4.6
TELVUE CORPORATION
1999 STOCK OPTION PLAN
ISO OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION ("ISO") Agreement is made as of June 29,
1999 by and between TELVUE CORPORATION, a Delaware corporation (the
"Company"), and ______________ (the "Optionee").
WITNESSETH:
1. GRANT. Effective as of the date hereof (the "Date of Grant"),
the Company hereby grants to the Optionee an option (the "Option") to
purchase on the terms and conditions hereinafter set forth all or any part
of an aggregate of ____ shares of the Company's Common Stock, par value
$0.01, (the "Option Shares"), at the purchase price of $[Insert Price] per
share (the "Option Price"). The Optionee shall have the cumulative right
to exercise the Option, and the Option is only exercisable, as follows:
NUMBER OF OPTION SHARES THAT TOTAL OPTION SHARES
MAY BE PURCHASED ON OR AFTER: -------------------
----------------------------
DATE DATE DATE DATE
_______ _______ _______ _______ ______________
2. TERM. The Option granted hereunder shall expire in all events at
5:00 p.m. (local time in Philadelphia, Pennsylvania) on June 28, 2009 (the
"Expiration Date"), unless sooner terminated as provided in Subparagraphs
(a), (b), (c), (d), (e) or (f) below.
(a) TERMINATION FROM EMPLOYMENT. The Option shall terminate
three(3) months after the Optionee's employment with the Company is
terminated for any reason other than (i) disability (within the meaning of
section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"); "Disability") or death, or (ii) circumstances described in
Subsection (2)(b) below. During such three-month period the Optionee may
purchase any remaining Option Shares that could have been purchased on the
date Optionee's employment terminated, but may not purchase any Option
Shares that would otherwise first become purchasable after Optionee's
employment terminated.
(b) DISMISSAL FOR CAUSE. The Option shall immediately
terminate upon termination of the Optionee's employment with the Company
if the Optionee is dismissed from employment with the Company for Cause
(as defined below). In addition to the immediate termination of the
Option, the Optionee shall automatically forfeit all vested Option Shares
for which the Company has not yet delivered the share certificates upon
refund by the Company of the Option Price for such Option Shares.
(c) DISABILITY OR DEATH. The Option shall terminate one (1)
year after Optionee's employment with the Company is terminated by reason
of the Optionee's Disability or death. During such one-year period the
Optionee (or the Optionee's heirs or legal representatives if Optionee is
deceased) may purchase any remaining Option Shares which could have been
purchased on the date Optionee's employment terminated, but may not
purchase any Option Shares which would otherwise first become purchasable
after Optionee's employment terminated.
(d) CHANGE IN CONTROL. In the event of a Change in Control
(as defined in the Plan), the Committee may either (i) accelerate the
termination date of the Option to a date no earlier than thirty (30) days
after notice of such acceleration is given to the Optionee whereupon the
Option shall become immediately exercisable in full or (ii) terminate any
Option which has not then vested.
(e) CHANGE IN ACCOUNTING TREATMENT. If the Committee finds
that a change in the financial accounting treatment for options granted
under the Plan (as defined below) from that in effect on the date of the
Plan was adopted, materially and adversely affects the Company or, in the
determination of the Committee, may materially and adversely affect the
Company in the foreseeable future, the Committee may, in its discretion,
set an accelerated termination date for the Option. In such event, the
Committee may take whatever other action, including acceleration of any
exercise provisions, it deems necessary.
(f) LIMITATION ON EXERCISE. No Option may be exercised after
five years from the Grant Date if, on the Grant Date the Optionee owns,
directly or by attribution under Section 424(d) of the Code, shares
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company.
(g) DEFINITIONS. For purposes of this Option the following
terms shall have the meanings set forth below:
(i) "Cause" shall mean (A) a breach by the Optionee of
his or her employment agreement with the Company, (B) a breach of the
Optionee's duty of loyalty to the Company, including, without limitation,
any act of dishonesty, embezzlement or fraud with respect to the Company,
(C) the commission by Optionee of a felony, a crime involving moral
turpitude or other act causing material harm to the Company's standing and
reputation, (D) Optionee's continued failure to perform his duties to the
Company or (E) unauthorized disclosure of trade secrets or other
confidential or proprietary information belonging to the Company;
(ii) "Committee" shall refer to the Committee
designated to administer the Plan; and
(iii) "Plan" shall mean the TelVue Corporation, 1999
Stock Option Plan.
3. GENERAL RULES. To the extent otherwise exercisable, this Option
may be exercised in whole or in part except that (i) any partial exercise
of this Option must be for a round lot of 100 Option Shares or a whole
number multiple thereof and (ii) this Option may in no event be exercised
(A) with respect to fractional shares or (B) after the expiration of the
Option term for any reason under Paragraph 2 hereof.
4. TRANSFERS. No Option granted under the Plan may be transferred,
except by will or by the laws of descent and distribution. During the
lifetime of the person to whom an Option is granted, such Option may be
exercised only by such person. Any attempt at assignment, transfer,
pledge or disposition of the Option contrary to the provisions hereof or
the levy of any execution, attachment or similar process upon the Option
shall immediately cause the Option to terminate, all vested and unvested
options to be forfeited and this Option Agreement shall be null and void
and without effect. Any exercise of the Option by a person other than the
Optionee shall be accompanied by appropriate proofs of the right of such
person to exercise the Option.
5. METHOD OF EXERCISE AND PAYMENT.
(a) METHOD OF EXERCISE. When exercisable under Paragraphs 1,
2 and 3, the Option may be exercised by written notice, pursuant to
Paragraph 10, to the Company's President specifying the number of Option
Shares to be purchased. The notice shall also contain the representation
described in Paragraph 12, if applicable, and shall be accompanied by
payment of the aggregate Option Price of the Option Shares being
purchased. Such exercise shall be effective upon the actual receipt by
the Company's President of such written notice and payment.
Notwithstanding the above, should the Company be advised by counsel that
the issuance of Option Shares upon the exercise of an Option should be
delayed pending (A) registration under federal or state securities laws,
(B) the receipt of an opinion that an appropriate exemption therefrom is
available, (C) the listing or inclusion of the Option Shares on any
securities exchange or in an automated quotation system or (D) the consent
or approval of any governmental regulatory body whose consent or approval
is necessary in connection with the issuance of such Option Shares, the
Company may defer the exercise of any Option granted hereunder until
either such event in A, B, C, or D has occurred.
(b) MEDIUM OF PAYMENT. An Optionee may pay for Option Shares
(i) in cash, (ii) by certified check payable to the order of the Company,
or (iii) by such other mode of payment as the Committee may approve,
including payment through a broker in accordance with procedures permitted
by Regulation T of the Federal Reserve Board.
6. ADJUSTMENTS ON CHANGES IN COMMON STOCK. The aggregate number of
shares of Common Stock as to which Options may be granted under the Plan,
the number of Option Shares covered by each outstanding Option and the
Option Price per Option Share specified in each outstanding Option shall
be appropriately adjusted in the event of a stock dividend, stock split or
other increase or decrease in the number of issued and outstanding shares
of Common Stock resulting from a subdivision or consolidation of the
Common Stock or other capital adjustment (not including the issuance of
Common Stock on the conversion of other securities of the Company which
are convertible into Common Stock) effected without receipt of
consideration by the Company. The Committee shall have the authority to
determine the adjustments to be made under this Section and any such
determination by the Committee shall be final, binding and conclusive,
provided that no adjustment shall be made which will cause an Option to
lose its status as an incentive stock option.
7. WITHHOLDING. In addition to payment of the Option Price for the
Option Shares being purchased, as a condition to the issuance of Option
Shares and the delivery of any certificate for such Option Shares, the
Optionee shall be required to remit to the Company an amount sufficient to
satisfy any federal, state and/or local tax withholding requirements
arising in connection with the exercise of the Option. If the Company for
any reason does not require the Optionee to make a payment sufficient to
satisfy such withholding requirements, any tax withholding payments made
by the Company to any federal, state or local tax authority with respect
to the exercise of the Option shall constitute a personal obligation of
the Optionee to the Company, payable upon demand or, at the option of the
Company, by deduction from future compensation payable to the Optionee.
8. LEGAL REQUIREMENTS. If the listing, registration or
qualification of the Option Shares upon any securities exchange or under
any federal or state law, or the consent or approval of any governmental
regulatory body is necessary as a condition of or in connection with the
purchase of such Option Shares, the Company shall not be obligated to
issue or deliver the certificates representing the Option Shares as to
which the Option has been exercised unless and until such listing,
registration, qualification, consent or approval shall have been
effected or obtained. If registration is considered unnecessary by the
Company or its counsel, the Company may cause a legend to be placed on the
Option Shares being issued calling attention to the fact that they have
been acquired for investment and have not been registered.
9. ADMINISTRATION. The Option has been granted pursuant to, and is
subject to the terms and provisions of, the Plan. All questions of
interpretation and application of the Plan and the Option shall be
determined by the Committee, and such determination shall be final,
binding and conclusive.
10. NOTICES. Any notice to be given to the Company shall be
addressed to the President of the Company at its principal executive
office, and any notice to be given to the Optionee shall be addressed to
the Optionee at the address then appearing on the personnel records of the
Company, or at such other address as either party hereafter may designate
in writing to the other. Any such notice shall be deemed to have been
duly given when deposited in the United States mail, addressed as
aforesaid, registered or certified mail, and with proper postage and
registration or certification fees prepaid.
11. EMPLOYMENT. Nothing herein contained shall affect the right of
the Company to terminate the Optionee's employment, services,
responsibilities, duties, or authority to represent the Company at any
time for any reason whatsoever or no reason.
12. NOTICE OF DISPOSITION. As a condition to the grant of this
Option, Optionee agrees to provide written notice to the Company if
Optionee sells, transfers or otherwise disposes of any Option Shares on or
prior to the later of (a) the date which is two years after the date this
Option was granted or (b) the date which is one year after the date the
Company transferred the Option Shares to Optionee. The written notice of
exercise described in Paragraph 5(a) shall contain a representation that
Optionee shall provide written notice to the Company if the Option Shares
acquired upon such exercise are sold, transferred or otherwise disposed of
within the period described in this Paragraph 12.
13. ADDITIONAL PROVISION. None.
14. INCORPORATION. This ISO Option Agreement incorporates by this
reference all the terms and conditions set forth in the Plan and except as
expressly set forth in Paragraph 13 hereof, if any provision hereof is
inconsistent with the terms and conditions set forth in the Plan, the
terms and conditions of the Plan shall control. A copy of the Plan is
attached hereto as Exhibit A.
IN WITNESS WHEREOF, the Company has granted this Option as of the
day and year first above written.
ATTEST: TELVUE CORPORATION
By:_____________________________
----------------------------
Secretary Frank J. Carcione, President
(Corporate Seal)
WITNESS: ACCEPTED BY:
__________________________________ ____________________________
EXHIBIT 4.7
TELVUE CORPORATION
1999 STOCK OPTION PLAN
NQSO OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION ("NQSO") Agreement is made as of
[Insert Date of Grant] by and between TELVUE CORPORATION, a Delaware
corporation (the "Company"), and ____________________ (the "Optionee").
W I T N E S S E T H :
1. Grant. Effective as of [Insert Date of Grant] (the
"Date of Grant"), the Company hereby grants to the Optionee an option (the
"Option") to purchase on the terms and conditions hereinafter set forth
all or any part of an aggregate of ____ shares of the Company's Common
Stock, par value $0.01, (the "Option Shares"), at the purchase price of
$[Insert Price] per share (the "Option Price"). The Optionee shall have
the cumulative right to exercise the Option, and the Option is only
exercisable, as follows:
Number of Option Shares that may be Total Option Shares
Purchased on or after [Insert Date] -------------------
- -----------------------------------
[Date] [Date] [Date] [Date]
______ ______ ______ ______ ___________
2. Term. The Option granted hereunder shall expire in all
events at 5:00 p.m. (local Philadelphia, Pennsylvania time) on [Insert
Date - which should be one day short of the tenth anniversary of the date
of grant, or earlier] (the "Expiration Date"), unless sooner terminated as
provided in Subparagraphs (a), (b), (c), (d), or (e) below.
(a) Termination from Employment. The Option shall
terminate three (3) months after the Optionee's employment with the
Company is terminated for any reasons other than (i) disability (within
the meaning of section 22(e)(3) of the Internal Revenue Code of 1986, as
amended, ("Code"); "Disability") or death, or (ii) circumstances described
in Subsection (2)(b) below. During such three-month period the Optionee
may purchase any remaining Option Shares that could have been purchased on
the date Optionee's employment terminated, but may not purchase any Option
Shares that would otherwise first become purchasable after Optionee's
employment terminated.
(b) Dismissal for Cause. The Option shall immediately
terminate upon termination of the Optionee's employment with the Company
if the Optionee is dismissed from employment with the Company for Cause
(as defined below). In addition to the immediate termination of the
Option, the Optionee shall automatically forfeit all vested Option Shares
for which the Company has not yet delivered the share certificates upon
refund by the Company of the Option Price for such Option Shares.
(c) Disability or Death. The Option shall terminate
one (1) year after Optionee's employment with the Company is terminated by
reason of the Optionee's Disability or by death. During such one-year
period the Optionee (or the Optionee's heirs or legal representatives if
Optionee is deceased) may purchase any remaining Option Shares which could
have been purchased on the date Optionee's employment terminated, but may
not purchase any Option Shares which would otherwise first become
purchasable after Optionee's employment is terminated.
(d) Change in Control. In the event of a Change in
Control (as defined in the Plan), the Committee may either (i) accelerate
the termination date of the Option to a date no earlier than thirty (30)
days after notice of such acceleration is given to the Optionee whereupon
the Option shall become immediately exercisable in full or (ii) terminate
any Option which has not then vested.
(e) Change in Accounting Treatment. If the Committee
finds that a change in the financial accounting treatment for options
granted under the Plan (as defined below) from that in effect on the date
of the Plan was adopted, materially and adversely affects the Company or,
in the determination of the Committee, may materially and adversely affect
the Company in the foreseeable future, the Committee may, in its
discretion, set an accelerated termination date for the Option. In such
event, the Committee may take whatever other action, including
acceleration of any exercise provisions, it deems necessary.
(f) Definitions. For purposes of this Option the
following terms shall have the meanings set forth below:
(i) "Cause" shall mean (A) a breach by the
Optionee of his or her employment agreement with the Company or an
Affiliate, (B) a breach of the Optionee's duty of loyalty to the Company
or an Affiliate, including, without limitation, any act of dishonesty,
embezzlement or fraud with respect to the Company or an Affiliate, (C) the
commission by Optionee of a felony, a crime involving moral turpitude or
other act causing material harm to the Company's standing and reputation,
(D) Optionee's continued failure to perform his duties to the Company or
an Affiliate or (E) unauthorized disclosure of trade secrets or other
confidential or proprietary information belonging to the Company or an
Affiliate;
(ii) "Committee" shall refer to the Committee
designated to administer the Plan; and
(iii) "Plan" shall mean the TelVue Corporation,
1999 Stock Option Plan.
3. General Rules. To the extent otherwise exercisable,
this Option may be exercised in whole or in part except that (i) any
partial exercise of this Option must be for a round lot of 100 Option
Shares or a whole number multiple thereof and (ii) this Option may in no
event be exercised (A) with respect to fractional shares or (B) after the
expiration of the Option term for any reason under Paragraph 2 hereof.
4. Transfers. No Option under the Plan may be transferred,
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder. Any
attempt at assignment, transfer, pledge or disposition of the Option
contrary to the provisions hereof or the levy of any execution, attachment
or similar process upon the Option shall immediately cause the Option to
terminate, all vested and unvested options to be forfeited and this Option
Agreement shall be null and void and without effect. Any exercise of the
Option by a person other than the Optionee shall be accompanied by
appropriate proofs of the right of such person to exercise the Option.
5. Method of Exercise and Payment.
(a) Method of Exercise. When exercisable under
Paragraphs 1, 2 and 3, the Option may be exercised by written notice,
pursuant to Paragraph 10, to the Company's President specifying the number
of Option Shares to be purchased. The notice shall contain the
representation described in Paragraph 12 and shall be accompanied by
payment of the aggregate Option Price of the Option Shares being
purchased. Such exercise shall be effective upon the actual receipt by
the Company's President of such written notice and payment.
Notwithstanding the above, should the Company be advised by counsel that
the issuance of Option Shares upon the exercise of an Option should be
delayed pending (A) registration under federal or state securities laws,
(B) the receipt of an opinion that an appropriate exemption therefrom is
available, (C) the listing or inclusion of the Option Shares on any
securities exchange or in an automated quotation system or (D) the consent
or approval of any governmental regulatory body whose consent or approval
is necessary in connection with the issuance of such Option Shares, the
Company may defer the exercise of any Option granted hereunder until
either such event in A, B, C, or D has occurred.
(b) Medium of Payment. An Optionee may pay for Option
Shares (i) in cash, (ii) by certified check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may
approve, including payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board.
6. Adjustments on Changes in Common Stock. The aggregate
number of shares of Common Stock as to which Options may be granted under
the Plan, the number of Option Shares covered by each outstanding Option
and the Option Price per Option Share specified in each outstanding Option
shall be appropriately adjusted in the event of a stock dividend, stock split
or other increase or decrease in the number of issued and outstanding shares
of Common Stock resulting from a subdivision or consolidation of the Common
Stock or other capital adjustment (not including the issuance of Common
Stock on the conversion of other securities of the Company which are
convertible into Common Stock) effected without receipt of consideration by
the Company. The Committee shall have the authority to determine the
adjustments to be made under this Section and any such determination by the
Committee shall be final, binding and conclusive.
7. Withholding. In addition to payment of the Option Price
for the Option Shares being purchased, as a condition to the issuance of
Option Shares and the delivery of any certificate for such Option Shares,
the Optionee shall be required to remit to the Company an amount sufficient
to satisfy any federal, state and/or local tax withholding requirements
arising in connection with the exercise of the Option. If the Company for
any reason does not require the Optionee to make a payment sufficient to
satisfy such withholding requirements, any tax withholding payments made by
the Company or any Affiliate to any federal, state or local tax authority
with respect to the exercise of the Option shall constitute a personal
obligation of the Optionee to the Company, payable upon demand or, at the
option of the Company, by deduction from future compensation payable to the
Optionee.
8. Legal Requirements. If the listing, registration or
qualification of the Option Shares upon any securities exchange or under
any federal or state law, or the consent or approval of any governmental
regulatory body is necessary as a condition of or in connection with the
purchase of such Option Shares, the Company shall not be obligated to
issue or deliver the certificates representing the Option Shares as to
which the Option has been exercised unless and until such listing,
registration, qualification, consent or approval shall have been effected
or obtained. If registration is considered unnecessary by the Company or
its counsel, the Company may cause a legend to be placed on the Option
Shares being issued calling attention to the fact that they have been
acquired for investment and have not been registered.
9. Administration. The Option has been granted pursuant
to, and is subject to the terms and provisions of, the Plan. All
questions of interpretation and application of the Plan and the Option
shall be determined by the Committee, and such determination shall be
final, binding and conclusive.
10. Notices. Any notice to be given to the Company shall be
addressed to the President of the Company at its principal executive
office, and any notice to be given to the Optionee shall be addressed to
the Optionee at the address then appearing on the personnel records of the
Company, or at such other address as either party hereafter may designate
in writing to the other. Any such notice shall be deemed to have been
duly given when deposited in the United States mail, addressed as
aforesaid, registered or certified mail, and with proper postage and
registration or certification fees prepaid.
11. Employment. Nothing herein contained shall affect the
right of the Company to terminate the Optionee's employment, services,
responsibilities, duties, or authority to represent the Company at any
time for any reason whatsoever or no reason.
12. Notice of Disposition. As a condition to the grant of
this Option, Optionee agrees to provide written notice to the Company if
Optionee sells, transfers or otherwise disposes of any Option Shares on or
prior to the later of (a) the date which is two years after the date this
Option was granted or (b) the date which is one year after the date the
Company transferred the Option Shares to Optionee. The written notice of
exercise described in Paragraph 5(a) shall contain a representation that
Optionee shall provide written notice to the Company if the Option Shares
acquired upon such exercise are sold, transferred or otherwise disposed of
within the period described in this Paragraph 12.
13. Additional Provision. None.
14. Incorporation. This NQSO Option Agreement incorporates
by this reference all the terms and conditions set forth in the Plan and
except as expressly set forth in Paragraph 13 hereof, if any provision
hereof is inconsistent with the terms and conditions set forth in the
Plan, the terms and conditions of the Plan shall control. A copy of the
Plan is attached hereto as Exhibit A.
IN WITNESS WHEREOF, the Company has granted this Option as of the day
and year first above written.
Attest: TELVUE CORPORATION
By:------------------------------ ----------------------------
Secretary Frank J. Carcione, President
(Corporate Seal)
Witness: ACCEPTED BY:
- ------------------------- -------------------------------
<PAGE>
EXHIBIT 10.14
SECOND AMENDMENT TO LEASE
DATED MAY 5, 1999
BETWEEN
BLOOM ASSOCIATES (LANDLORD)
AND
TELVUE CORPORATION (TENANT)
PURSUANT to a Lease dated April 25, 1991 for 2,700 square feet of
space known as 18000 Horizon Way, Unit 300, Mt. Laurel, New Jersey; and
First Amendment to Lease dated March 30, 1994 (relocating to 16000 Horizon
Way, Unit 500 for a total of 8,732 SF); between the aforementioned parties,
the following changes shall be made;
1. PREMISES: 16000 Horizon Way, Unit 500 Mt. Laurel, NJ 08054
2. TERM: The term of the Lease shall be extended for an
additional five (5) years to commence June 1, 1999
and terminating May 30, 2004.
3. RENT: $100,418.00 per year, net;
$8,368.17 per month, net.
4. OPERATING
EXPENSES: $23,663.72 per year; $1,971.98 per month.
5. IMPROVEMENTS: Following execution of this Second Amendment to
Lease, the Landlord shall repair and steam clean
the carpet in Tenant's unit. Landlord and Tenant
agree that the carpet shall be cleaned around the
furniture and the furniture shall not be moved.
All other terms and conditions of the original Lease will remain in
full force and effect.
BLOOM ASSOCIATES, (Landlord)
By: /s/Steven Bloom
----------------
Steven Bloom
TELVUE CORPORATION, (Tenant)
By: /s/Frank J. Carcione 6/17/99
---------------------------
Name: Frank J. Carcione
Title: President
<PAGE>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 325,698
<SECURITIES> 0
<RECEIVABLES> 752,297
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,298,568
<PP&E> 5,039,277
<DEPRECIATION> 4,123,653
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<COMMON> 241,995
0
3,518,694
<OTHER-SE> (4,949,680)
<TOTAL-LIABILITY-AND-EQUITY> 3,860,723
<SALES> 5,619,968
<TOTAL-REVENUES> 5,619,968
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<INCOME-TAX> 361,072
<INCOME-CONTINUING> 650,475
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<NET-INCOME> 650,475
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