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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
ACTV, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 94-2907258
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1270 Avenue of the Americas
New York, New York 10020
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(Address of principal executive offices) (Zip Code)
(212) 262-2570 (Registrant's telephone number, including area code)
- --------------
Securities registered pursuant to Section 12 (g) of the Act:
Title of each class Name of exchange on which registered
- ------------------- ------------------------------------
Common Stock, Par Value $0.10 Boston Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $0.10 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
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As of April 23, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant (based on the NASDAQ Stock Market closing bid
price on April 23, 1995) was $36,463,514.
As of April 23, 1996, there were 11,891,105 shares of the registrant's common
stock outstanding.
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PART III
ITEM 10. MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company as of April 23, 1996, are as
follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- -------------------------- --- --------------------------
<S> <C> <C>
William C. Samuels 53 Chairman, Chief Executive
Officer and Director
Jay M. Kaplowitz 49 Director
David Reese 39 President, ACTV Entertainment,
Inc. and Director
Bruce Crowley 38 President, ACTV Interactive, Inc.
and Director
Christopher C. Cline 45 Vice President--Finance, Chief
Financial Officer, Secretary
Howard Squadron 69 Director
Richard Hyman 44 Director
</TABLE>
WILLIAM C. SAMUELS has served as President and a Director of the Company since
August 1, 1989, and became the Chief Executive Officer in 1993 and Chairman of
the Board in November 1994. He also served as Chairman of ACTV Interactive. He
was the founder and Chief Executive Officer of A.P.C. Skills, an international
consulting firm specializing in education and training, which merged with
Alexander Proudfoot, PLC in 1986. Mr. Samuels is a trustee of the Howard J.
Samuels Institute at City College. Mr. Samuels has a JD from Harvard Law School
(1968) and a BS in Economics and Engineering from the Massachusetts Institute of
Technology (1965).
JAY M. KAPLOWITZ has been a Director of the Company since December 1988. Mr.
Kaplowitz has for more than the past 20 years engaged in the practice of law in
New York, New York. For the last 18 years, he has been a member of the law firm
of Gersten, Savage, Kaplowitz & Curtin, general counsel to the Company.
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DAVID REESE has been Executive Vice President of the Company since November
1992 and has been President of ACTV Entertainment, Inc. a subsidiary of the
Company, since November 1994. He has been employed by the Company since December
1988, and served as the Company's Vice President of Finance from September 1989
through November 1992. He has been a director since 1992. Mr. Reese has a BS
from Pennsylvania State University (1978).
BRUCE CROWLEY joined the Company as President, Distance Learning in October
1994, became Executive Vice President in October, 1995, and became President of
ACTV Interactive, Inc. and a Director of the Company in December 1995. Prior
thereto, he had been employed by KDI Corporation since 1988, and was most
recently responsible for KDI Corporation's education division. Mr. Crowley has
a BA from Colgate University and an MBA from Columbia University.
CHRISTOPHER C. CLINE has been Chief Financial Officer since July 1995. Mr. Cline
joined the Company as Vice President--Finance in November 1993. From 1991 to
1993 he was employed by Showcase Communications Network, Ltd., a multimedia
computer software and publishing company, first as Vice President--Finance and
later as President and Chief Executive Officer. From 1988 to 1990, Mr. Cline was
Vice President of Intercontinental Trade and Finance Corp., a cross-border
financial trading and consulting company. Mr. Cline received a BA from Haverford
College (1973) and an MBA from Stanford University (1976).
RICHARD HYMAN has been a director since December 1994. For more than the past
five years, he has been the President of Triquest Financial Services, Inc. Mr.
Hyman received a BA from the University of Wisconsin (1974).
HOWARD SQUADRON has been a director since January 1995. He has been engaged in
the practice of law for more than 40 years, since 1954, with the firm of
Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin. Mr. Squadron received his BA
from City College (1946) and his JD from Columbia University (1947).
Executive officers are appointed by the Board of Directors and serve at the
pleasure of the Board of Directors. All Directors hold office until the next
annual meeting of stockholders or until their successors are elected and
qualified.
KEY EMPLOYEES AND CONSULTANTS
MICHAEL J. FREEMAN, Ph.D. has been Advanced Product Development Liaison since
November 1994. Prior thereto, he had been a director and Chairman of the Board
of Directors since June 1985. He is the inventor of the Programming Technology
and the founder of the Company. Dr. Freeman devotes a substantial amount of his
business time
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to the Company. Prior to his association with the Company and interactive
television, Dr. Freeman was involved in developing interactive products
principally in the toy and telecommunications industries. Dr. Freeman has a
Ph.D. from City University of New York (1977) and an MBA from Bernard Baruch
College (1970).
JAMES CROOK has been the Executive Vice President--Education Sales for the
Company or its subsidiary since joining the Company in 1990. From 1985 to 1990,
Mr. Crook was the President of Mind Training Systems, Inc. He has a BA from
Muskingum College of New Concord, Ohio (1966) and completed two years of
graduate study at Kent State University.
EMPLOYMENT AGREEMENTS
The Company and Mr. Samuels entered into an employment agreement August 1995
that runs through December 2000. Mr. Samuels serves as Chairman of the Board,
President and Chief Executive Officer of the Company. For the five-year term of
the agreement, Mr. Samuels will be paid a minimum annual salary of $190,000,
plus automatic adjustments for inflation. In addition, the agreement provides
for Mr. Samuels to receive an annual bonus based on the market appreciation of
the Company's common stock to be paid in cash and/or in unregistered
securities equal to 2% of the increase over a twelve month period in the total
market capitalization of the Company over fifty million dollars. Mr. Samuels'
employment agreement contains non-competition provisions pursuant to which
he agreed not to engage in a business that is competitive with the Company
during the term of his employment agreement and for one year thereafter.
The Company has issued to Mr. Samuels currently outstanding fully vested options
to purchase an aggregate of 533,035 shares of common stock at an exercise price
of $2.50 per share, expiring at dates between August 1997 and April 2001. In
addition, the Company has issued to Mr. Samuels options to purchase 525,000
shares of common stock at an exercise price of $3.25 per share, exercisable
through December 2003, each third of which vests annually beginning January
1997. During 1995, Mr. Samuels exercised 100,000 options at $2.50 per share and
80,000 at $3.50 per share.
Options for 120,000 of such shares may also be adjusted to avoid dilution from
the issuance from August 1989 through July 1993 by the Company of any Common
Stock (including Common Stock issued after July 1993 based on options granted
during the August 1989 to July 1993 period) as a result of any financing, joint
venture or other business transaction. The Company has also issued to Mr.
Samuels 215,000 outstanding SARs.
The Company and Mr. Reese entered into an employment agreement August 1995 that
runs through December 2000. Mr. Reese has agreed to serve as the President of
ACTV Entertainment at an annual base salary of $150,000, plus automatic
adjustments for inflation. Mr. Reese's employment agreement contains
non-competition provisions pursuant to which he agreed not to engage in a
business that is competitive with the Company during the term of his employment
agreement and for one year thereafter. Mr. Reese's employment agreement is
terminable by the Company on six months notice.
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The Company has issued to Mr. Reese currently outstanding fully vested options
to purchase (i) an aggregate of 49,683 shares of common stock at an exercise
price of $2.50 per share, and (ii) an aggregate of 55,317 shares of common stock
at an exercise price of $3.50 per share. The options expire at dates between
August 1997 and January 2002. In addition, the Company has issued to Mr. Reese
options to purchase 330,000 shares of common stock at an exercise price of $3.25
per share, exercisable through December 2003, each third of which vests annually
beginning January 1997. The Company has also issued to Mr. Reese 124,000,
outstanding SARs.
The Company and Mr. Crowley entered into an employment agreement in December
1995. Mr. Crowley has agreed to serve as President, ACTV Interactive, Inc. at an
annual base salary of $150,000. Mr. Crowley's employment agreement contains
non-competition provisions pursuant to which he agreed not to engage in a
business that is competitive with the Company during the term of his employment
agreement and for one year thereafter.
The Company has issued to Mr. Crowley currently outstanding fully vested options
to purchase an aggregate of 33,333 shares of common stock at an exercise price
of $3.50 per share, exercisable through July 1999. In addition, the Company has
issued to Mr. Crowley (i) options to purchase 201,000 shares of common stock at
an exercise price of $3.25 per share, exercisable through December 2003, each
third of which vests annually beginning January 1997, and (ii) 66,667 shares at
an exercise price of $3.50 per share, vesting in equal installments in July 1996
and July 1997 and exercisable through July 1999. The Company has also issued to
Mr. Crowley 100,000 SARs.
Mr. Samuels', Mr. Reese's and Mr. Crowley's employment contracts contain a
change in control provision whereby, in certain circumstances, including the
possibility that a person other than the Washington Post Company becomes the
owner of 30% or more of the outstanding securities of the employer and they are
not retained, they receive a bonus not to exceed 2.7 times the then current
base salary and the exercise price on all options is reduced to $.10 per option.
The Company and Dr. Freeman entered into an employment agreement in November
1994, whereby Dr. Freeman agreed to serve as Advanced Product Development
Liaison for a term of five years from the original date of the agreement. Dr.
Freeman is paid at the rate of $167,500 per year. Dr. Freeman is required to
devote as much time as he, in his discretion, deems necessary to discharge his
duties. The employment agreement of Dr. Freeman contains non-competition
provisions pursuant to which he agreed not to engage in a business that is
competitive with the Company during the term of his employment agreement and for
one year thereafter. The Company has also issued to Dr. Freeman 64,000
outstanding SARs.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation for services rendered in
all capacities to the Company, its subsidiaries and ACTV Interactive for the
fiscal years ended December 31, 1995, December 31, 1994, and December 31, 1993
paid to the Company's Chief Executive Officer, the four other most highly
compensated executive officers (the
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"Named Executive Officers") at the end of the above fiscal years whose total
compensation exceeded $100,000 per annum, and up to two persons whose
compensation exceeded $100,000 during the above fiscal years, although they were
not executive officers at the end of such years.
<TABLE>
<CAPTION>
Restricted All Other
Name and Principal Stock Compen-
Position Year Salary Bonus Awards Options/SARs sation
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William Samuels 1995 $196,597 $52,000 625,087/30,000 $185,551
Chairman, Chief 1994 $150,000 $25,000 80,000/100,000 $4,320
Executive Officer (1) 1993 $150,000 152,948/0
Michael J. Freeman 1995 $160,409 $197,652
Ph. D, Chairman of 1994 $162,500 $2,610
the Board (2) 1993 $162,500
David Reese 1995 $149,022 330,000/30,000 $86,957
President, ACTV 1994 $123,078 $15,000 40,000/30,000 $990
Entertainment, Inc. 1993 $100,000 15,317/0
(3)
Bruce Crowley 1995 $147,990 $10,000 201,000/0
President, ACTV 1994 $69,231 100,000/100,000 $55,000
Interactive, Inc. 1993
(4)
James Crook 1995 $107,347 $2,100 0/20,000 $79,426
Executive Vice Presi- 1994
dent, Ed. Sales (5) 1993
Gregory Harper 1995
President, Technology 1994 $126,923 $32,211
(6) 1993
</TABLE>
(1) Mr. Samuels has been Chief Executive Officer of the Company since 1993
and Chairman of the Board since November 1994; he has served as a
President of the Company since 1989. Mr. Samuel's "other compensation"
for 1994 relates to life insurance premiums paid by the Company. His
"other compensation" for 1995 relates to life insurance premiums paid by
the Company ($4,176) and to the exercise of stock appreciation rights
($181,375).
(2) Dr. Freeman was Chairman of the Board of Directors until November 1994,
and was Chief Executive Officer of the Company from 1985 to 1993. Dr.
Freeman's "other compensation" for 1994 relates to life insurance
premiums paid by the Company. His "other compensation" for 1995 relates
to life insurance premiums paid by the Company ($2,523) and to the
exercise of stock appreciation rights ($195,129).
(3) Mr. Reese has been President of ACTV Entertainment, Inc. since November
1994. Prior thereto he had been Executive Vice President since November
1992 and the Company's Vice President of Finance from September 1989
through November 1992. Mr. Reese's "other compensation" for 1994 relates
to life insurance premiums paid by the Company. His "other compensation"
for 1995 relates to life insurance premiums paid by the Company ($957)
and to the exercise of stock appreciation rights ($86,000).
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(4) Mr. Crowley has been President of ACTV Interactive, Inc. since December
1995, and prior thereto, the Company's President, Distance Learning
since October 1994. During the period January-September 1994, Mr.Crowley
performed consulting services for the Company for which he was paid
$55,000.
(5) Mr. Crook has been Executive Vice President, Education Sales for the
Company or its subsidiary since joining the Company in 1990. Mr. Crook's
"other compensation" for 1995 relates to life insurance premiums paid by
the Company ($4,176) and to the exercise of stock appreciation rights
($75,250). In 1993 and 1994, Mr. Crook's compensation from the Company
was less than $100,000.
(6) Mr. Harper served as the President of Technology for the Company from
November 1993 to November 1994.
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SAR GRANTS
The following tables set forth certain information with respect to all
outstanding stock options and stock appreciation rights ("SARs") granted or
issued to the Company's Named Executive Officers and Directors.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
% of Total Stock Price
Number SARs Granted Exercise Appreciation for
of SARs to Employees Price Expiration Option Term
Name of Holder Granted in Fiscal Year ($/Share) Date 5%($) 10%($)
- ----------------------- ---------- -------------- ---------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
William Samuels 30,000 17.2% $3.50 5/26/05 $66,034 $167,343
David Reese 30,000 17.2% $3.50 5/26/05 $66,034 $167,343
James Crook 20,000 11.5% $3.50 5/26/05 $44,023 $111,562
</TABLE>
OPTION GRANTS
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
% of Total Stock Price
Number SARs Granted Exercise Appreciation for
of SARs to Employees Price Expiration Option Term
Name of Holder Granted in Fiscal Year ($/Share) Date 5%($) 10%($)
- ----------------------- ---------- -------------- ---------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
William C. Samuels 525,000 30.7% $3.25 12/31/03 $814,658 $1,951,248
William C. Samuels 100,087 5.9% $2.50 12/31/03 $155,308 $371,990
David Reese 330,000 19.3% $3.25 12/31/03 $512,071 $1,226,499
Bruce Crowley 201,000 11.8% $3.25 12/31/03 $311,898 $747,049
</TABLE>
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TEN-YEAR OPTION REPRICING
The following tables set forth certain information with respect to option
repricings during the past ten years for the Company's Named Executive Officers
and Directors.
<TABLE>
<CAPTION>
Number of
Securities Un- Market Length of
derlying Op- Price of Exercise Original
tions/ Stock at Price at Option Term
SARs Time of Time of New Remaining at
Repriced or Repricing or Repricing or Exercise Date of
Amended Amendment Amendment Price Repricing or
Name of Holders Date (#) ($) ($) ($) Amendment
- ---------------- ------- --------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William Samuels 1/13/95 80,000 3.38 5.00 3.50 7.0 Yrs
David Reese 1/13/95 40,000 3.38 5.00 3.50 7.0 Yrs
David Reese 1/13/95 15,317 3.38 5.50 3.50 3.9 Yrs
Bruce Crowley 1/13/95 100,000 3.38 5.50 3.50 4.5 Yrs
James Crook 1/13/95 20,000 3.38 5.00 3.50 7.0 Yrs
</TABLE>
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TEN-YEAR SAR REPRICING
The following tables set forth certain information with respect to stock
appreciation right repricings during the past ten years for the Company's Named
Executive Officers and Directors.
<TABLE>
<CAPTION>
Number of
Securities Un- Market Length of
derlying Op- Price of Exercise Original
tions/ Stock at Price at Option Term
SARs Time of Time of New Remaining at
Repriced or Repricing or Repricing or Exercise Date of
Amended Amendment Amendment Price Repricing or
Name of Holders Date (#) ($) ($) ($) Amendment
- ---------------- ------- --------- ---------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
William Samuels 1/13/95 100,000 3.38 5.50 3.50 9.6 Yrs
William Samuels 11/17/95 30,000 3.38 4.50 3.50 9.5 Yrs
David Reese 1/13/95 30,000 3.38 5.50 3.50 9.6 Yrs
David Reese 11/17/95 30,000 3.38 4.50 3.50 9.5 Yrs
Bruce Crowley 1/13/95 100,000 3.38 5.50 3.50 9.5 Yrs
James Crook 11/17/95 20,000 3.38 4.50 3.50 9.5 Yrs
</TABLE>
OPTION/SAR YEAR END VALUES (1)
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-End at FY-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William Samuels (2) 180,000 $165,000 41,000/174,000 SARs $49,688/$160,625
20,000 $50,000 533,035/525,000 Options $632,979/$229,688
Michael Freeman, Ph.D. (2) 0/64,000 SARs $0/$140,000
0/0 Options $0/$0
David Reese (2) 38,000/86,000 SARs $71,125/$80,125
65,000/370,000 Options $61,871/$151,875
Bruce Crowley (2) 20,000/80,000 SARs $3,750/$15,000
33,000/268,000 Options $6,188/$100,500
James Crook (2) 28,000/48,000 SARs $61,250/$65,000
21,000/20,000 Options $24,938/$3,750
</TABLE>
(1) The closing bid price of a share of the Company's Common Stock at
December 31, 1995, was 3 11/16. The base prices of SARs were either
$1.50 and $3.50, and the exercise prices of stock options were either
$2.50, $3.25 or $3.50.
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(2) During 1995, Mr. Samuels exercised 180,000 options and exercised 32,000
SARs (cash proceeds of $181,375), Mr. Reese exercised 16,000 SARs (cash
proceeds of $86,000), Mr. Crook exercised 14,000 SARs (cash proceeds of
$75,250) and Dr. Freeman exercised 96,000 SARs (proceeds of 70,956
shares of unregistered stock).
EXECUTIVE COMPENSATION POLICY
The Company's executive compensation policy is designed to attract, motivate,
reward and retain the key executive talent necessary to achieve the Company's
business objectives and contribute to the long-term success of the Company. In
order to meet these goals, the Company's compensation policy for its executive
officers focuses primarily on determining appropriate salary levels and
providing long-term stock-based incentives. To a lesser extent, the Company's
compensation policy also contemplates performance-based cash bonuses. The
Company's compensation principles for the Chief Executive Officer are identical
to those of the Company's other executive officers.
Cash Compensation. In determining its recommendations for adjustments to
officers' base salaries for fiscal 1995, the Company focused primarily on the
scope of each officer's responsibilities, each officer's contributions to the
Company's success in moving toward its long-term goals, the accomplishment of
goals set by the officer and approved by the Board for that year, the Company's
assessment of the quality of services rendered by the officer, comparison with
compensation for officers of comparable companies and an appraisal of the
Company's financial position. In certain situations, relating primarily to the
completion of important transactions or developments, the Company may also pay
cash bonuses, the amount of which will be determined based on the contribution
of the officer and the benefit to the Company of the transaction or development.
Equity Compensation. The grant of stock options and stock appreciation rights to
executive officers constitutes an important element of long-term compensation
for the executive officers. The grant of stock options and stock appreciation
rights increases management's equity ownership in the Company with the goal of
ensuring that the interests of management remain closely aligned with those of
the Company's stockholders. The Board believes that stock options and stock
appreciation rights in the Company provide a direct link between executive
compensation and stockholder value. By attaching vesting requirements, stock
options and stock appreciation rights also create an incentive for executive
officers to remain with the Company for the long term. See "Stock Option Plan"
and "Stock Appreciation Rights Plan."
CHIEF EXECUTIVE OFFICER COMPENSATION
As indicated above, the factors and criteria upon which the compensation of
William C. Samuels, the Chief Executive Officer, is based are identical to the
criteria used in evaluating the compensation packages of the other executive
officers of the Company. The Chief Executive Officer's individual contributions
to the Company included his
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leadership role in establishing and retaining a strong management team,
developing and implementing the Company's business plans and attracting
investment capital to the Company. In addition, the Company reviewed
compensation levels of chief executive officers at comparable companies with the
Company's industry.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee during the past fiscal year
and all determinations concerning executive compensation for such period for the
Company's executive officers were made by the Board of Directors. The directors
abstained from participation in compensation determinations concerning their own
compensation. None of the executive officers of the Company has served on the
board of directors or on the compensation committee of any other entity, any of
whose officers served on the Board of Directors of the Company.
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CORPORATE PERFORMANCE GRAPH
The graph shows a comparison of cumulative total stockholder returns from
December 31, 1990 through December 31, 1995 for the Company, the NASDAQ Stock
Market-U.S. Index ("NASDAQ") and the Hambrecht & Quist Technology Index ("H&Q").
The graph assumes that the value of the investment in the Company's Common
Stock, NASDAQ and H&Q was $100 on December 31, 1990 and that all dividends were
reinvested. No dividends have been declared or paid on the Company's Common
Stock. The cumulative total stockholder returns for such investment in the
Company, NASDAQ and H&Q resulted in values of $39, $61, and $148, respectively,
on December 31, 1991; values of $89, $187, and $170, respectively, on December
31, 1992; values of $279, $214, and $186, respectively, on December 31, 1993;
values of $153, $210, and $215, respectively, on December 31, 1994; and values
of $158, $297, and $253, respectively, on December 31, 1995.
OTHER COMPENSATION
Outside directors may be paid an honorarium for attending meetings of the Board
of Directors of the Company, in an amount that management anticipates will not
exceed $500 per meeting.
AGREEMENTS WITH MANAGEMENT
In June 1985, a group of investors, including Dr. Freeman, engaged in a
restructuring of the Company and the purchase of the shares of certain previous
investors. In connection with such restructuring, the Company obligated itself
to repay certain creditors, out of a repayment pool ("Repayment Pool") to be
Funded with 10% of the Company's "available cash flow" in excess of $1,000,000
in any calendar year. Available cash flow is the excess of gross revenues.
As of December 31, 1993, the aggregate amount of principal and interest due
such creditors was approximately $709,794. During 1994, the Company extinguished
all outstanding obligations under the Repayment Pool by paying cash, and in
three cases issuing promissory notes, in separately negotiated settlement
agreements with the holders of the obligations. The three notes, issued to
Nolan Bushnell, Prudential Bache Securities, Inc. and Dr. Freeman, in the
original principal amount of $190,000, $25,000 and $8,770, respectively,
were also repaid during 1995, at either their original principal amount, or at a
discounted amount. The settlement price in all these agreements was
approximately 18% of the obligations' face value.
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STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Stock Option Plan
In December 1986, the Board of Directors approved a stock option plan (the "1986
Plan") that provided for the granting of 24,435 stock options to employees,
consultants, officers and directors, as selected by the Board of Directors. As
of December 31, 1991, options for 11,413 shares had been granted to eight
employees with exercise prices from $0.01 to $8.185 under the 1986 Plan. No
further shares are to be granted under the 1986 Plan, since it has been
canceled. By December 31, 1994, all options granted under this plan had been
exercised or had expired.
On August 9, 1989, the Board of Directors approved a 1989 Employee Incentive
Stock Option Plan and a 1989 Non-Qualified Stock Option Plan (collectively, the
"Plans") and on October 20, 1989, the stockholders authorized and approved the
adoption of the Plans. Michael J. Freeman is not eligible to participate in
either Plan. The 1989 Employee Incentive Stock Option Plan, which is
administered by the Board of Directors, provides for the issuance of up to an
aggregate of 100,000 shares of Common Stock upon exercise of options granted to
key employees. This Plan stipulates that the option price may not be less than
fair market value on the date of the grant and, from May 4, 1990, through May 4,
1992, could not be less than $5.50 per share. Options granted under this Plan
shall not be exercisable for a period longer than ten (10) years from the date
of the grant. The Plan generally provides that at the time of exercise of any
option the purchase price must be delivered in cash, or at the option of the
Board of Directors, or a committee designated by the Board to administer the
Plan (the "Committee"), through delivery of the Company's Common Stock equal in
value to the option exercise price, or by a combination thereof. Options under
this Plan may be issued as "Incentive Stock Options" under Federal tax laws. As
of December 31, 1995, 100,000 options had been granted under this Plan at
exercise prices of $2.50 to $3.50 per share; the options expire between the
years 1997 and 2000. During 1995, 2,000 options under the Plan were exercised.
The 1989 Non-qualified Stock Option Plan, which is administered by the Board of
Directors, provides for the issuance of up to an aggregate of 100,000 shares of
Common Stock upon exercise of options granted to employees, officers, directors,
consultants and independent contractors. This Plan provides that the Board has
the discretion to establish the option exercise price, and that the option
exercise price may be less than fair market value at the time of the grant of
the option. However, a further provision is that from May 4, 1990 through May 4,
1992, no options could be granted having an exercise price that was less than
the higher of the then current market price of the Company's Common Stock or
$5.50 per share. Options granted under this Plan shall expire on a date
determined by the Board or the Committee, but in no event later than three
months after the termination of employment or retainer. This Plan generally
provides that the purchase price must be delivered in cash, or if permitted by
the Board or the Committee, services rendered or by a combination thereof. As of
December 31, 1995, 100,000 options had been granted under this plan at exercise
prices of $2.50 to $5.50 per share, which options
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<PAGE>
expire between the years 1997 and 1998. During 1995, 1,000 options under the
Plan were exercised.
The Company has issued options to purchase shares of Common Stock at varying
prices, expiring at dates from 1996 to 2003, and are not part of the Plans.
These include currently outstanding options to (i) Mr. Samuels for 533,035
shares at $2.50 per share and 525,000 at $3.25 per share: (ii) Mr. Reese for
49,683 shares at $2.50 per share, 55,317 at $3.50 per share, and 330,000 at
$3.25 per share; Mr. Crowley for 100,000 shares at $3.50 per share and 201,000
at $3.25 per share; and Mr. Crook for 21,000 shares at $2.50 per share and
20,000 at $3.50 per share.
Stock Appreciation Rights Plan
The Company's 1992 Stock Appreciation Rights Plan ("SAR Plan") was approved by
the Company's stockholders in December 1992. The SAR Plan provides a means
whereby employees, officers, directors, consultants and independent contractors
may acquire the right to participate in the appreciation of the Common Stock of
the Company pursuant to stock appreciation rights ("SARs"). The SAR Plan is
designed to promote the long-term interest of the Company and its stockholders
by providing the recipients with an additional incentive to promote the
financial success of the Company and its subsidiaries. Subject to adjustment as
set forth in the SAR Plan, the aggregate number of SARs that may be granted
shall not exceed 900,000. The SAR Plan is administered by the Stock Appreciation
Rights Committee (the "SAR Committee").
SARs may not be exercised until the expiration of six months from the date of
grant, and could in no event be exercised earlier than May 1, 1994. One-fifth of
the SARs awarded to a recipient vest at the end of each 12-month period
following the date of grant. If a holder of a SAR ceases to be an employee,
director or consultant of the Company, or one of its subsidiaries or an
affiliate, other than by reason of the holder's death or disability, any SARs
that have not vested shall become void. Exercise of SARs also will be subject to
such further restrictions (including limits on the time of exercise) as may be
required to satisfy the requirements of Rule 16b-3 promulgated by the Securities
and Exchange Commission and any other applicable law or regulation (including,
without limitation, federal and state securities laws and regulations). SARs are
not transferable, except by will or under the laws of descent and distribution.
Upon exercise of a SAR, the holder will receive for each share for which a SAR
is exercised, as determined by the SAR Committee in its discretion, (a) shares
of the Company's Common Stock, (b) cash, or (c) cash and shares of Common Stock,
equal to the difference between (i) the fair market value per share of the
Common Stock on the date of exercise of the SAR and (ii) the value of a SAR,
which amount shall be no less than the fair market value per share of Common
Stock on the date of grant of the SAR.
A grant of SARs has no Federal income tax consequences at the time of such
grant. Upon the exercise of SARs, the amount of any cash and, generally, the
fair market value of any
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shares of Common Stock received, is taxable to the holder as ordinary income;
the Company will have a corresponding deduction. Upon the sale of any Common
Stock acquired by the exercise of SARs, holders will realize long-term or
short-term capital gains or losses, depending upon their holding period for such
Common Stock.
Under the Company's SAR Plan, as of December 31, 1995, the Company had granted a
total of 874,000 SARs at exercise prices of either $1.50 or $3.50 per share,
including 290,000 SARs to William Samuels, 160,000 SARs to Dr. Michael Freeman,
100,000 SARs to Bruce Crowley, 140,000 SARs to David Reese and 90,000 SARs to
James Crook. The initial prices of all the SARs granted were equal to the fair
market values of a share of Common Stock on the dates of grant. During 1995, Mr.
Samuels exercised 43,000 SARs and received cash proceeds of $181,375, Mr. Reese
exercised 16,000 SARs and received cash proceeds of $86,000, Mr. Crook exercised
14,000 SARs and received cash proceeds of $75,250, and Dr. Freeman exercised
96,000 SARs and received 70,956 unregistered shares of ACTV common stock as
proceeds .
The SARs expire between 1998 and 2004; one-fifth of the total SARs granted to
each recipient vest at the end of each 12 month period following the date of
grant.
SECTION 16(A) REPORTING
As under the securities laws of the United States, the Company's directors, its
executive (and certain other) officers, and any persons holding ten percent or
more of the Company's Common Stock must report on their ownership of the
Company's Common Stock and any changes in that ownership to the Securities and
Exchange commission and to the National Association of Securities Dealers,
Inc.'s Automated Quotation System. Specific due dates for these reports have
been established. During the year ended December 31, 1995, all reports for all
transactions were filed on a timely basis, except for inadvertent late filings
of a Form 3 for each of Howard Squadron and Richard Hyman, relating to their
appointment as directors in January 1995. Upon discovery of these oversights, a
Form 3 setting forth an initial statement of beneficial ownership for each of
Howard Squadron and Richard Hyman was promptly filed.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 23, 1996, with
respect to each beneficial owner of five percent (5%) or more of the outstanding
shares of Common Stock of the Company, each director of the Company and all
officers and directors as a group. The table does not include options or SARs
that have not yet vested or are not exercisable within 60 days of the date
hereof.
<TABLE>
<CAPTION>
Name and Address Number of
of Beneficial Owner Shares Percent of Class
- -------------------------------- --------- ----------------
<S> <C> <C>
William C. Samuels (1)
c/o ACTV, Inc.
1270 Avenue of the Americas
New York, NY 10020 3,321,917 26.74%
David Reese (2)
c/o ACTV, Inc.
1270 Avenue of the Americas
New York, NY 10020 105,000 *
Bruce Crowley (3)
c/o ACTV, Inc.
1270 Avenue of the Americas
New York, NY 10020 66,000 *
Jay M. Kaplowitz, Esq. (4)
c/o Gersten, Savage, Kaplowitz & Curtin
575 Lexington Avenue
New York, NY 10022 27,000 *
Richard Hyman (5)
c/o Triquest Financial Services
505 Park Avenue
New York, NY 10022 25,000 *
Howard Squadron (6)
c/o Squadron, Ellenoff, Plesent,
Sheinfeld & Sorkin
551 Fifth Avenue
New York, NY 10176 65,267 *
The Washington Post Company (7)
1150 15th Street, N.W.
Washington, D.C. 20071 2,341,334 19.69%
All Directors and Officers
as a Group (8 persons)
(1)(2)(3)(4)(5)(6) 3,672,163 28.86%
</TABLE>
<PAGE>
<PAGE> 18
* Indicates that director holds less than 1% of common shares outstanding
(1) Includes 240,950 shares of Common Stock owned by Mr. Samuels, up to
533,035 shares of Common Stock issuable to Mr. Samuels upon the exercise
of stock options, 2,341,334 shares of Common Stock owned by the Post
Company and 206,598 shares owned by Dr. Freeman, which are subject to a
voting agreement with Mr. Samuels. Does not include shares that may be
issued by the Company upon the exercise of SARs.
(2) Includes 105,000 shares issuable to upon the exercise of stock options.
Does not include shares that may be issued by the Company upon the
exercise of SARs.
(3) Includes 66,000 shares of Common Stock issuable to Mr. Crowley upon the
exercise of stock options. Does not include shares that may be issued by
the Company upon the exercise of SARs.
(4) Includes 25,000 shares issuable upon the exercise of stock options.
(5) Includes 25,000 shares issuable upon the exercise of stock options.
(6) Includes 50,000 shares issuable upon the exercise of stock options.
(7) Includes 2,341,334 shares of Common Stock issued to the Post Company,
including 750,000 shares of Common Stock issued March 15, 1994, upon
exercise of an option and 871,334 shares of Common Stock issued March
15, 1994, upon conversion of an 8% Convertible Promissory Note
(including accrued interest through March 15, 1994). All of the Post
Company's shares are subject to a voting agreement with Mr. Samuels.
Does not include shares issuable upon the exercise of the right of the
Post Company to purchase form the Company the amount of shares of Common
Stock necessary to bring the Post Company's percentage ownership of the
total then outstanding shares to 51%. See "CERTAIN TRANSACTIONS."
(8) Includes 835,035 shares issuable upon the exercise of options that have
vested or vest within 60 days of the date of this report. Does not
include shares that may be issued by the Company upon the exercise of
SARs.
ITEM 13. CERTAIN TRANSACTIONS
On March 17, 1992, the Post Company acquired an 8% Convertible Promissory Note
of the Company in the principal amount of $1,500,000 (the "Convertible Note")
and, in connection therewith, acquired 720,000 unregistered shares of Common
Stock. The principal amount of the Convertible Note was payable in four
installments of $375,000, together with accrued interest thereon, on March 15,
1994, September 15, 1994, March 15, 1995, and September 15, 1995. The purpose of
this transaction was to provide working capital to the Company. On March 15,
1994, the unpaid principal and accrued and unpaid interest on the Convertible
Note were converted into 871,334 shares of Common Stock of the Company at $2.00
per share.
On March 11, 1994, the Post Company entered into a voting agreement with the
Company and William C. Samuels, Chief Executive Officer of the Company as voting
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trustee ("Voting Trustee"), pursuant to which the Post Company has assigned to
Mr. Samuels its voting rights with respect to the Company's Common Stock that it
holds. This voting trust remains in effect for 10 years, or as long as the Post
Company's shareholdings in the Company are greater than 20% or less than 51% of
outstanding Common Stock. The Post Company also regains the right to vote its
shares of Common Stock under certain circumstances, including the proposal of
any amendment to the Company's certificate of incorporation requiring
stockholder approval; in case of any reclassification or change of the
outstanding Common Stock of the Company, any consolidation of the Company with,
or merger of the Company into, another corporation, or in the case of a sale or
conveyance to another corporation or other entity of all or substantially all of
the property, assets or business of the Company; upon the commencement of a
proxy contest regarding the Company's Board of Directors; if a person or entity
acquires 20% or more of the outstanding Common Stock of the Company; or if a
conflict of interest (as determined by the Post Company in its sole discretion)
involving the Voting Trustee or any successor Voting Trustee should arise.
On March 17, 1992, effective with the formation of ACTV Interactive, the Post
Company acquired an option (the "Option") pursuant to an option agreement (the
"Option Agreement") to purchase an additional 750,000 shares of the Company's
Common Stock at $2.00 per share, or $2.50 per share if exercised after March 15,
1994. On March 15, 1994, the Post Company exercised this Option, receiving
750,000 shares at $2.00 per share. On such date, the average of the high bid and
ask prices of the Company's Common Stock was $5 7/8. The Post Company also
obtained pursuant to the Option Agreement certain "piggyback" and demand
registration rights with respect to the 720,000 shares of Common Stock that it
purchased in 1992 and the shares of Common Stock that it received upon exercise
of the Option and conversion of the Convertible Note. In connection with the
Option Agreement, the Post Company also received the right to purchase, from the
Company, at a fair market exercise price to be determined, an amount of shares
of Common Stock necessary to increase the Post Company's percentage ownership of
the total then outstanding shares of Common Stock to 51%.
Such right is exercisable through March 17, 1997, subject to extension in
certain circumstances. Until March 17, 1995, the Post Company agreed not to
acquire more than 40% of the Company unless certain events occurred, such as a
tender offer, a proxy contest, or the acquisition by a third party of in excess
of 15% of the Company's Common Stock, as set forth in a standstill agreement
between the Company and the Post Company (the "Standstill Agreement").
On July 14, 1992, the Post Company and the Company formed ACTV Interactive to
market the Company's Programming Technology for educational applications
world-wide. The Post Company invested $2.5 million and owned 51% of ACTV
Interactive.
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ACTV Interactive, Inc., a wholly owned subsidiary of the Company, owned a 49%
interest in ACTV Interactive. In connection with the formation of ACTV
Interactive, the Company entered into a license agreement (the "License
Agreement") with the partnership, pursuant to which ACTV Interactive was given a
license to exploit the Programming Technology in the creation and distribution
of educational programming. The License Agreement provided for the Company to
receive a five percent (5%) royalty on certain revenues generated by ACTV
Interactive, subject to certain adjustments.
On March 11, 1994, the Company purchased the Post Company's entire 51% interest
in ACTV Interactive for consideration of $4.5 million, consisting of $2.5
million in cash at closing and a $2 million note due December 31, 1996 (the "New
Note"). The New Note accrued interest at 8%. The principal of the New Note was
secured pursuant to a security agreement through which the Post Company acquired
a security interest in and lien with respect to all of the Company's existing
United States patents and pending applications. The New Note was paid in full by
October 1995.
The consideration for the acquisition by ACTV of the Post Company's interest in
ACTV Interactive was based on the value of the ACTV Programming it had developed
for education, its marketing and sales of such programming, and the Company's
assessment of the future value of the use of the Programming Technology in the
education and distance learning markets.
Jay M. Kaplowitz is a Director of the Company and a partner of Gersten, Savage,
Kaplowitz & Curtin, LLP, general counsel to the Company. Mr. Kaplowitz owns
2,000 shares and options to purchase 25,000 shares at an exercise price of $3.50
per share. The options were issued to Mr. Kaplowitz pursuant to an option
agreement dated January 1, 1989 that granted Mr. Kaplowitz registration rights
with respect to such options.
All current transactions between the Company, and its officers, directors and
principal stockholders or any affiliates thereof are, and in the future such
transactions will be, on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized in the City of New York
and State of New York on the 25th day of April 1996.
ACTV, Inc.
By: /s/William C. Samuels
---------------------
William C. Samuels
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William C. Samuels April 25, 1996
- ----------------------
William C. Samuels Chairman, Chief Executive
Officer, and Director
/s/ David Reese April 25, 1996
- ---------------
David Reese President - ACTV
Entertainment, Inc.,
and Director
/s/ Bruce Crowley April 25, 1996
- ----------------------
Bruce Crowley President - ACTV
Interactive, Inc.,
and Director
/s/ Jay M. Kaplowitz April 25, 1996
- --------------------
Jay M. Kaplowitz Director
/s/ Richard Hyman April 25, 1996
- ----------------------
Richard Hyman Director
/s/ Howard Squadron April 25, 1996
- ----------------------
Howard Squadron Director
/s/ Christopher C. Cline April 25, 1996
- ------------------------
Christopher C. Cline Chief Financial Officer
</TABLE>
