<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<S> <C>
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ACTV, Inc.
------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- - ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - ------------------------------------------------------------------------------
(5) Total fee paid:
- - ------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- - ------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- - ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- - ------------------------------------------------------------------------------
(3) Filing Party:
- - ------------------------------------------------------------------------------
(4) Date Filed:
- - ------------------------------------------------------------------------------
2
<PAGE>
<PAGE>
ACTV, INC.
1270 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
-----------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1997
-----------
TO THE STOCKHOLDERS OF ACTV, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Stockholders (the "Meeting") of ACTV, Inc. (the "Company") will be held at ACTV,
Inc., 1270 Avenue of the Americas, Suite 2401, New York, New York 10020 on May
16, 1997, at 9:30 a.m., local time for the following purposes:
1. To elect three Class I directors to hold office for a term of
three years;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock, $.10 par value per share, from 35,000,000
to 65,000,000;
3. To approve an amendment to the Company's Restated Certificate of
Incorporation to convert previously designated shares of Series A
Convertible Preferred Stock and Series B Convertible Preferred
Stock, each $0.10 par value per share and convertible at fixed
prices of $1.50 and $2.50 into shares of the Company's Common
Stock, respectively, into 1,000,000 shares of Blank Check
Preferred Stock;
4. To ratify the appointment of Deloitte & Touche LLP, as the
Company's independent certified public accountants for the
ensuing year; and
5. To act upon such other business as may properly come before the
Meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 31,
1997 are entitled to notice of and to vote at the Meeting and any adjournments
thereof.
In order to ensure the presence of a quorum at the Meeting, it is
important that Stockholders representing a majority of the voting power of all
stock outstanding be present in person or represented by their proxies.
Therefore, whether you expect to attend the Meeting in person or not, please
sign, fill out, date and promptly return the enclosed proxy card in the enclosed
self-addressed, postage-paid envelope. If you attend the Meeting and prefer to
vote in person, you can revoke your proxy.
In addition, please note that abstentions and broker non-votes
are each included in the determination of the number of shares present and
voting, for purposes of determining the presence or absence of a quorum for the
transaction of business. Neither abstentions nor broker non-votes are counted as
voted either for or against a proposal.
Dated: April 21, 1997 By Order of the Board of Directors
William C. Samuels
Chairman and Chief Executive
Officer
2
<PAGE>
<PAGE>
ACTV, INC.
1270 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
---------------------------
PROXY STATEMENT
---------------------------
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 9:30 A.M., AT ACTV, INC.,
1270 AVENUE OF THE AMERICAS, SUITE 2401, NEW YORK, NEW YORK 10020
ON MAY 16, 1997
This Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of ACTV, Inc. (the "Company")
for use at the 1997 Annual Meeting of Stockholders of the Company (the
"Meeting") to be held at 9:30 a.m. at ACTV, Inc., 1270 Avenue of the Americas,
Suite 2401, New York, New York 10020 on May 16, 1997, and at any adjournments
thereof. Anyone giving a proxy may revoke it at any time before it is exercised
by giving the Chairman of the Board of Directors of the Company written notice
of the revocation, by submitting a proxy bearing a later date, or by attending
the Meeting and voting. This Proxy Statement, the accompanying Notice of Meeting
and form of proxy have been first sent to the stockholders on or about April 21,
1997.
All properly executed, unrevoked proxies on the enclosed form, if
returned prior to the Meeting, will be voted in the manner specified by the
Stockholder. If no specific instruction is given, the shares represented by the
proxy will be voted in accordance with the Board of Directors' recommendations.
In addition, please note that abstentions and broker non-votes
are each included in the determination of the number of shares present and
voting, for purposes of determining the presence or absence of a quorum for the
transaction of business. Neither abstentions nor broker non-votes are counted as
voted either for or against a proposal.
4
<PAGE>
<PAGE>
OWNERSHIP OF SECURITIES
Only stockholders of record at the close of business on March 31,
1997, the date fixed by the Board of Directors in accordance with the Company's
By-Laws, are entitled to vote at the Meeting. As of March 31, 1997, the record
date fixed for the determination of Stockholders entitled to vote at the
Meeting, there were issued and outstanding 11,838,734 shares of common stock,
$.10 par value per share (the "Common Stock").
Each outstanding share is entitled to one vote on all matters
properly coming before the Meeting. A majority of the shares of the outstanding
Common Stock is necessary to constitute a quorum for the Meeting.
The following table sets forth certain information as of March
31, 1997 with respect to each beneficial owner of five percent (5%) or more of
the outstanding shares of Common Stock of the Company, each officer and director
of the Company and all officers and directors as a group. The table does not
include stock appreciation rights ("SARs"), nor does it include options that
have not yet vested or are not exercisable within 60 days of the date hereof:
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
- - -------------------- --------- ---------
WILLIAM C. SAMUELS (1) 3,496,917 27.69%
C/O ACTV, INC.
1270 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
DAVID REESE (2) 215,000 1.78%
C/O ACTV, INC.
1270 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
BRUCE CROWLEY (3) 133,000 1.11%
C/O ACTV, INC.
1270 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
RICHARD HYMAN (4) 25,000 *
C/O TRIQUEST FINANCIAL SERVICES, CORP.
505 PARK AVENUE
NEW YORK, NY 10022
THE WASHINGTON POST COMPANY (5) 2,341,334 19.78%
1150 15TH STREET, N.W.
WASHINGTON, D.C. 20071
WILLIAM A. FRANK (6) 8,334 *
C/O THE GREENWICH GROUP
1177 HIGH RIDGE ROAD
STAMFORD, CT 06905
CHRISTOPHER CLINE (7) 34,818 *
C/O ACTV, INC.
1270 AVENUE OF THE AMERICAS
<PAGE>
<PAGE>
NEW YORK, NY 10020
STEVEN SCHUSTER (8) 4,167 *
C/O MCLAUGHLIN & STERN
260 MADISON AVENUE
NEW YORK, NY 10016
JESS RAVICH (9) 45,000 *
C/O LIBRA INVESTMENTS, INC.
11766 WILSHIRE BLVD., SUITE 870
LOS ANGELES, CA 90025
ALL DIRECTORS AND OFFICERS 3,962,236 30.27%
AS A GROUP (8 PERSONS)
(1)(2)(3)(4)(6)(7)(8)(9)(10)
<PAGE>
<PAGE>
* Indicates less than 1% of shares of Common Stock outstanding.
(1) Includes (a) 160,950 shares of Common Stock owned by Mr. Samuels, (b)
788,035 shares of Common Stock issuable to Mr. Samuels upon the exercise
of stock options, and (c) 2,341,334 shares of Common Stock owned by The
Washington Post Company (the "Post Company") and 206,598 shares owned by
Dr. Michael J. Freeman, respectively, which are subject to voting
agreements with Mr. Samuels.
(2) Consists of 215,000 shares of Common Stock issuable to Mr. Reese upon
the exercise of stock options.
(3) Consists of 133,000 shares of Common Stock issuable to Mr. Crowley upon
the exercise of stock options.
(4) Consists of 25,000 shares issuable upon the exercise of stock options.
(5) All of the Post Company's shares are subject to a voting agreement with
Mr. Samuels.
(6) Consists of 8,334 shares issuable upon the exercise of stock options.
(7) Includes (a) 1,485 shares of Common Stock owned by Mr. Cline, and (b)
33,333 shares of Common Stock issuable to Mr. Cline upon the exercise of
Stock Options.
(8) Consists of 4,167 shares issuable upon the exercise of stock options.
(9) Consists of 45,000 shares issuable upon the exercise of stock options.
(10) Includes 1,251,869 shares issuable upon the exercise of options that
have vested or vest within 60 days of the date of this Proxy Statement.
This Proxy Statement contains certain forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in the foward-looking statements as a result
of certain factors, including those set forth below and elsewhere in this Proxy
Statement.
5
<PAGE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors
shall be divided into three classes, designated Class I, Class II and Class III.
At any annual meeting of stockholders held after the initial election of all
Classes of directors, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three year term.
Three Class One directors are proposed to be elected at the
Meeting, each to hold office for a period three years, or until such director's
successor shall be elected and shall qualify, subject, however to prior death,
resignation, retirement, disqualification or removal from office. Unless such
authority is withheld, it is intended that the accompanying proxy will be voted
in favor of the three persons named below, all of whom are now serving as Class
I Directors, unless the stockholder indicates to the contrary on the proxy. The
Company expects that each of the nominees will be available for election, but if
any of them is not a candidate at the time the election occurs, it is intended
that such proxy will be voted for the election of another nominee to be
designated by the Board of Directors to fill any such vacancy or the number of
directors to be elected at this time may be reduced by the Board of Directors.
6
<PAGE>
<PAGE>
CLASS I DIRECTOR NOMINEES - TERM EXPIRING 2000.
Bruce Crowley, 39, Director since December 1995. Mr. Crowley
became Executive Vice President of the Company in October 1995 and President of
ACTV Net, Inc. ("ACTV Net") (previously ACTV Interactive, Inc.) in December
1995, after joining the Company as President - Distance Learning in October
1994. 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 B.A. from Colgate University (1979) and an M.B.A. from Columbia University
(1984).
Richard Hyman, 45, Director since December 1994. For more than
the past five years, he has been the President of Triquest Financial Services,
Corp. Mr. Hyman received a BA from the University of Wisconsin (1974).
Jess Ravich, 39, Director since October 1996. He has been the
Chief Executive Officer and the majority shareholder of Libra Investments, Inc.
("Libra Investments"), a registered broker-dealer. Mr. Ravich is also a Director
of Cherokee, Inc., a clothing manufacturer, and Koo Koo Roo, Inc., a restaurant
chain.
CLASS II INCUMBENT DIRECTORS - TERM EXPIRING 1998.
David Reese, 41, Director since 1992. Executive Vice President
since November 1992 and President of ACTV Entertainment, Inc., a subsidiary of
the Company ("ACTV Entertainment"), 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. Mr. Reese has a B.S. from
Pennsylvania State University (1978).
Steven W. Schuster, 42, Director since May 1996. Mr. Schuster has
been engaged in the practice of law for more than 16 years, since January 1996,
with the law firm of McLaughlin & Stern LLP. From June 1993 to December 1995 he
was a member of the law firm of Shane & Paolillo, P.C., and from January 1991 to
May 1993 he was a member of the law firm of Gersten, Savage, Kaplowitz & Curtin,
LLP, counsel to the Company. Mr. Schuster received his BA from Harvard
University (1976) and his JD from New York University School of Law (1980).
CLASS III INCUMBENT DIRECTORS - TERM EXPIRING 1999.
William Samuels, 54, Director and President since August 1, 1989.
Chairman of the Board since November 1994, and Chief Executive Officer since
1993. Mr. Samuels served as Chairman of ACTV Interactive, a partnership with the
Post Company, from July 1992 through March 1994, when the Company acquired the
Post Company's interest in ACTV Interactive. Mr. Samuels is a trustee of Howard
J. Samuels Institute at City College. Mr. Samuels also serves on the Board of
Directors of the Council of Economic Priorities. Mr. Samuels has a JD from
Harvard Law School (1968) and a BS in Economics and Engineering from the
Massachusetts Institute of Technology (1965).
William Frank, 48, Director since April 1996. He currently serves
as the Chief Executive Officer of Greenwich Entertainment Group (the "Greenwich
Group"), a position he has held since August 1994. The Greenwich Group is a
licensee of the Company's Individualized Programming for use in malls and
museums. From 1991 to 1996 Mr. Frank also served as Chairman of the Board of
Directors of Corsearch, a data research company. From October 1993 to July 1994,
Mr. Frank was employed by the Company as President of Private Networks. Prior
thereto, he was employed for a period of eighteen years at the Alexander
Proudfoot Company, a strategic management consulting company. Mr. Frank has a
B.S. from the University of Missouri (1970).
7
<PAGE>
<PAGE>
STOCKHOLDER VOTE REQUIRED
Election of each director requires the affirmative vote of the
holders of a plurality of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION TO THE
BOARD OF DIRECTORS OF THE COMPANY OF EACH OF THE NOMINEES.
EXECUTIVE COMPENSATION
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company and Mr. Samuels entered into an employment agreement
in August 1995. 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 $250,000 and a bonus paid in
cash and/or in registered 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 and Mr. Reese entered into an employment agreement in
August 1995. For the five year term of the agreement, Mr. Reese will be paid a
minimum annual base salary of $200,000. 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.
Both Mr. Samuels' and Mr. Reese's employment contracts contain a
change of control provision whereby, in certain circumstances, including the
possibility that a person 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 Bruce Crowley entered into an employment
agreement in December 1995. Mr. Crowley has to serve as President of ACTV Net at
an annual base salary of $200,000. 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.
Messrs. Samuels, Reese and Crowley have been granted options to
purchase Common Stock of the Company, which as amended to date, are at an
exercise price of $2.10 per share which expire in December 2002 and December
2003. A portion of the options are subject to adjustment to avoid dilution under
certain circumstances. Mr. Samuels currently holds options to purchase an
aggregate of 1,037,948 shares of Common Stock of which 788,035 are currently
exercisable. Mr. Reese currently holds options to purchase an aggregate of
435,000 shares of Common Stock of which 215,000 are currently exercisable. Mr.
Crowley currently holds options to purchase an aggregate of 301,000 shares of
Common Stock of which 133,000 are currently exercisable. Messrs. Samuels, Reese
and Crowley currently hold 246,000, 186,000 and 160,000 SARs, respectively.
At the time of issuance, all options to the Company's employees
were granted at an exercise price equal to or greater than the prevailing market
price for the Company's Common Stock.
8
<PAGE>
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation for services
rendered in all capacities to the Company and its subsidiaries for the fiscal
years ended December 31, 1996, December 31, 1995, and December 31, 1994, paid to
the Company's Chief Executive Officer, the four other most highly compensated
executive officers (the "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 C. Samuels 1996 $197,600 $151,955 0/70,000 $ 4,176
Chairman, Chief 1995 $196,597 $ 52,000 625,087/30,000 $185,551
Executive Officer(1) 1994 $150,000 $ 25,000 80,000/100,000 $ 4,320
David Reese 1996 $156,000 $ 45,000 0/60,000 $ 50,253
President, ACTV 1995 $149,022 330,000/30,000 $ 86,957
Entertainment, Inc.(2) 1994 $123,078 $ 15,000 40,000/30,000 $ 990
Bruce Crowley 1996 $150,000 $ 25,000 0/50,000
President, ACTV 1995 $147,990 $ 10,000 201,000/0
Net(3) 1994 $ 69,231 100,000/100,000 $ 55,000
Christopher Cline 1996 $100,000 0/10,000
Vice President, Chief 1995
Financial Officer(4) 1994
Michael J. Freeman 1996 $173,680 $ 50,000 100,000/0 $ 3,238
Ph. D.(5) 1995 $160,409 $197,652
1994 $162,500 $ 2,610
</TABLE>
9
<PAGE>
<PAGE>
- - --------------
(1) Mr. Samuels has served as Chief Executive Officer of the Company
since 1993, Chairman of the Board since 1994, and President and a
Director of the Company since August 1, 1989. Mr. Samuels' "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 SARs
($181,375). His "other compensation" for 1996 relates to life
insurance premiums paid by the Company.
(2) Mr. Reese has been the Company's Executive Vice President since
November 1992 and the President of ACTV Entertainment, Inc. ("ACTV
Entertainment") since 1994. Prior thereto he was 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 SARs ($86,000). His "other compensation" for 1996
relates to life insurance premiums paid by the Company ($1,253) and
to the exercise of SARs ($49,000).
(3) Mr. Crowley has been President of ACTV Net since December 1995, and
prior thereto, the Company's President, Distance Learning since
October 1994. During the period January to September 1994, Mr.
Crowley performed consulting services for the Company for which he
was paid $55,000.
(4) Mr. Cline has been Vice President and Chief Financial Officer since
November 1993.
(5) Dr. Freeman currently serves as Advanced Product Development Liaison,
and was previously 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 SARs ($195,129). His "other compensation" for
1996 relates to life insurance premiums paid by the Company.
10
<PAGE>
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS TO NAMED EXECUTIVE OFFICERS
The following tables set forth certain information with respect
to all outstanding stock options and SARs granted or issued during 1996 to
the Company's Named Executive Officers.
SAR GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES SARs APPRECIATION
UNDERLYING GRANTED EXERCISE FOR
OPTIONS TO EMPLOYEES PRICE EXPIRATION OPTION TERM
NAME OF HOLDER GRANTED IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
-------------- -------- -------------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C>
William Samuels 70,000 27.34% $2.69 5/01/02 67,895 155,380
David Reese 60,000 23.44% $2.69 5/01/02 58,579 134,188
Bruce Crowley 50,000 19.53% $2.69 5/01/02 49,262 112,996
Christopher Cline 10,000 3.91% $2.69 5/01/02 9,316 21,192
</TABLE>
OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED EXERCISE FOR
OPTIONS TO EMPLOYEES PRICE EXPIRATION OPTION TERM
NAME OF HOLDER GRANTED IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
-------------- -------- -------------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C>
Michael Freeman 100,000 36.36% $2.69 11/1/01 74,251 164,075
</TABLE>
11
<PAGE>
<PAGE>
TEN-YEAR OPTION REPRICING
The following table sets forth certain information with
respect to option repricings during the past ten years for the Company's
Named Executive Officers. The purpose of the option repricings in fiscal
1996 was to provide additional incentives to certain employees, officers and
directors of the Company in a manner consistent with industry practices. The
option repricings were approved by the Company's Board of Directors.
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OF EXERCISE OPTION
SECURITIES STOCK AT PRICE AT TERM
UNDERLYING TIME OF TIME OF REMAINING
OPTIONS/SARS REPRICING REPRICING NEW AT DATE OF
REPRICED OR OR OR EXERCISE REPRICING
AMENDED AMENDMENT AMENDMENT PRICE OR
NAME OF HOLDER DATE (#) ($) ($) ($) AMENDMENT
-------------- ---- --- --- --- --- ---------
<S> <C> <C> <C> <C> <C> <C>
William Samuels 11/19/92 120,000 2.00 6.00 2.50 3.2 Yrs
David Reese 11/19/92 54,683 2.00 4.09 2.50 1.3 Yrs
William Samuels 1/13/95 80,000 3.44 5.00 3.50 7.0 Yrs
David Reese 1/13/95 40,000 3.44 5.50 3.50 7.0 Yrs
David Reese 1/13/95 15,317 3.44 5.50 3.50 3.9 Yrs
Bruce Crowley 1/13/95 100,000 3.44 5.50 3.50 4.5 Yrs
Christopher Cline 1/13/95 25,000 3.44 5.50 3.50 5.0 Yrs
Christopher Cline 1/13/95 25,000 3.44 5.50 3.50 4.5 Yrs
William Samuels 11/4/96 80,000 2.69 3.50 2.69 5.2 Yrs
William Samuels 11/4/96 525,000 2.69 3.25 2.69 7.2 Yrs
David Reese 11/4/96 40,000 2.69 3.50 2.69 5.2 Yrs
David Reese 11/4/96 15,317 2.69 3.50 2.69 2.0 Yrs
David Reese 11/4/96 330,000 2.69 3.25 2.69 7.2 Yrs
Bruce Crowley 11/4/96 100,000 2.69 3.50 2.69 2.7 Yrs
Bruce Crowley 11/4/96 201,000 2.69 3.25 2.69 7.2 Yrs
Christopher Cline 11/4/96 25,000 2.69 3.50 2.69 2.7 Yrs
Christopher Cline 11/4/96 25,000 2.69 3.50 2.69 3.2 Yrs
</TABLE>
12
<PAGE>
<PAGE>
Ten-Year SAR Repricing
The following table sets forth certain information with respect
to stock appreciation right repricings during the past ten years for the
Company's Named Executive Officers. The purpose of the stock appreciation
right repricings in fiscal 1996 was to provide additional incentives to
certain employees, officers and directors of the Company in a manner
consistent with industry practices and in accordance with the terms of the
Company's 1996 Stock Appreciation Rights Plan. The stock appreciation rights
repricings were approved by the Company's SAR Committee.
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OF EXERCISE OPTION
SECURITIES STOCK AT PRICE AT TERM
UNDERLYING TIME OF TIME OF REMAINING
OPTIONS/SARS REPRICING REPRICING NEW AT DATE OF
REPRICED OR OR OR EXERCISE REPRICING
AMENDED AMENDMENT AMENDMENT PRICE OR
NAME OF HOLDER DATE (#) ($) ($) ($) AMENDMENT
-------------- ---- --- --- --- --- ---------
<S> <C> <C> <C> <C> <C> <C>
William Samuels 1/13/95 100,000 3.44 5.50 3.50 9.6 Yrs
William Samuels 11/17/95 30,000 3.44 4.50 3.50 9.5 Yrs
David Reese 1/13/95 30,000 3.44 5.50 3.50 9.6 Yrs
David Reese 11/17/95 30,000 3.44 4.50 3.50 9.5 Yrs
Bruce Crowley 1/13/95 100,000 3.44 5.50 3.50 9.6 Yrs
Christopher Cline 11/17/95 20,000 3.44 4.50 3.50 9.5 Yrs
William Samuels 11/4/96 130,000 2.69 3.50 2.69 5.5 Yrs
William Samuels 11/4/96 40,000 2.69 3.75 2.69 5.5 Yrs
David Reese 11/4/96 60,000 2.69 3.50 2.69 5.5 Yrs
David Reese 11/4/96 30,000 2.69 3.75 2.69 5.5 Yrs
Bruce Crowley 11/4/96 100,000 2.69 3.50 2.69 5.5 Yrs
Bruce Crowley 11/4/96 20,000 2.69 3.75 2.69 5.5 Yrs
Christopher Cline 11/4/96 20,000 2.69 3.50 2.69 5.5 Yrs
Christopher Cline 11/4/96 10,000 2.69 3.75 2.69 5.5 Yrs
</TABLE>
13
<PAGE>
<PAGE>
OPTION/SAR YEAR END VALUES (1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
SHARES NUMBER OF UNEXERCISED OPTIONS/SARS
ACQUIRED ON VALUE OPTIONS/SARS AT FY-END AT FY-END
NAME EXERCISE (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William Samuels 99,000/186,000 SARs $118,625/$142,625
613,035/525,000 Options $444,776/$295,313
David Reese 50,000/118,000 SARs $66,125/$85,375
105,000/330,000 Options $68,378/$185,625
Bruce Crowley 40,000/110,000 SARs $22,500/$61,875
66,000/235,000 Options $37,125/$132,188
Christopher Cline 4,000/26,000 SARs $2,250/$14,625
33,333/16,667 Options $18,750/$9,375
Michael Freeman, Ph.D. 32,000/32,000 SARs $56,000/$56,000
0/100,000 Options $0/$56,250
</TABLE>
(1) The closing bid price of a share of the Company's Common Stock at
December 31, 1996, was $3 1/4. The base prices of SARs were either
$1.50 or $2.69, and the exercise prices of stock options were either
$2.50 or $2.69.
BOARD COMPENSATION REPORT
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 1996 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
during the fiscal year, 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
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<PAGE>
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
Plans" and "1992 Stock Appreciation Rights Plan."
SAR/COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The SAR/Compensation Committee of the Board of Directors
("Committee") is responsible for making all compensation decisions with
respect to the executive officers of the Company. The Committee consists of
William Frank and Steven Schuster, both of whom were elected to the
Committee in June 1996.
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 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.
Respectfully submitted,
William Samuels, Chairman
David Reese, Bruce Crowley, Richard Hyman, William Frank, Steven Schuster
and Jess Ravich
15
<PAGE>
<PAGE>
SAR/CORPORATE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total
stockholder returns from December 31, 1991 through December 31, 1996 for the
Company, the Nasdaq Stock Market-U.S. Index ("Nasdaq") and the Hambrecht &
Quist Technology Index ("H&Q").
ACTV, Inc. H&Q NASDAQ
----------------------------------------------
Dec-91 100.00 100.00 100.00
Mar-92 220.50 103.33 105.00
Jun-92 186.10 94.77 96.09
Sep-92 165.38 98.81 100.03
Dec-92 234.28 115.02 116.37
Mar-93 799.32 113.35 118.56
Jun-93 661.51 115.78 120.83
Sep-93 668.45 117.84 131.02
Dec-93 730.43 125.52 133.59
Mar-94 675.28 126.67 127.97
Jun-94 620.16 117.47 121.99
Sep-94 592.62 134.02 132.10
Dec-94 399.66 145.70 130.59
Mar-95 551.27 162.17 142.36
Jun-95 482.35 196.73 162.84
Sep-95 620.16 224.03 182.45
Dec-95 413.43 218.76 184.70
Mar-96 496.12 223.13 193.30
Jun-96 406.54 233.38 209.08
Sep-96 344.53 248.51 216.52
Dec-96 358.31 262.49 227.16
The graph assumes that the value of the investment in the
Company's Common Stock, Nasdaq and H&Q was $100 on December 31, 1991 and
that all dividends were reinvested. No dividends have been declared or paid
on the Company's Common Stock.
<PAGE>
<PAGE>
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. 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 settlement price in all
these agreements was approximately 18% of the obligations' face value. The
three notes, issued to Nolan Bushnell, Prudential Bache Securities, Inc.,
and Dr. Freeman, in the original principal amounts of $190,000, $25,000 and
$8,770, respectively, were also repaid during 1994, at either their original
principal amount, or at a discounted amount.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
STOCK OPTION PLANS
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. 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 the fair market value
on the date of the grant. 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 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, 1996, 59,000 options were outstanding under this
Option Plan at exercise prices of $2.50 to $2.69 per share, which options
expire between the years 1977 and 2000. During 1996, none of the options
granted 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. 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 Committe, services
rendered or by a combination thereof. As of December 31, 1996, 46,500
options were outstanding under this Plan at exercise prices of $2.50 to
$5.50 per
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<PAGE>
<PAGE>
share, which options expire between the years 1997 and 1998. During 1996, none
of the options under the Plan were exercised.
The Company's 1996 Stock Option Plan (the "1996 Stock Option
Plan") was adopted by the Board of Directors in April 1996 and approved by
the shareholders in July 1996. The purpose of the 1996 Stock Option Plan is
to grant officers, employees and others who provide significant services to
the Company a favorable opportunity to acquire Common Stock so that they
have an incentive to contribute to its success and remain in its employ.
Under the 1996 Stock Option Plan, the Company is authorized to issue options
for a total of 500,000 shares of Common Stock. As of December 31, 1996,
212,500 options were issued under the plan.
The Company has also issued options to purchase shares of Common
Stock at varying prices, expiring at dates from 1997 to 2003, that are not
part of the Plans. These include currently outstanding options to (i) Mr.
Samuels for 1,138,035 shares at $2.10 per share; (ii) Mr. Reese for 435,000
shares at $2.10 per share; (iii) Mr. Crowley for 301,000 shares at $2.10 per
share; and (iv) Mr. Cline for 50,000 shares at $2.10 per share. During the
year ended December 31, 1996, no executive officer exercised options.
1992 STOCK APPRECIATION RIGHTS PLAN
The Company's 1992 Stock Appreciation Rights Plan (the "1992 SAR
Plan") was approved by the Company's stockholders in December 1992. The 1992
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 1992 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
1992 SAR Plan, the aggregate number of SARs that may be granted shall not
exceed 900,000. The 1992 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. 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 an
SAR ceases to be an employee, director or consultant of the Company, or one
of its subsidiaries or an affiliate, other than by reason of the holder's
death or disability, any SARs that have not vested shall become void.
Exercise of SARs also will be subject to such further restrictions
(including limits on the time of exercise) as may be required to satisfy the
requirements of Rule 16b-3 promulgated by the Securities and Exchange
Commission and any other applicable law or regulation (including, without
limitation, federal and state securities laws and regulations). SARs are not
transferable, except by will or under the laws of descent and distribution
or pursuant to a domestic relations order as defined in the Internal Revenue
Code of 1986, as amended.
Upon exercise of an SAR, the holder will receive for each share
for which an 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 an 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 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
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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 1992 SAR Plan, as of December 31, 1996, the
Company had granted a total of 683,000 outstanding SARs at exercise prices
of either $1.50 or $2.69 per share, including outstanding SARs of 215,000 to
William Samuels, 100,000 to Bruce Crowley, 108,000 to David Reese and 20,000
to Christopher Cline. 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.
The SARs expire between 1998 and 2006.
1996 STOCK APPRECIATION RIGHTS PLAN
The Company's 1996 Stock Appreciation Rights Plan (the "1996 SAR
Plan") was adopted by the Board of Directors in April 1996 and approved by
the shareholders in July 1996. The 1996 SAR Plan will provide 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 1996 SAR Plan is designed to promote the long-term interest of
the Company and its stockholders by providing these individuals with an
additional incentive to promote the financial success of the Company and its
subsidiary corporations. Subject to adjustment as set forth in the 1996 SAR
Plan, the aggregate number of SARs that may be granted pursuant to the 1996
SAR Plan shall not exceed 500,000; provided, however that at no time shall
there be more than an aggregate of 900,000 outstanding, unexercised SARs
granted pursuant to both the 1996 SAR Plan and the Company's 1992 Stock
Appreciation Rights Plan. (See "1992 Stock Appreciation Rights Plan"). The
1996 SAR Plan is administered by the Stock Appreciation Rights/Compensation
Committee (the "SAR/Compensation Committee"). The 1996 SAR Plan imposes no
limit on the number of recipients to whom awards may be made.
SARs may not be exercised until the expiration of six months from
the date of grant. If a holder of an SAR ceases to be an employee, director
or consultant of the Company, or one of its subsidiaries or an affiliate,
other than by reason of the holder's death or disability, any SARs that have
not vested shall become void. Exercise of SARs also will be subject to such
further restrictions (including limits on the time of exercise) as may be
required to satisfy the requirements of Rule 16b-3 promulgated by the
Securities and Exchange Commission and any other applicable law or
regulation (including, without limitation, federal and state securities laws
and regulations). SARs are not transferable, except by will or under the
laws of descent and distribution or pursuant to a domestic relations order
as defined in the Internal Revenue Code of 1986, as amended.
Upon exercise of an SAR, the holder will receive for each share
for which an SAR is exercised, as determined by the SAR/Compensation
Committee in its discretion, (a) shares of the Company's Common Stock, (b)
cash, or (c) cash and shares of the Company's Common Stock, equal to the
difference between (i) the fair market value per share of the Common Stock
on the date of exercise of the SAR and (ii) the value of an 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.
The terms of the SARs will be set forth in a certificate of grant
issued to the holder, which certificate will contain the provisions referred
to above and such other provisions as the SAR Committee may determine.
A grant of SARs has no federal income tax consequences at the
time of such grant. Upon the exercise of such SARs, the amount of any cash
and, generally, the fair market value of any shares of Common Stock of the
Company received, is taxable to the holder as ordinary income; the Company
will have a corresponding deduction. Upon the sale of the Company's 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.
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<PAGE>
Under the Company's 1996 SAR Plan, as of December 31, 1996, the
Company had granted a total of 214,000 SARs at the exercise prices of $2.69
per share, including 70,000 SARs to William Samuels, 60,000 SARs to David
Reese, 50,000 SARs to Bruce Crowley and 10,000 SARs to Christopher Cline.
SECTION 401(K) PLAN
During 1996, the Company adopted a Savings and Retirement Plan
(the "401(k) Plan") covering the Company's full-time employees, the 401(k)
Plan is intended to qualify under Section 401(k) of the Internal Revenue
Code, so that contributions to the 401(k) Plan by employees or by the
Company, and the investment earnings on such contributions, are not taxable
to employees until withdrawn from the 401(k) Plan, and so that contributions
by the Company, if any, will be deductible by the Company when made.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($9,500 in
1996) and to have the amount of such reduction contributed to the 401(k)
Plan. The 401(k) Plan permits, but does not require, additional matching
contributions to the 401(k) Plan by the Company on behalf of all
participants in the 401(k) Plan.
OPTIONS GRANTS IN SUBSIDIARIES
In March 1997, William C. Samuels, the Company's President and a
director, David Reese, the Company's Executive Vice President and a
director, Bruce Crowley, the Company's Executive Vice President and a
Director, and Christopher Cline, the Company's Chief Financial Officer were
granted options to acquire Class B Common Stock of The Los Angeles
Individualized Television Network, Inc. The Texas Individualized Television
Network, Inc. ACTV Net, Inc. and ACTV Entertainment, Inc., each a wholly
owned subsidiary of the Company. Each option is for a term of ten years and
may be exercised in increments commencing July 1997 through March 14, 2007.
The Class B Common Stock of each subsidiary entitles the holders thereof to
25 votes per share. The following sets forth the number of shares of Class B
Common Stock of each subsidiary which may be acquired by each optionee and
the percentage of the voting rights represented thereby assuming the
exercise of all then exercisable options both as to the initial number of
shares which may be acquired and as to all shares which may be acquired:
<TABLE>
<CAPTION>
Subsidiary Optionee Number of Shares Initial Voting Total Voting
Percentage Percentage
<S> <C> <C> <C> <C>
Los Angeles Samuels 250,000 25.76 37.9
Network
Reese 250,000 25.76 37.9
Texas Network Samuels 250,000 25.76 37.9
Reese 250,000 25.76 37.9
ACTV Net Samuels 290,000 24.33 33.72
Reese 100,000 9.71 11.63
Crowley 290,000 24.33 33.72
Cline 20,000 1.66 2.33
ACTV Samuels 290,000 24.33 33.72
Entertainment
Reese 290,000 24.33 33.72
Crowley 100,000 8.71 11.63
Cline 20,000 1.66 2.33
</TABLE>
The exercise price of the options are $1.55, $1.50 and $1.90 as
to Los Angeles Network, Texas Network and ACTV Net which represent the fair
market values per share based on an appraisal of the value obtained by the
Company. Such appraisal deemed the shares of ACTV Entertainment to be
valueless and the option price for such shares is the par value, $.10. In
the event the employment
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of the optionee is terminated for any reason or there is a change in control
as defined in the option, the options become immediately exercisable and the
exercise price is reduced to $.10 per share.
Messrs. Samuels, Reese, Crowley and Cline have also entered into
shareholders' agreements regarding the shares of each subsidiary which may
be acquired on the exercise of the options. Under the agreements each of the
optionees has agreed that upon acquisition of the Class B Common Stock of a
subsidiary he will not sell his shares except in connection with a bona fide
offer from a third party, in which event the subsidiary and the other
optionees will have a right of first refusal to acquire the offered shares
on the same terms as the third party has offered to purchase them. Under
each agreement the shares will be voted by William Samuels so long as he is
Chairman, an officer or a director of such subsidiary, or if he ceases to
hold such positions, Bruce Crowley will vote the Class B Shares of ACTV Net
and David Reese will vote the Class B Shares of the other subsidiaries. On
the second anniversary of the death, disability or resignation from
employment by the subsidiary of the shareholder, such shareholders' Class B
Common Stock will automatically convert to Class A Common Stock.
21
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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, 1996 all reports for all transactions were filed on a
timely basis.
MEETINGS OF THE BOARD OF DIRECTORS
There were ten meetings of the Company's Board of Directors
during 1996 held on March 25, 1996, April 19, 1996, May 21, 1996, June 20,
1996, July 29, 1996, August 2, 1996, August 12, 1996, September 18, 1996,
September 27, 1996 and November 11, 1996. All of the Directors were either
present or participated by telephone conference call at such meetings,
except David Reese who was not present at, nor did he participate in the
March 25, 1996 and September 27, 1996 meetings, Richard Hyman who was not
present at, nor did he participate in the August 2, 1996, August 12, 1996
and September 27, 1996 meetings, and Jess Ravich, who was elected to the
Board of Directors on October 1, 1996, who was not present at, nor did he
participate at the November 11, 1996 meeting. There were two unanimous
written consents of the Company's Board of Directors, pursuant to Section
141 of the General Corporation Law of Delaware, during 1996 dated May 6,
1996 and May 10, 1996. The Company has an SAR/Compensation Committee,
consisting of Steven Schuster, who replaced Richard Hyman in June, 1996, and
William A. Frank, who replaced Jay M. Kaplowitz, a former director, in
April, 1996. There were five meetings of the SAR/Compensation Committee
during 1996, held on March 11, 1996, June 20, 1996, July 24, 1996, November
5, 1996 and December 31, 1996. The Company also has an Incentive Stock
Option Committee, which consists of William Samuels and David Reese. There
were three meetings of the Incentive Stock Option Committee during 1996,
held on March 20, 1996, July 24, 1996 and November 5, 1996. The Company does
not currently have a standing Audit Committee or a Nominating Committee.
CERTAIN RELATIONSHIPS AND RELATED 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 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 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
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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 was
exercisable through March 17, 1997, and was not exercised.
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. ACTV Net, 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% and
was paid in full by October 1995.
The consideration for the acquisition by the Company 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.
William A. Frank is a director of the Company and the Chief
Executive Officer of Greenwich Entertainment Group (the "Greenwich Group"),
a position he has held since August 1994. In January 1995, the Company
granted an exclusive license to the Greenwich Group for the use of the
Company's Programming Technology in shopping malls, museums and
entertainment centers. The Company expects minimal revenues from such
license agreement. If the licensees are not paid, the Company has the right
to cancel its license as to future theaters. In addition, the Company
invested approximately $274,000 in 1996, in the Greenwich Group, in exchange
for approximately 15% of the Company's outstanding common stock.
Jess Ravich is a director of the Company and the Chief Executive
Officer and Majority Stockholder of Libra Investments. Libra Investments was
granted 100,000 options to purchase shares of Common Stock in connection
with financial advisory services provided by Libra Investments. In addition,
in connection with an equity offering offered through Libra Investments,
Libra Investments and the Ravich Revocable Trust of 1989 were each issued
warrants to purchase up to 18,000 shares of cumulative convertible preferred
stock of ACTV Holdings, Inc., a wholly-owned subsidiary, convertible into
shares of Common Stock of the Company.
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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.
24
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PROPOSAL NO. 2
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK
The Board of Directors of the Company has adopted resolutions proposing
an amendment to the Company's Restated Certificate of Incorporation which would
amend the first paragraph of Article IV of the Company's Restated Certificate of
Incorporation to increase the number of shares of Common Stock, $.10 par value,
to 65,000,000 shares from the 35,000,000 shares currently authorized. No change
is proposed in the number of shares of Preferred Stock presently authorized,
mainly 1,000,000. There are currently 11,838,734 shares of Common Stock and zero
shares of Preferred Stock outstanding. In addition, the Company has reserved for
issuance 3,017,718 shares of Common Stock in connection with outstanding stock
options and has 337,000 stock options which may be granted under presently
approved option plans.
The Board of Directors of the Company is recommending the approval of
the amendment to the Certificate of Incorporation for the following reasons. The
Company previously announced a proposed private debt offering by a subsidiary
and a proposed public offering of its shares of Common Stock. Each of these
financing opportunities and other financing opportunities which may arise in the
future will require substantial issuances of the Company's Common Stock. As
presently proposed, the debt offering will require the Company to initially
capitalize the subsidiary, that is now wholly-owned by the Company, with shares
of the Company's Common Stock. While the number of shares involved is not known
and is still subject to negotiation, at the present time it is estimated to be
four million shares. There are no specific current plans with respect to such
equity offering and it is too remote to estimate the number of shares to be
offered in such a public offering. Furthermore, in August 1996, as part of a
financing for the Company, a subsidiary of the Company issued preferred stock
which is convertible into Common Stock of the Company. Under the terms of the
agreements relating to such financing, the Company is required to reserve for
issuance, in connection with the possible conversion of such Preferred Stock,
additional shares of Common Stock. While there is no requirement that the
holders of such Preferred Stock exercise their rights to convert at any
particular time, it is currently estimated, based upon the conversion formula,
including the current trading price of the Company's shares and accrued
dividends, that if all such holders were to convert now, then approximately 6.8
million shares of Common Stock would be issued to such Preferred Stockholders.
Finally, the Board believes that it is desirable to have the additional shares
available to enable the Company to take advantage of other favorable financing
opportunities that may arise in the future. The Board believes that the
availability of such shares for issuance in the future will give the Company
greater flexibility (with respect to the purpose of such issuance and the
nature of any consideration that may be received therefor) and permit such
shares to be issued without the expense and delay of holding a stockholders
meeting. The shares would be available for issuance by the Board without further
stockholder authorization, except as may be required by law or by the rules of
Nasdaq (or any other national quotation system or stock exchange on which the
shares of Common Stock may then be listed). The issuance of any additional
shares of Common Stock may result in a dilution of the voting power of the
holders of outstanding shares of Common Stock and their equity interest in the
Company.
Although not intended as an anti-takeover device, issuing additional
shares the Common Stock could impede a non-negotiated acquisition of the Company
by diluting the ownership interest of a substantial stockholder, increasing the
total amount of consideration necessary for a person to obtain control of the
Company, or increasing the voting power of friendly third-parties.
STOCKHOLDER VOTE REQUIRED
Approval of the amendment to the Restated Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
SHARES OF AUTHORIZED COMMON STOCK.
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PROPOSAL NO. 3
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO CONVERT PREVIOUSLY
DESIGNATED SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK AND SERIES B
CONVERTIBLE PREFERRED STOCK INTO BLANK CHECK PREFERRED STOCK;
The Board of Directors of the Company has adopted resolutions
proposing the conversion of 666,667 shares of Series A Convertible Preferred
Stock and 333,333 shares of Series B Convertible Preferred Stock, each $0.10
par value per share and convertible at $1.50 and $2.50 into shares of the
Company's Common Stock, respectively, into 1,000,000 Shares of Blank Check
Preferred Stock, by means of an amendment to the Company's Restated
Certificate of Incorporation. There are currently no shares of Preferred
Stock outstanding nor are there any understandings, arrangements or plans
for the issuance of any such shares.
If this amendment is adopted by the shareholders, the Board of
Directors will be empowered, without the necessity of further action or
authorization by the shareholders (unless required in a specific case by
applicable laws, regulations or stock exchange rules), to cause the Company
to issue Preferred Stock from time to time in one or more series, and to fix
by resolution the relative rights and preferences of each series. Each
series of Preferred Stock may rank senior to the Company's Common Stock with
respect to dividends and liquidation rights.
The current conversion prices of both the Series A and Series
B Convertible Preferred Stock, $1.50 and $2.50, respectively, do not allow
the Company to use effectively the Preferred Stock to further its business
strategies. Therefore the Company seeks to remove all designations upon the
Series A and Series B Convertible Preferred Stock, in order for the Company
to have 1,000,000 shares of blank check preferred stock available for future
use.
The Blank Check Preferred Stock will allow the Board of
Directors to determine, among other things, with respect to each series of
Preferred Stock which may be issued: (i) the distinctive designation of such
series and the number of shares constituting such series, (ii) whether or
not shares have voting rights and the extent of such voting rights, if any,
(iii) the election, term of office, filling of any vacancies, and other
terms of the directorship of directors, if any, to be elected by the holders
of any one or more series of such Preferred Stock, (iv) the dividend rights,
if any, including the dividend rates, preferences with respect to other
series of classes of stock, the times of payment and whether dividends shall
be cumulative, (v) the redemption price, terms of redemption, and the amount
of and provisions regarding any sinking fund for the purchase or redemption
thereof, (vi) the liquidation preferences and the amounts payable on
dissolution or liquidation, and (vii) the terms and conditions, if any,
under which shares of the series may be converted into any other series or
class of stock or debt of the Company. Holders of Common Stock have no
preemptive right to purchase or otherwise acquire any Preferred Stock that
may be issued in the future.
The adoption of this proposal will increase the Company's
financial flexibility. The Board believes that the complexity of modern
business financing and acquisition transactions requires greater flexibility
in the Company's capital structure than now exists. Preferred Stock will be
available for issuance from time to time as determined by the Board for any
proper corporate purpose. Such purposes could include, without limitation,
issuance in public or private sales for cash as a means of obtaining capital
for use in the Company's business and operations, issuance as part or all of
the consideration required to be paid by the Company for acquisitions of
other businesses or properties, and issuance under employee benefit plans.
The availability of Blank Check Preferred Stock could also have certain
anti-takeover effects. The Company does not presently have any plans,
agreements, understandings or arrangements that will or could result in the
issuance of any Preferred Stock.
If this proposal is adopted, then until the Board determines
the respective rights of the holders of one or more series of Preferred
Stock, it is not possible to state the actual effect of the authorization of
the Preferred Stock upon the rights of holders of Common Stock. Typical
effects of such issuance could include, however: (i) reduction of the amount
otherwise available for payment of
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dividends on Common Stock if dividends are payable on the Preferred Stock,
(ii) restrictions on dividends on Common Stock if dividends on the Preferred
Stock are in arrears, (iii) dilution of the voting power of Common Stock if
the Preferred Stock has voting rights, and (iv) restriction of the rights of
holders of Common Stock to share in the Company's assets upon liquidation
until satisfaction of any liquidation preference granted to the holders of
Preferred Stock.
STOCKHOLDER VOTE REQUIRED
Approval of the amendment to the Restated Certificate of
Incorporation requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CONVERT PREVIOUSLY
DESIGNATED SHARES OF SERIES A AND SERIES B PREFERRED STOCK INTO BLANK
CHECK PREFERRED STOCK.
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP
AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
The Board of Directors of the Company has adopted resolutions
appointing Deloitte & Touche LLP as the Company's independent certified
public accountants for the ensuing year. Deloitte & Touche LLP, which has
served as the Company's independent certified public accountants since 1989,
is familiar with the Company's operations, accounting policies and
procedures and is, in the Company's opinion, well-qualified to act in this
capacity. A member of Deloitte & Touche LLP will be available to answer
questions and will have the opportunity to make a statement if he or she so
desires at the Annual Meeting of Stockholders.
STOCKHOLDER VOTE REQUIRED
Ratification of the appointment of Deloitte & Touche LLP as
independent certified public accountants requires the affirmative vote of
the holders of a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
OTHER MATTERS
The Board of Directors does not know of any matters other than
those referred to in the notice of meeting that will be presented for
consideration at the Meeting. However, it is possible that certain proposals
may be raised at the Meeting by one or more stockholders. In such case, or
if any other matter should properly come before the Meeting, it is the
intention of the person named in the accompanying proxy to vote such proxy
in accordance with his best judgment.
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SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company.
Solicitations may be made by mail, personal interview, telephone, and telegram
by directors, officers and employees of the Company. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy material to beneficial owners of
the Company's capital stock.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to
be presented by such stockholders at the Company's 1998 Annual Meeting of
Stockholders must be received by the Company no later than January 1, 1998 in
order that they may be considered for inclusion in the Proxy Statement and form
of proxy relating to that Meeting.
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION
Copies of the annual report (Form 10-K) of the Company for the
year ended December 31, 1996, as filed with the Securities and Exchange
Commission (without exhibits), and any amendments thereto, are available to
stockholders free of charge by writing to ACTV, Inc., 1270 Avenue of the
Americas, New York, New York 10020.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company
and its subsidiaries for the fiscal year ended December 31, 1996, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, are annexed hereto as Appendix I.
By Order of the Board of
Directors of ACTV, Inc.
William C. Samuels
Chairman and Chief Executive Officer
April 21, 1997
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APPENDIX 2
GENERAL PROXY - ANNUAL MEETING OF STOCKHOLDERS OF ACTV, INC.
The undersigned hereby appoints William C. Samuels, with full
power of substitution, proxy to vote all of the shares of Common Stock of the
undersigned and with all of the powers the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of ACTV, Inc., to be
held at ACTV, Inc., 1270 Avenue of the Americas, New York, New York 10020 on May
16, 1997 at 9:30 a.m. and at all adjournments thereof, upon the matters
specified below, all as more fully described in the Proxy Statement dated
April 21, 1997 and with the discretionary powers upon all other matters which
come before the meeting or any adjournment therof.
THIS PROXY IS SOLICITED ON BEHALF OF ACTV, INC.'S BOARD OF DIRECTORS.
1. To elect three Class I directors to hold office for a term of three years.
Bruce Crowley; Richard Hyman; and Jess Ravich.
[ ] FOR ALL NOMINEES [ ] WITHHELD FOR ALL NOMINEES
INSTRUCTION: To withhold authority to vote for any individual, strike that
nominee's name from the list above.
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2. To approve an amendment to the Company's Restated Certificate of
Incorporation which would increase the authorized shares of the Company's
Common Stock to 65,000,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve amendment to the Company's Restated Certificate of Incorporation
which would convert Series A and Series B Convertible Preferred Stock into
1,000,000 shares of Blank Check Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment of Deloitte & Touche, LLP as the Company
independent certified public accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, upon such other matter or matters that may properly
come before the meeting, or any adjournment thereof.
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(Continued and to be signed on the other side)
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(Continued from other side)
Every properly signed proxy will be voted in accordance with the specifications
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3, 4 and 5.
The undersigned hereby acknowledges receipt of a copy of the accompanying
Notice of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Date: ___________________________, 1997
_______________________________________
(Print name of Stockholder)
_______________________________________
(Print name of Stockholder)
_______________________________________
Signature
_______________________________________
Signature
Number of Shares ______________________
Note: Please sign exactly as name
appears in the Company's
records. Joint owners should
each sign. When signing as
attorney, executor or trustee,
please give title as such.
