LYNCH INTERACTIVE CORP
DEF 14A, 2000-04-19
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  SCHEDULE 14A

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 [_]

Check the appropriate box:

[_]  Preliminary Proxy Statement          [_]  Soliciting Material Pursuant to
[_]  Confidential, For Use of the              SS.240.14a-11(c) or SS.240.14a-12
     Commission Only (as permitted
     by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[_]  Definitive Additional Materials


                         Lynch Interactive Corporation
- --------------------------------------------------------------------------------
                (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)(4) 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:
- --------------------------------------------------------------------------------

SEC 1913 (3-99)



<PAGE>

                          LYNCH INTERACTIVE CORPORATION
                            401 Theodore Fremd Avenue
                                  Rye, NY 10580
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                             TO BE HELD MAY 11, 2000

                                                             April 18, 2000

To the Shareholders of
  Lynch Interactive Corporation

      NOTICE IS HEREBY GIVEN that the Annual  Meeting of  Shareholders  of Lynch
Interactive Corporation,  an Indiana Corporation,  will be held at the Greenwich
Public Library, 101 West Putnam Avenue, Greenwich,  Connecticut on Thursday, May
11, 2000, at 3:00 p.m. for the following purposes:

     1.   To elect six  directors  to serve  until the next  Annual  Meeting  of
          Shareholders   and  until  their   successors  are  duly  elected  and
          qualified.

     2.   To consider and vote on the 2000 Stock Option Plan.

     3.   To consider and vote on the Principal Executive Bonus Plan.

     4.   To transact such other business as may properly come before the Annual
          Meeting or any adjournments thereof.

      Information  relating  to the above  matters is set forth in the  attached
Proxy Statement. As fixed by the Board of Directors, only Shareholders of record
at the close of business of March 27,  2000 are  entitled to receive  notice of,
and to vote at, the Annual Meeting and any adjournments thereof.

      The Board of Directors  encourages all  shareholders to personally  attend
the annual  meeting.  Your vote is very  important  regardless  of the number of
shares  you own.  Shareholders  who do not  expect to attend  are  requested  to
promptly  date,  complete  and return the  enclosed  proxy card in the  enclosed
accompanying  postage-paid  envelope in order that their  shares of common stock
may  be  represented  at  the  annual  meeting.   Your  cooperation  is  greatly
appreciated.

                                    By Order of the Board of Directors

                                    Robert A. Hurwich
                                    Secretary

     IMPORTANT:  Your vote is important  regardless  of the number of shares you
own. Please date, sign and return your proxy promptly in the enclosed  envelope.
Your cooperation is greatly appreciated.

<PAGE>



                          LYNCH INTERACTIVE CORPORATION
                            401 Theodore Fremd Avenue
                                  Rye, NY 10580
                                 PROXY STATEMENT

      This Proxy  Statement  is  furnished  by the Board of  Directors  of Lynch
Interactive  Corporation (the "Corporation") in connection with the solicitation
of proxies  for use at the  Annual  Meeting  of  Shareholders  to be held at the
Greenwich Public Library,  Greenwich,  Connecticut on May 11, 2000, at 3:00 P.M.
and at any adjournments thereof. This Proxy Statement and the accompanying proxy
is first being mailed to shareholders on or about April 18, 2000.

      Only shareholders of record at the close of business on March 27, 2000 are
entitled  to notice of, and to vote at, the Annual  Meeting.  As of the close of
business on such date,  1,412,183 shares of the Corporation's  common stock, par
value $.0001 (the "Common  Stock"),  were outstanding and eligible to vote. Each
share of Common  Stock is entitled to one vote on each matter  submitted  to the
shareholders. Where a specific designation is given in the proxy, the proxy will
be voted in accordance with such  designation.  If no such  designation is made,
the proxy will be voted FOR the nominees for director named below,  FOR approval
of the 2000 Stock Option Plan and FOR approval of the Principal  Executive Bonus
Plan, and in the discretion of the proxies with respect to any other matter that
is properly  brought before the Annual Meeting.  Any shareholder  giving a proxy
may revoke it at any time before it is voted at the Annual Meeting by delivering
to the  Secretary of the  Corporation  a written  notice of  revocation  or duly
executed  proxy  bearing a later date or by appearing at the Annual  Meeting and
revoking his or her proxy and voting in person.

      An automated  system  administered  by the  Corporation's  transfer  agent
tabulates the votes.  Pursuant to the Delaware  General  Corporation Law and the
By-laws of the  Company,  shares held by persons  who  abstain  from voting on a
proposal will be counted in  determining  whether a quorum is present,  but will
not be  counted  as voting  either for or  against  such  proposal.  If a broker
indicates  on the  proxy  that it does not have  discretionary  authority  as to
certain  shares  to  vote on a  particular  matter,  those  shares  will  not be
considered as present and entitled to vote with respect to that matter.

      The  Corporation  was spun off (the "Spin Off") from Lynch  Corporation on
September 1, 1999, and became a public company at that time.

                              ELECTION OF DIRECTORS

      Six directors  are to be elected at the Annual  Meeting to serve until the
next Annual Meeting of Shareholders  and until their  respective  successors are
elected.  Except where authority to vote for directors has been withheld,  it is
intended that the proxies received  pursuant to this  solicitation will be voted
FOR the  nominees  named  below.  If for any  reason  any  nominee  shall not be
available for election,  such proxies will be voted in favor of the remainder of
those  named  and may be voted  for  substitute  nominees  in place of those who
decline to be candidates.  Management, however, has no reason to expect that any
of the nominees will be unavailable for election.

      The election of directors  shall be determined by a plurality of the votes
cast.

      All of the nominees had served as directors of Lynch  Corporation and have
served as directors of the Corporation  since the Spin Off on September 1, 1999.
The By-laws of the Corporation  provide that Board of Directors shall consist of
no less than two and no more than nine  members  and that any  vacancies  on the
Board  of  Directors  for  whatever  cause  arising,   including   newly-created
directorships,  may be filled by the remaining  directors until the next meeting
of  shareholders.  Biographical  summaries  and ages as of April 1,  2000 of the
nominees are set forth  below.  Data with respect to the number of shares of the
Common Stock beneficially owned by each of them appears on pages 4 and 5 of this
Proxy  Statement.  All such information has been furnished to the Corporation by
the nominees.


<PAGE>

<TABLE>
<CAPTION>

                               Name: Age; Business Experience
                                  And Principal Occupation                           Served as
                           For Last 5 Years; and Directorships in                  Director From
                        Public Corporations and Investment Companies
<S>                                                                                     <C>
Paul J. Evanson, 58
President  (since 1995) of Florida Power & Light Co.; former President and Chief
Operating  Officer of Lynch  Corporation  and former  Chairman and  President of
Spinnaker Industries,  Inc., a subsidiary of Lynch Corporation;  Director of FPL
Group, Inc. and Florida Power & Light Company ..................................        1999

John C. Ferrara, 48
Chief Financial  Officer (since 1999) of SPACE.com,  an internet  start-up which
offers  content,  news,  entertainment,  information  and education about space;
Executive  Vice President and Chief  Financial  Officer  (1998-January  1999) of
Golden  Books Family  Entertainment,  Inc., a NASDAQ  company  which  published,
licensed  and  marketed   entertainment  products  and  subsequently  filed  for
protection under the Bankruptcy Act in late February 1999 (and is now out); Vice
President and Chief Financial Officer (1989-1997) of Renaissance  Communications
Corp., a NYSE company which owned and operated  television  broadcast  stations;
from 1973-1989,  various  financial  positions at The American  Express Company,
National  Broadcasting Company (NBC) and Deloitte & Touche;  Director of Gabelli
Asset Management Inc. ..........................................................       1999

Mario J. Gabelli, 57
Chairman and Chief Executive Officer of the Corporation  (since September 1999);
Chairman (since 1986), Chief Executive Officer  (1986-January 2000) and Director
of Lynch  Corporation;  Chairman and Chief  Executive  Officer of Gabelli  Group
Capital Partners (since 1980), a private company which makes investments for its
own account;  Chairman and Chief Executive  Officer of Gabelli Asset  Management
Inc.  (since 1999), a NYSE listed holding  company for  subsidiaries  engaged in
various aspects of the securities business; Director/Trustee and/or President of
all registered  investment companies managed by Gabelli Funds, LLC (since 1986);
Director of Spinnaker Industries, Inc.; Governor of the American Stock Exchange;
Overseer  of  Columbia  University  Graduate  School  of  Business;  Trustee  of
Fairfield University, Roger Williams University, Bruce Museum, Winston Churchill
Foundation  and  E.L.  Wigend  Foundation;   Chairman,   Patron's Committee of
Immaculate  Conception School; and former trustee of Fordham  Preparatory School
and Dr. I. Fund Foundation .....................................................        1999

David C. Mitchell, 58
President  of the  Telephone  Group and  member of the Board of  Directors  of
Rochester  Telephone  (now  Global  Crossing)  until 1992;  President  and Chief
Executive Officer of Personal Sound Technologies,  Inc., a development stage new
venture company bringing a technology hearing aid to market (1992-3); Advisor to
C-Tec Corporation from 1993 to its corporate reorganization in 1997; Director of
Commonwealth  Telephone  enterprises,  Inc.  (where  he has  also  served  as an
adviser),  USN Communications,  Inc.; HSBC (Rochester,  NY Board),  Finger Lakes
Long term Care Insurance Co. and IBS International Corp. (until September 1999)         1999

Salvatore Muoio, 40
Principal  and Chief  Investment  Officer  of S. Muoio & Co.  LLC, a  securities
advisory  firm (since 1996); Securities Analyst and Vice President of Lazard
Freres & Co., L.L.C., an investment banking firm (1995-1996); Securities Analyst
at Gabelli & Company, Inc. (1985-1995) .........................................        1999

Ralph R. Papitto, 73
Chairman and Chief Executive Officer of AFC Cable Systems,  Inc., a manufacturer
and supplier of electrical  distribution  products (since 1993-1999); Founder,
Chairman and a Director of Nortek, Inc., a manufacturer of construction products
(1967-1993);  Director of AFC Cable Systems, Inc., Lynch Corporation;  Spinnaker
Industries,  Inc.  and  Global  Sports &  Gaming.Com;  Chairman  of the Board of
Trustees of Roger Williams University ..........................................        1999

</TABLE>

<PAGE>

                 OPERATION OF BOARD OF DIRECTORS AND COMMITTEES

         Since the Spin Off,  there was one  meeting  of the Board of  Directors
during 1999, and the Board acted once by unanimous written consent.

         The Board of directors has established three standing  committees,  the
principal duties of which are described below:

         Audit  Committee:  Recommends to the Board of Directors the appointment
of independent auditors;  reviews annual financial reports to shareholders prior
to their publication;  reviews the report by the independent auditors concerning
management  procedures  and policies;  and  determines  whether the  independent
auditors  have  received  satisfactory  access  to the  Corporation's  financial
records and full  cooperation  of corporate  personnel in connection  with their
audit of the Corporation's  records. Since the Spin Off, the Audit Committee met
once during 1999. The present members are Messrs.  Ferrara (Chairman),  Mitchell
and Muoio.

         Executive  Compensation  and  Benefits  Committee:  Develops  and makes
recommendations  to the Board of  Directors  with  respect to the  Corporation's
executive  compensation  policies;  recommends  to the  Board of  Directors  the
compensation to be paid to executive officers; administers the Lynch Interactive
Corporation  Bonus  Plan,  401(k)  Savings  Plan,  and Phantom  Stock  Plan,  as
summarized  on pages 8 through 12 of this Proxy  Statement;  and  performs  such
other duties as may be assigned to it by the Board of Directors.  Since the Spin
Off, the Executive Compensation and Benefits Committee did not meet during 1999.
The present members are Messrs.  Papitto  (Chairman),  and Evanson.  A Committee
consisting  of Messrs.  Papitto and Ferrara  deal with  matters  relating to the
Principal Executive Bonus Plan (being submitted to shareholders for approval).

         Executive Committee: Exercises all the power and authority of the Board
of Directors,  except as otherwise provided by Delaware law or by the By-laws of
the Corporation,  in the management  affairs of the Corporation during intervals
between  meeting of the Board of  Directors.  Since the Spin Off, the  Executive
Committee  did not meet during  1999.  The present  members are Messrs.  Gabelli
(Chairman), Evanson and Papitto.

         The Corporation does not have a nominating  committee.  Nominations for
directors and officers of the Corporation  are matters  considered by the entire
Board of Directors.

                            COMPENSATION OF DIRECTORS

         Directors,  who are not  otherwise  employees,  receive a monthly  cash
retainer  of $1,500,  a fee of $2,000 for each in  personam  Board of  Directors
Meeting  and a fee of $1,000  for each  telephonic  board of  Directors  meeting
(which  lasts for at least one hour) and each  committee  meeting  the  director
attends.  In addition,  a non-employee  director serving as a committee chairman
receives  an  additional  $2,000  annual  cash  retainer.  A director  who is an
employee of the  Corporation is not  compensated for services as a member of the
Board of Directors  or any  committee  thereof.  In  addition,  the  Corporation
purchases  accident and  dismemberment  insurance  coverage of $100,000 for each
member of the Board of  Directors  and  maintains a liability  insurance  policy
which  provides for  indemnification  of each  Director  (and  officer)  against
certain liabilities which each may incur in his capacity as such.


<PAGE>



         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table  sets  forth,  as  of  March  15,  2000,  certain
information  with  respect  to all  persons  known  to the  Corporation  to each
beneficially own more than 5% of the Common Stock of the  Corporation,  which is
the only class of voting stock of the  Corporation  outstanding.  The table also
sets  forth  information  with  respect  to  the   Corporation's   Common  Stock
beneficially owned by the directors,  by each of the executive officers named in
the Summary  Compensation  Table on page 6 of this Proxy  Statement,  and by all
directors and executive  officers as a group. The number of shares  beneficially
owned is determined under rules of the Securities and Exchange  Commission,  and
the  information is not necessarily  indicative of beneficial  ownership for any
other purpose.  Under such rules,  beneficial  ownership  includes any shares to
which a person has the sole or shared voting or  investment  power or any shares
which the person can  acquire  within 60 days (e.g.,  through  exercise of stock
options or  conversions  of  securities).  Except as  otherwise  indicated,  the
shareholders  listed in the table have sole  voting and  investment  powers with
respect to the Common Stock set forth in the table. The following information is
either  reflected in Schedule 13Ds and 13Gs or Form 3s, Form 4s and Form 5s that
have  been  filed  with the  Securities  and  Exchange  Commission  or which has
otherwise been furnished to the Corporation.


<PAGE>
<TABLE>
<CAPTION>
        Name of                          Amount and Nature              Percent
    Beneficial Owner*                  Of Beneficial Ownership          Of Class

<S>                                         <C>                             <C>
Dimensional Fund Advisors, Inc. ......      80,400(1)                       5.7%
Cascade Investment LLC ...............     294,118(2)                      17.2%
Mario J. Gabelli .....................     325,876(3)                      23.1%
Paul J. Evanson ......................       5,652                            **
John C. Ferrara ......................       1,414                            **
David C. Mitchell ....................         400(4)                         **
Salvatore Muoio ......................         852                            **
Ralph R. Papitto .....................         952                            **
Robert E. Dolan ......................         235(5)                         **
Robert A. Hurwich ....................         399(6)                         **
All Directors and Executive Officers .     335,780                         23.8%
as a group (eight in total)
<FN>

 *      The  address of each  holder of more than 5% of the  Common  Stock is as
        follows: Dimensional Fund Advisors - 1299 Ocean Avenue, Santa Monica, CA
        90401; Cascade Investment LLC, 2365 Carillon Point, Kirkland, Washington
        98033, and Mr. Gabelli - Corporate Center at Rye, Rye, NY 10580.

**      Represents holdings of less than one percent.

(1)     Because of its  investment  and/or  voting  power over  shares of Common
        Stock of the Corporation held in the accounts of its investment advisory
        clients,   Dimensional  Fund  Advisors,   Inc.,  an  investment  adviser
        ("Dimensional"),  is deemed to be the beneficial owner of 86,900 shares.
        Dimensional disclaims beneficial ownership of all such shares.

(2)     Cascade Investment LLC owns a $25,000,000 Convertible Promissory Note of
        the Corporation  convertible into Common Stock of the Corporation at the
        rate of $85 principal amount of the Note for each share of Stock.

(3)     Includes  252,376  shares of Common Stock owned  directly by Mr. Gabelli
        (including  3,462  held  for  the  benefit  of  Mr.  Gabelli  under  the
        Corporation's  401(k) Savings Plan),  3,500 shares owned by a charitable
        foundation of which Mr.  Gabelli is a trustee and 70,000 shares owned by
        a limited  partnership in which Mr.  Gabelli is the general  partner and
        has a 6% interest.  Mr. Gabelli  disclaims  beneficial  ownership of the
        shares owned by the  foundation and by the  partnership,  except for his
        approximate 6% interest therein.

(4)     200 shares jointly owned with wife and sharing voting and investment
        power.

(5)     Includes 35 shares  registered  in the name of Mr.  Dolan's  children
        with  respect to which Mr. Dolan has voting and investment power.

(6)     Held for the benefit of Mr. Hurwich under the Corporation's 401(k)
        Savings Plan.
</FN>
</TABLE>

        Morgan Group is an approximately 55% owned subsidiary of the Corporation
whose stock is traded on the American Stock Exchange (AMEX). As of April 1, 1999
Mr.  Gabelli  beneficially  owns 10,000 shares (0.7%) of Morgan  Group's Class A
Common Stock.  He may also be deemed to be a beneficial  owner of 155,900 shares
of Morgan  Group's Class A Common Stock and 1,200,000  shares of Morgan  Group's
Class B Common  Stock owned by the  Corporation,  by virtue of his  ownership of
approximately  23.1% of the  shares  of  Common  Stock of the  Corporation.  Mr.
Gabelli,  however,  specifically disclaims beneficial ownership of all shares of
Morgan Group stock held by the Corporation.
<PAGE>

                             EXECUTIVE COMPENSATION

        At the time of the Spin Off on September 1, 1999, the Executive Officers
of Lynch Corporation became employees of Lynch Interactive Corporation (with the
substantially same salaries, bonus potential and other compensation arrangements
as were then in  effect).  At that time,  they ceased to be  employees  of Lynch
Corporation  although they remained the Executive Officers of Lynch Corporation.
Lynch Interactive  began charging Lynch  Corporation for the corporate  services
provided by such Executive  Officers  (approximately  25% of their  compensation
cost from September 1 to December 31, 1999).

        The   following   tables  set  forth   compensation   received   by  the
Corporation's  Chief Executive Officer and each of the other executive  officers
of the Corporation for the last three fiscal years and certain information as to
stock options:

        Prior to the Spin Off, such officers were, and continue to be,  officers
of Lynch Corporation, and the information set forth under Executive Compensation
includes  the  compensation  paid  both  prior  to  September  1,  1999 by Lynch
Corporation and after September 1, 1999 by the Corporation.

<TABLE>

                           SUMMARY COMPENSATION TABLE
                               Annual Compensation

<CAPTION>
                                                                      Long Term
                                                                 Compensation Awards
                                                                Stock
                                                              Underlying                 All Other
Name and Principal Position                                     SARs2     Payments3    Compensation
                              Year    Salary($)   Bonus($)1      (#)        ($)           ($)4

<S>                           <C>      <C>          <C>        <C>       <C>              <C>
Mario J. Gabelli ..........   1999     500,000           0        --     1,868,998           0
  Chief Executive Officer .   1998     500,000           0        --          --           200
  Chairman of the Board ...   1997     500,000           0      25,000        --           200
  Chairman of the Executive

Robert E. Dolan ...........   1999     250,000      75,000        --       685,822           0
 Chief Financial Officer(5)   1998     250,000      50,000       2,000          --         200
                              1997        --             0       4,000   -         200

Robert A. Hurwich .........   1999     180,000           0        --       345,722           0
  Vice President-Admin- ...   1998     164,000      20,000       1,000        --           200
istration, Secretary,......   1997     156,000           0       1,500        --           200
General Counsel

<FN>
(1)  Bonuses  earned in any fiscal year are generally  paid during the following
     fiscal year.

(2)  Shares of Common Stock of Lynch Corporation at the time of grant underlying
     Phantom Stock Plan awards.

(3)  Represents  payments  by Lynch  Interactive  Corporation  under the Phantom
     Stock Plan of Lynch  Corporation  and Lynch  Interactive in 2000 based upon
     December 31, 1999, stock values.  Does not include  $483,039,  $177,249 and
     $89,351  paid by Lynch  Corporation  in 2000 based upon  December  31, 1999
     stock values to Messrs. Gabelli, Dolan and Hurwich, respectively.

(4)  The  compensation  reported  represents  contributions  made  to the  Lynch
     Corporation  401(k) Savings Plan. The amount of perquisites,  as determined
     in  accordance  with the rules of the  Securities  and Exchange  Commission
     relating to Executive  Compensation did not exceed the lesser of $50,000 or
     10% of salary and bonus for 1999.
</FN>
</TABLE>

         There  were no grants of stock  options  or stock  appreciation  rights
during 1999, and the Phantom Stock Plan was terminated by the Board of Directors
of Lynch Interactive (See "Termination of Lynch Phantom Stock Plan" at page 10).
<PAGE>

<TABLE>

                     AGGREGATE OPTION/SAR EXERCISES IN LAST
                    FISCAL YEAR AND FY-END OPTION/SAR VALUES

<CAPTION>

                             SARs                          Number of Securities
                           Exercised                    Underlying Options/SARs at         Value of Unexercised
                              (#)          Value             Fiscal Year-End           In-the-Money Options/SARs at
                              (b)        Realized                   (#)                    Fiscal Year-End (#)
          Name                              ($)         Exercisable/Unexercisable       Exercisable/Unexercisable
          (a)                               (c)                    (d)                             (e)
Mario J. Gabelli
<S>                        <C>          <C>                                                    <C>
Chairman of the Board      25,000       1,868,998              None/None                       $0/$0

Robert E. Dolan Chief
Financial Officer          10,000         685,823              None/None                       $0/$0

Robert A. Hurwich
VP-Admin., Sec. & Gen.
Counsel                     5,000        345,722               None/None                       $0/$0
<FN>

(1)  Represents payments in 2000 by Lynch Interactive Corporation upon exercises
     under the Phantom  Stock Plan of Lynch  Corporation  and Lynch  Interactive
     based upon  December  31, 1999 stock  values.  Does not  include  $483,039,
     $177,249 and $89,351 paid by Lynch  Corporation in 2000 based upon December
     31, 1999 stock prices.

</FN>
</TABLE>

<TABLE>
                         Ten Year Option/SAR Amendments1
<CAPTION>
                                                                                                       Length of
                                      Number of                                                       Original Term
                                      Securities     Market Price    Exercise Price        New         Remaining at
                                      Underlying      of Stock at      at Time of        Exercise        Date of
                                     Options/SARs       Time of         Amendment         Price         Amendment
        Name              Date         Amended       Amendment(2)          (e)              $              (g)
         (a)               (b)           (c)              (d)                              (f)

<S>                    <C>          <C>                 <C>          <C>              <C>               <C>
Mario J. Gabelli
Chairman of the Board  3/15/00      25,000 Units        $155.00      $70.106(3)       $70.106(3)        3/5/02

Robert E. Dolan
Chief Financial
Officer                3/15/00      10,000 Units        $155.00      $70.19(3)(4)     $70.18(2)(3)      2/2801-3/5/03(5)

Robert A. Hurwich
VP-Admin, Sec &
General Counsel        3/15/00       5,000 Units        $155.00      $69.47(3)(4)      $69.47(2)(3)     2/29/01-3/5/03(5)
<FN>
(1)  As a result  of the  Interactive  Spin  Off,  Lynch  Interactive  and Lynch
     Corporation  each decided to terminate  the Phantom  Stock Plan,  including
     outstanding  units. The termination of the outstanding units prior to their
     original  expiration date required the consent of  participants.  The total
     amount paid to each  participant was calculated based upon the December 31,
     1999 (i) Lynch Corporation stock price ($25.81), (ii) the Lynch Interactive
     stock price ($99.875) and (iii) East/West Communications,  Inc. stock price
     ($38.50).  East/West was spun off by Lynch Corporation in December 1997 and
     the Boards of Lynch Corporation and Lynch  Interactive,  in connection with
     the termination of the outstanding  units,  agreed to add its value to that
     of Lynch Corporation and Lynch  Interactive  stocks for units granted prior
     to December  1997. To the extent  necessary,  the Boards of Directors  also
     waived the  requirement  (enacted  retroactively  in 1998 after the grants)
     that the stock price double prior to  exercise.  It was further  determined
     that Lynch Interactive would pay 79.5% of the amount, and Lynch Corporation
     would pay 20.5% of the amount.  See  "Termination  of Lynch  Phantom  Stock
     Plan" at page 10.

(2)  Combined closing prices of Lynch  Interactive and Lynch  Corporation  stock
     prices on the American Stock Exchange on March 15, 2000.

(3)  Combined exercise prices of Lynch Interactive and Lynch Corporation units.

(4)  Average  exercise  price of units.  Of the 8,000 units granted to Mr. Dolan
     prior to the  East/West  spin off,  4,000 units had a grant price of $63.03
     and 4,000 units had a grant price of $70.106,  and the 2,000 units  granted
     after the  East/West  spin off had a grant  price of  $84.63.  Of the 4,000
     units granted to Mr.  Hurwich prior to the East/West  spin off, 2,500 units
     had a grant price of $63.03,  and 1,500 units had a grant price of $70.106,
     and the 1,000 units granted after the East/West  spin off had a grant price
     of $84.63. The units only became exercisable if at any time during the term
     the stock price exceeds two times the grant price.

(5)  Of Mr.  Dolan's 8,000 units granted prior to the East/West  spin off, 4,000
     expired  February 28, 2001,  and 4,000  expired March 5, 2002 and the 2,000
     units granted after the East/West spin off expired on March 5, 2003. Of Mr.
     Hurwich's  4,000  units  granted  prior to the  East/West  spin off,  2,500
     expired  February 28, 2001,  and 1,500  expired March 5, 2002 and the 2,000
     units granted after the East/West spin off expired on March 5, 2003.
</FN>
</TABLE>

EXECUTIVE COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Overview and Philosophy

        The Executive  Compensation and Benefits Committee  ("Committee") of the
Board of Directors is responsible for developing and making  recommendations  to
the Board of Directors with respect to the Corporation's  executive compensation
policies  and  administering  the  various  executive   compensation  plans.  In
addition,  the  Committee  recommends  to the  Board  of  Directors  the  annual
compensation  to be paid to the Chief  Executive  Officer  and each of the other
executive  officers of the Corporation,  as well as to other key employees.  The
Committee is comprised of two independent, non-employee directors.

        The objectives of the Corporation's  executive  compensation program are
to:

     o    Support the achievement of desired Corporation performance.

     o    Provide  compensation that will attract and retain superior talent and
          reward performance.

     o    Ensure   that  there  is   appropriate   linkage   between   executive
          compensation and the enhancement of shareholder  value.

     o    Evaluate the  effectiveness  of the  Corporation's  incentives for key
          executives.

        The  executive  compensation  program is  designed to provide an overall
level  of  compensation  opportunity  that  is  competitive  with  companies  of
comparable size,  capitalization  and complexity.  Actual  compensation  levels,
however,  may be  greater or less than  average  competitive  levels  based upon
annual and long-term Company performance, as well as individual performance. The
Committee  uses its  discretion to recommend  executive  compensation  at levels
warranted in its judgment by corporate and individual performance.

Executive Officer Compensation Program

        The Corporation's executive officer compensation program is comprised of
base salary,  cash bonus  compensation,  Lynch  Interactive  Corporation  401(k)
Savings  Plan,  and other  benefits  generally  available  to  employees  of the
Corporation.  In 1996 Lynch Corporation  adopted a Phantom Stock Plan applicable
to officers and employees of the Lynch Corporation.

Base Salary

        Base salary levels for the Corporation's executive officers are intended
to be  competitive.  In  recommending  salaries  the  Committee  also takes into
account  individual  experience and  performance and specific issues relating to
the Corporation.  A summary of the  compensation  awarded to the Chief Executive
Officer  and  the  other  executive  officers  is  set  forth  in  the  "Summary
Compensation Table" on page 6 of this Proxy Statement. Salary increases for 1999
were  based upon a variety  of  judgmental  factors,  including  the  individual
performances of the officers in 1998 and their anticipated  contributions to the
Corporation in 1999, the increasing  size and complexity of the  Corporation and
the general financial and strategic performance of the Corporation. With respect
to Mr. Gabelli, the Committee determined again not to raise Mr. Gabelli's salary
of $500,000 per year.

Bonus Plan

        The  Corporation has in place a bonus plan that is based on an objective
measure of corporate  performance  and on  subjective  evaluation  of individual
performance  for its  executive  officers  (other than the  Principal  Executive
Officer,  i.e., Mr. Gabelli if the Principal Executive Bonus Plan is approved by
shareholders)  and other key  personnel.  In general,  the plan  provides for an
annual  bonus pool equal to 20% of the  excess of (i) the  consolidated  pre-tax
profits  of  the   Corporation  for  a  calendar  year  less  (ii)  25%  of  the
Corporation's  average  shareholders  equity  at the  beginning  of  such  year.
Shareholders'  equity is the average of shareholders  equity at the beginning of
the period and at the beginning of the two preceding years. The bonus pool would
also be reduced by amounts paid pursuant to the Principal  Executive  Bonus Plan
if approved.  See next paragraph below. The Executive  Compensation and Benefits
Committee  in its  discretion  may take into  consideration  other  factors  and
circumstances  in determining the amount of the bonus pool and awarding  bonuses
such as progress toward  achievement of strategic goals and qualitative  aspects
of management performance. The total bonuses paid for 1998 and 1999 exceeded the
bonus formula  because of the work by management in achieving  strategic  goals,
including  investments in personal  communications  services,  acquisitions  and
financings.  No bonuses were paid to executive  officers for 1997. The breakdown
of the bonus pool is not based upon a formula but upon judgmental factors.

        Mr.  Gabelli is the sole  participant in the Principal  Executive  Bonus
Plan of Lynch  Corporation  adopted by the Board of  Directors  and  approved by
shareholders  in 1997.  The  Principal  Executive  Bonus  Plan is similar to the
regular  Bonus Plan,  except that it (i)  specifies a Maximum  Annual  Bonus (as
defined  therein)  which is based on a maximum  percentage  (80%) of a specified
bonus pool and (ii)  removes the  discretion  of the  Committee  to award annual
bonuses above the  established  Maximum  Annual  Bonus.  The Plan is designed to
satisfy an exemption  from Section  162(m) of the Internal  Revenue Code,  which
denies a deduction  by an  employer  for  certain  compensation  in excess of $1
million per year. No bonus was paid to Mr. Gabelli for 1997,  1998 or 1999 under
the Principal  Executive  Bonus Plan. The Committee  determined  that 1999 bonus
calculations  would be made on the  assumption  that the Spin Off did not  occur
until January 1, 2000.  Lynch  Interactive  has adopted  subject to  shareholder
approval at the 2000  Annual  Meeting of  Shareholders  a  comparable  plan (See
Principal Executive Bonus Plan at pages 16 to 19 below).

        A summary of bonuses awarded to the Chief Executive  Officer and certain
other  executive  officers is set forth in the "Summary  Compensation  Table" on
page 6 of this Proxy Statement.

Termination of the Lynch Phantom Stock Plan

        In February 1996 Lynch Corporation adopted a Phantom Stock Plan pursuant
to  which  share  units  equivalent  to one  share  of  Common  Stock  of  Lynch
Corporation could be awarded to officers and employees of Lynch Corporation. The
Lynch Corporation  Committee was responsible for administering the Phantom Stock
Plan, including selection of the persons to be awarded share units and number of
units to be awarded.  Under the terms of the Phantom Stock Plan such share units
are initially valued at a trailing average price of Lynch  Corporation's  Common
Stock  (or such  other  price as the  Committee  determines),  vest on the first
anniversary of the date of grant and may be exercised by the grantee at any time
after  vesting  and prior to the fifth  anniversary  of the date of Grant.  Upon
exercise the grantee is entitled to the  difference  between the market price of
Lynch  Corporation's  Common  Stock on the date of exercise and the award value,
multiplied by the number of share units granted, and Lynch Corporation may elect
to pay the award with Common  Stock of Lynch  Corporation  for up to 100% of the
value. Seven thousand four hundred units were awarded in February 1996, of which
4,000 were awarded to Mr. Dolan and 2,500 were awarded to Mr.  Hurwich at $63.03
per share unit.  Thirty-one thousand,  seven hundred units were awarded in March
1996,  of which  25,000 were awarded to Mr.  Gabelli,  4,000 were awarded to Mr.
Dolan and 1,500 were  awarded to Mr.  Hurwich,  all at $70.106  per share  unit.
Three  thousand  nine hundred  units were awarded in March 1998,  of which 2,000
were awarded to Mr. Dolan and 1,000 were awarded to Mr.  Hurwich,  all at $84.63
per share unit. The awards were  discretionary  and not based upon a formula but
were  intended  to give  executive  officers a  substantially  increased  equity
equivalent interest in the Corporation as a continuing  incentive.  In 1998, the
Plan, as well as  outstanding  rights,  was amended to provide that rights would
become  exercisable  only if at any time during the term thereof the stock price
exceed twice the base or grant price.

        As a result of the  Interactive  Spin Off, an adjustment in the terms of
the  outstanding  units was required.  The approach that was taken was to divide
each unit into two units, one representing one share of Lynch  Corporation stock
and one representing one share of Lynch  Interactive  stock. This was considered
appropriate  since, at least for the short term, the  individuals  holding those
units would provide services for both Lynch  Corporation and Lynch  Interactive.
The original grant prices were apportioned between the corresponding units based
on the relative market prices of the common stock of the two companies after the
spin off.

        After further  reflection,  the Boards of Directors of Lynch Interactive
and Lynch Corporation each decided that the preferable course of action would be
to terminate the phantom stock plan,  including  outstanding units, and to start
with a clean slate in each company  regarding an appropriate long term incentive
program.   The  companies  operate  in  completely   different   industries  and
competitive  environments.  Consequently,  the business conditions and prospects
that  existed  in Lynch  Corporation  at the time the units  were  granted  were
substantially  different than they are today in either  company.  In the case of
Lynch Interactive particularly,  there was concern that stock price fluctuations
over the  remaining  terms of the  outstanding  units  could  result in material
quarterly charges (and distortions) to reported earnings.

        In  order  to  terminate  the  outstanding  units,  the  consent  of the
employees  holding those units was required and, in this connection,  the future
appreciation  potential  of the units  being  relinquished  had to be taken into
account.  An agreement  was  reached,  deemed by the Boards of Directors of both
Lynch  Interactive and Lynch Corporation to be both fair and equitable to all of
the  employees  holding  the  units,  as well as in the  best  interests  of the
respective shareholders of both corporations.  The agreement recognizes the fact
that the holders of the units created  significant value for shareholders  since
their  issuance,  as well  as the  manner  in  which  that  value  was  created,
specifically  including the spin off to Lynch  Corporation  shareholders of both
the stock of East/West  Communications,  Inc. in December 1997, and the stock of
Lynch Interactive.

        In calculating the payment the holders are to receive,  they are treated
as holding only the original set of stock  appreciation  units issued to them by
Lynch Corporation,  each with the original exercise price. The payment due under
each unit was  determined by  subtracting  that exercise price from the total of
the market prices on December 31, 1999, of a share of (a) Lynch Corporation, (b)
Lynch  Interactive,  and (c)  except  for units  granted  after  December  1997,
East/West  Communications.  To the extent necessary,  the Boards of Directors of
both companies also waived the requirement (enacted retroactively in 1998, after
the grants) that the stock price  exceed twice the exercise  price before a unit
could be exercised.

        Finally,  the  Boards  of  Directors  of  Lynch  Interactive  and  Lynch
Corporation  agreed that the total payments so determined would be paid 79.5% by
Lynch  Interactive and 20.5% by Lynch  Corporation.  The allocation was based on
the relative  market prices of the common stock of the two companies on December
31, 1999.

Lynch Interactive Corporation 401(k) Savings Plan

        All employees of the  Corporation  and certain of its  subsidiaries  are
eligible to participate in the Lynch Interactive Corporation 401(k) Savings Plan
adopted  after the Spin Off,  after  having  completed  one year of service  (as
defined in the Plan) and having reached the age of 18.

        The 401(k) Plan permits  employees to make  contributions by deferring a
portion  of  their   compensation.   Participating   employees   also  share  in
contributions made by their respective employers.  The annual mandatory employer
contribution to each participant's  account is equal to 25% of the first $800 of
the  participant's   contribution.   In  addition,   the  employer  may  make  a
discretionary  contribution of up to 75% of the first $800 of the  participant's
contribution.   No  such   discretionary   contribution  was  made  in  1998.  A
participant's  interest in both employee and employer contributions and earnings
thereupon are fully vested at all times.

        Employee  and  employer   contributions   are  invested  in   guaranteed
investment  contracts,  certain mutual funds or Common Stock of the Corporation,
as determined by the participants. With respect to the individuals listed in the
Summary  Compensation  Table,  each of  Messrs.  Gabelli,  Dolan,  and  Hurwich,
deferred  $10,000 under the Lynch  Corporation  Plan during 1999,  which amounts
have been included for each individual in the Summary Compensation Table.

Benefits

        The Corporation  provides medical life insurance and disability benefits
to the executive officers that are generally available to Corporation employees.
The amount of  perquisites,  as determined  in accordance  with the rules of the
Securities and Exchange Commission relating to executive  compensation,  did not
exceed 10% of salary and bonus for fiscal 1999.

Chief Executive Officer Compensation

        The following table sets forth compensation  received by Mr. Gabelli for
the last ten years as Chairman and Chief Executive  Officer of Lynch Corporation
(including September 1 - December 31, 1999 from Lynch Interactive):
<TABLE>
<CAPTION>

           1990     1991      1992      1993      1994      1995     1996       1997    1998      1999
           ----     ----      ----      ----      ----      ----     ----       ----    -----     ----
<S>       <C>       <C>      <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Salary    90,000    90,000   150,000   150,000   150,000   325,000   500,000   500,000   500,000   500,000
Bonus          0         0   100,000   250,000         0   625,000         0         0         0         0
</TABLE>

Mr. Gabelli  performs the usual  functions of the chief  executive  officer of a
company  and  is  particularly  involved  in  the  development  of  acquisition,
investment and financial strategies.  After considering the substantial increase
in the size and scope of the  Corporation,  improved  financial  performance  as
reflected  by the  increase  in private  market  value as well as public  market
value,  and  improved  return  on  shareholder  equity,  the  Lynch  Corporation
Compensation  Committee  recognized  that Mr.  Gabelli's  1994 and prior  years'
compensation was materially below that of chief executive officers of comparable
companies.  Therefore, that Committee increased Mr. Gabelli's salary to $500,000
per year  effective July 1, 1995,  with no raise since then.  Effective in 2000,
the $500,000  salary will be split,  with $150,000 to be paid by the Corporation
and  $350,000  to be paid by Lynch  Interactive.  1999  was a year of  strategic
accomplishments,  including  the Spin Off and the sale by  Spinnaker of its tape
operations.  However, 1999 was also a year of certain disappointments  including
the profitability of certain manufacturing operations and The Morgan Group, Inc.
(part of the Interactive Spin Off). Mr. Gabelli made  substantial  contributions
to the Corporation's  performance;  however, no bonus was awarded to Mr. Gabelli
for  1999.  In  addition,  that  Committee  recognizes  the role of  leadership,
particularly  that of Mr.  Gabelli,  in developing  existing  businesses  and in
making strategic acquisitions. In 1997, the Committee granted Mr. Gabelli 25,000
units under the Lynch Corporation's  Phantom Stock Plan in 1997. See Termination
of the Lynch Phantom Stock Plan at page 10 and the Summary Compensation Table at
page 6 for amounts paid to Mr. Gabelli upon such  termination.  Previously,  the
Corporation authorized the sale by the Corporation to Mr. Gabelli of $625,000 of
Common Stock in March 1996 (equal to Mr.  Gabelli's 1995 bonus),  which resulted
in the purchase of 10,373 shares,  and in January 1994, the Corporation sold Mr.
Gabelli 100,000 shares at the then market price.

Ralph R. Papitto, Chairman of the Executive Compensation and Benefits Committee


<PAGE>





                                PERFORMANCE GRAPH

The graph below compares the cumulative total  shareholder  return on the Common
Stock  of the  Corporation  for the  period  September  1,  1999  (the  date the
Corporation's  stock began trading  publicly) through December 31, 1999 with the
cumulative total return over the same period on the broad market, as measured by
the American Stock Exchange Market Value Index, and on a peer group, as measured
by a  composite  index  based on the  total  returns  earned on the stock of the
publicly  traded  companies  included in the Media  General  Financial  Services
database  under the two Standard  Industrial  Classification  (SIC) codes within
which the  Corporation  conducts the bulk of its business  operations:  SIC Code
4813, Telephone Communications,  except Radio Telephone (105 companies), and SIC
Code 4213,  Trucking,  except Local (52  companies).  The data  presented in the
graph  assumes that $100 was invested in the  Corporation's  Common Stock and in
each of the indexes on September 1, 1999 and that all dividends were reinvested.

                 INVESTMENT OF $100 DOLLARS ON SEPTEMBER 1, 1999
                         WITH REINVESTMENT OF DIVIDENDS
                    COMPARISON OF CUMULATIVE TOTAL RETURN OF
                      COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
                                  FISCAL YEAR ENDING
COMPANY/INDEX/MARKET               9/1/99   12/31/99
<S>                                <C>      <C>
Lynch Interactive Corporation      100.00   192.07
Peer Group Index ............      100.00   113.69
AMEX Market Index ...........      100.00   116.58
</TABLE>


The Industry Index Chosen was:
A Composite of SIC Codes - 4213 and 4813

The Broad Market Index Chosen was:
American Stock Exchange



<PAGE>



                                     Item 2

               APPROVAL OF THE LYNCH INTERACTIVE CORPORATION 2000
                                STOCK OPTION PLAN

Background

         On March 9, 2000,  the Board of  Directors of the  Corporation  adopted
(subject to shareholder  approval) the Lynch Interactive  Corporation 2000 Stock
Option Plan (the  "Plan"),  which  provides  that the total  number of shares of
Common Stock issuable pursuant to the Plan is 83,000. The following  description
of the Plan is intended  only as a summary and is  qualified  in its entirety by
reference to the Plan, which is an exhibit to this proxy statement.

Purpose

         The  purpose of the Plan is to enhance the  profitability  and value of
the Corporation for the benefit of its shareholders  principally by enabling the
Corporation  to offer  employees  and  consultants  of the  Corporation  and its
subsidiaries  stock-based  incentives  in the  Corporation  in order to attract,
retain and reward such  individuals  and  strengthen  the  mutuality of interest
between such individuals and the Corporation's shareholders.

Eligibility

         All employees and consultants of the  Corporation and its  subsidiaries
of the  Corporation  designated by the board of directors to  participate in the
Plan are eligible to receive options under the Plan.

Available Shares

         Options  covering  a maximum  of 83,000  shares of Common  Stock may be
issued  under the Plan.  Options  covering  a maximum  of 75,000  shares  may be
granted to a single individual in any one fiscal year. These amounts are subject
to adjustment to reflect  changes in the capital  structure of the  Corporation,
stock  splits,  recapitalizations,  mergers  and  reorganizations.  If an option
expires,  terminates or is canceled, the unissued shares of Common Stock subject
to the option will again be available under the Plan.

Terms of Stock Options

         Under the Plan,  options  granted  to  employees  may be in the form of
incentive  stock options or  non-qualified  stock  options.  Options  granted to
consultants  may  only  be  non-qualified  stock  options.  The  committee  that
administers  the  plan  (see  "Administration"  below)  (the  "Committee")  will
determine the number of shares  subject to each option,  the term of each option
(which  may not exceed ten years or, in the case of an  incentive  stock  option
granted to a ten percent shareholder,  five years), the exercise price per share
of stock  subject to each  option,  the vesting  schedule (if any) and the other
material  terms of the option.  No  incentive  stock option may have an exercise
price less than 100% of the fair market value of the Common Stock at the time of
grant (or, in the case of an  incentive  stock  option  granted to a ten percent
shareholder,  110% of fair market value).  The exercise price of a non-qualified
stock option will be determined by the Committee.

         The  option  price  upon  exercise  may be  paid  in  cash,  or,  if so
determined by the  Committee,  in shares of Common Stock,  by a reduction in the
number of shares of Common Stock issuable upon exercise of the option or by such
other method as the Committee  determines.  Options may be made  exercisable  in
installments,  and the  exercisability  of  options  may be  accelerated  by the
Committee.  The  Committee  may at any time  offer to buy an  option  previously
granted  on such  terms and  conditions  as the  Committee  establishes.  At the
discretion  of the  Committee,  options may provide for "reloads"  (i.e.,  a new
option is granted for the same number of shares as the number used by the holder
to pay the option price upon exercise).

         Subject to limited  exceptions,  options are forfeited upon termination
of employment or service. Options are not assignable (except by will or the laws
of descent and distribution or the consent of the Committee).

         Options may not be granted  after the tenth  anniversary  of the Plan's
adoption, but options granted prior to that date may extend beyond that date.


<PAGE>



Change in Control

         Unless otherwise determined by the Committee at the time of grant, upon
a Change in Control (as defined in the Plan),  all  options  automatically  will
become fully exercisable.  However, unless otherwise determined by the Committee
at the time of grant, no acceleration of exercisability of an option will occur,
if the Committee determines prior to a Change in Control that the option will be
honored or assumed or new rights substituted immediately following the Change in
Control.

Amendments

         The  Plan  may be  amended  by the  board  of  directors,  except  that
shareholder approval of amendments will be required,  among other things, to (i)
increase the maximum number of shares  subject to options  granted in any fiscal
year, (ii) change the  classification  of employees  eligible to receive awards,
(iii)  extend the maximum  option  period  under the Plan or (iv)  increase  the
number of shares that may be issued under the Plan.

Administration

         The  Plan  will  be  administered  by a  committee  of the  board  (the
"Committee"),  which  will  include  two or more  "non-employee"  and  "outside"
directors.  However, with respect to option grants to non-employee directors and
any action under the Plan  relating to options held by  non-employee  directors,
the Committee will consist of the entire board of directors.  The Committee will
determine the individuals who will receive options and the terms of the options,
which will be reflected in written agreements with the holders.

Certain U.S. Federal Income Tax Consequences

         Under current  federal income tax laws, the grant of an incentive stock
option  can be  made  solely  to  employees  and  generally  has no  income  tax
consequences for the optionee or the Corporation.  In general, no taxable income
results to the optionee upon the grant or exercise of an incentive stock option.
However,  the  amount  by which  the fair  market  value of the  stock  acquired
pursuant  to the  incentive  stock  option  exceeds  the  exercise  price  is an
adjustment  item for purposes of  alternative  minimum tax. If no disposition of
the shares is made  within  either two years from the date the  incentive  stock
option was granted or one year from the date of exercise of the incentive  stock
option, any gain or loss realized upon disposition of the shares will be treated
as a long-term capital gain or loss to the optionee. The Corporation will not be
entitled to a tax deduction upon the exercise of an incentive stock option,  nor
upon a subsequent disposition of the shares, unless the disposition occurs prior
to the  expiration of the holding period  described  above.  In general,  if the
optionee does not satisfy these holding period  requirements,  any gain equal to
the difference between the exercise price and the fair market value of the stock
at exercise (or, if a lesser amount, the amount realized on disposition over the
exercise  price)  will  constitute  ordinary  income.  In the  event  of  such a
disposition  before the expiration of that holding  period,  the  Corporation is
entitled  to a  deduction  at that time equal to the amount of  ordinary  income
recognized by the optionee.  Any gain in excess of the amount  recognized by the
optionee as ordinary  income  would be taxed to the  optionee as  short-term  or
long-term capital gain (depending on the applicable holding period).

         In general,  an optionee will realize no taxable  income upon the grant
of a  non-qualified  option,  and the  Corporation  generally will not receive a
deduction at the time of grant.  Upon  exercise of a  non-qualified  option,  an
optionee  generally  will  recognize  ordinary  income in an amount equal to the
excess of the fair market  value of the stock on the date of  exercise  over the
exercise  price.  Upon a  subsequent  sale of the  stock  by the  optionee,  the
optionee will recognize  short-term or long-term capital gain or loss, depending
upon his holding  period for the stock.  Subject to the possible  application of
section 162(m) of the Internal  Revenue Code, the Corporation  will generally be
allowed a deduction  equal to the amount  recognized by the optionee as ordinary
income.

         Any  entitlement  to a tax deduction on the part of the  Corporation is
subject  to  applicable  federal  tax  rules,  including  section  162(m) of the
Internal   Revenue  Code  regarding  a  $1  million   limitation  on  deductible
compensation.  In addition,  if the  exercisability  of an option is accelerated
because of a change in control,  payments relating to the options,  either alone
or together with certain other payments, may constitute parachute payments under
section 280G of the Internal Revenue Code, which may be subject to excise tax.

         See the Summary  Compensation Table on page 6, the Option/SAR Tables on
page 7 and the Executive Compensation and Benefits Committee Report on Executive
Compensation for additional  information on  compensations  and employee benefit
plans.

THIS BOARD OF DIRECTORS (OTHER THAN MR. GABELLI WHO IS MAKING NO RECOMMENDATION)
RECOMMENDS A VOTE IN FAVOR OF APPROVAL OF THE PLAN.

         Approval of Item 2 requires the  affirmative  vote of a majority of the
shares of Common Stock of the Corporation  voting on the proposition,  excluding
any abstentions.  Mr.  Gabelli has not  indicated  how he intends to vote shares
beneficially owned by him.

                                     Item 3

                 APPROVAL OF THE PRINCIPAL EXECUTIVE BONUS PLAN

         On March 9, 2000,  the Board of Directors of the  Corporation  adopted,
subject to  approval  by the  shareholders  of the  Corporation,  the  Principal
Executive Bonus Plan (the "Plan") to provide the chief executive  officer of the
Corporation  and,  if  so  designated,   certain  other  key  employees  with  a
performance-based  Annual Bonus (as defined below) for calendar years  beginning
January  1,  2000.  The Plan is  similar  to the Lynch  Corporation's  Principal
Executive  Bonus Plan which has been in effect  since 1997  except that the Plan
limits any participant  (rather than the Chief Executive  Officer) to 80% of the
Annual Bonus Pool (as described  below) and is applicable to the chief executive
officer and certain other key corporate  employees.  For the 2000 calendar year,
only the chief  executive  officer is  participating  in the Plan, and he is not
eligible to participate in the existing bonus plan.

         The Plan is designed to satisfy Section 162(m) of the Internal  Revenue
Code of 1986,  as amended  (the  "Code").  Section  162(m) of the Code  denies a
deduction  by an employer for certain  compensation  in excess of $1 million per
year paid by a publicly held corporation to the chief executive  officer and the
four other most highly  compensated  executive  officers who are employed at the
end of the fiscal year. Certain compensation,  including compensation paid based
on the achievement of  preestablished  performance  goals, is excluded from this
deduction limit.  For  compensation to qualify for this exclusion,  the material
terms  pursuant  to  which  the  compensation  is  to  be  paid,  including  the
performance  goals, must be disclosed to, and approved by, the shareholders in a
separate vote prior to the payment.  Accordingly, the Plan is being submitted to
shareholders so that payments  thereunder will be exempt under Section 162(m) of
the Code.

Administration

         The Plan is  administered  by the Executive  Compensation  and Benefits
Committee,  which is currently composed of two members of the Board of Directors
who  qualify  as  "outside  directors"  under  Section  162(m)  of the Code (the
"Committee").  The  Committee  has the  authority to designate the key employees
eligible to  participate in the Plan (other than the chief  executive  officer),
establish  Individual  Bonus Pool  Percentages  (as  defined  below),  determine
performance criteria, certify attainment of performance goals and other material
terms,  to construe  and  interpret  the Plan and make all other  determinations
deemed necessary or advisable for the administration of the Plan.

Eligibility and Participation

         The chief executive officer of the Company will participate in the Plan
during each calendar year automatically.  In addition, the Committee may, in its
sole  discretion,  select other key  executive  officers or key employees of the
Company  (including  subsidiaries) to be eligible to participate in the Plan for
any calendar year.

Determination of Annual Bonus

         Each  participant's  Annual Bonus under the Plan for each calendar year
will be equal to the participant's  Individual Bonus Pool Percentage (as defined
below)  multiplied by the achieved  Annual Bonus Pool (as defined below) for the
respective  calendar  year.  The Annual Bonus Pool is determined  pursuant to an
objective  formula  or  standard  based  on  the  attainment  of  preestablished
performance  goals  specified  by  the  Committee.  The  Individual  Bonus  Pool
Percentage shall be determined by the Committee and be expressed as a percentage
of the Annual Bonus Pool for each  calendar  year.  In no event may the total of
all participants'  Individual Bonus Pool Percentages  exceed one hundred percent
(100%) of the Annual Bonus Pool for any calendar year.  Unless otherwise reduced
by the Committee,  payment of a participant's Annual Bonus shall be made only if
and to the extent performance goals for the relevant calendar year are attained.

Performance Goals

         The Committee  generally has the authority to determine the performance
goals that will be in effect for each calendar year. The performance  goals with
respect to the  Annual  Bonus  Pool will be based on the  attainment  of certain
target  levels of, or a  percentage  increase  in,  Pre-Tax  Profits (as defined
below) in excess of certain target levels or percentages of Shareholders  Equity
(as defined below). In addition,  the Committee has the authority to incorporate
provisions in the  performance  goals allowing for adjustments in recognition of
unusual or  non-recurring  events  affecting  the  Corporation  or the financial
statements of the  Corporation,  or in response to changes in  applicable  laws,
regulations or accounting principles,  to the extent permitted by Section 162(m)
of the Code.

Limits on Annual Bonus

         Notwithstanding  the attainment of performance goals, the Committee has
the discretion to reduce (but not increase) a  participant's  Annual Bonus under
the Plan for any calendar  year,  regardless  of the degree of attainment of the
performance  goals.  In any event,  the Maximum Annual Bonus permitted under the
Plan  with  respect  to any  calendar  year  may not  exceed  in the case of any
participant  eighty  percent (80%) of an amount equal to twenty percent (20%) of
the excess of (a) Pre-Tax Profits (as defined below) for such calendar year less
(b) twenty-five percent (25%) of Shareholders Equity (as defined below).

         Pre-Tax  Profits  means  income  before  income  taxes  (excluding  any
provision for annual bonuses under the Plan and under the Bonus Plan  applicable
to other corporate employees),  minority interest (if any),  extraordinary items
(if any), cumulative changes in accounting (if any) and discontinued  operations
(if any) in the Corporation's  Statement of Consolidated  Income reported in its
annual financial  statements  adjusted by (i) minority  interest effects on such
pre-tax  profits;  and (ii)  pre-tax  effect of income or loss  associated  with
discontinued  operation net of minority  interest effects.  Shareholders  Equity
means the average of  shareholders  equity at the beginning of the Plan Year and
at the  beginning of the two preceding  Plan Years,  in each case as reported in
the  Company's  consolidated  balance sheet in its annual  financial  statements
(restated as the result of the Spin Off).

Form and Payment of Annual Bonus

         With respect to each  participant,  payment under the Plan will be made
in cash in an amount  equal to the  achieved  Annual  Bonus and may be made only
after  attainment of the performance  goals has been certified in writing by the
Committee.  Unless otherwise determined by the Committee in its sole discretion,
each  participant  shall,  to the extent the applicable  performance  goals with
respect to the Annual Bonus Pool are attained at the end of each calendar  year,
have the right to receive  payment of a prorated  portion of such  participant's
Annual Bonus under the Plan for any calendar year during which the participant's
employment  with the  corporation  is  terminated  for any reason other than for
"cause" (as determined by the Committee in its sole discretion).

Amendment and Termination of Plan

         The  Committee  may at any  time and from  time to time  alter,  amend,
suspend or terminate the Plan in whole or in part;  provided,  that no amendment
shall,  without the prior  approval of the  shareholders  of the  Corporation in
accordance  with the laws of the State of Delaware to the extent  required under
Code Section 162(m):  (i) materially alter the performance  goals, (ii) increase
the  Maximum  Annual  Bonus for any  calendar  year,  (iii)  change the class of
persons  eligible to participate in this Plan, or (iv) implement any change to a
provision of the Plan  requiring  shareholder  approval in order for the Plan to
continue  to  comply  with the  requirements  of  Section  162(m)  of the  Code.
Notwithstanding  the foregoing,  no amendment shall affect  adversely any of the
rights of any participant,  without such participant's  consent, under the award
theretofore granted under the Plan.

2000 Performance Award

         Only the chief executive officer of the Corporation is participating in
the Plan for calendar  year 2000.  On March 27, 2000,  the Committee set for the
2000 calendar year the performance  goals  underlying the 2000 Annual Bonus Pool
and the Individual  Bonus Pool Percentage for the chief executive  officer.  The
Committee  determined  that the 2000 Annual Bonus Pool amount,  if any,  will be
equal to twenty  percent  (20%) of the  excess  of (a)  Pre-tax  Profits  of the
Corporation less (b) twenty-five percent (25%) of the Corporation's Shareholders
Equity. In addition, the Committee determined that the chief executive officer's
Individual  Bonus Pool Percentage under the Plan will be equal to eighty percent
(80%) of the 2000 Annual Bonus Pool.

         If the Plan had been in effect for 1999, neither Mr. Gabelli, the chief
executive  officer of the  Corporation,  nor any other key employee,  would have
received  any annual  bonus;  however,  for 2000 and future years the Plan could
result  in  substantial  bonuses  if  Pre-Tax  Profits  increase  substantially,
including as a result of a major business,  and/or Shareholders Equity decreases
substantially.

Other Plans

         Corporate  executives  and  employees,  other than the chief  executive
officer, will continue to participate for the 2000 calendar year in the existing
bonus plan which permits the  Corporation  to use  subjective  factors,  such as
progress  towards  achievement of strategic in goals and qualitative  aspects of
management performance, in addition to the formula, in awarding bonuses.

         See the Summary  Compensation  Table on page 6 the Option/SAR Tables on
page 7 and the Executive Compensation and Benefits Committee Report on Executive
Compensation for additional  information on  compensations  and employee benefit
plans.

THE BOARD OF DIRECTORS (OTHER THAN MR. GABELLI WHO IS MAKING NO  RECOMMENDATION)
RECOMMENDS A VOTE IN FAVOR OF APPROVAL OF THE PLAN.

         Approval of this Item 3 requires the affirmative  vote of a majority of
the  shares  of  Common  Stock of the  Corporation  voting  on the  proposition,
excluding any abstentions.  Mr. Gabelli has not indicated how he intends to vote
the shares beneficially owned by him.

                  TRANSACTIONS WITH CERTAIN AFFILIATED PERSONS

        Mr.  Gabelli is affiliated  with various  entities  which he directly or
indirectly  controls and which are engaged in various  aspects of the securities
business,  such as an investment advisor to various institutional and individual
clients  including  registered  investment  companies  and pension  plans,  as a
broker-dealer,  and as managing  general partner of various  private  investment
partnerships.  During 1999,  the  Corporation  and its  subsidiaries  engaged in
various   transactions  with  certain  of  these  entities  and  the  amount  of
commissions,  fees,  and other  remuneration  paid to such  entities,  excluding
reimbursement of certain  expenses  related to Mr.  Gabelli's  employment by the
Corporation (including approximately $69,000 reimbursement in connection with an
airplane in part owned by a subsidiary of Gabelli Group Capital  Partners,  Inc.
("Gabelli Partners"), was less than $60,000.

        In March,  1997 and February 1998,  Bal/Rivgam,  L.L.C.  and BCK/Rivgam,
L.L.C., in which affiliates of Gabelli Partners have a 49.9% interest, agreed to
pay the  subsidiary  a 5% net  profits  interest  (after a  capital  charge)  in
Bal/Rivgam and BCK/Rivgam, respectively, in return for certain services provided
or to be provided by the Corporation's  subsidiary in connection with bidding on
and developing  wireless  communication  service  licenses and local  multipoint
distribution  services  licenses.  Mr.  Gabelli is the majority owner of Gabelli
Partners and is its Chairman and Chief Executive Officer.

        In 1998, the Lynch  Corporation  entered into a lease for  approximately
5,000  square  feet in a building in Rye,  New York,  recently  purchased  by an
affiliate of Mr. Gabelli.  The lease runs through  December,  2002, and provides
for rent at  approximately  $18.00 per square foot,  per annum plus a minimum of
$2.50 per  square  foot per annum for  electricity,  subject to  adjustment  for
increases  in tax and  other  operating  expenses.  The  amount  of the lease is
currently  approximately  $8,400 per month. Lynch Interactive became the primary
lessee of such lease at the Spin Off.

        To assist the  Corporation  with the private  placement of a $25 million
convertible  promissory  note to Cascade  Investment  LLC, Mr. Gabelli agreed to
give Cascade a one-time  option to sell the Note to him at 105% of the principal
amount  thereof on December  15, 2000,  secured by a bank letter of credit.  The
letter of credit is secured by  securities  deposited  by Mr.  Gabelli  with the
bank.  The  Corporation  agreed to  reimburse  the  Chairman for the cost of the
letter of credit  (approximately  $160,000)  plus his counsel fees in connection
with the option to sell agreement and obtaining the letter of credit.

        In 1999, the Corporation  agreed to pay Gabelli  Securities,  Inc. a fee
for services in  connection  with the  acquisition  of Central  Scott  Telephone
Company in July 1999,  which is intended to be paid by  transferring  to Gabelli
Securities the stock of Lynch Capital  Corporation,  an in-house  broker-dealer.
Lynch Capital  recorded in 1999 revenues of $1,000 and a net loss of $20,000 and
will contain $40,000 in cash or equivalents at transfer.

                              INDEPENDENT AUDITORS

        Representatives  of Ernst & Young, the Corporation's  auditors for 1999,
are expected to be available at the Annual Meeting with the  opportunity to make
a statement  if they desire to do so and to answer  appropriate  questions.  The
Corporation has not yet selected a principal auditor for 2000.

                             SECTION 16(a) REPORTING

        Section 16(a) of the  Securities  and Exchange Acts of 1934, as amended,
requires the  Corporation's  directors,  executive  officers and holders of more
than 10% of the  Corporation's  Common  Stock to file  with the  Securities  and
Exchange Commission and American Stock Exchange initial reports of ownership and
reports of changes in the ownership of Common Stock and other equity  securities
of the Company. Such persons are required to furnish the Corporation with copies
of all Section 16(a) filings.  Based solely on the  Corporation's  review of the
copies of such filings it has received and written  representations of directors
and  officers,  the  Corporation  believes  that  during the  fiscal  year ended
December  31,  1999,  its  officers,  directors,  and  10%  shareholders  are in
compliance with all Section 16(a) filing requirements applicable to them.

                            PROPOSALS OF SHAREHOLDERS

        Proposals  of  shareholders  intended to be presented at the 2000 Annual
Meeting of Shareholders  must be received by the Office of the Secretary,  Lynch
Corporation, 401 Theodore Fremd Avenue, Rye, NY 10580, by no later than December
20, 2000, for inclusion in the  Corporation's  proxy statement and form of proxy
relating to the 2001 Annual Meeting.

                                  MISCELLANEOUS

        The Board of  Directors  knows of no other  matters  which are likely to
come before the Annual Meeting. If any other matters should properly come before
the Annual Meeting, it is the intention of the persons named in the accompanying
form of proxy to vote on such matters in accordance with their best judgment.

        The  solicitation of proxies is made on behalf of the Board of Directors
of the Corporation,  and the cost thereof will be borne by the Corporation.  The
Corporation  has employed the firm of Morrow & Co.  Inc.,  445 Park Avenue,  5th
Floor,  New York, New York,  10022 to assist in this  solicitation  at a cost of
$3,500,  plus  out-of-pocket  expenses.  The  Corporation  will  also  reimburse
brokerage firms and nominees for their expenses in forwarding  proxy material to
beneficial owners of the Common Stock of the Corporation.  In addition, officers
and  employees of the  Corporation  (none of whom will receive any  compensation
therefor in addition to their regular  compensation)  may solicit  proxies.  The
solicitation will be made by mail and, in addition, may be made by telegrams and
personal interviews, and the telephone.

                                  ANNUAL REPORT

        The  Corporation's  Annual  Report to  Shareholders  for the fiscal year
ended December 31, 1999, has been sent herewith to each shareholder. Such Annual
Report, however, is not to be regarded as part of the proxy soliciting material.

                                    By Order of the Board of Directors

                                          ROBERT A. HURWICH
                                          Secretary

Dated:  April 18, 2000

Exhibit to Proxy Statement



                          LYNCH INTERACTIVE CORPORATION
                             2000 Stock Option Plan
                                   ARTICLE I.
                                     PURPOSE

         The purpose of this Lynch  Interactive  Corporation  2000 Stock  Option
Plan  (the  "Plan"),  is  to  enhance  the  profitability  and  value  of  Lynch
Interactive  Corporation  (the "Company") for the benefit of its shareholders by
enabling the Company to offer  certain  employees  and  Consultants  (as defined
herein) of the Company and its  Subsidiaries  (as  defined  herein)  stock based
incentives in the Company,  thereby creating a means to raise the level of stock
ownership by employees and  Consultants  in order to attract,  retain and reward
such  individuals  and  strengthen  the  mutuality  of  interests  between  such
individuals and the Company's shareholders.

                                   ARTICLE II.
                                   DEFINITIONS

         For purposes of this Plan, the following terms shall have the following
meanings:

2.1. "Board" shall mean the Board of Directors of the Company.

2.2. "Cause"  shall  mean,  with  respect  to  a  Participant's  Termination  of
     Relationship,  unless  otherwise  determined  by the  Committee  at  grant,
     willful  misconduct  in  connection  with the  Participant's  employment or
     consultancy  or  willful  failure  to  perform  his  or her  employment  or
     consultancy   responsibilities   in  the  best  interests  of  the  Company
     (including,  without limitation, breach by the Participant of any provision
     of  any  employment,   nondisclosure,   non-competition  or  other  similar
     agreement  between the Participant  and the Company),  as determined by the
     Committee, which determination shall be final, conclusive and binding.

2.3. "Change in Control" shall have the meaning set forth in Article VIII.

2.4. "Code"  shall mean the  Internal  Revenue  Code of 1986,  as  amended.  Any
     reference  to any  section  of the Code shall  also be a  reference  to any
     successor provision.

2.5. "Committee"  shall mean a committee or sub-committee of the Board appointed
     from time to time by the Board or such committee, as the case may be, which
     Committee  shall  include  two  or  more  directors  who  are  non-employee
     directors as


<PAGE>



     defined in Rule 16b-3 (as defined herein) and outside  directors as defined
     under Section 162(m) of the Code (as defined herein). If for any reason the
     appointed Committee does not meet the requirements of Rule 16b-3 or Section
     162(m) of the Code, such  noncompliance with the requirements of Rule 16b-3
     or Section  162(m) of the Code shall not affect the validity of the awards,
     grants,  interpretations  or other actions of the Committee.  If and to the
     extent that no Committee  exists which has the authority to administer  the
     Plan, the functions of the Committee shall be exercised by the Board.

2.6. "Common  Stock"  means the Common  Stock,  no par value per  share,  of the
     Company.

2.7. "Consultant" means any advisor or consultant to the
         Company or its Subsidiaries who is eligible pursuant to Article V to be
         granted Options under this Plan.

2.8. "Disability"  shall  mean  total and  permanent  disability,  as defined in
     Section 22(e)(3) of the Code.

2.9. "Effective  Date" shall mean the  effective  date of the Plan as defined in
     Article XII.

2.10. "Eligible Employee" shall mean the employees of the
         Company and its Subsidiaries who are eligible  pursuant to Article V to
         be granted Options under this Plan.

2.11. "Exchange Act" shall mean the Securities Exchange Act of 1934.

2.12."Fair Market Value" for purposes of this Plan,  unless  otherwise  required
     by  any  applicable  provision  of  the  Code  or  any  regulations  issued
     thereunder,  shall mean, as of any date,  the last sales price reported for
     the Common Stock on the  applicable  date (i) as reported by the  principal
     national  securities  exchange  in the  United  States  on which it is then
     traded, or (ii) if not traded on any such national securities exchange,  as
     quoted  on  an  automated   quotation  system  sponsored  by  the  National
     Association  of  Securities  Dealers.  If the Common  Stock is not  readily
     tradable on a national  securities  exchange or any system sponsored by the
     National  Association of Securities Dealers, its Fair Market Value shall be
     set in good  faith  by the  Committee.  For  purposes  of the  grant of any
     Option,  the  applicable  date  shall be the date for which the last  sales
     price is available at the time of grant.

2.13."Good Reason" shall mean,  with respect to a  Participant's  Termination of
     Relationship,  (i) if there is an employment  agreement between the Company
     or a  Subsidiary  and the  Participant  in effect at the time of grant that
     defines "good  reason" (or words of like import) a  termination  that is or
     would be deemed  for "good  reason"  (or words of like  import)  as defined
     under such employment  agreement at the time of grant,  (ii) if there is an
     employment   agreement   between  the  Company  or  a  Subsidiary  and  the
     Participant  in effect  at the time of grant  that  does not  define  "good
     reason" (or words of


<PAGE>



     like import), a voluntary termination which is permitted under the terms of
     such employment  agreement and which is at least ninety (90) days after the
     occurrence  of an event  which would be grounds  for a  termination  by the
     Company that is or would be deemed for "cause" (or words of like import) as
     defined under such  employment  agreement at the time of grant, or (iii) if
     there is no employment  agreement  between the Company or a Subsidiary  and
     the Participant in effect at the time of grant, a voluntary termination for
     any reason upon two (2) weeks' prior written  notice to the Company,  which
     is at least ninety (90) days after the  occurrence  of an event which would
     be grounds  for a  Termination  of  Relationship  by the  Company for Cause
     (without regard to any notice or cure period requirement).

2.14."Incentive  Stock  Option"  shall mean any Stock Option  awarded under this
     Plan intended to be, and designated as, an "Incentive  Stock Option" within
     the meaning of Section 422 of the Code.

2.15."Non-Qualified  Stock  Option"  shall mean any Stock Option  awarded  under
     this Plan that is not an Incentive Stock Option.

2.16."Participant"  shall mean the following  persons to whom an Option has been
     granted  pursuant to this Plan:  Eligible  Employees and Consultants of the
     Company or its Subsidiaries and non-employee directors of the Company.

2.17."Retirement"  with respect to a  Participant's  Termination of Relationship
     shall mean a  Termination  of  Relationship  without Cause from the Company
     and/or a  Subsidiary  by a  Participant  who has  attained (i) at least age
     sixty-five  (65);  or (ii) such earlier date after age  fifty-five  (55) as
     approved by the Committee with regard to such Participant.  With respect to
     a  Participant's  Termination of  Directorship,  Retirement  shall mean the
     failure to stand for  reelection  or the  failure to be  reelected  after a
     Participant has attained age sixty-five (65).

2.18."Rule 16b-3" shall mean Rule 16b-3 under  Section 16(b) of the Exchange Act
     as then in effect or any successor provisions.

2.19."Section  162(m) of the Code"  shall mean the  exception  for  performance-
     based  compensation  under  Section  162(m)  of the Code  and any  Treasury
     regulations thereunder.

2.20. "Stock Option" or "Option" shall mean any option to
         purchase  shares  of  Common  Stock  granted  to  Eligible   Employees,
         Consultants or non-employee directors pursuant to Article VI.

2.21."Subsidiary"  shall mean any  corporation  that is defined as a  subsidiary
     corporation in Section 424(f) of the Code.



<PAGE>



2.22."Ten Percent  Shareholder"  shall mean a person  owning Common Stock of the
     Company possessing more than ten percent (10%) of the total combined voting
     power of all  classes of stock of the  Company as defined in Section 422 of
     the Code.

2.23."Termination  of  Consultancy"  shall mean (i) an  individual  is no longer
     acting as a  Consultant  to the  Company or a  Subsidiary;  or (ii) when an
     entity which is  retaining a  Participant  as a  Consultant  ceases to be a
     Subsidiary, unless the Participant thereupon is retained as a Consultant by
     the Company or another Subsidiary.

2.24."Termination  of  Employment"  shall mean (i) a termination of service (for
     reasons other than a military or personal  leave of absence  granted by the
     Company) of a Participant  from the Company and its  Subsidiaries;  or (ii)
     when an entity which is employing a Participant  ceases to be a Subsidiary,
     unless the Participant thereupon becomes employed by the Company or another
     Subsidiary.

2.25."Termination of  Relationship"  shall mean a Termination of Employment or a
     Termination of Consultancy, as applicable.

2.26."Transfer" or "Transferred" shall mean anticipate,  alienate, attach, sell,
     assign, pledge, encumber, charge or otherwise transfer.

2.27. "Withholding Election" shall have the meaning set forth in Section 11.4.


                                  ARTICLE III.
                                 ADMINISTRATION

3.1. The  Committee.  The Plan  shall be  administered  and  interpreted  by the
     Committee.

3.2. Awards.  The Committee  shall have full  authority to grant Stock  Options,
     pursuant to the terms of this Plan. In particular, the Committee shall have
     the authority:

          (a)  to select the Eligible  Employees and  Consultants  to whom Stock
               Options may from time to time be granted hereunder;

          (b)  to determine  whether and to what extent Stock  Options are to be
               granted   hereunder  to  one  or  more  Eligible   Employees  and
               Consultants;

          (c)  to  determine,  in  accordance  with the terms of this Plan,  the
               number  of shares of Common  Stock to be  covered  by each  Stock
               Option granted to an Eligible Employee or Consultant;


<PAGE>



          (d)  to determine the terms and conditions,  not inconsistent with the
               terms of this Plan, of any Stock Option  granted  hereunder to an
               Eligible Employee or Consultant  (including,  but not limited to,
               the share  price,  any  restriction  or  limitation,  any vesting
               schedule or acceleration thereof, or any forfeiture  restrictions
               or  waiver  thereof,  and the  shares of  Common  Stock  relating
               thereto,  based on such factors,  if any, as the Committee  shall
               determine, in its sole discretion);

          (e)  to determine whether and under what  circumstances a Stock Option
               may be settled  in cash  and/or  Common  Stock  under  Subsection
               6.3(d);

          (f)  to determine whether, to what extent and under what circumstances
               to provide  loans (which  shall be on a recourse  basis and shall
               bear a reasonable  rate of interest)  to Eligible  Employees  and
               Consultants in order to exercise Options under the Plan; and

          (g)  to   determine   whether  to  require   Eligible   Employees   or
               Consultants, as a condition of the granting of any Option, to not
               sell or  otherwise  dispose of shares  acquired  pursuant  to the
               exercise of an Option for a period of time as  determined  by the
               Committee,  in its  sole  discretion,  following  the date of the
               acquisition of such Option.

3.3. Guidelines.  Subject to Article IX  hereof,  the  Committee  shall have the
     authority to adopt, alter and repeal such administrative rules,  guidelines
     and  practices  governing  this Plan and  perform all acts,  including  the
     delegation of its administrative  responsibilities,  as it shall, from time
     to time, deem advisable; to construe and interpret the terms and provisions
     of this Plan and any Option  granted  under  this Plan (and any  agreements
     relating  thereto);  and to otherwise  supervise the administration of this
     Plan.  The  Committee  may  correct  any  defect,  supply any  omission  or
     reconcile  any  inconsistency  in this  Plan or in any  agreement  relating
     thereto in the manner  and to the extent it shall deem  necessary  to carry
     this Plan into  effect,  but only to the  extent any such  action  would be
     permitted  under the  applicable  provisions of Rule 16b-3 (if any) and the
     applicable provisions of Section 162(m) of the Code (if any). The Committee
     may adopt special  guidelines  and  provisions for persons who are residing
     in, or subject to, the taxes of,  countries other than the United States to
     comply with applicable tax and securities laws. If and solely to the extent
     applicable,  this Plan is  intended  to comply  with Rule 16b-3 and Section
     162(m) of the Code and shall be limited,  construed  and  interpreted  in a
     manner so as to comply therewith.

3.4. Decisions Final. Any decision, interpretation or other action made or taken
     in good faith by or at the  direction  of the  Company,  the Board,  or the
     Committee (or any of its members)  arising out of or in connection with the
     Plan shall be within the absolute  discretion  of all and each of them,  as
     the case may be, and shall be final,  conclusive and binding on the Company
     and all  employees,  directors,  consultants  and  Participants  and  their
     respective heirs, executors, administrators, successors and assigns.

3.5. Reliance on Counsel.  The Company,  the Board or the  Committee may consult
     with legal  counsel,  who may be counsel for the Company or other  counsel,
     with respect to its


<PAGE>



     obligations  or  duties  hereunder,  or  with  respect  to  any  action  or
     proceeding  or any question of law, and shall not be liable with respect to
     any action  taken or omitted by it in good faith  pursuant to the advice of
     such counsel.

3.6. Procedures. If the Committee is appointed, the Board shall designate one of
     the members of the  Committee  as  chairman  and the  Committee  shall hold
     meetings,  subject to the By-Laws of the Company,  at such times and places
     as it shall deem  advisable.  A majority  of the  Committee  members  shall
     constitute a quorum. All determinations of the Committee shall be made by a
     majority of its members.  Any decision or determination  reduced to writing
     and signed by all Committee  members in accordance  with the By-Laws of the
     Company  shall be  fully  effective  as if it had been  made by a vote at a
     meeting  duly  called and held.  The  Committee  shall keep  minutes of its
     meetings and shall make such rules and  regulations  for the conduct of its
     business as it shall deem advisable.

3.7. Designation of Advisors -- Liability.

          (a)  The  Committee  may  designate   employees  of  the  Company  and
               professional   advisors   to   assist   the   Committee   in  the
               administration  of the Plan and may grant  authority to employees
               to  execute  agreements  or  other  documents  on  behalf  of the
               Committee.

          (b)  The  Committee  may employ such legal  counsel,  consultants  and
               agents as it may deem  desirable  for the  administration  of the
               Plan and may rely upon any opinion received from any such counsel
               or  consultant  and  any  computation   received  from  any  such
               consultant or agent.  Expenses incurred by the Committee or Board
               in the engagement of any such counsel,  consultant or agent shall
               be paid by the Company. The Committee, its members and any person
               designated  pursuant to  paragraph  (a) above shall not be liable
               for any action or  determination  made in good faith with respect
               to the Plan. To the maximum extent  permitted by applicable  law,
               no officer or former  officer of the  Company or member or former
               member of the  Committee  or of the Board shall be liable for any
               action or  determination  made in good faith with  respect to the
               Plan or any Stock Option  granted under it. To the maximum extent
               permitted by applicable law and the Certificate of  Incorporation
               and  By-Laws of the  Company  and to the  extent  not  covered by
               insurance,  each  officer or former  officer and member or former
               member of the Committee or of the Board shall be indemnified  and
               held  harmless  by  the  Company  against  any  cost  or  expense
               (including  reasonable fees of counsel  reasonably  acceptable to
               the Company) or liability  (including  any sum paid in settlement
               of a claim  with  the  approval  of the  Company),  and  advanced
               amounts  necessary to pay the  foregoing at the earliest time and
               to the  fullest  extent  permitted,  arising  out  of any  act or
               omission to act in connection with the Plan, except to the extent
               arising out of such  officer's or former  officer's,  member's or
               former  member's  own fraud or bad  faith.  Such  indemnification
               shall  be in  addition  to  any  rights  of  indemnification  the
               officers,  directors or members or former officers,  directors or
               members may have under applicable law or under the Certificate of
               Incorporation   or   By-Laws  of  the   Company  or   Subsidiary.
               Notwithstanding  anything else herein, this  indemnification will
               not apply to the actions or determinations


<PAGE>



               made by an individual with regard to Stock Options granted to him
               or her under this Plan.

                                   ARTICLE IV.
                           SHARE AND OTHER LIMITATIONS

4.1. Shares.

               (a)  General Limitation. The aggregate number of shares of Common
                    Stock  which may be issued  under this Plan with  respect to
                    which Stock  Options may be granted  shall not exceed 83,000
                    shares  (subject to any  increase  or  decrease  pursuant to
                    Section  4.2) which may be either  authorized  and  unissued
                    Common  Stock or Common  Stock held in or  acquired  for the
                    treasury of the Company.  If any Stock Option  granted under
                    this Plan expires,  terminates or is canceled for any reason
                    without  having  been  exercised  in  full  or  the  Company
                    repurchases any Stock Option pursuant to Section 6.3(f), the
                    number of shares of Common Stock  underlying the repurchased
                    Option,   and/or  the  number  of  shares  of  Common  Stock
                    underlying any  unexercised  Option shall again be available
                    for the purposes of Options under the Plan.

               (b)  Individual  Participant  Limitations.  The maximum number of
                    shares of Common  Stock  subject to any Option  which may be
                    granted under this Plan to each Participant shall not exceed
                    75,000 shares (subject to any increase or decrease  pursuant
                    to Section 4.2) during each fiscal year of the Company.

4.2. Changes.

               (a)  The existence of the Plan and the Options granted  hereunder
                    shall not  affect in any way the right or power of the Board
                    or the  shareholders of the Company to make or authorize any
                    adjustment, recapitalization, reorganization or other change
                    in the  Company's  capital  structure or its  business,  any
                    merger or  consolidation  of the Company or Subsidiary,  any
                    issue of bonds,  debentures,  preferred or prior  preference
                    stock ahead of or affecting Common Stock, the dissolution or
                    liquidation  of the  Company  or  Subsidiary,  any  sale  or
                    transfer  of all or part of its  assets or  business  or any
                    other corporate act or proceeding.

               (b)  In the event of any such change in the capital  structure or
                    business of the  Company by reason of any stock  dividend or
                    distribution,   stock   split  or   reverse   stock   split,
                    recapitalization,   reorganization,  merger,  consolidation,
                    split-up,  combination  or exchange of shares,  distribution
                    with  respect  to its  outstanding  Common  Stock or capital
                    stock  other than Common  Stock,  sale or transfer of all or
                    part of its  assets  or  business,  reclassification  of its
                    capital stock, or any similar change affecting the Company's
                    capital  structure or business and the Committee  determines
                    an adjustment is appropriate under


<PAGE>



                    the Plan,  the number  and kind of shares or other  property
                    (including   cash)  to  be  issued   upon   exercise  of  an
                    outstanding  Option and the purchase  price thereof shall be
                    appropriately  adjusted  consistent with such change in such
                    manner  as the  Committee  may  deem  equitable  to  prevent
                    substantial  dilution or  enlargement  of the rights granted
                    to, or  available  for,  Participants  under this Plan or as
                    otherwise  necessary  to reflect  the  change,  and any such
                    adjustment  determined  by the  Committee  shall  be  final,
                    conclusive  and binding on the Company and all  Participants
                    and  employees  and  their  respective   heirs,   executors,
                    administrators, successors and assigns.

               (c)  Fractional   shares  of  Common  Stock  resulting  from  any
                    adjustment  in Options  pursuant to this  Section 4 shall be
                    aggregated until, and eliminated at, the time of exercise by
                    rounding-down  for fractions  less than  one-half  (1/2) and
                    rounding-up  for fractions equal to or greater than one-half
                    (1/2).  No cash  settlements  shall be made with  respect to
                    fractional  shares  eliminated  by  rounding.  Notice of any
                    adjustment   shall  be  given  by  the   Committee  to  each
                    Participant   whose  Option  has  been   adjusted  and  such
                    adjustment  (whether or not such  notice is given)  shall be
                    effective and binding for all purposes of the Plan.

               (d)  In the  event  of a merger  or  consolidation  in which  the
                    Company is not the  surviving  entity or in the event of any
                    transaction  that  results  in  the  acquisition  of  all or
                    substantially all of the Company's  outstanding Common Stock
                    by a single person or entity or by a group of persons and/or
                    entities  acting in concert,  or in the event of the sale or
                    transfer of all or substantially all of the Company's assets
                    (all of the  foregoing  being  referred  to as  "Acquisition
                    Events"),  then the Committee  may, in its sole  discretion,
                    terminate  all  outstanding  Options of Eligible  Employees,
                    Consultants and non- employee directors, effective as of the
                    date of the  Acquisition  Event,  by  delivering  notice  of
                    termination  to each such  Participant  at least twenty (20)
                    days prior to the date of  consummation  of the  Acquisition
                    Event;  provided,  that  during the period  from the date on
                    which  such  notice  of  termination  is  delivered  to  the
                    consummation of the Acquisition Event, each such Participant
                    shall have the right to  exercise  in full all of his or her
                    Options  that are then  outstanding  (without  regard to any
                    limitations  on  exercisability  otherwise  contained in the
                    Option  Agreement)  but  contingent  on  occurrence  of  the
                    Acquisition  Event,  and,  provided that, if the Acquisition
                    Event does not take place  within a specified  period  after
                    giving such notice for any reason whatsoever, the notice and
                    exercise shall be null and void.

                  If an  Acquisition  Event occurs,  to the extent the Committee
         does not terminate  the  outstanding  Options  pursuant to this Section
         4.2(d), then the provisions of Section 4.2(b) shall apply.


<PAGE>



                                   ARTICLE V.
                                   ELIGIBILITY

         All employees and Consultants of the Company and its  Subsidiaries  are
eligible to be granted  Stock Options  under this Plan.  Eligibility  under this
Plan shall be determined by the Committee in its sole discretion.

                                   ARTICLE VI.

                               STOCK OPTION GRANTS

6.1. Options. Each Stock Option granted hereunder shall be one of two types: (i)
     an Incentive Stock Option  intended to satisfy the  requirements of Section
     422 of the Code or (ii) a Non-Qualified Stock Option.

6.2. Grants.  The  Committee  shall have the  authority to grant to any Eligible
     Employee one or more Incentive Stock Options,  Non-Qualified Stock Options,
     or both types of Stock Options.  The Committee  shall have the authority to
     grant to any Consultant one or more Non-Qualified Stock Options.  The Board
     shall have the authority to grant to any non-employee  director one or more
     Non-Qualified  Stock Options.  To the extent that any Stock Option does not
     qualify as an Incentive Stock Option (whether  because of its provisions or
     the time or manner of its exercise or otherwise),  such Stock Option or the
     portion  thereof  which  does not  qualify,  shall  constitute  a  separate
     Non-Qualified Stock Option.

6.3. Terms of Options.  Options  granted under this Plan shall be subject to the
     following terms and conditions,  and shall be in such form and contain such
     additional terms and conditions,  not  inconsistent  with the terms of this
     Plan, as the Committee shall deem desirable:

               (a)  Option  Price.  The option  price per share of Common  Stock
                    purchasable   under  an  Incentive  Stock  Option  shall  be
                    determined  by the  Committee at the time of grant but shall
                    not be less than 100% of the Fair Market  Value of the share
                    of Common Stock at the time of grant; provided,  however, if
                    an  Incentive  Stock  Option  is  granted  to a Ten  Percent
                    Shareholder,  the purchase  price shall be no less than 110%
                    of the Fair Market Value of the Common  Stock.  The purchase
                    price of shares of Common Stock  subject to a  Non-Qualified
                    Stock Option shall be determined by the Committee.

               (b)  Option Term. The term of each Stock Option shall be fixed by
                    the Committee, but no Stock Option shall be exercisable more
                    than ten (10) years  after the date the  Option is  granted,
                    provided,  however,  the term of an  Incentive  Stock Option
                    granted to a Ten Percent Shareholder may not exceed five (5)
                    years.


<PAGE>



               (c)  Exercisability.  Stock Options shall be  exercisable at such
                    time or times and  subject to such terms and  conditions  as
                    shall  be  determined  by the  Committee  at  grant.  If the
                    Committee provides, in its discretion, that any Stock Option
                    is exercisable  subject to certain  limitations  (including,
                    without   limitation,   that  it  is  exercisable   only  in
                    installments or within certain time periods),  the Committee
                    may waive such limitations on the exercisability at any time
                    at or after  grant in whole or in part  (including,  without
                    limitation,  that the  Committee  may waive the  installment
                    exercise  provisions or accelerate the time at which Options
                    may be  exercised),  based on such  factors,  if any, as the
                    Committee shall determine, in its sole discretion.

               (d)  Method of Exercise. Subject to whatever installment exercise
                    and waiting  period  provisions  apply under  subsection (c)
                    above, Stock Options may be exercised in whole or in part at
                    any time during the Option term, by giving written notice of
                    exercise to the Company  specifying  the number of shares to
                    be purchased. Such notice shall be accompanied by payment in
                    full of the  purchase  price  in such  form,  or such  other
                    arrangement  for the  satisfaction of the purchase price, as
                    the Committee may accept. If and to the extent determined by
                    the  Committee  in its sole  discretion  at or after  grant,
                    payment  in full or in part  may also be made in the form of
                    Common Stock  withheld from the shares to be received on the
                    exercise of a Stock  Option  hereunder or Common Stock owned
                    by the  Participant  (and for which the Participant has good
                    title free and clear of any liens and encumbrances) based on
                    the Fair  Market  Value of the Common  Stock on the  payment
                    date as  determined  by the  Committee.  No shares of Common
                    Stock shall be issued  until  payment,  as provided  herein,
                    therefor has been made or provided  for and the  Participant
                    shall  have  none of the  rights  of a holder  of  shares of
                    Common  Stock  until such  shares of Common  Stock have been
                    issued.

               (e)  Incentive Stock Option  Limitations.  To the extent that the
                    aggregate  Fair Market Value  (determined  as of the time of
                    grant) of the Common Stock with  respect to which  Incentive
                    Stock  Options  are  exercisable  for the  first  time by an
                    Eligible  Employee  during any calendar  year under the Plan
                    and/or any other  stock  option  plan of the  Company or any
                    Subsidiary  or parent  corporation  (within  the  meaning of
                    Section 424(e) of the Code) exceeds  $100,000,  such Options
                    shall be treated as Options  which are not  Incentive  Stock
                    Options.

                  Should the  foregoing  provision not be necessary in order for
         the Stock Options to qualify as Incentive Stock Options,  or should any
         additional  provisions  be required,  the  Committee may amend the Plan
         accordingly,  without the  necessity of  obtaining  the approval of the
         shareholders of the Company.

               (f)  Buy Out and Settlement Provisions.  The Committee may at any
                    time on  behalf  of the  Company  offer to buy out an Option
                    previously  granted,  based on such terms and  conditions as
                    the  Committee   shall  establish  and  communicate  to  the
                    Participant at the time that such offer is made.


<PAGE>



               (g)  Form,  Modification,   Extension  and  Renewal  of  Options.
                    Subject  to  the  terms  and   conditions   and  within  the
                    limitations  of the Plan,  an Option  shall be  evidenced by
                    such  form of  agreement  or  grant  as is  approved  by the
                    Committee,  and the  Committee  may modify,  extend or renew
                    outstanding  Options  granted under the Plan  (provided that
                    the rights of a  Participant  are not  reduced  without  his
                    consent), or accept the surrender of outstanding Options (up
                    to the extent not  theretofore  exercised) and authorize the
                    granting of new  Options in  substitution  therefor  (to the
                    extent not theretofore exercised).

               (h)  Other Terms and  Conditions.  Options may contain such other
                    provisions,  which shall not be inconsistent with any of the
                    foregoing  terms of the Plan,  as the  Committee  shall deem
                    appropriate   including,   without  limitation,   permitting
                    "reloads"  such that the same  number of Options are granted
                    as the number of Options  exercised,  shares used to pay for
                    the  exercise  price  of  Options  or  shares  used  to  pay
                    withholding taxes ("Reloads").  With respect to Reloads, the
                    exercise  price of the new  Stock  Option  shall be the Fair
                    Market  Value on the date of the  Reload and the term of the
                    Stock Option shall be the same as the remaining  term of the
                    Options that are  exercised,  if  applicable,  or such other
                    exercise price and term as determined by the Committee.

6.4. Termination  of  Relationship.  The  following  rules  apply with regard to
     Options upon the Termination of Relationship of a Participant:

               (a)  Termination   by  Reason  of  Death.   If  a   Participant's
                    Termination of Relationship is by reason of death, any Stock
                    Option held by such Participant, unless otherwise determined
                    by  the   Committee  at  grant  or,  if  no  rights  of  the
                    Participant's  estate  are  reduced,   thereafter,   may  be
                    exercised,  to the extent  exercisable at the  Participant's
                    death,  by the legal  representative  of the estate,  at any
                    time  within a period  of one (1) year from the date of such
                    death,  but in no event beyond the  expiration of the stated
                    term of such Stock Option.

               (b)  Termination  by Reason  of  Disability.  If a  Participant's
                    Termination of Relationship is by reason of Disability,  any
                    Stock  Option  held by such  Participant,  unless  otherwise
                    determined by the Committee at grant or, if no rights of the
                    Participant are reduced,  thereafter,  may be exercised,  to
                    the extent exercisable at the Participant's termination,  by
                    the  Participant  (or  the  legal   representative   of  the
                    Participant's   estate  if  the   Participant   dies   after
                    termination)  at any time  within  a period  of one (1) year
                    from the date of such  termination,  but in no event  beyond
                    the expiration of the stated term of such Stock Option.

               (c)  Termination  by Reason  of  Retirement.  If a  Participant's
                    Termination of Relationship is by reason of Retirement,  any
                    Stock  Option  held by such  Participant,  unless  otherwise
                    determined  by the  Committee at grant,  or, if no rights of
                    the  Participant  are  reduced,  thereafter,  shall be fully
                    vested and may thereafter be exercised by the Participant at
                    any time  within a period  of one (1) year  from the date of
                    such  termination,  but in no event beyond the expiration of
                    the stated term of such Stock Option; provided,


<PAGE>



                    however,  that, if the Participant dies within such exercise
                    period,   any   unexercised   Stock   Option  held  by  such
                    Participant  shall thereafter be exercisable,  to the extent
                    to which it was  exercisable  at the  time of  death,  for a
                    period  of  one  (1)  year  (or  such  other  period  as the
                    Committee  may  specify  at grant  or,  if no  rights of the
                    Participant's estate are reduced,  thereafter) from the date
                    of such death,  but in no event beyond the expiration of the
                    stated term of such Stock Option.

               (d)  Involuntary  Termination  Without Cause or  Termination  for
                    Good Reason. If a Participant's  Termination of Relationship
                    is by  involuntary  termination  without  Cause  or for Good
                    Reason,  any Stock Option held by such  Participant,  unless
                    otherwise  determined  by the  Committee  at grant or, if no
                    rights of the  Participant are reduced,  thereafter,  may be
                    exercised, to the extent exercisable at termination,  by the
                    Participant  at any time within a period of ninety (90) days
                    from the date of such  termination,  but in no event  beyond
                    the expiration of the stated term of such Stock Option.

               (e)  Termination   Without  Good  Reason.   If  a   Participant's
                    Termination  of  Relationship  is voluntary but without Good
                    Reason and such Termination of Relationship occurs prior to,
                    or more than ninety (90) days after,  the  occurrence  of an
                    event which would be grounds for Termination of Relationship
                    by the  Company for Cause  (without  regard to any notice or
                    cure  period  requirements),  any Stock  Option held by such
                    Participant, unless otherwise determined by the Committee at
                    grant  or,  if no rights  of the  Participant  are  reduced,
                    thereafter,  may be exercised,  to the extent exercisable at
                    termination,  by the Participant at any time within a period
                    of thirty  (30) days  from the date of such  Termination  of
                    Relationship,  but in no event beyond the  expiration of the
                    stated term of such Stock Option.

               (f)  Other  Termination.   Unless  otherwise  determined  by  the
                    Committee at grant or, if no rights of the  Participant  are
                    reduced,  thereafter,  if  a  Participant's  Termination  of
                    Relationship is for any reason other than death, Disability,
                    Retirement,  Good  Reason  involuntary  termination  without
                    Cause or voluntary termination as provided in subsection (e)
                    above,  any  Stock  Option  held by such  Participant  shall
                    thereupon   terminate   and   expire   as  of  the  date  of
                    termination,  provided that (unless the Committee determines
                    a  different  period  upon  grant  or,  if, no rights of the
                    Participant  are  reduced,  thereafter)  in the  event  such
                    termination  is  for  Cause  or is a  voluntary  termination
                    without Good Reason or voluntary  resignation  within ninety
                    (90)  days  after  occurrence  of an  event  which  would be
                    grounds for  Termination of  Relationship by the Company for
                    Cause   (without   regard  to  any  notice  or  cure  period
                    requirement),  any Stock Option held by the  Participant  at
                    the time of  occurrence  of the event which would be grounds
                    for Termination of Relationship for Cause shall be deemed to
                    have  terminated  and expired upon  occurrence  of the event
                    which would be grounds for  Termination of  Relationship  by
                    the Company for Cause.


<PAGE>



                                  ARTICLE VII.

                               NON-TRANSFERABILITY

         Without  the  consent  of the  Committee,  no  Stock  Option  shall  be
Transferable by the Participant otherwise than by will or by the laws of descent
and  distribution,  and all  Stock  Options  shall be  exercisable,  during  the
Participant's lifetime,  only by the Participant.  No Stock Option shall, except
as otherwise  specifically  provided by law or herein,  be  Transferable  in any
manner,  and any attempt to Transfer any such Option shall be void,  and no such
Option  shall in any manner be liable  for or  subject to the debts,  contracts,
liabilities,  engagements  or torts of any person who shall be  entitled to such
Option,  nor shall it be subject to  attachment  or legal process for or against
such person.

                                  ARTICLE VIII.

                          CHANGE IN CONTROL PROVISIONS

8.1. Benefits.  In the event of a Change in Control of the  Company  (as defined
     below),  except as otherwise provided by the Committee upon the grant of an
     Option, the Participant shall be entitled to the following benefits:

          (a)  Subject  to  paragraph  (b)  below,  all  outstanding  Options of
               Participants  granted  prior to the  Change in  Control  shall be
               fully vested and immediately  exercisable in their entirety.  The
               Committee,  in its sole discretion,  may provide for the purchase
               of any such Stock  Options by the  Company  for an amount of cash
               equal to the excess of the Change in  Control  price (as  defined
               below) of the  shares  of  Common  Stock  covered  by such  Stock
               Options, over the aggregate exercise price of such Stock Options.
               For purposes of this Section 8.1,  Change in Control  price shall
               mean the  higher  of (i) the  highest  price  per share of Common
               Stock paid in any  transaction  related to a Change in Control of
               the  Company,  or (ii) the highest Fair Market Value per share of
               Common  Stock at any  time  during  the  sixty  (60)  day  period
               preceding a Change in Control.

          (b)  Notwithstanding  anything  to the  contrary  herein,  unless  the
               Committee  provides otherwise at the time an Option is granted to
               an Eligible  Employee or Consultant  hereunder or thereafter,  no
               acceleration of  exercisability  shall occur with respect to such
               Option if the  Committee  reasonably  determines  in good  faith,
               prior  to the  occurrence  of the  Change  in  Control,  that the
               Options  shall be honored or assumed,  or new rights  substituted
               therefor  (each  such  honored,  assumed  or  substituted  option
               hereinafter   called   an   "Alternative    Option"),   by   such
               Participant's  employer  (or the parent or a  subsidiary  of such
               employer), or in the case of a Consultant,  by the entity (or its
               parent or subsidiary)  which retains the Consultant,  immediately
               following   the  Change  in  Control,   provided  that  any  such
               Alternative Option must meet the following criteria:


<PAGE>



                           (i) the  Alternative  Option  must be  based on stock
         which is traded on an established  securities  market, or which will be
         so traded within thirty (30) days of the Change in Control;

                           (ii)  the   Alternative   Option  must  provide  such
         Participant with rights and entitlements substantially equivalent to or
         better  than the rights,  terms and  conditions  applicable  under such
         Option,  including, but not limited to, an identical or better exercise
         schedule; and

                           (iii) the Alternative Option must have economic value
         substantially equivalent to the value of such Option (determined at the
         time of the Change in Control).

                  For  purposes  of  Incentive  Stock  Options,  any  assumed or
         substituted  Option  shall  comply  with the  requirements  of Treasury
         regulation ss. 1.425-1 (and any amendments thereto).

8.2. Change in Control. A "Change in Control" shall be deemed to have occurred:

               (a)  upon any "person" as such term is used in Sections 13(d) and
                    14(d) of the  Exchange  Act  (other  than the  Company,  any
                    trustee  or other  fiduciary  holding  securities  under any
                    employee  benefit  plan of the Company,  any company  owned,
                    directly or indirectly,  by the  shareholders of the Company
                    in substantially  the same proportions as their ownership of
                    Common Stock of the Company), becoming the owner (as defined
                    in  Rule  13d-3  under  the  Exchange   Act),   directly  or
                    indirectly,  of securities of the Company representing fifty
                    percent  (50%) or more of the  combined  voting power of the
                    Company's then outstanding  securities  (including,  without
                    limitation,  securities owned at the time of any increase in
                    ownership);

               (b)  during any period of two consecutive  years, a change in the
                    composition  of the Board of  Directors  of the Company such
                    that the  individuals  who, as of the date hereof,  comprise
                    the Board (the  "Incumbent  Board")  cease for any reason to
                    constitute  at  least a  majority  of the  Board;  provided,
                    however, for purposes of this subsection that any individual
                    who becomes a member of an Incumbent Board subsequent to the
                    date hereof whose  election,  or nomination  for election by
                    the  Company's  shareholders,  was  approved  in  advance or
                    contemporaneously with such election by a vote of at least a
                    majority  of  those  individuals  who  are  members  of  the
                    Incumbent  Board  (or  deemed  to be such  pursuant  to this
                    proviso) shall be considered as though such  individual were
                    a member of the Incumbent Board; but, provided further, that
                    any such  individual  whose  initial  assumption  of  office
                    occurs  as a  result  of  either  an  actual  or  threatened
                    election  contest  (as such terms are used in Rule 14a-11 of
                    Regulation 14A promulgated  under the Exchange Act) or other
                    actual or threatened  solicitation of proxies or consents by
                    or on behalf of a Person  other than the Board of  Directors
                    of the  Company  or actual or  threatened  tender  offer for
                    shares  of the  Company  or  similar  transaction  or  other
                    contest


<PAGE>



                    for  corporate  control  (other  than a tender  offer by the
                    Company)  shall  not be so  considered  as a  member  of the
                    Incumbent Board;

               (c)  upon the merger or  consolidation  of the  Company  with any
                    other  corporation   (other  than  a  parent  or  subsidiary
                    corporation  within the meaning of Section  424(e) or 424(f)
                    of  the  Code,   respectively),   other  than  a  merger  or
                    consolidation which would result in the voting securities of
                    the Company outstanding immediately prior thereto continuing
                    to represent  (either by remaining  outstanding  or by being
                    converted  into voting  securities of the surviving  entity)
                    more than fifty percent  (50%) of the combined  voting power
                    of the voting  securities  of the Company or such  surviving
                    entity   outstanding   immediately   after  such  merger  or
                    consolidation; or

               (d)  upon the  shareholders' of the Company approval of a plan of
                    complete  liquidation of the Company or an agreement for the
                    sale or disposition  by the Company of all or  substantially
                    all of the  Company's  assets  other than the sale of all or
                    substantially  all of the assets of the  Company to a person
                    or persons who beneficially own, directly or indirectly,  at
                    least fifty  percent  (50%) or more of the  combined  voting
                    power of the outstanding voting securities of the Company at
                    the time of the sale.

                                   ARTICLE IX.

                      TERMINATION OR AMENDMENT OF THE PLAN

9.1. Termination or Amendment. Notwithstanding any other provision of this Plan,
     the  Board may at any time,  and from time to time,  amend,  in whole or in
     part,  any or all of the provisions of the Plan, or suspend or terminate it
     entirely,  retroactively  or otherwise;  provided,  however,  that,  unless
     otherwise required by law or specifically  provided herein, the rights of a
     Participant  with  respect  to  Options  granted  prior to such  amendment,
     suspension or termination,  may not be impaired without the consent of such
     Participant and, provided further, without the approval of the shareholders
     of the Company, if and to the extent required by the applicable  provisions
     of Rule 16b-3 or under the  applicable  provisions of Section 162(m) of the
     Code or, with regard to Incentive  Stock Options,  Section 422 of the Code,
     no amendment  may be made which would (i)  increase the maximum  individual
     Participant   limitations   under   Section   4.1(b);   (ii)   change   the
     classification  of employees  eligible to receive  Options under this Plan;
     (iii) extend the maximum  option  period under Section 6.3; or (iv) require
     shareholder  approval  in order for the Plan to continue to comply with the
     applicable  provisions,  if any,  of  Section  162(m) of the Code or,  with
     regard to Incentive Stock Options, Section 422 of the Code. In no event may
     the Plan be amended without the approval of the shareholders of the Company
     in accordance  with the applicable  laws or other  requirements to increase
     the aggregate number of shares of Common Stock that may be issued under the
     Plan or to make any other amendment that would require shareholder approval
     under the rules of any exchange or system on which the Company's securities
     are listed or traded at the request of the Company.


<PAGE>



         The  Committee may amend the terms of any Option  theretofore  granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.

                                   ARTICLE X.

                                  UNFUNDED PLAN

10.1.Unfunded  Status of Plan. This Plan is intended to constitute an "unfunded"
     plan for incentive compensation. With respect to any payments as to which a
     Participant has a fixed and vested interest but which are not yet made to a
     Participant by the Company,  nothing  contained  herein shall give any such
     Participant any rights that are greater than those of a general creditor of
     the Company.

                                   ARTICLE XI.

                               GENERAL PROVISIONS

11.1.Legend.  The Committee may require each person  receiving  shares of Common
     Stock  pursuant  to the  exercise  of a  Stock  Option  under  the  Plan to
     represent to and agree with the Company in writing that the  Participant is
     acquiring the shares without a view to distribution thereof. In addition to
     any legend  required  by this Plan,  the  certificates  for such shares may
     include any legend which the  Committee  deems  appropriate  to reflect any
     restrictions on Transfer.

     All  certificates for shares of Common Stock delivered under the Plan shall
     be subject  to such stock  transfer  orders and other  restrictions  as the
     Committee  may deem  advisable  under  the  rules,  regulations  and  other
     requirements of the Securities and Exchange Commission,  any stock exchange
     upon  which the  Common  Stock is then  listed or any  national  securities
     association  system upon whose system the Common Stock is then quoted,  any
     applicable  Federal or state  securities law, and any applicable  corporate
     law, and the  Committee may cause a legend or legends to be put on any such
     certificates to make appropriate reference to such restrictions.

11.2.Other Plans.  Nothing  contained in this Plan shall  prevent the Board from
     adopting  other  or  additional  compensation   arrangements,   subject  to
     shareholder  approval if such approval is required;  and such  arrangements
     may be either generally applicable or applicable only in specific cases.

11.3.No Right to Employment/Consultancy.  Neither this Plan nor the grant of any
     Option  hereunder shall give any Participant or other  individual any right
     with respect to  continuance of employment or consultancy by the Company or
     any Subsidiary, nor shall there be


<PAGE>



     a limitation  in any way on the right of the Company or any  Subsidiary  by
     which an employee is employed or if a  consultant,  retained,  to terminate
     his employment or consultancy at any time.

11.4.Withholding  of Taxes.  The Company  shall have the right,  if necessary or
     desirable (as determined by the Company),  to deduct from any payment to be
     made to a Participant,  or to otherwise  require,  prior to the issuance or
     delivery  of any  shares  of  Common  Stock  or  the  payment  of any  cash
     hereunder, payment by the Participant of, any Federal, state or local taxes
     required by law to be withheld.

     The Committee may permit any such withholding obligation with regard to any
     Participant  to be  satisfied  by  reducing  the number of shares of Common
     Stock otherwise deliverable or by delivering shares of Common Stock already
     owned. Any fraction of a share of Common Stock required to satisfy such tax
     obligations  shall be disregarded  and the amount due shall be paid instead
     in cash by the Participant.

11.5. Listing and Other Conditions.

                  (a) As  long as the  Common  Stock  is  listed  on a  national
         securities  exchange  or  system  sponsored  by a  national  securities
         association,  the issue of any shares of Common  Stock  pursuant to the
         exercise  of an Option  shall be  conditioned  upon such  shares  being
         listed on such exchange or system. The Company shall have no obligation
         to issue such shares  unless and until such  shares are so listed,  and
         the right to exercise  any Option with  respect to such shares shall be
         suspended until such listing has been effected.

                  (b) If at any  time  counsel  to the  Company  shall be of the
         opinion that any sale or delivery of shares of Common Stock pursuant to
         the exercise of an Option is or may in the circumstances be unlawful or
         result in the  imposition  of  excise  taxes on the  Company  under the
         statutes,  rules or  regulations of any  applicable  jurisdiction,  the
         Company shall have no  obligation to make such sale or delivery,  or to
         make any application or to effect or to maintain any  qualification  or
         registration under the Securities Act of 1933, as amended, or otherwise
         with respect to shares of Common  Stock,  and the right to exercise any
         Option shall be suspended  until, in the opinion of said counsel,  such
         sale or delivery  shall be lawful or will not result in the  imposition
         of excise taxes on the Company.

                  (c) Upon  termination  of any period of suspension  under this
         Section 11.5, any Option  affected by such  suspension  which shall not
         then have expired or  terminated  shall be  reinstated as to all shares
         available before such suspension and as to shares which would otherwise
         have become available during the period of such suspension, but no such
         suspension shall extend the term of any Option.

11.6.Governing  Law.  This Plan shall be governed and  construed  in  accordance
     with the laws of the State of  Delaware  (regardless  of the law that might
     otherwise govern under applicable New York principles of conflict of laws).



<PAGE>



11.7.Construction.  Wherever  any words  are used in this Plan in the  masculine
     gender  they  shall be  construed  as  though  they  were  also used in the
     feminine  gender in all cases where they would so apply,  and  wherever any
     words are used  herein in the  singular  form they  shall be  construed  as
     though they were also used in the plural form in all cases where they would
     so apply.

11.8.Other  Benefits.  No Stock Option  granted  under this Plan shall be deemed
     compensation  for purposes of computing  benefits under any retirement plan
     of the Company or its  Subsidiaries nor affect any benefits under any other
     benefit plan now or subsequently in effect under which the  availability or
     amount of benefits is related to the level of compensation.

11.9.Costs. The Company shall bear all expenses  included in administering  this
     Plan,  including  expenses of issuing Common Stock pursuant to the exercise
     of any Options hereunder.

11.10. No Right to Same Benefits. The provisions of Options need not be the same
     with  respect  to  each   Participant,   and  such  Options  to  individual
     Participants need not be the same in subsequent years.

11.11.  Death/Disability.  The  Committee  may in  its  discretion  require  the
     transferee  of a  Participant  to  supply  it with  written  notice  of the
     Participant's  death or Disability and to supply it with a copy of the will
     (in the case of the  Participant's  death) or such  other  evidence  as the
     Committee  deems  necessary to establish the validity of the transfer of an
     Option. The Committee may also require that the agreement of the transferee
     to be bound by all of the terms and conditions of the Plan.

11.12. Section 16(b) of the Exchange Act. All elections and  transactions  under
     the Plan by persons  subject to Section 16 of the  Exchange  Act  involving
     shares of Common Stock are intended to comply with any applicable exemptive
     condition  under Rule 16b-3.  To the extent  applicable,  the Committee may
     establish  and  adopt  written  administrative   guidelines,   designed  to
     facilitate  compliance  with Section  16(b) of the Exchange  Act, as it may
     deem necessary or proper for the  administration  and operation of the Plan
     and the transaction of business thereunder. For purposes of this paragraph,
     the  Company  shall be deemed  publicly  held when and if the Company has a
     class of  common  equity  securities  registered  under  Section  12 of the
     Exchange Act.

11.13.  Severability  of Provisions.  If any provision of the Plan shall be held
     invalid or  unenforceable,  such invalidity or  unenforceability  shall not
     affect any other  provisions  hereof,  and the Plan shall be construed  and
     enforced as if such provisions had not been included.

11.14. Headings and Captions.  The headings and captions herein are provided for
     reference and convenience  only,  shall not be considered part of the Plan,
     and shall not be employed in the construction of the Plan.




<PAGE>


                                  ARTICLE XII.

                             EFFECTIVE DATE OF PLAN

         The Plan shall take  effect upon  adoption  by the Board,  but the Plan
(and any grants of  Options  made prior to the  shareholder  approval  mentioned
herein) shall be subject to the requisite  approval of the  shareholders  of the
Company. In the absence of such approval, such Options shall be null and void.

                                  ARTICLE XIII.
                                  TERM OF PLAN

         No Stock Option  shall be granted  pursuant to the Plan on or after the
tenth  anniversary of the earlier of the date the Plan is adopted or the date of
shareholder  approval,  but Options granted prior to such tenth  anniversary may
extend beyond that date.

                                  ARTICLE XIV.
                                  NAME OF PLAN

         This Plan  shall be known as the  Lynch  Interactive  Corporation  2000
Stock Option Plan.


<PAGE>



NOT SENT TO SHAREHOLDERS WITH PROXY MATERIALS

                          LYNCH INTERACTIVE CORPORATION
                         PRINCIPAL EXECUTIVE BONUS PLAN

         The purpose of this Plan is to provide  certain  Executive  Officers of
the Lynch  Interactive  Corporation (the "Company") and certain other designated
key  employees  with an Annual  Bonus  (as  defined  below)  that  qualifies  as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986,  as amended  (the  "Code") or any  successor  section and the  Treasury
regulations  promulgated  thereunder  ("Section 162(m) of the Code").  Under the
Plan, certain Executive Officers and designated key employees of the Company may
participate   in  the  Annual   Bonus  Pool  (as   defined   below)  if  certain
preestablished  performance  goals are  attained.  This Plan is  effective as of
January 1, 1997,  subject to  approval  by the  shareholders  of the  Company in
accordance with the laws of the State of Delaware.

1.   Definitions.  The following terms, as used herein, shall have the following
     meanings:

     (a)  "Annual  Bonus"  shall mean,  with  respect to each  Participant,  the
          product of the Participant's  Individual Bonus Pool Percentage and the
          achieved Annual Bonus Pool for any Plan Year.

     (b)  "Annual Bonus Pool" shall mean,  with respect to each Plan Year,  that
          amount determined pursuant to an objective formula or standard that is
          based on the attainment of preestablished  performance goals specified
          by the Committee in accordance with Section 4 hereof.

     (c)  "Board" shall mean the Board of Directors of the Company.

     (d)  "Committee"  shall  mean  the  Executive   Compensation  and  Benefits
          Committee of the Board, or such other committee of the Board comprised
          solely of two (2) or more  members who qualify as "outside  directors"
          within the meaning of Section 162(m) of the Code.

     (e)  "Individual  Bonus Pool  Percentage"  shall mean, with respect to each
          Participant,  that  percentage  of the achieved  Annual Bonus Pool, as
          specified  by the  Committee in  accordance  with Section 4(b) hereof,
          used to determine the Participant's Annual Bonus for any Plan Year.

     (f)  "Participant"  shall mean the Chief  Executive  Officer of the Company
          and any other key  employee  of the Company  (including  subsidiaries)
          selected,  in accordance with Section 3 hereof,  to participate in the
          Plan.

     (g)  "Plan Year" shall mean each  calendar year during which the Plan is in
          effect.

     (h)  "Pre-Tax Profits" shall mean the Company's income before income taxes,
          (excluding  any provision for annual  bonuses under the Plan and under
          the Bonus Plan  applicable  to other  corporate  employees),  minority
          interest (if any), extraordinary items (if any), cumulative changes in
          accounting (if any) and discontinued  operations (if any) contained in
          the Statement of Consolidated Income in the Company's annual financial
          statements  adjusted  by (i) the  minority  interest  effects  on such
          pre-tax  profits,  and (ii)  the  pre-tax  effect  of  income  or loss
          associated  with  discontinued  operation  net  of  minority  interest
          effects.

     (i)  "Shareholders Equity" shall mean the average of shareholders equity at
          the  beginning  of the  Plan  Year  and at the  beginning  of the  two
          preceding  Plan  Years,  in each  case as  reported  in the  Company's
          consolidated  balance  sheet in its annual  financial  statements  (as
          adjusted  for the spin  off by Lynch  Corporation  of the  Company  on
          September 1, 1999).

2.   Administration  of  the  Plan.  The  Plan  shall  be  administered  by  the
     Committee.  The Committee  shall have exclusive and final  authority in all
     determinations and decisions  affecting the Plan and each Participant.  The
     Committee  shall also have the sole  authority  to interpret  the Plan,  to
     designate eligible Participants in the Plan (other than the Chief Executive
     Officer of the  Company),  to establish  and revise  rules and  regulations
     relating to the Plan,  to delegate  such  responsibilities  or duties as it
     deems  desirable,  and to make any  other  determination  that it  believes
     necessary or advisable for the  administration  of the Plan including,  but
     not limited to: (i) setting the  performance  criteria  and the  Individual
     Bonus Pool  Percentages  within the Plan  guidelines,  and (ii)  certifying
     attainment of  performance  goals and other material  terms.  The Committee
     shall  have  the  authority  in its  sole  discretion,  subject  to and not
     inconsistent  with the  express  provisions  of the  Plan,  to  incorporate
     provisions in the performance goals allowing for adjustments in recognition
     of unusual or  non-recurring  events affecting the Company or the financial
     statements of the Company,  or in response to changes in  applicable  laws,
     regulations,  or accounting principles;  provided, that the Committee shall
     have such authority solely to the extent permitted by Section 162(m) of the
     Code.  To the  extent  any  provision  of the  Plan  creates  impermissible
     discretion  under  Section  162(m) of the Code or would  otherwise  violate
     Section 162(m) of the Code, such provision shall have no force or effect.

3.   Eligibility and Participation.

     (a)  For each Plan Year, the Committee, in its sole discretion,  may select
          the  Executive  Officers  and  employees  of the  Company  who  are to
          participate  in the Plan from  among the  Executive  Officers  and key
          employees of the Company.

     (b)  No person shall be entitled to an Annual Bonus under this Plan for any
          Plan Year unless he or she is so designated as a Participant  for that
          Plan Year. The Committee may add or delete  individuals  from the list
          of designated  Participants  at any time and from time to time, in its
          sole  discretion,  subject to any limitations  required to comply with
          Section 162(m) of the Code.

4.   Payment.

     (a)  With respect to each Participant,  payment under the Plan will be made
          in cash in an amount equal to the achieved Annual Bonus, as determined
          by the Committee in its sole  discretion  for each Plan Year.  Payment
          with  respect  to a Plan Year  shall be made only if and to the extent
          the applicable  performance  goals upon which the Annual Bonus Pool is
          based  are  attained.   Notwithstanding   anything  else  herein,  the
          Committee may, in its sole discretion, elect to pay any Participant an
          amount that is less than (but in no event more than) his or her Annual
          Bonus regardless of the degree of attainment of the performance  goals
          with respect to the Annual Bonus Pool.

     (b)  Not later than  ninety (90) days after the  commencement  of each Plan
          Year (or, in the event the period of service to which the  performance
          goal  relates is shorter  than a Plan Year,  during  such time  period
          required by Section 162(m) of the Code), the Committee shall establish
          in writing all performance goals with respect to the Annual Bonus Pool
          and the Individual  Bonus Pool  Percentages  for each  Participant for
          such Plan Year. At the time the performance goals are established, the
          Committee  shall  prescribe  an  objective   formula  or  standard  to
          determine  the  amount of the  Annual  Bonus Pool which may be payable
          based upon the degree of  attainment of the  performance  goals during
          the Plan Year. In no event may the total of the Individual  Bonus Pool
          Percentages for all Participants  exceed one hundred percent (100%) of
          the Annual Bonus Pool for any Plan Year.

     (c)  The  performance  goals with respect to the Annual Bonus Pool shall be
          based on the  attainment of certain  target levels of, or a percentage
          increase in,  Pre-Tax  Profits in excess of certain  target  levels or
          percentages  of  Shareholders  Equity.  Notwithstanding  the preceding
          sentence,  in no event shall any  Participant's  Annual  Bonus for any
          Plan Year exceed  eighty  percent  (80%) of an amount  equal to twenty
          percent (20%) of the excess of (a) Pre-Tax  Profits for such Plan Year
          less  (b)  twenty-five  percent  (25%)  of  Shareholders  Equity  (the
          "Maximum  Annual  Bonus").  Subject to Section 2 of the Plan regarding
          certain  adjustments,  in  connection  with the  establishment  of the
          performance  goals,  the  performance  criteria  listed  above for the
          Company  shall be determined in  accordance  with  generally  accepted
          accounting principles  consistently applied by the Company, but before
          consideration of payments to be made pursuant to this Plan.

     (d)  Unless  otherwise  determined by the Committee in its sole discretion,
          each Participant shall, to the extent the applicable performance goals
          with  respect to the Annual  Bonus Pool are  attained  at the end of a
          Plan Year, have the right to receive payment of a prorated  portion of
          such  Participant's  Annual  Bonus  under  the Plan for any Plan  Year
          during  which  the  Participant's   employment  with  the  Company  is
          terminated for any reason other than for "cause" (as determined by the
          Committee in its sole discretion).

5.   Time of Payment.  Subject to Section 4 hereof,  each  Participant's  Annual
     Bonus  under  this  Plan  will be paid  within a  reasonable  period  after
     performance  goal  achievements  for the Plan  Year  have  been  finalized,
     reviewed, approved, and certified in writing by the Committee.

6.   Miscellaneous Provisions.

     (a)  Each  Participant's  rights  and  interests  under the Plan may not be
          sold, assigned, transferred, pledged or alienated.

     (b)  In the case of any  Participant's  death,  payment,  if any, under the
          Plan shall be made to his designated  beneficiary,  or in the event no
          beneficiary is designated or surviving, to the Participant's estate.

     (c)  Neither this Plan nor any action taken hereunder shall be construed as
          giving any  Participant  the right to continue his employment  with of
          the Company.

     (d)  The Company  shall have the right to make such  provisions as it deems
          necessary or  appropriate  to satisfy any  obligations  it may have to
          withhold  federal,  state or local  income or other taxes  incurred by
          reason of payments made pursuant to the Plan.

     (e)  The Plan and any amendments  thereto shall be construed,  administered
          and governed in all respects in accordance  with the laws of the State
          of Indiana  (regardless of the law that might  otherwise  govern under
          applicable principles of conflicts of law).

     (f)  The Plan is designed and intended to comply with Section 162(m) of the
          Code with regard to awards made to each Participant and all provisions
          hereof shall be limited,  construed and  interpreted in a manner to so
          comply.

     (g)  The  Board or the  Committee  may at any  time  and from  time to time
          alter,  amend,  suspend  or  terminate  the  Plan in whole or in part;
          provided,  that no amendment shall,  without the prior approval of the
          shareholders  of the Company in accordance  with the laws of the State
          of Indiana to the extent  required  under  Code  Section  162(m):  (i)
          materially  alter the  performance  goals as set forth in Section 4(c)
          hereof,  (ii)  increase  the Maximum  Annual  Bonus for any Plan Year,
          (iii)  change the class of persons  eligible  to  participate  in this
          Plan,  or  (iv)  implement  any  change  to a  provision  of the  Plan
          requiring  shareholder  approval  in order for the Plan to continue to
          comply with the  requirements of Code Section 162(m).  Notwithstanding
          the foregoing,  no amendment shall affect  adversely any of the rights
          of any  Participant,  without such  Participant's  consent,  under the
          award theretofore granted under the Plan.


<PAGE>

                          LYNCH INTERACTIVE CORPORATION

           This Proxy is Solicited on Behalf of the Board of Directors

         The  undersigned  shareholder  of LYNCH  INTERACTIVE  CORPORATION  (the
"Corporation") hereby appoints Robert E. Dolan and Robert A. Hurwich, or any one
of them (each with power to act alone and with power of  substitution),  Proxies
of the undersigned, with authority to vote at the Annual Meeting of Shareholders
of the Corporation to be held May 11, 2000 at 3:00 p.m., and at any adjournments
thereof, all the shares of Common Stock of the Corporation which the undersigned
would be entitled to vote if then personally present, upon the matters specified
below, and, in their discretion,  upon such other matters that may properly come
before the Annual Meeting, and any adjournments thereof.

         The shares  represented by this Proxy shall be voted in accordance with
the  instructions  given by the  shareholder,  but if no instructions are given,
this Proxy will be voted FOR all of the nominees for Directors listed in Item 1,
FOR  approval of the 2000 Stock  Option Plan in Item 2, and FOR  approval of the
Principal  Executive Bonus Plan in Item 3 and, in the discretion of the Proxies,
with  respect to any other  matter  that is properly  brought  before the Annual
Meeting.

               (continued and to be signed on the reverse side)





<PAGE>




                          LYNCH INTERACTIVE CORPORATION

1.  Election of Directors Duly Nominated:

FOR WITHHOLD  Paul J.  Evanson,  John C.  Ferrara,  Mario J.  Gabelli,  David C.
Mitchell,  Salvatore  Muoio  and Ralph R.  Papitto.  (INSTRUCTION:  To  withhold
authority to vote for one or more individual nominees,  write such name or names
on the space provided below.)

2.    Approval of the 2000 Stock Option Plan:

FOR AGAINST ABSTAIN
[ ]   [ ]    [ ]

3.    Approval of the Principal Executive Bonus Plan:

FOR AGAINST ABSTAIN
[ ]   [ ]    [ ]





                    Please sign exactly as your name appears on this Proxy.  All
                    joint owners must sign.  When acting as attorney,  executor,
                    administrator,  trustee or guardian,  please give full title
                    as such.  If a  corporation,  please sign in full  corporate
                    name  by  President  or  other  authorized   person.   If  a
                    partnership,   please  sign  in  full  partnership  name  by
                    authorized person.

                     Dated:______________________________, 2000


                   _____________________________________(L.S.)

(Signature of Shareholder)

                   ____________________________________(L.S.)
                        (Signature of Shareholder)

                    PLEASE  DATE,  SIGN AND  MAIL  THIS  PROXY  IN THE  ENVELOPE
                    PROVIDED.



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