SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
INTERACTIVE NETWORK, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock No Par Value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
45837P108
- --------------------------------------------------------------------------------
(CUSIP Number)
Daniel O'Rourke, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
(312) 609-7500
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 4, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[ ]
(Page 1 of 11 Pages)
<PAGE>
CUSIP No. 45837P108 SCHEDULE 13D Page 2 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Thomas T.M. Donaher SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 10,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 10,000
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than .1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 3 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Peter B. Fritzsche SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 10,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 10,000
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than .1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 4 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David B. Lockton SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,759,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 2,759,000
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,759,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 5 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
N. Ann McArtor SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 10,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 10,000
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than .1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 6 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert J. Regan SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 10,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 10,000
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than .1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 7 of 11 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Jerome Rubin SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 240,000
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 240,000
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
240,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
.7%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 8 of 11 Pages
Item 1. Security and Issuer.
-------------------
This Schedule 13D relates to the shares of Common Stock, no par value
(the "Common Stock"), of Interactive Network, Inc. ("IN" or the "Company"), a
corporation organized under the laws of the State of California. The principal
executive offices of the Company are located at 1161 Old County Road, Belmont,
California 94002.
Item 2. Identity and Background.
-----------------------
(a) - (c) This Amendment No. 1 to Schedule 13D originally filed by
David B. Lockton is filed on behalf of the members of the Committee to
Revitalize Interactive Network, Inc. who in addition to Mr. Lockton are Thomas
T.M. Donaher, Peter B. Fritzsche, N. Ann McArtor, Robert J. Regan and Jerome
Rubin. All members of the Committee may be reached c/o of David B. Lockton at 9
Miramonte Road, Carmel Valley, California 93942. Mr. Lockton is currently a
director of the Company and is otherwise not presently employed. The current
employment of the other members of the Committee are as set forth in Appendix A.
(d) During the past five years, no member of the Committee has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, no member of the Committee has been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Each member of the Committee is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
The source of the funds used by Mr. Lockton to purchase shares of
Common Stock owned by him listed in Item 5(a) was personal funds. The amount of
the funds used to purchase such shares aggregated approximately $150,000 and a
transfer of intellectual property. The other members of the Committee also used
personal funds in each case being approximately $1,000, except for Mr. Rubin who
paid approximately $70,000 for the shares he owns.
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 9 of 11 Pages
Item 4. Purpose of Transaction.
----------------------
The shares of Common Stock owned by Mr. Lockton and the other members
of the Committee were acquired for the purpose of investment. The members of the
Committee intend to participate in calling a special shareholder meeting of the
Company for the purposes of electing directors and amending the by-laws of the
Company as described in the copy of a preliminary proxy statement attached
hereto as Appendix A.
Except as described in this Item 4, the Committee has not formulated
any plans or proposals which relate to or would result in:
(a) the acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company;
(c) a sale or transfer of a material amount of assets of the
Company;
(d) any material change in the present capitalization or dividend
policy of the Company;
(e) any other material change in the Company's business or
corporate structure;
(f) causing a class of securities of the Company to be delisted
from a national securities exchange or to cease to be authorized to be quoted in
any inter-dealer quotation system of a registered national securities
association;
(g) a class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended; or
(h) any action similar to any of those enumerated above.
Each member of the Committee will review his or her investment in the
Company from time to time and reserves the right to take or not to take any
action he or she deems to be in his best interest or to change his or her
intention as set forth in this Item 4.
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 10 of 11 Pages
Item 5. Interest in the Securities of the Issuer.
----------------------------------------
(a) As of December 4, 1998, based upon the last shareholder list
available to the Committee, there were 30,840,441 shares of Common Stock
outstanding. The percentages set forth in this Item 5(a) were derived using such
number with, where applicable, presently exercisable options added thereto.
Each member of the Committee is the beneficial owner of shares of
Common Stock as shown in Appendix A attached hereto.
(b) Each member of the Committee has sole power to vote and to dispose
of the shares of Common Stock owned by him or her.
(c) During the last sixty days, no member of the Committee has
effected any purchases of shares of Common Stock.
(d) No person other than each member of the Committee, respectively,
has the right to receive or the power to direct the receipt of dividends from,
or the proceeds from the sale of, the shares of Common Stock owned by him or
her.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
---------------------------------------------------------------------
to Securities of the Issuer.
---------------------------
No member of the Committee has any contract, arrangement,
understanding or relationship (legal or otherwise) with any person with respect
to any securities of the Company, including, but not limited to, the transfer or
voting of any such securities, finders' fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies except as set forth in Appendix A.
Item 7. Material to be Filed as Exhibits.
--------------------------------
None.
<PAGE>
SCHEDULE 13D
CUSIP No. 45837P108 Page 11 of 11 Pages
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned each certifies that the information set forth in this statement
with respect to his or her is true, complete and correct. Each of the
undersigned hereby appoints David B. Lockton as his or her power of attorney and
agent to file any and all amendments hereto.
Date: December 7, 1998 By: /s/ David B. Lockton
------------------------------------
David B. Lockton
Date: December 7, 1998 By: /s/ Thomas T.M. Donaher
------------------------------------
Thomas T.M. Donaher
Date: December 7, 1998 By: /s/ Peter B. Fritzsche
------------------------------------
Peter B. Fritzsche
Date: December 7, 1998 By: /s/ N. Ann McArtor
------------------------------------
N. Ann McArtor
Date: December 7, 1998 By: /s/ Robert J. Regan
------------------------------------
Robert J. Regan
Date: December 7, 1998 By: /s/ Jerome Rubin
------------------------------------
Jerome Rubin
<PAGE>
Appendix A
THE COMMITTEE TO REVITALIZE
INTERACTIVE NETWORK, INC.
Thomas T. M. Donaher N. Ann McArtor
Peter B. Fritzsche Robert J. Regan
David B. Lockton Jerome Rubin
Dear Fellow Shareholders of Interactive Network:
A Special Meeting of Shareholders of Interactive Network, Inc. ("IN" or
the "Company") has been called by the holders of 3,812,766 shares, being more
than 10% of the Common Stock of IN. The Special Meeting will be held pursuant to
applicable California law including Section 305(c) of the California General
Corporation Law which provides that holders of more than 5% of the Common Stock
of IN may call a shareholders' meeting in the situation where a majority of the
board of directors has not been elected by shareholders. Only David B. Lockton,
one of the founders of IN and an inventor of several key IN patents, and a
member of The Committee to Revitalize Interactive Network, Inc. (the
"Committee"), is an IN director elected by you, the shareholders. The other
incumbent members of the IN Board, appointed to the Board by the existing
directors (including Mr. Lockton) without a shareholder vote, are not the
directors IN and you need going forward.
It is the opinion of the Committee that the Unelected Incumbents have
not used sound business judgment in carrying out their duties as directors of
your Company. We further believe that many of their actions and decisions since
the settlement of the shareholder litigation against Tele-Communications,
Incorporated ("TCI") have been shortsighted and potentially detrimental to the
maximization of IN shareholder value. The Company has not elected directors at a
meeting of shareholders since May, 1995. Now is the time for new IN leadership -
and we are the right people!
The following is what the Committee believes the Unelected Incumbents
have accomplished over the past ten months on your behalf. These
"accomplishments," in the Committee's view, show that the Unelected Incumbents
are not focused on maximizing shareholder value.
1. A PALTRY $.10 SHARE SETTLEMENT AGAINST TCI. The settlement of the
significant litigation claim against TCI and the other defendants, yielding less
than $4 million after payment of all known IN liabilities, also allows TCI and
the other defendants to convert its debt into an additional eight million shares
of stock (20%) in your Company while requiring the voting rights to be
personally held by the Unelected Incumbents. This settlement will yield IN
shareholders less than a paltry $.10 per share and, in the Committee's view, was
decidedly not in the best interest of IN shareholders. This view is based on the
opinion of Mr. Lockton, who as the inventor of the key IN technology, and as the
CEO of IN during the TCI litigation, is in the best position to assess the
viability of the Company's claims against TCI. Mr. Lockton strongly opposed this
settlement as a member of the IN Board.
<PAGE>
2. AN EXPENSIVE AND UNNECESSARY BANKRUPTCY. As part of the settlement
of the TCI litigation, the Unelected Incumbents agreed to put your Company into
Chapter 11 BANKRUPTCY, which the Committee believes was totally unwarranted
given the fact that the total amount of cash in the Company after receipt of the
settlement payment will exceed all of the liabilities. This unnecessary action
will cost the IN shareholders at least an additional estimated
$200,000-$300,000, plus the significant incremental interest on the unsecured
debt and ongoing depreciation of the IN intellectual property during this
time-consuming, unnecessary procedure. Mr. Lockton opposed this action as an IN
board member.
3. NO BOARD MINUTES. The Board has refused, despite repeated requests
by Mr. Lockton, to keep any minutes of the Board meetings held over the past
year. It was during this time that the Board maintains it approved the
settlement of the TCI litigation and the filing of the IN bankruptcy, in both
cases on terms the Committee believes are more beneficial to TCI than to IN
shareholders. Section 7.3 of IN's by-laws provides that the minutes of all
directors meetings must be kept in written form.
4. NO REORGANIZATION PLAN. Since the announcement of the TCI settlement
on March 2, 1998 and the filing of the bankruptcy on September 14, 1998, to the
best of the Committee's knowledge there still is no reorganization or strategic
plan developed by the Unelected Incumbents to increase your shareholder value
through possible utilization of IN's technology and patents, nor for the use of
the cash resources IN will have after exiting bankruptcy.
5. NO RESPONSE TO FORMAL REVITALIZATION PROPOSAL. The Board requested a
formal proposal from Mr. Lockton to revitalize the IN technological assets and
received such a proposal on September 25, 1998. The proposal, in the Committee's
view, offered the potential to increase several times the current market value
of the assets (based on the Committee's opinion of the market value). The
Unelected Incumbents refused to hold a board meeting to even discuss the
proposal. As the proposal was time sensitive due to the need to quickly rehire
former IN employees, the fast pace of change in interactive communications
technology, the necessity to raise capital to support this proposal, and other
factors, it has been withdrawn. The Committee has no present plans to reexamine
Mr. Lockton's proposal at a later date.
6. WASTEFUL USE OF CORPORATE FUNDS. The Unelected Incumbents have
appointed two of their members to serve as IN officers. Bruce Bauer has been
elected president of IN at a salary of $125,000 a year. Before this appointment
Bauer ran a building maintenance/custodian business. John Bohrer was elected
treasurer of IN at a salary of $50,000 a year. Mr. Bauer is a retired stock
broker. These men are not qualified, in the Committee's view, by training,
expertise or experience to administer IN as a publicly-held company in
bankruptcy and which will rely heavily on the revitalization of its patented
technology, if it can ever be revived.
YOU NEED TO ACT NOW. The Unelected Incumbents do not, in the
Committee's opinion, have the experience, knowledge or capabilities to manage IN
to maximize shareholder value. The Committee believes that you will agree that a
change in management is needed and that time is of the essence. We believe that
you deserve a Board of Directors that has the relevant
2
<PAGE>
business experience and is also committed to a plan that will take full
advantage of the opportunity remaining to revitalize IN. You deserve a Board
that will strive hard to restore some of the value that was lost as the result
of TCI's actions which resulted in the IN litigation against TCI and the other
defendants. The Committee members have no current plans to set aside the
settlement agreement or to change the present course of the bankruptcy
proceeding involving IN. If elected as directors of IN, Committee members will
review the various issues (including Mr. Lockton's claim as an unsecured
creditor in the bankruptcy) and challenges which IN faces and take appropriate
action in the best interests of the Company and its shareholders in light of
their fiduciary duties as directors under California law. See "Election of
Directors--Potential Conflicts of Interest" below for information on Mr.
Lockton's compensation arrangements with the Company and questions concerning
their payment.
We urge you to carefully consider our views and the facts as we see
them described in this letter and the accompanying Proxy Statements. Please help
us, your fellow investors, to revitalize IN by voting in favor of our proposed
slate of Directors. Please complete, sign and date the enclosed BLUE proxy card
and return it today in the envelope provided.
AREN'T YOU CONCERNED?
---------------------
AREN'T YOU CONCERNED that the present IN management and Unelected
Incumbents approved a settlement with TCI that was less than it should have
been?
It is the Committee's opinion that the actions of the Unelected
Incumbents are more likely to benefit themselves than the interests of
IN shareholders. Despite the vigorous opposition of then Chairman and
CEO, David Lockton, the Unelected Incumbents, after three years of
trial preparation, a court date set, a judge and a jury selected, voted
to accept an out-of-court settlement of the litigation against TCI,
worth less than $.10 per share to the IN shareholders. The settlement
represented only a fraction of the lawsuit's potential value in excess
of $400 million in damages and losses suffered by the IN shareholders,
according to an expert witness prepared to testify in the TCI trial.
AREN'T YOU CONCERNED that the Unelected Incumbents committed IN to a
bankruptcy, at an estimated cost of $300,000 and for no apparent reason
beneficial to the IN shareholders?
The settlement of the TCI litigation not only gives TCI and its
co-defendants eight million shares of IN stock (20%) but will yield an
estimated maximum of $4 million in cash to the IN shareholders after
all known expenses and liabilities, thereby negating any obvious reason
for declaring bankruptcy. The only apparent reason for IN entering
bankruptcy, in the Committee's opinion, was to mitigate any potential
personal liability the directors might have as a result of their
settlement of the litigation on unfavorable terms to IN.
3
<PAGE>
AREN'T YOU CONCERNED that the current management and Unelected
Incumbents are not communicating directly with IN shareholders on their plans
for the future of the Company or any other corporate matters?
The current management of IN has refused Mr. Lockton's repeated
requests to communicate with the shareholders since assuming control of
IN, to express their reasons for accepting the settlement or for going
into bankruptcy or to disclose the complete terms of the settlement, or
to discuss their plans for the future of the Company. WHY NOT?
The Committee intends to use its best efforts, if elected, to cause the
Company to communicate with the shareholders relating to these matters
and to otherwise come back into compliance with its disclosure
obligations under the Securities Laws at the earliest practicable date.
AREN'T YOU CONCERNED that the Unelected Incumbents won't allow Dave
Lockton to inspect IN corporate files which under California law he has the
"absolute right" to inspect?
California General Corporation Law, Section 1602 states, ". . . Every
director shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every kind [of
the Corporation] . . . " Despite repeated oral and written requests,
the Unelected Incumbents, claiming confidentiality and lack of time,
have refused to give Mr. Lockton, an IN director obligated under law
to supervise the business of IN, necessary access to the relevant
books and records!
AREN'T YOU CONCERNED that eight months after the TCI settlement was
announced, the present management and Unelected Incumbents, to the best of the
Committee's knowledge, still have not developed or submitted a reorganization
plan, detailed or otherwise, that would benefit the shareholders and maximize
the potential that remains in the original IN patents and technology while
refusing to consider a formal proposal from the founder of the Company which was
presented at their request?
The Committee believes that the future value of IN's intellectual
property will be optimized by immediately selling, joint venturing,
and/or licensing the technology to a qualified entity to generate the
greatest economic value to the IN shareholders.
AREN'T YOU CONCERNED that the current management and Unelected
Incumbents do not have, in the Committee's opinion, the requisite business
background and experience to develop, organize, and successfully implement a
plan of action that will benefit all of us?
In the Fall of 1995, the IN lawsuit against TCI AND THE OTHER
DEFENDANTS was filed and IN's Board of Directors consisted of individuals who
had extensive technological and business experience. They had assisted IN in
forging alliances and guiding the Company to the threshold of a national launch
of its innovative consumer technology. Because the IN lawsuit against TCI
4
<PAGE>
represented the most significant asset of the Company at that time, David
Lockton as IN CEO recommended that, until the litigation was resolved, a board
of directors made up of IN shareholders might better serve the shareholders'
interests during the litigation. Three new shareholder/directors--Bruce Bauer,
President of Unlimited Services (a Belmont, California building maintenance
company); John Bohrer (a retired Dickerson & Co. stock broker living in Corpus
Cristi, Texas); and Donald Graham, owner of an Omaha, Nebraska construction and
asphalt paving company and Mr. Bohrer's client--were added to the Board by the
then-existing directors, all of whom, with the exception of David Lockton, then
retired from the Board. Subsequently, on March 6, 1998 Mr. Graham nominated his
friend, William Green, who was elected to the Board. Up until the present time,
the other Board members still have not been provided with Mr. Green's phone
number, business background, business experience, or other relevant information
and, to the Committee's knowledge, Mr. Graham is the only IN director who has
ever met Mr. Green. Mr. Green has missed 80% of IN's Board meetings since his
addition to the Board.
In June 1998, four months after the TCI settlement was announced, Mr.
Bauer nominated his stockbroker and friend, William Groeneveld, a principal in
Program Trading, Inc. of Orlando, Florida, who was also subsequently added to
the Board. It is the Committee's opinion that none of the current IN board, with
the exception of Mr. Lockton, has had any experience as an officer, director or
key employee of a company even remotely comparable to your Company in terms of
technology, business, or marketplace potential.
The Committee urges you to compare the business background and
experience of the Unelected Incumbents with the experience of the Committee's
nominated slate as follows:
THOMAS T.M. DONAHER (57)--Mr. Donaher served as Vice President of
Network Operations of IN from June 1991 to January 1994 when he became
Senior Vice President of Network Operations (supervising the team that
developed the custom software for the Company's competitive scoring
system), and also served as Secretary of the Company from 1993 to 1995.
He was responsible for the development and operations management of the
Company's data distribution and collection network and its game
production facilities. Prior to coming to IN, Mr. Donaher was Vice
President of Applications Operations and Development of B.T. Tymnet, a
$300 million company. Mr. Donaher currently is a founder of ATM Tix, an
Internet start up. Mr. Donaher holds an A.A. degree from Pasadena City
College.
PETER B. FRITZSCHE (63)--Mr. Fritzsche was formerly Vice President of
Business Development for the Quaker Oats Company from 1968-1976;
Executive Vice President of CVC Capital and Evergreen Capital (venture
capital firms) from 1976-1982; and is currently Chairman of EAC
Industries, Inc., a holding company with interests in the printing
industry. Mr. Fritzsche holds a B.S. from Yale (1957) and an MBA from
the School of Management at Case Western Reserve University (1961).
5
<PAGE>
DAVID B. LOCKTON (61)--Dave Lockton founded Interactive Network in 1987
and is an inventor of four of the Company's seven major patents. Mr.
Lockton served as Chief Executive Officer until his removal on June 15,
1998 and has been a director of the Company since its inception. Mr.
Lockton was elected Chairman of the Board of Directors in January 1994.
From 1980 until June 1985 he was employed as Chairman and Chief
Executive Officer of Data Broadcasting, Inc. where he developed and
marketed mobile and personal real-time digital receiving devices,
including the QuoTrek and Signal products. Mr. Lockton received a B.A.
degree from Yale University and a J.D. from the University of Virginia
Law School.
N. ANN MCARTOR (51)--Ann McArtor joined Interactive Network in March,
1993 from Viacom International, Inc. where she served as Regional
Director of Marketing and Sales from 1990 until 1993. At IN, she served
as Director of Member Services and then as Vice President of Member
Marketing. Ms. McArtor oversaw the development and implementation of IN
customer service operations and the contest and award administration
programs. After leaving IN in July 1995, Ms. McArtor was a Senior
Associate with Lexicon Branding, Inc. consulting on electronic commerce
branding for Time Warner, Pac Bell and other clients. Ms. McArtor was
Vice President of Marketing of Big Book, a direct Internet marketing
firm from January 1998 until October 1998. Currently, Ms. McArtor is
consulting to various Internet companies.
ROBERT J. REGAN (43)--In 1993, Mr. Regan joined Interactive Network as
a consultant and acting Director of Programming. Upon leaving in 1994,
he continued his involvement in interactive television and assumed his
current position with GTE Main Street as Senior Vice President of
Programming and Content Development. GTE Main Street is the nation's
first two-way cable network and largest commercially deployed
interactive television channel. Mr. Regan was Executive Producer for
NBC Productions, and until 1991, was Senior Vice President of
Programming and Operations for Financial News Network (now CNBC). Mr.
Regan has a Bachelor of Science in Media from Worcester State College
in Worcester, MA, and a Master of Science in Broadcasting from Boston
University.
JEROME RUBIN (73)--Mr. Rubin is currently an Advisory Managing
Director at Veronis, Suhler & Associates, New York. He was director of
Interactive Network from 1988 to 1995. As the founder of Lexis-Nexis,
Mr. Rubin in 1985 was the recipient of the Information Industry
Association Hall of Fame Award for his pioneering achievements in
electronic publishing. Mr. Rubin is the former Chairman of the
Association of American Publishers, and the former head of the News in
the Future Consortium at the MIT Media Lab. Mr. Rubin was a major
contributor to IN's electronic information strategies, is also an
expert in distant learning, an area in which IN will need to focus to
leverage the value of its remaining assets.
6
<PAGE>
WHAT CAN BE DONE
----------------
The Committee recognizes that it will require an extraordinary effort
to successfully revitalize IN but the Committee's nominees are prepared to make
the effort because of their ownership positions and their strong belief that
with the proper guidance and counsel, they can achieve for the shareholders
something far in excess of the current per share value of their ownership in the
Company. The Committee has a long-range plan and mission to increase shareholder
value through taking advantage of three separate opportunities available to the
Company:
1. REVITALIZE THE INTELLECTUAL PROPERTY. One of Interactive Network's
greatest assets, the Committee believes, is the pioneering real-time distributed
processing software and encryption technology developed by a large staff of
software engineers and technicians. This software library now needs to be
repurposed for today's technology, including digital set-top boxes, lap-top
computers, and broad-band cable modems. The former IN employees who helped
create this technology now hold leadership engineering positions in a variety of
Internet and electronic gaming companies. To create any significant value from
the Company patents, those unique people who can repurpose this technology and
software will need to be recruited back to join the Company, and significant
resources and new capital will need to be obtained and employed. Accomplishing
this task will be difficult, but the Committee believes the potential rewards
will justify the effort.
The Committee will pursue the maximum potential return from this
intellectual property for IN shareholders and will consider various strategic
options, including:
a. License the software to an operating entity with the necessary
assistance from key ex-Interactive Network personnel who uniquely have the
ability to make the technology work;
b. Sell or license the intellectual property to a privately-held
company which would raise separate development capital and seek to attract a
critical mass of the founding IN engineers;
c. Recapitalize IN and offer significant equity incentives to the
former IN engineers and technological managers necessary for the technology to
be repurposed; or
d. Sell the IN technology and patents outright to the highest cash
bidder.
Of course, there can be no assurance that the Committee's strategies can or will
be successful.
Key to the success of any of these strategies will be quick and
decisive action by the Committee's nominees as the new Board, as the key IN
patent now has less than 57 months before expiration. Other important IN patents
expire between 2009 and 2016. The Committee's nominees can draw upon their prior
experience and first hand knowledge of the relative values of the engineering
team, available funds, and the IN intellectual property to optimize the most
significant opportunity for the IN shareholders.
7
<PAGE>
2. EXPLOIT THE EXISTING IN CORPORATE STRUCTURE. The Committee believes
that Interactive Network has approximately 5,000 holders of shares, including
APPROXIMATELY 800 record and 4200 beneficial owners, who have been loyal and
long-suffering. After paying off the unsecured creditors, including Mr. Lockton,
the Company should be left with approximately $3,500,000 in cash, no debt, and a
$130,000,000 tax loss carry-forward. The Company will rely on the experience of
various Committee members as well as outside expert advisers to determine the
best strategy for optimizing the value of the corporate entity. This may include
a possible merger of the Company with another suitable operating company, if
this can be achieved without destroying the tax loss carry-forward.
3. LIQUIDATE THE TANGIBLE HARDWARE ASSETS. As part of the TCI
litigation settlement agreement, Interactive Network will regain title to
approximately 40,000 interactive control units now held by TCI. While now
obsolete for use in the home, these assets may have some value in the training,
home education, market research or international segments. Key former employees
would need to be recruited in order to liquidate the hardware inventory. Quick
and decisive action will be necessary to obtain any value at all from these
"tangible" assets.
* * *
We believe that we can achieve this plan and mission for the benefit of
all IN shareholders. We need action NOW. In this rapidly growing and changing
market, where windows of opportunity open and close in the blink of an eye, the
Company needs a Board of Directors that can respond to the rapid changes using
sound business judgment and take decisive action on your behalf.
THE COMMITTEE IS COMMITTED. The members have a substantial investment
in the Company reflecting our commitment to promote the future of IN and to
protect the shareholders' investment in the Company.
NO MATTER HOW MANY SHARES YOU OWN, YOUR VOTE IS IMPORTANT. WE URGE YOU
TO REGISTER YOUR SUPPORT OF OUR PLAN TO CHANGE IN'S MANAGEMENT BY
SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY CARD TODAY. YOU MAY
VOTE IN FAVOR OF THE COMMITTEE'S NOMINEES AND OTHER PROPOSALS WHETHER
OR NOT YOU HAVE PREVIOUSLY RETURNED A PROXY CARD.
8
<PAGE>
NOTICE OF SPECIAL MEETING
OF
SHAREHOLDERS OF INTERACTIVE NETWORK, INC.
Notice is hereby given that a Special Meeting of shareholders of
Interactive Network, Inc. has been duly called to be held at the offices of the
Company at 1161 Old Country Road, Belmont, California, on the 30th day of
December, 1998 at 10 a.m. Local Time for the following purposes:
1. To elect a board of directors.
2. To amend the By-laws of the Company to eliminate cumulative
voting in the election of directors.
3. To adjourn the Special Meeting to a later date to solicit
additional proxies if such action becomes necessary or
appropriate.
4. To transact such other business as may properly come before the
Special Meeting.
Only shareholders of record at the close of business on December 4, 1998 are
entitled to notice of, and to vote at, the Special Meeting and at any and all
adjournments thereof.
THE COMMITTEE TO REVITALIZE
INTERACTIVE NETWORK
December 7, 1998
<PAGE>
THE COMMITTEE TO REVITALIZE INTERACTIVE NETWORK, INC.
9 MIRAMONTE ROAD
CARMEL VALLEY, CALIFORNIA 93942
Thomas T.M. Donaher N. Ann McArtor
Peter B. Fritzsche Robert J. Regan
David B. Lockton Jerome Rubin
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
These proxy materials are furnished in connection with the solicitation
of proxies by The Committee to Revitalize Interactive Network, Inc.
("Committee") for the Special Meeting of Shareholders of Interactive Network,
Inc. ("IN" or "Company") to be held at 10:00 a.m. Local Time, on December 30,
1998, at the offices of the Company at 1161 Old Country Road, Belmont,
California. The Committee's proxy materials regarding the Special Meeting are
being mailed or delivered to shareholders on or about December 7, 1998.
The shareholders of the Company last elected directors at its 1995
annual meeting on May 18, 1995, over 42 months ago. Several shareholders of the
Company, including David Lockton, a member of the Committee, and in accordance
with California law (the state in which IN is incorporated), have demanded the
Special Meeting to elect a new board of directors to serve the Company and to
amend the Company's By-laws to eliminate cumulative voting in the election of
directors. The California General Corporation Law, Section 305(c)(1), allows
holders of more than 5% of IN shares to demand a Special Meeting when a majority
of the Company's Board has not been elected by the shareholders. Section 601(d)
of the California General Corporation Law allows holders of more than 10% of IN
shares to call a Special Meeting.
THE COMMITTEE TO REVITALIZE INTERACTIVE NETWORK, INC.
Mr. Lockton and several other members of the Committee had discussions
beginning in the fall of 1998 about what could be done to revitalize the
Company. Prior to those discussions, several members of the Committee had also
counseled Mr. Lockton on his personal efforts to revitalize the Company. Members
of the Committee firmly committed after they had the opportunity to approve the
final draft preliminary proxy materials. Therefore, the Committee was formed on
November 16, 1998, to solicit proxies in connection with the Special Meeting.
The members of the Committee formed the Committee because of dissatisfaction
with the actions of the current board, the Committee's negative views as to the
prospects of the Company under the existing Board's leadership, and a desire to
change the management of the Company to better serve the interests of IN
shareholders. The members of the committee are Thomas T.M. Donaher, Peter B.
Fritzsche, David B. Lockton, N. Ann McArtor, Robert J. Regan and Jerome Rubin.
The Committee, as a
i
<PAGE>
group, beneficially owns 3,039,000 shares of Common Stock of the Company, which
includes vested options for 2,253,000 shares of Common Stock, representing 9.2%
of the Company's outstanding shares of Common Stock. Members of the Committee
will be entitled to vote 786,000 (2.5%) of the outstanding shares entitled to
vote at the Special Meeting (i.e. exclusive of options). If the Committee's
nominees are elected at the Special Meeting, they intend to review the Company's
present operations and as promptly as feasible implement a plan designed to
increase the shareholder value of IN, including consideration of the following
strategies:
The Committee slate for Board of Directors believes that the future
value of IN's intellectual property will be optimized by selling, joint
venturing, licensing and spinning off such technology to generate the
greatest economic value to the IN shareholders. This would allow IN's
basic technology and patents to migrate to the digital set-top box, PCS
and the Internet, while applying IN's existing test market experience
and success in developing the broadest market segments for the product.
The Committee's plan includes the need to identify and, if possible,
recruit talented engineers and managers to provide the technological
leadership as well as to establish alliances with major TV, cable and
television partners. The Committee's plan also includes the need to
attract substantial investment from a variety of sources either
directly in the Company or indirectly through subsidiaries, joint
venture partners or licensees. The Committee recognizes that all these
strategic initiatives require substantial financial, personnel and
other resources which the Committee does not presently have.
Nevertheless the Committee is dedicated to the task of developing and
gathering these resources.
If the Committee's nominees are elected, the Company may, as
appropriate, hire or engage for compensation one or more members of the
Committee or their affiliates, although the Committee has no specific plans with
respect to employment of any such persons. Of course, there can be no assurance
that the Committee's goals and intentions can or will be achieved.
VOTING RIGHTS AND SOLICITATION
If you are a Shareholder of record of IN Common Stock at the close of
business on December 4, 1998 (the "Record Date"), you are entitled to vote your
shares at the Special Meeting. Each share entitles you to one vote on each
matter to come before the Shareholders, except as described below under
"Election of Directors." As of December 4, 1998, based upon the last shareholder
list available to the Committee, there were 30,840,441 shares of IN Common Stock
outstanding and entitled to vote.
At the Special Meeting the presence in person or by proxy of the
holders of a majority of the shares entitled to vote constitutes a quorum for
the transaction of business at the Special Meeting. Failure of a quorum to be
present at the Special Meeting, or failure of a matter or proposal to obtain a
necessary vote, may result in an adjournment. Under the Company's Bylaws an
adjournment of a shareholder meeting requires the affirmative vote of a majority
of the shares present in person or represented by proxy at the meeting, though
less than a quorum.
ii
<PAGE>
The cost of soliciting proxies, consisting of the printing, handling,
and mailing of the proxy and related materials, and the actual expenses incurred
by brokerage houses, custodians, nominees and fiduciaries in forwarding proxy
material to the beneficial owners of IN Common Stock will be borne by the
Committee in a to-be-determined manner. Members of the Committee and other
representatives who may also solicit proxies by telephone, telefax, telegraph or
in person will receive no compensation for their solicitation services. It is
estimated that the Committee will spend up to $125,000 in connection with the
solicitation of proxies from Shareholders. As of the date of this Proxy
Statement, the Committee has incurred expenses of approximately $75,000. If the
Committee's nominees are elected, the Committee intends to seek reimbursement
from the Company for its expenses in connection with the solicitation, without
submitting the issue of reimbursement to a vote of Shareholders. Due to the fact
that the Company has filed for bankruptcy under Chapter 11 of the Federal
Bankruptcy Law, the approval of the Bankruptcy Court may be necessary for such
reimbursement to be made.
Any person giving a proxy for the Special Meeting has the power to
revoke it at any time before its exercise. A proxy given to the Committee may be
revoked by (i) filing with the Committee, c/o David B. Lockton at 9 Miramonte
Road, Carmel Valley, California 93942, a written notice of revocation; (ii)
delivering to a person other than a proxy holder for the Committee a proxy that
is duly executed with a later date; or (iii) attending the Special Meeting and
voting in person. Attendance at the Special Meeting will not in and of itself
constitute such a revocation.
ELECTION OF DIRECTORS
Each Director to be elected at this Special Meeting will hold office
until the next annual meeting and until his successor is elected and qualified,
or until his/her earlier death, resignation or removal. Unless otherwise
instructed, the proxy holder will vote the proxies received by him for the
nominees named below. The Company's By-laws provide that the six candidates
receiving the highest number of affirmative votes of the shares entitled to vote
at the Special Meeting will be elected Directors of the Company to serve until
the next annual meeting and until their successors are elected and qualified.
Therefore, votes against and withheld, broker non-votes and abstentions will
have no legal effect on the election of directors. Currently, the Company has
six directors serving on its Board. The Company's By-laws provide for ten (10)
directors. The Committee believes that the Board of Directors of the Company has
amended its By-laws to permit a Board with six directors by operating with only
six directors. The Committee has nominated six candidates to replace the current
six directors.
Under California law and the Company's current By-laws, if the
candidates names have been placed in nomination prior to commencement of voting
and a shareholder has given notice prior to commencement of the voting of the
shareholder's interest to cumulate votes, shareholders may cumulate votes for
candidates placed in nomination and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which that shareholder's shares are entitled, or distribute such votes on the
same principle among any or all of the candidates, as the shareholder thinks
fit. Otherwise, each shareholder is entitled to one vote for each nominee for
each share held of record on the Record Date.
iii
<PAGE>
The Committee does not presently intend to seek to cumulate votes under
the Company's current By-laws. However, if proper notice of a shareholder's
interest to cumulate votes is received and if shareholders may properly cumulate
votes under the Company's current By-laws, the Committee's proxy holders will
cumulate votes and vote the proxies received by them in a manner so as to elect
the largest number of the nominees listed in the table below. The Committee
currently does not know which of the nominees it intends to elect if
shareholders may cumulate votes. The Committee will use its discretion, and the
Committee's proxies are being given such discretion, as to any such matter.
NOMINEES
The following table sets forth the Committee's nominees for election as
Directors and their beneficial ownership of shares of Common Stock of the
Company as of the Record Date. For this purpose, beneficial ownership includes
the right to vote or dispose of the shares, either individually or in
conjunction with others. Members of the Committee will be entitled to vote
786,000 (2.5%) of the outstanding shares entitled to vote at the Special
Meeting.
<TABLE>
<CAPTION>
Percent
Number of Shares of Class
Nominee Age Beneficially Owned (approx.)
- ------- --- ------------------ ---------
<S> <C> <C> <C>
Thomas T.M. Donaher 57 10,000 ***
2504 Neville Avenue
San Jose, CA 95130
Peter B. Fritzsche 63 10,000 ***
625 West Madison Street
Apt. 4-3004
Chicago, IL 60661
David B. Lockton 61 2,759,000* 8.4%
405 El Camino Real #423
Menlo Park, CA 94025
N. Ann McArtor 51 10,000 ***
2613 Isabelle Avenue
San Mateo, CA 94403
Robert J. Regan 43 10,000 ***
4341-C Freedom Drive
Calabasas, CA 91302
Jerome Rubin 73 240,000** .8%
606 Indian Field Road
Greenwich, CT 06830
TOTAL 3,039,000 9.2%
</TABLE>
- ----------
*Includes vested options of 2,103,000 exercisable at $.09 per share
**Includes vested options of 150,000 exercisable at $0.9 per share
***Less than .1%
iv
<PAGE>
COMPENSATION
During the last three years, Mr. Lockton has received no compensation
as the CEO of IN or as a director. See the discussion below covering his
employment and related arrangements with IN.
BUSINESS EXPERIENCE OF NOMINEES
See the description of the background and business experience of the
Committee's nominees set forth on page 5 hereof.
POTENTIAL CONFLICTS OF INTEREST
The following information was provided in the Company's 1995 proxy
statement. The Company entered into an employment agreement in January 1991 with
David B. Lockton, the Chairman of the Board, President and Chief Executive
Officer, which provided for a base salary and a bonus that is determined on the
basis of a percentage of the Company's pre-tax earnings. The employment
agreement was amended effective in October, 1994 to increase to $250,000 the
base compensation payable to Mr. Lockton during the time he served as Chief
Executive Officer. Mr. Lockton was also granted an option to purchase 425,000
shares of Common Stock at an exercise price of $4.625 per share, which option
vested in four equal annual installments commencing in October 1995. The grant
of the additional options and the increase in his base compensation were in
response to the increased duties and responsibilities of Mr. Lockton when he
re-assumed the position of President and the disparity between his previous base
salary of $144,000, the fourth highest salary of the executive officers in the
Company at that time. In May 1994, Mr. Lockton agreed to amend the payment terms
of a promissory note in the principal amount of $2,000,000 issued by the Company
to Mr. Lockton in December 1986 to make the payments tax deductible to the
Company. The debt and equity financing obtained by the Company in September 1994
satisfied the financing goals and payments under the New Deferred Compensation
Agreement were to commence under the revised payment terms. In view of the
Company's then cash needs, the Company and Mr. Lockton agreed to cancel the
promissory note and enter into a Deferred Compensation and Non-Competition
Agreement under which the Company made a cash payment of $150,000 to Mr. Lockton
and agreed to make a cash payment of $55,000 on January 1, 1996 and $62,500 on
each January 1, April 1, July 1 and October 1 thereafter through October 1,
2002, provided that the Company's unrestricted cash was sufficient to satisfy
the Company's requirements following the 90-day period. In consideration of and
as a condition to such payments, Mr. Lockton agreed that during the period
ending on December 31, 2002 he will not engage in or become associated with any
person or entity engaged in any activity in the United States or Canada that is
competitive with the business of the Company. Concurrently with the execution of
the Deferred Compensation and Non-Competition Agreement, the promissory note
described above was canceled.
In October of 1995, the then shareholder-elected Board modified Mr.
Lockton's employment agreement wherein he agreed to accrue his $250,000 salary,
plus interest over the next three years to be paid from litigation proceeds, if
any. In return, he was granted an additional stock option to purchase 600,000
shares of stock annually over the next 3 years, vesting at 50,000 shares per
month
v
<PAGE>
at an option price of 10 cents per share. On November 3, 1995, the Board of
Directors ratified this modification of the employment agreement and stock
option. On October 27, 1995, the Board reduced the exercise price of the options
to 9 cents per share.
Mr. Lockton claims that under the terms of the Deferred Compensation
Agreement, replacing the $2,000,000 note, the transfer of the intellectual
property to TCI and the secured creditors was an event of acceleration under the
terms of the Agreement. Mr. Lockton's deferred salary and the accelerated
deferred compensation, plus other contractual agreements, and the reimbursement
of expenses total approximately $3.7 million, including interest and penalties.
The Company acknowledged in its bankruptcy filing Mr. Lockton's claims
for salary and deferred compensation against the Company as contingent,
unliquidated and disputed. These claims make Mr. Lockton the largest unsecured
creditor identified in the Company's bankruptcy filings. In addition, the
Company has asserted that any amount of compensation due is subject to set-off
for alleged breach of fiduciary duties by Mr. Lockton. Also, the Company
disputes several of Mr. Lockton's claims with respect to the options granted to
him referred to above. Mr. Lockton denies any such allegations and intends to
contest any such allegations in bankruptcy court.
It is the Committee's intention, if elected to the Board of Directors,
to review the situation described above with counsel and to take action with
respect to Mr. Lockton's claims against the Company that are in the best
interests of the shareholders of IN in light of the directors' fiduciary duties
under applicable law. Mr. Lockton intends to abstain on any such Board
consideration. Any creditor of the Company and potentially other persons may
have standing to object to any action by the Company in this regard in the
bankruptcy court or in other forums.
REASONS FOR THE SOLICITATION
The Committee believes that the Board of Directors of IN, as presently
constituted, does not adequately represent the interests and concerns of
Shareholders in the challenge to create value from the Company's now moribund
intellectual property. The Committee believes that the election of its six
nominees to the Board would provide the Company a new management approach more
committed to serving Shareholder interests and addressing Shareholder concerns.
It is the Committee's view that the challenge facing the Company can
better be met by individuals who understand how the Company's patents,
structure, and technology can best be exploited in the current environment. It
is the Committee's view that none of the Unelected Incumbents have any
experience as an officer or director in technology, intellectual property, or
services addressed and utilized by IN. The Committee also believes it is
important for the board to include directors who have, or represent, a
significant ownership stake in the performance of IN. The Committee owns
3,047,986 shares which includes options for 2,253,000 shares exercisable at $0.9
per share of IN Common Stock. Mr. Lockton, who owns 656,000 shares of record is
the largest individual Shareholder of record in the Company.
vi
<PAGE>
COMMITTEE'S BYLAW PROPOSAL
Section 2.8 of Company's Bylaws, in relevant part, states the following
with respect to the election of Directors:
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one
or more candidates a number of votes greater than the number of the
shareholders' shares) unless the candidates' names have been placed in
nomination prior to commencement of the voting and a shareholder has
given notice prior to commencement of the voting of the shareholder's
intention to cumulate votes. If any shareholder has given such a
notice, then every shareholder entitled to vote may cumulate votes for
candidates placed in nomination and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the
number of votes to which that shareholder's shares are entitled, or
distribute the shareholder's votes on the same principle among any or
all of the candidates, as the shareholder thinks fit.
The Committee proposes that shareholders approve an amendment to the Bylaws to
eliminate the language above, to become effective if and when the Company
becomes a listed corporation within the meaning of Section 301.5 of the
California General Corporation Law. The Committee believes that this Bylaw, by
allowing for cumulative voting for directors, provides for the possibility of a
segmented board of directors, which could lead to continuing divisiveness and
discord on the board, and is not in the best interests of IN shareholders.
The Committee intends to present and vote on the Bylaw proposal at the
Special Meeting. As soon as practicable thereafter, if elected, the Committee's
nominees will vote as directors to adopt the By-law amendment, which will become
effective when the Company becomes a listed corporation. Currently the Committee
intends to take such steps necessary to re-list the Company as qualified for
trading as a "national market system security" on the National Association of
Securities Dealer Automatic Quotation System ("NASDAQ"). There are a number of
qualifications for this status which IN and its Common Stock currently do not
meet. No representation is given by the Committee that these qualifications can
be met.
Pursuant to the Company's Bylaws, any amendment to the Bylaws must be
approved by holders of a majority of the outstanding Common Stock entitled to
vote thereon. Therefore, broker non-votes and abstentions will have the effect
of a vote against the Committee's By-law proposal.
PROPOSALS TO ADJOURN THE SPECIAL MEETING
The Committee may seek an adjournment of the Special Meeting to a later
date in order to solicit additional proxies if there is insufficient number of
shares present in person or by proxy to constitute a quorum for the purposes of
transacting business at the Special Meeting or, if the Committee does not have a
sufficient number of proxies to adopt the Committee's By-law proposal, or for
any other lawful purpose. The Committee is asking for shareholder approval to
adjourn the
vii
<PAGE>
Special Meeting to a later date to solicit additional proxies if such action
becomes necessary or appropriate. Under the Company's By-laws, adjournment of
the Special Meeting requires the affirmative vote of a majority of the shares
present in person or represented by proxy at the Special Meeting, though less
than a quorum.
OTHER INFORMATION
Certain information regarding the Company has been omitted from the
proxy statement. Such information relates to the Company and management in
general and in particular the ownership of Common Stock by beneficial owners of
more than 5% of the Common Stock. Such information is not reasonably within the
power of the Committee to ascertain or procure primarily because the Company has
not filed with the Securities and Exchange Commission (the "SEC") since 1995 an
annual report pursuant to Section 13 or 15(d) of the Securities and Exchange Act
of 1934 on Form 10-K nor a proxy statement. The Committee is therefore unable to
provide any reliable information about such matters. The Committee will
supplement this Proxy Statement to provide any such information to shareholders
should it obtain any reliable information or should the Company file any
relevant information with the SEC.
OTHER BUSINESS
Except as set forth in this Proxy Statement, the Committee is not aware
of any other matter to be considered at the Special Meeting. If any other
matters requiring a vote of the Shareholders arise, the enclosed proxy card
gives discretionary voting authority to the persons specified therein regarding
any other business that may properly come before the Special Meeting.
Respectfully,
THE COMMITTEE TO REVITALIZE
INTERACTIVE NETWORK, INC.
viii
<PAGE>
BLUE PROXY CARD
PROXY SOLICITED ON BEHALF OF COMMITTEE TO REVITALIZE INTERACTIVE
NETWORK, INC. ("COMMITTEE")
FOR USE AT THE SPECIAL MEETING OF STOCKHOLDERS OF
INTERACTIVE NETWORK, INC.
TO BE HELD ON DECEMBER 30, 1998
The undersigned stockholder of Interactive Network, Inc. (the
"Company") hereby appoints David B. Lockton and Peter B. Fritzsche, and each of
them acting alone, as lawful attorneys and proxies with several power of
substitution, for and in the name of the undersigned to represent, and vote, as
designated hereon, all shares of the Common Stock of the Company which the
undersigned is entitled to vote at the Special Meeting of the Stockholders of
the Company to be held on December 30, 1998, 10:00 a.m., local time, or at any
adjournment, postponement or rescheduling thereof (collectively, the "Special
Meeting").
THE COMMITTEE RECOMMENDS A VOTE FOR THE FOLLOWING NOMINEES
1. ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[ ] FOR all nominees listed to the right (except as Thomas T.M. Donaher Nancy Ann McArtor
marked to the contrary below) Peter B. Fritzsche Robert J. Regan
David B. Lockton Jerome Rubin
[ ] WITHHOLD AUTHORITY to vote for all
nominees listed to the right
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
PRINT THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
<PAGE>
THE COMMITTEE RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS
---
2. BYLAW PROPOSAL OF COMMITTEE: To approve an amendment to the Company's Bylaws
to eliminate cumulative voting in the election of directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. ADJOURNMENT: To adjourn the Special Meeting to a later date to solicit
additional proxies if such action becomes necessary or appropriate.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. DISCRETIONARY AUTHORITY:
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
THE ELECTION OF EACH OF THE NOMINEES, "FOR" PROPOSAL 2 AND 3 AND IN THE
DISCRETION OF THE PROXY HOLDERS AS TO OTHER MATTERS. THIS PROXY REVOKES ALL
PRIOR PROXIES.
IF STOCK IS JOINTLY HELD, EACH JOINT
OWNER SHOULD SIGN, WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN,
CORPORATE OFFICER OR PARTNER, PLEASE
GIVE FULL TITLE OR CAPACITY. PLEASE SIGN
THIS PROXY EXACTLY AS YOUR NAME APPEARS
HEREIN.
Signature(s):___________________________
Printed Name:___________________________
Title:__________________________________
Dated:__________________________________
PLEASE SIGN, DATE AND MAIL YOUR PROXY
TODAY.
