UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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INTERACTIVE NETWORK, INC.
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(Name of Registrant as Specified in Its Charter)
The Committee to Revitalize Interactive Network, Inc.
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REVISED PRELIMINARY
PROXY MATERIAL
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") has
been called by the holders of _____ 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 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 TELE-COMMUNICATIONS, INCORPORATED
("TCI"). The Settlement of the significant litigation claim against TCI,
yielding less than $4 million after payment of all known IN liabilities, also
allows TCI 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
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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.
2. AN EXPENSIVE AND UNNECESSARY BANKRUPTCY. 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. Even though he is the largest
unsecured creditor of IN, 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 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, 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. 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.
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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 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. 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 and challenges which IN faces and take
appropriate action in the best interests of the Company and its shareholders.
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?
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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
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personal liability the directors might have as a result of their settlement
of the litigation on unfavorable terms to IN.
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?
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 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 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 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,
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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 in 1961.
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
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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 MainStreet as Senior Vice President of Programming and
Content Development. MainStreet 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.
WHAT CAN BE DONE
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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
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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.
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. 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.
2. EXPLOIT THE EXISTING IN CORPORATE STRUCTURE. The Committee believes that
Interactive Network has approximately 5,000 holders of shares, including
beneficial owners, who have been loyal and long-suffering. After paying off the
unsecured creditors, 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.
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3. LIQUIDATE THE TANGIBLE HARDWARE ASSETS. Interactive Network regains
title to approximately 40,000 Interactive Control Units. 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 MAY 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 WHETHER OR NOT YOU HAVE PREVIOUSLY
RETURNED A PROXY CARD.
IF YOU HAVE ALREADY GIVEN THE COMPANY A PROXY, OUR LATER DATED BLUE PROXY
WILL REVOKE THE EARLIER ONE GIVEN TO THE COMPANY.
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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 __________, ____, in Palo Alto, 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 transact such other business as may properly come before the
Special Meeting, including, but not limited to, a vote to adjourn
the Special Meeting to solicit additional proxies with respect to
any matter properly before the meeting if such action becomes
necessary or appropriate.
Only shareholders of record at the close of business on December ___, 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
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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. Pacific Time, on December 30, 1998, at
__________. The Committee's proxy materials regarding the Special Meeting are
being mailed or delivered to shareholders on or about December __, 1998.
The shareholders of the Company last elected directors at its 1995 annual
meeting on May 18, 1995, over 41 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 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. 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 group, beneficially owns 2,944,986 shares
of Common Stock of the Company, which includes vested options for 2,253,000
shares of Common Stock. If the Committee's nominees are elected at the Special
Meeting, they intend to review the
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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 __, 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 __, 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.
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
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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 $_______ 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 Company has in fact 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.
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 accumulate votes is received and if shareholders may properly cumulate votes
under the Company's current By-laws,
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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.
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.
<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 2,656,000* 8.6%
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 73 248,986** .8%
606 Indian Field Road
Greenwich, CT 06830
TOTAL 2,944,986 9.51%
- ----------
*Includes vested options of 2,103,000
**Includes vested options of 150,000
***Less than .1%
</TABLE>
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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 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
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<PAGE>
at an option price of 10 cents per share. On November 5, 1995, the current Board
ratified this modification of the employment agreement and stock option.
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 is subject to set-off for alleged breach of fiduciary
duties by Mr. Lockton. 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. 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 or controls the voting of more than ____
of IN Common Stock. Mr. Lockton, who owns or controls the voting of
approximately ____% of the outstanding shares of the Company, including ____
that he individually owns of record, is the largest individual Shareholder of
record in the Company.
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<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 Shares 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
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<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.
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<PAGE>
REVISED
PRELIMINARY COPY
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 on the
reverse side, 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:
o FOR all nominees listed Thomas T.M. Donaher Nancy Ann McArtor
to the right (except as Peter B. Fritzsche Robert J. Regan
marked to the contrary David B. Lockton Jerome Rubin
below)
o WITHHOLD AUTHORITY to
vote for all nominees
listed to the right
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"
PROPOSAL 1, 2 AND 3 AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO OTHER
MATTERS.
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:_______________________________________
