SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
Filed by the Registrant / /
Filed by a Party other than the Registrant: /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
INTERACTIVE NETWORK, INC.
(Name of Registrant as Specified In Its Charter)
INTERACTIVE NETWORK INDEPENDENT SHAREHOLDERS COMMITTEE
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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PROXY STATEMENT
OF
INTERACTIVE NETWORK INDEPENDENT SHAREHOLDERS COMMITTEE
ANNUAL MEETING OF SHAREHOLDERS
OF
INTERACTIVE NETWORK, INC.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD TODAY!
This proxy statement (this "Proxy Statement") and BLUE proxy card are
being furnished in connection with the solicitation of proxies by the
Interactive Network Independent Shareholders Committee (the "Committee") for use
at the upcoming annual meeting of shareholders of Interactive Network, Inc., a
California corporation ("INNN" or the "Company"), and at any adjournments or
postponements thereof (the "Annual Meeting"). INNN has provided notice that the
Annual Meeting will be held at 9:00 a.m., Pacific Time, on June 30, 2000 at San
Mateo Marriott, 1770 South Amphlett Boulevard, San Mateo , California 94402. The
Company has set the record date for determining shareholders entitled to notice
of and to vote at the Annual Meeting as May 19, 2000 (the "Record Date") and the
Company mailed its proxy solicitation materials on [June __, 2000].
The Committee is proposing to amend the Company's by-laws to increase
the size of the INNN Board from five to nine (the "Board Amendment"), and has
nominated five individuals to be elected to the INNN Board to fill the
newly-created directorships. The Committee's nominees are: John Cronin, Robert
H. Hesse, Scott Mager, Shane O'Neil and Richard Perkins (collectively, the
"Nominees"). The Committee is soliciting proxies for the approval of the Board
Amendment and for the election of the Nominees to the INNN Board. Members of the
Committee intend to vote their Shares (as defined below) for the Board Amendment
and for the election of the Nominees. If you sign and return the enclosed BLUE
proxy card but do not specify how to vote, we will vote your Shares in favor of
the Board Amendment and in favor of the election of the Nominees.
On the Record Date, the Company has stated that [_______] shares of
Common Stock of the Company, no par value per share (the "Shares") were
outstanding and entitled to vote at the Annual Meeting. The members of the
Committee, along with all of the participants in this solicitation, were the
beneficial owners of an aggregate of _________ Shares which represents
approximately [_]% of the Shares outstanding, on the Record Date, and were the
beneficial owners of an aggregate of ___________ Shares which represents
approximately [_]% of the Shares, on the date hereof (based on information
publicly disclosed by the Company).
Holders of Common Stock have one vote for each share with respect to
all matters to be considered at the Annual Meeting, and may have cumulative
voting rights with respect to the
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election of directors. No shareholder may cumulate votes unless a shareholder
has announced at the Annual Meeting his intention to do so, but if any
shareholder makes such an announcement, all shareholders may cumulate votes.
Cumulative voting rights entitle a shareholder to give one nominee as many votes
as is equal to the number of directors to be elected, multiplied by the number
of shares owned by him on the Record Date, or to distribute his votes on the
same principle among two or more nominees, as he sees fit. In the event
cumulative voting is in effect at the Annual Meeting, the Committee is
soliciting discretionary authority to cumulate votes. In the event additional
persons are nominated for the position of director, the proxyholders may
cumulate and cast their votes, at their discretion, among all or less than all
of the nominees in such proportions as they see fit. Where no vote is specified
or where a vote for all nominees is marked, the cumulative votes represented by
a proxy will be cast at the discretion of the proxyholders in order to elect the
maximum number of nominees under the then prevailing circumstances. If you
withhold your vote for a nominee, all of your cumulative votes will be
distributed to the remaining nominees. The five nominees, or if the Board
Amendment is approved, nine nominees for director receiving the highest number
of votes at the Meeting will be elected. The Committee plans to make an
announcement at the Annual Meeting of its intent to cumulate votes. Shareholders
voting by means of the accompanying BLUE proxy card will be granting the
proxyholders discretionary authorities to vote their Shares cumulatively at the
discretion of the persons named in the BLUE proxy card, but such shareholders
may not mark the BLUE proxy card to cumulate their own votes. Unless votes are
withheld for any of the Nominees, the persons names as proxies on the BLUE proxy
card intend to cumulate such votes in a manner so as to maximize representation
on the INNN Board of the Nominees.
The Committee is soliciting the discretionary authority to cumulate
votes and the persons named in the accompanying proxy will have the authority to
cumulate votes at their discretion. The Committee has not determined the order
of priority in which it will cast its cumulative votes disproportionately among
its Nominees, if it elects to cumulate disproportionately. The Committee
reserves the right to change the priority of its nominees once determined,
depending upon the manner in which the Committee believes other votes will be
cast and such other factors as the Committee may deem appropriate in its
discretion consistent with the goal of maximizing the number of Nominees elected
to the INNN Board.
The persons named as proxies on the BLUE proxy card do not intend to
vote any Shares for the election of the nominees proposed by INNN. Instead, such
persons will cumulate votes in respect of such Shares to elect the maximum
number of the Nominees. In the event the number of persons constituting the INNN
Board is increased prior to the election of directors at the Annual Meeting, the
persons named as proxies on the BLUE proxy card reserve the right to vote for
any additional nominees for directors nominated by the Committee.
The accompanying BLUE proxy card will be voted at the Annual Meeting in
accordance with your instructions on such card. You may vote FOR the election of
the Nominees as the directors of INNN or withhold authority to vote for the
election of the Nominees by marking the proper box on the BLUE proxy card. You
may also withhold your vote from any of the Nominees by striking the name
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of such nominee in the list provided on the BLUE proxy card. If no marking is
made and you have signed and dated the proxy card, you will be deemed to have
given a direction to cumulate and vote the Shares represented by the BLUE proxy
card FOR the election of the Nominees, which votes will be cumulatively
allocated among the Nominees at the discretion of the persons named in the BLUE
proxy card.
This Proxy Statement and the BLUE proxy card are first being furnished
to INNN shareholders on or about [___] __, 2000. As Nominees, Messrs. Cronin,
Hesse, Mager, O'Neil and Perkins are also deemed to be participants in this
proxy solicitation. Tim Hurley is also a participant. Shareholders of record at
the close of business on the Record Date will be entitled to one vote at the
Annual Meeting for each Share held on the Record Date. The principal executive
offices of INNN are 1161 Old County Road, Belmont, California 94002.
In the event the Company purports to increase to more than nine
members, the number of directorships pursuant to its by-laws, the Committee
reserves the right to nominate additional persons as director such that the
Nominees would constitute a majority of the INNN Board.
THIS SOLICITATION IS BEING MADE BY THE COMMITTEE AND NOT ON BEHALF OF
THE BOARD OF DIRECTORS OR MANAGEMENT OF THE COMPANY.
The Company has publicly stated that at the Annual Meeting, the
Company's shareholders will be asked to (i) approve the grant to TWIN
Entertainment, Inc., a Delaware corporation, of an "exclusive" license to use
INNN's intellectual property for developing, marketing and providing digital and
analog interactive services, products and technology in specified territories
pursuant to the terms and conditions of a joint venture license agreement INNN
entered into with TWIN Entertainment, Inc. and TwoWay TV Ltd., a corporation
organized under the laws of England and Wales, on January 31, 2000; (ii) approve
an amendment to INNN's 1999 stock option plan increasing the number of shares of
INNN's common stock authorized for issuance under the plan from 3,650,000 shares
to 5,000,000 shares; (iii) re-elect INNN's four directors to serve until the
2001 annual meeting of shareholders or until their successors are elected and
qualified; (iv) ratify the appointment of Marc Lumer & Company as INNN's
independent accountants for the fiscal year ending December 31, 2000; and (v)
transact any other business which may properly come before the annual meeting
and any adjournments or postponements thereof. Each of the foregoing items of
business are more fully described in INNN's proxy statement (the "Management
Proxy Statement"). The Committee has taken no position on INNN's proposals as
disclosed to date.
The Committee is not aware of any other proposals to be brought before
the Annual Meeting. However, should other proposals be brought before the Annual
Meeting, the persons named as proxies in the enclosed BLUE proxy card will vote
on such matters in their discretion.
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IMPORTANT
Your vote is important, no matter how many or how few Shares you own.
The Committee urges you to sign, date, and return the enclosed BLUE proxy card
today to vote FOR the election of the Nominees.
/ / If your Shares are registered in your own name, please sign and date
the enclosed BLUE proxy card and return it to the Interactive Network
Independent Shareholders Committee, c/o Innisfree M&A, Incorporated,
501 Madison Avenue, 20th Floor, New York, New York 10022, in the
enclosed envelope today.
/ / If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the record date, only it can vote
such Shares and only upon receipt of your specific instructions.
Accordingly, please contact the person responsible for your account and
instruct that person to execute on your behalf the BLUE proxy card. The
Committee urges you to confirm your instructions in writing to the
person responsible for your account and to provide a copy of such
instructions to the Interactive Network Independent Stockholders
Committee, c/o Innisfree M&A, Incorporated, 501 Madison Avenue, 20th
Floor, New York, New York 10022, who is assisting in this solicitation,
at the address and telephone numbers set forth below, and on the back
cover of this Proxy Statement, so that we may be aware of all
instructions and can attempt to ensure that such instructions are
followed.
/ / The Committee urges you NOT to sign any proxy card sent to you by INNN.
If you have already done so, you may revoke your previous proxy by
signing, dating and returning the enclosed BLUE proxy card today.
If you have any questions regarding your proxy,
or need assistance in voting your Shares, please call:
INNISFREE M & A, INCORPORATED
Call toll-free: (888) 750-5834
Bankers and Brokers Call Collect: (212) 750-5833
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THE COMMITTEE'S CONCERNS
The past several years has been a very challenging and difficult period
for the Company. INNN has had no revenue from operations during the past three
fiscal years and has struggled to obtain the financing necessary to exploit its
potentially valuable intellectual property assets. INNN filed for Chapter 11
bankruptcy protection in December 1998 and its bankruptcy plan was confirmed in
April 1999. During these difficult times, the INNN Board has shrunk to four
directors. There is a skeletal staff of employees. Few, if any, of the commonly
recognized acceptable public company corporate governance measures have been
implemented at INNN and there is little dialogue between management and
shareholders. Major decisions affecting your investment in INNN are being made
by the four directors. Excluding each of the four directors' involvement with
INNN, the published biographical data of the directors in the Management Proxy
Statement disclose no significant experience or expertise in technology or
finance. Mr. Bauer previously owned and operated a company which provided
building and clean room services, supplies and consulting, Mr. Bohrer was a vice
president and branch manager of a company which provided investment services
until he retired in 1997, Mr. Green is a vice president of a dredging specialty
company and Mr. Groeneveld is a trader at a trading company.
It has become apparent to the members of the Committee that the INNN
Board lacks much- needed experience in the areas of intellectual property,
management, investment banking, finance, and growth through acquisitions.
Because the Committee believes these areas are critical to the Company,
especially at the present time and over the next year, the Committee is uneasy
with the lack of broad based experience now available to the INNN Board. INNN's
shareholders cannot wait for the current INNN Board and management to recognize
the benefits of expanding the diversification, depth of advice and experience on
the INNN Board. It is imperative that the Company expand its board immediately
to nine members, and elect the five members currently being nominated by the
Committee.
The Committee believes that these are critical times for the Company,
with numerous issues to be addressed which can lead INNN to either a significant
success or a dismal failure. INNN's intellectual property is a potentially
valuable asset which must be effectively managed to maximize its value. As
stated in the Management Proxy Statement, INNN has entered into a joint venture
with Two Way TV Ltd. ("Two Way") which resulted in the formation of TWIN
Entertainment, Inc. ("Twin Entertainment"), a new company jointly owned and
co-managed by INNN and Two Way. The Management Proxy Statement asks shareholders
to vote on a proposal to grant an exclusive license to use INNN's intellectual
property to Twin Entertainment, as further described therein. The Committee has
not taken a position on such proposal. We do question, however, the process,
research and investigation done by the INNN Board and the Company's management
prior to their decision to enter into this joint venture, which is a defining
transaction for INNN. Among the pages of description contained in the Management
Proxy Statement, there is no mention of other options explored or considered, no
"Fairness Opinion" obtained and no outside industry expertise engaged by the
Board to assist in this critical transfer of assets. The Committee believes that
future major decisions should be considered by a more diversified and
experienced body of managers.
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CRITICAL ISSUES NOW BEFORE THE COMPANY AND ITS CURRENT BOARD:
1. Obtain a Fairness Opinion on the grant to Twin Entertainment of an
exclusive license to use INNN's intellectual property;
2. Raising badly needed investment capital;
3. Enhancing and protecting the Company's intellectual property and
patent portfolio;
4. Initiating a dialogue with INNN shareholders;
5. Producing a Business Plan to identify the Company's strategy and
technology;
6. Hiring an investment bank to advise and consider potential
corporate alliance possibilities; and
7. Implementing basic corporate infrastructure and oversight.
The Committee believes that the major issues impacting INNN in the
future require a functioning and active board. Consequently, the Committee
believes that it is in the Company's best interest to increase the INNN Board to
nine members and elect its Nominees. If elected, the Nominees will implement a
program of Corporate Governance based on the California Public Employees
Retirement System ("CalPERS") U.S. Corporate Governance Principles. Attached as
Exhibit A is a summary of CalPERS's Core Principles and Governing Guidelines.
The Committee believes that this system will promote an active, informed and
independent board which will better serve INNN's shareholders.
The Nominees will further seek to supplement and expand management
through hiring qualified and capable individuals who will be able to assist
existing management and work on behalf of INNN. A strengthened management will
also be empowered to institute and foster a better dialogue between INNN and its
shareholders.
If all are elected, the Nominees will constitute a majority of the
proposed nine members of the INNN Board and will, subject to their fiduciary
duties, seek to conduct a comprehensive and impartial review of all available
options to increase shareholder value, including raising additional capital,
review joint venture arrangements, consider alternative methods of maximizing
the value of the Company's intellectual property, or pursue the possibility that
the Company be sold in whole or in part. In considering who is most capable of
maximizing value, the Committee believes that its Nominees will bring their
depth of experience to better enable the INNN Board to advance the interests and
value to shareholders. Neither the Committee, nor any other person on its
behalf, has made or undertaken any analyses or reports as to whether shareholder
present value will be maximized as a result of this solicitation. There can be
no assurance that the present value of the Shares will be maximized as a result
of this solicitation or the election of the Nominees.
On the Record Date and on the date hereof, the members of the
Committee, along with all participants in this solicitation, beneficially owned
___________ Shares, or [_]% of the outstanding Shares, acquired at an aggregate
cost of $[_____], and [______] Shares, or [_]% of the outstanding Shares,
acquired at an aggregate cost of $[_______], respectively.
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The Nominees
The Nominees, John Cronin, Robert H. Hesse, Scott Mager, Shane O'Neil
and Richard Perkins, are each eminently qualified individuals who will be able
to make an immediate and substantial contribution to INNN. Please see "The
Committee and its Slate" for a brief biography of each Nominee.
The reason for nominating the Nominees to the INNN Board is to seek to
elect directors who will bring background and experience in the areas of
intellectual property, management and finance who will serve to complement the
current members of the INNN Board and are committed, among other things, to
maximizing value for INNN's shareholders.
YOU ARE URGED TO VOTE FOR BOARD AMENDMENT AND THE ELECTION OF THE
NOMINEES ON THE ENCLOSED BLUE PROXY CARD.
PROPOSAL I - AMENDMENT OF THE BY-LAWS (INCREASE THE BOARD)
The Committee is asking for your support to approve the Board Amendment
which will amend Article 3 Section 3.2 of the by-laws of the Company to set the
number of directors serving on the INNN Board at nine. The INNN Board currently
has five seats, four of which are filled. If the Board Amendment is approved by
the shareholders, Article III, Section 3.2 of the by-laws of the Company shall
be amended and restated in its entirety as follows:
3.2 Number of Directors.
The number of directors of this corporation shall be not less
than five (5) nor more than nine (9). The exact number of directors
shall be nine (9) until changed, within the limits specified above, by
a By-Law amending this Section 3.2, duly adopted by the Board of
Directors or by the shareholders. The indefinite number of directors
may be changed, or a definite number fixed without provision for an
indefinite number, by a duly adopted amendment to the Articles of
Incorporation or by an amendment to this By-Law adopted by the vote or
written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the
number of directors to a number less than five (5) cannot be adopted
if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of action by written consent, are equal to more
than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote thereon.
The affirmative vote of a majority of the outstanding shares entitled
to vote at the Annual Meeting are required to approve this proposal.
The Committee urges you to vote FOR the approval of the Board Amendment
which will set the number of directors to serve on the INNN Board at nine.
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PROPOSAL II - ELECTION OF DIRECTORS
THE COMMITTEE IS ASKING FOR YOUR SUPPORT TO ELECT THE NOMINEES.
If the Board Amendment is approved, five Nominees will stand for
election to fill the vacant seats. If the Board Amendment is not approved, the
Nominees will stand for election in opposition to management's four nominees and
to fill the vacant seat on the INNN Board. If a majority of shares of the
Company's common stock present by proxy or in person vote in favor of the Board
Amendment, there will be nine vacancies on the INI Board and the nine nominees
receiving the highest vote (whether the Committee's nominees or the Company's
nominees) will be elected to the INNN Board. If the five Nominees are elected,
the Nominees will constitute a majority of the INNN Board and control of the
Company will transfer to the Nominees.
If required, the Committee intends to distribute to the shareholders of
the Company supplemental materials, in the event that the INNN Board takes
action after the date of this Proxy Statement, to increase the number of
directors of the Company. In the event the Company purports to increase the
number of directorships pursuant to the Company's by-laws, the Committee
reserves the right to nominate additional persons as director such that the
Nominees would constitute a majority of the INNN Board.
The Committee And Its Slate
The Committee is composed of Robert H. Hesse and Tim Hurley. John
Cronin, Robert H. Hesse, Scott Mager, Shane O'Neil and Richard Perkins
constitute the Nominees for election to the INNN Board. Biographical data on the
Nominees is set forth below. The Committee was formed on or about May 1, 2000.
The Committee is an unincorporated association with its office at 26 Woodhill
Road, Tenafly, New Jersey 07670. Its telephone number is (201) 567-4415. The
Committee's officers are Messrs. Hesse and Hurley.
The following information sets forth the name, business address,
present principal occupation, and employment and material occupations,
positions, offices, or employments for the past five years of the Nominees. This
information has been furnished to the Committee by the Nominees. Where no date
is given for the commencement of the indicated office or position, such office
or position was assumed prior to January 1, 1995. Each person listed below is a
citizen of the United States.
John Cronin (45) is one of the nominees for director. Since 1998, Mr.
Cronin has been the Chief Executive Officer and founder of Venture Info Capital,
an international patent consulting and intellectual property development firm.
Prior to that, Mr. Cronin was an electrical engineer with
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IBM, where he was the recipient of more than 100 patents and generated more than
$1 billion in revenues for IBM.
Robert H. Hesse (57) is one of the nominees for director. Since 1992,
Mr. Hesse has been President of the Dorchester Group, Inc., an investment
banking firm specializing in international cross border financial transactions.
Mr. Hesse is a founder of TwoWay TV Ltd. and has been an adviser to the Company
since January 1999.
Scott Mager (42) is one of the nominees for director. Mr. Mager is
President and General Counsel of BuildingNetworks, an Internet service provider.
Since 1985, Mr. Mager has been President of PBM Incorporated, a real estate
maintenance firm. Mr. Mager was formerly a securities attorney with Proskauer
Rose LLP, and Shea & Gould.
Shane O'Neil (54) is one of the nominees for director. Since 1998, Mr.
O'Neil has been a partner of Crary, Onthank & O'Neil, an investment banking
firm. From 1995 to 1998, Mr. O'Neil was director of Media and Entertainment for
the firm of Auerback, Pollack and Richardson. Mr. O'Neil is a former Chairman
and Chief Executive Officer of RKO General, and Frontier Airlines.
Richard Perkins (70) is one of the nominees for director. Mr. Perkins
is the founder of Perkins Capital Management. Until 1984, he was a Senior Vice
President with Piper Jaffray & Hoppwood. He has served on the board of directors
of 20 companies. Mr. Perkins received his M.B.A. degree from the University of
Wisconsin and is a Chartered Financial Analyst.
The Nominees will not receive any compensation from the Committee for
their services as a director of the Company. On May 1, 2000, Robert H. Hesse and
Tim Hurley entered into an agreement pursuant to which, among other things, they
formed the Committee and agreed to nominate a slate of directors to the INI
Board and solicit proxies for the Annual Meeting for their proposals and slate
of directors for the INNN Board.
Other than as stated above, there are no arrangements or understandings
between the Committee and each Nominee or any other person or person pursuant to
which the nominations described herein are to be made, other than the consent by
each of the Nominees to serve as a director of the Company if elected as such at
the Annual Meeting. The Nominees have executed written consents agreeing to be a
nominee for election of director of the Company and to serve as a director if so
elected. None of the Nominees have been convicted in any criminal proceedings
(excluding traffic violations or similar misdemeanors) over the past ten years
and are not adverse to the Company or any of its subsidiaries in any material
pending legal proceedings.
According to the Company's public filings, if elected as a director,
each Nominee, as a non-employee director, will not be compensated for serving as
a director except for reimbursement for out-of-pocket transportation and other
expenses actually incurred in attending INNN Board meetings, and each will
receive an annual grant of a stock option to purchase 50,000 Shares.
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The Committee does not expect that the Nominees will be unable to stand
for election, but, in the event that such persons are unable to do so, the
Shares represented by the enclosed BLUE proxy card will be voted for alternate
nominees. In addition, the Committee reserves the right to nominate substitute
or additional persons if the Company makes or announces any changes to its
by-laws, including increasing the size of the INNN Board, or takes or announces
any other action that has, or if consummated would have, the effect of
disqualifying the Nominees. In any such case, Shares represented by the enclosed
BLUE proxy card will be voted for such substitute or additional nominees. Also,
in the event the election of directors is by cumulative voting, the persons
named in the enclosed proxy will cumulate the votes represented by the proxies
so as to elect the maximum number of Nominees possible, which number may be less
than five.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE NOMINEES ON THE ENCLOSED
BLUE PROXY CARD.
VOTING AND PROXY PROCEDURES
Only shareholders of record on the Record Date will be entitled to
notice of and to vote at the Annual Meeting. Each Share is entitled to one vote.
Shareholders who sell Shares before the Record Date (or acquire them without
voting rights after the Record Date) may not vote such Shares. Shareholders of
record on the Record Date will retain their voting rights in connection with the
Annual Meeting even if they sell such Shares after the Record Date. Based on
publicly available information, the Committee believes that the only outstanding
class of securities of the Company entitled to vote at the Annual Meeting are
the Shares.
Shares represented by properly executed BLUE proxy cards will be voted
at the Annual Meeting as marked and, in the absence of specific instructions,
will be voted FOR the election of as many of the Nominees to the INNN Board as
the vote represented by such proxies are entitled to elect, FOR the Board
Amendment and in the discretion of the persons named as proxies on all other
matters as may properly come before the Annual Meeting. The candidates receiving
the highest number of votes, up to the number of directors to be elected (which
is presently four), shall be elected. Votes against a director and votes
withheld shall have no legal effect.
In the event the Company purports to increase the number of
directorships pursuant to its by-laws, the Committee reserves the right to
nominate additional persons as director such if all the Nominees are elected,
they would constitute a majority of the INNN Board.
A quorum must be present to take any action on a voting matter at the
Annual Meeting. The presence in person or by proxy of the persons entitled to
vote a majority of the Shares will constitute a quorum at the Annual Meeting.
For purposes of determining the number of Shares present in person or
represented by proxy on voting matters, all votes cast "FOR", "AGAINST" or
"ABSTAIN" are included. A "Broker Non-Vote" is a vote withheld by a broker on a
particular matter because the broker has not received instructions from the
customer for whose account the shares are held.
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Broker non-votes and abstentions are not treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. Broker
non-votes and abstentions will have no effect on the election of directors.
Shareholders of the Company may revoke their proxies at any time prior
to its exercise by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a proxy) or by delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered either to the
Committee, in care of Innisfree M&A, Incorporated, at the address set forth on
the back cover of this Proxy Statement or to the Company, at 1161 Old County
Road, Belmont, California 94002 or any other address provided by the Company.
Although a revocation is effective if delivered to the Company, the Committee
requests that either the original or photostatic copies of all revocations be
mailed to the Committee, in care of Innisfree M&A, Incorporated, at the address
set forth on the back cover of this Proxy Statement so that the Committee will
be aware of all revocations and can more accurately determine if and when
proxies have been received from the holders of record on the Record Date of a
majority of the outstanding Shares.
IF YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE BOARD,
PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED BLUE PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being
made by the Committee. Proxies may be solicited by mail, facsimile, telephone,
telegraph, in person and by advertisements. Solicitations may be made by certain
directors, officers and employees of the Committee, none of whom will receive
additional compensation for such solicitation.
The Committee has retained Innisfree M&A, Incorporated, for
solicitation and advisory services in connection with this solicitation, for
which Innisfree M&A, Incorporated will receive $_______ together with
reimbursement for its reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses, including certain liabilities under
the federal securities laws. Innisfree M&A, Incorporated will solicit proxies
from individuals, brokers, banks, bank nominees and other institutional holders.
The Committee has requested banks, brokerage houses and other custodians,
nominees and fiduciaries to forward all solicitation materials to the beneficial
owners of the Shares they hold of record. The Committee will reimburse these
record holders for their reasonable out-of-pocket expenses in so doing. It is
anticipated that Innisfree M&A, Incorporated will employ approximately ____
persons to solicit the Company's shareholders for the Annual Meeting.
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The entire expense of soliciting proxies is being borne by the
Committee. The Committee does not currently intend to seek reimbursement of the
costs of this solicitation from the Company, although if some or all of the
Nominees are elected, the Committee may seek reimbursement from the Company for
the costs of this solicitation. Costs of this solicitation of proxies are
currently estimated to be approximately ___________. The Committee estimates
that through the date hereof, its expenses in connection with this solicitation
are approximately ________.
INFORMATION ABOUT PARTICIPANTS
The Committee is comprised of Robert H. Hesse and Tim Hurley. On May 1,
2000, Robert H. Hesse and Tim Hurley entered into an Agreement pursuant to
which, among other things, they formed the Committee and agreed to nominate a
slate of directors to the INNN Board and solicit proxies for the Annual Meeting
for their slate of directors for the INNN Board. On the Record Date and on the
date hereof, members of the Committee, along with all participants in this
solicitation, beneficially owned _________ Shares and [_____] Shares,
respectively.
Mr. Hesse is a principal of the Dorchester Group Inc., an investment
banking firm. On the Record Date and on the date hereof, Mr. Hesse beneficially
owned 356,000 Shares. For information regarding the purchases and sales of
Shares during the past two years by Mr. Hesse, see Schedule I.
Mr. Hurley is a private investor. On the Record Date and date hereof,
Mr. Hurley beneficially owned 320,000 Shares. For information regarding the
purchases and sales of Shares during the past two years by Mr. Hurley, see
Schedule I.
On the Record Date and date hereof, Mr. Mager beneficially owned _____
Shares. For information regarding the purchases and sales of Shares during the
past two years by Mr. Mager, see Schedule I.
On the Record Date and date hereof, Mr. O'Neil did not beneficially own
any Shares. For information regarding the purchase and sales of Shares during
the past two years by Mr. O'Neil, see Schedule I.
On the Record Date and date hereof, Mr. Perkins beneficially owned
660,000 Shares. For information regarding the purchase and sales of Shares
during the past two years by Mr. Perkins, see Schedule I.
Mr. Cronin did not beneficially own any Shares on the Record Date or
the date hereof and has not purchased or sold any Shares in the past two years.
Schedule II lists the security ownership of certain beneficial owners
and management of the company as disclosed in the Management Proxy Statement.
-12-
The INNN Board has a single class of directors. At each annual meeting
of shareholders, the directors are elected to a one-year term. The Nominees, if
elected, would serve as directors for the term expiring in 2001 or until the due
election and qualification of their successors. The Committee has no reason to
believe any of the Nominees will be disqualified or unable or unwilling to serve
if elected.
CERTAIN TRANSACTIONS BETWEEN THE COMMITTEE
AND THE COMPANY
Except as set forth in this Proxy Statement (including the Schedules
hereto), neither the Committee, nor any of the Nominees or any of the other
participants in this solicitation, or any of their respective associates: (i)
directly or indirectly beneficially owns any Shares or any securities of the
Company; (ii) has had any relationship with the Company in any capacity other
than as a shareholder, or is or has been a party to any transactions, or series
of similar transactions, since January 1, 1998, with respect to any Shares; or
(iii) knows of any transactions since January 1, 1998, currently proposed
transaction, or series of similar transactions, to which the Company or any of
its subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any of them or their respective affiliates had, or will
have, a direct or indirect material interest. In addition, other than as set
forth herein, there are no contracts, arrangements or understandings entered
into by the Committee or any of the Nominees or any other participant in this
solicitation or any of their respective associates within the past year with any
person with respect to any of the Company's securities, including, but not
limited to, joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies.
Except as set forth in this Proxy Statement (including the Schedules
hereto), neither the Committee nor any of the Nominees, nor any of the other
participants in this solicitation, or any of their respective associates, has
entered into any agreement or understanding with any person with respect to (i)
any future employment by the Company or its affiliates or (ii) any future
transactions to which the Company or any of its affiliates will or may be a
party. However, the Committee has reviewed, and will continue to review, on the
basis of publicly available information, various possible business strategies
that they might consider in the event that the Nominees are elected to the INI
Board. In addition, if and to the extent that the Nominees are elected, the
Nominees intend to conduct a detailed review of the Company and its assets,
financial projections, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and consider and
determine what, if any, changes would be desirable in light of the circumstances
which then exist.
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OTHER MATTERS AND ADDITIONAL INFORMATION
The Committee is not aware of any other proposals to be brought before
the Annual Meeting. However, should other proposals be brought before the Annual
Meeting, the persons named as proxies on the enclosed BLUE proxy card will vote
on such matters in their discretion.
THE INTERACTIVE NETWORK INDEPENDENT
SHAREHOLDERS COMMITTEE
_____ __, 2000
-14-
EXHIBIT A
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM ("CALPERS")
U.S. Corporate Governance Principles
I. CORE PRINCIPLES
A. Board Independence and Leadership
1. A substantial majority of the board consists of
directors who are independent.
2. Independent directors meet periodically (at least
once a year) alone, without the CEO or other
non-independent directors.
3. When the chair of the board also serves as the
company's chief executive officer, the board
designates - formally or informally - an independent
director who acts in a lead capacity to coordinate
the other independent directors.
4. Certain board committees consist entirely of
independent directors. These include the committees
who perform the following functions:
o Audit
o Director Nomination
o Board Evaluation and Governance
o CEO Evaluation and Management
Compensation
o Compliance and Ethics
5. No director may also serve as a consultant or service
provider to the company.
6. Director compensation is a combination of cash and
stock in the company. The stock component is a
significant portion of the total compensation.
B. Board Processes and Evaluation
1. The board has adopted a written statement of its own
governance principles, and regularly re-evaluates
them.
2. With each director nomination recommendation, the
board considers the mix of director characteristics,
experiences, diverse perspective and skills that is
most appropriate for the company.
-15-
3. The board establishes performance criteria for
itself, and periodically interviews board performance
against those criteria.
4. The independent directors establish performance
criteria and compensation incentives for the CEO, and
regularly reviews the CEO's performance against those
criteria. The independent directors have access to
advisers on this subject, who are independent of
management. Minimally, the criteria ensure that the
CEO's interests are aligned with the long-term
interests of shareholders, that the CEO is evaluated
against comparable peer groups, and that a
significant portion of the CEO'S total compensation
is at risk.
C. Individual Director Characteristics
1. The board has adopted guidelines that address the
competing time commitments that are faced when
director candidates serve in multiple boards. These
guidelines are published annually in the company's
proxy statement.
II. GOVERNING GUIDELINES
A. Board Independence and Leadership
1. Corporate directors, managers and shareholders should
come together to agree upon a uniform definition of
"independence." Until this uniformity is achieved,
each corporation should publish in their proxy
statement the definition adopted or relied upon by
its board.
2. With each director nomination recommendation, the
board should consider the issue of continuing
director tenure and take steps as may be appropriate
to ensure that the board maintains an openness to new
ideas and a willingness to critically re-examine the
status quo.
3. When selecting a new chief executive officer, boards
should re-examine the traditional combination of the
"chief executive" and "chairman" positions.
B. Board Processes and Evaluation
1. The board should have in place an effective CEO
succession plan, and receive periodic reports from
management on the development of other members of
senior management.
2. All directors should have access to senior
management. However, the CEO, chair, or independent
lead director may be designated as liaison between
-16-
management and directors to ensure that the role
between board oversight and management operations is
respected.
3. The board should periodically review its own size,
and determine the size that is most effective toward
future operations.
C. Individual Director Characteristics
1. Each board should establish performance criteria, not
only for itself (acting as a collective body) but
also individual behavioral expectations for its
directors. Minimally, these criteria should address
the level of director: attendance, preparedness,
participation, and candor.
2. To be re-nominated, directors must satisfactorily
perform based on the established criteria.
Re-nomination on any other basis should neither be
expected nor guaranteed.
3. Generally, a company's retiring CEO should not
continue to serve as a director on the board.
4. The board should establish and make available to
shareholders the skill sets which it seeks from
director candidates. Minimally, these core
competencies should address: accounting or finance,
international markets, business or management
experience, industry knowledge, customer-base
experience or perspective, crisis response, or
leadership or strategic planning.
D. Shareowner Rights
-17-
SCHEDULE I
TRANSACTIONS IN THE SECURITIES OF INTERACTIVE NETWORK, INC.
Shares of Common Price Date of
Stock Purchased/(Sold) Per Share Purchase/Sale
- ---------------------- --------- -------------
ROBERT H. HESSE
TIM HURLEY
SCOTT MAGER
SHANE O'NEIL
RICHARD PERKINS
-18-
SCHEDULE II
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF THE COMPANY
The following is based on information contained in the Management Proxy
Statement.
The following table sets forth certain information known to INNN with
respect to the beneficial ownership of INNN's common stock ("Common Stock") as
of May 19, 2000, by (i) each shareholder known to INNN to own beneficially more
than 5% of INNN's Common Stock; (ii) each of INNN's directors; (iii) the named
executive officer in the summary compensation table in the Management Proxy
Statement, and (iv) all of INNN's directors and executive officers as a group.
SHARES APPROXIMATE
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED (1) OWNED (1)
- ------------------------ ----- -----
AT&T Corp. (2).......................................
32 Avenue of the Americas
New York, NY 10013-2412 7,773,815 20.00%
National Broadcasting Company Holding, Inc. (3)...... 3,645,575 9.38%
30 Rockefeller Plaza
New York, NY 10112
Voting Agreement (4)................................. 7,814,589 20.11%
David Lockton (5).................................... 2,250,000 5.47%
Bruce W. Bauer (6)................................... 2,150,500 5.03%
John J. Bohrer (7)................................... 222,850 *
William H. Green (8)................................. 75,000 *
William L. Groeneveld (9)............................ 62,500 *
Robert Brown (10).................................... 137,375 *
All executive officers and directors as a group 2,548,225 6.19%
(5 persons) (11).....................................
- -------------------
* Less than 1% of outstanding shares.
-19-
1. Except as indicated and pursuant to applicable community property laws,
we believe that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by them.
2. Includes 2,942,907 shares held by Tele-Communications, Inc., a
wholly-owned subsidiary of AT&T Corp.
3. Includes 1,902,279 shares held by National Broadcasting Company
Holding, Inc., a wholly-owned subsidiary of General Electric Company
which are subject to the Voting Agreement (see footnote 4 below).
4. Pursuant to a certain voting agreement, each of the parties to a
certain settlement agreement agreed to vote their shares issued in such
agreement as directed by a committee (except for matters relating to
David Lockton and certain major transactions of INNN), which currently
consists of John Bohrer, William H. Greene and Bruce Bauer. This
agreement does not provide for any other joint action by the parties
thereto. The parties to the voting agreement disclaim beneficial
ownership of shares owned by other parties thereto, and the committee
disclaims beneficial ownership of all of the shares subject to the
voting agreement.
5. David Lockton is claiming ownership of options to purchase 2,250,000
shares. He claims that one option granted in October of 1994 gave him
the right to purchase 450,000 shares that may be acquired upon exercise
of stock options that are currently exercisable and a second option
granted as of November 3, 1995 gave him the right to purchase 1,800,000
shares that may be acquired upon exercise of stock options that are
currently exercisable. INNN disputes the ownership and validity of
these options. Trial on these matters is set for May 8, 2000 in U.S.
Bankruptcy Court. INNN has no knowledge regarding Lockton's ownership
of any other shares.
6. Includes (i) 100,500 Shares and (ii) 2,050,000 Shares that may be
acquired upon exercise of stock options that are currently exercisable.
7. Includes 150,000 Shares that may be acquired upon exercise of stock
options that are currently exercisable.
8. Includes 75,000 Shares that may be acquired upon exercise of stock
options that are currently exercisable.
9. Includes 62,500 Shares that may be acquired upon exercise of stock
options that are exercisable.
10. Includes 100,000 Shares that may be acquired upon exercise of stock
options that are currently exercisable within 60 days of March 1, 2000.
11. Includes 2,337,500 Shares that may be acquired upon exercise of stock
options that are exercisable within 60 days of March 1, 2000.
-20-
YOUR VOTE IS IMPORTANT
Elect Nominees who are committed to protecting and enhancing the value
of your investment in INNN. No matter how many Shares you own, please give the
Committee your proxy FOR the Board Amendment and FOR the election of the
Nominees by taking three steps:
1. Sign the enclosed BLUE Proxy Card;
2. Date the enclosed BLUE Proxy Card; and
3. Mail the enclosed BLUE Proxy Card today in the envelope provided (no
postage is required if mailed in the United States).
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee of other institution, only it can vote such Shares and only upon receipt
of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the BLUE proxy
card representing your Shares. The Committee urges you to confirm in writing
your instructions to the Committee in care of Innisfree M&A, Incorporated at the
address provided below so that the Committee will be aware of all instructions
given and can attempt to ensure that such instructions are followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact Innisfree M&A, Incorporated at the address
set forth below:
Innisfree M & A, Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Call Toll Free (888) 750-5834
or
Banks and Brokers Call (212) 750-5833
-21-
INTERACTIVE NETWORK, INC. 2000 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE INTERACTIVE NETWORK
INDEPENDENT SHAREHOLDERS COMMITTEE
The undersigned shareholder of Interactive Network, Inc. ("INNN") appoints
Robert H. Hesse and Tim Hurley and each of them, as attorneys and agents with
full power of substitution to vote all Shares which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders of
the Company that is currently scheduled to be held on June 30, 2000, at 9:00
a.m., local time, at San Mateo Marriott, 1770 South Amphlett Boulevard, San
Mateo, California 94402 and at any adjournments, postponements, continuations or
reschedulings thereof and at any special meeting called in lieu thereof, as
follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
WITH RESPECT TO THE ELECTION OF DIRECTORS (PROPOSAL 2), WHERE NO VOTE IS
SPECIFIED OR WHERE A VOTE FOR ALL NOMINEES IS MARKED, THE CUMULATIVE VOTES
REPRESENTED BY A PROXY WILL BE CAST AT THE DISCRETION OF THE PROXIES NAMED
HEREIN IN ORDER TO ELECT AS MANY NOMINEES AS BELIEVED POSSIBLE UNDER THE THEN
PREVAILING CIRCUMSTANCES. IF YOU WITHHOLD YOUR VOTE FOR A NOMINEE, ALL OF YOUR
CUMULATIVE VOTES WILL BE DISTRIBUTED TO THE REMAINING NOMINEES. WITH RESPECT TO
PROPOSALS 3, 4 AND 5, IF NO MARKING IS MADE, THIS PROXY WILL BE TREATED AS
DIRECTION TO ABSTAIN FROM VOTING WITH RESPECT TO APPROVAL OF SUCH PROPOSALS. THE
INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO VOTE IN THEIR DISCRETION ON ANY OTHER
MATTERS THAT PROPERLY COME BEFORE THE MEETING.
THE UNDERSIGNED HEREBY REVOKES ANY OTHER PROXY OR PROXIES HERETOFORE GIVEN TO
VOTE OR ACT WITH RESPECT TO THE SHARES HELD BY THE UNDERSIGNED, AND HEREBY
RATIFIES AND CONFIRMS ALL ACTION THE HEREIN NAMED ATTORNEYS AND PROXIES, THEIR
SUBSTITUTES, OR ANY OF THEM MAY LAWFULLY TAKE BY VIRTUE HEREOF.
THE COMMITTEE RECOMMENDS A VOTE FOR THE APPROVAL OF THE BOARD AMENDMENT AND FOR
THE ELECTION OF THE NOMINEES NAMED BELOW. THE COMMITTEE DOES NOT MAKE ANY
RECOMMENDATION WITH RESPECT TO MATTERS
3-5 LISTED BELOW.
1. APPROVAL OF FOR AGAINST ABSTAIN
BOARD AMENDMENT [ ] [ ] [ ]
-22-
2. ELECTION OF DIRECTORS: FOR WITHHOLD FOR ALL
ALL ALL Except
Nominees: John Cronin, Nominee(s)
Robert H. Hesse, Scott Mager, Written below
Shane O'Neil and Richard
Perkins. [ ] [ ] [ ]
3. Approve the exclusive license grant of the IN Patents to TWIN
Entertainment in the territory pursuant to the joint venture license
agreement, dated as of January 31, 2000:
_________ FOR ______ AGAINST _______ ABSTAIN
4. Approve the amendment to INNN's 1999 Stock Option Plan to increase the
number of shares reserved for issuance thereunder:
__________ FOR ______ AGAINST _______ ABSTAIN
5. Ratify the appointment of Marc Lumer & Company as the independent public
accountants of INNN for the fiscal year ending December 31, 2000:
__________ FOR ______ AGAINST _______ ABSTAIN
6. In their discretion with respect to any other matters as may properly come
before the Annual Meeting.
-23-
This proxy will be valid until the sooner of one year from the date
indicated below and the completion of the Annual Meeting.
DATED: _________________________________, 2000.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
-------------------------------------------------------
(Signature)
-------------------------------------------------------
(Signature, if held jointly)
-------------------------------------------------------
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN.
EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE
CAPACITY IN WHICH SIGNING.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN
THE ENCLOSED ENVELOPE!
IF YOU NEED ASSISTANCE VOTING YOUR SHARES, PLEASE CALL
INNISFREE M&A, INCORPORATED
TOLL FREE 1-(888) 750-5834
-24-