<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
NOSTALGIA NETWORK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
THE NOSTALGIA NETWORK, INC.
650 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20001
_______________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
TO THE STOCKHOLDERS:
The 1998 Annual Meeting of Stockholders of The Nostalgia Network, Inc. will
be held at the offices of the Company at 650 Massachusetts Avenue, N.W.,
Washington, D.C. 20001 on Wednesday, June 10, 1998 at 11:00 a.m. local time, for
the following purposes:
1. To elect ten directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified;
2. To ratify the appointment of independent accountants for 1998;
3. To approve the options granted pursuant to the May 13, 1996 Stock
Option Agreement between The Nostalgia Network, Inc. and
Squire D. Rushnell, the Company's President and Chief Executive
Officer; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record on the close of business on Monday, May 18, 1998 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, stockholders are urged to
mark, sign, date and return the enclosed proxy card in the enclosed envelope as
promptly as possible. The principal address of The Nostalgia Network, Inc. is
650 Massachusetts Avenue, N.W., Washington, D.C. 20001.
By order of the Board of Directors,
/s/ Willard R. Nichols
Willard R. Nichols
General Counsel and Secretary
Dated: April 30, 1998
YOUR VOTE IS IMPORTANT. Please sign, date and return the enclosed proxy card
immediately, whether or not you plan to attend the meeting
1
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THE NOSTALGIA NETWORK, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors (the "Board of Directors") of
The Nostalgia Network, Inc. (the "Company") for use at the Company's 1998 Annual
Meeting of Stockholders (the "Meeting"), at the offices of the Company at 650
Massachusetts Avenue, N.W., Washington, D.C. 20001, on Wednesday, June 10, 1998
at 11:00 a.m. local time, and at any adjournment thereof. This Proxy Statement,
the accompanying proxy card and the Company's Annual Report to Stockholders for
the year ended December 31, 1997 are first being sent to stockholders on or
about Wednesday, May 20, 1998.
At the close of business on April 15, 1998, the Company had outstanding
20,274,371 shares of Common Stock, par value $0.04 per share (the "Common
Stock"), and 3,250 shares of Preferred Stock, par value $2.00 per share (the
"Preferred Stock"). Each stockholder is entitled to one vote per share of Common
Stock and one hundred votes per share of Preferred Stock registered in such
stockholder's name on the books of the Company as of the close of business on
April 15, 1998. The Preferred Stock will vote with the Common Stock as a single
class on all matters expected to come before the Meeting, with the result that a
maximum of 20,599,371 votes may be cast on any such matter.
The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation of proxies by mail, employees of the Company or its
affiliates may solicit proxies by telephone or facsimile.
Any duly executed proxy received prior to the closing of the polls during
the Meeting will be voted in the manner specified on the proxy. If no direction
is indicated on a proxy, it will be voted to elect as directors the nominees
listed in this Proxy Statement. A proxy given pursuant to this solicitation may
be revoked by a stockholder of record at any time before it is voted either by
delivering a written notice of revocation bearing a date later than the proxy or
a subsequent, duly-executed proxy relating to the same shares to the Secretary
of the Company or by voting in person at the Meeting. Materials intended for the
Secretary of the Company should be mailed to the Company at 650 Massachusetts
Avenue, N.W., Washington, D.C. 20001. The Company's telephone number is (202)
289-6633.
ITEM 1. ELECTION OF DIRECTORS
At the Meeting, the shares represented by proxies, unless otherwise
specified, will be voted for the election of the ten nominees named herein, each
to serve until the next annual meeting and until their successors are duly
elected and qualified.
If for any reason any of the nominees is not a candidate when the election
occurs (which is not expected), the Board of Directors expects that proxies will
be voted for the election of a substitute nominee designated by the Board of
Directors.
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NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Ten nominees, including nine incumbent members of the Board of Directors
and one additional nominee, have been nominated for election as directors at the
Meeting, each to serve until the next annual meeting of stockholders of the
Company, and until his or her successor is duly elected and qualified. All
nominees for election have indicated their willingness to serve, but if any of
them should decline or be unable to serve as a director, it is intended that the
enclosed proxy will be voted for the election of such person or persons who are
nominated as replacements.
THE BOARD RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THE ELECTION OF EACH OF THE NOMINEES.
---
Certain information concerning each of the nominees for election as a
director is set forth below, including the nominee's age as of the date of this
Proxy Statement, position with the Company, other recent business experience and
period of service as a director of the Company:
CHRISTOPHER A. CATES, 44 Director since October 1990
Mr. Cates is currently Senior Vice President of Corporate Development of
Atlantic Video, Inc. ("AVI") which is engaged in the production and recording of
videotapes, the provision of post-production services and related activities.
Mr. Cates served as Vice President/General Manager of AVI from July 1989 to
January 1998. From March 1992 to January 1998 he also served as President of
Pyramid Video, Inc. ("PVI"), a subsidiary of Concept Communications, Inc.
("Concept"), which is engaged in satellite transmission services, the production
and recording of videotapes, the provision of post-production services and
related activities. From December 1985 to July 1989 Mr. Cates served as Vice
President/General Manager of Glendale Studios, a television production company.
From December 1983 to May 1985 Mr. Cates acted as a free lance producer and
consultant. During 1997, AVI, PVI and their affiliates had substantial dealings
with the Company. See Certain Relationships and Related Transactions.
FLOYD CHRISTOFFERSON, 43 Director since June 1995
Mr. Christofferson has served as President and Chief Executive Officer of
Potomac Television/Communications, Inc. ("Potomac") since April 1997. From
November 1994 to April 1997 Mr. Christofferson served as President of Manhattan
Center Studios ("Manhattan"), a multimedia group. From 1990 through 1994 he was
a senior partner and creative director in Delta Imaging, a computer graphics
firm. From 1989 to 1993, Mr. Christofferson was a general partner in Alapitvany
Kiado, kft., a Hungarian/U.S.A. joint venture publishing firm. From February
1985 to February 1989 he was an associate publisher for the Middle East Times in
Athens, Greece and, prior to that, was a foreign correspondent for various
newspapers around the world. Potomac, Manhattan and the Middle East Times are
affiliates of AVI. During 1997, Potomac, Manhattan, AVI and their affiliates
had substantial dealings with the Company. See Certain Relationships and
Related Transactions.
3
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DIANNE M. FAURE, 41 Director since June 1995
Ms. Faure is an attorney and, since October 1989, has worked in the areas
of health care, insurance and contract law. During this time, she also has
served as a board member to numerous civic and nonprofit associations. From
August 1988 to October 1989 she was an Attorney-Advisor specializing in Title
VIII of the Civil Rights Act at the United States Commission on Civil Rights in
Washington D.C. From January 1988 to August 1988 she was Legal Counsel at the
Coalition for Religious Freedom a nonprofit corporation located in Alexandria,
Virginia. From February 1986 to May 1987 she was Assistant General Counsel in
the Office of General Counsel at the Legal Services Corporation in Washington,
D.C., specializing in administrative, regulatory and contract compliance law.
HIROSHI GOTO, 43 Nominee
Mr. Goto has served as the budget director of The Washington Times
Corporation ("Washington Times") since August 1997. From September 1986 through
July 1988, Mr. Goto served in various capacities at Washington Times, including
finance manager, assistance finance manager and internal auditor. Washington
Times is a subsidiary of News World Communications, Inc ("NWC"), an affiliate of
AVI. During 1997 AVI and its affiliates had substantial transactions with the
Company. See Certain Relationships and Related Transactions.
DONG MOON JOO, 52 Director since October 1992
Mr. Joo has served as a director and President of Concept since April 1993.
Mr. Joo has been President and Chief Executive Officer of Washington Times and
its parent company, NWC, since September 1992. He was Executive Vice President
of those companies from July 1991 until September 1992. Those companies publish
numerous newspapers and periodicals, including The Washington Times, Insight,
The World & I, The Middle East Times and Noticias del Mundo. For at least three
years prior to July 1991, Mr. Joo ran the division of NWC that published The
World & I. Since April 1991, Mr. Joo also has served as President and a
director of AVI, and as President of the corporate general partner of Washington
Television Center Limited Partnership ("WTC"), which owns a multi-purpose
building in Washington, D.C., including office space and television production
facilities, where the Company has its executive offices. Mr. Joo serves as Chief
Executive Officer and Chairman of the Board of Directors of AVI, Crown Capital
Corporation ("Capital"), and Crown Communications Corporation ("Crown"), as
President and a director of Concept, and as a director of PVI. During 1997,
Concept, Capital, Crown, AVI and WTC and their affiliates had substantial
transactions with the Company. See Certain Relationships and Related
Transactions.
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DR. S. ROBERT LICHTER, 49 Director since April 1998
Dr. Lichter has served as President of the Center for Media and Public
Affairs, a nonpartisan, nonprofit research organization that analyzes how news
and entertainment media treat social and political issues, and Statistical
Assessment Service, a nonprofit research organization. Dr. Lichter is currently
an adjunct professor of government at Georgetown University. He has taught
media and politics at Princeton University, and served as a senior research
fellow at Columbia University and served as a postdoctoral fellow in politics
and psychology at Yale University.
FREDERICK W. NEWTON, 40 Director since November 1997
Mr. Newton is a certified Public Accountant. Since 1987, Mr. Newton has
served as President of Corporate Recovery Inc., which provides consulting
services to area corporations, including Capital, NWC and certain of their
affiliates. During 1997, Capital and its affiliates had substantial
transactions with the Company. See Certain Relationships and Related
Transactions. Since 1989, Mr. Newton has served as President of Stellar
Printing Inc. Since 1993, Mr. Newton has served as President of Freestate
Publishing, Inc., which publishes a community newspaper. Both Stellar Printing,
Inc. and Freestate Publishing, Inc. are subsidiaries of NWC.
SQUIRE D. RUSHNELL, 59 Director since June 1997
Since June 1996 Mr. Rushnell has served as the Company's President and
Chief Executive Officer. From August 1995 to December 1995 Mr. Rushnell was
President and Co-Founder of Our Time Television, Inc. a cable television network
targeted to emerging baby boomers. From January 1990 to March 1996 Mr. Rushnell
served as President of Rushnell Communications and Publishing, Inc. producing
programming for broadcast networks and syndication. From September 1969 to
December 1989 Mr. Rushnell served as a program executive with the ABC Television
Network. In December 1995 Mr. Rushnell resigned all positions and disposed of
all stock ownership in Our Time Television, Inc. In December 1996 Our Time
Television, Inc. filed for bankruptcy protection in the Southern District of New
York.
AMBASSADOR PHILLIP SANCHEZ, 68 Director since September 1994
Since February 1987 Ambassador Sanchez has served as Vice President of NWC,
which publishes numerous newspapers and periodicals. Ambassador Sanchez is
currently the Publisher of Noticias Del Mundo, a national Spanish-language daily
newspaper. From 1975 to 1977, Ambassador Sanchez served as the U.S. Ambassador
to the Republic of Colombia, and from 1973 to 1975; he served as the U.S.
Ambassador to the Republic of Honduras. Ambassador Sanchez was National Director
of the U.S. Office of Economic Opportunity ("OEO") from 1971 to 1973 and
Assistant Director (Operations) of OEO during 1971. He is a Director of the
International Security Council, President of CAUSA USA and Vice President of the
American Freedom Coalition. Ambassador Sanchez is the Chairman of the Board of
Trustees of the National Hispanic University (located in San Jose, California)
and serves on the board of Trustees of the University of the Americas (located
in Mexico City, Mexico), the University of Bridgeport (located in Bridgeport,
Connecticut) and the West Coast University (located in Los Angeles, California).
NWC is an affiliate of AVI. During 1997 AVI and its affiliates had substantial
transactions with the Company. See Certain Relationships and Related
Transactions.
5
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ROBERT J. WUSSLER, 61 Director since January 1995
Since June 1995 Mr. Wussler has served as President and Chief Executive
Officer of Affiliate Enterprises, Inc., a television syndication company. Mr.
Wussler also has served as President and Chief Executive Officer of The Wussler
Group, a worldwide media-consulting group, since February 1992. From September
1989 to January 1992, Mr. Wussler served as President and Chief Executive
Officer of COMSAT Video Enterprises, a satellite delivered entertainment and
information business. Mr. Wussler is former President of CBS Television, CBS
Sports and former Senior Executive Vice President of Turner Broadcasting
System, Inc. Mr. Wussler serves as a director of Cafe USA, an advertiser
supported television network broadcast to food courts of major shopping malls
throughout the United States. Mr. Wussler also serves on the boards of
directors of Ed Net which specializes in compressed audio and video technology;
US Digital, which specializes in internet broadcasting services and satellite
technology; and Beechport, which specializes in arena promotions.
Masahisa Kobayashi will resign from the Board of Directors upon election of a
successor. William H. Lash, III resigned from the Board of Directors in 1998
and Josette Shiner resigned from the Board of Directors in 1997. None of these
persons had a disagreement with the Company.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has appointed an Executive Committee, a Finance
Committee, an Audit Committee, and a 144 Committee. The Board has established no
nominating or compensation committee.
The Executive Committee, composed of Messrs. Joo, Cates, and
Christofferson, is authorized to exercise the powers of the Board of Directors
in the oversight of management and of the business affairs of the Company during
intervals between the meetings of the Board of Directors. The Executive
Committee met four times during 1997.
The Finance Committee, composed of Messrs. Kobayashi, Newton and Wussler,
was created to work with management in recommending policy to the Board of
Directors on all areas of the Company's finances, including budget, compensation
policy, stock option plans, and other financially related matters. The Finance
Committee met one time during 1997.
The Audit Committee, composed of Messrs. Christofferson and Kobayashi,
recommends the appointment of independent public accountants for the Company;
receives audit reports and financial statements of the Company; and reviews the
plan, scope and results of the audit of the Company's financial statements, the
fees for services performed and the adequacy of internal control systems with
the independent public accountants. The Audit Committee met two times during
1997.
The 144 Committee, composed in 1997 of Messrs. Wussler and Lash, considers
proposed transactions that may come within the scope of Section 144 of the
Delaware General Corporation Law, which relates to transactions in which
directors or officers of a Delaware corporation may have a direct or indirect
financial interest. In 1997, the 144 Committee approved the loan arrangements
between the Company and Concept and the Company and Crown. See Certain
Relationships and Related Transactions. The 144 Committee met one time during
1997.
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The Board of Directors held seven regular and three special meetings during
1997. Each of the incumbent directors attended at least 75.0% of the total
number of meetings of the Board and each committee on which he or she served.
DIRECTORS' COMPENSATION
The Company reimburses directors for costs and expenses in connection with
their attendance and participation at Board of Directors meetings and for other
travel expenses incurred on the Company's behalf. In addition, the Company
compensates each non-employee director $3,000 per quarter for his efforts on the
Company's behalf, with additional compensation for attendance at Board meetings.
Each quarter, the non-employee directors receive $1,000 for attendance
(telephonically or in person) at Board meetings and reimbursement of expenses if
attendance is in person. Additionally, as permitted by the Company's 1996
Incentive Stock Option Plan (the "1996 Plan"), in 1997 each director received
grants of options for the purchase of an additional 3,000 shares of Common Stock
at $0.07 per share, vesting ratably over three years. The Company compensates
members of the Audit Committee an additional $1,000 per quarter and members of
the 144 Committee an additional $2,000 per quarter. Members of the Executive and
Finance Committees do not receive compensation (other than reimbursement of
expenses) for services performed for those committees.
ITEM 2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, on the recommendation of its Audit Committee, has
appointed BDO Seidman, LLP as independent public accountants to audit the
financial statements of the Company for 1998. Although ratification by
stockholders is not required, the Board of Directors requests that stockholders
ratify this appointment. If ratification is not obtained, the Board will
reconsider this appointment.
The Company has been advised that representatives of BDO Seidman, LLP will
be present at the Meeting. They will be afforded the opportunity to make a
statement, should they desire to do so, and respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THIS PROPOSAL.
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7
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ITEM 3. PROPOSAL TO APPROVE STOCK OPTIONS
The Company entered into a Stock Option Agreement dated May 13, 1996
between Mr. Rushnell, then the Company's President and Chief Executive Officer,
and now also a director, and the Company (the "Agreement") pursuant to which Mr.
Rushnell was granted the right to purchase 839,840 shares of Common Stock at a
price of $0.35 per share in accordance with the terms of the Agreement (the
"Options"). The Options were not granted pursuant to the 1996 Plan. Once the
Options are approved by a majority of the Company's stockholders, the Options,
once vested, are exercisable by Mr. Rushnell until the earliest of (i) 90 days
after termination of Mr. Rushnell's employment by the Company for cause or
resignation by Mr. Rushnell without good cause; (ii) one year after the
termination of Mr. Rushnell's employment by reason of death or disability,
termination without cause, termination following a change of control (as defined
in the 1996 Plan) or resignation by Mr. Rushnell for good cause; or (iii) May
12, 2006 at 5:00 p.m. The market value of the Common Stock underlying the
Options as of April 15, 1998 was $41,992.
Upon stockholder approval, 419,920 of the Options will vest immediately;
209,960 of the Options will vest on August 12, 1998; and 209,960 of the Options
will vest on May 12, 1999 (each, a "Vesting Date"). In the event of termination
of Mr. Rushnell's employment in certain circumstances or upon a change of
control, the Options shall vest fully. In the event of Mr. Rushnell's death,
Mr. Rushnell's estate, executors or administrators, or personal or legal
representatives may exercise the Options for a period of one year following the
date of Mr. Rushnell's death if Mr. Rushnell was entitled to exercise such
Options at the time of his death.
In the event that, on a Vesting Date, the Options vesting on such date
represent less than 1.0% of the outstanding Common Stock on the Vesting Date,
assuming the conversion of all outstanding shares of Preferred Stock into shares
of Common Stock and the exercise of all outstanding options and warrants
exercisable for Common Stock or Preferred Stock which are "in-the-money" as of
the Vesting Date, the Company shall issue to Mr. Rushnell fully exercisable and
vested options which, together with the Options to be exercised on such Vesting
Date, equal 1.0% of the outstanding Common Stock. The exercise price of the
additional options shall be the average of the bid and asked prices of the
Common Stock on the last 30 trading days prior to the applicable Vesting Date.
On or before the date on which any portion of the Options may first be
exercised, the Company must use reasonable efforts to prepare, file with the
Commission and make effective a Form S-8 registration statement registering the
shares of Common Stock underlying the Options, including a reoffer prospectus
covering any resale or reoffer of any or all of the shares of Common Stock
underlying the Options in brokers' transactions or private, negotiated
transactions, to keep such registration statement in effect and to amend the
registration statement if necessary, until the earliest of (i) two years after
the date upon which the Options are fully exercised, (ii) the date upon which
Mr. Rushnell has sold or transferred all of the shares of Common Stock
underlying the Options, or (iii) the date on which the Options expire. In the
event that the Company cannot or does not prepare a Form S-8 registration
statement, the Company must use reasonable efforts to prepare, file with the
Commission and make effective a Form S-3 registration statement registering the
shares of Common Stock underlying the Options. In the event that a registration
statement is not effective at the time on which Mr. Rushnell elects to sell the
shares of Common Stock underlying the Options, Mr. Rushnell may, by written
notice to the Company, cause the Company to repurchase the shares at a price per
share equal to the average of the closing bid and asked prices of a shares of
Common Stock on the 30 trading days
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prior to the date on which Mr. Rushnell sends written notice of his election to
the Company. The registration rights granted pursuant to the Agreement may not
be assigned by Mr. Rushnell without the prior written consent of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE OPTIONS.
---
OTHER MATTERS
The Board of Directors does not intend to bring any matter before the
Meeting other than as stated in this Proxy Statement, and is not aware of any
other matter that may be presented for action at the Meeting. If any other
matter comes before the Meeting, the persons named in the enclosed form of proxy
will vote the proxy with respect thereto in accordance with their best judgment,
pursuant to the discretionary authority granted by the proxy.
VOTE REQUIRED
The Company's Bylaws provide that the holders of a majority of the
outstanding shares of the Company entitled to vote at the Meeting, present in
person or by proxy, will constitute a quorum, and that the affirmative vote of a
majority of the shares represented and entitled to vote at the Meeting will
decide any question brought before the Meeting, unless a greater proportion or
number of votes is required by law or by the Company's Certificate of
Incorporation or Bylaws. The election of directors and the ratification of the
appointment of independent accountants will each require the affirmative vote of
a majority of the shares present at the Meeting. For purposes of determining
whether a proposal has received a majority vote, abstentions will be included in
the vote total, with the result that an abstention will have the same effect as
a negative vote. For purposes of determining whether a proposal has received a
majority vote, in instances where brokers are prohibited from exercising
discretionary authority for beneficial holders of Company stock who have not
returned a proxy (so-called "broker non-votes"), those shares will not be
included in the vote totals and, therefore, will have no effect on the outcome
of the vote.
Concept has indicated that it intends to vote all shares over which it has
voting power to elect as directors the ten nominees listed above. Concept has
voting power over shares having at least 14,432,417 votes or approximately 70.1%
of the votes entitled to be cast at the Meeting. Concept's voting of such
shares at the Meeting as it has indicated will constitute a quorum for the
Meeting and will cause the nominees for whom Concept votes to be elected as
directors.
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SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 15, 1998, the number of shares
of Common Stock and Preferred Stock beneficially owned by each of the Company's
current executive officers, by each current director or nominee for director of
the Company, by all directors and executive officers as a group, and by each
person known by the Company to own beneficially more than 5.0% of the
outstanding Common Stock or Preferred Stock.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
----------------------------- -----------------------------
PERCENT OF PERCENT OF
NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
NAME OF BENEFICIAL OWNER(1) SHARES SHARES SHARES SHARES
- -------------------------------------- --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
Squire D. Rushnell................ 419,920(2) 1.0% 0 *
Martin A. Gallogly................ 19,333(3) * 0 *
DIRECTORS AND NOMINEES
Christopher A. Cates.............. 21,000(4) * 0 *
Floyd Christofferson.............. 1,000(5) * 0 *
Dianne M. Faure................... 1,000(5) * 0 *
Dong Moon Joo..................... 1,000(5) * 0 *
Masahisa Kobayashi................ 1,000(5) * 0 *
Dr. S. Robert Lichter............. 0 * 0 *
Frederick W. Newton............... 0 * 0 *
Phillip Sanchez................... 1,000(5) * 0 *
Robert J. Wussler................. 1,000(5) * 0 *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (12 PERSONS).............. 466,253 2.3% 0 0%
OTHER 5% HOLDERS
Concept Group (6)................. 14,432,417(7) 70.1% 2,500 76.9
Charles Potter.................... 123,285(8) * 750 23.1
</TABLE>
* Less than one percent.
(1) Unless otherwise indicated, each person included in the table has sole
power to vote, or dispose or direct the disposition of, all shares
beneficially owned by him or her, subject to applicable community property
laws. Unless otherwise indicated, the address for each such person is 650
Massachusetts Avenue, N.W., Washington, D.C. 20001.
(2) Includes 419,920 shares of Common Stock issuable upon the exercise of
options held by Mr. Rushnell which will be exercisable upon approval of
such options by the Company's stockholders. See Item 3. Proposal to
Approve Stock Option Agreement. Excludes 419,920 shares for which options
may vest in August 1998 and May 1999 if Mr. Rushnell remains with the
Company. Mr. Rushnell is also a director of the Company.
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(3) Includes 19,333 shares of Common Stock issuable upon the exercise of
currently exercisable options held by Mr. Gallogly. Excludes 9,667 shares
of which options may vest in August 1998.
(4) Includes 21,000 shares of Common Stock issuable upon the exercise of
currently exercisable options held by Mr. Cates. Excludes 5,000 shares for
which options may vest in August 1998, 1999 and 2000.
(5) Includes 1,000 shares of Common Stock issuable upon the exercise of
currently exercisable option held by Messrs. Christofferson, Joo,
Kobayashi, Sanchez and Wussler and Ms. Faure. Excludes 5,000 shares for
which options may vest in August 1998, 1999 and 2000.
(6) The Concept Group consists of Concept, Crown and Capital, which constitute
a "group" within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Crown has informed the
Company that it is a subsidiary of Capital, and Concept has informed the
Company that it is a subsidiary of Crown. Concept, Crown and Capital have
informed the Company that they share voting and dispositive power with
respect to all shares as to which Crown and Concept are record holders.
(7) Includes 13,182,417 shares of Common Stock, 215,005 shares of Common Stock
that may be acquired upon the exercise of warrants, 250,000 shares of
Common Stock that may be acquired upon the conversion of 2,500 shares of
Preferred Stock, all of which are held of record by Concept, and 1,000,000
shares of Common Stock held of record by Crown. The Concept Group claims
sole voting and dispositive power with respect to such shares.
(8) Includes 75,000 shares of Common Stock issuable upon conversion of 750
shares of Preferred Stock held of record by Mr. Potter.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for the years
ended December 31, 1995, 1996 and 1997 of those persons serving as the Company's
chief executive officer or acting in a similar capacity and the Company's chief
financial officer. During 1997, no other executive officer of the Company
received total annual salary and bonus in excess of $100,000. No restricted
stock awards or stock appreciation rights ("SARs") have been granted at any time
in prior years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- -------------------------- -------- -------------- -------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C>
Squire D. Rushnell, 1997 $205,923 $37,500 -- --
Chief Executive Officer, 1996 119,231 50,000 -- --
and President (1)
Martin A. Gallogly, Vice 1997 93,876 13,500 -- --
President, Treasurer and
Chief Financial
Officer(2)
</TABLE>
_______________________
11
<PAGE>
(1) The Company entered into an employment agreement with Mr. Rushnell dated
May 13, 1996. See Employment Contracts and Termination of Employment and
Change-in-Control Arrangements.
(2) The Company has not entered into an employment agreement with Mr. Gallogly.
Mr. Gallogly did not earn in excess of $100,000 per year from the Company
prior to 1997.
STOCK OPTION GRANTS
On May 13, 1996, the Company granted Mr. Rushnell options to purchase
839,840 shares of Common Stock at an exercise price of $0.35 per share. As of
December 31, 1997, none of these shares have vested. See Item 3. Proposal to
Approve Stock Options. On August 16, 1995, the Company granted Mr. Gallogly
29,000 shares of Common Stock at an exercise price of $1.00. As of December 31,
1997, 19,333 of these shares have vested. No SARs, long-term incentives or
restricted stock were granted to any of the named executive officers or any
other Company employee in 1997.
STOCK OPTION EXERCISES
The following table summarizes information relating to stock option
exercises during 1997 and the number and value of unexercised stock options
previously granted to the executive officers named in the Summary Compensation
Table. As previously indicated, no SARs have been granted at any time to any of
the named executive officers or any other Company employee.
AGGREGATE OPTION EXERCISES IN 1997 AND
OPTION VALUES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ON VALUE ----------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISEABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------- -------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Squire D. Rushnell 0 0 419,920(2) 419,920(2) $0 $0
Martin A. Gallogly 0 0 19,333 9,667 $0 $0
</TABLE>
_______________________
*(1) Based on a stock price of $0.05, which was the average of the high asked
and low bid prices reported on December 31, 1997.
(2) Options to acquire 419,920 shares of Common Stock will vest upon approval
of the options by the Company's stockholders. Options to acquire the
remaining 419,920 shares of Common Stock may vest in August 1998 and May
1999. See Item 3. Proposal to Approve Stock Options.
12
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On May 13, 1996, the Company entered into an employment agreement with Mr.
Rushnell which provided that Mr. Rushnell would hold the offices of President
and Chief Executive Officer and that the Company would pay Mr. Rushnell an
annual base salary of $200,000, with annual increases of no less than 5.0%. The
Company paid Mr. Rushnell a "benchmark" bonus of $50,000 in advance upon
commencement of his tenure as President and Chief Executive Officer. In
addition, Mr. Rushnell is entitled to receive annual benchmark bonuses of
$50,000, payable quarterly, if the Company attains or exceeds its business plan.
Mr. Rushnell received a benchmark bonus of $37,500 for 1997. Mr. Rushnell is
also entitled to receive annual deficit reduction bonuses of 10.0% of the amount
of deficit reduction for the current period compared to that of the prior
period. The Company has also provided Mr. Rushnell with a monthly stipend of
$600 for obtaining and maintaining an automobile. Mr. Rushnell is entitled to
receive a severance payment in the event that Concept no longer owns, directly
or indirectly, more than 50.0% of the total voting power of the Company's
outstanding shares and Mr. Rushnell is subsequently terminated. The severance
payment will equal (i) $200,000 if in the second contract year, and (ii) not
more than $100,000 if in the third contract year.
Pursuant to the Agreement, Mr. Rushnell was granted options to acquire
839,840 shares at an exercise price of $0.35 per share. The effectiveness of
this grant is conditioned on stockholder approval. The options are nonqualified
stock options, and were granted outside the 1996 Plan. The options vest in four
equal installments on February 12, 1997, November 12, 1997, August 12, 1998 and
May 12, 1999. They expire on the earliest of (i) May 12, 2006; (ii) 90 days
following termination of Mr. Rushnell's employment for cause or resignation by
Mr. Rushnell without good cause (unless stockholder approval of the grant has
not been obtained at the time of termination or resignation, in which case the
90 day period will run from the date approval is obtained); and (iii) one year
following termination by reason of death or disability, termination without
cause, termination following a change in control, or resignation by Mr. Rushnell
for good reason (unless stockholder approval of the grant has not been approved
at the time of the termination or resignation, in which case the one year period
will run from the date approval is obtained). Vesting accelerates upon
termination without cause, a change in control or resignation by Mr. Rushnell
for good reason. Upon a change in control, Mr. Rushnell will be entitled to
cancel his options and receive a payment equal to the difference between the
exercise price and the higher of the current market price of the stock and the
highest price paid to stockholders in the transactions leading to the change in
control. Additional options will be granted on each vesting date sufficient to
ensure that on such date, the options that vest are sufficient to give Mr.
Rushnell the right to acquire 1.0% of the issued and outstanding Common Stock.
The exercise price of the additional options will be based on the average of the
bid and asked prices of the stock over the thirty trading days prior to the
vesting date. Mr. Rushnell has registration rights with respect to the resale of
the shares of the Common Stock to be acquired upon exercise of his options. See
Item 3. Proposal to Approve Stock Options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors determines the compensation of, and incentives for,
the Company's Chief Executive Officer. See Item 1. Election of Directors and
Certain Relationships and Related Transactions for a description of interlocks
and insider participation.
13
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The following graph indicates the Company's cumulative total return to
holders of its Common Stock for the past five years, as compared to the
cumulative total return for the Standard & Poor's ("S&P") 500 Composite Stock
Index and the S&P Broadcast Media Index, on an annual basis. The comparison
assumes $100 was invested on December 31, 1992 in Common Stock and in each of
the foregoing indices and assumes reinvestment of dividends, if any. The stock
performance shown on the following graph is not necessarily indicative of future
performance.
TOTAL RETURN TO SHAREHOLDERS
(DIVIDENDS REINVESTED MONTHLY)
ANNUAL RETURN PERCENTAGE
YEARS ENDING
<TABLE>
<CAPTION>
COMPANY/INDEX DEC93 DEC94 DEC95 DEC96 DEC97
================================================================================
<S> <C> <C> <C> <C> <C>
NOSTALGIA NETWORK INC 58.33 (61.85) (72.41) (50.00) (60.00)
BRDCAST (TV,RADIO, CABLE)-500 40.27 (7.15) 30.91 (18.03) 64.53
S&P 500 INDEX 10.08 1.32 37.58 22.96 33.36
</TABLE>
INDEXED RETURNS
YEARS ENDING
<TABLE>
<CAPTION>
BASE
PERIOD
COMPANY/INDEX DEC92 DEC93 DEC94 DEC95 DEC96 DEC97
====================================================================================
<S> <C> <C> <C> <C> <C> <C>
NOSTALGIA NETWORK INC 100 158.33 60.40 16.67 8.33 3.33
BRDCAST (TV,RADIO, CABLE)-500 100 140.27 130.24 170.50 139.76 229.94
S&P 500 INDEX 100 110.08 111.53 153.45 188.68 251.63
</TABLE>
INDEX RETURNS
<TABLE>
BASE PERIOD...
--------------
COMPANY/INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Nostalgia Network, Inc. $ 100.00 $ 158.33 $ 60.40 $ 16.67 $ 8.33 $ 3.33
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index $ 100.00 $ 110.08 $ 111.53 $ 153.45 $ 188.68 $ 251.63
- --------------------------------------------------------------------------------------------------------------------------------
S&P Broadcast Media Index $ 100.00 $ 140.27 $ 130.24 $ 170.50 $ 139.76 $ 229.94
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company has no compensation committee or other committee of the Board
of Directors performing similar functions. Accordingly, the Board of Directors
determines the amount of compensation of, and incentives for, the Company's
Chief Executive Officer. The Chief Executive Officer determines the
compensation of, and incentives for, the Company's other executive officers.
The Board also administers the stock option plans of the Company.
The base salary, bonus and benefits payable for 1997 to Mr. Rushnell, the
Company's President and Chief Executive Officer, is fixed under a multi-year
employment agreement, which was approved by the Board of Directors. See
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
14
<PAGE>
Stock options may be granted, at the direction of the Board, under the
Company's 1996 Plan to the Company's executive officers, other employees,
independent contractors and agents. The 1996 Plan provides that all remaining
reserved shares, as well as any subsequent cancellations of any options
currently outstanding, under the 1987 Stock Option Plan (the "1987 Plan") and
the 1990 Incentive and Nonqualified Stock Option Plan (the "1990 Plan" and,
collectively with the 1996 Plan and the 1987 Plan, the "Plans"), be transferred
into the 1996 Plan. The purposes of the Plans are to attract and retain high-
quality personnel and strengthen the Company by providing incentives for its
success. Under the Plans, stock options are granted for terms not exceeding ten
years, with an exercise price equal to (or greater than) the market price of the
Common Stock on the date of grant, and typically are granted, subject to
vesting, in installments of share amounts over a three year period. In 1997, the
Board awarded options under the 1996 Plan to directors by formula grants
representing 3,000 shares per director, or 30,000 shares in the aggregate, at an
exercise price of $0.07 which will vest over a period of three years.
PHILLIP SANCHEZ (CHAIRMAN) MASAHISA KOBAYASHI
CHRISTOPHER A. CATES S. ROBERT LICHTER
FLOYD CHRISTOFFERSON FREDERICK W. NEWTON
DIANNE M. FAURE SQUIRE D. RUSHNELL
DONG MOON JOO ROBERT J. WUSSLER
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Exchange Act, the Company's directors,
executive officers and any persons holding 10.0% or more of its stock are
required to report their beneficial ownership and any changes therein to the
Commission. Specific due dates for these reports have been established and the
Company is required to report herein any failure to file such reports by those
due dates. Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during 1997, its executive officers, directors and
greater than 10.0% beneficial owners complied with all applicable Section 16(a)
filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had the following transactions directly or indirectly with
directors, executive officers and holders of more than 5.0% of the Company's
issued and outstanding stock since the beginning of 1997:
CONCEPT AND CROWN. In 1997, loans from Concept and Crown (collectively, the
"Majority Stockholders") were the principal source of the Company's capital.
From 1994 through December 31, 1997, the Majority Stockholders provided $39.5
million in financing, including $19.5 million loaned to the Company in 1997 at
an interest rate of 8.5% per annum. In addition, in 1998 Crown has loaned an
additional $8.0 million to the Company at an interest rate of 8.5% per annum.
On April 1, 1998, the Company issued promissory notes in the principal
amounts of approximately $19.2 million to Concept and approximately $28.6
million to Crown in substitution and replacement of the Company's previously
issued promissory notes and accrued interest thereon. These notes bear interest
at 8.5% per annum and are secured by a security interest in all of the Company's
15
<PAGE>
assets. Interest on the unpaid principal and interest shall compound monthly
and is subject to a minimum aggregate monthly payment of $60,000. These notes
and all accrued and unpaid interest mature on February 1, 1999.
On April 1, 1998, the Company issued a promissory note to Crown in the
maximum principal amount of approximately $15.3 million (the "Grid Note") at
8.5% per annum and secured by a security interest on all of the Company's
assets. Interest on the unpaid principal and interest shall compound monthly
and are due on or before February 1, 1999. As of April 28, 1998, the Company
has drawn approximately $3.8 million of principal amount of the loan.
In connection with the two substitution and replacement notes and the Grid
Note, the Company entered into certain letter agreements (the "Letter
Agreements") with the Majority Stockholders. In the Letter Agreements the
Company granted to Concept a right of first refusal in the event that the
Company desires to sell more than 500,000 shares of the Common Stock or more
than 500 shares of its Preferred Stock. The Letter Agreements also provide that
during the terms of the loans evidenced by the promissory notes, the Company
will not enter into any agreement committing it to spend in excess of $1.0
million unless such expenditure is provided for in the Company's budget or
otherwise approved by the Majority Stockholders. In the Letter Agreements, the
Company agrees to provide the Majority Stockholders monthly financial statements
and financial information until the loans mature.
Throughout 1997, Mr. Joo was an officer and director of Crown and Concept,
and Messrs. Cates and Christofferson were officers of Concept subsidiaries.
AVI. The Company and AVI are parties to an agreement (the "AVI Agreement")
pursuant to which AVI provides to the Company certain exclusive television
production, post-production and master control/uplink services and equipment and
leases to the Company 3,000 square feet of office space in AVI's Alexandria,
Virginia production facilities at a monthly rate of $3,896. Under the terms of
the AVI Agreement, the Company is required to purchase a minimum of number of
hours of such services during each year at specified rates. The Company has
agreed to pay a minimum monthly fee of 78,000 to AVI. If the Company does not
actually purchase $78,000 of services in a month from AVI, the differences up to
a maximum of $75,000 for all months elapsed, subject to certain limitations, may
be used as a credit of the fees in future months. The net amount payable to AVI
for these additional services with respect to 1997 was approximately $119,000.
In March 1992, in connection with payment of amounts then claimed by AVI to
be due under the AVI Agreement, the Company paid $2.0 million for the benefit of
AVI and executed a promissory note in favor of AVI in the principal amount of
$305,000, bearing interest at the rate of 2.5% percent per quarter, compounded
quarterly, due March 31, 2002 (the "AVI Note"). The AVI Note contains provisions
for, inter alia, conversion of the indebtedness into Senior Preferred Stock,
which the Company currently is not authorized to issue. Pursuant to a security
agreement entered into between the Company and AVI at that time, the Company
granted AVI a security interest in (a) $150,000 in specified accounts receivable
and certain other accounts and contracts; (b) proceeds thereof; and (c) copies
of certain books and records, provided that, as long as the Company was not in
default, AVI agreed not to perfect its security interest and to hold for filing
the UCC-1 financing statement.
Throughout 1997, Messrs. Cates and Joo were officers and directors of AVI.
16
<PAGE>
WTC. The Company's executive offices are located at 650 Massachusetts
Avenue, N.W., Washington, D.C., where the Company leases approximately 5,100
square feet of space from WTC. The lease expires in November 1999 and provides
for an initial base monthly rent of $12,537. Effective November 1997 that rent
increased to $12,788. All of the interest in WTC is owned by U.S. Property
Development Corporation ("USPDC") (99.0% directly and 1.0% through a USPDC
subsidiary). Throughout 1997, Mr. Joo was an officer and director of USPDC.
WTC is under common control with AVI. Throughout 1997, Messrs. Cates and Joo
were officers and directors of AVI.
MANHATTAN. The Company utilizes the facilities of Manhattan for both
remote and on-site television production on an ad hoc basis. During 1997 the
Company incurred $446,000 for services rendered by Manhattan. Through April
1997, Mr. Christofferson was an officer of Manhattan. Manhattan is under common
control with AVI.
AVI AFFILIATES. The Company is informed that in addition to WTC a number
of other companies (the "AVI Affiliates") are under common control with AVI.
These AVI Affiliates include Manhattan, True World Group, Inc., and NWC.
Through April 1997, Mr. Christofferson was an officer of Manhattan. From April
1997, Mr. Kobayashi has served as an officer of True World Group, Inc., and
Messrs. Sanchez and Joo have served as officers of NWC.
POTOMAC. The Company utilizes the facilities of Potomac for remote site
television production on an ad hoc basis. During 1997 the Company incurred
approximately $66,000 for services rendered by Potomac. Throughout 1997, Mr.
Christofferson was an officer of Potomac. Potomac is a subsidiary of Concept.
PVI. The Company utilizes the facilities of PVI for transmission services
on an ad hoc basis. During 1997 the Company incurred $10,000 for services
rendered by PVI. Throughout 1997, Mr. Cates was an officer of PVI. PVI is a
subsidiary of Concept.
CONCEPT AFFILIATES. The Company is informed that in addition to Crown a
number of other companies (the "Concept Affiliates") are under common control
with Concept. These Concept Affiliates include Crown, Capital, Potomac and PVI.
Since April 1997, Mr. Christofferson has served as an officer of Potomac.
Throughout 1997, Mr. Cates was an officer of PVI, and Mr. Joo was an officer of
Concept, Crown and Capital, and a director of Concept, Crown, Capital, Potomac
and PVI.
OTHER INFORMATION
Brokers and other persons holding Common Stock in their names, or in the
names of a nominee, will be requested to forward this Proxy Statement and the
accompanying material to the beneficial owners of the Common Stock and to obtain
proxies, and the Company will defray reasonable expenses incurred in forwarding
such material.
The Company's Annual Report to Stockholders, which includes the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, including
financial statements and schedules filed with the Securities and Exchange
Commission, accompanies this Proxy Statement. If a stockholder desires an
additional copy of the Form 10-K, with exhibits, one will be provided without
charge upon written request to the Company.
17
<PAGE>
STOCKHOLDER PROPOSALS
Stockholders may submit written proposals to be considered for stockholder
action at the Company's 1999 Annual Meeting of Stockholders expected to be held
in June 1998. To be eligible for inclusion in the Company's Proxy Statement for
the 1999 Annual Meeting, stockholder proposals must be received by the Company
by December 31, 1998 and must otherwise comply with applicable Commission
regulations. Stockholder proposals should be addressed to the Company at its
principal place of business, attention: Secretary.
In addition, the Company's Certificate of Incorporation requires that
stockholders wishing to nominate a person for election as a director give
written notice to the Company and provide certain information regarding the
nominee not less than 14 nor more than 50 days prior to the meeting.
By order of the Board of Directors,
/s/ Willard R. Nichols
Willard R. Nichols
General Counsel and Secretary
18
<PAGE>
COMMON STOCK
THE NOSTALGIA NETWORK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy... The undersigned stockholder of THE NOSTALGIA NETWORK, INC.
(the "Company") appoints DIANE FULLER and MARTIN A. GALLOGLY, or either
of them, proxies, with full power of substitution, to vote at the 1998
Annual Meeting of Stockholders of the Company to be held in the Second
Floor Conference Room, 650 Massachusetts Avenue, N.W., Washington D.C.
20001 at 11:00 a.m., Wednesday, June 10, 1998, and any adjournment or
adjournments thereof, the shares of Common Stock or equivalent thereof of
the Company that the undersigned is entitled to vote, on all matters that
may properly come before that meeting.
(TO BE SIGNED ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
You are urged to cast your vote by marking the appropriate boxes. Please note
that, unless a contrary instruction is indicated, this proxy will be voted FOR
election of all nominees identified in Item 1.
FOR WITHHELD
1. The election of ten [ ] [ ] Nominees: Christopher Cates,
directors for the Floyd Christofferson, Dianne Faure,
ensuing year. Hiroshi Goto, Dong Moon Joo, S.
Robert Lichter, Frederick W. Newton,
SQuire Rushnell, Phillip Sanchez,
and Robert Wussler
FOR AGAINST WITHHELD
2. Ratification of [ ] [ ] [ ]
selection of BDO
Seidman, LLP as
independent public
accountants.
For all nominees listed above (except as marked to the contrary)
(INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ONE OR MORE INDIVIDUAL NOMINEES,
WRITE THE NAMES OF EACH NOMINEE WITH RESPECT TO WHOM YOU CHOOSE TO WITHHOLD
AUTHORITY TO VOTE IN THE SPACE PROVIDED BELOW.)
FOR AGAINST WITHHELD
3. Approval of stock [ ] [ ] [ ]
options granted to
SQuire Rushnell.
4. In their discretion, the proxies are authorized
to vote upon such other business as may properly
come before the meeting.
SIGNATURE (S) DATE
------------------------------------------------ ------------
------------------------------------------------
IMPORTANT: Please sign your name or names exactly as shown hereon and date
your proxy in the blank space provided above. For joint accounts,
each joint owner should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your
full title as such. If the signer is a corporation or
partnership, please sign full corporate or partnership name by
duly authorized officer of partner.
