<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] 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 Rule 14a-11(c) or Rule 14a-12
THE 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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
THE NOSTALGIA NETWORK, INC.
650 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20001
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 1999
To the Stockholders:
The 1999 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 9, 1999 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 1999;
3. 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 Thursday, May 20,
1999 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
Vice President, General Counsel and Secretary
Dated: April 30, 1999
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IMMEDIATELY, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE> 3
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 1999 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 9, 1999 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, 1998 are first
being sent to stockholders on or about Friday, May 21, 1999.
At the close of business on April 15, 1999, 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 May 20, 1999. 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, NW, 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 his or her successor is
duly elected and qualified.
If for any reason any of the nominees is not a candidate when the
election occurs, 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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<PAGE> 4
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Ten nominees, all incumbent members of the Board of Directors, 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, the enclosed proxy will be voted for the
election of such person or persons who are nominated as replacements.
THE BOARD OF DIRECTORS 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, 45 Director since October 1990
Mr. Cates is currently President and Chief Executive Officer of
MediaComm, a teleproduction facility located in Charlotte, N.C. From February
1998 to February 1999, Mr. Cates served as Senior Vice President of Corporate
Development of Atlantic Video, Inc. ("AVI"), an affiliate of the Company, 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"), an affiliate
of the Company, which is engaged in satellite transmission services, the
production and recording of videotapes, the provision of post-production
services and related activities. During 1998, AVI and its affiliates had
substantial dealings with the Company. See Certain Relationships and Related
Transactions.
FLOYD CHRISTOFFERSON, 44 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 Center"), a multimedia group. From 1990
through 1994, he was a senior partner and creative director of Delta Imaging, a
computer graphics firm. Potomac and Manhattan Center are affiliates of the
Company. During 1998, Potomac, Manhattan Center, and their affiliates had
substantial dealings with the Company. See Certain Relationships and Related
Transactions.
DIANNE M. FAURE, 42 Director since June 1995
Ms. Faure is an attorney in private practice 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
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<PAGE> 5
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, 44 Director since June 1998
Mr. Goto has served as the budget director of The Washington Times
Corporation ("Washington Times") since August 1997. From September 1986
through July, 1997, Mr. Goto served in various capacities at Washington Times,
including finance manager, assistant finance manager and internal auditor.
Washington Times is a subsidiary of News World Communications, Inc. ("NWC"), an
affiliate of the Company.
DONG MOON JOO, 53 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. Those companies
publish numerous newspapers and periodicals, including The Washington Times,
Insight, The World & I, The Middle East Times and Noticias del Mundo. From
April 1991 through February 1, 1998, Mr. Joo 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 a
director and Chief Executive Officer of AVI, director and President of Crown
Capital Corporation ("Capital"), an affiliate of the Company, Chairman of the
Board of Directors and President of Crown Communications Corporation ("Crown"),
an affiliate of the Company, and as a director of PVI and Potomac. During
1998, Concept, Capital, Crown, AVI and WTC and their affiliates had substantial
transactions with the Company. See Certain Relationships and Related
Transactions.
DR. S. ROBERT LICHTER, 50 Director since April 1998
Since 1985, 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, 41 Director since November 1997
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 1998, Capital and its
affiliates had substantial transactions with the Company. See Certain
Relationships and Related Transactions. Mr. Newton has served as President of
Stellar Printing Inc., since 1989, and as President of Freestate Publishing
Inc., which publishes a community newspaper, since 1993.
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<PAGE> 6
SQUIRE D. RUSHNELL, 60 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. Earlier,
Mr. Rushnell served for over twenty years as a senior executive at the ABC
Television Network.
AMBASSADOR PHILLIP SANCHEZ, 69 Director since September 1994
Ambassador Sanchez, Chairman of the Board of Directors, has served
since February 1987 as Vice President of NWC, which publishes numerous
newspapers and periodicals. Ambassador Sanchez currently is the Publisher of
Noticias Del Mundo, a national Spanish-language daily newspaper, and Tiempos
del Mundo, a Spanish-language weekly newspaper published throughout the western
hemisphere. Ambassador Sanchez is the Chairman of the Board of Trustees of the
National Hispanic University (San Jose, California), and serves on the Board of
Trustees of the Educational Foundation of the Americas, and of the University
of Bridgeport (Bridgeport, Connecticut). NWC is an affiliate of the Company.
ROBERT J. WUSSLER, 62 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 Chairman of the Board of Directors and
Chief Executive Officer of U.S. Digital Communications, Inc., which specializes
in internet broadcasting services and satellite technology, since May 1998, and
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, and Beechport, which
specializes in arena promotions.
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 of Directors 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 1998. It also met twice during the year in
joint meetings with the Finance Committee.
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<PAGE> 7
The Finance Committee, composed of Messrs. Goto, 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 financial matters. The
Finance Committee met fifteen times during 1998. It also met twice during the
year in joint meetings with the Executive Committee.
The Audit Committee, composed of Messrs. Christofferson and Goto,
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 controls with the
independent public accountants. The Audit Committee met two times during 1998.
The 144 Committee, composed of Messrs. Wussler and Lichter, 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 1998, 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 once during
1998.
The Board of Directors held eight regular and three special meetings
during 1998. Each of the incumbent directors attended at least 75.0% of the
total number of meetings of the Board of Directors and each committee on which
he 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 of Directors meetings. Each quarter, the non-employee directors receive
$1,000 for attendance (telephonically or in person) at Board of Directors
meetings and reimbursement of expenses if attendance is in person.
Additionally, as permitted by the 1996 Stock Option Plan, in 1998 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 Grant Thornton, LLP as independent public accountants to audit
the financial statements of the Company for 1999. 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.
On April 1, 1999, BDO Seidman, LLP ("BDO"), the Company's certifying
accountant, notified the Company that the client-auditor relationship between
the Company and BDO had terminated and BDO declined to stand for re-election.
BDO's report on the financial statements for the past two years contained no
adverse opinion or disclaimer of opinion, nor was the report qualified or
modified as to uncertainty, audit scope or accounting principles. During the
last two fiscal
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<PAGE> 8
years and through the subsequent interim period, there were no disagreements
with BDO on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure.
The Company has been advised that representatives of Grant Thornton,
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.
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 owners 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 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 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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<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 15, 1999, the number of
shares of Common Stock and Preferred Stock beneficially owned by each of the
Company's executive officers, by each current director (each of whom
are also nominees for the Board of Directors), 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........................... 840,840(2) 1.0% 0 *
Martin A. Gallogly........................... 29,000(3) * 0 *
Willard R. Nichols........................... 0 * 0 *
DIRECTORS AND NOMINEES
Christopher A. Cates......................... 23,000(4) * 0 *
Floyd Christofferson......................... 3,000(5) * 0 *
Dianne M. Faure.............................. 3,000(5) * 0 *
Hiroshi Goto................................. 0 * 0 *
Dong Moon Joo................................ 3,000(5) * 0 *
Dr. S. Robert Lichter........................ 0 * 0 *
Frederick W. Newton.......................... 0 * 0 *
Phillip Sanchez.............................. 3,000(5) * 0 *
Robert J. Wussler............................ 3,000(5) * 0 *
ALL DIRECTORS AND
EXECUTIVE OFFICERS
AS A GROUP (13 PERSONS)......................... 907,840 2.3% 0 0%
5% BENEFICIAL OWNERS
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 has sole power to vote, and
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 840,840 shares of Common Stock issuable upon the exercise of
currently exercisable options held by Mr. Rushnell or options
exercisable within sixty days. Excludes 5,000 shares for which
options may vest in August
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<PAGE> 10
1999, 2000, and 2001, if Mr. Rushnell remains with the Company. Mr.
Rushnell also is a director of the Company.
(3) Includes 29,000 shares of Common Stock issuable upon the exercise of
currently exercisable options held by Mr. Gallogly.
(4) Includes 23,000 shares of Common Stock issuable upon the exercise of
currently exercisable options. Excludes 6,000 shares for which
options may vest in August, 1999, 2000, and 2001.
(5) Includes 3,000 shares of Common Stock issuable upon the exercise of
currently exercisable options. Excludes 6,000 shares for which
options may vest in August 1999, 2000 and 2001.
(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, 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, 1996, 1997 and 1998 of those persons serving as the
Company's chief executive officer or acting in a similar capacity, and other
executive officers of the Company whose compensation was 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, 1998 $225,063 $50,000 --- ---
Chief Executive Officer and 1997 205,923 37,500 --- ---
President(1) 1996 119,231 50,000 --- ---
Martin A. Gallogly, Vice 1998 114,654 16,000 --- ---
President, Treasurer and Chief 1997 93,876 13,500 --- ---
Financial Officer(2)
Willard R. Nichols, Vice 1998 103,085 9,100 --- ---
President, General Counsel and
Secretary(3)
</TABLE>
- -----------------------
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<PAGE> 11
(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) Mr. Gallogly died on April 16, 1999.
(3) Mr. Nichols, 52, is currently Vice President, General Counsel and
Secretary of the Company. Mr. Nichols served as General Counsel and
Secretary from May 1997 to June 1998. He has served as a Vice
President of the Company since his election by the Board of Directors
to that position in June 1998. Prior to his service with the Company,
Mr. Nichols was an attorney in private practice engaged in domestic
and international telecommunications consulting. He also served for
the calendar year 1995 as Executive Vice President and Managing
Director of UTAM, Inc. Mr. Nichols did not earn in excess of
$100,000 prior to 1998. In addition to his salary, Mr. Nichols may
receive installment bonus payments from the Company in 1999, depending
upon the length of time he remains employed by the Company in 1999.
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, 1998, 629,880 of these shares have vested. 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, 1998, 29,000 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 1998.
STOCK OPTION EXERCISES
The following table summarizes information relating to stock option
exercises during 1998 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 1998 AND
OPTION VALUES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options at Options at
December 31, 1998 December 31, 1998(1)
----------------- --------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SQuire D. Rushnell 0 0 840,840 5,000 $0 $0
Martin A. Gallogly 0 0 29,000 0 $0 $0
Willard R. Nichols 0 0 0 0 $0 $0
</TABLE>
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<PAGE> 12
- ---------------
(1) Based on a stock price of $0.015, which was the average of the high
asked and low bid prices reported on December 31, 1998.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On May 13, 1996, the Company entered into an three year 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 $50,000 for 1998.
Mr. Rushnell also is 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 also has 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 agreement further provides that 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 options are
nonqualified stock options, and were granted outside the 1996 Stock Option
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; 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. 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.
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.
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<PAGE> 13
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, 1993 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.
[Graph]
INDEX RETURNS
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<CAPTION>
Base Period
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Company/Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
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<S> <C> <C> <C> <C> <C> <C>
The Nostalgia Network, Inc. 100 $ 38.15 $ 10.53 $ 5.26 $ 2.11 $ 0.42
- -------------------------------------------------------------------------------------------------------
S&P 500 Index 100 $101.32 $139.40 $171.40 $228.59 $293.91
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S&P Broadcast Media Index 100 $ 92.85 $121.55 $ 99.63 $163.92 $254.30
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</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 of Directors also administers the stock option plans of the Company.
The base salary, bonus and benefits payable for 1998 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.
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<PAGE> 14
Stock options may be granted, at the direction of the Board of
Directors, under the Company's 1996 Incentive Stock Option Plan (the "Plan") to
the Company's executive officers, other employees, independent contractors and
agents. The purposes of the Plan is to attract and retain high-quality
personnel and strengthen the Company by providing incentives for its success.
Under the Plan, 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 1998,
the Board of Directors awarded options under the 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.
<TABLE>
<S> <C>
PHILLIP SANCHEZ (CHAIRMAN) DONG MOON JOO
CHRISTOPHER A. CATES S. ROBERT LICHTER
FLOYD CHRISTOFFERSON FREDERICK W. NEWTON
DIANNE M. FAURE SQUIRE D. RUSHNELL
HIROSHI GOTO ROBERT J. WUSSLER
</TABLE>
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 person holding 10.0% or more of its
Common Stock are required to report their beneficial ownership and any changes
therein to the United States Securities and Exchange 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 1998, 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 1998:
CONCEPT AND CROWN. Since 1990, Crown and Concept, in the aggregate
the Company's majority stockholders, have been the principal source of the
Company's capital. Crown and Concept have invested $2,300,000 and provided
$58,500,000 in financing since 1994, including $19,000,000 loaned by Crown to
the Company in 1998. Additionally, as of March 23, 1999, Crown has provided
$8,000,000 in debt financing to the Company since January 1, 1999, and has
committed to advance as needed an additional $7,000,000 in debt financing
during the balance of 1999.
As of March 27, 1999, the Company had issued and outstanding
promissory notes to Concept and Crown in the aggregate principal amount of
$20,600,000 and $54,072,000, respectively, bearing interest of approximately
7.75% per annum which are due and payable on January 1, 2000.
Throughout 1998, Mr. Joo was an officer and director of Crown and
Concept, and Messrs. Cates and Christofferson were officers of Concept
subsidiaries.
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<PAGE> 15
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 4,300 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
number of hours of such services during each year at specified rates. The
Company has agreed to pay a minimum monthly fee of $93,000 to AVI. If the
Company does not actually purchase $50,000 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 1998
was approximately $217,809.
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 1998, Mr. Cates was an officer of AVI and Mr. Joo was an
officer and a director of AVI.
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 1998 that rent
increased to $13,944. 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 1998, Mr. Joo was an officer of USPDC. WTC is under
common control with AVI.
MANHATTAN CENTER. The Company utilizes the facilities of Manhattan
Center for both remote and on-site television production on an ad hoc basis.
During 1998, the Company incurred $955,000 for services rendered by Manhattan
Center. Manhattan Center is under common control with AVI.
POTOMAC. The Company utilizes the facilities of Potomac for remote
site television production on an ad hoc basis. During 1998, the Company
incurred approximately $1,300 for services rendered by Potomac. Throughout
1998, Mr. Christofferson was an officer of Potomac. Potomac is a subsidiary of
Concept and an affiliate of the Company.
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.
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<PAGE> 16
The Company's Annual Report to Stockholders, which includes the
Company's Annual Report on Form 10-K for the year ended December 31, 1998,
including financial statements and schedules filed with the United States
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.
STOCKHOLDER PROPOSALS
Stockholders may submit written proposals to be considered for
stockholder action at the Company's 2000 Annual Meeting of Stockholders
expected to be held in June 2000. To be eligible for inclusion in the
Company's Proxy Statement for the 2000 Annual Meeting, stockholder proposals
must be received by the Company by December 31, 1999 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.
For those stockholder proposals which are not submitted in accordance
with Rule 14a-8 (such as a proposal to be submitted at the next annual meeting
of stockholders but not submitted for inclusion in the Company's proxy
statement), the Company's designated proxies may exercise their discretionary
voting authority without any discussion of the proposal in the Company's proxy
materials for any proposal which is received by the Company after January 20,
2000.
By order of the Board of Directors,
/s/ WILLARD R. NICHOLS
Willard R. Nichols
Vice President, General Counsel and Secretary
- 14 -
<PAGE> 17
THE NOSTALGIA NETWORK, INC.
650 Massachusetts Avenue, N.W.
Washington, D.C. 20001
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE NOSTALGIA
NETWORK, INC. FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON JUNE 9, 1999 AND ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of THE NOSTALGIA NETWORK, INC. (the
"Company"), hereby authorizes Diane Fuller and Daniel P. Collins with the full
power of substitution, to represent the undersigned at the Annual Meeting of
Stockholders of the Company to be held at the offices of the Company, 650
Massachusetts Avenue, N.W., Washington, D.C. on June 9, 1999 at 11:00 a.m.,
local time, and at any adjournment thereof, and at the Meeting to act with
respect to all votes that the undersigned would be entitled to cast, if then
personally present, as appears on the reverse side of this proxy.
In their discretion, the proxies are authorized to vote with respect to
matters incident to the conduct of the Meeting and upon such other matters as
may properly come before the Meeting. This proxy may be revoked at any time
before it is exercised.
Shares of the Common Stock of the Company will be voted as specified. If no
specification is made, shares will be voted FOR the nominees for director named
on the reverse side and IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES as to
any other mater which may properly come before the Meeting.
-----------------------
CONTINUED ON OTHER SIDE
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<PAGE> 18
THE NOSTALGIA NETWORK, INC.
-- Tear at Perforation --
<TABLE>
<S> <C>
The Annual Meeting of 1. ELECTION OF DIRECTORS
Stockholders of The Nostalgia Nominees: Christopher Cates Floyd Christofferson Dianne M. Faure Hiroshi Goto
Network, Inc. will Dong Moon Joo Dr. S. Robert Lichter Frederick W. Newton
be held Wednesday, June 9, 1999, Squire D. Rushnell Ambassador Phillip Sanchez Robert J. Wussler
at 11:00 a.m. [ ] FOR all nominees [ ] WITHHELD as to all nominees
at the offices of the Company,
650 Massachusetts Avenue, N.W. FOR, except vote withheld from the following nominee(s):
Washington, D.C, 20001 [ ] _________________________________________________
2. RATIFICATION OF GRANT THORNTON, LLP AS INDEPENDENT PUBLIC ACCOUNTANT
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of Stockholders
of The Nostalgia Network, Inc. called for June 9 , 1999, and a Proxy Statement for the Meeting
prior the signing of this proxy.
Dated: ______________________, 1999
_________________________________
_________________________________
Please sign exactly as your name(s) appears(s)
on this proxy. When signing in a
representative capacity, please give title.
</TABLE>
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
