<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of
1934
For the Quarterly period from July 1, 1998 to September 30, 1998
------------ ------------------
Commission file number 0-19997
-------
College Television Network, Inc.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3557317
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5784 Lake Forrest Drive. Suite 275 Atlanta, GA 30328
----------------------------------------------------
(Address of Principal Executive Offices)
(404) 256-9630
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock outstanding as of November 10, 1998:
14,265,153
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
College Television Network, Inc.
BALANCE SHEET
September 30, 1998
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 2,396,933
Accounts receivable, net of allowance of $25,000............. 2,110,625
Prepaid expenses............................................. 312,828
Other current assets......................................... 153,761
------------
Total current assets.................................. 4,974,147
Property and equipment, net..................................... 4,640,926
Other assets.................................................... 171,480
Intangible assets, net.......................................... 480,871
------------
Total assets.......................................... $ 10,267,424
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 775,191
Accrued expenses............................................ 1,184,022
Capital lease obligation.................................... 146,020
------------
Total current liabilities............................. 2,105,233
Accrued severance, net of current portion...................... 454,735
------------
Total liabilities..................................... 2,559,968
------------
Capital stock:
Preferred stock-$.001 par; authorized 2,000,000
shares, no shares issued and outstanding
Common stock - $.005 par; authorized 50,000,000 shares;
issued and outstanding 8,506,722 shares.................... 71,326
Additional paid in capital.................................... 40,033,984
Accumulated deficit........................................... (23,184,364)
Subscriptions receivable...................................... (9,213,490)
------------
Total stockholders' equity............................ 7,707,456
------------
Total liabilities and stockholders' equity............ $ 10,267,424
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
COLLEGE TELEVISION NETWORK, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................................. $ 2,175,447 $ 517,167 $ 5,850,415 $ 1,911,425
----------- ----------- ----------- -----------
Expenses
Operating......................................... 1,339,164 944,533 2,971,263 1,513,807
Selling, general and administrative............... 2,450,322 1,540,544 7,758,844 3,069,613
Depreciation and amortization..................... 736,506 236,720 1,743,768 625,442
----------- ----------- ----------- -----------
4,525,992 2,721,797 12,473,875 5,208,862
----------- ----------- ----------- -----------
Other Income
Interest, net..................................... 38,784 188,388 295,822 350,817
----------- ----------- ----------- -----------
Net loss............................................ $(2,311,761) $(2,016,242) $(6,327,638) $(2,946,620)
=========== =========== =========== ===========
Basic and diluted loss per share (1997 share
information restated for one-for-five stock split
occurring on November 12, 1997).................... (0.28) (0.31) (0.79) (0.68)
Weighted average number of common shares
outstanding........................................ 8,127,532 6,416,752 8,052,613 4,306,862
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COLLEGE TELEVISION NETWORK, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................... $(6,327,638) $(2,946,620)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................................... 1,743,768 625,442
Fixed asset impairment loss............................................ 122,207 --
Changes in operating assets and liabilities, net of acquisition
Increase decrease in accounts receivable.......................... (687,525) 92,545
Increase in prepaid expenses...................................... (237,267) (41,849)
Increase in other assets.......................................... (267,604) (16,179)
Increase in accounts payable...................................... 101,899 207,079
Increase in accrued expenses...................................... 795,041 72,112
Decrease in deferred revenue...................................... (236,252) -
----------- -----------
Net cash used in operating activities........................... (4,993,371) (2,007,470)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment........................................ (4,368,619) (494,184)
Cash paid for acquisitions, net of cash received........................... (123,090) -
----------- -----------
Net cash used in investing activities............................ (4,491,709) (494,184)
----------- -----------
Cash flows from financing activities:
Payments under capital lease obligation.................................... (103,674) -
Payments on notes payable.................................................. (57,000)
Redemption of preferred stock.............................................. (5,809) -
Net proceeds from issuance of common stock................................. 610,207 15,400,672
----------- -----------
Net cash provided by financing activities......................... 443,724 15,400,672
----------- -----------
Net (decrease) increase in cash and cash equivalents.......................... (9,041,356) 12,899,018
Cash and cash equivalents, beginning of period................................ 11,438,289 734,353
----------- -----------
Cash and cash equivalents, end of period...................................... $ 2,396,933 $13,633,371
=========== ===========
Supplemental disclosure:
Non-cash financing activities:
Additions to capital lease obligation -0- 242,157
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COLLEGE TELEVISION NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the Company's financial statements for the fiscal year ended October 31,
1997 included in the Annual Report as filed on Form 10-KSB with the United
States Securities and Exchange Commission.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position as of September 30, 1998 and
the results of operations and of cash flows for the nine months ended September
30, 1998 and 1997.
The results of operations for the three and nine-month periods ended
September 30, 1998 and 1997 are not necessarily indicative of the results of
operations for a full fiscal year of the Company. Certain prior period amounts
have been reclassified to conform with current period presentation.
NOTE (A) - THE COMPANY
- ----------------------
College Television Network, Inc., (the "Company"), is a broadcasting
company which owns and operates the College Television Network ("CTN"), a
proprietary commercial television network operating on college and university
campuses, through single-channel television systems placed primarily in campus
dining facilities and student unions. Substantially all of the Company's
revenue is derived from advertising displayed on CTN. At September 30, 1998 and
1997, CTN was installed or contracted for installation at approximately 553 and
256 locations, respectively, at various colleges and universities throughout the
United States. The Company also owns and publishes "Link Magazine", a
publication having an approximate circulation of one million students. Link
Magazine is distributed to more than five hundred campuses nationwide.
The Company's revenue is affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company has generated a
significant portion of its revenue during the period from September through May
and substantially less revenue during the summer months when colleges and
universities do not hold regular classes.
NOTE (B) - ACQUISITION
- ----------------------
On January 12, 1998, the Company acquired Link Magazine ("Link"), a New
York-City based publication to college students, from Creative Media
Generations, Inc., a New Jersey corporation ("Creative Media"). Founded in
1993, Link Magazine is a free publication sent to approximately 1,000,000
college students at more than 500 colleges and universities nationwide. The
magazine generates revenues through advertising sales. The Company acquired
substantially all of the assets of Link in exchange for the assumption of
certain liabilities in the approximate amount of $370,000. The acquisition has
been accounted for under the purchase method of accounting. Goodwill in the
approximate amount of $345,000 relating to this transaction will be amortized
over 15 years on a straight line basis. The Company entered into two employment
agreements and a consulting agreement with certain officers of Creative Media.
Link's results of operations are not considered material to the
<PAGE>
Company's financial statements. The results of operations of Link are included
in the Company's Statement of Operations from the acquisition date through
September 30, 1998.
On July 1, 1998, the Company acquired Sadler & Streib Advertising LLC
("S&S"), an Atlanta based advertising agency that was founded in January 1997.
S&S is in the primary business of placing media buys and providing creative
services for their clients. The Company acquired substantially all of the
assets and assumed all of the liabilities of S&S for $240,000. The acquisition
has been accounted for under the purchase method of accounting. Goodwill of
approximately $130,000 was recognized as the excess of total purchase price over
net assets acquired in the transaction and is being amortized on a straight line
basis over fifteen years. One of the former partners of S&S is the spouse of the
Chief Executive Officer and Chairman of the Board of the Company. The operating
results of S&S are not considered material to the Company's financial
statements. The results of operations of S&S are included in the Company's
statement of operations from the acquisition date through September 30, 1998.
NOTE (C) - CONVERSION OF DELIVERY PLATFORM
- ------------------------------------------
During the second quarter, the Company finalized a plan to convert the
current delivery platform of CTN from the send and store method to the Direct
Video Broadcast (DVB) method. The Company believes that the new system is
similar to the delivery systems used by other networks, such as the CNN Airport
Network, and will improve the quality of programming, quality of signal and
reliability of the system.
As a result of the change in delivery technology, certain of the Company's
previous delivery system components have been rendered obsolete or impaired in
value. Accordingly, the Company reported an impairment charge of approximately
$122,000 in the second quarter. Certain other previous system components which
were required to operate the network through August 17, 1998, are not required
to operate the new delivery system. Accordingly, during the second quarter, the
Company reevaluated the useful lives of those components to more accurately
match future revenue with operational expenses associated with those depreciable
assets. The change in useful lives of these assets resulted in additional
depreciation of approximately $550,000 and $1,010,000 for the three and nine-
month periods ended September 30, 1998. These assets have been fully
depreciated effective as the launch of the new delivery platform which occurred
on August 17, 1998.
NOTE (D) - COMMITMENTS AND CONTINGENCIES
- ----------------------------------------
The Company executed an Equipment Rental Agreement with Hughes Network
Systems on November 6, 1996. The agreement called for the installation of 200
systems for receiving satellite transmissions over a three-year period. The
Company terminated the agreement with Hughes in May 1998 with the conversion to
a new real-time, digital satellite distribution system. The Company negotiated
a termination fee of $190,000 in full settlement with Hughes Network Systems.
This amount has been accrued in the September 30, 1998 balance sheet and was
paid in full in October 1998.
The Company is currently utilizing Crawford and Viatech International, Inc.
to complete the installation of new systems in the Company's existing locations,
remove certain equipment and install new equipment in order to allow the
equipment to meet the requirements of the new broadcast platform. The Company
also entered into an Agreement with Crawford dated July 15, 1998 for a five-year
term. In accordance with this contract, Crawford is responsible for the
transmission via satellite of CTN's daily programming, including encoding
signals, testing, maintaining CTN's programming
<PAGE>
library, and obtaining programming from Turner Private Networks, Inc. ("Turner")
pursuant to the Company's programming agreement with Turner, as well as other
programming from other CTN sources. Crawford is responsible for the uplink of
the programming to a satellite as well as the downlink of the signal from the
satellite at each installation site.
On March 21, 1998, the Company entered into a severance agreement with one
of its Senior Executives. The Agreement provides for payments of approximately
$870,000 over a three year period ending in April 2001. A provision for this
obligation is included in the Company's statement of operations for the nine
months ended September 30, 1998. As of September 30, 1998, the Company has paid
approximately $170,000 of this obligation.
On March 27, 1998, the Company signed an agreement with Turner to provide
news and sports programming on CTN through December 31, 2002. The total license
fee is approximately $2,900,000. This agreement supersedes the prior programming
agreement entered into on November 5, 1996.
In connection with the delivery platform conversion, the Company entered
into a Transponder Use Agreement with Public Broadcasting Service ("PBS") on
April 30, 1998. The Company has subleased capacity on a satellite owned and
operated by GE American Communications, Inc. ("GE") and leased to PBS by GE.
This contract terminates on July 31, 2003. The Company has protected status on
this satellite, which provides that in the event of a satellite failure or
performance problem, the Company's programming will preempt transmissions of
other users on this satellite or on another satellite.
In May 1998, the Company entered into a lease for new space in New York
City. The New York operations of CTN and Link Magazine have been consolidated
in this new office space, effective October 1, 1998. The lease term is for ten
(10) years and the initial annual rent is $249,900, subject to annual increases
based upon certain economic factors. The landlord is required to pay for
certain tenant improvements in accordance with the lease.
NOTE (E) - STOCK RIGHTS OFFERING
- --------------------------------
The Company distributed to holders of record as of the close of business on
July 17, 1998 (the "Record Date"), of its common stock, $.005 par value per
share (the "Common Stock"), one non-transferable right for each 1.2825 shares of
Common Stock held on the Record Date. Each right entitled the holder to
subscribe for and purchase one share of Common Stock for a price of $1.60 per
share (the "Rights"), for a total of 6,250,000 shares offered pursuant to the
exercise of Rights (the "Rights Offering"). The Rights Offering subscription
period expired on September 10, 1998. Pursuant to a Standby Stock Purchase
Agreement with U-C Holdings, L.L.C. ("U-C Holdings"), the holder of a majority
of the Common Stock, U-C Holdings purchased in the Rights Offering all of the
4,536,593 shares of Common Stock issuable to it upon exercise of the Rights
distributed to U-C Holdings and all of the 1,221,838 shares of Common Stock
offered in the Rights Offering which were not purchased by other holders of
Rights. Holders of the Rights other than U-C Holdings subscribed for and
purchased 491,569 shares of Common Stock in the offering. The Rights Offering
closed on October 5, 1998 and provided the Company with proceeds of
approximately $10,000,000 which it will use for general corporate purposes. The
Company issued a warrant to U-C Holdings, in consideration for its purchase
commitment and standby commitment under the Standby Stock Purchase Agreement, to
purchase an additional 152,000 shares of Common Stock at $1.60 per share at any
time during a seven-year period from the date of issuance of the warrant.
<PAGE>
NOTE (F) - BASIC AND DILUTED LOSS PER SHARE
- -------------------------------------------
The Company computes loss per common share in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share". Basic loss per
share is computed by dividing net income by weighted average common shares
outstanding for the period. Diluted loss per share is computed by dividing net
income by weighted average common shares and dilutive equivalent shares
outstanding for the period.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with
the Company's financial statements appearing elsewhere in this report.
Information contained or incorporated by reference in this report contains
"forward looking statements" which can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "will," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. No assurance can be given that the
future results covered by the forward-looking statements will be achieved.
RESULTS OF OPERATION
The Company is a broadcasting company which owns and operates the College
Television Network ("CTN"), a proprietary commercial television network
operating on college and university campuses, through single-channel television
systems (collectively, the "Systems" and individually, a "System") placed
primarily in campus dining facilities and student unions. Substantially all of
the Company's revenue is derived from advertising displayed on CTN. At
September 30, 1998, CTN was installed or contracted for installation at
approximately 553 locations at various colleges and universities throughout the
United States. The Company believes CTN currently reaches a viewership of
approximately 1,000,000 daily impressions.
The Company also owns and publishes "Link Magazine", a publication having
an approximate circulation of one million students. Link Magazine is
distributed to more than five hundred campuses nationwide.
The Company's revenue is affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company has generated a
significant portion of its revenue during the period of September through May
and substantially less revenue during the summer months when colleges and
universities do not hold regular classes.
The following table sets forth certain financial data derived from the
Company's statement of operations for the three and nine months ended September
30, 1998 and September 30, 1997:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------
Sept 30, 1998 Sept 30, 1997
------------------- --------------------
% of % of
$ Revenue $ Revenue
------------------- --------------------
<S> <C> <C> <C> <C>
Revenue............................... 2,175,447 100% 517,167 100%
Operating expenses.................... 1,339,164 62 944,533 183
Selling, general and administrative... 2,450,322 113 1,540,544 298
Depreciation and amortization......... 736,506 34 236,720 46
Interest income....................... 38,784 2 188,388 36
Net loss.............................. 2,311,761 106 2,016,242 390
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------------
Sept 30, 1998 Sept 30, 1997
------------------- --------------------
% of % of
$ Revenue $ Revenue
------------------- --------------------
<S> <C> <C> <C> <C>
Revenue............................... 5,850,415 100% 1,911,425 100%
Operating expenses.................... 2,971,263 51 1,513,807 79
Selling, general and administrative... 7,758,844 133 3,069,613 161
Depreciation and amortization......... 1,743,768 30 625,442 33
Interest income....................... 295,822 5 350,817 18
Net loss.............................. 6,327,638 108 2,946,620 154
</TABLE>
Revenue increased to $2,175,447 and $5,850,415 for the three and nine-month
periods ended September 30, 1998, respectively, versus $517,167 and $1,911,425
for the comparable periods in the prior year. Increased advertising sales to
existing customers combined with sales to new customers and the addition of
"Link Magazine" revenue was the primary source of this increase. The Company
anticipates continued sales growth throughout the fiscal year ending December
31, 1998 by continuing to expand its advertiser base and by increasing the rates
charged for its advertising spots to reflect the anticipated increase in
viewership.
Although the Company has agreements with national advertisers and has held
discussions or had prior agreements with other national advertisers, no
assurance can be given that these or other advertisers will continue to purchase
advertising time from the Company, or that future significant advertising
revenue will ever be generated. A failure to significantly increase advertising
revenue could have a material adverse impact on the operations of the Company.
Operating expenses increased to $1,339,164 and $2,971,263 for the three and
nine-month periods ended September 30, 1998, respectively, as compared to
$944,533 and $1,513,807 for the comparable periods in the prior year. The
increase over the comparable prior year period is primarily attributable to
increased programming costs for improved programming for CTN. Furthermore, the
Company continues to incur expenses in 1998 directly related to the commencement
of satellite transmission of the network. In addition, the 1998 operating
expenses include amounts associated with publishing "Link Magazine" which was
purchased on January 1, 1998.
Selling, general and administrative expenses increased to $2,450,322 and
$7,758,844 for the three and nine-month periods ended September 30, 1998,
respectively versus $1,540,544 and $3,069,613 for the comparable periods in the
prior year. A significant portion of this increase is directly attributable to
severance obligations for a Senior Executive of the Company. (See Note D for
additional information). Other reasons for this increase are attributable to
the Company's efforts to increase market awareness for the network. This is
being achieved by expanding the Company's management team, advertising and
affiliate sales forces, opening additional regional sales offices, and
instituting a more aggressive advertising and marketing campaign for CTN. In
addition, the 1998 selling, general and administrative expenses reflect various
costs associated with "Link Magazine", coupled with post-acquisition expenses
relating to the Sadler & Streib Advertising Agency (see note B).
<PAGE>
Depreciation and amortization expense totaled $736,506 and $1,743,768 for
the three and nine month periods ended September 30, 1998, respectively, as
compared to $236,720 and $625,442 for the comparable prior year periods. The
increases in 1998 are primarily attributable to the acceleration of depreciation
taken on the previous delivery system, coupled with increased depreciation on
office equipment and the current year fixed asset additions. (See Note C).
Interest income amounted to $38,784 and $295,822 for the three and
nine-month periods ended September 30, 1998, respectively, versus $188,388 and
$350,817 for the comparable periods in the prior year. The income figures are
reflective of higher interest rates and greater average cash balances directly
related to the April 1997 purchase of a majority of the Company's common stock
by U-C Holdings, L.L.C. The decrease in the current quarter is attributable to
the Company's cash expenditures directly related to the equipment required for
the new direct broadcast satellite delivery system.
The Company has incurred substantial losses since commencement of its
operations and anticipates that such losses will continue in Fiscal 1998. The
net loss amounted to $2,311,761 and $6,327,638 for the three and nine-month
periods ended September 30, 1998, respectively, versus $2,016,242 and $2,946,620
for the comparable periods in the prior year. Approximately fourteen percent of
the net loss for the nine-month period is directly attributable to the severance
obligation discussed in Note D. The increase in the 1998 net loss for the three
and nine-month period is reflective of the Company's continued efforts to expand
the advertising and affiliate bases. The Company has incurred significant costs
on programming, System installation, maintenance and overhead expenses as the
number of employees has increased. Management of the Company believes this
expansion is necessary in order to grow the advertising and affiliate levels to
a point where the Company will achieve profitability.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1998, the Company has working capital of $2,868,914. At
such date, the Company's cash and cash equivalents totaled $2,396,933.
Cash used in operations increased to $4,993,371 during the nine months
ended September 30, 1998 from $2,007,470 for the comparable period in the prior
year. The impact of increased sales during the nine month period ended
September 30, 1998 was more than offset by additional expenditures related to
programming and personnel in connection with the Company's effort to expand its
network and advertiser base. A portion of this increase was also attributable
to the timing of collections of accounts receivable and payments of accounts
payable.
Purchases of property and equipment increased to $4,368,619 during the nine
months ended September 30, 1998 from $494,184 for the comparable period in the
prior year due to the purchase of additional network systems, equipment
associated with the commencement of the DVB broadcast platform, coupled with the
purchase of furniture and equipment needed for the addition of new regional
offices and additional employees hired during the fiscal year. Through
September 30, 1998, the Company has spent approximately $3,300,000 on DVB
Delivery System costs. As the Company's affiliate base continues to grow,
additional capital expenditures will be required.
The Company has incurred substantial losses since commencement of its
operations and anticipates that such losses will continue through Fiscal 1998.
In order to reach the stage where the
<PAGE>
Company is profitable, it is expected that additional expenditures will be
required to increase the affiliate base and to market the network properly to
attract more advertisers.
The Company distributed to holders of record as of the close of business on
July 17, 1998 (The "Record Date"), of its common stock, $.005 par value per
share (The "Common Stock"), one non-transferable right for each 1.2825 shares of
common stock held on the Record Date. Each right entitled the holder to
subscribe for and purchase one share of Common Stock for a price of $1.60 per
share pursuant to a prospectus dated July 28, 1998 (the "Rights Offering"). The
Rights Offering, which was completed on October 5, 1998, provided the Company
with approximately $10,000,000 of additional working capital. The proceeds of
the Rights Offering will be used by the Company for general corporate purposes.
Although the Company has not yet achieved profitability, as a result of the
Rights Offering discussed above, the Company believes it has sufficient working
capital available to continue operating as a going concern through the end of
Fiscal 1998.
YEAR 2000
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the Year
2000, those date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, over the
next two years, computer systems and/or software used by many companies may need
to be upgraded to comply with such "Year 2000" requirements. The Company relies
on computer applications provided by third parties to deliver and track its
programming on CTN as well as to manage and monitor its accounting, advertising
sales and administrative functions. Because the Company is dependent on vendor
compliance, its ability to assure Year 2000 compliance is limited. The Company
has obtained representations from its most significant computer system and
software vendors that the services and products provided are, or will be, Year
2000 compliant, with the exception that it has not obtained any such
representations from Public Broadcasting Service under its Transponder Use
Agreement, dated April 30, 1998 (as described in the preceding Notes to
Financial Statements under Note (D) Commitments and Contingencies). The
Company has obtained insurance for certain of the costs associated with a
failure of the satellite transmission equipment upon which CTN's programming
delivery is based, including the cost of redirecting satellite dishes, securing
a new satellite transponder, and lost advertising revenue resulting from an
interruption in programming. However, this business interruption insurance
would not cover all costs associated with a satellite failure. Despite the
Company's efforts to address the Year 2000 impact on its business operations and
internal systems, there can be no assurance that such impact will not result in
a material disruption of its business or have a material adverse effect on the
Company's business, financial condition or results of operations.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 10.1 Agreement between Crawford Communications Inc. and
Registrant dated July 15, 1998.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COLLEGE TELEVISION NETWORK, INC.
Registrant
Date: November 12, 1998 /s/ Jason Elkin
---------------
Jason Elkin
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Date: November 12, 1998 /s/ Patrick Doran
-----------------
Patrick Doran
Chief Financial Officer, Secretary and
Treasurer (Principal Accounting
and Financial Officer)
<PAGE>
EXHIBIT 10.1
AGREEMENT
---------
THIS AGREEMENT (the "Agreement") made and entered into as of the 15th day
of July, 1998, by and between COLLEGE TELEVISION NETWORK, INC., a Delaware
corporation ("User"); and CRAWFORD COMMUNICATIONS, INC., a Georgia corporation
("CCI").
W I T N E S S E T H
WHEREAS, User requires services in connection with the playback and
transmission of three (3) channels of programming produced and distributed by
User as the television service currently known as COLLEGE TELEVISION NETWORK
(the "Channels"); and
WHEREAS, CCI has the facilities and expertise necessary to provide the
playback and transmission services required by User;
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual covenants and
conditions herein and other good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto,
each intending to be legally bound, do hereby agree as follows:
1. PROVISION BY USER OF PROGRAM MATERIAL AND LOGS. At no expense to CCI, User
----------------------------------------------
shall deliver to CCI at 535 Plasamour Drive, Atlanta, Georgia, 30324 (the
"CCI Facility") tapes in Digi Beta format of the programs, infomercials,
promotional spots, commercials, network identifications, sponsor
billboards, the Cable News Network fiber feed (discussed in PARAGRAPH
2(A)(15) below), and any other materials that comprise the User program
service ("Program Material") for which it desires CCI to provide Services
(as defined in PARAGRAPH 2 below) and program logs that identify specific
components of the Program Material, their duration, and the schedule for
transmitting such components ("Program Logs"), User shall make all
reasonable efforts to provide Program Material and Program Logs no later
than twenty-four (24) hours before such Program Material is to be uplinked
or, in the case of the CNN fiber feed, no later than four (4) hours before
same is to be uplinked. User may in exigent circumstances require changes
in such Program Material and Program Logs up to fifteen (15) minutes before
it is to be uplinked, provided that the Program Material involved is
present in User's database of Program Material at CCI. CCI and User shall
each provide a dedicated project manager who will be responsible for
operational issues relating to the performance of the Services (as
hereinafter defined) hereunder. Each party shall have the right to replace
its project manager upon fifteen (15) days prior notice to the other party.
The initial project manager appointed by CCI shall be Tom Wheeler and the
initial project manager appointed by User shall be Jim Nieves.
<PAGE>
2. PROVISION OF SERVICES BY CCI. Subject to the terms and conditions herein
----------------------------
contained, CCI shall provide to User Origination Services, Uplink Services,
Monitoring and Restoral Services and Downlink Services (all of which are
defined below and shall be referred to in the aggregate as the "Services")
twenty-four (24) hours per day, seven (7) days per week (the "Operating
Period") during the Term (as hereinafter defined).
(a) "Origination Service" shall consist of: 1) commissioning of affiliate
locations; 2) inserting bar codes and such other material as is
necessary to permit such Program Materials and Program Logs to be used
with User's automation system (the "Automation System"); 3) revising
the Program Logs as necessary in accordance with User's instructions
(the "Revised Logs"); 4) organizing and integrating the components of
the reviewed and corrected Program Material in accordance with the
scheduling instructions provided in the Revised Logs (the "Program
Feed"); 5) loading the Automation System in accordance with the Revised
Logs; 6) transmitting the Program Feed using the Automation System to
the GE3 Spacecraft, transponder K/20 or such other satellite or
transponder as User shall designate in accordance with PARAGRAPHS
2(B)(II) and (III) below, it being the parties' intent that a "soft"
launch occur on or about August 1, 1998, and that the "hard" launch
occur on August 17, 1998; 7) providing the full range of technical
operations and support services required for origination of the Program
Feed to the extent required for the timely and proper performance of
the foregoing items in accordance with this Agreement; 8) providing
library for CTN inventory of up to One Thousand (1,000) tapes and
maintaining CTN library at the CCI Facility; 9) providing a dedicated
operator to supervise the provision of Services, during the school year
(August 7 through May 7) on a seven (7) day a week basis, eight (8)
hours a day, and during Summer break (May 8 through August 6) on a two
(2) day a week, eight (8) hour a day basis; 10) providing site
authorization of IRDs and group scheduling of local program
distribution and conditional access operations; 11) maintaining the
affiliate data base with such information as User may from time to time
reasonably request; 12) providing periodic monitoring to ensure proper
functioning of the CTN Web Site ; 13) providing periodic system
monitoring and operation of the Kencast satellite file transport system
and operation of conditional access features of Kencast system; 14)
coordinating and performing the verification of new affiliate
installations pursuant to the terms of a further agreement to be
entered into between CCI and User with respect to such new
installations; 15) receiving daily fiber feeds from the Cable News
Network at Techwood Technical Center which shall be incorporated into
the Program Feed as specified in the Revised Logs; and 16) bimonthly
assessment of User equipment to determine if origination network
systems continue to meet published technical specifications and
notification to User of any discrepancies.
(b) (i) "Uplink Service" shall commence on June 8, 1998 and shall consist
of transmitting the Program Feed to the GE3 Spacecraft,
transponder K/22 (until August 1, 1998), and thereafter to
transponder K/20 or such other satellite and transponder as User
shall designate in accordance with PARAGRAPHS 2(B)(II) OR (III)
below.
(ii) In the event User transfers its service to another satellite or
transponder in the United States domestic arc due to satellite or
<PAGE>
transponder failure, User shall provide CCI with notice as
promptly as possible of the time and date on which User will
begin to use such different satellite and transponder (and the
transponder and satellite that User will be using). CCI shall
begin uplinking to such new transponder and satellite as quickly
as it is able, using its best efforts to do so, but in no event
later than one (1) hour in the case of a transponder change and
twenty-four (24) hours after receiving such notice in the case of
a satellite change. To assist User in a smooth transition, CCI
shall provide simultaneous Uplink Service (to commence on the
date User has specified) to both the satellite and transponder
User has been using and such other satellite and transponder as
User shall have designated. User shall be responsible for any
costs incurred in obtaining service on any satellite transponder,
including, without limitation, a second transponder during a
period of simultaneous Uplink Service, and shall pay CCI an
amount equal to Four Hundred and No/100 Dollars ($400.00) per
twenty-four (24) hours for the Uplink Services undertaken in
connection with such simultaneous service. User agrees that any
simultaneous uplinking to a second transponder must originate to
the same frequency band (i.e., KU-Band).
(iii) In the event User transfers its service to another satellite or
transponder in the United States domestic arc for reasons other
than satellite or transponder failure, User shall provide CCI
with thirty (30) days' prior written notice of the date on which
such service shall commence and of the satellite and transponder
that User will be using, but CCI shall make reasonable efforts to
accommodate User requests for transfers on shorter notice. To
assist User in a smooth transition, CCI shall provide
simultaneous Uplink Service (to commence on the date User has
specified) to both the satellite and transponder User has been
using and such other satellite and transponder as User shall have
designated. User shall be responsible for any costs incurred in
obtaining service on any satellite transponder, including,
without limitation, a second transponder during a period of
simultaneous Uplink Service, and shall pay CCI an amount equal to
Four Hundred and No/100 Dollars ($400.00) per twenty-four (24)
hours for the Uplink Services undertaken in connection with such
simultaneous service. User agrees that any simultaneous uplinking
to a second transponder must originate to the same frequency band
(i.e., KU-Band).
(iv) User shall provide, at its sole cost and expense, all required
space segments on the GE3 Spacecraft, or such other satellite or
transponder selected pursuant to PARAGRAPH 2(B)(II) OR (III)
hereof.
(c) "Monitoring and Restoral Service" shall consist of: 1) visually monitoring
the Program Feed transmissions being generated at the CCI Facility; and 2)
compiling reports of any transmission, tape, playback, equipment, and
operator failures and errors, the time of such error, the sources, if
known, of such error, and the corrective action taken by CCI (the
"Discrepancy Reports"). CCI shall deliver the Discrepancy Reports daily,
by facsimile or e-mail, to User's designated representative for the
previous day to demonstrate performance and compliance with the standards
and terms set forth in this Agreement.
(d) "Downlink Service" shall commence on June 8, 1998 and shall consist of 1)
CCI receiving the Program Feed via a 1.0m TVRO (to be provided by User)
for visually monitoring said Program Feed; and 2) , CCI transmitting such
received Program Feed into User's Broadcast Suite (as hereafter defined)
at the CCI Facility.
<PAGE>
3. Broadcast Suite; Relocation.
(a) In addition to the services provided in PARAGRAPH 2 above, CCI shall
provide to User, as part of the Services, throughout the Term, secure
space at the CCI Facility more particularly located on the Floor Plan
attached hereto as EXHIBIT "A" and by this reference made an integral
part hereof (the "Broadcast Suite"). Located within the Broadcast
Suite shall be the Automation Equipment and computer equipment required
to perform portions of the Origination Service. CCI shall make the
Broadcast Suite available to User or its representative or agents with
twenty-four (24) hours advance notice for its use commencing on June
15, 1998. Within the CCI teleport, CCI shall provide rack space for
User's equipment, consisting of one (1) DIGI Cypher II Encode System
(three (3) Channel MCPC), three (3) DSR 4200V IRDs, alarm system, three
(3) by monitors for User's outbound signals prior to DC II Encode
System, three (3) by monitors for User's return signals after DSR 4200V
IRDs, and coordination communications. CCI shall install cabling
between the CCI teleport and the Broadcast Suite sufficient for six (6)
channels of CCIR 601 video, stereo, audio and RS 232 data at 9,600 baud
to the DC II Encode equipment for network origination, three (3)
channels of analog RS 250B video, stereo, audio and RS 232 data at
9,600 baud for network return, alarms, and coordination communications.
Without limiting the generality of the foregoing, CCI shall provide
four (4) 1FB phone lines in the Broadcast Suite and connection to the
Internet for the User's web server through CCI's Internet Service
Provider Gateway in the CCI teleport.
(b) CCI shall have the right to relocate User's Broadcast Suite to other
locations within the CCI Facility which shall be the same size or
larger than the initial Broadcast Suite. In such event, CCI shall be
responsible for all costs and expenses related to such relocation and
shall provide User thirty (30) days prior written notice of CCI's
intention to so relocate the Broadcast Suite. Any such relocation of
the Broadcast Suite shall be performed without interruptions to User's
network or the performance of the Services hereunder.
(c) To the extent that CCI, during the Term, relocates the CCI Facility to
another location, it shall give User not less than thirty (30) days
prior written notice of its intention to so relocate and the address of
the new facility. CCI shall provide User with a comparable Broadcast
Suite in the new facility, of at least the same size as the initial
Broadcast Suite. In that event, CCI shall, at its sole cost and
expense, remove the Automation Equipment, computer equipment, the User
Purchased Equipment and all other equipment or materials utilized to
provide Services hereunder and shall relocate and reinstall same at the
new CCI facility, with no interruption to User's network or the
performance of Services hereunder.
4. EQUIPMENT. The User agrees to purchase, at User's sole cost and expense,
---------
each of the items of equipment specifically set forth on EXHIBIT "B"
attached hereto and by this reference made an integral part hereof (the
"User Purchased Equipment"). All equipment owned by the User to provide
Origination Services shall be supported by an
<PAGE>
Uninterrupted Power Supply ("UPS"), and shall be supported with seamless,
automatic transfer to an on-site backup diesel generator. The 4.5 Mtr
antenna, with redundant (1:1) 300 watt (minimum) KU Band shall uplink to a
minimum of 10 MHz of space segment capacity on Transponder 20 on the GE3
Satellite located at 87 degrees west, with the ability to utilize up to one
(1) full transponder space capable of uplink power control. The CCI
Facility shall have not less than sixty (60) amps of power supply and shall
be grounded. CCI shall perform regularly scheduled monitoring, testing,
repair, preventative maintenance, maintenance and quality control
evaluations of all equipment used in the performance of CCI's duties
hereunder.
5. TERM. Unless sooner terminated pursuant to the terms hereof, the term of
----
this Agreement shall commence as of the date hereof and continue through
July 15, 2003 the "Term").
6. FEES. In consideration of CCI's performance of the Services, User shall
----
pay to CCI fees (the "Monthly Fee") as follows:
(a) Simultaneous with the execution hereof, User agrees to pay CCI for test
period services a fee equal to Sixteen Thousand Eight Hundred and
No/100 Dollars ($16,800.00) for the period June 3, 1998 through July
14, 1998. This fee shall constitute payment in full for all test
period services rendered by CCI during such time period.
(b) User agrees to pay CCI for the Services a Monthly Fee equal to Twenty-
Two Thousand and No/100 Dollars ($22,000.00) commencing on July 15,
1998. The Monthly Fee shall constitute payment in full for all
Services provided by CCI hereunder. CCI shall invoice User on the
fifteenth (15th) day of each month in advance, for the Services to be
provided. Payment of each invoice is due within fifteen (15) days of
receipt of CCI's invoice by User.
(c) User has informed CCI that it may request, from time to time, that CCI
provide User with additional services including, without limitation,
Graphic Services, Audio Services, Editorial Services and Duplication
Services. CCI shall invoice User, in addition to the Monthly Fees, for
the amount of such services requested by User and provided by CCI at
the rates for such services set forth on the CCI Standard Rate Card in
effect from time to time, less ten percent (10%). CCI shall deliver
invoices to User for such services on a monthly basis and each invoice
shall be payable no later than fifteen (15) days after receipt by User.
(d) Any amounts due to CCI that are not paid by User within fifteen (15)
days of the date an invoice is received by User shall accrue interest
from the due date at the rate of one and one-half percent (1 1/2%) per
month or at the highest lawful rate from the date such amounts were
first due until they are paid, whichever is the lesser of these two
rates.
(e) Notwithstanding the foregoing, interest shall not accrue, CCI may not
suspend providing the Services and it shall not be a default hereunder
if User has not paid the invoice when due based upon a legitimate, good
faith dispute between the parties relating to the amount of the
invoice, the services or goods provided thereto or the lack of
sufficient documentation, and User has notified CCI in writing as to
its claim
<PAGE>
and specified the nature of the dispute, and the parties shall at all
times thereafter diligently and in good faith attempt to resolve such
dispute with CCI.
(f) Simultaneously with the execution hereof, User shall tender to CCI an
amount equal to Forty-Four Thousand and No/100 Dollars ($44,000.00),
representing the Monthly Fees for Services commencing on July 15, 1998
and June 15, 2003.
7. USER'S DEFAULT. User shall be deemed to have committed a default of this
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Agreement upon the occurrence of any of the following events (a "User Event
of Default"):
(a) User's failure to timely pay any sums required to be paid pursuant to
PARAGRAPH 6 hereof, which failure shall not have been cured within ten
(10) days of User's receipt of written notice thereof from CCI.
(b) User's failure to comply with any term, provision or condition of this
Agreement other than as provided in PARAGRAPH 7(A) above, which failure
shall not have been cured by User within thirty (30) days of User's
receipt of written notice thereof from CCI alleging such a default; or
(c) User's filing a petition for bankruptcy, in any federal or state
proceeding, or having an involuntary petition filed against it in any
federal bankruptcy proceeding which petition shall not have been
dismissed within sixty (60) days of the filing thereof, or User
becoming insolvent or consenting to the appointment of a trustee or
receiver or either or both is appointed for User; or
(d) The occurrence of a CTN Event of Default under the terms of that
certain Installation Agreement (Phase I) or that certain Installation
Agreement (Phase II) between CCI and User, dated March 13, 1998 and
July ___, 1998, respectively, which by this reference are hereby made
integral parts hereof.
Upon the occurrence of a User Event of Default, CCI shall be entitled to, after
any applicable grace period (i) terminate this Agreement without any further
obligation whatsoever; (ii) declare all remaining Monthly Fees due hereunder to
be immediately due and payable; (iii) cease providing Services until such User
Event of Default shall have been cured; and (iv) exercise any other remedies
available to it under this Agreement or under applicable law. All remedies
hereunder shall be cumulative.
8. CCI'S DEFAULT. CCI shall be deemed to have committed a default of this
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Agreement upon the occurrence of any of the following events (a "CCI Event
of Default"):
(a) CCI's failure to comply in any material respect with any term,
provision or condition of this Agreement, which failure shall not have
been cured by CCI within thirty (30) days of CCI's receipt of written
notice thereof from User alleging such a default; or
(b) CCI's filing a petition for bankruptcy, in any federal or state
proceeding, or having an involuntary petition filed against it in any
federal bankruptcy proceeding which petition shall not have been
dismissed within sixty (60) days of the filing thereof, or CCI becoming
insolvent or consenting to the appointment of a trustee or receiver, or
either or both is appointed for CCI; or
<PAGE>
(c) Any interruption or any series of interruptions caused by CCI operator
error, power outage or malfunction of RF equipment aggregating at least
fifty-three (53) minutes during any consecutive twelve (12) month
period occurs in the Program Feed; provided, however, that User shall
be entitled to a credit against the Monthly Fees in the amount of Two
and 50/100 Dollars ($2.50) for every five (5) minute period in which
the Services are completely or partially interrupted; or
(d) The occurrence of a CCI Event of Default under the terms of that
certain Installation Agreement (Phase I) or that certain Installation
Agreement (Phase II) between CCI and User, dated March 13, 1998 and
July ___, 1998, respectively, which by this reference are hereby made
integral parts hereof.
Upon the occurrence of a CCI Event of Default, User shall be entitled to (i)
terminate this Agreement; and (ii) exercise any other remedies available to it
under this Agreement or under applicable law. All remedies hereunder shall be
cumulative.
9. (Intentionally Omitted).
10. OWNERSHIP OF PROGRAM MATERIAL. As between User and CCI, User shall
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have and retain all right, title and interest in and exclusive control of
the Program Material (and all audio and video artwork, performing and
broadcast rights therein) provided to CCI for transmission and any copy of
the audio and video elements of the Program Material. CCI shall not
transmit, distribute, sell or otherwise use the Program Material or copies
thereof, or the audio or video elements thereof, except as expressly
authorized by User pursuant to this Agreement. CCI hereby warrants that it
shall use best efforts to ensure that no other person or entity will use
the Program Material provided by User or copies thereof for any purpose
other than transmission pursuant to this Agreement.
11. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) User represents and warrants to, and covenants and agrees with, CCI
that during the Term:
(i) The Program Material shall not include MPAA "X-rated" films or
any material which is to User's knowledge defamatory or contrary
to law;
(ii) No claim or litigation is pending or threatened with respect to
the Program Material or any element thereof;
(iii) User or third parties have paid (or will pay when due) all
residuals, reuse or other fees or compensation of any kind,
however denominated, which are due or may become due in respect
of the Program Material or any element thereof;
(iv) User shall comply with the rules, regulations, guidelines and
primers relating to the content of the Program Material of the
FCC and the Federal Trade Commission and state, federal and
local governmental agencies with jurisdiction over the content
of the Program Material;
(v) User has the right and authority to enter into this Agreement
and to perform fully its obligation hereunder; and
<PAGE>
(vi) As of the date of this Agreement: 1) User has not sought and has
no intention voluntarily to seek the protection of the
bankruptcy laws; 2) User has no present reason to believe that
any creditor or creditors of User have caused or presently
intend to cause User to become the subject of any proceeding
under the bankruptcy laws, and 3) User has no knowledge of any
state of facts that, if known to creditors of User, (A) would
cause User voluntarily to seek the protection of the bankruptcy
laws; or (B) might reasonably cause such creditor or creditor of
User to cause User to become the subject of any proceeding under
the bankruptcy laws.
(b) CCI represents and warrants to, and covenants and agrees with, User
that during the Term:
(i) CCI has and will maintain during the term of this Agreement all
rights, power, licenses, permits and authorizations (including,
but not limited to, those issued under the authority of federal,
state and local governments and governmental agencies) necessary
to enter into and perform the obligations of CCI under this
Agreement;
(ii) CCI shall comply with the rules and regulations, guidelines and
primers of the FCC, and the requirements of state, federal and
local governmental agencies with jurisdiction over the
transmission and broadcast of the Program Material and the
performance of CCI's obligations under this Agreement;
(iii) CCI has the right and authority to enter into this Agreement and
to perform fully its obligations hereunder;
(iv) As of the date of this Agreement: 1) CCI has not sought and has
no intention voluntarily to seek the protection of the
bankruptcy laws; 2) CCI has no present reason to believe that
any creditor or creditors of CCI have caused or presently intend
to cause CCI to become the subject of any proceeding under the
bankruptcy laws; and 3) CCI has no knowledge of any state of
facts that, if known to creditors of CCI, (A) would cause CCI
voluntarily to seek the protection of the bankruptcy laws; or
(B) might reasonably cause such creditor or creditor of CCI to
cause CCI to become the subject of any proceeding under the
bankruptcy laws;
(v) CCI shall use best efforts to coordinate its provision of Uplink
Services and operate in accordance with the requirements imposed
upon User in its sublease of transponder space from the Public
Broadcasting System (the "PBS Agreement") and in accordance with
the terms and conditions imposed by GE Americom. CCI has
reviewed the User Guide attached to the PBS Agreement and has
the facilities and expertise necessary to comply with the
requirements of such PBS Agreement;
(vi) CCI hereby warrants that the Services shall be free from defects
and performed in a workmanlike manner throughout the Term; and
<PAGE>
(vii) The advent of the year 2000 shall not cause the Services to be
provided in a manner significantly different than immediately
prior to January 1, 2000 at 12:01 a.m. and all Services
hereunder shall be uninterrupted.
12. LOSS OF TRANSPONDER SERVICE. In the event of a loss or preemption of
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User's transponder use rights and services or in the event of a loss of
User's transponder use for reasons of Force Majeure, as described in
PARAGRAPH 13 of this Agreement, User shall apply its reasonable efforts to
obtain rights to take service on another transponder within a reasonable
period of time, and the Monthly Fee shall be prorated to the date of
satellite or transponder loss . CCI acknowledges that User has a Restoral
Plan with the Public Broadcasting System and GE Americom . In the event
that the Restoral Plan is implemented, CCI shall, if requested by User,
cause User's remote antennas to be repeaked in accordance with Restoral
Plans , for such additional fee as CCI shall reasonably charge at the time
of repeaking.
13. FORCE MAJEURE. Neither User nor CCI shall be liable for any failure of
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performance hereunder due to causes beyond its control, including , but
not limited to, acts of God (including, without limitation, weather, fire,
flood, or other catastrophes); transportation delays; supplier delays;
change in the substance or application of any law, order or regulation of
any local, state or federal government having jurisdiction over CCI or
User or any instrumentality of any one or more of said governments;
insurrections, riots, wars, strikes, lockouts, and work stoppages. In the
event that a force majeure event occurs to either party, it shall be the
obligation of such party to immediately thereafter notify the other party
thereof and state the ramifications of such force majeure event and what
alternate arrangements such party intends to take as a result of such
force majeure event. The party claiming a force majeure event shall at
all times have the obligation to act promptly and reasonably to make
alternate arrangements so as to carry out the intent of this Agreement;
provided, however, that to the extent that such alternate arrangements
-------- -------
would increase the cost of such party hereunder, it shall not be obligated
to make such alternate arrangements unless the other party shall agree to
pay any increased cost occasioned thereby. Either party shall have the
right to terminate this Agreement in the event that a Force Majeure event
affecting the other party continues for a period in excess of thirty (30)
consecutive days.
14. INDEMNIFICATION.
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(a) User shall indemnify and hold harmless CCI from and against all
losses, liabilities, damages, costs and expenses, including reasonable
attorneys' fees and disbursements, incurred by CCI and arising out of
or in connection with: 1) any claims, actions, or proceedings arising
out of the content of the Program Material provided by User for
transmission by CCI, including, without limitation, if such Program
Material is determined to be obscene; 2) any claims, actions, or
proceedings arising out of any act or omission of User relating to the
use of the CCI Facility; 3) any claims, actions or proceedings arising
out of User's failure to have obtained all rights in the Program
Materials and in all literary, dramatic and musical material included
therein necessary for the transmission of the Program Materials; and
4) any breach or alleged breach of any representation, warranty,
covenant or agreement made herein by User.
<PAGE>
(b) CCI shall indemnify and hold harmless User from and against all
claims, losses, liabilities, costs and expenses, including reasonable
attorneys' fees and disbursements, incurred by User and arising out of
or in connection with: (1) any breach or alleged breach of any
representation, warranty, covenant or agreement made herein by CCI;
and (2) CCI's failure to comply with the PBS Agreement, including, but
not limited to, SECTION 8.7 thereof as in effect as of the date
hereof.
(c) In no event shall either party be liable to the other for incidental
or consequential damages or loss of anticipated profits.
(d) In the event that any person or entity shall make any claim or
institute any suit or proceeding against a party to which this
indemnity would apply, such party shall promptly notify the
indemnifying party in writing, and the indemnifying party shall
promptly assume, at its own cost and expense, the defense thereof;
provided, however, that indemnitee's failure to provide such notice
-------- -------
shall not affect this indemnity unless indemnitor has been materially
prejudiced by indemnitee's delay in providing such notice. If the
indemnitor has been so notified and is not diligently, continuously,
and satisfactorily pursuing such matter, the indemnitee may take such
action on behalf of itself and may, at its election, offset any costs
incurred as a result against any payments due hereunder or forward a
bill for such amount to the indemnitor, which shall be promptly
reimbursed.
15. ASSIGNMENT OF AGREEMENT. Neither party shall have the right to assign any
-----------------------
of its rights, duties, or obligations under this Agreement without the
prior written consent of the other party, which may not be unreasonably
withheld or delayed. Notwithstanding the foregoing, if User shall, during
the Term, sell all or substantially all of its assets, or merge or
consolidate with any other entity, then it shall have the right to assign
its rights hereunder and its successor shall be deemed to have
automatically assumed all of User's rights, duties and obligations
hereunder without the necessity of executing any further documentation,
provided that User shall nevertheless remain liable for the performance of
its obligations under the Agreement.
16. MODIFICATIONS. This Agreement shall not be modified, except by written
-------------
instrument duly executed by the authorized representatives of CCI and
User.
17. WAIVER. The failure of either CCI or User to object to or take action
------
with respect to any conduct of the other, which is in violation of the
terms of this Agreement, shall not be construed as a waiver of such
violation or breach, or of any prior or subsequent breach, violation or
wrongful conduct.
18. HEADINGS. The headings in this Agreement are solely for convenience and
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ease of reference and shall have no effect in interpreting the meaning of
any provision of this Agreement.
19. CHOICE OF LAW. This Agreement shall be construed in accordance with the
-------------
laws of the State of Georgia.
<PAGE>
20. BINDING EFFECT. This Agreement and its rights, privileges, duties and
--------------
obligations shall inure to the benefit of and be binding upon each of the
parties hereto, together with their respective successors and permitted
assigns.
21. NOTICES. Any notice required or permitted to be given under this
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Agreement shall be in writing and either shall be mailed by certified
mail, postage prepaid, return receipt requested, or sent by overnight air
courier service, or personally delivered to a representative of the
receiving party, or sent by telecopy (provided an identical notice is also
sent simultaneously by mail, overnight courier, or personal delivery as
otherwise provided in this PARAGRAPH 21). All such communications shall be
mailed, sent or delivered, addressed to the party for whom it is intended,
at its address set forth below:
If to User: College Television Network, Inc.
5784 Lake Forrest Drive, Suite 295
Atlanta, Georgia 30328
Attn: Pat Doran, C.F.O.
Telecopy: (404) 257-9517
with a copy to: Neil Dickson, Esq.
Morris, Manning & Martin, L.L.P.
Suite 1600/East Tower
Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Telecopy: (404) 365-9532
If to CCI: Crawford Communications, Inc.
535 Plasamour Drive
Atlanta, Georgia 30324
Attn: James L. Schuster, Vice President
Telecopy: (404) 873-0292
with a copy to: Wagner, Johnston & Rosenthal, P.C.
3340 Peachtree Street, N.E.
Suite 1200/Tower Place
Atlanta, Georgia 30326
Attn: Craig A. Wagner, Esq.
Telecopy: (404) 261-6779
Any communication so addressed and mailed shall be deemed to be given on the
earliest of (a) when actually delivered, (b) on the first business day after
deposit with an overnight air courier service, or on the third business day
after deposit in the United States mail, postage prepaid, in each case to the
address of the intended addressee, and any communication so delivered in person
shall be deemed to be given when received. If given by telecopy, a notice shall
be deemed given and received when the telecopy is transmitted to the party's
telecopy number specified above, confirmation of complete receipt is received by
the transmitting party during normal business hours or on the next business day
if not confirmed during normal business hours. Either party may designate a
change of address by written notice to the other by giving prior written notice
of such change of address.
<PAGE>
22. INSURANCE. The parties to this Agreement shall, at each party's sole
---------
expense, procure and maintain in effect the insurance policies and
coverages stated in EXHIBIT "C" and shall provide a certificate evidencing
-----------
such insurance to the other party, which certificate shall state that the
coverages noted thereon shall not be canceled, allowed to expire,
terminated, abridged or otherwise reduced in coverage without thirty (30)
days prior notice to the recipient of the certificate. All such insurance
shall be issued by companies lawfully authorized to issue such insurance
in the State of Georgia and shall be issued by insurance companies having
a "general policy holders rating" of no less than B+ and a "financial
rating" of X or better in the latest edition of "Best's Insurance Guide".
Each party shall, to the extent commercially reasonable to do so, cause
the insurer to waive any right of subrogation it may have against the
other party.
23. COUNTERPARTS. This Agreement may be executed in counterparts, which shall
------------
together constitute one and the same agreement.
24. ENTIRE AGREEMENT. This Agreement represents the full and complete
----------------
agreement between the parties hereto with respect to the subject matter
contained herein and supersedes all prior written or oral agreements
between said parties with respect to said subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers as
of the day and year first above written.
USER:
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Patrick Doran
-----------------
Its: CFO
CCI:
CRAWFORD COMMUNICATIONS, INC.
By: /s/ James Lee Shuster
---------------------
Its: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THE SEPTEMBER 30,1998 REPORT FILED
ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,396,933
<SECURITIES> 0
<RECEIVABLES> 2,135,625
<ALLOWANCES> 25,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,974,147
<PP&E> 8,917,374
<DEPRECIATION> 4,276,424
<TOTAL-ASSETS> 10,267,424
<CURRENT-LIABILITIES> 2,105,233
<BONDS> 0
0
0
<COMMON> 71,326
<OTHER-SE> 7,636,130
<TOTAL-LIABILITY-AND-EQUITY> 10,267,424
<SALES> 5,850,415
<TOTAL-REVENUES> 6,146,237
<CGS> 0
<TOTAL-COSTS> 12,473,875
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,327,638)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> (.79)
</TABLE>
