Nostalgia Network Inc – ‘PREM14A’ on 2/2/00

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     The Nostalgia Network Preliminary Proxy Statement    122    643K 

Document Table of Contents

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 

Filed by the Registrant [X]                                                     

Filed by a Party Other than the Registrant [ ]                                  

Check the appropriate Box:                                                      

                                                        [Enlarge/Download Table]
                                                                                                   
[X]  Preliminary Proxy Statement                      [ ]  Confidential, for use of Commission only
[ ]  Definitive Proxy Statement                       (as permitted by Rule 14a-6(e)(2))           
[ ]  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)

Payment of Filing Fee (Check the appropriate box):                              

[ ]  No fee required.                                                           

[X]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.   

CALCULATION OF FILING FEE 

                                                        [Enlarge/Download Table]

---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                         AGGREGATE NUMBER OF                                                     
                                                         SECURITIES TO WHICH  PER UNIT PRICE OR OTHER   PROPOSED MAXIMUM         
           TITLE OF EACH CLASS OF SECURITIES                 TRANSACTION        UNDERLYING VALUE OF    AGGREGATE VALUE OF        
       TO WHICH FILING TRANSACTION APPLIES(1)(2)             APPLIES(1)           TRANSACTION(1)         TRANSACTION(1)   AMOUNT 
-------------------------------------------------------- ------------------- ------------------------- ------------------ -------
                                                                                                                                 
Common Stock............................................     20,274,411                $0.07             $1,419,208.77    $283.85
Preferred Stock.........................................          3,250                $7.00             $   22,750.00    $  4.55
Total...................................................             --                   --             $1,441,958.77    $288.40
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------

(1) Estimated solely for the purpose of computing the amount of the filing fee  
    pursuant to Rule 0-11 under the Securities Exchange Act of 1934, as amended.

(2) The fee was computed in accordance with Rule 0-11(c)(1)(i) based upon the   
cash consideration to be paid to security holders.                      

[ ]  Fee paid previously with preliminary materials.                            

[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
  0-11(a)(2) and identify the filing for which the offsetting fee was paid
    previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.                   

(1)  Amount Previously Paid: $                                        

       -------------------------------------------------------------------------

(2)  Form, Schedule or Registration Statement No.:                    

       -------------------------------------------------------------------------

(3)  Filing Party:                                                    

       -------------------------------------------------------------------------

(4)  Date Filed:                                                      

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THE NOSTALGIA NETWORK, INC. 
650 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20001
------------------

NOTICE OF SPECIAL MEETING TO BE HELD ON 
            , 2000
------------------

To the Stockholders of                                                          
The Nostalgia Network, Inc.:                                                    

     Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of The Nostalgia Network, Inc., a Delaware corporation (the           
"Company"), will be held on             , 2000, 11:00 a.m., local time, at 650  
Massachusetts Avenue, N.W., Washington, D.C., for the following purposes:       

        1.  to approve the merger of NNI Acquisition Corporation, a Delaware
corporation ("Acquisition"), with and into the Company pursuant to an 
Agreement and Plan of Merger dated as of January 11, 2000 (the "Merger
Agreement"), between the Company and Acquisition; and                 

       2.  to transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.         

The proposed merger is more fully described in the accompanying Proxy 
Statement and Appendices thereto which are part of this Notice.                 

The Company's Board of Directors has fixed the close of business on   
February 11, 2000 as the record date (the "Record Date") for the determination  
of stockholders entitled to notice of, and to vote at, the Special Meeting or   
any adjournments or postponements thereof. Only stockholders of record on the   
Record Date will be entitled to notice of, and to vote at, the Special Meeting  
or any adjournments or postponements thereof. A list of stockholders of record  
as of the Record Date will be available for inspection at the offices of the    
Company at 650 Massachusetts Avenue, N.W., Washington, D.C. at least ten days   
prior to the Special Meeting.                                                   

Pursuant to Section 262 of the Delaware General Corporation Law,      
stockholders of the Company are entitled to appraisal rights in connection with 
the proposed merger.                                                            

     If you plan to attend the Special Meeting, please notify the undersigned so
that identification can be prepared for you. Whether or not you plan to attend  
the Special Meeting, please execute, date and promptly return the enclosed      
proxy. A return envelope is enclosed for your convenience and requires no       
postage for mailing in the United States. If you attend the Special Meeting, you
may withdraw your proxy and vote in person.                                     

                                       By Order of the Board of Directors,

                                      /s/ WILLARD R. NICHOLS
                                          --------------------------------------
                                         Vice President, General Counsel and
                                         Secretary

, 2000                                                  

YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE 
ENCLOSED PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE.                     

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THE NOSTALGIA NETWORK, INC. 
650 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20001
(202) 289-6633

SPECIAL MEETING OF STOCKHOLDERS 

            , 2000

PROXY STATEMENT 
------------------

 This Proxy Statement is being provided to stockholders of The Nostalgia
Network, Inc., a Delaware corporation (the "Company"), in connection with the   
solicitation of proxies by the Company's Board of Directors (the "Board of      
Directors") for use at a Special Meeting of Stockholders (the "Special Meeting")
to be held on             , 2000 at 11:00 a.m., local time, at 650 Massachusetts
Avenue, N.W., Washington, D.C., and any adjournments or postponements thereof.  

    At the Special Meeting, common and preferred stockholders of record of the
Company as of the close of business on February 11, 2000 (the "Record Date")    
will be asked to consider and vote upon a proposal (the "Merger Proposal") to   
approve the merger of NNI Acquisition Corporation, a Delaware corporation       
("Acquisition"), with and into the Company (the "Merger") pursuant to an        
Agreement and Plan of Merger dated as of January 11, 2000 (the "Merger          
Agreement"), between the Company and Acquisition. Acquisition is an affiliate of
the Company and is wholly-owned by Concept Communications, Inc., a Delaware     
corporation ("Concept"), and Crown Communications Corporation, a Delaware       
corporation ("Crown"). Concept is an affiliate of the Company and majority-owned
by Crown. Crown is an affiliate of the Company and a wholly-owned subsidiary of 
Crown Capital Corporation, a Delaware corporation ("Capital," and collectively  
with Crown, Concept and Acquisition, the "Concept Group"). The Concept Group is 
the beneficial owner of 70.3% of the issued and outstanding shares of the       
Company's common stock, presently par value $.04 per share and, pursuant to an  
amendment to the Company's Certificate of Incorporation under the Merger        
Agreement, to be $0.01 per share following the Merger (the "Common Stock") and  
76.9% of the issued and outstanding shares of the Company's preferred stock, par
value $2.00 per share (the "Preferred Stock").                                  

  Upon consummation of the Merger, the Company will become wholly-owned by
Crown and Concept; the separate corporate existence of Acquisition will         
terminate; each issued and outstanding share of Common Stock, other than shares 
of Common Stock owned by Acquisition or for which appraisal rights have been    
exercised, will be converted into the right to receive $0.07; each issued and   
outstanding share of Preferred Stock, other than shares of Preferred Stock owned
by Acquisition or for which appraisal rights have been exercised, will be       
converted into the right to receive $7.00; the issued and outstanding shares of 
Common Stock and Preferred Stock owned by Acquisition will be cancelled; and    
each issued and outstanding share of the common stock, par value $.01 per share 
of Acquisition (the "Acquisition Common Stock") will be converted into one share
of Common Stock. The Merger constitutes a "going private" transaction pursuant  
to Section 13(e) of the Securities Exchange Act of 1934 (the "Exchange Act") and
Exchange Act Rule 13e-3. Following the Merger, the Common Stock (all of which   
will be owned by Crown and Concept) no longer will be publicly traded, and the  
Company no longer will be required to file periodic and other reports with the  
United States Securities and Exchange Commission (the "Commission") and will    
formally terminate its reporting obligations under the Exchange Act.            

     PURSUANT TO THE DELAWARE GENERAL CORPORATION LAW (THE "DGCL"), STOCKHOLDERS
OF THE COMPANY ARE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER.  
SEE "APPRAISAL RIGHTS."                                                         

  NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE PROPOSED MERGER, PASSED UPON THE  
MERITS OR FAIRNESS OF THE TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY  
OF THE DISCLOSURE IN THIS PROXY STATEMENT, AND ANY REPRESENTATION TO THE        
CONTRARY IS A CRIMINAL OFFENSE.                                                 

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    Because the Merger involves affiliates of the Company, and a member of the
Board of Directors has a conflict of interest in connection therewith, the terms
of the Merger and the Merger Agreement were negotiated on behalf of the Company 
by a special committee of the Board of Directors consisting entirely of         
independent directors of the Company (the "Special Committee"). For a           
description of these conflicts, see "Conflicts of Interest."                    

   The Common Stock is listed for quotation on the NASDAQ OTC Bulletin Board
(the "Bulletin Board") under the symbol "NNET". On             , 2000 the last  
reported sale price for the Common Stock on the Bulletin Board was $     per    
share.                                                                          

  All information concerning the Company contained in this Proxy Statement
has been furnished by the Company, and certain information concerning           
Acquisition, Capital, Crown and Concept contained in this Proxy Statement has   
been furnished by Acquisition, Capital, Crown or Concept, respectively. No      
person is authorized to make any representation with respect to the matters     
described in this Proxy Statement other than those contained herein, and if     
given or made, must not be relied upon as having been authorized by the Company,
Acquisition, Capital, Crown, Concept or any other person.                       

------------------

     THIS PROXY STATEMENT AND THE ACCOMPANYING PROXY CARD ARE FIRST BEING MAILED
OR DELIVERED TO THE STOCKHOLDERS OF THE COMPANY ON OR ABOUT        , 2000.      
------------------

THE DATE OF THIS PROXY STATEMENT IS             , 2000. 

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SUMMARY TERM SHEET

 The following summarizes the most material terms of our proposed merger
with NNI Acquisition Corporation. This summary may not contain all the          
information you should consider before voting on the proposed merger. You should
read the entire Proxy Statement and all of its Appendices before voting on the  
proposed merger.                                                                

     - Crown Communications Corporation and Concept Communications, Inc. propose
   to purchase all of the shares of our Common Stock and Preferred Stock
except for those owned by NNI Acquisition Corporation which is    
wholly-owned by Crown and Concept.                                

 - Crown and Concept are offering $0.07 a share for the Common Stock and
$7.00 a share for the Preferred Stock.                            

     - This is a "going-private" transaction. The shares of our Common Stock and
      Preferred Stock owned by Acquisition will be cancelled and the shares of
Acquisition, all of which are owned by Crown and Concept, will be 
converted into shares of our Common Stock.                        

    - As a result of the merger, you no longer will have in interest in any of
       our future earnings or growth, we no longer will be a public company, the
     Common Stock will no longer be traded on the Nasdaq Bulletin Board, and
Crown and Concept will be our only stockholders.                  

 - The merger has been considered by a Special Committee of our Board of
    Directors consisting entirely of independent directors who are not our
       officers or employees or officers, directors or employees of Acquisition,
Crown or Concept.                                                 

     - The Special Committee retained an independent financial advisor to assist
      it in considering the merger and which provided to the Special Committee
its written opinion that the terms of the merger are fair, from a 
financial point of view, to our public stockholders.              

- Based upon all of the factors it considered, including the written  
fairness opinion of its financial advisor, the Special Committee  
     concluded that the merger is fair to, and in the best interests of, our
    company and our stockholders and recommended to our Board of Directors
that the merger be approved.                                      

- Based upon the recommendation of the Special Committee, our Board of
      Directors, with an interested director not participating in any meetings
      concerning, or voting on, the merger unanimously has approved the merger
as in the best interests of our company and our stockholders and  
recommends that you approve the merger.                           

   - Under Delaware corporate law, the merger must be approved by a majority
     of all of our shares entitled to vote on the merger. Our certificate of
       incorporation entitles each share of Preferred Stock to 100 votes on each
     matter submitted to the holders of Common Stock and also to approve the
merger voting separately.                                         

    - Acquisition has informed the Company that it will vote all of its shares
    of Common Stock and Preferred Stock "FOR" the Merger. Acquisition owns
       enough shares of Common Stock and Preferred Stock that its vote "FOR" the
merger will be sufficient to ensure that the merger is approved.  

 - Delaware law entitles stockholders who do not vote for the merger and
      fulfill certain other procedural requirements to a judicial appraisal of
  their shares. These rights and procedures are explained in the Proxy
Statement.                                                        

- The merger will occur pursuant to written merger agreement which is 
    described in, and attached as Appendix A to, this Proxy Statement. The
       merger agreement contains customary representations and warranties of the
      parties and conditions to the obligations of the parties to complete the
     merger. You should read the description of the merger agreement in this
Proxy Statement and the merger agreement carefully.               

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AVAILABLE INFORMATION 

  The Company is subject to the informational requirements of the Exchange
Act, pursuant to which it files reports and other information with the          
Commission. Such reports and other information may be inspected and copied at   
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's  
Regional Offices at 13th Floor, 7 World Trade Center, New York, New York 10048, 
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois     
60661, and copies may be obtained at prescribed rates from the Public Reference 
Section of the Commission at its principal office in Washington, D.C. The       
Commission also maintains an internet web site that contains periodic and other 
reports, proxy and information statements and other information regarding       
registrants that file electronically with the Commission, including the Company.
The address of the Commission's web site is http://www.sec.gov.                 

    None of Acquisition, Capital, Concept or Crown is subject to the reporting
requirements of Section 13 or Section 15 of the Exchange Act.                   

FORWARD LOOKING STATEMENTS

This Proxy Statement contains certain forward-looking statements which
represent the Company's expectations or beliefs, including, but not limited to, 
statements concerning industry performance, regulatory environment and the      
Company's operations, performance, financial condition, plans, growth and       
strategies. Any statements contained in this Proxy Statement which are not      
statements of historical fact may be deemed to be forward-looking statements.   
Without limiting the generality of the foregoing, words such as "may," "will,"  
"expect," "anticipate," "intend," "could," "estimate" or "continue," or the     
negative or other variations thereof or comparable terminology are intended to  
be forward-looking statements. These statements by their nature involve         
substantial risks and uncertainties, certain of which are beyond the Company's  
control, and actual results may differ materially depending on a variety of     
important factors, many of which are beyond the control of the Company.         

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
AVAILABLE INFORMATION.......................................     4
SUMMARY.....................................................     7
COMPARATIVE PER SHARE MARKET INFORMATION....................    12
THE SPECIAL MEETING.........................................    13
  General...................................................    13
  Matters to Be Considered..................................    13
  Recommendation of the Board of Directors..................    13
  Record Date; Shares Entitled to Vote; Quorum..............    13
  Proxies; Proxy Solicitation...............................    13
  Vote Required.............................................    14
  Effects of Abstentions and Broker Non-Votes...............    14
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL           
  OWNERS....................................................    15
THE MERGER..................................................    16
  Background................................................    16
  Opinion of the Financial Advisor to the Special                 
     Committee..............................................    17
  Reasons for the Merger; Recommendations of the Special          
     Committee and the Board of Directors...................    22
  Conflicts of Interest.....................................    24
  Regulatory Approval.......................................    24
  Effect of the Merger on the Rights of Existing                  
     Stockholders...........................................    24
  Appraisal Rights..........................................    25
  Accounting Treatment......................................    27
THE MERGER AGREEMENT........................................    28
  Terms of the Merger.......................................    28
  Indemnification...........................................    28
  Effective Time of the Merger..............................    29
  Representations and Warranties............................    29
  Covenants.................................................    29
  Conditions to the Merger..................................    30
  Amendment; Waiver; Termination............................    30
  Expenses and Fees.........................................    31
FEDERAL INCOME TAX CONSIDERATIONS...........................    31
CERTAIN TRANSACTIONS AND RELATIONSHIPS......................    33
THE CONCEPT GROUP...........................................    35
BUSINESS OF THE COMPANY.....................................    36
  General...................................................    36
  Description of Business...................................    36
  Affiliated Cable Systems and Subscribers..................    36
  Advertising...............................................    37
  Programming...............................................    37
  Patents, Trademarks, Licenses.............................    39
  Competition...............................................    39
  Government Regulation.....................................    40
  Employees.................................................    41
  Properties................................................    41
  Legal Proceedings.........................................    41
SELECTED FINANCIAL DATA.....................................    42

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                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION       
AND RESULTS OF OPERATIONS...................................    43
  General...................................................    00
  Results of Operations.....................................    43
  Liquidity and Capital Resources...........................    45
INDEPENDENT ACCOUNTANTS.....................................    51
OTHER MATTERS...............................................    51
ANNUAL REPORT AND FORM 10-K.................................    51
STOCKHOLDER PROPOSAL FOR 2000 ANNUAL MEETING................    52
[INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............]     
INDEX TO FINANCIAL STATEMENTS...............................   F-1
MERGER AGREEMENT (AND ATTACHED EXHIBITS)....................   A-1
FAIRNESS OPINION OF CHATSWORTH SECURITIES, LLC..............   B-1
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.........   C-1

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SUMMARY 

  The following is a summary of certain information contained elsewhere in
this Proxy Statement. This summary does not purport to be complete and is       
qualified in its entirety by, and is subject to, the more detailed information  
incorporated by reference and contained elsewhere in this Proxy Statement and   
the Appendices hereto. Stockholders are urged to read the Proxy Statement and   
Appendices in their entirety before voting on the Merger Proposal described     
herein.                                                                         

     THE SPECIAL MEETING

Date, Time and Place..........   The Special Meeting will be held on           ,
                        2000 at 11:00 a.m., local time, at 650
                              Massachusetts Avenue, N.W., Washington, D.C.
                       See "The Special Meeting -- General."

Record Date...................   Holders of record of Common Stock and Preferred
                               Stock as of the close of business on February
                             11, 2000, are entitled to notice of, and to
                             vote at, the Special Meeting. On that date,
                             20,274,411 shares of Common Stock and 3,250
                           shares of Preferred Stock were issued and
                            outstanding. Each share of Common Stock is
                                legally entitled to one vote on each matter to
                                 be acted upon or which may properly come before
                                the Special Meeting. Pursuant to the Company's
                                Certificate of Incorporation (the "Certificate
                            of Incorporation"), the Preferred Stock is
                                 entitled to be voted on any matter submitted to
                                a vote of the holders of Common Stock and each
                             share of Preferred Stock is entitled to 100
                            votes on each such matter. Pursuant to the
                             Certificate of Incorporation, the Preferred
                               Stock also is entitled to be voted separately
                          on the Merger Proposal. See "The Special
                            Meeting -- Record Date; Shares Entitled to
Vote."        

Matters to be Considered......   At the Special Meeting, the stockholders of the
                                 Company will be asked to consider and vote upon
                              (i) the Merger Proposal; and (ii) such other
                          business as may properly come before the
                        Special Meeting or any adjournments or
                         postponements thereof. See "The Special
                       Meeting -- Matters to be Considered."

Vote Required.................   The DGCL requires the Company to submit the    
                         Merger Proposal to its stockholders for
                             approval. As of the Record Date, 20,274,411
                            shares of Common Stock and 3,250 shares of
                                 Preferred Stock were issued and outstanding. In
                            accordance with the DGCL, the standard for
                      approving the Merger Proposal is the
                               affirmative vote of a majority of outstanding
                                 shares of capital stock entitled to be voted on
                              the Merger Proposal (including the Preferred
                              Stock voted with 100 votes for each share of
                                 Preferred Stock). The vote of a majority of the
                              Preferred Stock, voting as a separate class,
                        also is required to approve the Merger
                              Proposal. Acquisition, which owns 14,180,427
                            shares of Common Stock and 2,500 shares of
                               Preferred Stock and which is not precluded by
                                the Merger Agreement from voting its shares of
                               Common Stock or Preferred Stock on the Merger
                           Proposal has informed the Company that it
                             intends to vote all of its shares of Common
                            Stock and Preferred Stock "FOR" the Merger
                                Proposal. Acquisition owns a sufficient number
                               of shares of Common Stock and Preferred Stock
                            to ensure approval of the Merger Proposal.

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REASONS FOR THE MERGER/SPECIAL FACTORS

Crown and Concept.............   As the majority stockholders of the Company,   
                                and source of substantially all of its working
                           capital, the Concept Group has decided to
                              pursue the Merger to protect more adequately
                                 its investment in the Company. In reaching this
                            decision, the Concept Group considered the
                                substantial expense of maintaining the Company
                                 as a publicly held entity including the ongoing
                                expense of compliance with reporting and other
                             Exchange Act obligations as compared to the
                                minor benefits of the extremely limited public
                                 market for the Common Stock; the historical and
                                recent volume and trading market prices of the
                                Common Stock and the substantial premium which
                            will be paid to holders of Common Stock in
                             consideration of the Merger compared to the
                               prices at which the Common Stock traded prior
                        to the announcement of the Merger; the
                             financial condition, results of operations,
                        business and prospects of the Company,
                     including its aggregate net loss of
                              approximately $30.0 million since January 1,
                               1998; the enhanced likelihood of attracting a
                                 strategic alliance as a privately held company;
                               and the Company's outstanding indebtedness to
                               Crown and Concept. See "The Merger -- Reasons
  for the Merger."

Recommendations of the                                                          
Company's Special Committee                                                     
and the Board of                                                            
Directors...................   Because the Merger is among affiliates, and a
                                member of the Company's Board of Directors has
                                 a conflict of interest in connection therewith,
                        the terms of the Merger and the Merger
                            Agreement were negotiated on behalf of the
                        Company by the Special Committee which
                                consisted entirely of independent directors of
                               the Company who are not members of management
                           or employees of the Company, Acquisition,
                                 Capital, Crown or Concept, or their affiliates.
                               The Special Committee is a standing committee
                                of the Board of Directors consisting of Robert
                        J. Wussler and S. Robert Lichter which
                                 addresses matters involving potential conflicts
                              of interest among the Company, its officers,
                            directors and/or stockholders. The Special
                               Committee retained Chatsworth Securities, LLC
                                ("Chatsworth") as its financial advisor and to
                                 deliver a written opinion as to the fairness to
                              the Company's stockholders, from a financial
                                point of view, of the consideration to be paid
                              to the Company's stockholders in the Merger.
                             See "The Merger -- Opinion of the Financial
                          Advisor to the Special Committee." After
                              careful consideration, the Special Committee
                          has determined the Merger and the Merger
                                Agreement to be fair and in the best interests
                             of the Company and its stockholders and has
                         unanimously recommended to the Board of
                          Directors that the Merger and the Merger
                               Agreement be approved. The Board of Directors
                            (with an interested director not attending
                                meetings of the Board of Directors concerning,
                        or voting on, the Merger or the Merger
                   Agreement), after considering the
                              recommendation of the Special Committee, has
                                unanimously approved the Merger and the Merger
                                Agreement and recommends that the stockholders
                           of the Company approve the Merger and the
   Merger Agreement.

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                              In concluding that the Merger is in the best
                                interests of the Company and its stockholders,
                        the Special Committee and the Board of
                              Directors considered the fairness opinion of
                            Chatsworth; the premium represented by the
                           consideration to be paid to the Company's
                                stockholders as compared to the historic price
                                 of the Common Stock from January 1, 1998 to the
                             date of the announcement of the Merger; the
                               financial condition and results of operations
                         of the Company, including its aggregate
                                 operating losses of approximately $30.0 million
                             since January 1, 1998; the inability of the
                               Company to raise equity and debt capital from
                        conventional sources and the Company's
                            resulting reliance on Crown and Concept to
                              provide working capital; and the lack of any
                                assurance that Crown or Concept would continue
                                to provide such working capital to the Company
                       under current circumstances. See "The
                   Merger -- Reasons for the Merger;
                              Recommendations of the Special Committee and
          the Board of Directors."

Opinion of Financial                                                            
Advisor.......................   Chatsworth has delivered to the Board of       
                              Directors its written opinion, dated October
                                 18, 1999, to the effect that, as of the date of
                                 its opinion and subject to certain assumptions,
                                qualifications and limitations stated therein,
                     the consideration to be paid to the
                                 stockholders of the Company in consideration of
                               the Merger is fair to the stockholders from a
                               financial point of view. On January 27, 2000,
                             Chatsworth reconfirmed its fairness opinion
                                 based upon information as of December 31, 1999.
                         A copy of Chatsworth's October 18, 1999
                                opinion, which states its assumptions, matters
                         considered and limits of its review, is
                                attached to this Proxy Statement as Appendix B
                              and should be read in its entirety. See "The
                               Merger -- Opinion of the Financial Advisor to
         the Special Committee."

Effects of the Merger.........   As a result of the Merger, the Company will    
                                 become privately held and wholly-owned by Crown
                                and Concept, and the Company's stockholders no
                         longer will have an equity interest, or
                               participate, in any future earnings or growth
                                 of the Company; the Common Stock no longer will
                             be publicly traded on the Bulletin Board or
                          otherwise; the Company no longer will be
                             subject to the periodic reporting and other
                          obligations of the Exchange Act; and the
                              Company will terminate its registration with
                        the Commission under the Exchange Act.

THE MERGER    

NNI Acquisition Corporation...   Acquisition is a Delaware corporation, an      
                                 affiliate of the Company and is wholly-owned by
                              Crown and Concept. Acquisition is the record
                                owner of 14,180,427 shares of Common Stock and
                               2,500 shares of Preferred Stock which are its
                          sole substantial assets. Acquisition was
                              incorporated for the purposes of owning such
                                shares of Common Stock and Preferred Stock and
                                to facilitate the Merger and has not conducted
                                any business or engaged in any other activity.
                               Upon consummation of the Merger, the separate
                         corporate existence of Acquisition will
terminate.    

The Consideration.............   At the effective time of the Merger, each      
                               issued and outstanding share of Common Stock,
                   other than shares of Common Stock

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                             owned by Acquisition or for which appraisal
                               rights have been exercised, will be converted
                              into the right to receive $0.07; each issued
                                 and outstanding share of Preferred Stock, other
                         than shares of Preferred Stock owned by
                                Acquisition or for which appraisal rights have
                            been exercised, will be converted into the
                        right to receive $7.00; the issued and
                        outstanding shares of Common Stock and
                              Preferred Stock owned by Acquisition will be
                                cancelled and the separate corporate existence
                               of Acquisition will terminate; and each share
                               of Acquisition Common Stock will be converted
                               into a share of Common Stock. See "The Merger
                    Agreement -- Terms of the Merger."

Effective Time of the                                                           
Merger........................   Promptly following the satisfaction or waiver  
                              (where permissible) of the conditions of the
                            Merger, the Merger will be consummated and
                              become effective on the date and at the time
                             the required certificate of merger is filed
                              with the Secretary of State of Delaware (the
                                 "Effective Time"). See "The Merger Agreement --
                Effective Time of the Merger."

Conditions of the Merger......   The Merger is subject to the satisfaction or   
                               waiver (where permissible) on or prior to the
                               closing date of certain conditions to closing
                             set forth in the Merger Agreement. See "The
                      Merger -- Conditions to the Merger."

Termination...................   The Merger Agreement may be terminated at any  
                           time prior to the Effective Time, whether
                               before or after approval of the Merger by the
                           Company's stockholders, by mutual written
                               consent of the Company and Acquisition, or by
                            either of the Company or Acquisition under
                             certain circumstances, including if (i) the
                                required vote of the Company's stockholders is
                                 not obtained or (ii) the Effective Time has not
                               occurred on or before June 30, 2000. See "The
                     Merger Agreement -- Termination and
Abandonment." 

Tax Treatment of the Merger...   Stockholders will be taxed on receipt of the   
                              $0.07 per share of Common Stock and/or $7.00
                             per share of Preferred Stock if, and to the
                                extent that, the amount received exceeds their
                                tax basis in the Common Stock and/or Preferred
                          Stock, respectively. Determining the tax
                               consequences of the Merger can be complicated
                           and stockholders should consult their tax
                                 advisors to understand fully the tax effects of
                     the Merger. See "Federal Income Tax
                                 Considerations -- Tax Treatment of the Merger."

Accounting Treatment..........   The Merger will be accounted for under the     
                             purchase method of accounting in accordance
                               with generally accepted accounting principles
                         ("GAAP"). See "The Merger -- Accounting
Treatment."   

Business of the Company.......   The Company has agreed that, prior to the      
                              Effective Time or the earlier termination of
                              the Merger Agreement, except as permitted by
                          the Merger Agreement, it will pursue its
                              business in the ordinary course and will not
                         engage in certain extraordinary actions
                             specified in the Merger Agreement. See "The
                              Merger Agreement -- Covenants -- Business of
the Company." 

Management of the Company                                                       
Following the Merger........   There will be no change in the Board of      
                            Directors or the executive officers of the
                          Company as a result of the Merger. It is
anticipated   

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                             that following the Merger, the business and
                             operations of the Company will be continued
                              substantially as currently conducted for the
                               immediate future. Following the Merger, Crown
                                and Concept intend to continue to evaluate the
                                 business and operations of the Company and take
                              such actions they deem appropriate under the
                                 circumstances then existing. Although there are
                                currently no definitive plans or agreements in
                                place, Crown and Concept will continue to seek
                                 material strategic alliances for the Company in
                             the form of joint ventures, partnerships or
                           other business combinations following the
Merger.       

Conflicts of Interests........   Dong Moon Joo, a member of the Board of        
                                 Directors of the Company, is a director and the
                            President of each of Acquisition, Capital,
                         Concept and Crown, including serving as
                              chairman of the Board of Directors of Crown,
                               and may have interests in connection with the
                             Merger that are in addition to, or conflict
                    with, those of the Company and its
                             stockholders. Because of his positions with
                              Acquisition, Capital, Concept and Crown, Mr.
                             Joo did not attend meetings of the Board of
                                 Directors concerning, or vote on, the Merger or
                         the Merger Agreement. See "Conflicts of
Interest."    

Regulatory Matters............   No material regulatory approval is required to 
                       effect the Merger. See "The Merger --
      Regulatory Matters."

Appraisal Rights..............   Holders of Common Stock and Preferred Stock are
                              entitled to appraisal rights under the DGCL.
                                The Merger Agreement provides that a condition
                                to the obligation of Acquisition to consummate
                             the Merger is that holders of not more than
                       five percent (5.0%) of the issued and
                        outstanding shares of Common Stock and
                            Preferred Stock, on an as converted basis,
                             shall have exercised appraisal rights. This
                                condition is subject to waiver by Acquisition.
                          See "The Merger -- Appraisal Rights" and
"Appendix C." 

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COMPARATIVE PER SHARE MARKET INFORMATION

During 1999, the Common Stock was traded on the Bulletin Board. The   
following table sets forth, for each quarter during 1999 and 1998, the high ask 
and low bid quotations for the Common Stock as reported on the Bulletin Board.  
These quotations are representative of prices between dealers, do not include   
retail markups, markdowns or commissions and may not represent actual           
transactions.                                                                   

                                                                [Download Table]

                                                                COMMON STOCK    
                                                             -------------------
                                                             HIGH ASK    LOW BID
                                                             --------    -------
                                                                                
1999                                                                            
----                                                                            
First Quarter...............................................  $0.27       $0.01 
Second Quarter..............................................   0.11        0.05 
Third Quarter...............................................   0.10        0.05 
Fourth Quarter..............................................   0.10        0.03 

1998                                                                            
----                                                                            
First Quarter...............................................   0.06        0.04 
Second Quarter..............................................   0.05        0.03 
Third Quarter...............................................   0.05        0.02 
Fourth Quarter..............................................   0.04        0.01 

 As of February 11, 2000, there were approximately                record
holders of the Company's Common Stock.                                          

The Company has not paid a dividend since its inception and does not  
anticipate paying a dividend on its Common Stock or Preferred Stock in the      
foreseeable future.                                                             

     On October 20, 1999, the last full trading day prior to announcement of the
proposed Merger, the last reported sale price per share of Common Stock on the  
Bulletin Board was $0.05. On                , 2000 the last reported sale price 
per share of Common Stock on the Bulletin Board was $          .                

As of September 30, 1999, the book value per share of the Company was 
($3.81).                                                                        

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THE SPECIAL MEETING 

GENERAL                                                                         

This Proxy Statement is being furnished to holders of Common Stock and
Preferred Stock in connection with the solicitation of proxies by the Board of  
Directors for use at the Special Meeting to be held on                2000,     
11:00 a.m., local time, at 650 Massachusetts Avenue, N.W., Washington, D.C., and
at any adjournments or postponements thereof. This Proxy Statement, the attached
Notice of the Special Meeting and the accompanying proxy card are first being   
mailed to stockholders of the Company on or about             , 2000.           

MATTERS TO BE CONSIDERED                                                        

 At the Special Meeting, holders of record of Common Stock and Preferred
Stock on the Record Date will consider and vote upon (i) the Merger of          
Acquisition with and into the Company pursuant to which the Company will become 
wholly-owned by Crown and Concept; and (ii) such other business as may properly 
come before the Special Meeting or any adjournments or postponements thereof.   

RECOMMENDATION OF THE BOARD OF DIRECTORS                                        

  Upon the recommendation of the Special Committee, the Board of Directors
(with an interested director abstaining) has unanimously approved the Merger and
the Merger Agreement, having concluded that the Merger and the Merger Agreement 
are fair to, and in the best interests of, the Company and its stockholders. The
Board of Directors (with Mr. Joo, the interested director abstaining)           
unanimously recommends that stockholders of the Company vote "FOR" the Merger   
Proposal. See "The Merger -- Reasons for the Merger; Recommendation of the      
Special Committee and the Board of Directors."                                  

RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM                                    

     The Board of Directors has fixed the close of business on February 11, 2000
as the Record Date for determining the holders of shares of Common Stock and    
Preferred Stock who are entitled to notice of, and to vote at, the Special      
Meeting. As of the Record Date, 20,274,411 shares of Common Stock at 3,250      
shares of Preferred Stock were issued and outstanding and held of record by     
approximately                stockholders. The holders of record on the Record  
Date of shares of Common Stock are entitled to one vote per share of Common     
Stock and the holders of record of shares of Preferred Stock are entitled to    
vote with the Common Stock and to 100 votes for each share of Preferred Stock.  
In addition to being entitled to be voted with the Common Stock, pursuant to the
Certificate of Incorporation, approval of the Merger requires the affirmative   
vote of a majority of the issued and outstanding shares of Preferred Stock      
voting separately as a class. The Company has determined that pursuant to the   
DGCL and the Company's Bylaws, the presence of holders of shares representing a 
majority of the outstanding shares of Common Stock and Preferred Stock entitled 
to be voted, whether in person or by properly executed proxy, is necessary to   
constitute a quorum for the transaction of business at the Special Meeting.     
Under the DGCL, abstentions and "broker non-votes" (i.e., proxies from brokers  
or nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to a matter with   
respect to which the brokers or nominees do not have discretionary power to     
vote) will be treated as present for purposes of determining the presence of a  
quorum.                                                                         

PROXIES; PROXY SOLICITATION                                                     

     Shares of Common Stock represented by properly executed proxies received at
or prior to the Special Meeting that have not been revoked will be voted at the 
Special Meeting in accordance with the instructions indicated on the proxies.   
Shares of Common Stock represented by properly executed proxies for which no    
instruction is given will be voted "FOR" the Merger Proposal. Stockholders are  
requested to complete, sign, date and promptly return the enclosed proxy card in
the postage-prepaid envelope provided for this purpose to ensure that their     
shares are voted.                                                               

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    Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing  
with the Secretary of the Company, at or before the taking of the vote at the   
Special Meeting, a written notice of revocation bearing a later date than the   
proxy; (ii) executing a later dated proxy relating to the same shares of Common 
Stock and delivering it to the Secretary of the Company before the taking of the
vote at the Special Meeting, or (iii) attending the Special Meeting and voting  
in person (although attendance at the Special Meeting will not, in and of       
itself, revoke a proxy). Any written revocation or subsequent proxy should be   
sent so as to be delivered to The Nostalgia Network, Inc., 650 Massachusetts    
Avenue, N.W. Washington, D.C. 20001, Attention: Corporate Secretary, or hand    
delivered to the Secretary of the Company or his representative at or before the
taking of the vote at the Special Meeting.                                      

If the Special Meeting is postponed or adjourned, at any subsequent   
reconvening of the Special Meeting all proxies will be voted in the same manner 
as such proxies would have been voted at the original convening of the Special  
Meeting (except for any proxies that previously have been revoked or withdrawn  
effectively), notwithstanding that they may have been effectively voted on the  
same or any other matter at a previous meeting.                                 

     The Company will bear the cost of soliciting proxies from its stockholders.

VOTE REQUIRED                                                                   

  Under the DGCL, the Company is required to submit the Merger Proposal to
the stockholders for approval. In accordance with the DGCL, the standard for    
approving the Merger Proposal is the affirmative vote of a majority of the      
outstanding shares of capital stock entitled to be voted on the Merger Proposal 
(including the Preferred Stock voted with 100 votes for each share of the       
Preferred Stock). The affirmative vote of 10,297,206 shares of Common Stock and 
Preferred Stock (with Preferred Stock having 100 votes per share) and of 1,626  
shares of Preferred Stock voting separately as a class is required for approval 
of the Merger Proposal. If the stockholders approve the Merger and the          
transaction subsequently is challenged, the Company may be entitled under       
Delaware law to assert stockholder approval as a defense. As of the Record Date 
there are issued and outstanding 20,274,411 shares of Common Stock and 3,250    
shares of Preferred Stock. Acquisition which is the record owner of 14,180,427  
shares (70.0%) of the issued and outstanding shares of Common Stock and 2,500   
shares (76.9%)of Preferred Stock has informed the Company that it intends to    
vote all of its shares of Common Stock and Preferred Stock "FOR" the Merger     
Proposal. The affirmative vote of the shares of Common Stock and Preferred Stock
owned by Acquisition will be sufficient to ensure approval of the Merger        
Proposal.                                                                       

EFFECTS OF ABSTENTIONS AND BROKER NON-VOTES                                     

   For purposes of determining approval of the Merger Proposal and any other
proposal to be presented at the Special Meeting, abstentions will have the same 
legal effect as a vote "against" a matter presented at the meeting. Broker      
non-votes will have the same effect as a vote "against" the Merger Proposal.    

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SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS 

The following table sets forth, as of December 31, 1999, the number of
shares of Common Stock and Preferred Stock beneficially owned by each of the    
Company's executive officers and directors, by all executive officers and       
directors as a group and by each person known by the Company to own beneficially
more than 5.0% of the outstanding shares of Common Stock or Preferred Stock.    

                                                        [Enlarge/Download Table]

                                                    COMMON STOCK             PREFERRED STOCK     
                                              -------------------------  ------------------------
                                                            PERCENT OF                PERCENT OF 
                                              NUMBER OF     OUTSTANDING  NUMBER OF    OUTSTANDING
NAME                                            SHARES        SHARES      SHARES        SHARES   
----                                          ----------    -----------  ---------    -----------
                                                                                                 
EXECUTIVE OFFICERS                                                                               
SQuire D. Rushnell(2)........................    840,840(2)     4.0%           0            *    
                                                               ----                              
  Willard R. Nichols.........................          0          *            0                 
  Diane C. Fuller............................      6,000(2)                                      
DIRECTORS                                                                                        
  Christopher A. Cates.......................     26,000(2)       *            0            *    
  Floyd Christofferson.......................      6,000(2)       *            0            *    
  Dianne M. Faure............................      6,000(2)       *            0            *    
  Hiroshi Goto...............................      1,000(2)       *            0            *    
  Dong Moon Joo..............................      6,000(2)       *            0            *    
  Dr. S. Robert Lichter......................      1,000(2)       *            0            *    
  Frederick W. Newton........................      1,000(2)       *            0            *    
  Phillip Sanchez............................      6,000(3)       *            0            *    
  Robert J. Wussler..........................      6,000(2)       *            0            *    
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A                                                        
  GROUP......................................    905,840(2)     4.3%           0            0%   
                                                               ----                              
  Concept Group(4)........................... 14,430,427(5)    70.3%       2,500         76.9%   
                                              ----------       ----                              
  Charles Potter.............................     75,000(6)       *          750         23.1%   

---------------                                                                 
*  Less than one percent.                                                   

(1) Mr. Rushnell also is a director of the Company.                           

 (2) Consists entirely of shares of Common Stock subject to acquisition pursuant
to options.                                                           

(3) Includes 5,000 shares subject to acquisition pursuant to options.         

(4) The Concept Group consists of Acquisition, Concept, Crown and Capital,    
  which constitute a "group" within the meaning of Section 13(d)(3) of the
 Exchange Act. Acquisition, Concept, Crown and Capital have informed the
  Company that they share voting and dispositive power with respect to all
shares as to which Acquisition is the owner.                          

(5) Includes 14,180,427 shares of Common Stock, and 250,000 shares of Common  
   Stock issuable upon conversion of 2,500 shares of Preferred Stock, all of
which are held of record by Acquisition.                              

(6) Includes 75,000 shares of Common Stock issuable upon conversion of 750    
shares of Preferred Stock.                                            

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THE MERGER

BACKGROUND                                                                      

     On June 28, 1999, the Concept Group, which then consisted of Crown, Concept
and Capital, informed the Company of its possible intention to seek a           
transaction with the Company which would result in the Company becoming         
wholly-owned by Crown and Concept.                                              

In August 1999, prior to the receipt of the Merger Proposal, a        
representative of Crown initiated preliminary discussions with a representative 
of the Special Committee concerning the possible conversion to equity of the    
Company's indebtedness to Crown and Concept or the acquisition of the Company.  
The Special Committee met with the representative of Crown on September 8, 1999,
September 24, 1999 and October 7, 1999.                                         

  At a regular meeting of the Board of Directors on September 8, 1999, the
Special Committee reported to the Board of Directors concerning its discussions 
with Crown. Based upon the report of the Special Committee, which included the  
potential valuation range of any potential transaction, the Board of Directors  
authorized the Special Committee to retain an independent financial advisor and 
legal counsel. Pursuant to this authorization, the Special Committee retained   
Chatsworth as its financial advisor to evaluate a possible going-private        
transaction. The Special Committee retained Caplan, Buckner, Rohrbaugh &        
Kostecka as its legal counsel.                                                  

On October 5, 1999, Chatsworth delivered to the Special Committee its 
written analysis of a possible going-private transaction.                       

    On October 8, 1999, Crown delivered to the Special Committee and the other
directors correspondence setting forth the basic terms of the Merger Proposal.  
The Merger Proposal was referred to the Special Committee for further           
consideration.                                                                  

On October 13, 1999, the Special Committee determined that the Merger 
Proposal was in the best interests of, and fair to, the Company and its         
stockholders and recommended that the Board of Directors approve the Merger     
Proposal and submit it to the stockholders for approval subject to receipt by   
the Board of Directors of a written opinion from Chatsworth that the            
consideration to be paid to the Company's stockholders in the Merger is fair to 
the stockholders from a financial point of view.                                

As the Merger Proposal required approval by the Company by October 18,
1999, the Board of Directors met, with Mr. Joo not attending, to discuss the    
Merger Proposal on October 14, 1999. Following this discussion, a vote on the   
Merger Proposal was postponed due to the unavailability of several directors.   
Due to the inability of the Board of Directors to meet again prior to the       
deadline for approval of the Merger Proposal, the Company requested, and was    
granted, an extension until October 21, 1999 to approve the Merger Proposal.    

On October 18, 1999, Chatsworth delivered to the Special Committee its
written opinion that, subject to the various assumptions, qualifications and    
limitation expressed therein, the consideration to be paid to the Company's     
stockholders in the Merger is fair to the Company's stockholders from a         
financial point of view.                                                        

  On October 21, 1999, at a special meeting of the Board of Directors, the
Special Committee delivered to the Board of Directors its recommendation that   
the Merger Proposal was fair to, and in the best interests of, the Company and  
its stockholders. The Board of Directors determined that the Merger Proposal was
in the best interests of the Company and its stockholders and approved the      
Merger Proposal subject to the negotiation of mutually satisfactory definitive  
documentation. At this meeting the Board of Directors also requested Chatsworth 
to supplement the analysis which it had delivered previously to the Special     
Committee by identifying additional valuation methodologies which it had        
utilized but not described. Mr. Joo did not attend this meeting of the Board of 
Directors or vote on this matter.                                               

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On October 21, 1999, the Company issued a press release announcing its
approval of the Merger Proposal.                                                

On October 26, 1999, Chatsworth delivered to the Special Committee the
supplemental information with respect to its analyses which had been requested  
by the Board of Directors.                                                      

On December 20, 1999, counsel to the Special Committee circulated an  
initial draft of the proposed Merger Agreement. There ensued over the next      
fifteen days a series of conference calls and negotiations followed by numerous 
revisions and recirculations of drafts of the proposed Merger Agreement.        

  Subsequent to December 20, 1999 and prior to the meeting of the Board of
Directors on January 4, 2000, the Special Committee had multiple discussions    
regarding the proposed Merger and the terms of the Merger Agreement. After an   
extensive discussion and considering such factors as the fairness of the        
Consideration from a financial point of view, and the terms of the Merger       
Agreement, the Special Committee determined that the Merger Agreement is in the 
best interests of the Company and its stockholders and recommended that the     
Board of Directors approve the Merger Agreement.                                

On January 4, 2000, the Board of Directors met and determined that the
Merger would be in the best interests of the Company and its stockholders and is
on terms that are fair and reasonable to the Company and its stockholders and   
approved the Merger Agreement. Mr. Joo did not attend this meeting of the Board 
of Directors or vote on this matter.                                            

    The Merger Agreement was executed by the Company on January 7, 2000 and by
Acquisition on January 11, 2000.                                                

 On January 27, 2000, Chatsworth reconfirmed its fairness opinion to the
Board of Directors based upon financial information as of December 31, 1999.    

     Work on the Merger on behalf of the Company is being primarily performed by
the Company's General Counsel and Corporate Counsel with assistance from the    
Company's finance department. Work on the Merger on behalf of The Concept Group 
is being primarily performed by The Concept Group's General Counsel with        
assistance from its finance department.                                         

    Daniels and Associates, L.P. ("Daniels") acted as financial advisor to the
Concept Group and negotiated with Chatsworth as to the value and terms of the   
Merger and assisted and advised the Concept Group in its negotiations with the  
Special Committee. Daniels will be compensated by Crown for its services.       

 The Concept Group is not aware of, and the Company did not receive, any
firm offers in the last two years for a merger or consolidation of the Company, 
the sale or other transfer of all or any substantial part of the assets of the  
Company or a purchase of the Company's securities that would enable a purchaser 
of the securities to exercise control of the Company.                           

OPINION OF THE FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE                       

Chatsworth is an investment banking firm which, among other things,   
provides financial advisory services in connection with mergers and             
acquisitions. Chatsworth was selected by the Special Committee based upon its   
expertise and prior experience with Mr. Wussler. Chatsworth delivered its       
written opinion to the Board of Directors on October 18, 1999 stating that the  
consideration to be paid to the Company's stockholders in the Merger is fair    
from a financial point of view to the Company's stockholders.                   

 On January 27, 2000, Chatsworth reconfirmed its fairness opinion to the
Special Committee. The following summary of Chatsworth's opinion has been       
revised with financial information as of December 31, 1999.                     

    The full text of Chatsworth's written opinion is attached as Appendix B to
this Proxy Statement. Stockholders should read Chatsworth's opinion for a       
discussion of assumptions made, matters considered and limitations of the review
undertaken by Chatsworth in rendering its opinion. The following summary of     
Chatsworth's opinion is qualified in its entirety by reference to the full text 
of the opinion attached as Appendix B to this Proxy Statement.                  
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 No limitations were imposed by the Company on the scope of Chatsworth's
investigation or the procedures followed by Chatsworth in rendering its opinion.
Chatsworth's opinion is for the use and benefit of the Special Committee and    
Board of Directors and was rendered to the Special Committee in connection with 
its consideration of the Merger. Chatsworth's opinion is not intended to be, and
does not constitute, a recommendation to any stockholder as to how such         
stockholder should vote with respect to the Merger. Chatsworth was not requested
to opine as to, and its opinion does not address, the Company's underlying      
business decision to proceed with, or effect, the Merger.                       

In connection with the preparation and delivery of its opinion to the 
Special Committee, Chatsworth performed a variety of financial and comparative  
analyses which are summarized below. The preparation of a fairness opinion      
involves various determinations as to the most appropriate and relevant methods 
of financial and comparative analysis and the application of those methods to   
the particular circumstances and, therefore, such an opinion is not readily     
susceptible to summary description. In arriving at its opinion, Chatsworth did  
not attribute any particular weight to any analysis or factor considered by it, 
but rather, made qualitative judgments as to the significance and relevance of  
each analysis and factor. Accordingly, Chatsworth's analyses must be considered 
as a whole and considering any portion of such analyses and factors, without    
considering all analyses and factors, could create a misleading or incomplete   
view of the process underlying Chatsworth's opinion. In its analyses, Chatsworth
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control 
of the Company. Any estimates or projections contained in Chatsworth's analyses 
are not necessarily indicative of actual values or predictive of future results 
or values, which may be significantly more or less favorable than as set forth  
therein.                                                                        

For purposes of its opinion Chatsworth:                               

          (i) reviewed certain publicly available financial statements and other
information of the Company;                                           

          (ii) reviewed certain internal financial and operating data concerning
the Company prepared by management of the Company;                    

 (iii) discussed the past and current operations and financial
    condition and the prospects of the Company, including information relating
to certain strategic, financial and operational issues, with senior   
management of the Company;                                            

         (iv) reviewed the reported prices and trading activity for the Common
Stock;                                                                

        (v) compared the financial performance of the Company and prices and
    trading activity of the Common Stock with that of certain other comparable
publicly-traded companies and their securities; and                   

        (vi) performed such other analyses and considered such other factors
as it deemed appropriate.                                             

   Chatsworth assumed and relied upon, without independent verification, the
accuracy and completeness of the information provided to it for the purposes of 
its opinion. With respect to the internal financial statements and other        
financial and operating data, including forecasts, and discussions relating to  
the strategic, financial and operational benefits anticipated from the Merger,  
Chatsworth assumed that such materials were reasonably prepared on bases        
reflecting the best currently available estimates and judgments of the prospects
of Crown and the Company. Chatsworth also has relied upon, without independent  
verification, the assessment by management of Crown and the Company of the      
strategic and other benefits expected to result from the Merger. Chatsworth has 
not made any independent valuation or appraisal of the assets or liabilities of 
Crown or the Company nor has it been furnished with any such appraisals.        
Chatsworth's opinion is based on financial, economic, market and other          
conditions as in effect on, and the information made available to it as of the  
date of its opinion and its opinion is for the use and benefit of the Special   
Committee and the Board of Directors. Chatsworth's opinion does not address the 
merits of the underlying decision by Crown to engage in the Merger and does not 
constitute a recommendation to any stockholder of the Company with respect to   
the Merger Proposal.                                                            

  The following is a summary of certain financial and comparative analyses
performed by Chatsworth and presented to the Special Committee and the Board of 
Directors. Certain of the analyses include information                          
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presented in tabular format. In order to fully understand the financial analyses
used, the tables must be read together with the text of each summary. The tables
alone do not constitute a complete description of the financial analyses. The   
methodologies used for the valuation were the following:                        

- Market Comparable Valuation Analysis                                

- Stock Price Trading History and Analysis                            

- Valuation per Subscriber Analysis                                   

Market Comparable Valuation Analysis                                        

 Chatsworth analyzed audited financial statements, the Company's filings
with the Commission and financial and market information from comparable "Peer  
Group" companies. The most commonly used valuation multiples are enterprise     
value ("EV") relative to sales, operating cash flow (EBITDA), net income, book  
value and total debt. Chatsworth's analysis shows that none of the Company's    
ratios except "Enterprise Value/Subscribers" are comparable to similar companies
in the market. This is reflected in the low stock price and market              
capitalization of the Company. Enterprise Value is defined as market            
capitalization (current market price times the number of shares of common stock 
outstanding) plus short and long term debt plus preferred stock less cash and   
cash equivalents.                                                               

As the Company has negative EBITDA, net income and book value, ratio  
analysis for these multiples was not considered meaningful by Chatsworth.       
However, Chatsworth believes the following ratios provide a basis for comparison
with the Company's peer group.                                                  

EV/Sales:                        The Company's ratio of 17.6x is substantially  
                               higher than the 4.2x for the peer group. This
                          reflects below average revenue given the
          Company's level of debt.

Total Debt/EV:                   The Company's ratio of 1.0x versus .10x also   
                                reflects a significantly greater level of debt
                           versus its current market capitalization.

EV/Subscribers:                  The Company's ratio of 10.4x is in line with   
                          the peer group ratio of 10.1x (excluding
                               ValueVision*). This indicates that the Common
                              Stock is fairly valued at current levels and
             relative to its peer group.
---------------                                                                 
(*) ValueVision's stock price appreciated significantly after its announcements 
  concerning (1) ValueVision's agreement with IBM to implement ValueVision's
   TV/Internet convergence strategy, (2) ValueVision's investment with General
 Electric and NBC in Telocity to accelerate the use of high-speed Internet
access, and (3) ValueVision's investment with NBC in ROXY.com for       
multifaceted agreements covering television and Internet programming and
marketing.                                                              

MARKET COMPARABLES(1) 
(ALL FIGURES ARE IN MILLIONS, AND PER SHARE)

                                                        [Enlarge/Download Table]

                                          RECENT ACQUISITIONS                        PUBLICLY TRADED         
                             ---------------------------------------------  ---------------------------------
                             BTV(2)      SPZE(3)   E!(4)   CMT(4)   TFN(4)   SATH         VVTV        NNET(5)
                             ------      -------   -----   ------   ------  ------      --------      -------
                                                                                                             
Price Per Share                                                                                              
(12/31/99)..................     NA          NA                                  9 15/16      57 5/16  0.055 
52 Wk High..................     63 1/16      7 3/32                            30 1/8        62        0.25 
52 Wk Low...................     38 3/4       4 1/2                              6 5/8         6 1/2    0.02 
Shares Outstanding                                                                                           
  (millions)................   10.1         3.4                               30.4          37.4        20.3 
Market Cap.................. $634.5      $ 94.1                             $302.1      $2,143.5      $  1.1 
ST Debt + LT Debt........... $ 48.0      $ 12.3                             $ 76.2      $    0.2      $ 95.4 
Cash & Equivalents.......... $  9.8      $  1.7                             $ 22.5      $  315.5      $  0.6 
Preferred Stock............. $   --      $   --                             $  1.1      $   41.5      $  0.0 
Minority Interest........... $   --      $   --                             $   --      $     --      $   -- 
Enterprise Value (EV)....... $672.8      $104.7                             $356.8      $1,869.6      $ 96.0 
Sales....................... $166.2      $ 30.9                             $163.4      $  253.5      $  5.5 

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                                                        [Enlarge/Download Table]

                                          RECENT ACQUISITIONS                        PUBLICLY TRADED         
                             ---------------------------------------------  ---------------------------------
                             BTV(2)      SPZE(3)   E!(4)   CMT(4)   TFN(4)   SATH         VVTV        NNET(5)
                             ------      -------   -----   ------   ------  ------      --------      -------
                                                                                                             
Cash Flow................... $ 47.7      $  2.5                             $   --      $     --      $   -- 
Book Value.................. $113.3      $ 13.2                             $ 88.9      $  366.9      ($82.5)
Subscribers (mm)............   56.7        22.1                               55.4          31.0         9.2 
EV/Market Cap(6)............  1.06x       1.11x                              1.18x         0.87x      86.07x 
EV/Sales(6).................  4.05x       3.39x                              2.18x         7.37x      17.58x 
EV/Book Value(6)............  5.94x       7.91x                              4.01x         5.10x          NA 
Total Debt/EV...............  0.07x       0.12x                              0.21x         0.00x       0.99x 
Market Cap/Book Value.......  5.60x       7.11x                              3.40x         5.84x          NA 
EV/Cash Flow(6)............. 14.11x      42.39x                                 NA            NA          NA 
Market Cap/Subscriber.......  11.2x        4.3x                               5.5x         69.1x        0.1x 
EV/SUBSCRIBERS(6)...........  11.9X        4.7X    13.0X   14.5X     9.5X     6.4X         60.3X       10.4X 

---------------                                                                 
(1) BTV (Black Entertainment), SPZE (Spice), E! (Entertainment), CMT (Country   
  Music Television Channel), TFN (TV Food Network), SATH (Shop at Home),VVTV
(ValueVision), NNET (GoodLife).                                         

(2) Acquired for $63 per share effective August 3, 1998.                        

(3) Acquired on March 16, 1999 for $105 million in cash, stock in Playboy Class 
B and Directrix and assumption of debt. Approximate value is $27.8 per  
share.                                                                  

(4) Only "EV/Subscriber" is available as these companies were private at the    
time of the Merger.                                                     

(5) Price per share is based on the average of the actual trading prices over   
the prior 30 days.                                                      

(6) EV is Enterprise Value which is defined as market capitalization plus       
preferred stock plus long and short term debt minus cash and cash       
equivalents.                                                            

Stock Price Trading History and Analysis                                    

The Common Stock volume and trading history was analyzed to determine 
liquidity, the frequency of trading, the average size stock trade, the average  
price for stock trades within the past twelve months and the premium represented
by the Merger consideration in relation to the current bid price.               

Chatsworth concluded that the most significant activity during 1999   
occurred on January 6, 7 and 8, 1999 as the apparent result of speculation by   
day traders in response to the announcement that Crown was seeking a strategic  
partner for the Company. The speculative trading activity that occurred in early
January 1999 has been excluded from Chatsworth's analysis since Chatsworth      
concluded it does not reflect normal trading activity.                          

To conduct its analysis, Chatsworth developed a model showing the     
cumulative trading volume for each respective price from $.01 to $.18 during the
12 month period ended December 31, 1999 to show whether an offer of $.07 per    
share would represent a price higher than 83.0% of all normal stock trades      
during the preceding year.                                                      

 For the month of December 1999, the average closing price of the Common
Stock was $0.0476 per share. The cash price offered of $0.07 pursuant to the    
Merger Proposal represents approximately a 50.0% premium over the average       
closing price of $0.0476 per share of Common Stock.                             

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PRICE/VOLUME TABLE(1) 

                                                                [Download Table]

                          PERCENT OF        
PRICE    VOLUME          TOTAL VOLUME       
-----    -------   -------------------------
                                            
$0.010   228,400              9.6%          
$0.015   214,000             18.6%          
$0.020    75,000             21.8%          
$0.030   205,500             30.5%          
$0.035   258,400             41.4%          
$0.050   326,900             55.1%          
$0.055   239,000             65.2%          
$0.060   301,300             77.9%          
$0.065    33,200             79.3%          
$0.070    87,400    83.0% PRICE FOR MERGER  
--------------------------------------------
$0.080    99,200             87.2%          
$0.090     2,300             87.3%          
$0.094    35,000             88.8%          
$0.095    74,600             91.9%          
$0.100   123,900             97.1%          
$0.110    11,600             97.6%          
$0.120    56,800            100.0%          
$0.130        --            100.0%          
$0.180        --            100.0%          

---------------                                                                 
(1) Represents volume trading at each respective price during 1999 except the   
volume which occurred during January 7, 1999 through January 11, 1999.  

Valuation per Subscriber Analysis                                           

The basis for comparison was the price paid per subscriber which is   
calculated by dividing the value of the transaction by the number of            
subscribers.                                                                    

Comparable Transactions                                                     

  The following sets forth certain merger and acquisition transactions for
basic cable networks:                                                           

                                                                [Download Table]

  DATE                     NETWORK                    VALUE     SUBS     PER SUB
--------    -------------------------------------    -------    -----    -------
                                                     ($ MIL)    (MIL)      ($)  
                                                                                
11/01/98    Odyssey Channel......................      222       30        7.40 
11/01/98    ZDTV.................................      162        9       18.00 
12/01/98    Eye on People........................      100       11        9.10 
02/01/99    The Travel Channel...................      176       20        8.80 
                                                                          ----- 

Weighted Average $8.20 (excluding ZDTV)                                         
---------------                                                                 
Source: Paul Kagan Associates, Inc.                                             

Chatsworth does not consider ZDTV to be a comparable transaction and  
excluded it from the calculation of the weighted average "Per Sub" valuation.   
ZDTV is the Internet cable channel purchased by Ziff-Davis from Softbank. Paul  
Allen's Vulcan Ventures also announced a $54.0 million investment for one-third 
ownership simultaneous with the purchase by Ziff-Davis. Advertisers on ZDTV     
include 3Com, America Online, Barnes & Noble, Canon, Charles Schwab, Comdisco,  
Dell, Earthlink, Egghead, IBM, Intel, Hewlett Packard, Micron, Microsoft, NEC,  
Packard Bell, PSI Net, Siebel Systems, Sprint, Sun Microsystems and ONSALE.     

    The weighted average value "Per Sub" for the above transactions, excluding
ZDTV, is $8.20. This includes the value of $8.80 per subscriber for The Travel  
Channel transaction which closed on February 1, 1999. Chatsworth noted that     
three separate equity investments in The Travel Channel which closed from June  
1997 to September 1997 ranged from $1.43 to $3.75 "Per Sub". Chatsworth also    
noted that while $8.20 was                                                      

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used for purposes of presenting a conservative valuation methodology, Chatsworth
does not believe that it represents the Company's true value per subscriber     
which is lower for the following reasons:                                       

     - Only 60.0% of the Company's subscribers are full-time (see "The Company's
Subscribers");                                                    

  - The Company does not have a high concentration of subscribers in urban
markets);                                                         

   - The Company is not able to carry national advertising given the present
size and demographic profile of its subscriber base; and          

 - The Company's programming is not being carried by the highest profile
networks.                                                         

The Company's Subscribers                                                   

   As of December 31, 1999, the Company had 9,232,523 total subscribers. For
purposes of Chatsworth's analysis, and in order to be conservative, full value  
was attributed by Chatsworth to all subscribers, including C-Band, Local and    
Part-Time subscribers.                                                          

Valuation Calculation                                                       

     The Company's 9,232,523 total subscribers valued at an average of $8.20 per
subscriber gives an implied value for the Company of $75,706,689 based on the   
valuation of the subscriber base as of December 31, 1999. The Company's         
unaudited balance sheet as of December 31, 1999 shows Total Liabilities of      
$95,415,207 and Total Assets of $12,872,273 for a net asset value of            
($82,542,934). The valuation "Per Subscriber" of $75,706,689 less negative net  
assets of ($82,542,934) gives a valuation for the Company of ($6,836,245) or    
($0.33) per share of Common Stock.                                              

Conclusion                                                                  

     On the basis of and subject to the foregoing, Chatsworth concluded that the
cash consideration of $0.07 per share to be paid to the Company stockholders in 
the Merger (including the holders of Preferred Stock, the consideration for     
which was determined on an as converted basis) is fair from a financial point of
view. On January 27, 2000, Chatsworth confirmed its fairness opinion to the     
Board of Directors.                                                             

     Pursuant to an August 27, 1999 engagement letter, the Company agreed to pay
Chatsworth for acting as financial advisor to the Special Committee a financial 
advisory fee of $50,000, (which has been paid); to reimburse Chatsworth for all 
reasonable expenses incurred as the Special Committee's financial advisor; and  
to indemnify Chatsworth against certain liabilities relating to, or arising out 
of, its engagement. Pursuant to a September 23, 1999 letter agreement, the      
Company agreed to pay Chatsworth an additional $50,000 (which has been paid) for
its fairness opinion. The Company also has agreed to pay Chatsworth an          
additional $25,000 for reconfirming its fairness opinion to the Special         
Committee based on information as of December 31, 1999. Prior to acting as      
financial advisor to the Special Committee, Chatsworth had not provided any     
services to the Company, Acquisition, Capital, Crown or Concept.                

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD  
OF DIRECTORS                                                                    

  The Concept Group.  As the majority stockholder of the Company, and also
the source of substantially all of the Company's working capital, the Concept   
Group decided to pursue the Merger to protect more adequately its investment by 
gaining full ownership of the Company. In reaching its decision, the Concept    
Group considered the following factors:                                         

          (i) the substantial burden and expense of maintaining the Company as a
   publicly-held entity, including the burden and expense of filing periodic
  reports under the Exchange Act and compliance with the various rules and
regulations of the Commission as compared to the minor benefits of the
extremely limited public market for the Common Stock;                 

     (ii) the financial condition, results of operations, business and
     prospects of the Company, including its aggregate net loss of approximately
$30.0 million since January 1, 1998;                                  

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       (iii) the inability of the Company to raise equity and debt capital
   from conventional sources and its ongoing dependence on the Concept Group
for working capital;                                                  

        (iv) the historic and recent trading volume and market prices of the
Common Stock;                                                         

    (v) the Company's outstanding indebtedness to the Concept Group,
  which, if converted to equity to strengthen the Company's balance sheet,
would result in significant dilution to the Company's minority        
stockholders;                                                         

         (vi) the enhanced possibility of attracting a strategic alliance as a
privately-held company; and                                           

         (vii) the substantial premium represented by the Merger consideration
over the historical price for the Common Stock.                       

   The Concept Group believes the Merger and consideration to be paid to the
Company's stockholders (other than Acquisition) is fair based upon the foregoing
reasons, the available alternatives to the Merger including the benefits and    
risks to the Company's stockholders of the Company continuing to be publicly    
held, and the advice of Daniels with respect to the fairness of the Merger. In  
considering the above factors, the Concept Group did not assign relative weights
to any particular factor or determine that any factor was more significant than 
another. Rather, the Concept Group viewed its position and recommendations as   
being based on the totality of the information presented to and considered by   
it.                                                                             

Special Committee.  In reaching its recommendation that the Board of  
Directors approve the Merger, the Special Committee considered a number of      
factors, including the following:                                               

       (i) the terms and conditions of the Merger Agreement, including the
consideration to be paid in the Merger;                               

        (ii) historical and recent market prices of the Common Stock and the
     premium represented by the consideration over the historical prices for the
Common Stock since January 1, 1998;                                   

  (iii) the financial condition and results of operations of the
     Company, including an aggregate of approximately $30.0 million in operating
losses since January 1, 1998;                                         

          (iv) the debt structure of the Company and its effect on the Company's
ability to obtain additional capital;                                 

         (v) the inability of the Company to raise equity or debt capital from
  conventional sources, the resulting reliance of the Company on Crown and
   Concept to provide working capital necessary for continued operations and
   the lack of any assurance that Crown and Concept will continue to provide
such capital under current circumstances;                             

        (vi) alternatives to the Merger, including continuing to operate the
  Company as a publicly traded company, the possible benefits and risks of
   such alternatives and the timing and likelihood of increasing stockholder
value beyond the value of the consideration; and                      

         (viii) the valuation analysis performed by Chatsworth and its written
 opinion provided to the Special Committee on October 18, 1999, that, on
such date and subject to certain assumptions, qualifications and      
   limitations stated therein, the consideration to be paid in the Merger is
fair to the Company's stockholders from a financial point of view.    

 The Special Committee also considered certain factors which could, as a
result of the Merger, negatively affect the Company and its stockholders. These 
factors included the following:                                                 

         (i) loss of the Company's status as a publicly traded corporation and
the corresponding loss of a market for the Common Stock;              

         (ii) potential recognition of taxable income/gain to the stockholders
   of the Company upon the consummation of the Merger and the payment of the
consideration; and                                                    

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        (iii) that minority stockholders would not participate in any future
growth in the value of the Company, if any.                           

The Special Committee unanimously determined that, based upon all the 
factors it considered, the Merger is fair to, and in the best interests of, the 
Company and its stockholders. ACCORDINGLY, THE SPECIAL COMMITTEE UNANIMOUSLY    
RECOMMENDED THAT THE BOARD OF DIRECTORS APPROVE THE MERGER.                     

  Board of Directors.  The Board of Directors (with an interested director
not attending Board of Directors meetings where the Merger was discussed or vote
on the proposed Merger) has determined that the Merger is fair to, and in the   
best interests of, the Company's stockholders based on the analyses and         
conclusions of the Special Committee (which were adopted by the Board of        
Directors), and on the negotiations between the Company, as directed by the     
Special Committee, and Acquisition, and on the Chatsworth opinion delivered to  
the Special Committee. The Board of Directors did not quantify or otherwise     
assign relative weights to the specific factors considered in reaching its      
determination. The Board of Directors (with Mr. Joo, the interested director,   
not attending Board of Directors meetings where the Merger was discussed or     
voting on the proposed Merger or the Merger Agreement) has unanimously approved 
the Merger and recommends that the Company's stockholders vote "FOR" approval of
the Merger.                                                                     

CONFLICTS OF INTEREST                                                           

Mr. Dong Moon Joo, a Director of the Company, is the President and a  
director of each of Acquisition, Capital, Concept and Crown (for which he serves
as chairman of the Board of Directors), and may have interests in connection    
with the Merger that are in addition to, or conflict with, those of the Company 
and its stockholders. Because of his positions with Acquisition, Capital,       
Concept and Crown, and as a result of possible conflicts of interest, Mr. Joo   
did not participate in meetings of the Board of Directors relating to, or vote  
on, the Merger and the Merger Agreement. Acquisition, which is wholly-owned by  
Crown and Concept, is the record owner of 14,180,427 shares of Common Stock and 
2,500 shares of Preferred Stock. The Concept Group is the beneficial owner of   
14,432,417 shares of Common Stock (including 250,000 shares of Common Stock     
subject to acquisition upon conversion of 2,500 shares of Preferred Stock).     
Concept is majority-owned by Crown. Crown is a wholly-owned subsidiary of       
Capital. See "Security Ownership of Certain Beneficial Owners and Management"   
and "Certain Transactions and Relationships."                                   

REGULATORY APPROVAL                                                             

     The Company and Acquisition are not aware of any material approval or other
action by any state, federal or foreign governmental agency that is required    
prior to the consummation of the Merger in order to effect the Merger or of any 
license or regulatory permit that is material to the businesses of the Company  
or Acquisition which is likely to be adversely affected by the consummation of  
the Merger.                                                                     

EFFECT OF THE MERGER ON THE RIGHTS OF EXISTING STOCKHOLDERS                     

   Holders of Common Stock, other than Acquisition and stockholders who have
exercised their appraisal rights, will receive $0.07 per share and holders of   
Preferred Stock, other than Acquisition and stockholders who have exercised     
their appraisal rights, will receive $7.00 per share. The shares of Common Stock
owned by Acquisition will be cancelled and each issued and outstanding share of 
Acquisition Common Stock (all of which are owned by Crown and Concept) will be  
converted into one share of Common Stock. As a result of the Merger, the Common 
Stock no longer will be listed for quotation on the Bulletin Board; the Company 
will become wholly-owned by Crown and Concept; the Company's other stockholders 
no longer will have an equity interest or participate in any future earnings or 
growth of the Company; and the Company no longer will be subject to registration
under the Exchange Act and will terminate its Exchange Act registration. The    
termination of the Company's Exchange Act registration will relieve the Company 
of its periodic and other Exchange Act reporting obligations and also will      
relieve the Company's officers, directors and principal stockholders of certain 
reporting and other obligations under the Exchange Act.                         

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APPRAISAL RIGHTS                                                                

     If the Merger is consummated, stockholders who do not vote "FOR" the Merger
Proposal, who hold share of Common Stock or Preferred Stock of record on the    
date of making a written demand for appraisal as described below and who        
otherwise comply fully with Section 262 of the DGCL ("Section 262") will be     
entitled to a judicial determination of the fair value of their shares of Common
Stock and Preferred Stock in accordance with the provisions of Section 262 and  
to receive from the Company payment of such fair value in cash together with a  
fair rate of interest, if any, as determined by such court. Stockholders who    
properly perfect their appraisal rights will not be entitled to surrender their 
shares of Common Stock and Preferred Stock for payment in the manner provided in
the Merger Agreement and described in this Proxy Statement. The Merger Agreement
provides that the obligation of Acquisition to consummate the Merger is         
conditioned upon stockholders of the Company owning not more than five percent  
(5.0%) of the issued and outstanding shares of Common Stock (which for purposes 
of determining whether this condition has been satisfied includes 325,000 shares
of Common Stock issuable upon conversion of the Preferred Stock) exercising     
appraisal rights. This condition may be waived by Acquisition.                  

     Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special        
Meeting, not less than 20 calendar days prior to the meeting, a constituent     
corporation in the merger must notify each of the holders of its stock who was  
such on the record date for the meeting that such appraisal rights are available
and include in each such notice, a copy of Section 262. This Proxy Statement    
constitutes such notice to the holders of record of Common Stock and Preferred  
Stock.                                                                          

   The following is a summary of the procedures to be followed under Section
262, the full text of which is attached as Appendix C to this Proxy Statement.  
The summary does not purport to be a complete statement of, and is qualified in 
its entirety by reference to, Section 262 and to any amendments to Section 262  
after the date of this Proxy Statement. Failure to follow any Section 262       
procedures may result in the loss of appraisal rights under Section 262.        
Stockholders should assume that the Company will take no action to perfect any  
appraisal rights of any stockholder. Any stockholder who desires to exercise    
appraisal rights should review carefully Section 262 and is urged to consult a  
legal advisor before electing or attempting to exercise appraisal rights.       

   Holders of record of shares of Common Stock or Preferred Stock who desire
to exercise appraisal rights must not vote in favor of the Merger Proposal and  
must deliver a separate written demand for appraisal of such shares to the      
Company prior to the taking of the vote on the Merger Proposal. A holder of     
shares of Common Stock or Preferred Stock wishing to exercise appraisal rights  
must hold of record such shares on the date the written demand for appraisal is 
made and must continue to hold such shares through the Effective Time. The      
demand for appraisal will be sufficient if it reasonably informs the Company of 
the identity of the stockholder and that the stockholder intends to demand an   
appraisal of the fair value of shares of Common Stock or Preferred Stock.       

 If the shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand must be executed by or for the record
owner, and if the shares are owned of record by more than one person, as in a   
joint tenancy or tenancy in common, the demand must be made by or for all owners
of record. An authorized agent, including an agent for one or more joint owners,
may execute the demand for appraisal for a holder of record provided the agent  
identifies the record owner or owners and expressly discloses in such demand    
that the agent is acting as agent for the record owner or owners of such shares.

A record holder, such as a broker, who holds shares of Common Stock or
Preferred Stock as a nominee for beneficial owners, some or all of whom desire  
to demand appraisal, must exercise appraisal rights on behalf of such beneficial
owners with respect to the shares held for such beneficial owners. In such case,
the written demand for appraisal should set forth the number of shares covered  
by such demand. Unless a demand for appraisal specifies a number of shares, the 
demand will be presumed to be applicable to all shares outstanding in the name  
of such record owner. If a stockholder holds shares of Common Stock or Preferred
Stock through a broker which in turn holds the shares through a central         
securities depository nominee such as Cede & Co., a demand for appraisal of such
shares must be made by or on behalf of the depository nominee and must          
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identify the depository nominee as record holder. BENEFICIAL OWNERS WHO ARE NOT 
RECORD OWNERS AND WHO INTEND TO EXERCISE APPRAISAL RIGHTS SHOULD INSTRUCT THE   
RECORD OWNER TO COMPLY STRICTLY WITH THE STATUTORY REQUIREMENTS WITH RESPECT TO 
THE DELIVERY OF WRITTEN DEMAND FOR APPRAISAL. A DEMAND FOR APPRAISAL SUBMITTED  
BY A BENEFICIAL OWNER WHO IS NOT THE RECORD OWNER WILL NOT BE HONORED.          

   A proxy or vote against the Merger Agreement will not constitute a demand
for appraisal. Stockholders should not expect to receive any additional notice  
with respect to the deadline for demanding appraisal rights.                    

Any stockholder who elects to exercise appraisal rights must mail or  
deliver the written demand for appraisal to The Nostalgia Network, Inc., 650    
Massachusetts Avenue, N.W. Washington, D.C. 20001, Attention: Corporate         
Secretary.                                                                      

   If the Merger is approved, then within ten days after the Effective Time,
the Company will provide notice of the Effective Time to all stockholders who   
have complied with Section 262.                                                 

    A stockholder may withdraw a demand for appraisal within 60 days after the
Effective Time of the Merger and accept the terms of the Merger. Thereafter, the
approval of the Company will be needed for such a withdrawal.                   

Within 120 days after the Effective Time (the "120-Day Period"), in   
compliance with Section 262, any stockholder who has properly demanded an       
appraisal and who has not withdrawn his or her demand as provided above (such   
stockholders being referred to collectively as the "Dissenting Stockholders")   
and the Company each has the right to file in the Delaware Court of Chancery    
(the "Delaware Court") a petition (the "Petition"), with a copy served on the   
Company in the case of a Petition filed by a Dissenting Stockholder, demanding a
determination of the fair value of the shares held by all Dissenting            
Stockholders. If, within the 120-Day Period, no Petition shall have been filed  
as provided above, all rights to appraisal will cease and all Dissenting        
Stockholders who owned shares of Common Stock or Preferred Stock will become    
entitled to receive for each share of Common Stock or Preferred Stock the       
applicable consideration, as if such stockholder had initially voted to approve 
and adopt the Merger Proposal. The Company is not obligated, and does not       
currently intend, to file such a Petition.                                      

    Any Dissenting Stockholder is entitled, within the 120-Day Period and upon
written request to the Company, to receive from the Company a statement setting 
forth (a) the aggregate number of shares of Common Stock or Preferred Stock     
which have not voted to adopt and approve the Merger Proposal and with respect  
to which demands for appraisal have been received and (b) the aggregate number  
of Dissenting Stockholders. Such statement must be mailed (i) within ten days   
after a written request therefor has been received by the Company, or (ii)      
within ten days after the expiration of the period for delivery of demands, as  
described above, whichever is later.                                            

   Upon the filing of a Petition, the Delaware Court may order a hearing and
that notice of the time and place fixed for the hearing on the Petition be      
mailed to the Company and all Dissenting Stockholders. Notice will also be      
published at least one week before the day of the hearing in a newspaper of     
general circulation published in the City of Wilmington, Delaware or in another 
publication deemed advisable by the Delaware Court. The costs relating to these 
notices will be borne by the Company.                                           

  If a hearing on the Petition is held, the Delaware Court is empowered to
determine which Dissenting Stockholders have complied with the provisions of    
Section 262 and are entitled to an appraisal of their shares. The Delaware Court
may require that Dissenting Stockholders submit their share certificates for    
notation thereon of the pendency of the appraisal proceedings and the Delaware  
Court may dismiss the proceedings as to any Dissenting Stockholder who does not 
comply with such requirement.                                                   

     The Delaware Court will appraise shares of Common Stock and Preferred Stock
owned by the Dissenting Stockholders, determining the fair value of such shares 
exclusive of any element of value arising from the accomplishment or expectation
of the Merger. In determining the fair value, the Delaware Court is to take into
account all relevant factors. In WEINBERGER V. UOP, INC., the Delaware Supreme  
Court discussed                                                                 

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the factors that could be considered in determining fair value in an appraisal  
proceeding, stating that "proof of value by any techniques or methods which are 
generally considered acceptable in the financial community and otherwise        
admissible in court" should be considered and that "[f]air" price obviously     
requires consideration of all relevant factors involving the value of a company.
The Delaware Supreme Court has stated, that in making this determination of fair
value, the Delaware courts must consider market value, asset value, dividends,  
earnings prospects, the nature of the enterprise and any other factors which    
could be ascertained as of the date of the merger and which "throw any light on 
future prospects of the merged corporation." The Delaware Supreme Court noted   
that Section 262 provides that fair value is to be determined "exclusive of any 
element of value arising from the accomplishment or expectation of the merger." 
In CEDE & CO. V. TECHNICOLOR, INC., the Delaware Supreme Court stated that such 
exclusion is a "narrow exclusion [that] does not encompass known elements of    
value" but which applies only to the speculative elements of value arising from 
such accomplishment or expectation. In WEINBERGER, the Delaware Supreme Court   
held that "elements of future value, including the nature of the enterprise,    
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered."                                     

  Stockholders considering seeking appraisal should consider that the fair
value of their shares determined by the Delaware Court under Section 262 could  
be more than, the same as, or less than the consideration payable pursuant to   
the Merger Agreement. The Company does not anticipate offering more than the    
consideration payable pursuant to the Merger Agreement to any Dissenting        
Stockholder and reserves the right to assert in any appraisal proceedings, that,
for purposes of Section 262, the "fair value" of a share of Common Stock or     
Preferred Stock is less than the consideration payable pursuant to the Merger   
Agreement.                                                                      

    The Delaware Court may also (i) determine a fair rate of interest, if any,
to be paid to Dissenting Stockholders in addition to the fair value of the      
shares, (ii) determine the costs of the proceeding and tax such costs against   
the parties as the Delaware Court deems equitable (however, costs do not include
attorneys' and expert witnesses' fees), and (iii) upon application of a         
Dissenting Stockholder, order all or a portion of the expenses incurred by any  
Dissenting Stockholder in connection with the appraisal proceeding, including,  
without limitation, reasonable attorney's fees and fees and expenses of experts,
to be charged pro rata against the value of all shares entitled to appraisal.   

    No appraisal proceedings in the Delaware Court will be dismissed as to any
Dissenting Stockholder without the approval of the Delaware Court, and this     
approval may be conditioned upon terms which the Delaware Court deems just.     

From and after the Effective Time, Dissenting Stockholders will not be
entitled to vote (or consent by written action) any shares subject to demand for
appraisal for any purpose and will not be entitled to receive payment of        
dividends or other distributions payable to stockholders of record at a date    
prior to the Effective Time.                                                    

   Failure to take any required step in connection with appraisal rights may
result in the loss of such rights. Any stockholder who loses such rights will   
only be entitled to receive the consideration.                                  

ACCOUNTING TREATMENT                                                            

     The Merger will be accounted for under the purchase method of accounting in
accordance with GAAP, whereby the value of the consideration paid in the Merger 
will be allocated based upon the estimated fair values of the assets acquired   
and liabilities assumed at the Effective Date.                                  

Pro forma financial information has not been included in this proxy   
solicitation because the stockholders, other than Acquisition, are receiving    
cash consideration only and will not retain or receive a continuing interest in 
the Company's business after the Merger.                                        

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THE MERGER AGREEMENT

  The following description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by, and is subject to, the more       
complete and detailed information set forth in the Merger Agreement, a copy of  
which is attached as Appendix A to this Proxy Statement and incorporated herein 
by reference.                                                                   

TERMS OF THE MERGER                                                             

   The Merger.  Subject to the terms and conditions of the Merger Agreement,
Acquisition will merge with and into the Company which will result in the       
Company becoming wholly-owned by Crown and Concept and the separate corporate   
existence of Acquisition will cease. The Company will continue to exist         
following the Merger and its internal corporate affairs will continue to be     
governed by Delaware law. Crown and Concept, as the only stockholders of the    
Company following the Merger, will have sole power and authority to control all 
aspects of the internal corporate and business affairs of the Company following 
the Merger. Acquisition is wholly-owned by Crown and Concept. Concept is        
majority owned by Crown. Crown is a wholly-owned subsidiary of Capital.         

 Certificate of Incorporation and Bylaws.  The Merger Agreement provides
that at the Effective Time and without any further action on the part of the    
Company or Acquisition: (1) the Certificate of Incorporation will be amended and
restated substantially as set forth in Exhibit A to the Merger Agreement and,   
from and after the Effective Time, the Certificate of Incorporation, as so      
amended and restated, will be the Certificate of Incorporation of the Company;  
and (2) the Bylaws of Acquisition, as in effect at the Effective Time, shall be 
the Bylaws of the Company. Pursuant to the amendment to the Certificate of      
Incorporation, among other things, the Company will have authorized 1,000 shares
of common stock, par value $.01 per share.                                      

 Conversion of Common Stock and Preferred Stock.  At the Effective Time,
each issued and outstanding share of Common Stock, other than shares of Common  
Stock owned by Acquisition or for which appraisal rights have been exercised,   
will be converted into the right to receive $0.07; each issued and outstanding  
share of Preferred Stock, other than shares of Preferred Stock owned by         
Acquisition or for which appraisal rights have been exercised, will be converted
into the right to receive $7.00; the issued and outstanding shares of Common    
Stock owned by Acquisition will be cancelled; and each share of Acquisition     
Common Stock will be converted into a share of Common Stock.                    

Options.  Prior to the Effective Time, the Company will take all steps
necessary to (a) terminate, to the extent permitted by the terms thereof, all   
stock option plans without prejudice to the rights of the holders of options    
thereunder and (b) will grant no additional options. The Company will use its   
best efforts to take all actions necessary to cause each outstanding stock      
option, whether or not exercisable or vested, to be cancelled, as of the        
Effective Time and to obtain the consent of each holder of an option (whether or
not then exercisable) to the cancellation of the option. In exchange for the    
cancellation of options, the Company may make payments to, or enter into other  
agreements with, the option holders in consideration of the termination of the  
options.                                                                        

Directors and Officers.  There will be no change to the directors and 
executive officers of the Company as a result of the Merger, and each director  
and executive officer of the Company will continue to serve in that capacity    
until his or her successor has been duly elected or appointed and qualified or  
until his or her earlier death, resignation or removal.                         

INDEMNIFICATION                                                                 

   From and after the Effective Time, the Company will continue to indemnify
each present and former officer, director, employee and agent of the Company    
against any and all claims, losses, damages, liabilities, costs, judgments,     
amounts paid in settlement and expenses (including reasonable attorneys' fees)  
in connection with any threatened, pending or completed action, suit, claim,    
proceeding or investigation arising out of, or pertaining to, any act or        
omission prior to the Effective Time to full extent permitted under the         
Company's Bylaws and Delaware law. The Company has agreed to use its best       
efforts to provide to those officers and directors of the Company as of October 
21, 1999 who also are officers or directors of the Company                      

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immediately following the Effective Time with officers' and directors' liability
insurance comparable to that maintained by the Company as of October 21, 1999,  
subject only to certain limitations with respect to the cost of such insurance. 

EFFECTIVE TIME OF THE MERGER                                                    

  Promptly following the satisfaction or waiver (where permissible) of the
conditions to the Merger, the Merger will be consummated and become effective on
the date and at the time the required certificate of merger is filed with the   
Secretary of State of Delaware. See "The Merger Agreement -- Merger-Effective   
Time."                                                                          

REPRESENTATIONS AND WARRANTIES                                                  

Representations and Warranties of Acquisition.  The Merger Agreement  
includes representations and warranties of Acquisition as to, among other       
things, (i) the due authorization of the Merger Agreement and the transactions  
contemplated thereby by the Board of Directors and the stockholders of          
Acquisition, and the enforceability of the Merger Agreement; (ii) that          
Acquisition has received commitments for the funding necessary to complete the  
transactions contemplated by the Merger; and (iii) the accuracy of information  
provided by Acquisition for use in this Proxy Statement.                        

Representations and Warranties of the Company.  The Merger Agreement  
includes representations and warranties of the Company as to, among other       
things, (i) the due authorization and approval of the Merger Agreement and the  
transactions contemplated thereby by the Board of Directors of the Company, and 
the enforceability of the Merger Agreement subject to approval by the Company's 
stockholders; (ii) the capitalization of the Company, the validity of the Common
Stock and Preferred Stock and the absence of any undisclosed options, warrants  
or other similar rights with respect to the Common Stock or Preferred Stock;    
(iii) the absence of any undisclosed material liabilities other than those      
incurred in the ordinary course of the business of the Company consistent with  
past practice and liabilities incurred in connection with the Merger; (iv) that 
the execution or delivery of the Merger Agreement or the consummation of the    
Merger will not violate the Certificate of Incorporation or Bylaws or result in 
a breach of any material contract, agreement, order, law, rule or regulation to 
which the Company is subject; and (v) the accuracy in all material respects of  
this Proxy Statement, except for the information provided by Acquisition, and   
the conformity of this Proxy Statement to the requirements of the Exchange Act  
and the rules promulgated thereunder.                                           

COVENANTS                                                                       

The Merger Agreement contains a number of customary and               
transaction-specific covenants, including the following:                        

Business of the Company.  The Company has agreed, except as 
     contemplated by the Merger Agreement, from the date of the Merger Agreement
  to the Effective Time, not to take any action that adversely affects its
    ability to pursue its business in the ordinary course, to seek to preserve
  its current business organization, to keep available the services of its
     current officers and employees, and to use its best efforts to preserve its
     relationships with customers, suppliers and others having business dealings
     with it. The Company also has agreed that before the Effective Time, except
   as expressly permitted by the Merger Agreement or by Acquisition, it will
     not, among other things, (i) split, combine or reclassify any shares of its
    capital stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or directly or indirectly
  redeem, purchase or otherwise acquire any shares of its capital stock or
     other securities; (ii) authorize for issuance, issue, sell, pledge, dispose
of or encumber, deliver or agree or commit to issue, sell, pledge or  
     deliver (whether through the issuance or granting of any options, warrants,
   commitments, subscriptions, rights to purchase or otherwise) any stock of
    any class of the Company or any securities convertible into or exercisable
     or exchangeable for shares of stock of any class of the Company, other than
   the issuance of shares pursuant to the exercise of options outstanding as
of the date hereof; (iii) except in the ordinary and usual course of  
   business and consistent with past practice, incur any material liability,
obligation or indebtedness, issue any debt securities or assume,      

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    guarantee, endorse or otherwise become responsible for, the obligations of
     any other individual or entity; (iv) acquire any other business or make any
material investment; (v) change in any material respect its accounting
methods, principles or practices except as in accordance with GAAP,   
   consistently applied (vi) file for voluntary bankruptcy or become subject
   to involuntary bankruptcy proceedings; (vii) take any action or course of
   action inconsistent with any of the covenants and agreements contained in
     the Merger Agreement; and (viii) take or agree to commit to take any action
     that would make any representation or warranty of the Company in the Merger
    Agreement inaccurate in any material respect at the Effective Time or omit
     to take any action necessary to prevent any such representation or warranty
from being inaccurate in any material respect at such time.           

Deposit of Funds.  Not less than 10 days prior to the Special Meeting,
Acquisition will deposit or cause to be deposited with an agent retained for    
purposes of facilitating the payment of the consideration in exchange for the   
Common Stock and the Preferred Stock, immediately available funds in an amount  
equal to $0.07 for each issued and outstanding share of Common Stock and $7.00  
for each issued and outstanding share of Preferred Stock excluding shares of    
Common Stock and Preferred Stock owned by Acquisition which will be cancelled.  
If necessary, the funds to be paid to the holders of Common Stock and Preferred 
Stock (other than Acquisition), together with all other funds necessary for     
Acquisition to consummate the Merger, will be loaned to Acquisition by Crown.   
Any funds loaned by Crown to Acquisition will be loaned to Crown by Atlantic    
Video, Inc., a Delaware corporation ("AVI") and an affiliate of the Concept     
Group. Any funds borrowed by Crown from AVI will be pursuant to a December 30,  
1993 promissory note, as amended, which entitles Crown to borrow up to $96.0    
million and bears interest at the annual rate of 6.0%. The Concept Group        
understands that any funds loaned to it by AVI will be provided to AVI by One-Up
Enterprises, Inc., an affiliate, which will borrow the funds from Unification   
Church International, Inc.                                                      

   Best Efforts.  Each of the Company and Acquisition have agreed to utilize
its best efforts to cause the Merger, and all transactions contemplated by the  
Merger Agreement, to be consummated.                                            

CONDITIONS TO THE MERGER                                                        

Conditions to Each Party's Obligations to Effect the Merger.  The     
respective obligations of the Company and Acquisition are subject to certain    
conditions, including the following (which have been satisfied): (i) the Merger 
shall have been duly approved by the Company's stockholders; and (ii) Chatsworth
shall have delivered to the Company its written opinion that the consideration  
is fair to the Company's stockholders from a financial point of view.           

Conditions to the Obligations of Acquisition.  The obligations of     
Acquisition to effect the Merger also are subject to satisfaction or waiver of  
the following conditions, among others: (i) the accuracy and completeness in all
material respects of the representations and warranties of the Company in the   
Merger Agreement; (ii) the performance by the Company in all material respects  
of its obligations under the Merger Agreement which are required to be performed
at or prior to the Effective Time; and (iii) holders of not more than five      
percent (5.0%) of Common Stock and Preferred Stock (calculated on an "as        
converted" basis to Common Stock at the ratio of 100 shares of Common Stock for 
each share of Preferred Stock) shall have exercised appraisal rights;           
Acquisition may waive any of the foregoing or other such conditions to the      
Merger.                                                                         

Conditions to the Obligations of the Company.  The obligation of the  
Company to effect the Merger also is subject to satisfaction or waiver of the   
following conditions: (i) the accuracy and completeness in all material respects
of the representations and warranties of Acquisition in the Merger Agreement;   
and (ii) the performance by Acquisition in all material respects of its         
obligations under the Merger Agreement which are required to be performed at or 
prior to the Effective Time. The Company may waive either or both of the        
foregoing conditions.                                                           

AMENDMENT; WAIVER; TERMINATION                                                  

Amendment.  The Merger Agreement may be amended at any time by written
agreement of the Company and Acquisition (prior to the Effective Time), as      
applicable. An amendment to the Merger Agreement subsequent to adoption by      
stockholders of the Company may not alter or change the amount or               
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kind of consideration to be received in exchange for, or on conversion of, the  
Common Stock or Preferred Stock without the approval of the holders thereof.    

   Waiver.  Either party to the Merger Agreement may extend the time for the
performance of any of the obligations or other acts of the other party thereto, 
or waive compliance with any of the agreements or any condition to the          
obligations thereunder of the other party thereto, to the extent that such      
obligations, agreements and conditions are intended for its benefit.            

   Termination.  The Merger may be abandoned and the Merger Agreement may be
terminated prior to the Effective Time, before or after approval by the         
stockholders of the Company, by the mutual written consent of the Company and   
Acquisition or by either party if (i) there has been a material failure by the  
other party to perform any of its covenants, obligations, agreements or         
conditions or the other party has breached any of the representations or        
warranties of the Merger Agreement; (ii) there shall be in effect any permanent 
injunction or action preventing the consummation of the Merger; or (iii) if the 
Effective Time shall not have occurred by June 30, 2000.                        

    Upon termination of the Merger Agreement pursuant to its terms, the Merger
Agreement shall become void and no longer be of any force and effect and there  
shall be no liability of either party to the other party to the Merger          
Agreement.                                                                      

EXPENSES AND FEES                                                               

Each party will bear its own expenses incurred in connection with the 
Merger. The Company will bear expenses arising out of or incurred in connection 
with, the preparation of this Proxy Statement and the Special Meeting including 
printing, mailing, solicitation, accounting and other fees and expenses related 
thereto. The Company and the Concept Group estimate their respective expenses to
be incurred in connection with the Merger as follows:                           

                                                                [Download Table]
                                                                      
The Company                                                           
  Legal.....................................................  $ 75,000
  Accounting................................................  $  6,000
  Financial Advisors........................................  $135,000
  Filing....................................................  $    290
  Transfer Agent............................................  $  5,000
  Printing..................................................  $ 30,000
The Concept Group                                                     
  Legal.....................................................  $200,000
  Financial Advisors........................................  $125,000
  Disbursement Agent........................................  $ 10,000

FEDERAL INCOME TAX CONSIDERATIONS 

The following discussion summarizes material federal income tax       
considerations from the Merger to the Company's and its stockholders. This      
discussion does not address the tax consequences to Acquisition or its          
stockholders arising from the Merger. This discussion is general in nature and  
is not tax advice. No representations are made as to state, local or foreign tax
consequences to the Company or any stockholder of the Company resulting from the
Merger. Each stockholder should consult his or her own tax advisor of the       
stockholder's unique tax position.                                              

   The exchange of Common Stock or Preferred Stock for cash by a stockholder
in the Merger will be a taxable transaction under the Internal Revenue Code of  
1986, as amended (the "Code"). In general, a stockholder will recognize gain or 
loss equal to the difference between the tax basis of his or her Common Stock or
Preferred Stock and the amount of cash received in exchange therefor. Such gain 
or loss will be capital gain or loss if the Common Stock or Preferred Stock is a
capital asset in the hands of the stockholder and will be long-term gain or loss
if the stockholder has held the Common Stock or Preferred Stock for more        

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than one year as of the Effective Time. These rules may not apply to            
stockholders who acquired Common Stock or Preferred Stock pursuant to the       
exercise of stock options or other compensation arrangements with the Company or
to stockholders who are not citizens or residents of the United States or who   
are otherwise subject to special tax treatment under the Code.                  

     The Company will not recognize gain or loss for federal income tax purposes
as a result of the Merger.                                                      

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CERTAIN TRANSACTIONS AND RELATIONSHIPS

  The following are descriptions of certain transactions and relationships
between the Company and any of its affiliates and Acquisition, Capital, Crown   
and Concept or their respective affiliates. See "The Merger -- Conflicts of     
Interest."                                                                      

   Concept and Crown.  Since 1990, Crown and Concept have been the principal
source of the Company's capital. Crown and Concept have invested approximately  
$2.1 million and provided approximately $70.5 million in financing since 1994,  
including $19.0 million loaned by Crown to the Company in 1998 and $12.0 million
loaned by Crown to the Company during the nine months ended September 30, 1999. 

On March 27, 1999, the Company issued two substitution and replacement
notes to Crown and Concept in the amount of $50,571,503, and $20,598,036,       
respectively, at an annual interest rate of 7.75%, with the principal and unpaid
interest due January 1, 2000. On March 22, 1999, and on June 9, 1999, the       
Company issued two promissory notes to Crown in the principal amounts of $3.5   
million and $2.0 million, respectively, at an annual interest rate of 7.75%,    
each due January 1, 2000. On August 24, 1999, and on September 10, 1999, the    
Company issued two promissory notes to Crown in the principal amounts of $1.0   
million each, at annual interest rates of 8.00% and 8.25%, respectively, each   
due January 1, 2000. As of December 30, 1999, the Company was indebted to       
Concept and Crown in the aggregate principal amount of $21,783,608 and          
$63,997,292, respectively, pursuant to promissory notes bearing interest at the 
annual rate of approximately 8.50% and which are secured by substantially all of
the Company's assets and mature on January 1, 2001.                             

  Mr. Joo is the President and a director of each of Acquisition, Capital,
Concept and Crown (for which he serves as chairman of the Board of Directors).  
Christopher A. Cates and Floyd Christofferson, directors of the Company, were   
officers of Concept subsidiaries until January 26, 1999 and October 27, 1999,   
respectively.                                                                   

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 difference, up to an      
aggregate maximum of $75,000, subject to certain limitations, may be used as a  
credit against future fees. The net amount payable to AVI for these additional  
services with respect to the nine months ended September 30, 1999 was           
approximately $733,915.                                                         

 At September 30, 1999, the Company was indebted to AVI in the principal
amount of $305,000 and accrued interest of approximately $330,400 pursuant to a 
promissory note bearing interest at the annual rate of 10.0% and which matures  
on March 31, 2002 (the "AVI Note"). The AVI Note is convertible 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 the
time of the execution of the AVI Note, the Company granted AVI a security       
interest in (a) $150,000 in specified accounts receivable and certain other     
accounts and contracts and the proceeds thereof; and (b) copies of certain books
and records. AVI agreed not to perfect its security interest with respect to the
AVI Note provided the Company was not in default thereof.                       

Mr. Cates was an officer of AVI until January 26, 1999. Mr. Joo is an 
officer and director of AVI.                                                    

  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 Washington Television Center Limited Partnership ("WTC") on a     
month-to-month basis at a monthly rate of $16,900. All of the interest in WTC is
owned by U.S. Property Development Corporation of which Mr. Joo is an officer.  
WTC is an affiliate of AVI.                                                     

  The Company utilizes the facilities of Manhattan Center Studios for both
remote and on-site television production on an as needed basis. During the first
nine months of 1999, the Company incurred approximately $107,595 for services   
rendered by Manhattan Center Studios. Manhattan Center Studios is an affiliate  
of AVI.                                                                         

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     Pursuant to a letter agreement dated March 29, 1995 between Concept and the
Company that was signed in anticipation of a possible conversion of the         
Company's indebtedness to Concept into equity, which debt conversion has not    
occurred, as of the date hereof, the Company agreed to: sell at least 2,000     
shares of Preferred Stock to Concept pursuant to the conversion; not to issue   
additional shares of Preferred Stock until Concept and the Company reached      
mutual agreement as to the price per share of the debt conversion; granted to   
Concept the right of first refusal with regard to the sale of in excess of      
500,000 shares of Common Stock or 500 shares of Preferred Stock in the          
aggregate; and agreed to issue additional shares of Common Stock to Concept in  
the event of future sales of capital stock by the Company to third parties at a 
price per share less than that agreed upon by Concept and the Company for the   
debt conversion.                                                                

     The Company leases equipment from Pyramid Video, Inc. ("Pyramid"), which is
a majority-owned subsidiary of Concept, at the monthly rate of $2,440 and       
expended approximately $17,080 for the leased equipment during the nine months  
ended September 30, 1999. Mr. Joo is a director of Pyramid.                     

 On January 7, 2000, Crown and Concept transferred to Acquisition all of
their respective shares of Common Stock and Preferred Stock in exchange for 1000
shares of the Acquisition Common Stock.                                         

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THE CONCEPT GROUP 

    The Concept Group consists of Acquisition, Capital, Crown and Concept. The
following is a brief description of the business conducted by each of           
Acquisition, Capital, Crown and Concept and identifies each of their respective 
executive officers and directors.                                               

  Acquisition is a Delaware corporation formed to own the Common Stock and
Preferred Stock and to facilitate the Merger. Upon consummation of the Merger,  
Acquisition will be merged with and into the Company and the Company will be    
wholly-owned by Concept and Crown. The directors and executive officers of      
Acquisition are Mr. Joo (President) and Werner Seubert (Vice President).        

    Concept has diverse interests in the communications and telecommunications
industries with ownership interests in firms principally involved in video      
newsgathering and transmission services, corporate video communication and      
program production and post-production. Messrs. Joo and Seubert and Max Hugel   
are the directors of Concept, and Messrs. Joo and Seubert are the President and 
Vice President, respectively, of Concept.                                       

  Crown owns a majority of the capital stock of Concept. Crown has diverse
interests in the communications and telecommunications industries through       
operation of a satellite up-linking business and its majority ownership interest
in Concept. Mr. Joo, Theodore Agres, Robert Morton, Pauline Eby and Peter Gogan 
are the directors of Crown, and Messrs. Joo (President) and Seubert (Vice       
President) are the executive officers of Crown.                                 

   The sole stockholder of Crown is Capital. Capital is a Delaware non-stock
corporation, which indirectly owns interests in firms involved in the           
communications and telecommunications industries through its ownership of Crown.
Mr. Joo, Neil A. Salonen, Thomas Ward, Anthony Guerra and Michael McDevitt are  
the members of Capital. Mr. Joo, Keith Cooperrider and Mr. Gogan are the        
directors of Capital. Messrs. Joo (President) and Seubert (Vice President) are  
the executive officers of Capital.                                              

    The principal business address for Acquisition, Concept, Crown and Capital
is 650 Massachusetts Avenue, N.W., Washington, D.C. 20001 and the telephone     
number is (202) 789-2124.                                                       

 For the last five years, Mr. Joo also has been President of Concept and
President and Chief Executive Officer of The Washington Times Corporation (the  
"Washington Times")and News World Communications, Inc. ("News World"). The      
Washington Times and News World publish numerous newspapers and periodicals. Mr.
Joo's business address is 650 Massachusetts Avenue, N.W., Suite 200, Washington,
D.C. 20001.                                                                     

Mr. Hugel is Chairman of the Board of Rockingham Venture, Inc.        
("Rockingham"), which is engaged in the operation of a racetrack. The principal 
offices of Rockingham are located at Rockingham Park Boulevard, P.O. Box 45,    
Salem, New Hampshire 03079, which is Mr. Hugel's business address.              

For the last five years, Mr. Seubert also has been Vice President and 
Controller of AVI. AVI is engaged in the production and recording of videotapes,
the provision of postproduction services and related activities. Mr. Seubert's  
business address is 650 Massachusetts Avenue, N.W., Suite 200, Washington, D.C. 
20001.                                                                          

     Messrs. Morton, Gogan and Agres (for the last five years), and Ms. Eby (for
the last three years), also have been principally employed by the Washington    
Times. For the two years prior to her employment with the Washington Times, Ms. 
Eby was principally employed by AVI. The business address of each of the above  
officers and the principal offices of the Washington Times is 3600 New York     
Avenue, N.E., Washington, D.C. 20002. Mr. Morton serves as Assistant Managing   
Editor, Mr. Gogan serves as Special Assistant to the President, Ms. Eby serves  
as Executive Assistant to the President and Mr. Agres is the Deputy Managing    
Editor of The Washington Times newspaper.                                       

   Mr. Salonen is President of International Cultural Foundation, which is a
nonprofit, tax-exempt foundation with the purpose of promoting academic,        
scientific, religious and cultural exchange among the countries of the world.   
The principal offices of International Cultural Foundation are located at 51    
Monroe Street, Suite 1201, Rockville, Maryland 20850, which is Mr. Salonen's    
business address.                                                               

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For the last five years, Messrs. Ward and Guerra have been principally
employed by the University of Bridgeport for which the address is 271 Park      
Avenue, Bridgeport, Connecticut 06601. Mr. Ward serves as Special Assistant to  
the President for New Initiatives, and Mr. Guerra serves as the Dean of College 
Graduate and Undergraduate Studies.                                             

For the last five years, Mr. McDevitt has been Director of Security at
Belvedere Estates, which operates a group of properties in Westchester County,  
New York. The principal offices of Belvedere Estates are located at 723 South   
Broadway, Tarrytown, New York 10591, which is the business address of Mr.       
McDevitt.                                                                       

   For the last five years, Mr. Cooperrider has been principally employed as
Treasurer of the Washington Times. The business address of Mr. Cooperrider is   
3600 New York Avenue, N.E., Washington, D.C. 20002.                             

    To the knowledge of the Concept Group, during the last five years, none of
the Company, Acquisition, Concept, Crown, Capital, Ms. Eby and Messrs. Joo,     
Hugel, Gogan, Seubert, Agres, Cooperrider, Morton, Salonen, Ward, Guerra and    
McDevitt have been convicted in a criminal proceeding (excluding traffic        
violations or similar misdemeanors) or has been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and, as a result of 
such proceeding, was or is subject to a judgment, decree or final order         
enjoining future violations of, or prohibiting or mandating activities subject  
to, Federal or state securities laws or finding any violation with respect to   
such laws.                                                                      

BUSINESS OF THE COMPANY 

OVERVIEW                                                                        

    The Company operates a television programming service, GoodLife TV Network
(the "Network"), which offers a variety of entertainment, information and       
lifestyle programming exemplifying traditional American culture, values and a   
sense of community. This programming mix targets the most neglected audience on 
television, America's Boomers and over audience. The Company was originally     
incorporated in Colorado in 1983. In 1987, the Company changed its name from    
Boston Investments, Inc., and reincorporated in Delaware through a merger into a
wholly-owned subsidiary.                                                        

DESCRIPTION OF BUSINESS                                                         

   The Network's programming is telecast over a network of cable television,
wireless cable, satellite and video-dial-tone systems (each an "Affiliate"). The
Company uplinks it's programming from its facilities in Alexandria, Virginia to 
a satellite which then transmits the programming to the Affiliates. The Company 
derives revenue primarily from the sale of advertising time and from fees paid  
by Affiliates for its programming.                                              

AFFILIATED CABLE SYSTEMS AND SUBSCRIBERS                                        

     The Network's programming is distributed by approximately 1,410 Affiliates,
from which the Network derives fees, typically based upon the number of monthly 
subscribers in each Affiliate's system. As of September 30, 1999, the Network   
had 8,585,900 subscribers, an increase of 11.2% from December 31, 1998, when the
Network had 7,718,000 subscribers. As of December 31, 1999 the Network had      
9,232,500 subscribers, an increase of 646,000 (7.5%) subscribers from September 
30, 1999. The length of each Affiliate contract varies, but generally ranges    
from three to five years. Certain of the Network's Affiliate contracts have     
expired and carriage is currently provided on a month-to-month basis. Many of   
these Affiliates have declined to enter into new contracts until their plans for
channel expansion are completed. During the nine months ended September 30,     
1999, the Network had revenues of approximately $1.5 million from Affiliate     
fees. Two multiple system operator Affiliates accounted for approximately 20.0% 
and 16.0% of Affiliate revenue for the nine months ended September 30, 1999.    

  Each Affiliate has a limited number of "channels" over which programming
can be distributed to its subscribers. The must carry/retransmission consent    
provisions of the Cable Act of 1992 caused Affiliates to increase the number of 
channels allocated to broadcasters and affiliates of broadcasters, resulting in 
a                                                                               
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corresponding decrease in the number of channels available to independent       
networks such as the Network. As a result of intense competition among cable    
networks for this reduced number of channels, the Company's per subscriber fees 
from Affiliates have declined and may continue to decline.                      

ADVERTISING                                                                     

  The Company also derives revenues from the sale of advertising receiving
fees for approximately, on average, 10 minutes of advertising time per hour of  
programming, with an additional two minutes of each hour of programming reserved
for the use of Affiliates. The Company also derives advertising revenue from the
sale of time for infomercials, which are program length advertisements, and from
programming sponsorship and home shopping revenue sharing arrangements. During  
the nine months ended September 30, 1999, the Company derived revenues of       
$2,398,361 from advertising.                                                    

PROGRAMMING                                                                     

   The Network has continued to expand and improve its original programming.
The following are descriptions of programs aired on the Network during 1999.    

GTV DanceSport (Original)                                                   

 Competition dancing has become one of the fastest growing trends in the
United States. Through its exclusive agreement with DanceSport America, the     
Network covers major dance competitions, including the national championships in
Miami. This exciting program showcases not only the champions in each class, but
also provides insight into the techniques and fine points of competition.       

Cafe DuArt (Original)                                                       

     Renowned impressionist/comedian Louise DuArt serves as the owner/hostess of
a New York cabaret club where a wide variety of famous guests interact with the 
club's staff in comedic settings. Musical variety acts are intertwined in the   
comedic setting to provide a well balanced source of entertainment.             

The Real Me Autobiographies (Original)                                      

   Set in a casual atmosphere, The Real Me Autobiographies provides a unique
insight into the lives and significant influences of its guest hosts as they    
tell their own stories in their own words.                                      

American Couples (Original Pilot)                                           

Hosted by Nancy Glass, American Couples is an hour long show which    
celebrates the family values, love, commitment and partnership of famous        
couples.                                                                        

Heroes & Sheroes (Original Pilot)                                           

    Heroes & Sheroes profiles ordinary men and women who have performed heroic
tasks for the benefit of their fellow man.                                      

American Families (Original Elements begin airing in January 2000)          

 American Families spotlighting regular families discussing contemporary
solutions to issues raised in episodes of classic family programs of Ozzie &    
Harriet and Make Room for Daddy.                                                

Cookbook Cooking with Christopher Kent (Original)                           

 This program features the Network's Flea Market Movie host, Christopher
Kent, who also is an accomplished chef, preparing dishes from famous cookbooks. 

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The Bull & The Bear (Original)                                              

The "Siskel and Ebert" of Wall Street, hosts Llewellyn King and Linda 
Gasperillo, answer viewer calls to provide unique insight into stocks and       
investment opportunities.                                                       

More Money with The Dolans (Original)                                       

Ken and Daria Dolan, "the first family of finance," present a one hour
televised version of their nationally syndicated daily radio program on money   
issues. On More Money with The Dolans, Network viewers can call in questions to 
Ken and Daria about retirement plans, investment and tax strategies, saving     
money for college and how to get a good buy on a new car.                       

Flea Market Movie (Original Elements)                                       

The Network has added short segments to every commercial break in its 
movies where its collectibles aficionado, Christopher Kent, dispenses his wit   
and wisdom about all sorts of collectable items. In these short interstitials,  
viewers can learn about the value of various collectibles. Additionally, viewers
can call to discuss or send in pictures of items for Christopher to appraise.   

American Soldier (Original Elements)                                        

Interviews with veterans, focusing on their wartime experiences, are  
wrapped around three classic dramatic television shows. The shows, which the    
Network has licensed for two years, are Combat!, Twelve O'clock High and        
Garrison's Gorillas. The programs and their wrap around elements are part of a  
weekday and weekend block entitled American Soldier.                            

GTV Variety Hour                                                            

     The GTV Variety Hour features classic variety programs such as Tony Orlando
and Dawn, Leslie Uggams and Dean Jones which were purchased by the Network.     

Acquired Programming                                                        

     Off-network series airing on the Network include The Love Boat and Bonanza.

Dual Language Programming                                                   

In an effort to provide service to a broader community of viewers, the
Network commenced airing dual language programming during 1997. Found on the SAP
channel, where available, the Network provides Spanish language versions of The 
Love Boat.                                                                      

Programming for the Visually Impaired                                       

     The Company has had a significant and mutually beneficial relationship with
the Narrative Television Network ("NTN"). Found on the SAP channel, where       
available, these narrative tracks of certain Network programming provide        
descriptive narratives of the on-screen action to allow visually impaired       
viewers to better understand and account for noises and actions they cannot see.

FINANCIAL INFORMATION                                                           

  During 1999, the Network continued to focus on rebuilding and rebranding
its programming. In an effort to differentiate itself from its many competitors,
and in response to comments from cable system operators, the Network continued  
its efforts to increase original programming.                                   

The Company also continued its efforts to grow its subscriber base. At
September 30, 1999, the Company had 8,585,900 subscribers, compared to 7,718,000
subscribers at December 31, 1998. As of December 31, 1999 the Network had       
9,232,500 subscribers, an increase of 646,000 (7.5%) subscribers from September 
30, 1999. The Service Transmission Agreement between the Company and National   
Digital Television Center                                                       
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providing for digital distribution of the Network's signal through the Headend  
in the Sky program ("HITS") contributed significantly to the Company's increase 
in subscribers.                                                                 

The Company also continued in its analysis of, and efforts to seek, a 
strategic alliance. The Company has had contact with several possible strategic 
partners, but no serious discussions have occurred. There can be no assurance   
that the Company will be able to obtain a strategic partner, or that any        
strategic partner will be willing to invest the sums required by the Company in 
order to continue to grow the Network's subscriber base. It is anticipated that 
following the Merger, the business and operations of the Company will be        
continued substantially as currently conducted for the immediate future. Crown  
and Concept have informed the Company that they intend to reevaluate the        
business and operations of the Company following the Merger and take such       
actions with respect to the future business and operations of the Company as    
they deem appropriate. Although there are no definitive plans or agreements in  
place, Crown and Concept may cause the Company to enter into joint ventures or  
other agreements with other business entities after the Merger.                 

  In March 1999, to more closely align its sales and marketing activities,
the Company determined to consolidate these efforts at its headquarters in      
Washington, D.C. and closed its Englewood, Colorado and Ft. Washington,         
Pennsylvania offices, resulting in a reduction of its staffing levels by eleven 
positions.                                                                      

For a description of the revenue obtained by the Company from external
customers and the Company's loss and total assets, see the Company's audited    
financial statements for the fiscal year ended December 31, 1998 and Notes      
thereto and the Company's unaudited financial statements for the nine months    
ended September 30, 1999 and the Notes thereto which are included in this Proxy 
Statement.                                                                      

Financing for the Network has previously been provided by Concept and 
Crown. Crown loaned to the Company $12.0 million during the nine months ended   
September 30, 1999 and $19.0 million in 1998.                                   

PATENTS, TRADEMARKS, LICENSES                                                   

  The Company neither holds nor depends on any material patent, trademark,
license, franchise or concession except for its trademarks "Nostalgia Channel"  
and "Nostalgia Television." In 1998, the Company licensed the right to use      
"GoodLife TV Network" from Scripps Howard Broadcasting Company for ten years.   

COMPETITION                                                                     

There is intense competition among providers of programming via cable 
television, direct broadcast satellite ("DBS") and other video delivery systems.
The Network competes with other programmers for access to limited channel space 
on Affiliates and viewers; for advertising revenues with other cable networks,  
broadcast television, radio and print media; and more generally, with various   
other leisure-time activities such as home video, movies, the internet and other
forms of information and entertainment.                                         

  A number of basic networks (such as USA Network, American Movie Classics
and Turner Network Television), pay television networks (such as The Disney     
Channel) and superstations (such as WOR and WGN) provide programming directed   
towards various sub-groups which are included in the Network's target audience. 
Most providers of these programming services are comprised of a group of        
programming services or are affiliated with cable system operators or motion    
picture studios, and may enjoy advantages that independent services, such as the
Network, do not. Many of the Network's competitors have substantially greater   
financial and other resources than the Network.                                 

Technological advances over the next five years, such as digital      
compression technology, which will allow cable systems to expand channel        
capacity, and the development of fiber optic cable, which has the capacity to   
carry a much greater number of channels than coaxial cable, are expected to     
increase the number of available channels. The Company believes that the        
increase in the number of channels will both reduce competition for access to   
channel space and increase competition for viewers. There can be no assurance as
to when technological advances will be commercially implemented to increase     
significantly overall channel capacity.                                         

  Many of the Company's competitors pay cable systems, DBS and other video
delivery systems a significant upfront "per subscriber" fee. This fee may act as
an incentive to a system to carry a certain network                             

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because it will receive fees based upon the number of subscribers to that       
system. The Company pays some competitive, upfront fees, but only in            
circumstances judged to be most beneficial in terms of launch opportunities. The
Company has relied more on waiver of future fees to be paid to the Network by   
its Affiliates, and on quality original programming and other branding efforts  
to distinguish the Network from its competitors and, thereby, provide a         
substantive reason for cable systems to choose the Network for carriage. While  
this determination may have, in the short term, an adverse impact on the        
Network's ability to gain carriage, the Company believes it is the most         
appropriate way to maximize the value and impact of the Company's financial     
resources. The Company also is actively engaged in efforts to review and        
identify potential strategic alliance partners that could provide support to the
Company's efforts to increase its subscriber base.                              

GOVERNMENT REGULATION                                                           

  The Telecommunications Act of 1996 (the "1996 Act"), among other things,
repealed statutory provisions and regulations of the Federal Communications     
Commission ("FCC") that prohibited telephone companies from operating cable     
television or other multi-channel distribution systems in areas in which those  
companies offer telephone service and restricted the ability of such telephone  
companies to produce, acquire an interest in, or distribute programming in which
they have an interest. The 1996 Act limits the ability of telephone companies to
purchase existing cable systems, but otherwise imposes minimal constraints upon 
their entry into multi-channel video distribution and program production.       
Pursuant to the 1996 Act, the FCC has extended to common carriers the           
regulations imposed upon traditional cable systems by the Cable Television      
Consumer Protection and Competition Act of 1992 (the "1992 Act"). These         
regulations are intended to prevent telephone companies from favoring program   
services in which they have an interest and from unreasonably denying access to 
unaffiliated programmers.                                                       

The 1996 Act also significantly relaxes multiple ownership and other  
restrictions imposed by FCC rules on traditional over-the-air broadcast stations
and television networks, such as CBS, NBC, ABC, and Fox. The 1996 Act requires  
the FCC to adopt rules which allow the traditional networks to operate more than
one television network, except that none of the four largest networks are       
permitted to merge with any of the other four or with either of the two         
"emerging networks" (Time Warner's WB Network and the United Paramount Network).
Under the statute, companies that own and operate television broadcast networks 
also will be permitted to own and operate cable television systems, subject to  
certain safeguards designed to prevent discrimination against unaffiliated      
program service providers.                                                      

The 1996 Act also modifies, to a limited extent, the system of rate   
regulation imposed upon traditional cable operators pursuant to the 1992 Act.   
Under the 1996 Act, rate regulation by the FCC of the upper tiers of service    
(where the Network typically is carried) expired on March 31, 1999. Basic       
service, which cable operators are required to offer to all subscribers, remains
subject to rate regulation in communities in which the cable system is not      
subject to "effective competition." The institution of an alternative           
multi-channel video distribution system by a telephone company serving          
substantially the same area as the cable system is deemed to constitute         
"effective competition" under the 1996 Act.                                     

   The 1996 Act does not alter the "must carry" and "retransmission consent"
requirements of the 1992 Act. These provisions, coupled with rate regulation,   
have forced cable systems to increase the number of channels carrying broadcast 
or broadcaster-affiliated channels, causing a corresponding decrease in the     
number of channels available to satellite distributed networks such as the      
Network. In the past, the Network has lost carriage on cable systems because the
system needed to reassign the channel used by the Network either to comply with 
the 1992 Act's must carry provisions or to fulfill a contractual obligation to a
broadcaster arising out of the "retransmission consent" requirements of the 1992
Act. While the FCC relaxed its rate regulation rules in 1995 to encourage cable 
company investment in additional channel capacity, the end of upper tier rate   
regulations on March 31, 1999 may further encourage cable operators to invest in
new facilities that will accommodate additional programming.                    

     The Company is unable to predict what effect, if any, these legislative and
regulatory changes will have on its operations or finances. In general, the     
Company believes that the relaxation of rate regulation and the                 

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introduction of competition in the multi-channel distribution business will     
improve the Company's ability to obtain carriage of the Network in markets in   
which the service is not now available and will have a favorable effect on      
affiliate subscriber fees earned by the Network. The entry of telephone         
companies into the program production business and the relaxation of existing   
constraints on broadcast stations and traditional broadcast networks are        
expected to increase the competition the Network already faces for advertising  
revenues and audiences.                                                         

EMPLOYEES                                                                       

   On September 30, 1999, the Company had a total of 26 full-time, non-union
employees. On March 2, 1999, the Company announced its determination to         
consolidate the Network's sales and marketing staffs at its headquarters in     
Washington, DC, resulting in a reduction of its staffing levels by eleven       
positions. The Company has experienced no work stoppage, is not a party to any  
collective bargaining agreements and believes that it enjoys good relations with
its current employees.                                                          

PROPERTIES                                                                      

  The Company's executive offices are located at 650 Massachusetts Avenue,
N.W., Washington, D.C., where the Company leases, on a month-to-month basis at a
monthly rate of $16,900, approximately 5,100 square feet of office space and 900
square feet of storage space from WTC, a subsidiary of U.S. Property Development
Corporation, of which Mr. Joo, a director of the Company, is an officer. See    
"Certain Relationships and Transactions."                                       

 The Company's traffic and finance facility, consisting of approximately
4,300 square feet in Alexandria, Virginia, is leased on a month-to-month basis  
at a monthly rate of $3,896 from AVI. Mr. Cates was an officer of AVI until     
January 26, 1999, and Mr. Joo is an officer and director of AVI. See "Certain   
Relationships and Transactions."                                                

LEGAL PROCEEDINGS                                                               

   Roger M. Rosenberg, et al. v. Sam Oolie, et al. On or about September 29,
1989, an action was commenced in the Delaware Court of Chancery for New Castle  
County. The Company is a nominal defendant for purposes of the derivative claims
asserted. Summary judgment has been entered dismissing all causes of action     
against the Company, although causes of action against the other individual     
defendants, including certain former directors of the Company, continue. The    
Company is required to indemnify those former directors of the Company and to   
pay their costs of defense.                                                     

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SELECTED FINANCIAL DATA 

   The following is a summary of selected financial data for the Company for
each of the last five fiscal years.                                             

                                                        [Enlarge/Download Table]

                       NINE MONTHS    NINE MONTHS                                                                           
                          ENDED          ENDED                                     YEAR ENDED                               
                       ------------   ------------   ---------------------------------------------------------------------- 
                         9/30/99        9/30/98          1998           1997           1996          1995          1994     
                       ------------   ------------   ------------   ------------   ------------   -----------   ----------- 
                                                                                                                            
Subscribers..........     8,585,900      7,344,519      7,718,000      7,060,000      7,694,000     8,905,000     8,927,000 
BALANCE SHEET DATA                                                                                                          
Total Assets.........  $ 14,691,323   $ 15,474,477   $ 12,979,711   $ 16,997,972   $ 17,486,702   $23,955,541   $11,154,537 
Long Term                                                                                                                   
  Obligations........    85,183,407     61,673,971     66,664,879     45,989,547     28,202,711    22,881,635     3,096,540 
Stockholders' Equity                                                                                                        
  (Deficit)..........   (77,262,888)   (55,530,298)   (61,403,423)   (38,352,747)   (19,464,221)   (7,522,733)    1,953,634 
INCOME STATEMENT DATA                                                                                                       
Affiliate Sales                                                                                                             
  Revenue............     1,681,827      1,972,421      2,530,714      2,579,376      3,850,745     4,205,324     5,014,547 
Advertising Sales                                                                                                           
  Revenue............     2,267,090      1,966,203      2,965,896      4,474,597      5,652,938     5,812,663     7,206,501 
Other Revenue........                       35,465         34,750        124,960                    1,248,898       231,052 
Total Operating                                                                                                             
  Revenues...........     3,948,917      3,974,089      5,531,360      7,178,933      9,503,683    11,266,885    12,452,100 
Operating Expenses...    15,428,429     17,940,815     24,058,635     23,467,791     20,394,940    20,260,931    16,425,169 
Loss From                                                                                                                   
  Operations.........   (11,479,512)   (13,966,726)   (18,527,275)   (16,288,858)   (10,891,257)   (8,994,046)   (3,973,069)
Net Loss.............   (15,859,535)   (17,177,545)   (23,050,676)   (18,888,526)   (11,941,488)   (9,476,367)   (4,231,177)
Net Loss Per Common                                                                                                         
  Share -- Basic and                                                                                                        
  Diluted............         (0.78)         (0.85)         (1.14)         (0.93)         (0.59)        (0.47)        (0.22)

As of September 30, 1999, the book value per share of the Company was 
($3.81).                                                                        
The Company has not paid a dividend since its inception.              
   The ratio of earnings to fixed charges for the periods as required by the
fiscal years ending 1997 and 1998 and the period ended September 30, 1999 was   
deficient. The fixed charges for these periods were:                            
1997 -- $2,599,668                                
1998 -- $4,523,401                                
For the nine months ended 9/30/99 -- $4,380,023   

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS                                                           

Nine months ended September 30, 1999                                        

  Total revenues decreased $25,172, or .6% (from $3,974,089 to $3,948,917)
for the nine months ended September 30, 1999 (the "1999 Period") as compared    
with the nine months ended September 30, 1998 (the "1998 Period") and increased 
$84,948, or 7.4% (from $1,154,078 to $1,239,026) for the three months ended     
September 30, 1999 (the "1999 Quarter") as compared with the three months ended 
September 30, 1998 (the "1998 Quarter"). The decline resulted principally from  
Affiliate revenue decreases offset, in part, by increases in advertising        
revenue.                                                                        

     Overall advertising revenue increased $265,422 or 13.3% (from $2,001,668 to
$2,267,090) for the 1999 Period and increased $155,120, or 26.5% (from $569,634 
to $720,754) for the 1999 Quarter. Infomercial sales decreased $375,126, or     
35.3% (from $1,061,310 to $686,184) for the 1999 Period and decreased $272,939, 
or 96.1% (from $283,985 to $11,046) for the 1999 Quarter. The decrease in       
infomercial revenue is due to the Company's decision to shift from selling      
infomercial time during the overnight block to selling Nested Programs, which   
combines all of the available time during the overnights and allows the Company 
to sell it as a block of time which has been designated as Nested Programs.     
Revenue from Nested Programs amounted to $331,499, for the 1999 Period and the  
1999 Quarter. Conventional advertising increased $321,091 or 35.5% (from        
$904,893 to $1,225,984) for the 1999 Period and increased $97,069, or 35.6%     
(from $272,454 to $369,523) for the 1999 Quarter. This was primarily as a result
of increased national spot buys. Other revenue decreased by $12,042, or 34.0%   
(from $35,465 to $23,423) for the 1999 Period and decreased by $4,509, or 34.2% 
(from $13,195 to $8,686) for the 1999 Quarter.                                  

Affiliate revenues decreased by $290,594, or 14.7% (from $1,972,421 to
$1,681,827) for the 1999 Period and decreased by $66,172, or 11.3% (from        
$584,444 to $518,272) for the 1999 Quarter. This was primarily as a result of   
the acquisition of new subscribers having upfront zero fee carriage arrangements
for the first several years of their contract periods. These arrangements       
provide for long-term carriage for the Network with various multiple system     
operators with the intent to generate higher revenue streams from advertising in
the future. Management firmly believes that the Company's niche, the nation's   
Boomer and over audience, is a valuable market, which currently is not being    
served by any other network. Government statistics show that this demographic is
the fastest growing population segment and will account for nearly 30.0% of the 
population in the year 2000. As delivery technology continues to change,        
management believes the Company's best approach is to increase branding of the  
Network and build consumer demand for its product. For the remainder of 1999,   
the Company plans to continue its efforts to develop new original programming   
specifically targeted to America's Boomer and over audience and build upon the  
programming ideas developed in 1998.                                            

Operating expenses decreased $2,512,386, or 14.0% (from $17,940,815 to
$15,428,429) for the 1999 Period and decreased $1,054,379, or 17.6% (from       
$6,001,707 to $4,947,328) for the 1999 Quarter. The decrease for the 1999 Period
was primarily a result of a decrease of $762,526, or 17.3% (from $4,405,975 to  
$3,643,449) in programming, production and transmission costs, a decrease in    
sales and marketing costs of $3,258,444, or 55.2% (from $5,904,085 to           
$2,645,641), and offset, in part, by an increase in finance, general and        
administrative costs of $358,492, or 15.8% (from $2,264,577 to $2,623,069). The 
decrease for the 1999 Quarter was primarily the result of a decrease in         
programming, production and transmission costs of $442,879, or 28.9% (from      
$1,534,693 to $1,091,814), a decrease in sales and marketing costs of           
$1,113,572, or 57.6% (from $1,934,913 to $821,341), and a decrease in finance,  
general and administrative costs of $5,630 or .7% (from $764,591 to $758,961).  

  Programming, production and transmission costs decreased by $762,535, or
17.3% (from $4,405,984 to $3,643,449) for the 1999 Period and decreased by      
$442,877, or 28.9% (from $1,534,691 to $1,091,814) for the 1999 Quarter. The    
decrease is a result of a decrease in programming costs of $2,621,423, or 49.0% 
(from $5,349,143 to $2,727,720) for the 1999 Period, and a decrease of $621,322 
or 38.4% (from $1,618,067 to $996,745) for the 1999 Quarter, a decrease in      
production and traffic costs of $52,903, or 12.9% (from                         

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$408,996 to $356,093) for the 1999 Period, and a decrease of $38,253, or 26.2%  
(from $146,171 to $107,918) for the 1999 Quarter. These decreases were offset in
part by an increase in transmission costs of $223,014, or 9.8% (from $2,284,703 
to $2,507,717) for the 1999 Period, and an increase of $80,128, or 10.3% (from  
$781,427 to $861,555) for the 1999 Quarter. Programming amortization costs      
increased by $1,150,092 or 21.4% (from $5,366,178 to $6,516,270) for the 1999   
Period and increased $507,698 or 28.7% (from $1,767,510 to $2,275,208) for the  
1999 Quarter primarily as a result of changes in the Network's programming      
lineup and programming contracts. The Company expects to incur additional       
increases in future programming and studio production costs as a consequence of 
the Network's programming initiatives and the creation of new original programs 
which has continued in 1999. These additional future expenditures will adversely
impact the Company's results of operations in the short-term; however,          
management believes they are critical to the Company's long-term survival and   
growth.                                                                         

Sales and marketing expenses decreased by $3,258,444, or 55.2% (from  
$5,904,085 to $2,645,641) for the 1999 Period and decreased $1,113,572, or 57.6%
(from $1,934,913 to $821,341) for the 1999 Quarter. This decrease is a result of
the Company's decision in March 1999 to more closely align its sales and        
marketing activities by consolidating these efforts at its headquarters in      
Washington, D.C. Salaries and wages decreased by $355,706, or 27.6% (from       
$1,289,594 to $933,888) for the 1999 Period and decreased by $234,149, or 48.6% 
(from $481,768 to $247,619) for the 1999 Quarter. Travel and entertainment      
expenses decreased by $243,507, or 66.2% (from $367,877 to $124,370) for the    
1999 Period and decreased by $60,858, or 58.7% (from $103,744 to $42,886) for   
the 1999 Quarter. Both of these decreases were primarily due to the departure of
personnel who have not been replaced. Convention expenses decreased by $957,441,
or 93.9% (from $1,019,463 to $62,022) for the 1999 Period and decreased by      
$408,801, or 93.5% (from $437,252 to $28,451) for the 1999 Quarter. Advertising 
expenditures decreased by $1,088,665, or 90.7% (from $1,200,059 to $111,394) for
the 1999 Period and decreased $92,709, or 71.4% (from $129,814 to $37,105) for  
the 1999 Quarter. Sales and Marketing materials decreased by $117,804, or 80.1% 
(from $147,105 to $29,301) for the 1999 Period and decreased by $61,530, or     
85.7% (from $71,758 to $10,228) for the 1999 Quarter. Premium expenditures      
decreased by $109,941, or 97.0%, (from $113,286 to $3,345) for the 1999 Period  
and decreased by $15,124, or 100% (from $15,124 to $0) for the 1999 Quarter.    
These decreases also were due to the Company's efforts to reduce marketing      
costs. Professional fees decreased by $402,237, or 44.0% (from $914,028 to      
$511,791) for the 1999 Period and decreased by $206,622, or 55.1% (from $374,991
to $168,369) for the 1999 Quarter primarily as a result of reduced expenditures 
on the Network's affinity and new media efforts, as well as bringing the        
Network's public relations operations in house. These decreases were offset in  
part by an increase in marketing allowance costs of $138,429, 61.3% (from       
$225,799 to $364,228) for the 1999 Period and an increase of $9,114, or 6.5%    
(from $140,222 to $149,336) for the 1999 Quarter and an increase in Affiliate   
events of $107,526, or 100.0% (from $0 to $107,526) for the 1999 Period and     
$7,592, or 100.0% (from $0 to $7,592) for the 1999 Quarter.                     

   Finance, general and administrative costs increased by $358,492, or 15.8%
(from $2,264,577 to $2,623,069) for the 1999 Period and decreased by $5,624, or 
.7% (from $764,591 to $758,967 for the 1999 Quarter. This increase was primarily
a result of an increase in consolidation and retention costs by $359,518, or    
100.0% (from $0 to $359,518) for the 1999 Period and an increase of $93,394, or 
100.0% (from $0 to $93,394) for the 1999 Quarter. Bad debt expense increased by 
$54,731, or 23.4% (from $234,000 to $288,731) for the 1999 Period and increased 
by $6,731, or 22.4% (from $30,000 to $36,731) for the 1999 Quarter. These       
increases were offset by decreases in salaries and wages of $51,286, or 5.9%    
(from $865,213 to $813,927) for the 1999 Period and decreases of $21,594, or    
6.9% (from $311,391 to $289,797) for the 1999 Quarter. Legal and professional   
fees increased by $20,702, or 5.5% (from $376,421 to $397,123) for the 1999     
Period and decreased by $94,837, or 64.4% (from $147,234 to $52,397) for the    
1999 Quarter. Office expenses decreased by $48,063, or 36.3% (from $132,269 to  
$84,206) for the 1999 Period and decreased by $13,783, or 33.3% (from $41,429 to
$27,646) for the 1999 Quarter.                                                  

As a result of decreased revenues ($25,172), increased programming    
amortization costs ($1,150,092), and increased finance, general and             
administrative costs ($358,492) which were offset by decreased programming,     
production and transmission costs ($762,535), and decreased sales and marketing 
costs ($3,258,444), the Company's loss from operations decreased $2,487,214, or 
17.8% (from $13,966,726 to $11,479,512) for                                     

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the 1999 Period. As a result of increased revenues of ($84,948) and increased   
programming amortization costs ($507,698) which were offset by decreased        
programming, production and transmission costs ($442,877), decreased sales and  
marketing costs ($1,113,572), and decreased finance, general and administrative 
costs ($5,624), the Company's loss from operations decreased $1,139,327, or     
23.5% (from $4,847,629 to $3,708,302) for the 1999 Quarter.                     

Other expenses increased $1,169,204 or 36.4% (from $3,210,819 to      
$4,380,023) for the 1999 Period and increased $308,002, or 25.9% (from          
$1,188,750 to $1,496,752) for the 1999 Quarter, primarily as a result of        
interest on outstanding debt.                                                   

Liquidity and Capital Resources                                             

    Cash increased from $539,371 at December 31, 1998 to $614,103 at September
30, 1999, principally due to $12.0 million in financing received during the 1999
Period, offset by cash outlays to cover operating losses and repayments of      
certain debts. Working capital increased from $1,224,708 at December 31, 1998 to
$3,083,738 at September 30, 1999, principally as a result of $12.0 million in   
financing received, netted against purchases of programming and cablecast       
rights, and cash outlays to cover operating losses and repayment of certain     
debt. Cablecast rights have increased by $1,734,442, since December 31, 1998 as 
a result of the Company's investment in its primetime line-up. Total liabilities
increased primarily due to $12.0 million in additional financing.               

Cash used in operating activities decreased $1,759,642, or 23.1% (from
($7,613,735) to $(5,854,093)), for the 1999 Period compared to the 1998 Period, 
principally as a result of decreases in accounts payable of $2,134,145, or      
116.6% (from $1,829,878 to ($304,267)), offset in part by increases in          
depreciation of $1,154,106, or 20.7% (from $5,580,937 to $6,735,043), and       
increases in accrued expenses of $1,156,775, or 46.6% (from $2,484,144 to       
$3,640,919), primarily as a result of interest on additional borrowings.        

Cash used in investing activities decreased $1,981,628, or 44.0% (from
($4,500,423) to ($2,518,795)) principally due to a decrease in purchases of     
programming and cablecast rights of $2,003,021, or 44.8% (from $4,466,858 to    
$2,463,837).                                                                    

   Cash flows from financing activities decreased $2,892,405, or 25.5% (from
$11,340,025 to $8,447,620) due principally to decreases in financing of $3.0    
million, or 20.0% (from $15.0 million to $12.0 million) and decreased repayment 
of long-term obligations of $107,525, or 2.9% (from $3,659,975 to $3,552,450).  

Since 1990, Crown and Concept have been the principal source of the   
Company's capital. Crown and Concept have invested $2.3 million and provided    
$70.5 million in financing since 1994, of which $12.0 million was provided      
during the 1999 Period. Additionally, Crown and Concept have committed to       
advance, as needed, an additional $3.0 million in debt financing for the        
remainder of 1999. Management believes that these funds will be sufficient to   
satisfy the Company's operating needs for 1999. In connection with the          
additional borrowings, the Company has entered into security agreements, as     
amended, pledging substantially all the Company's assets as security for its    
indebtedness to Crown and Concept.                                              

   The Company's outstanding indebtedness to Crown and Concept in the amount
of $63,997,292 and $21,783,608, respectively, matures on January 1, 2001. The   
Company does not possess sufficient capital to repay this amount when due and   
does not possess the ability to raise the amount necessary to repay the         
indebtedness from the conventional public or private debt and equity capital    
markets. The Company intends to engage in discussions with Crown and Concept    
with respect to the restructuring of this indebtedness. There can be no         
assurance that the Company will be successful in its efforts to restructure this
indebtedness which is secured by substantially all of the Company's assets. If  
the Company is unsuccessful in its efforts to restructure the indebtedness, its 
failure to repay the indebtedness when due will constitute a default subjecting 
the Company to a foreclosure on its assets which secure the indebtedness.       

  The Company believes that, in order to survive in the highly competitive
market for cable television programming, the Company will need significant      
additional investment over the next four to five years. Such additional         
investment is necessary to improve programming and increase distribution, which 
the Company anticipates ultimately will increase advertising revenues and result
in substantial long-term revenue increases.                                     
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   The Company's Board of Directors has directed its Executive Committee and
management to study the question of whether the Company should enter into, and  
the potential opportunities for, a strategic alliance, and to make              
recommendations to the full Board of Directors. The Executive Committee and     
management have been actively engaged in this pursuit. Because of the           
unpredictable factors involved in the search for a strategic alliance, and the  
dynamic changes taking place in the industry, there is considerable uncertainty 
about the Company's future needs. There can be no assurance either that the     
Company will be able to locate sufficient funding in excess of the funds        
committed for 1999, or that it will be able to achieve a strategic alliance. The
Company continues to evaluate strategic alliance alternatives and has had       
preliminary discussions with a number of potential strategic partners. These    
discussions are preliminary and no definitive proposals or targeted entities    
have been identified. The Company will actively continue to pursue              
identification of potential strategic alliance candidates. There can be no      
assurance that the Company will be able to obtain a strategic partner, or that  
any strategic partner will be willing to invest the sums required by the Company
in order to continue to grow the Network's subscriber base. It is anticipated   
that following the Merger, the business and operations of the Company will be   
continued substantially as currently conducted for the immediate future. Crown  
and Concept have informed the Company that they intend to reevaluate the        
business and operations of the Company following the Merger and take such       
actions with respect to the future business and operations of the Company as    
they deem appropriate. Although there are no definitive plans or agreements in  
place, Crown and Concept intend to continue to seek material transactions and/or
relationships such as joint ventures, strategic partnerships, mergers or other  
forms of business combinations with third parties following the Merger.         

  Fiscal year ended December 31, 1998 compared to fiscal year ended December 31,
1997                                                                            

Net loss in 1998 increased $4,162,000, or 22.0% (from $18,889,000 to  
$23,051,000). This increase was due principally to reduced revenues (a reduction
of $1,648,000); increased interest expenses (an increase of $1,924,000);        
increased program amortization expenses (an increase of $867,000); increased    
finance, general and administrative expenses (an increase of $335,000); and     
increased programming, production and transmission expenses (an increase of     
$136,000); offset by decreased sales and marketing expenses (a decrease of      
$746,000).                                                                      

Revenues:                                                                   

   Total revenues in 1998 decreased by $1,648,000, or 23.0% (from $7,179,000
to $5,531,000). This decrease was primarily attributed to advertising revenues. 

Affiliate revenues declined $48,000, or 1.9% (from $2,579,000 to      
$2,531,000), reflecting earlier losses of subscribers as a result of competition
for scarce channel capacity. Additionally, increased competition has put        
downward pressure on the rates which the Company can charge its Affiliates.     
While subscriber losses are immediately reflected in Affiliate revenue, the same
is not true for increases in subscribers as it is common for a new Affiliate to 
receive a minimum of two years of free service as an incentive for commencing   
carriage of a programming service. For these reasons, the Company expects future
increases in its subscriber base, if any, to result in less than fully          
proportionate increases in Affiliate revenues.                                  

 Advertising revenues decreased $1,509,000, or 33.7% (from $4,475,000 to
$2,966,000), primarily as a result of decreased rates associated with the       
Company's reduced subscriber base from past years. Revenues from infomercials   
decreased approximately $1,182,000, or 39.9%, primarily due to a decrease in    
average rate per half hour which was primarily the result of market pressures as
well as a 10.0% decrease from 1997 with respect to the amount of time devoted to
this format. Revenues from short-format commercial advertising (two minutes or  
less in length) decreased by approximately $327,000, or 21.6%, due to a 26.3%   
decrease in the average rate charged per spot. This decrease was due to market  
pressures and make goods to certain advertisers. Other revenues decreased       
approximately $90,000, or 72.0% (from $125,000 to $35,000) due to extraordinary 
collections of previously written-off affiliate fees in the prior year.         

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Operating Expenses:                                                         

   Total operating expenses increased $592,000, or 2.5% (from $23,468,000 to
$24,060,000). The increase was due principally to increased program amortization
expenses (an increase of $867,000); increased finance, general and              
administrative expenses (an increase of $335,000); and increased programming,   
production and transmission expenses (an increase of $136,000); offset by       
decreased sales and marketing expenses (a decrease of $746,000).                

    Programming expenses for 1998 increased $136,000, or 2.5% (from $5,524,000
to $5,660,000). Programming costs, net of $4,179,000 in capitalized costs,      
increased by $68,000, or 3.4% (from $1,977,000 to $2,045,000) primarily as a    
result of costs associated with new original programs. Transmission costs       
increased by $216,000, or 7.6% (from $2,857,000 to $3,073,000) primarily as a   
result of incurring HITS transport fees, which allow the Company to transmit its
signal digitally, as well as incurring higher master control and uplink charges 
for the year. Program, production and traffic expenses decreased $149,000, or   
21.6% (from $691,000 to $542,000) primarily as a result of reduced Network      
branding costs for the current year.                                            

   Programming amortization increased $867,000, or 12.6% (from $6,891,000 to
$7,758,000). The majority of this increase results from a shorter amortization  
period for original programming, which comprises the bulk of capitalized costs. 

Sales and marketing expenses decreased by $746,000, or 9.2% (from     
$8,120,000 to $7,374,000) primarily as a result of the following: Advertising   
expenses decreased by $1,556,000, or 55.0% (from $2,827,000 to $1,271,000) as a 
result of not incurring satellite, ad sale and special programming advertising  
costs within the current year; conventions and national events increased by     
$318,000, or 31.5% (from $1,009,000 to $1,327,000) as a result of increased     
presence and activities at cable trade shows and other special events;          
professional fees increased by $123,000, or 27.2% (from $452,000 to $575,000) as
a result of increased public relations efforts and increased consulting in      
relation to satellite sales and affinity programs; program guide costs increased
by $97,000, or 43.5% (from $223,000 to $320,000) as a result of associated costs
with redesigning the guides; employee related costs decreased by $93,000, or    
4.0% (from $2,307,000 to $2,214,000) primarily as a result of decreased travel  
and entertainment expenses within the affiliate sales and marketing areas.      

Finance, general and administrative expenses increased by $335,000, or
11.4% (from $2,932,000 to $3,267,000). The increase was attributable to a       
$432,000 or 423.5% increase in bad debt expense (from $102,000 to $534,000), due
primarily to an increase in Affiliate write-offs during the year as well as any 
reserves for certain advertising revenues that were placed in litigation.       
Personnel costs increased by $74,000, or 6.6% (from $1,118,000 to $1,192,000)   
due to the addition of staff within the accounting department. Professional fees
decreased $73,000, or 13.0% (from $562,000 to $489,000) principally as a result 
of reduced consulting and legal fees. Other expenses decreased by $42,000, or   
10.3% (from $406,000 to $364,000) primarily due to a reduction in directors'    
fees, shareholders' expenses, repairs and maintenance expenses and dues and     
subscriptions expenses. These were offset by increases in insurance expenses    
that were related to increases in various policy coverages. Office expenses     
decreased by $38,000, or 18.0% (from $211,000 to $173,000), primarily due to    
lower general expenditures.                                                     

    Net interest expense increased by $1,923,000, or 74.0% (from $2,600,000 to
$4,523,000) due to increased principal on the notes payable to Crown. Interest  
expense is expected to increase in 1999 as a result of a full year's interest on
1998 borrowings as well as interest on additional borrowings anticipated in     
1999.                                                                           

  Fiscal year ended December 31, 1997 compared to fiscal year ended December 31,
1996                                                                            

Net loss in 1997 increased $6,948,000, or 58.2% (from $11,941,000 to  
$18,889,000). This increase was due principally to reduced revenues (a reduction
of $2,325,000); increased sales and marketing expenses (an increase of          
$3,610,000); increased interest expense (an increase of $1,549,000); and        
increased programming, production and transmission expenses (an increase of     
$65,000); offset by decreases in finance, general and administrative expenses (a
decrease of $311,000) and decreased programming amortization expense (a decrease
of $292,000).                                                                   

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Revenues:                                                                   

   Total revenues in 1997 decreased by $2,325,000, or 24.5% (from $9,504,000
to $7,179,000). This decrease was primarily attributed to decreases in Affiliate
and advertising revenues.                                                       

Affiliate revenues declined $1,272,000, or 33.0%, (from $3,851,000 to 
$2,579,000) reflecting a loss of subscribers as a result of competition for     
scarce channel capacity. Additionally, increased competition has put downward   
pressure on the rates which the Company can charge its Affiliates. While        
subscriber losses are immediately reflected in Affiliate revenue, the same is   
not true for increases in subscribers as it is common for a new Affiliate to    
receive a minimum of two years of free service as an incentive for commencing   
carriage of a programming service. For these reasons, the Company expects future
increases in its subscriber base, if any, to result in less than fully          
proportionate increases in Affiliate revenues. The Company anticipates Affiliate
revenues for 1998 will continue to decline as it will reflect a full year of the
1997 subscriber losses and any additional subscriber losses, if any, in 1998.   

Advertising sales decreased $1,178,000, or 20.8% (from $5,653,000 to  
$4,475,000) primarily as a result of decreased rates associated with the        
Company's reduced subscriber base. The Company anticipates advertising revenues 
for 1998 will continue to decline as it will reflect a full year of the 1997    
subscriber losses and any additional subscriber losses, if any, in 1998.        
Revenues from infomercials decreased $845,000, or 22.2% primarily due to a      
decrease in average rate per half hour as a result of lower subscriber numbers  
and market pressures. Revenues from short-format commercial advertising (two    
minutes or less in length) decreased by $333,000, or 18%, due to lower          
subscriber numbers and market pressures. Other revenues increased $125,000, or  
100% (from $0 to $125,000) as a result of collection of amounts previously      
written off as uncollectible.                                                   

Operating Expenses:                                                         

   Total operating expenses increased $3,073,000, or 15.0% (from $20,395,000
to $23,468,000). The increase was due principally to increased sales and        
marketing expenses (an increase of $3,610,000); and increased programming,      
production and transmission expenses (an increase of $65,000); offset by        
decreases in finance, general and administrative expenses (a decrease of        
$311,000) and decreased programming amortization expense (a decrease of         
$292,000).                                                                      

Programming, production and transmission expenses for 1997 increased  
$65,000, or 1.2% (from $5,459,000 to $5,524,000). Programming costs, net of     
$3,533,000 in capitalized costs, decreased by $146,000, or 6.9% (from $2,123,000
to $1,977,000) primarily as a result of costs associated with new original      
programs. During 1997, the Network increased its original programming from two  
hours a day to eight hours a day. Many of the new programs, such as Ballroom    
DanceSport Competitions and Cafe DuArt, are long lived in nature and, as such,  
their production costs were capitalized and are being amortized over the life of
the program, which is generally two years. Network branding costs increased     
$178,000, or 178.0% (from $10,000 to $188,000) as a result of developing a new  
on-air look in association with the Network's new name. Transmission costs      
increased by $92,000, or 3.3% (from $2,765,000 to $2,857,000) as a result of    
costs associated with scrambling the Network's signal. Programming costs are    
expected to increase in 1998 as a result of the Network's plans to increase     
production of new original programs. Transmission expenses are expected to      
increase in 1998 as a result of charges associated with the Network's HITS feed 
and anticipated improvements in the Network's master control operations. See    
Part 1, Item 1, Section 4.                                                      

  Programming amortization decreased $292,000, or 4.0% (from $7,183,000 to
$6,891,000). The majority of this decrease results from a different mix of      
programs and related license fees for prime-time programming.                   

Sales and marketing expenses increased by $3,610,000, or 80.0% (from  
$4,510,000 to $8,120,000). Advertising expenses increased by $2,317,000, or     
454.3% (from $510,000 to $2,827,000) as a result of increased trade advertising,
increased consumer advertising and awareness campaigns, as well as combined     
trade and consumer advertising to the satellite community in anticipation of the
planned signal scrambling in third quarter 1997. Conventions and national events
increased by $444,000, or 78.6% (from $565,000 to $1,009,000) as a result of    
increased presence and activities at cable trade shows and other special events.
Employee related costs increased by $364,000, or 18.7% (from $1,943,000 to      
$2,307,000) primarily as a result                                               

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of additional advertising sales support staff, filling vacant affiliate sales   
positions and increased travel and entertainment expenses. Professional fees    
increased by $171,000, or 81.0% (from $211,000 to $382,000) as a result of      
increased public relations efforts and increased consulting in relation to      
satellite sales and affinity programs. Program guide costs increased by $68,000,
or 43.9% (from $155,000 to $223,000) as a result of redesigning the guides.     
Sales and marketing expenses are expected to increase in 1998 as a result of the
Company's plans to increase consumer awareness advertising and other sales and  
marketing initiatives.                                                          

     Finance, general and administrative expenses decreased by $311,000, or 9.6%
(from $3,243,000 to $2,932,000). The decrease is primarily attributable to a    
$341,000 or 75.8% decrease in bad debt expense (from $450,000 to $109,000) as a 
result of improved credit and collections efforts. Professional fees decreased  
by $194,000, or 26.8% (from $724,000 to $530,000) principally as a result of    
reduced legal fees. Personnel costs decreased by $169,000, or 13.2% (from       
$1,287,000 to $1,118,000) due to additional staff and costs in 1996 associated  
with transition of the chief executive's office. Rent and lease costs increased 
by $75,000, or 54.0% (from $139,000 to $214,000) as a result of restructuring   
departmental charges. Litigation settlement income/expense increased by         
$165,000, or 110.0% (from $150,000 income to $15,000 expense) as a result of    
litigation settlements in each of the two years.                                

 Interest expense increased by $1,550,000, or 147.6% (from $1,050,000 to
$2,600,000) due to interest on notes payable to the Majority Stockholders.      
Interest expense is expected to increase in 1998 as a result of a full year's   
interest on 1997 borrowings as well as interest on additional borrowings        
anticipated in 1998.                                                            

Liquidity and Capital Resources                                                 

  Fiscal year ended December 31, 1998 compared to fiscal year ended December 31,
1997                                                                            

Working capital increased $1,039,000, or 558.6% (from $186,000 to     
$1,225,000). The increase is primarily a result of increases in current portion 
of programming rights, offset by increases in accounts payable.                 

Cash used in operating activities increased $3,123,000, or 36.3% (from
($8,601,000) to ($11,724,000)), due to an increased loss of $4,162,000, offset  
by an increase in programming amortization and accrued interest.                

Cash used in investing activities increased $560,000, or 15.3% (from  
($3,660,000) to ($4,220,000)), due primarily to an increase in acquisition of   
programming and cablecast rights of $821,000, offset by a decrease in the       
acquisition of property and equipment of $231,000.                              

    Cash provided by financing activities increased $2,037,000, or 16.1% (from
$12,643,000 to $14,680,000), due primarily to decreased payments on financing   
for programming and other debt of $2,536,000, offset by a decrease in financing 
by Crown of $500,000.                                                           

In light of the Company's recurring losses, management is actively    
monitoring expenses and examining operating methods to increase efficiencies.   
These measures may provide short term improvement, but do not address the more  
critical long term growth needs for the Network. In order to grow, the Network  
needs to increase its Affiliate base which, in turn, will increase the          
subscriber base and should allow the Network to increase its advertising rates  
as well as Affiliate revenues. To provide for necessary future growth,          
management continued its focus on an aggressive Affiliate marketing campaign    
including consumer awareness advertising and events, prominent presence at major
trade shows and new trade advertising.                                          

 Increased competition from networks with strong strategic alliances and
significant financial resources continue to significantly effect the Company's  
ability to increase its subscriber base and, correspondingly, has reduced       
revenues from Affiliates and advertising. This competition also has increased   
the costs which the Company must pay for programming. The Company does not      
anticipate significant improvement in the results of its operations until such  
time as the number of its subscribers increases significantly.                  

Since 1990, Crown and Concept 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, between January 1, 1999 and March 23, 1999,  
Crown                                                                           

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has provided $8,000,000 in debt financing to the Company, and has committed to  
advance, as needed, an additional $7,000,000 in debt financing during the       
balance of the calendar year. The Company believes that these funds will be     
sufficient to satisfy its operating needs for 1999. In connection with the      
borrowings, the Company has entered into a security agreement pledging          
substantially all the Company's assets as security for its indebtedness to Crown
and Concept.                                                                    

   The Company continues to evaluate strategic alliance alternatives and has
had preliminary discussions with a number of potential strategic partners. These
discussions are preliminary and no definitive proposals or targeted entities    
have been identified. The Company will actively continue to pursue              
identification of potential strategic alliance candidates. The Company also     
continued in its analysis of and efforts to seek a strategic alliance. The      
Company has engaged in active discussions with several possible strategic       
partners, but no serious discussions have occurred. There can be no assurance   
that the Company will be able to obtain a strategic partner, or that any        
strategic partner will be willing to invest the sums required by the Company in 
order to continue to grow the Network's subscriber base. It is anticipated that 
following the Merger, the business and operations of the Company will be        
continued substantially as currently conducted for the immediate future. Crown  
an Concept have informed the Company that they intend to reevaluate the business
and operations of the Company following the Merger and take such actions with   
respect to the future business and operations of the Company as they deem       
appropriate. Although there are no definitive plans or agreements in place,     
Crown and Concept intend to continue to seek material transactions and/or       
relationships such as joint ventures, strategic partnerships, mergers or other  
forms of business combinations with third parties following the Merger.         

     Because of the unpredictable factors involved in the search for a strategic
alliance, and the dynamic changes taking place in the industry, there is        
considerable uncertainty about the Company's future needs. There can be no      
assurance that the Company will be able to locate sufficient financing in excess
of that committed from Crown, nor that it will be able to achieve a strategic   
alliance.                                                                       

  Fiscal year ended December 31, 1997 compared to fiscal year ended December
31, 1996                                                                

Working capital increased by $794,693, or 131.0% (from a deficit of   
($608,569) to $186,124), primarily as a result of increases in current portion  
of programming rights and cash, offset by increases in accounts payable.        

    Cash used in operating activities increased by $5,685,379, or 195.0% (from
($2,915,657) to ($8,601,036)), due to an increased loss of $6,947,038, and an   
increase in gross reductions in accounts receivable of $1,032,094 due to        
write-offs of bad debt and additional collection efforts. Offsetting these      
amounts were an increase of $1,133,042 in long-term accrued interest expense; an
increase of $1,048,945 in accounts payable due to timing of payments and        
increased expense volume; and a decrease of $417,000 in provision for losses on 
accounts receivable as a result of reduced exposure to bad debts.               

   Cash used in investing activities increased by $3,286,375 or 879.1% (from
($373,819) to ($3,660,194)) for the years ended December 31, 1996 and 1997,     
respective, due primarily to an increase in acquisition of programming and      
cablecast rights of $3,151,910.                                                 

 Cash provided by financing activities increased by $8,788,660 or 228.0%
(from $3,854,748 to $12,643,408), due to an increase in financing by the        
Majority Stockholders of $9,500,000, offset by increased payments on financing  
for programming and other debt of $711,340.                                     

MATERIAL COMMITMENTS                                                            

     The Company leases transponder space and related services on a satellite at
a base monthly rental of $205,400. The lease provides for greater back-up       
protection than did the Company's previous leases in the event of satellite     
failure. The lease terminates with the life of the satellite, which is expected 
in the year 2006, and requires the Company to pay a launch protection fee of    
$1,000,000 plus capitalized interest at 12.0% and other direct costs.           

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 As of March 23, 1999, the Company had issued and outstanding promissory
notes to Concept and Crown in the aggregate principal amount of $20,600,000 and 
$50,572,000, respectively, bearing interest of approximately 7.75% per annum    
which are due and payable on January 1, 2000.                                   

INDEPENDENT ACCOUNTANTS 

    The consolidated financial statements and financial statement schedules of
the Company for each of the years in the three-year period ended December 31,   
1998 included in this Proxy Statement have been audited by BDO Seidman, LLP.    

   As reported on the Company's Form 8-K, filed with the Commission on April
5, 1999, BDO Seidman, LLP notified the Company on April 1, 1999 that the        
auditor-client relationship between the Company and BDO Seidman, LLP had        
terminated and that it would decline to stand for re-election. BDO Seidman'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  
years and through the subsequent interim period, there were no disagreements    
with BDO Seidman on any matter of accounting principles or practices, financial 
statement disclosure, or auditing scope or procedure. The Company has engaged   
Grant Thornton LLP as the Company's independent accountant as of April 2, 1999. 
Grant Thornton LLP was ratified as the Company's independent accountants at the 
Company's 1999 Annual Meeting of Stockholders.                                  

OTHER MATTERS 

  The Board of Directors knows of no other business to be presented at the
Special Meeting. If other matters properly come before the meeting in accordance
with the Bylaws, the persons named as proxies will vote on them in accordance   
with their best judgment.                                                       

ANNUAL REPORT AND FORM 10-K 

The 1998 Annual Report to Stockholders containing the consolidated    
financial statements of the Company for the year ended December 31, 1998 and the
Company's annual report on Form 10-K for the fiscal year ended December 31, 1998
as filed with the Commission without the accompanying exhibits has previously   
been mailed to stockholders. A list of the Exhibits included in the Form 10-K   
and the exhibits may be obtained by writing to investor relations, The Nostalgia
Network, Inc. 650 Massachusetts Avenue, N.W., Washington, D.C. 20001.           

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STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING 

     The deadline for submission of stockholder proposals intended for inclusion
in the Company's proxy statement for the 2000 Annual Meeting of Stockholders    
(the "2000 Annual Meeting") was December 31, 1999. Upon consummation of the     
Merger, Crown and Concept will be the only stockholders of the Company and the  
Company will terminate its Exchange Act registration.                           

   You are urged to complete, date, sign and return your Proxy Card promptly
to make certain your shares will be voted at the Special Meeting, even if you   
plan to attend the meeting in person. If you desire to vote your shares in      
person at the meeting, your proxy may be revoked. For your convenience in       
returning the Proxy Card, a pre-addressed and postage paid envelope has been    
enclosed.                                                                       

YOUR PROXY IS IMPORTANT 
WHETHER YOU OWN FEW OR MANY SHARES

Please date, sign and mail the enclosed Proxy Card today. 

                                      By Order of the Board of Directors

                          /s/ WILLARD R. NICHOLS
                                          --------------------------------------
                                       Vice President, General Counsel and
             Secretary

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INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
THE NOSTALGIA NETWORK, INC.                                       
Report of Independent Accountants...........................   F-2
Balance Sheets as of December 31, 1998 and 1997.............   F-3
Statements of Operations for the Years Ended December 31,         
  1998, 1997 and 1996.......................................   F-4
Statements of Changes in Stockholders' Equity (Deficit) for       
  the Years Ended December 31, 1998, 1997 and 1996..........   F-5
Statements of Cash Flows for the Years Ended December 31,         
  1998, 1997 and 1996.......................................   F-6
Notes to Financial Statements...............................   F-7
Balance Sheet as of September 30, 1999 (unaudited)..........  F-20
Statements of Operations for the Three Months Ended               
  September 30, 1999 and 1998 and for the Nine Months Ended       
  September 30, 1999 and 1998 (unaudited)...................  F-21
Statements of Cash Flows for the Nine Months Ended September      
  30, 1999 and 1998 (unaudited).............................  F-22
Notes to Financial Statements...............................  F-23

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders                                      
The Nostalgia Network, Inc.                                                     

   We have audited the accompanying balance sheets of The Nostalgia Network,
Inc. (the "Company") as of December 31, 1998 and 1997 and the related statements
of operations, changes in stockholders' deficit and cash flows for each of the  
three years in the period ended December 31, 1998. We have also audited Schedule
II for the years ended December 31, 1998, 1997 and 1996. These financial        
statements and schedule are the responsibility of the Company's management. Our 
responsibility is to express an opinion on these financial statements and       
schedule based on our audits.                                                   

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements and schedule are    
free of material misstatement. An audit includes examining, on a test basis,    
evidence supporting the amounts and disclosures in the financial statements and 
schedule. An audit also includes assessing the accounting principles used and   
significant estimates made by management, as well as evaluating the overall     
presentation of the financial statements and schedule. We believe that our      
audits provide a reasonable basis for our opinion.                              

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Nostalgia Network, Inc. 
at December 31, 1998 and 1997, and the results of its operations and cash flows 
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. Also, in our opinion, Schedule II
presents fairly, in all material respects, the information set forth therein for
the years ended December 31, 1998, 1997 and 1996.                               
                    BDO Seidman, LLP

Washington DC                                                                   
March 23, 1999                                                                  

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THE NOSTALGIA NETWORK, INC. 

BALANCE SHEETS
DECEMBER 31,

                                                        [Enlarge/Download Table]

                                                                  1998           1997     
                                                              ------------   ------------ 
                                                                                          
                                          ASSETS                                          
CURRENT ASSETS:                                                                           
  Cash and cash equivalents.................................  $    539,371   $  1,803,189 
  Accounts receivable, less allowance of $302,000 and                                     
     $467,000 for doubtful accounts.........................       935,230        723,766 
  Prepaid expenses..........................................       168,362        140,341 
  Programming and cablecast rights..........................     7,300,000      6,880,000 
                                                              ------------   ------------ 
          Total current assets..............................     8,942,963      9,547,296 
  Programming and cablecast rights, at cost -- net..........     2,788,129      5,956,646 
  Property and equipment, at cost -- net....................     1,191,879      1,441,290 
  Deposits..................................................        56,740         52,740 
                                                              ------------   ------------ 
          Total assets......................................  $ 12,979,711   $ 16,997,972 
                                                              ============   ============ 
                          LIABILITIES AND STOCKHOLDERS' DEFICIT                           
CURRENT LIABILITIES:                                                                      
  Current maturities of programming and cablecast fees......  $  5,068,000   $  6,334,000 
  Accounts payable -- Trade.................................     1,976,255      2,010,924 
                   -- Related parties.......................       278,919        343,321 
  Accrued expenses and other liabilities....................       395,081        672,927 
                                                              ------------   ------------ 
          Total current liabilities.........................     7,718,255      9,361,172 
                                                              ------------   ------------ 
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES:                                           
  Programming and cablecast fees............................       114,465      2,338,835 
  Notes payable to related parties..........................    62,832,873     41,417,194 
  Accrued interest payable -- Related parties...............     3,382,125      1,876,508 
  Other.....................................................       335,416        357,010 
                                                              ------------   ------------ 
          Total long-term liabilities.......................    66,664,879     45,989,547 
                                                              ------------   ------------ 
          Total liabilities.................................    74,383,134     55,350,719 
                                                              ------------   ------------ 
                              COMMITMENTS AND CONTINGENCIES                               
STOCKHOLDERS' DEFICIT:                                                                    
  Preferred stock, convertible: $2 par value, 125,000 shares                              
     authorized, 3,250 shares issued and outstanding........         6,500          6,500 
  Common stock: $.04 par value, 30,000,000 shares                                         
     authorized, 20,274,371 shares issued and outstanding in                              
     1998 and 1997..........................................       810,975        810,975 
  Additional paid-in capital................................    30,213,554     30,213,554 
  Deficit...................................................   (92,434,452)   (69,383,776)
                                                              ------------   ------------ 
          Total stockholders' deficit.......................   (61,403,423)   (38,352,747)
                                                              ------------   ------------ 
          Total liabilities and stockholders' deficit.......  $ 12,979,711   $ 16,997,972 
                                                              ============   ============ 

The accompanying summary of accounting policies and notes are an integral part
of these financial statements.

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THE NOSTALGIA NETWORK, INC. 

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

                                                        [Enlarge/Download Table]

                                                      1998           1997           1996     
                                                  ------------   ------------   ------------ 
                                                                                             
OPERATING REVENUES:                                                                          
Affiliate revenues............................... $  2,530,714   $  2,579,376   $  3,850,745 
  Advertising revenues...........................    2,965,896      4,474,597      5,652,938 
  Other..........................................       34,750        124,960             -- 
                                                  ------------   ------------   ------------ 
          Total operating revenues...............    5,531,360      7,178,933      9,503,683 
                                                  ------------   ------------   ------------ 
OPERATING EXPENSES:                                                                          
  Programming, production and transmission.......    5,659,937      5,524,078      5,458,931 
  Programming amortization.......................    7,757,637      6,891,161      7,182,932 
  Sales and marketing............................    7,373,867      8,120,458      4,510,056 
  Finance, general and administrative............    3,267,194      2,932,094      3,243,021 
                                                  ------------   ------------   ------------ 
          Total operating expenses...............   24,058,635     23,467,791     20,394,940 
                                                  ------------   ------------   ------------ 
          Loss from operations...................  (18,527,275)   (16,288,858)   (10,891,257)
INTEREST EXPENSE, NET:                                                                       
  Related parties................................   (4,581,460)    (2,689,000)    (1,141,000)
  Others.........................................       58,059         89,332         90,769 
                                                  ------------   ------------   ------------ 
          Net loss............................... $(23,050,676)  $(18,888,526)  $(11,941,488)
                                                  ============   ============   ============ 
LOSS PER COMMON SHARE -- BASIC AND DILUTED....... $      (1.14)  $      (0.93)  $      (0.59)
                                                  ============   ============   ============ 
WEIGHTED AVERAGE SHARES OUTSTANDING..............   20,274,371     20,274,371     20,274,371 

The accompanying summary of accounting policies and notes are an integral part
of these financial statements.

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THE NOSTALGIA NETWORK, INC. 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) 
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                                                                      TOTAL    
                             PREFERRED            COMMON              ADDITIONAL                  STOCKHOLDERS'
                               STOCK              STOCK                 PAID-IN                      EQUITY    
                              SHARES    AMOUNT    SHARES     AMOUNT     CAPITAL      DEFICIT        (DEFICIT)  
                             ---------  ------  ----------  --------  -----------  ------------   -------------
                                                                                                               
BALANCE AT DECEMBER 31,                                                                                        
  1995......................   3,250    $6,500  20,274,371  $810,975  $30,213,554  $(38,553,762)  $ (7,522,733)
Net loss for the year.......      --        --          --        --           --   (11,941,488)   (11,941,488)
                               -----    ------  ----------  --------  -----------  ------------   ------------ 
BALANCE AT DECEMBER 31,                                                                                        
  1996......................   3,250     6,500  20,274,371   810,975   30,213,554   (50,495,250)   (19,464,221)
Net loss for the year.......      --        --          --        --           --   (18,888,526)   (18,888,526)
                               -----    ------  ----------  --------  -----------  ------------   ------------ 
BALANCE AT DECEMBER 31,                                                                                        
  1997......................   3,250     6,500  20,274,371   810,975   30,213,554   (69,383,776)   (38,352,747)
Net loss for the year.......      --        --          --        --           --   (23,050,676)   (23,050,676)
                               -----    ------  ----------  --------  -----------  ------------   ------------ 
BALANCE AT DECEMBER 31,                                                                                        
  1998......................   3,250    $6,500  20,274,371  $810,975  $30,213,554  $(92,434,452)  $(61,403,423)
                               =====    ======  ==========  ========  ===========  ============   ============ 

The accompanying summary of accounting policies and notes are an integral part
of these financial statements.

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THE NOSTALGIA NETWORK, INC. 

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

                                                        [Enlarge/Download Table]

                                                       1998           1997           1996     
                                                   ------------   ------------   ------------ 
                                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES:                                                         
Net loss.........................................  $(23,050,676)  $(18,888,526)  $(11,941,488)
  Adjustments to reconcile net loss to net cash                                               
     used in operating activities:                                                            
     Depreciation................................       286,159        310,416        294,270 
     Programming amortization....................     7,757,637      6,891,161      7,182,931 
     Provision for losses on accounts                                                         
       receivable................................       534,000        102,000        450,000 
  Net change in operating assets and liabilities:                                             
     (Increase) decrease in accounts                                                          
       receivable................................      (745,464)      (119,132)       147,962 
     (Increase) decrease in prepaid expenses.....       (28,021)         5,657         35,267 
     Increase (decrease) in accounts payable.....       (99,071)       998,175        (50,770)
     Increase (decrease) in accrued expenses and                                              
       other liabilities.........................      (299,440)       121,155         (2,356)
     Increase in accrued interest................     3,921,296      1,978,058        968,527 
                                                   ------------   ------------   ------------ 
          Net cash used in operating                                                          
            activities...........................   (11,723,580)    (8,601,036)    (2,915,657)
                                                   ------------   ------------   ------------ 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                         
  Increase in deposits...........................        (4,000)       (35,000)        (1,709)
  Purchases of property and equipment............       (36,748)      (267,294)      (166,120)
  Acquisition of programming and cablecast                                                    
     rights......................................    (4,179,120)    (3,357,900)      (205,990)
                                                   ------------   ------------   ------------ 
          Net cash used in investing                                                          
            activities...........................    (4,219,868)    (3,660,194)      (373,819)
                                                   ------------   ------------   ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                         
  Proceeds from notes payable....................    19,000,000     19,500,000     10,000,000 
  Payments of long-term obligations..............    (4,320,370)    (6,856,592)    (6,145,252)
                                                   ------------   ------------   ------------ 
          Net cash provided by financing                                                      
            activities...........................    14,679,630     12,643,408      3,854,748 
                                                   ------------   ------------   ------------ 
NET INCREASE (DECREASE) IN CASH AND CASH                                                      
  EQUIVALENTS....................................    (1,263,818)       382,178        565,272 
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR...     1,803,189      1,421,011        855,739 
                                                   ------------   ------------   ------------ 
CASH AND CASH EQUIVALENTS -- END OF YEAR.........  $    539,371   $  1,803,189   $  1,421,011 
                                                   ============   ============   ============ 

The accompanying summary of accounting policies and notes are an integral part
of these financial statements.

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                      

    The Nostalgia Network, Inc. (the "Company") is engaged in the operation of
GoodLife TV Network (the "Network"), a television programming service offering a
variety of entertainment, lifestyle and informational programming to a target   
audience of "Boomers and over" via satellite to cable television and alternative
broadcasting systems ("Affiliates") throughout the United States.               

  Significant accounting policies used by the Company are described below:

Revenue Recognition                                                         

    Revenues from providing programming services to cable systems and sales to
advertisers are recognized on a monthly basis as the services are provided. The 
Company grants credit to cable systems and advertisers throughout the United    
States.                                                                         

Property and Equipment                                                      

 Depreciation and amortization are calculated based on estimated service
lives of depreciable assets by the straight-line method.                        

Leasehold improvements are amortized over the lives of the respective 
leases or the service lives of the improvements, whichever is shorter.          

  Major repairs or replacements of property and equipment are capitalized.
Maintenance, repairs and minor replacements are charged to operations as        
incurred.                                                                       

     When property or equipment are retired or otherwise disposed of, their cost
and related accumulated depreciation are removed from the accounts and any      
resulting gain or loss is included in operations.                               

Programming and Cablecast Rights                                            

Capitalized programming costs, film library and cablecast rights are  
recorded at the lower of unamortized costs or estimated net realizable value.   
Capitalized programming costs, film library and cablecast rights are amortized  
using the straight-line method, which approximates the anticipated revenue      
stream, over the estimated useful life or the lives of the rights agreements,   
respectively, in accordance with SFAS No. 63 -- Financial Reporting by          
Broadcasters as follows:                                                        

Programming costs -- 2 years                                                    
Film library -- 11 years                                                        
Cablecast rights -- contract period                                             

     Cablecast rights for programs to be amortized within the following year are
classified as current assets. The Company periodically evaluates its programming
and cablecast rights for possible changes in estimated useful life or the       
possibility of impairment. If a programming or cablecast right is considered    
potentially impaired, an analysis is performed consisting of a comparison of    
future projected net cash flows to the carrying value of such asset. Any excess 
carrying value over future projected net cash flows is written off due to       
impairment.                                                                     

Advertising Costs                                                           

Advertising and promotional costs are charged to operating expenses as
incurred and amounted to $1,279,000, $2,828,000, and $510,000 for the years     
ended December 31, 1998, 1997, and 1996, respectively.                          

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NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Earnings per Share                                                          

 Earnings per share is based on the weighted average number of shares of
common stock and dilutive common stock equivalents outstanding. Basic earnings  
per share includes no dilution and is computed by dividing income available to  
common shareholders by the weighted average number of common shares outstanding 
for the period. Diluted earnings per share reflects the potential dilution of   
securities that could share in the earnings of an entity. Basic and diluted     
earnings per share are the same during all three years because the impact of    
dilutive securities is anti-dilutive.                                           

     The net loss per common share -- basic is computed by dividing the net loss
for the period by the weighted average number of shares outstanding. Convertible
preferred stock, outstanding stock warrants and options are not included in the 
diluted calculation because their effect would be anti-dilutive.                

Cash Equivalents                                                            

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.                                                         

 The Company maintains its cash balances in First Union National Bank of
Washington and Correspondent Services Corporation in McLean, Virginia. Balances 
at First Union National Bank are insured by the Federal Deposit Insurance       
Corporation up to $100,000. Balances in First Union's overnight investment      
account are insured by the SPIC up to $500,000. Balances at Correspondent       
Services Corporation are insured up to $5,000,000 through a combination of      
$500,000 SPIC insurance and an additional $4,500,000 insurance policy provided  
by Aetna. Uninsured balances approximate $388,072, $1,654,000, and $660,000 at  
December 31, 1998, 1997, and 1996, respectively.                                

Risks and Uncertainties                                                     

   The Network competes with other programmers for access to limited channel
space and must also compete with other programmers for viewers. Based on the    
decline in sales and increase in operating expenses, the Company is dependent on
financing from the Majority Stockholders or other outside sources in order to   
fund operations.                                                                

Use of Estimates                                                            

The preparation of financial statements in accordance with generally  
accepted accounting principles requires management to make certain estimates and
assumptions particularly as it relates to the valuation of accounts receivable  
and programming and cablecast rights and the disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.                  

Reclassifications                                                           

     Certain prior year amounts have been reclassified to conform to the current
method of presentation.                                                         

New Accounting Pronouncements                                               

Statement of Financial Accounting Standards No. 130, "Reporting       
Comprehensive Income" ("SFAS 130"), establishes standards for reporting and     
display of comprehensive income, its components and accumulated balances.       
Comprehensive income is defined to include all changes in equity except those   
resulting from investments by owners and distributions to owners. Among other   
disclosures, SFAS 130 requires that all items that are required to be recognized
under current accounting standards as components of comprehensive income be     
reported in a financial statement that is displayed with the same prominence as 

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

other financial statements. The Company adopted SFAS 130 during the first       
quarter of 1998 and has no items of comprehensive income to report.             

   Statement of Financial Accounting Standards (SFAS) 131, "Disclosure about
Segments of a Business Enterprise", establishes standards for the way that      
public enterprises report information about operating segments in annual        
financial statements and requires reporting of selected information about       
operating segments in interim financial statements issued to the public for     
periods ending after December 15, 1997. It also establishes standards for       
disclosures regarding products and services, geographic areas and major         
customers. SFAS 131 defines operating segments as components of an enterprise   
about which separate financial information is available that is evaluated       
regularly by the chief operating decision maker in deciding how to allocate     
resources and in assessing performance. The Company is engaged in one line of   
business, the operation of GoodLife TV Network, and therefore reports as one    
operating segment.                                                              

    In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments" 
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for       
derivative instruments and for hedging activities. SFAS 133 requires that an    
entity recognized all derivatives as either assets or liabilities and measure   
those instruments at fair market value. Under certain circumstances, a portion  
of the derivative's gain or loss is initially reported as a component of other  
comprehensive income and subsequently reclassified into income when the         
transaction affects earnings. For a derivative not designated as a hedging      
instrument, the gain or loss is recognized in income in the period of change.   
Presently, the Company does not use derivative instruments either in hedging    
activities or as investments. Accordingly, the Company believes that adoption of
SFAS 133 will have no impact on its financial position or results of operations.

1.  MANAGEMENT STATEMENT                                                        

In light of the Company's recurring losses, management is actively    
monitoring expenses and examining operating methods to increase efficiencies.   
These measures are intended to address short term operating requirements, but do
not address the more critical long term growth needs for the Network. In order  
to grow, the Network needs to increase its Affiliate base which, in turn, should
increase the subscriber base allowing the Network to increase its advertising   
rates as well as Affiliate revenues.                                            

  Management has continued its efforts to further brand the Network as the
only network targeted to the ever growing Boomer and over audience, America's   
fastest growing demographic. In June 1998, the Network began operating under the
"GoodLife TV Network" name. Management believes that this designation more      
accurately captures and reflects the Network's mission and has been a           
significant help in presenting the Network to potential customers. Management   
also continued its aggressive Affiliate marketing campaign by having a prominent
presence at major trade shows and through trade advertising.                    

  A critical component to the Network's growth is to continually brand and
improve the quality of programming and the Network's on air look. Original      
programming is a key to such branding, as it allows the consumer to             
differentiate the Network from other networks. The Network has continued to     
produce new original programming reflecting the American culture and traditional
values of its Boomer and over audience. The Network reflects the "good life     
state of mind" of its audience in its mix of entertainment and information      
programs. GTV Ballroom DanceSport showcases the sport of ballroom dance         
competitions, a dance form popular with past generations that has become all the
rage with today's generation. The Network provides insight and coverage of all  
the major dance competitions across the United States. Cafe DuArt, features     
impressionist/comedian Louise DuArt, providing cabaret music, comedy and a      
humorous slice of life set in a New York cabaret club. The Real Me              
Autobiographies, features prominent guests recounting their life's stories in   
their own words, surrounded by friends and family. The Bull & The Bear provides 
stock market reports by a "Siskel and Ebert-type" pair of hosts. More Money with
the Dolans starring Ken and Daria Dolan, the First Family of Finance, offers    
practical financial advice for everyday Americans. TV Book Shop                 
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NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

features author interviews and book picks of interest to the Network's audience.
Issues and Answers, a panel discussion show hosted by Ron Nessen, provides the  
Network's audience with insight into the issues facing today's active adults.   
This is America with Dennis Wholey is a weekly, hour long roundtable discussion 
with six interesting and influential guests from the fields of entertainment,   
politics and industry. Management continues to search for creative new          
programming ideas targeted to the Boomer and over audience, and has several     
pilots in development for 1999.                                                 

     In addition to its new original programming, the Network continues to offer
its viewers classic off network television series. The Network currently airs   
The Rockford Files, The Love Boat, and The Streets of San Francisco. The Network
has also revised its film series through the introduction of Flea Market Movie, 
wherein short segments are added to commercial breaks where the Network's       
collectibles aficionado, Christopher Kent, dispenses his wit and wisdom about   
all sorts of collectable items. The GTV Variety Hour features classic variety   
programs such as Tony Orlando and Dawn, Leslie Uggams, The Lennon Sisters and   
others. American Soldier features interviews with veterans, focusing on their   
wartime experiences, which are wrapped around three classic dramatic television 
shows: Combat!, Twelve O'clock High and Garrison's Gorillas. These improvements 
to the programming line up have resulted in tangible results where total day    
ratings were a .2 and Monday to Sunday prime time ratings rose to a record .9 in
November.                                                                       

    Crown Communications Corporation ("Crown") has provided $8,000,000 in debt
financing to the Company since January 1, 1999 and also has committed to        
provide, as needed, an additional $7,000,000 in debt financing during the       
balance of the calendar year. The Company believes that these funds will be     
sufficient to satisfy its operating needs for 1999.                             

   The Executive Committee of the Board of Directors and management continue
to evaluate strategic alliance alternatives and have had preliminary discussions
with a number of potential strategic partners. These discussions are preliminary
and no definitive proposals or targeted entities have been identified. The      
Executive Committee and management will continue to actively pursue identifying 
potential strategic alliance candidates.                                        

     Because of the unpredictable factors involved in the search for a strategic
alliance and the dynamic changes taking place in the industry, there is         
considerable uncertainty about what the Company's needs will be in future years.
There can be no assurance that the Company will be able to locate financing in  
the amount required to execute its plans for future growth, or that it will be  
able to achieve a strategic alliance.                                           

2.  PROPERTY AND EQUIPMENT                                                      

Major classifications of property and equipment and their respective  
estimated service lives are summarized below:                                   

                                                        [Enlarge/Download Table]

                                                1998          1997                   
                                             -----------   -----------               
                                                                                     
Transponder................................. $ 1,427,968   $ 1,427,968     12 years  
Machinery and equipment.....................   1,397,333     1,360,810   5 to 7 years
Furniture and fixtures......................     299,890       299,663   5 to 7 years
Leasehold improvements......................      99,780        99,780     5 years   
                                             -----------   -----------               
                                               3,224,971     3,188,221               
Accumulated depreciation and amortization...  (2,033,092)   (1,746,931)              
                                             -----------   -----------               
                                             $ 1,191,879   $ 1,441,290               
                                             ===========   ===========               

Depreciation expense included in Finance, General and Administrative  
expenses was $286,000, $310,000, and $294,000, for 1998, 1997 and 1996,         
respectively.                                                                   

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3.  PROGRAMMING AND CABLECAST RIGHTS                                            

Prime time series consist of broadcast licenses for classic television
series and other programming acquired from various film studios or other        
sources. Original programs consist of series or specials developed and produced 
by the Network. Music programs include musical series or specials both those    
produced by the Network and those acquired or licensed from third parties. The  
film library consists of vintage feature films, interstitial material, and other
programming produced and/or owned by the Network. Film rights include broadcast 
licenses for films and specialty programming. Other programming and cablecast   
rights include production and post-production costs as well as costs to         
duplicate and edit programs and interstitial materials for broadcasting.        

                                                        [Enlarge/Download Table]

                                                              1998          1997     
                                                          ------------   ----------- 
                                                                                     
Prime time series........................................ $ 14,578,500   $14,323,500 
Original programs........................................    8,047,753     3,885,605 
Music programs...........................................    1,537,095     1,537,095 
Film library.............................................    1,266,667     1,266,667 
Other....................................................    1,525,409       933,436 
                                                          ------------   ----------- 
                                                            26,955,424    21,946,303 
Less accumulated amortization............................  (16,867,295)   (9,109,657)
                                                          ------------   ----------- 
                                                          $ 10,088,129   $12,836,646 
                                                          ============   =========== 
Consisting of:                                                                       
  Current................................................ $  7,300,000   $ 6,880,000 
  Long term..............................................    2,788,129     5,956,646 
                                                          ------------   ----------- 
                                                          $ 10,088,129   $12,836,646 
                                                          ============   =========== 

Estimated future amortization of programming and cablecast rights and 
maturities of related long-term obligations are approximately as follows:       

                                                                [Download Table]

YEAR                                                 1999        2000      2001  
----                                              ----------  ----------  -------
                                                                                 
Amortization..................................... $7,300,000  $2,406,700  $68,100
Obligation maturities............................ $5,068,000  $  114,465         

    The Company acquired or produced the following rights and materials during
the years ended December 31,                                                    

                                                                [Download Table]

                                                    1998        1997       1996  
                                                 ----------  ----------  --------
                                                                                 
Prime time series............................... $  255,000  $1,073,500  $     --
Original programs...............................  4,162,100   3,532,600   500,000
Music programs..................................         --   1,185,500   312,000
Other...........................................    592,000     254,700    96,500
Film rights.....................................         --          --        --
                                                 ----------  ----------  --------
                                                 $5,009,100  $6,046,300  $908,500
                                                 ==========  ==========  ========

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4.  NOTES PAYABLE TO RELATED PARTIES                                            

Notes payable consists of the following:                              

                                                                [Download Table]

                                                               1998         1997    
                                                            -----------  -----------
                                                                                    
Notes payable to Concept Communications, Inc. bearing                               
interest approximating 7.75% per annum, due upon the                                
earlier of an equity investment of not less than the                                
amount of the Notes or January 1, 2000; however, Concept                            
has represented that the Notes will not be called prior to                          
January 1, 2000 unless replaced by an equity investment...  $19,217,867  $18,112,194

Notes payable to Crown Communications Corporation bearing                           
interest approximating 7.75% per annum, due upon the                                
earlier of an equity investment of not less than the                                
amount of the Notes or January 1, 2000; however, Crown has                          
represented that the Notes will not be called prior to                              
January 1, 2000 unless replaced by an equity investment...  $43,310,006  $23,000,000

Subordinated note payable to Atlantic Video in the                                  
principal amount of $305,000, bearing interest at the rate                          
of 2.5% per quarter, compounded quarterly, with principal                           
and interest payable on March 31, 2002. The note agreement                          
contains certain restrictive covenants including                                    
limitations on liens, disposition of collateral and                                 
compliance with related contracts.........................      305,000      305,000
                                                            -----------  -----------
                                                            $62,832,873  $41,417,194
                                                            ===========  ===========

     Subsequent to December 31, 1998, Crown has loaned the Company an additional
$8,000,000 and extended the due dates on all related debt to January 1, 2000. In
addition, the Majority Stockholders have extended payments on the portion of    
accrued interest until 2000. In connection with the additional borrowings and   
extension of the due dates, the Company has entered into security agreements    
covering substantially all the Company's assets in favor of the Majority        
Stockholders. Current maturities of notes payable and long-term debt to related 
parties is as follows:                                                          

                                                                [Download Table]

1999      2000       2001     2002     2003
----   -----------   ----   --------   ----
                                           
 $--   $62,527,873    $--   $305,000    $--

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5.  STOCK OPTIONS AND WARRANTS                                                  

On July 15, 1987, the Company's Board of Directors adopted an Employee
Stock Option Plan (the "1987 Plan") which provides for discretionary grants to  
employees, officers or directors employed by the Company or its parent, as well 
as other individuals who perform services for the Company. The 1987 Plan was    
approved by the Company's shareholders on August 31, 1987. 325,000 shares of    
stock have been reserved for issuance pursuant to the 1987 Plan. Data with      
respect to stock options under the 1987 Plan are as follows:                    

                                                        [Enlarge/Download Table]

                                                               OPTIONS       PRICE   
                                                             OUTSTANDING   PER SHARE 
                                                             -----------  -----------
                                                                                     
Outstanding at January 1, 1997..............................    45,500    $.48 - 1.25
Canceled....................................................        --               
                                                               -------               
Outstanding at December 31, 1997............................    45,500    $.48 - 1.25
Canceled....................................................        --               
Expired.....................................................   (12,000)      $1.25   
                                                               -------               
Outstanding at December 31, 1998............................    33,500    $.48 - 1.25
                                                               =======               
Exercisable at December 31, 1998............................    33,500    $.48 - 1.25
                                                               =======               

   On August 21, 1990, the Company's Board of Directors adopted an Incentive
and Nonqualified Stock Option Plan (the "1990 Plan") which provides for         
discretionary grants to employees, officers and directors of the Company. The   
1990 Plan was approved by the Company's shareholders on October 2, 1990.        
1,000,000 shares of stock have been reserved for issuance pursuant to the 1990  
Plan. Data with respect to stock options under the 1990 Plan are as follows:    

                                                        [Enlarge/Download Table]

                                                               OPTIONS       PRICE   
                                                             OUTSTANDING   PER SHARE 
                                                             -----------  -----------
                                                                                     
Outstanding at January 1, 1997                                 175,000    $.48 - 1.57
Canceled....................................................        --               
                                                               -------               
Outstanding at December 31, 1997                               175,000    $.48 - 1.57
Canceled....................................................        --               
                                                               -------               
Outstanding at December 31, 1998............................   175,000    $.48 - 1.57
                                                               =======               
Exercisable at December 31, 1998............................   175,000    $.48 - 1.57
                                                               =======               

     In November, 1995, the Company's Board of Directors authorized registration
of the Company's existing stock option plans and agreements under the Securities
Act of 1933 and the establishment of a new stock option plan (the "1996 Plan")  
which will replace the two existing plans. This action did not result in any    
additional shares being reserved for options.                                   

     The 1996 Plan provides for all remaining reserved shares under the 1987 and
1990 Plans to be transferred into the 1996 Plan as well as any subsequent       
cancellations of any options currently outstanding in the 1987 and 1990 Plans.  
Additionally, the 1996 Plan provides for annual "formula" grants to nonemployee 
directors of 3,000 shares which vest over three years. The 1996 Plan was        
approved to provide an option plan which                                        

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

conforms to current securities law and was adopted by shareholder approval at   
the Company's 1996 Annual Meeting. Data with respect to stock options under the 
1996 Plan are as follows:                                                       

                                                        [Enlarge/Download Table]

                                                 SHARES       OPTIONS       PRICE    
                                                RESERVED    OUTSTANDING   PER SHARE  
                                                ---------   -----------  ------------
                                                                                     
Outstanding at January 1, 1997................. 1,006,166      30,000       $0.27    
Granted........................................   (30,000)     30,000       $0.07    
Canceled.......................................     9,000      (9,000)      $0.27    
                                                ---------     -------                
Outstanding at December 31, 1997...............   979,166      51,000    $0.07 - 0.27
Granted........................................   (30,000)     30,000       $0.07    
Canceled.......................................    12,000     (12,000)   $0.07 - 0.27
                                                ---------     -------                
Outstanding at December 31, 1998...............   961,166      69,000    $0.07 - 0.27
                                                =========     =======                
Exercisable at December 31, 1998...............                19,000    $0.07 - 0.27
                                                              =======                

    The exercise price of stock options at December 31, 1998 ranged from $1.57
to $0.07 per share with a weighted exercise price and remaining contractual life
of $0.74 and seven years, respectively.                                         

     On May 13, 1996, the Company entered into an agreement with SQuire Rushnell
to be employed as the Company's President and Chief Executive Officer. Under the
terms of the contract, the Company entered into a stock option agreement which  
reserves 839,840 shares of common stock at an exercise price of $0.35, which was
equal to the fair market value at the date of grant. The shares vest at a rate  
of 25% each nine months and the options expire at the earliest of (a) purchase  
of all shares, (b) 90 days following termination of employment, or (c) May 12,  
2006. The number of shares vesting in a given period can be accelerated and/or  
additional options granted if the number of shares vesting is less than 1% of   
the total shares of common stock outstanding on such date. At December 31, 1998,
629,880 shares were vested.                                                     

As of December 31, 1998, there were warrants outstanding to purchase  
approximately 156,000 shares of the Company's common stock at prices ranging    
from $1.25 to $4.80 per share for an average price of $2.31 per share. No       
options or warrants were exercised during 1997 or 1998. The Warrants will expire
45 days after the filing of a post-effective amendment to the related           
Registration Statement, as yet unfiled.                                         

 Total common shares reserved for issuance of subscribed stock, options,
warrants and conversion of preferred shares at December 31, 1998 were           
approximately 2,287,500.                                                        

6.  CAPITAL STOCK                                                               

Common Stock                                                                

     On November 13, 1984, the Company completed a public offering of 12,500,000
units of stock at $.02 per unit (156,250 units at $1.60 adjusted for all        
splits). Each unit originally consisted of one share of the Company's common    
stock and one purchase warrant to purchase one share of common stock at $.06 per
share ($4.80 per share adjusted for all splits). The warrants are exercisable by
the holder commencing May 13, 1985 and will expire 45 days after the filing of a
post-effective amendment to the related Registration Statement, as yet unfiled. 
Shares of common stock issued for other than cash have been assigned amounts    
equivalent to the fair value of the assets received in exchange.                

Preferred Stock                                                             

Each share of preferred stock is convertible into 100 shares of common
stock at the option of the holder thereof. Each preferred share is entitled to  
vote as 100 shares of common stock. Preferred shareholders are entitled to      
preferential rights on dividends. To date, no dividends have been declared or   
paid.                                                                           

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NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7.  FEDERAL INCOME TAXES                                                        

The Company has incurred net operating losses since its inception for 
income tax purposes. Accordingly, since realization of benefits from these      
losses is not assured, tax benefits were not recorded for financial statement   
purposes.                                                                       

At December 31, 1998, the Company has unused net operating loss       
carryforwards which will be limited. Internal Revenue Code Section 382 provides 
that certain changes in ownership of the Company can limit the amount of income 
that can be offset by net operating losses. The amount of the limitation is     
approximately $1,700,000 per year. The net operating loss carryforwards prior to
the application of the limitations are as follows:                              

                                                                [Download Table]

AVAILABLE FOR CARRYFORWARD TO                                
YEAR ENDING DECEMBER 31,                                     
-----------------------------                                
                                                             
1998 - 2000.....................................  $    87,000
2001............................................    1,323,000
2002............................................    3,493,000
2003............................................    1,725,000
2004............................................    2,424,000
2005............................................    3,630,000
2006............................................    2,786,000
2007............................................    2,803,000
2008............................................    2,218,000
2009............................................    3,719,000
2010............................................    8,787,000
2011............................................   13,094,000
2012............................................   19,644,000
2013............................................   22,482,000
                                                  -----------
Total...........................................  $88,215,000
                                                  ===========

    Under the asset and liability approach specified by Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes", deferred   
tax assets and liabilities are determined based on the difference between the   
financial statement and tax bases of assets and liabilities as measured by the  
currently enacted tax rates. Deferred tax expense or benefit is the result of   
the changes in deferred tax assets and liabilities.                             

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NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes arise from the difference between the financial 
statement and income tax basis of assets and liabilities. Principal items       
comprising net deferred tax assets as of December 31, 1998 and 1997 are as      
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                             1998           1997     
                                                         ------------   ------------ 
                                                                                     
Current:                                                                             
Allowance for doubtful accounts......................... $    103,000   $    159,000 
  Accrued liabilities and other.........................       81,000         75,000 
                                                         ------------   ------------ 
     Total current deferred tax assets..................      184,000        234,000 
                                                         ------------   ------------ 
Long-Term:                                                                           
  Net operating loss carryforwards......................   29,993,000     22,349,000 
  Accumulated depreciation and amortization.............     (397,000)      (585,000)
                                                         ------------   ------------ 
     Total net long-term deferred tax assets............   29,596,000     21,746,000 
                                                         ------------   ------------ 
     Total net deferred tax assets......................   29,780,000     21,998,000 
     Valuation allowance................................  (29,780,000)   (21,998,000)
                                                         ------------   ------------ 
     Net deferred tax asset............................. $         --   $         -- 
                                                         ============   ============ 

Management believes that a valuation allowance is necessary due to    
uncertainty regarding the timing and amount of future utilization of net        
operating loss carryforwards.                                                   

8.  RELATED PARTY TRANSACTIONS                                                  

Office Leases                                                               

   The Company entered into a five year lease agreement commencing November,
1994, with an entity affiliated with the Company's Majority Stockholders. The   
lease calls for base monthly rental payments of $12,537, plus 2% per year       
escalation and pro-rata increases in operating expenses and real estate taxes.  
The lease provides for three months rental abatement and a five year renewal    
option at the then prevailing market rate. For financial reporting purposes, the
lease payments are being recognized on a straight-line basis over the initial   
term of the lease. The Company was required to contribute $70,000 for above     
building standard buildout items to be paid in 60 monthly installments of       
$1,410, including 8% interest. Rental expense under this lease was $194,500,    
$184,600, and $172,000, for the years ended December 31, 1998, 1997 and 1996,   
respectively.                                                                   

Production and Post Production Services                                     

 During 1990, the Company entered into an agreement with Atlantic Video,
Inc., an entity of which two directors of the Company were officers and         
directors during 1998, for studio, production and post production services,     
master control/uplink services and office space. Under the terms of the         
agreement, which was renewed in August 1997, 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. If the Company  
does not actually purchase $93,000 of services in a month, the differences up to
a maximum of $75,000 for all months elapsed, subject to certain limitations, can
be used as credit for the fees in future months. Services rendered to the       
Company under this agreement amounted to $1,397,000, $1,525,000, and $1,588,000,
for the years ended December 31, 1998, 1997 and 1996, respectively.             

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9.  COMMITMENTS AND CONTINGENCIES                                               

Litigation                                                                  

   Roger M. Rosenberg, et al. v. Sam Oolie, et al. On or about September 29,
1989, an action was commenced in the Delaware Court of Chancery for New Castle  
County. The Company is named as a nominal defendant for purposes of the         
derivative claims asserted. However, the Company has no liability, and a summary
judgment has been entered dismissing all counts in which the Company had been   
named, although counts against the other individual defendants continue. The    
Company is required to indemnify the directors and to pay the cost of their     
defense.                                                                        

Employment Agreements                                                       

     On May 13, 1996, the Company entered into a three year employment agreement
with SQuire Rushnell pursuant to which Mr. Rushnell serves as the Company's     
President and Chief Executive Officer. The agreement provides for an annual     
salary of $200,000 with annual merit increases of not less than 5% of the       
immediately prior base salary and a $50,000 sign on bonus. Commencing in the    
second year the agreement provides for annual benchmark bonuses of $50,000,     
payable quarterly upon meeting or exceeding certain budgetary goals as well as  
annual bonuses based upon reducing the Company's deficit.                       

Leases                                                                      

Transponder                                                           

  The Company leases satellite transponder space and services on a 24-hour
per day basis. In connection with the Company's satellite transponder, which    
launched in March, 1994, a launch protection fee of $1,000,000 was paid and     
interest costs of $284,000 were capitalized along with other costs to acquire   
the transponder. The basic monthly rate is $205,400 for a term spanning the life
of the satellite, which is estimated to be twelve years. Expense for satellite  
transponder space and services was $2,464,800, $2,464,800, and $2,464,800, for  
1998, 1997 and 1996, respectively.                                              

Office, Studio, and Equipment                                         

    The Company conducts operations from leased premises which include studio,
office, sales and storage facilities. The Company also leases certain production
and communication equipment including its transponder. Generally the leases     
provide for renewal for various periods at stipulated rates. Some of the leases 
provide that the Company pay taxes, maintenance, insurance and other occupancy  
expenses applicable to leased premises.                                         

 Lease expense for premises and equipment for 1998, 1997 and 1996, which
consisted entirely of minimum rentals, was $280,000, $273,000, $234,000,        
respectively. Approximate minimum rental commitments under all noncancellable   
leases, including the transponder lease having terms in excess of a year are as 
follows:                                                                        

                                                                [Download Table]

                                                   FACILITY  TRANSMISSION           
YEAR ENDING DECEMBER 31,                            LEASES      LEASES       TOTAL  
------------------------                           --------  ------------  ---------
                                                                                    
1999.............................................. 166,000    3,111,000    3,277,000
2000..............................................  29,000    2,885,000    2,914,000
2001..............................................  29,000    2,885,000    2,914,000
2002..............................................  30,000    2,885,000    2,915,000
2003..............................................  21,000    2,885,000    2,906,000
Thereafter........................................      --    5,350,000    5,350,000

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Rating Service Contract                                                     

  The Company has contracted with a service that provides ratings reports,
analysis reports, demographic reports and other special reports. The agreement, 
commencing September, 1995, covers a minimum period of five years, requires a   
monthly base charge of approximately $30,000.                                   

Major Customers                                                             

 During 1998, two major customers accounted for 18% and 13% of Affiliate
revenues; during 1997, two major customers accounted for 20% and 12% of         
Affiliate revenues; and during 1996, three major customer accounted for 17%, 15%
and 11% of Affiliate revenues, respectively. Advertising sales revenues from one
agency accounted for 36% of advertising revenues in 1998 and 10% of advertising 
revenues in 1996.                                                               

10.  STATEMENTS OF CASH FLOWS                                                   

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                     

                                                                [Download Table]

                                                      1998      1997      1996  
                                                    --------  --------  --------
                                                                                
Cash paid during the year for:                                                  
Interest........................................... $660,000  $635,000  $166,213
  Income taxes.....................................     None      None      None

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:  

Fiscal 1998                                                           

 Programming acquisitions totaling $830,000 were financed through vendor
debt obligations.                                                               

Interest accrued and payable to Concept and Crown in the amounts of   
$1,105,673 and $1,310,006, respectively, were recapitalized into notes payable  
as part of a March 31, 1998 refinancing of debt owed to the Majority            
Stockholders.                                                                   

Fiscal 1997                                                           

   Programming acquisitions totaling $2,659,000 were financed through vendor
debt obligations.                                                               

 Interest accrued and payable to Concept in the amount of $1,612,194 was
recapitalized into a note payable as part of a March 31, 1997 refinancing of    
debt owed to the Majority Stockholders.                                         

Fiscal 1996                                                           

 Programming acquisitions totaling $702,500 were financed through vendor
debt obligations.                                                               

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THE NOSTALGIA NETWORK, INC. 

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                                                        [Enlarge/Download Table]

                                BALANCE AT  CHARGED TO  CHARGED TO                 BALANCE AT
                                BEGINNING   COSTS AND     OTHER                      END OF  
DESCRIPTION                      OF YEAR     EXPENSES    ACCOUNTS   DEDUCTIONS(1)     YEAR   
-----------                     ----------  ----------  ----------  -------------  ----------
                                                                                             
Year ended December 31, 1996                                                                 
  Allowance for doubtful                                                                     
  accounts receivable.......... $2,258,000   $450,000       $--      $1,554,000    $1,154,000
                                ==========   ========       ==       ==========    ==========
Year ended December 31, 1997                                                                 
  Allowance for doubtful                                                                     
  accounts receivable.......... $1,154,000   $102,000       $--      $  789,000    $  467,000
                                ==========   ========       ==       ==========    ==========
Year ended December 31, 1998                                                                 
  Allowance for doubtful                                                                     
  accounts receivable.......... $  467,000   $534,000       $--      $  699,000    $  302,000
                                ==========   ========       ==       ==========    ==========

---------------                                                                 
(1) Uncollectible accounts written off.                                         

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THE NOSTALGIA NETWORK, INC. 

BALANCE SHEETS

                                                        [Enlarge/Download Table]

                                                              SEP. 30, 1999   DEC. 31, 1998
                                                              -------------   -------------
                                                               (UNAUDITED)                 
                                                                                           
                                           ASSETS                                          
CURRENT ASSETS                                                                             
  Cash and cash equivalents.................................  $     614,103   $    539,371 
  Accounts receivable, less allowance of $156,000 and                                      
     $302,000, respectively.................................        943,582        935,230 
  Prepaid expenses..........................................        231,263        168,362 
  Cablecast rights..........................................      8,065,594      7,300,000 
                                                              -------------   ------------ 
          Total current assets..............................      9,854,542      8,942,963 
Programming and cablecast rights -- net.....................      3,756,977      2,788,129 
Property and equipment -- net...............................      1,028,064      1,191,879 
Other assets................................................         51,740         56,740 
                                                              -------------   ------------ 
          Total assets......................................  $  14,691,323   $ 12,979,711 
                                                              -------------   ------------ 

                           LIABILITIES AND STOCKHOLDERS' DEFICIT                           
CURRENT LIABILITIES                                                                        
  Current maturities of programming and cablecast fees......  $   4,327,411   $  5,085,827 
  Accounts payable..........................................      1,950,907      2,255,174 
  Accrued expenses and other liabilities....................        492,486        377,254 
                                                              -------------   ------------ 
          Total current liabilities.........................      6,770,804      7,718,255 
                                                              -------------   ------------ 
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES                                             
  Notes and interest payable -- related parties.............     81,970,561     66,214,998 
  Other.....................................................        348,308        335,416 
  Cablecast licenses and fees payable.......................      2,864,538        114,465 
                                                              -------------   ------------ 
          Total long-term liabilities.......................     85,183,407     66,664,879 
                                                              -------------   ------------ 
          Total liabilities.................................     91,954,211     74,383,134 
                                                              -------------   ------------ 

                               COMMITMENTS AND CONTINGENCIES                               
STOCKHOLDERS' DEFICIT                                                                      
  Preferred stock: $2 par value, 125,000 shares authorized,                                
     3,250 issued and outstanding...........................          6,500          6,500 
  Common stock: $0.04 par value, 30,000,000 shares                                         
     authorized, 20,274,411 and 20,241,037 shares issued and                               
     outstanding in 1999 and 1998...........................        811,015        810,975 
  Additional paid-in capital................................     30,213,584     30,213,554 
  Deficit...................................................   (108,293,987)   (92,434,452)
                                                              -------------   ------------ 
          Total stockholders' deficit.......................    (77,262,888)   (61,403,423)
                                                              -------------   ------------ 
          Total liabilities and stockholders' deficit.......  $  14,691,323   $ 12,979,711 
                                                              =============   ============ 

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THE NOSTALGIA NETWORK, INC. 

STATEMENTS OF OPERATIONS
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                        FOR THE THREE MONTHS          FOR THE NINE MONTHS      
                                        ENDED SEPTEMBER 30,           ENDED SEPTEMBER 30,      
                                     --------------------------   ---------------------------- 
                                        1999           1998           1999            1998     
                                     -----------    -----------   ------------    ------------ 
                                                                                               
OPERATING REVENUES                                                                             
  Affiliate revenue................. $   518,272    $   584,444   $  1,681,827    $  1,972,421 
  Advertising sales revenue.........     720,754        569,634      2,267,090       2,001,668 
                                     -----------    -----------   ------------    ------------ 
          Total operating                                                                      
            revenues................   1,239,026      1,154,078      3,948,917       3,974,089 
                                     -----------    -----------   ------------    ------------ 
OPERATING EXPENSES                                                                             
  Programming, production and                                                                  
     transmission...................   1,091,814      1,534,693      3,643,449       4,405,975 
  Programming amortization..........   2,275,208      1,767,510      6,516,270       5,366,178 
  Sales and marketing...............     828,930      1,934,913      2,645,641       5,904,085 
  Finance, general and                                                                         
     administration.................     758,967        764,591      2,623,069       2,264,577 
                                     -----------    -----------   ------------    ------------ 
          Total operating                                                                      
            expenses................   4,954,919      6,001,707     15,428,429      17,940,815 
                                     -----------    -----------   ------------    ------------ 
LOSS FROM OPERATIONS................  (3,715,893)    (4,847,629)   (11,479,512)    (13,966,726)
                                     -----------    -----------   ------------    ------------ 
OTHER INCOME AND (EXPENSE)                                                                     
  Interest and other -- net.........  (1,496,752)    (1,188,750)    (4,380,023)     (3,210,819)
                                     -----------    -----------   ------------    ------------ 
NET LOSS............................ $(5,212,645)   $(6,036,379)  $(15,859,535)   $(17,177,545)
                                     ===========    ===========   ============    ============ 
NET LOSS PER COMMON SHARE -- BASIC                                                             
  AND DILUTED....................... $     (0.26)   $     (0.30)  $      (0.78)   $      (0.85)
                                     ===========    ===========   ============    ============ 
WEIGHTED AVERAGE SHARES                                                                        
  OUTSTANDING.......................  20,274,371     20,274,371     20,274,382      20,274,371 
                                     ===========    ===========   ============    ============ 

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THE NOSTALGIA NETWORK, INC. 

STATEMENTS OF CASH FLOWS
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                 FOR THE NINE MONTHS      
                                                                 ENDED SEPTEMBER 30,      
                                                             ---------------------------- 
                                                                 1999            1998     
                                                             ------------    ------------ 
                                                                                          
CASH FLOWS FROM OPERATING ACTIVITIES                                                      
  Net loss.................................................. $(15,859,535)   $(17,177,545)
  Adjustments to reconcile net loss to net cash used in                                   
     operating activities:                                                                
     Depreciation and amortization..........................    6,735,043       5,580,937 
     Provision for losses on accounts receivable............      288,731         234,000 
  Net change in operating assets and liabilities:                                         
     Increase in accounts receivable........................     (297,083)       (444,552)
     Increase in prepaid expenses & other assets............      (57,901)       (120,597)
     Increase (decrease) in accounts payable................     (304,268)      1,829,878 
     Increase in accrued expenses and other liabilities.....    3,640,919       2,484,144 
                                                             ------------    ------------ 
       Net cash used in operating activities................   (5,854,094)     (7,613,735)
                                                             ------------    ------------ 
CASH FLOWS FROM INVESTING ACTIVITIES                                                      
  Purchases of programming and cablecast rights.............   (2,463,837)     (4,466,858)
  Purchases of property and other assets....................      (54,958)        (33,565)
                                                             ------------    ------------ 
       Net cash used in investing activities................   (2,518,795)     (4,500,423)
                                                             ------------    ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES                                                      
  Repayment of long-term obligations........................   (3,552,450)     (3,659,975)
  Proceeds from financing obtained from related parties.....   12,000,000      15,000,000 
                                                             ------------    ------------ 
       Net cash provided by financing activities............    8,447,550      11,340,025 
                                                             ------------    ------------ 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........       74,661        (774,133)
CASH AND CASH EQUIVALENTS -- BEGINNING......................      539,371       1,803,189 
                                                             ------------    ------------ 
CASH AND CASH EQUIVALENTS -- ENDING......................... $    614,032    $  1,029,056 
                                                             ============    ============ 
NONCASH INVESTING AND FINANCING ACTIVITIES:                                               
  Vendor financing of programming rights.................... $  5,786,875    $    743,750 
                                                             ============    ============ 

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THE NOSTALGIA NETWORK, INC. 

NOTES TO FINANCIAL STATEMENTS 

    1.  The financial information included herein is submitted pursuant to the
requirements of Form 10-Q and does not include all disclosures required by      
generally accepted accounting principles. These unaudited financial statements  
should be read in conjunction with the financial statements and notes thereto   
included in the Company's Annual Report on Form 10-K for the fiscal year ended  
December 31, 1998 of The Nostalgia Network, Inc. (the "Company"), filed with The
Securities and Exchange Commission on March 31, 1999 and which are incorporated 
herein by reference. The accompanying interim financial statements reflect all  
adjustments (consisting of normal recurring accruals only) which are, in the    
opinion of management, necessary for a fair statement of the results for the    
interim periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be obtained for the entire year.       

  2.  Certain reclassifications have been made to the financial statements
for the comparative period of the prior fiscal year for consistency with the    
presentation for the current period.                                            

     3.  Cash and cash equivalents include highly liquid debt instruments with a
maturity of three months or less.                                               

    4.  On March 27, 1999, the Company issued two substitution and replacement
notes to Crown Communications Corporation ("Crown") and Concept Communications, 
Inc. ("Concept") (together, the "Majority Stockholders") in the amount of       
$50,571,503 (which includes $4,500,000 of additional financing received in the  
first quarter), and $20,598,036, respectively, at an interest rate of 7.75%,    
with the principal and unpaid interest due January 1, 2000. These notes require 
minimum monthly interest payments in the aggregate of $60,000 and replace       
previously issued notes in the principal amounts of $47,810,006 and $19,217,867 
plus $2,761,497 and $1,380,169 in accrued and unpaid interest, respectively. On 
March 22, 1999, and on June 9, 1999, the Company issued two promissory notes to 
Crown in the principal amounts of $3,500,000 and $2,000,000 respectively, at an 
interest rate of 7.75%, each due January 1, 2000. On August 24, 1999, and on    
September 10, 1999, the Company issued two promissory notes to Crown in the     
principal amounts of $1,000,000 each, with interest rates of 8.00% and 8.25%,   
respectively, each due January 1, 2000. These notes are secured by substantially
all of the Company's assets pursuant to certain Security Agreements between the 
Majority Stockholders and the Company, as amended.                              

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AGREEMENT AND PLAN OF MERGER

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TABLE OF CONTENTS 

ARTICLE I 

MERGER

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
1.1  The Merger.............................................    1 
1.2  Surviving Corporation; Effects of the Merger...........    1 
1.3  Effective Time.........................................    1 
1.4  Certificate of Incorporation of the Surviving                
  Corporation...............................................    1 
1.5  Bylaws of the Surviving Corporation....................    1 
1.6  Board of Directors and Officers of the Surviving             
  Corporation...............................................    1 
1.7  Conversion of Shares...................................    2 
1.8  Dissenting Shares......................................    2 
1.9  Payment for Shares.....................................    2 
1.10 No Further Rights or Transfers.........................    3 

                          ARTICLE II                              

          REPRESENTATIONS AND WARRANTIES OF THE COMPANY           
2.1  Corporate Organization.................................    3 
2.2  Authorization..........................................    4 
2.3  Capitalization of the Company..........................    4 
2.4  Certain Fees...........................................    4 
2.5  SEC Filings............................................    4 
2.6  Consents and Approvals; No Violations..................    4 
2.7  No Undisclosed Material Liabilities....................    5 
2.8  Proxy Statement; Other Information.....................    5 

                          ARTICLE III                             

              REPRESENTATIONS AND WARRANTIES OF NAC               
3.1  Corporate Organization.................................    5 
3.2  Authorization..........................................    5 
3.3  Commitments for the Financing..........................    5 
3.4  Consents and Approvals; No Violations..................    5 
3.5  Proxy Statement; Other Information.....................    6 

                          ARTICLE IV                              

                          COVENANTS                               
4.1  Conduct of Business of the Company.....................    6 
4.2  No Solicitation........................................    8 
4.3  Access to Information..................................    8 
4.4  Best Efforts...........................................    9 
4.5  Public Announcements...................................    9 
4.6  Supplemental Information...............................    9 
4.7  Schedule 13E-3 and Proxy Material; Stockholders'             
  Meeting...................................................    9 
4.8  Agreement to Defend and Indemnify......................   10 
4.9  Option Plans...........................................   10 
4.10 Deposit of Funds.......................................   11 

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ARTICLE V 

CONDITIONS TO THE MERGER

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
5.1  Conditions to Each Party's Obligation to Effect the          
Merger......................................................   11 
5.2  Conditions to the Obligation of NAC to Effect the            
  Merger....................................................   11 
5.3  Conditions to the Obligations of the Company to Effect       
  the Merger................................................   12 

                            ARTICLE VI                            

                             CLOSING                              
6.1  Time and Place.........................................   12 
6.2  Deliveries at the Closing..............................   12 

                            ARTICLE VII                           

                   TERMINATION AND ABANDONMENT                    
7.1  Termination............................................   12 
7.2  Procedure and Effect of Termination....................   13 

                            ARTICLE VIII                          

                        GENERAL PROVISIONS                        
8.1  Survival of Representations, Warranties, Covenants and       
  Agreements................................................   13 
8.2  Amendment, Modification and Waiver.....................   13 
8.3  Waiver of Compliance; Consents.........................   13 
8.4  Severability...........................................   13 
8.5  Fees and Expenses......................................   13 
8.6  No Third Party Beneficiaries...........................   14 
8.7  Additional Agreements..................................   14 
8.8  Notices................................................   14 
8.9  Governing Law..........................................   14 
8.10 Counterparts...........................................   14 
8.11 Headings...............................................   15 
8.12 Entire Agreement.......................................   15 

EXHIBIT A  AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE NOSTALGIA   
NETWORK, INC.                                                                   

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AGREEMENT AND PLAN OF MERGER

 THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made as of the
11th day of January, 2000 by and between (i) THE NOSTALGIA NETWORK, INC., a     
Delaware corporation (the "Company"), and (ii) NNI ACQUISITION CORPORATION, a   
Delaware corporation ("NAC").                                                   

   WHEREAS, the Boards of Directors of the Company and NAC deem it advisable
and in the best interests of the stockholders of such corporations to effect the
merger of NAC with and into the Company (the "Merger"), to be consummated upon  
the terms and conditions set forth in this Agreement and in accordance with the 
applicable laws of the State of Delaware, whereby the outstanding shares of     
Common Stock, Four Cents ($0.04) par value, of the Company (the "Common         
Shares"), and the outstanding shares of Preferred Stock, Two Dollars ($2.00) par
value, of the Company (the "Preferred Shares"), other than Common Shares and    
Preferred Shares held by NAC and other than Dissenting Shares (as defined in    
Section 1.8 hereof), be converted upon the Merger into the right to receive cash
as provided in this Agreement.                                                  

NOW THEREFORE, the parties hereto agree as follows:                   

ARTICLE I 

MERGER

    1.1 The Merger.  At the Effective Time (as defined in Section 1.3 hereof),
and subject to the terms and conditions of this Agreement and the General       
Corporation Law of the State of Delaware (the "DGCL"), NAC shall be merged with 
and into the Company, the separate corporate existence of NAC shall thereupon   
cease, and the Company shall be the surviving corporation in the Merger         
(sometimes hereinafter referred to as the "Surviving Corporation").             

   1.2 Surviving Corporation; Effects of the Merger.  At the Effective Time,
the Surviving Corporation shall continue its corporate existence under the laws 
of the State of Delaware. The Merger shall have the effects specified in Section
259 of the DGCL. The name of the Surviving Corporation shall be The Nostalgia   
Network, Inc.                                                                   

1.3 Effective Time.  As soon as practicable following the Closing (as 
defined in Section 6.1 hereof), the parties hereto shall effect the Merger by   
filing with the Delaware Secretary of State a certificate of merger (the        
"Certificate of Merger") in such form as is required by, and executed in        
accordance with, the relevant provisions of the DGCL (the time of such filing   
being herein referred to as the "Effective Time").                              

1.4 Certificate of Incorporation of the Surviving Corporation.  At the
Effective Time and without any further action on the part of the Company or NAC,
the Certificate of Incorporation of the Company shall be amended and restated to
read substantially as set forth in Exhibit A to this Agreement. From and after  
the Effective Time, the Certificate of Incorporation of the Company, as so      
amended and restated, shall be the Certificate of Incorporation of the Surviving
Corporation, subject to the right of the Surviving Corporation to amend its     
Certificate of Incorporation after the Merger in accordance with the DGCL.      

     1.5 Bylaws of the Surviving Corporation.  At the Effective Time and without
any further action on the part of the Company or NAC, the Bylaws of NAC, as in  
effect at the Effective Time, shall be the Bylaws of the Surviving Corporation. 

   1.6 Board of Directors and Officers of the Surviving Corporation.  At the
Effective Time, the directors of the Company immediately prior to the Effective 
Time shall be the directors of the Surviving Corporation, each of such directors
to hold office, subject to the applicable provisions of the Certificate of      
Incorporation and Bylaws of the Surviving Corporation, until the next annual    
shareholders' meeting of the Surviving Corporation and until their successors   
shall be duly elected or appointed and qualified. The officers of the Company   
immediately prior to the Effective Time shall be the officers of the Surviving  
Corporation until their successors are duly elected or appointed and qualified. 

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   1.7 Conversion of Shares.  At the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof:                      

          (a) Each Common Share that is issued and outstanding immediately prior
     to the Effective Time (other than Common Shares which are Dissenting Shares
   as defined in Section 1.8 hereof, and any Common Shares which are held by
     NAC or are held in the treasury of the Company) shall be converted into and
represent the right to receive Seven Cents ($0.07) (the "Common Stock 
Merger Consideration"), in cash payable to the holder thereof, without
interest thereon, upon surrender of the certificate representing such 
Common Share.                                                         

       (b) Each Preferred Share that is issued and outstanding immediately
prior to the Effective Time (other than Preferred Shares which are    
Dissenting Shares as defined in Section 1.8 hereof, and any Preferred 
  Shares which are held by NAC or are held in the treasury of the Company)
  shall be converted into and represent the right to receive Seven Dollars
  ($7.00) (the "Preferred Stock Merger Consideration"), in cash payable to
the holder thereof, without interest thereon, upon surrender of the   
certificate representing such Preferred Share.                        

        (c) Each share of Common Share of NAC that is issued and outstanding
immediately prior to the Effective Time shall be converted into and   
   represent the right to receive one fully paid and non-assessable share of
    Common Share, par value $0.01 per share, of the Surviving Corporation, and
   such shares of Common Share of the Surviving Corporation shall constitute
the only issued shares of the Surviving Corporation.                  

          (d) Each Common Share and Preferred Share owned by NAC, or held in the
   treasury of the Company, immediately prior to the Effective Time shall be
cancelled and cease to exist at and after the Effective Time and no   
consideration shall be paid with respect thereto.                     

1.8 Dissenting Shares.  Notwithstanding the provisions of Section 1.7 
hereof, or any other provision of this Agreement to the contrary, Common Shares 
or Preferred Shares which are issued and outstanding immediately prior to the   
Effective Time and which are held by stockholders who have not voted such Common
Shares or Preferred Shares in favor of the Merger and who shall have delivered a
written demand for appraisal of such Common Shares or Preferred Shares in the   
manner provided in Section 262 of the DGCL (the "Dissenting Shares") shall not  
be converted into the right to receive cash at or after the Effective Time,     
unless and until the holder of such Dissenting Shares shall have failed to      
perfect or shall have effectively withdrawn or lost such right to appraisal and 
payment under the DGCL. If a holder of Dissenting Shares shall have so failed to
perfect or shall have effectively withdrawn or lost such right to appraisal and 
payment, then, as of the Effective Time or the occurrence of such event,        
whichever last occurs, such holder's Dissenting Shares shall automatically be   
converted into and represent the right to receive cash, without any interest    
thereon, as provided in Section 1.7(a) or 1.7(b) hereof, as the case may be.    

1.9 Payment for Shares.                                               

(a) Prior to the Effective Time, NAC shall deposit, or cause to be    
deposited in trust for the benefit of the Company's stockholders, in immediately
available funds with a disbursing agent selected by NAC and reasonably          
satisfactory to the Company (the "Exchange Agent"), an amount (the "Fund") equal
to the sum of (i) the product obtained by multiplying (A) the number of Common  
Shares issued and outstanding immediately prior to the Effective Time (other    
than Common Shares which are registered in the name of NAC or held in the       
treasury of the Company and other than Common Shares which are Dissenting       
Shares) as reflected on the stock transfer books of the Company immediately     
prior to the Effective Time by (B) the Common Stock Merger Consideration plus   
(ii) the product obtained by multiplying (A) the number of Preferred Shares     
issued and outstanding immediately prior to the Effective Time (other than      
Preferred Shares which are registered in the name of NAC or held in the treasury
of the Company and other than Preferred Shares which are Dissenting Shares) as  
reflected on the stock transfer books of the Company immediately prior to the   
Effective Time by (B) the Preferred Stock Merger Consideration. Out of the fund,
the Exchange Agent shall, pursuant to irrevocable instructions, make the        
payments referred to in Sections 1.7(a) and 1.7(b) hereof.                      

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  (b) As soon as practicable after the Effective Time, the Exchange Agent,
pursuant to irrevocable instructions, shall mail to each holder of record (other
than NAC) of a certificate or certificates which immediately prior to the       
Effective Time represented issued and outstanding Common Shares or Preferred    
Shares (the "Certificates"), a notice of effectiveness of the Merger, a form    
letter of transmittal (the "Letter of Transmittal") for return to the Exchange  
Agent, and instructions for use in effecting the surrender of the Certificates  
and to receive cash for each of such holder's Common Shares and Preferred       
Shares. The notice, Letter of Transmittal and instructions shall be in forms    
reasonably approved by counsel to the Company. The Letter of Transmittal shall  
specify that delivery shall be effected and risk of loss and title shall pass,  
only upon proper delivery to and receipt of such Certificate or Certificates by 
the Exchange Agent. The Exchange Agent, promptly following receipt of any such  
Certificate or Certificates, together with the Letter of Transmittal, duly      
executed, and any other items specified by the Letter of Transmittal, shall pay,
by check or draft, to the holders of Certificates an amount equal to the sum of 
(i) the product obtained by multiplying (A) the number of Common Shares         
represented by the Certificate or Certificates so surrendered by (B) Seven Cents
($0.07) plus (ii) the product obtained by multiplying (A) the number of         
Preferred Shares represented by the Certificate or Certificates so surrendered  
by (B) Seven Dollars ($7.00). No interest will be paid or accrued on the cash   
payable upon the surrender of a Certificate or Certificates.                    

(c) Any portion of the Fund which remains unclaimed for six (6) months
after the Effective Time shall be paid to the Surviving Corporation upon demand,
subject to any applicable escheat and other similar laws. Any holders of        
Certificates who have not theretofore complied with 1.9(b) hereof shall         
thereafter look only to the Surviving Corporation for payment of their claim for
the consideration set forth in Section 1.7 hereof, without any interest thereon,
but shall have no greater rights against the Surviving Corporation than may be  
accorded to general creditors of the Surviving Corporation under Delaware law.  

1.10 No Further Rights or Transfers.                                  

At and after the Effective Time of the Merger, (i) each holder of a   
Certificate or Certificates that represented issued and outstanding Common      
Shares or Preferred Shares immediately prior to the Effective Time shall cease  
to have any rights as a stockholder of the Company, except for the right to     
surrender his or her Certificate or Certificates in exchange for the payment    
provided pursuant to Sections 1.7 and 1.9 hereof, or to perfect his or her right
to receive payment for his or her Common Shares or Preferred Shares pursuant to 
Section 262 of the DGCL and Section 1.8 hereof, if such holder has validly      
exercised and perfected and not withdrawn his or her right to receive payment   
for his or her Common Shares or Preferred Shares, and (ii) no transfer of Common
Shares or Preferred Shares outstanding prior to the Effective Time shall be made
on the stock transfer books of the Surviving Corporation. If, after the         
Effective Time, Certificates formerly representing Common Shares or Preferred   
Shares are presented to the Surviving Corporation, they shall be cancelled and  
exchanged for the consideration set forth in Section 1.7 hereof.                

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

The Company hereby represents and warrants to NAC that:               

   2.1 Corporate Organization.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its 
incorporation, with all requisite power and authority to own, operate and lease 
its properties and to carry on its business as now being conducted. To the best 
knowledge of the executive officers of the Company, the Company is duly         
qualified or licensed as a foreign corporation in good standing in each         
jurisdiction in which the character of its properties or nature of its business 
activities requires such qualification, except to the extent that the failure to
be so qualified or licensed would not have a material adverse effect upon the   
business, operations or the financial condition, of the Company. There are no   
corporations, limited liability companies, partnerships, joint venture          
associations or other entities of which the Company, directly or indirectly,    
owns or controls more than 10% of the voting securities or other voting         
interests ("Subsidiary").                                                       

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2.2 Authorization.  The Company has the necessary corporate power and 
authority to enter into this Agreement. The execution and delivery of this      
Agreement by the Company, the performance by the Company of its obligations     
hereunder and the consummation by the Company of the transactions contemplated  
hereby have been duly and validly authorized by the Company's Board of Directors
and no other corporate proceeding on the part of the Company is necessary to    
authorize this Agreement or to consummate the transactions contemplated hereby  
(other than the approval of this Agreement by the requisite vote of the         
stockholders of the Company). This Agreement has been duly and validly executed 
and delivered by the Company and, assuming the due authorization, execution and 
delivery hereof by NAC, is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.                   

   2.3 Capitalization of the Company.  As of the date hereof, the authorized
capital stock of the Company consists of thirty million (30,000,000) shares of  
Common Stock, Four Cents ($0.04) par value, and one hundred twenty-five thousand
(125,000) shares of Preferred Stock, Two Dollars ($2.00) par value. As of the   
date hereof, there are twenty million two hundred seventy-four thousand four    
hundred eleven (20,274,411) Common Shares issued and outstanding and three      
thousand two hundred fifty (3,250) Preferred Shares issued and outstanding. As  
of the date hereof, there are no Common Shares or Preferred Shares held in the  
Company's treasury. All of the outstanding Common Shares and Preferred Shares   
have been validly issued, and are fully paid, nonassessable and free of         
preemptive rights with no personal liability attaching to the ownership thereof.
As of the date hereof, two million (2,000,000) Common Shares and no Preferred   
Shares are issuable upon exercise of options (the "Company Options") under stock
option plans of the Company (collectively, the "Option Plans"). A description of
the Option Plans and a list of all outstanding options, including the exercise  
price and other terms thereof, is set forth on Disclosure Schedule 2.3 attached 
hereto and made a part of hereof. Except as set forth above, as of the date     
hereof, there are no outstanding options, warrants, subscriptions, conversion or
other rights, agreements or commitments obligating the Company to issue any     
additional shares of the capital stock or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of the    
capital stock of the Company.                                                   

2.4 Certain Fees.  With the exception of a fee payable to Chatsworth  
Securities LLC, which has acted as financial advisor to the Company's Board of  
Directors (including its disinterested directors) pursuant to a letter agreement
which has been delivered to NAC, the Company has not employed any broker or     
finder or incurred any liability for any financial advisory, brokerage or       
finders' fees or commissions in connection with the transactions contemplated   
hereby.                                                                         

  2.5 SEC Filings.  To the best knowledge of the executive officers of the
Company, the Company has timely made all of its filings required by the         
Securities and Exchange Commission (the "Commission"). All such filings are true
and complete in all material respects.                                          

2.6 Consents and Approvals; No Violations.                            

 (a) To the best knowledge of the executive officers of the Company, the
Company is not in violation of any applicable law, statute, order, rule or      
regulation promulgated or judgment entered by any federal, state, local or      
foreign court or governmental authority relating to or affecting the operation, 
conduct or ownership of the property or business of the Company, which violation
or violations would have a material adverse effect on the business, operations  
or financial condition of the Company.                                          

   (b) Except for (i) applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "Exchange    
Act"), (ii) the filing and recordation of the Certificate of Merger as required 
by the DGCL and (iii) applicable requirements of state blue sky laws, no filing 
or registration with, no notice to and no permit, authorization, consent or     
approval of any public or governmental body or authority is necessary for the   
consummation by the Company of the transactions contemplated by this Agreement  
or to enable the Company to continue to conduct its business after the Effective
Time in a manner which is in all material respects consistent with that in which
they are presently conducted, except where the failure to make such filing or to
obtain such permit, authorization, consent or approval will not have a material 
adverse effect on the business, operations or financial condition of the        
Company. Neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby nor     
compliance by the Company with any of the provisions hereof will (i) conflict   
with                                                                            
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or result in any breach of any provision of the Certificate of Incorporation or 
Bylaws of the Company, (ii) result in a violation or breach of, or constitute   
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,       
agreement or other instrument or obligation to which the Company is a party or  
by which the Company or any of its properties or assets may be bound or (iii) to
the best knowledge of the executive officers of the Company, violate any order, 
writ, injunction, decree, statute, rule or regulation applicable to the Company 
or any of its properties or assets, excluding from the foregoing clauses (ii)   
and (iii) violations, breaches or defaults which in the aggregate would not have
a material adverse effect on the business, operations or financial condition of 
the Company.                                                                    

 2.7 No Undisclosed Material Liabilities.  Except for intercompany loans
made by Crown Communications Corporation, a Delaware corporation, and except as 
and to the extent set forth on the audited consolidated balance sheet of the    
Company at December 31, 1998, including the notes thereto (the "Balance Sheet"),
the Company had, at December 31, 1998, no liabilities or obligations material to
the Company. Since the date of the Balance Sheet, the Company has not incurred  
any liabilities material to the Company except (a) liabilities incurred in the  
ordinary and usual course of business and consistent with past practice and (b) 
liabilities incurred in connection with this Agreement and the transactions     
contemplated herein.                                                            

   2.8 Proxy Statement; Other Information.  None of the information supplied
by the Company included in the letter to stockholders, notice of meeting, proxy 
statement and form of proxy to be distributed to stockholders of the Company in 
connection with the Merger (collectively, the "Proxy Statement") or any         
schedules, including a Schedule 13E-3, required to be filed with the Commission 
in connection therewith (the "Schedules"), will, as of the date the Proxy       
Statement is first mailed to such stockholders, and on the date of the special  
meeting of the Company's stockholders and the date of any adjournment thereof,  
contain any untrue statement of a material fact or omit to state any material   
fact required to be stated therein or necessary in order to make the statements 
therein not misleading. The Proxy Statement and Schedules will comply as to form
in all material respects with all applicable provisions of the Exchange Act.    

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF NAC 

NAC hereby represents and warrants to the Company that:               

   3.1 Corporate Organization.  NAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has   
all requisite corporate power and authority to own, operate and lease its       
properties and to carry on its business as it is now being conducted.           

     3.2 Authorization.  NAC has the necessary, corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The       
execution and delivery of this Agreement by NAC, the performance by NAC, its    
obligations hereunder and the consummation by NAC of the transactions           
contemplated hereby, have been duly and validly authorized by the Board of      
Directors of NAC, and will have been duly and validly approved by the           
stockholders of NAC prior to the Effective Time, and no other corporate         
proceeding on the part of NAC is necessary for the execution and delivery of    
this Agreement by NAC, the performance of its obligations hereunder and the     
consummation by NAC of the transactions contemplated hereby. This Agreement has 
been executed and delivered by NAC and, assuming the due authorization,         
execution and delivery hereof by the Company, is a legal, valid and binding     
obligation of NAC, enforceable against NAC in accordance with its terms.        

  3.3 Commitments for the Financing.  NAC, or its respective associates or
affiliates, has heretofore received commitments to provide sufficient funds to  
complete the transactions contemplated by this Agreement.                       

3.4 Consents and Approvals; No Violations.                            

    (a) NAC is not in violation of any applicable law, statute, order, rule or
regulation promulgated or judgment entered by any federal, state, local or      
foreign court or governmental authority relating to or affecting                
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the operation, conduct or ownership of the property or business of NAC, which   
violation or violations would have a material adverse effect on the business,   
operations or financial condition of NAC.                                       

    (b) Except for applicable requirements of the Exchange Act, state blue sky
laws and the filing and recordation of the Certificate of Merger as required by 
the DGCL, no filing or registration with, no notice to and no permit,           
authorization, consent or approval of any public or governmental body or        
authority is necessary for the consummation by NAC of the transactions          
contemplated by this Agreement or to enable the Surviving Corporation to        
continue to conduct its business after the Effective Time, except where the     
failure to make such filing, or to obtain such permit, authorization, consent or
approval will not have a material adverse effect on the business, operations, or
financial condition of NAC. Neither the execution and delivery of this Agreement
by NAC nor the consummation by NAC of the transactions contemplated hereby nor  
compliance by NAC with any of the provisions hereof will (i) conflict with or   
result in any breach of any provision of the Certificate of Incorporation or    
Bylaws of NAC, (ii) result in a violation or breach of, or constitute (with or  
without due notice or lapse of time or both) a default (or give rise to any     
right of termination, cancellation or acceleration) under, any of the terms,    
conditions or provisions of any note, bond, mortgage, indenture, license,       
agreement or other instrument or obligation to which NAC is a party or by which 
it or any of its properties or assets may be bound or (iii) to the best         
knowledge of the executive officers of NAC, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to NAC, excluding from the       
foregoing clauses (ii) and (iii) violations, breaches or defaults which in the  
aggregate would not have a material adverse effect on the business, operations  
or financial condition of NAC.                                                  

   3.5 Proxy Statement; Other Information.  None of the information supplied
by NAC included in the Proxy Statement or any Schedule, or in any amendments or 
supplements thereto, required to be filed with the Commission in connection     
therewith, will, as of the date the Proxy Statement is first mailed to          
stockholders of the Company, and on the date of the meeting of the Company's    
stockholders and the date of any adjournment thereof, contain any untrue        
statement of a material fact or omit to state any material fact required to be  
stated therein or necessary in order to make the statements therein not         
misleading. The Proxy Statement and Schedules will comply as to form in all     
material respects with all applicable provisions of the Exchange Act.           

ARTICLE IV

COVENANTS 

   4.1 Conduct of Business of the Company.  Except as expressly contemplated
by this Agreement, including cancellation of Company Options in accordance with 
Section 4.9(a) hereof, during the period from the date of this Agreement to the 
Effective Time, the Company will conduct its operations only in, and the Company
shall not take any action except in, the ordinary and usual course of business  
and consistent with prior practice, and the Company shall use its best efforts  
to preserve substantially intact its business organization, goodwill, assets,   
permits and licenses, to keep available the services of its current officers and
employees and to maintain satisfactory relationships with licensors, licensees, 
suppliers, contractors, distributors, customers and others having business      
relationships with it; to comply in all material respects with all laws,        
statutes, ordinances, rules and regulations applicable to the Company; and,     
prior to the Effective Time, the Company covenants and agrees that it will not, 
without the prior consent of NAC:                                               

     (a) split, combine or reclassify any shares of its capital stock,
     declare, pay or set aside for payment any dividend or other distribution in
     respect of its capital stock, or directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or other securities;

  (b) authorize for issuance, issue, sell, pledge, dispose of or
encumber, deliver or agree or commit to issue, sell, pledge or deliver
(whether through the issuance or granting of any options, warrants,   
   commitments, subscriptions, rights to purchase or otherwise) any stock of
    any class of the Company or any securities convertible into or exercisable
     or exchangeable for shares of stock of any class of the Company, other than
the issuance of shares pursuant to the exercise of Company Options    
outstanding as of the date hereof;                                    

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         (c) except as set forth in Section 4.9 and except in the ordinary and
usual course of business and consistent with past practice, incur any 
material liability or obligation, issue any debt securities or assume,
     guarantee, endorse or otherwise as an accommodation become responsible for,
the obligations of any other individual or entity;                    

     (d) except as set forth in Section 4.9, adopt or amend any bonus,
   profit-sharing, compensation, stock option, pension, retirement, deferred
    compensation, employment or other employee benefit plan, agreement, trust,
  plan, fund or other arrangement (collectively, "Compensation Plans"), or
grant, or become obligated to grant, any general increase in the      
     compensation of officers or employees (including any such increase pursuant
     to any Compensation Plan) or any increase in the compensation payable or to
    become payable to any officer, institute any new employee benefit, welfare
   program or Compensation Plan, make any change in any Compensation Plan or
    other employee welfare or benefit arrangement or enter into any employment
or similar agreement or arrangement with any employee;                

    (e) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
 division thereof or make any material investment, either by purchase of
stock or securities, contributions to capital, property transfer, or  
purchase of any material amount of properties or assets of any other  
individual or entity;                                                 

        (f) amend the Certificate of Incorporation or Bylaws of the Company;

 (g) except in the ordinary course of business, and except for
  settlements made by insurers, enter into any compromise or settlement of
  any litigation, proceeding or governmental investigation relating to the
Company or its properties;                                            

         (h) change in any material respect its accounting methods, principles
    or practices except as in accordance with United States generally accepted
accounting principles, consistently applied ("GAAP");                 

         (i) revalue any of its assets, including, without limitation, writing
off notes or accounts receivable, other than in the ordinary course of
business consistent with prior practice;                              

    (j) create, incur, assume, maintain or permit to exist any lien,
pledge, mortgage, security interest, assessment, claim, lease, charge,
   option, right of first refusal, imperfection of title, easement, transfer
    restriction under any shareholder or similar agreement, encumbrance or any
    other restriction or limitation of any kind whatsoever ("Encumbrances") on
 any real, personal or mixed property, tangible or intangible, including
    without limitation, any leased property ("Property") of the Company, other
than liens for federal, state or local taxes and assessments not yet  
payable ("Permitted Encumbrances");                                   

    (k) create, incur or assume any indebtedness for borrowed money,
including obligations in respect of capital leases, or guarantee any  
    indebtedness for borrowed money or any other obligation of any individual,
   corporation, partnership, limited liability company, firm, joint venture,
association, joint stock company, trust, unincorporated organization, 
governmental or regulatory authority or other entity ("Person");      

     (l) pay or discharge any material claim, liability or Encumbrance
   (whether absolute, accrued, contingent or otherwise), or waive any right,
     other than in the ordinary course of business consistent with past practice
    or pursuant to binding contractual obligations of the Company in existence
on the date hereof;                                                   

  (m) hire any new employees, agents, independent contractors or
consultants, except for those earning less than Fifty Thousand Dollars
($50,000) per annum who are hired in the ordinary course of business  
    consistent with past practice and the then applicable Board of Directors',
approved budget;                                                      

       (n) authorize or make any capital expenditure inconsistent with the
then applicable Board of Directors' approved budget;                  

  (o) issue or agree to issue any shares of its capital stock or
securities exchangeable for or convertible into such capital stock;   
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     (p) become a party to any agreement, amend or terminate any other
     agreement, contracts, leases, subleases, licenses, obligations, instruments
   or other legally binding commitments, arrangements or undertakings of any
kind ("Contract"), other than in the ordinary course of business and  
   consistent with past practice and the then applicable Board of Directors'
approved budget;                                                      

(q) make any investments in noninvestment grade securities; 

          (r) make any loan, advance or capital contribution to or investment by
  the Company in any Person, except in the ordinary course of business and
consistent with past practice;                                        

      (s) file for voluntary bankruptcy or become subject to involuntary
bankruptcy proceedings;                                               

    (t) consider or adopt a plan of complete or partial liquidation,
dissolution, rehabilitation, restructuring, recapitalization,         
re-domestication or other reorganization;                             

          (u) enter into any joint venture, partnership, managing general agency
or similar arrangement with any Person;                               

 (v) take any action or course of action inconsistent with its
   compliance with the covenants and agreements contained in this Agreement;
and                                                                   

      (w) take or agree to commit to take any action that would make any
  representation or warranty of the Company contained herein inaccurate in
any material respect at the Effective Time or omit to take any action 
necessary to prevent any such representation or warranty from being   
inaccurate in any material respect at such time.                      

   4.2 No Solicitation.  The Company will not, and will use its best efforts
to ensure that its officers, directors, representatives or agents shall not,    
directly or indirectly (i) solicit or initiate (including by way of furnishing  
any non-public information concerning the Company's business, properties or     
assets) negotiations with and (ii) subject to the exercise of their fiduciary   
responsibilities on advice of counsel, participate in any negotiations leading  
to any proposals or enter into any agreement with any corporation, partnership, 
person or other entity or group (other than NAC) (the "Third Party") concerning 
any tender offer, exchange offer, merger, consolidation, sale of substantial    
assets or of a significant amount of assets, sale of securities, liquidation,   
dissolution or similar transactions involving the Company (such proposals,      
announcements or transactions being referred to herein as "Acquisition          
Proposals"). The Company will promptly inform NAC of any inquiry (including the 
terms thereof and the identity of the Third Party making such inquiry) which it 
may receive in respect of an Acquisition Proposal and furnish to NAC a copy of  
any such inquiry. Nothing contained herein shall be construed to prohibit the   
Company from taking and disclosing to its stockholders a position contemplated  
by Rule 14e-2(a)(2) or (3) promulgated under the Exchange Act or from making    
such other disclosure to stockholders which, in the judgment of the Board of    
Directors, on advice of counsel, may be required by law.                        

4.3 Access to Information.                                            

    (a) Between the date of this Agreement and the Effective Time, the Company
will give NAC and its authorized representatives access during normal business  
hours to all personnel, offices and other facilities of the Company and to all  
books and records of the Company and will permit NAC to make such inspections as
it may reasonably request and will cause its officers to furnish NAC with such  
financial and operating data and other information with respect to the business 
and properties of the Company as NAC may from time to time reasonably request.  

   (b) NAC will hold and will cause its representatives (and its affiliates)
to hold in strict confidence, unless compelled to disclose by judicial or       
administrative process, or, in the opinion of its counsel, by other requirements
of law, all documents and information concerning the Company furnished to NAC   
(or its affiliates) in connection with the transactions contemplated by this    
Agreement (except to the extent that such information can be shown to have been 
(i) known by NAC or its affiliates (other than affiliates who are directors,    
officers or employees of the Company) prior to its disclosure to NAC or its     
affiliates by the Company, (ii) in the public domain through no fault of NAC or 
its affiliates or (iii) later lawfully acquired by                              

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NAC or its affiliates from other sources) and will not release or disclose such 
information to any other person, except in connection with this Agreement on a  
confidential basis to (A) its auditors, attorneys, financial advisors, other    
consultants and advisors and (B) responsible financial institutions,            
corporations, partnerships and individuals in connection with the Merger. If the
transactions contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information can be shown to have  
been (i) previously known by NAC or its affiliates (other than affiliates who   
are directors, officers or employees of the Company) prior to its disclosure to 
NAC or its affiliates by the Company, (ii) in the public domain through no fault
of NAC (or its affiliates) or (iii) later lawfully acquired by NAC (or its      
affiliates) from other sources, and, if requested by the Company, NAC (or its   
affiliates) will destroy or return to the Company all copies of written         
information furnished by the Company to NAC or to NAC's affiliates, agents,     
representatives or advisors. No investigation or access to information pursuant 
to this Section 4.3 shall affect any representation or warranty made by the     
Company.                                                                        

     4.4 Best Efforts.  Upon the terms and subject to the conditions hereof, NAC
and the Company agree to use their respective best efforts to take, or cause to 
be taken, all actions and to do, or cause to be done, all things necessary,     
proper or advisable to consummate and make effective the transactions           
contemplated by this Agreement, including providing information necessary for   
inclusion in the Proxy Statement and Schedules, and shall use their respective  
best efforts to obtain all waivers, permits, consents and approvals and to      
effect all registrations, filings and notices with or to third parties or       
governmental or public bodies or authorities which are in the opinion of NAC or 
the Company necessary or desirable in connection with the transactions          
contemplated by this Agreement, including, without limitation, filings to the   
extent required under the Exchange Act. If at any time after the Effective Time 
any further action is necessary or desirable to carry out the purposes of this  
Agreement, the proper officers or directors of NAC, the Company and the         
Surviving Corporation shall take such action.                                   

     4.5 Public Announcements.  NAC and the Company will consult with each other
before issuing any press release or otherwise making any public statements with 
respect to the Merger and shall not issue any such press release or make any    
such public statement prior to such consultation, except as may be required by  
law.                                                                            

 4.6 Supplemental Information.  From time to time prior to the Effective
Time, each party hereto will promptly disclose in writing to the other any      
matter hereafter arising which, if existing, occurring or known at the date of  
this Agreement, would have been required to be disclosed to such other party.   

    4.7 Schedule 13E-3 and Proxy Material; Stockholders' Meeting.  NAC and the
Company will prepare and file with the Commission the documents, Schedules and  
amendments and supplements thereto required to be filed with respect to the     
transactions contemplated by this Agreement. The Company, acting through its    
Board of Directors, shall cause a meeting of its stockholders to be duly called,
give notice of, convene and hold such meeting as soon as practicable for the    
purpose, inter alia, of approving this Agreement and all actions contemplated   
hereby which require the approval of the Company's stockholders. The Company    
will use its best efforts to obtain and furnish the information required to be  
included by it in any required Proxy Statement and, after consultation with NAC,
respond promptly to any comments of the Commission relating to any preliminary  
proxy material or regarding the transactions contemplated by this Agreement and 
to cause the Proxy Statement relating to the transactions contemplated by this  
Agreement to be mailed to its stockholders, all at the earliest practicable     
time. Whenever any event occurs which should be set forth in an amendment or    
supplement to the Proxy Statement, Schedules or any other filing required to be 
made with the Commission, each party will promptly inform the other and         
cooperate in filing with the Commission and/or mailing to stockholders such     
amendment or supplement. The Proxy Statement, Schedules and all amendments and  
supplements thereto shall comply with applicable law and be in form and         
substance satisfactory to NAC and the Company. The Board of Directors of the    
Company, subject to the exercise of its fiduciary obligations, shall include in 
the Proxy Statement its recommendation that stockholders of the Company vote in 
favor of the approval and adoption of the Agreement and take such further       
actions as NAC may reasonably request in order to secure such approval and      
adoption. NAC shall cause to be present for the purpose of obtaining a quorum   
and shall vote, or cause to be voted, all of the Common Shares and Preferred    
Shares then owned by NAC or its affiliates in favor of the Merger at any meeting
of the stockholders of the Company.                                             
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4.8 Agreement to Defend and Indemnify.                                

    (a) In the event any action, suit, proceeding or investigation relating to
the Merger, this Agreement or the transactions contemplated hereby or thereby is
commenced, whether before or after the Effective Time, the parties hereto agree 
to cooperate and use their best efforts to defend against and respond thereto.  
It is understood and agreed that the Company shall indemnify and hold harmless, 
and, after the Effective Time, the Surviving Corporation shall indemnify and    
hold harmless, each present and former director, officer, employee and agent of 
the Company (the "Indemnified Parties") against losses, claims, damages,        
liabilities, costs, expenses (including attorneys' fees), judgments and amounts 
paid in settlement in connection with any threatened, pending or completed      
action, suit, claim, proceeding or investigation arising out of or pertaining to
any action or omission occurring at or prior to the Effective Time (including,  
without limitation, any which arise out of or relate to the transactions        
contemplated by this Agreement) to the full extent permitted or required under  
Delaware law and the Company's Bylaws (and the Company or the Surviving         
Corporation, as the case may be, will advance expenses to each such person to   
the full extent so permitted). Neither the Company, the Surviving Corporation   
nor NAC shall be liable for any settlement effected by such Indemnified Party   
(or group of Indemnified Parties) unless the Company, the Surviving Corporation 
or NAC, respectively, have approved such settlement in writing. Any Indemnified 
Party wishing to claim indemnification under this Section 4.8, upon learning of 
any such claim, action, suit, proceeding or investigation, shall notify, in     
writing, the Company or the Surviving Corporation and NAC thereof; provided,    
however, that any failure to so notify the Company or the Surviving Corporation 
and NAC shall not relieve the Company or the Surviving Corporation and NAC of   
any obligation to indemnify such Indemnified Party or of any other obligation   
imposed by this Section 4.8 unless and to the extent such failure to so notify  
shall prejudice the position of the Company or the Surviving Corporation.       

(b) From the date of this Agreement, the Company or the Surviving     
Corporation, as the case may be, shall use its best efforts to provide officers'
and directors' liability insurance covering the Indemnified Parties who were    
covered by the Company's officers' and directors' liability insurance on October
21, 1999 or who become officers or directors of the Company after such date and 
prior to the Effective Time with respect to actions and omissions occurring     
prior to the Effective Time upon terms no less favorable to the Indemnified     
Parties than such insurance maintained in effect by the Company on October 21,  
1999 in terms of coverage and amounts, subject to the availability of such      
insurance at a cost not in excess of $82,000 per year, and if the amount of such
insurance available for $82,000 per year is less than the amount in effect as of
October 21, 1999, the amount of coverage provided will be the maximum amount    
available for $82,000 per year. The Surviving Corporation shall advise the      
Indemnified Parties at least annually as to the amount and coverage of such     
insurance then in effect. Such officers' and directors' liability insurance     
shall remain in full force and effect until the third anniversary of the        
Effective Time.                                                                 

    (c) The covenants contained in this Section 4.8 shall survive the Closing,
shall continue without time limit and are intended to benefit the Company and   
each of the Indemnified Parties. Subject to the requirements of the DGCL, the   
Certificate of Incorporation and Bylaws of the Company and the Surviving        
Corporation shall not be amended in a manner which adversely affects the rights 
of the Indemnified Parties under this Section 4.8.                              

4.9 Option Plans.  The Company shall take all steps necessary to (a)  
terminate, to the extent permitted by the terms thereof, the Option Plans       
immediately prior to the Effective Time, without prejudice to the rights of the 
holders of Company Options and (b) grant no additional Company Options under the
Option Plans. Except as set forth below in this Section 4.9, the Company shall  
use its best efforts to take all actions necessary as soon a practicable after  
the date hereof (i) to cause each outstanding Company Option, whether or not    
exercisable or vested, to be cancelled, as of the Effective Time and (ii) to    
obtain the consent of each holder of a Company Option (whether or not then      
exercisable) to the cancellation thereof, to take effect as of the Effective    
Time. In exchange for the cancellation of each such Company Option, the Company 
may pay in respect thereof an amount to be mutually agreed upon by NAC and the  
holders of such Company Options or enter into other arrangements mutually       
acceptable to NAC and the holders of such Company Options.                      

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    4.10 Deposit of Funds.  Not less than ten days prior to the meeting of the
Company's stockholders at which this Agreement will be voted upon, NAC shall    
cause to have deposited with a depository acceptable to the Company funds       
sufficient to make the payments required by Section 1.9(a) hereof.              

ARTICLE V 

CONDITIONS TO THE MERGER

5.1 Conditions to Each Party's Obligation to Effect the Merger.  The  
respective obligations of each party to this Agreement to consummate the Merger 
shall be subject to the following conditions, which may not be waived:          

          (a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote or consent, if any, of the stockholders of the  
Company required by the Company's Certificate of Incorporation and the
DGCL;                                                                 

   (b) No order, statute, rule, regulation, executive order, stay,
  decree, judgment or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which  
prohibits or restricts the consummation of the Merger; and            

        (c) Chatsworth Securities LLC ("Chatsworth") shall have delivered to
the Company a written fairness opinion for inclusion in the Proxy     
 Statement, relating to the transactions contemplated by this Agreement.

5.2 Conditions to the Obligation of NAC to Effect the Merger.  The    
obligations of NAC to effect the merger shall be further subject to the         
fulfillment at or prior to the Effective Time of the following conditions, any  
one or more of which may be waived by NAC:                                      

     (a) The Company shall have performed and complied in all material
  respects with the agreements and obligations contained in this Agreement
required to be performed and complied with by it at or prior to the   
Effective Time;                                                       

      (b) The representations and warranties of the Company contained in
     this Agreement shall be true and correct as of the date hereof and shall be
  deemed to have been made again at and as of the Effective Time and shall
then be true and correct in all material respects;                    

    (c) All licenses, permits, consents or approvals of governmental
  authorities or agencies necessary to consummate the Merger and to permit
   the continuance of operations of the Company by the Surviving Corporation
    thereafter shall have been received and shall be in full force and effect;

         (d) The terms of the Merger shall have been approved by a majority of
the Company's disinterested directors;                                

        (e) The terms of the Merger shall have been approved and recommended
by a majority of the Company's Board of Directors;                    

         (f) The terms of the Merger shall have been approved by a majority of
Company's stockholders;                                               

          (g) Stockholders of the Company owning not more than five percent (5%)
   of the Company's issued and outstanding shares (on an as converted basis)
shall have exercised dissenters' rights;                              

          (h) The Company shall have obtained and provided NAC a written opinion
from Chatsworth that the terms of the Merger are fair to the Company's
stockholders; and                                                     

        (i) The Company shall have obtained any and all regulatory approvals
for the consummation of the Merger, and there shall have been no      
outstanding order of a court of competent jurisdiction enjoining the  
consummation of the Merger.                                           

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     5.3 Conditions to the Obligations of the Company to Effect the Merger.  The
obligations of the Company to effect the Merger shall be further subject to the 
fulfillment at or prior to the Effective Time of the following conditions, any  
one or more of which may be waived by the Company:                              

      (a) NAC shall have performed and complied in all material respects
     with the agreements and obligations contained in this Agreement required to
     be performed and complied with by it at or prior to the Effective Time; and

   (b) The representations and warranties of NAC contained in this
    Agreement shall be true as of the date hereof, and shall be deemed to have
    been made again at and as of the Effective Time and shall then be true and
correct in all material respects.                                     

ARTICLE VI

CLOSING 

6.1 Time and Place.  Subject to the provisions of Articles V and VII  
hereof, the closing (the "Closing") of the transactions contemplated hereby     
shall take place at the offices of Tucker Flyer, 1615 L Street, N.W., Suite 400,
Washington, D.C. 20036, at 10:00 A.M., local time, as soon as practicable after 
the meeting of stockholders referred to in Section 4.7 hereof (the "Closing     
Date") or at such other place or at such other time as NAC and the Company may  
mutually agree upon for the Closing to take place.                              

   6.2 Deliveries at the Closing.  At the Closing, the Company and NAC shall
cause the Certificate of Merger to be filed and recorded in accordance with the 
applicable provisions of the DGCL and shall take any and all other lawful       
actions necessary to cause the Merger to become effective.                      

ARTICLE VII 

TERMINATION AND ABANDONMENT 

7.1 Termination.  This Agreement may be terminated and the Merger     
contemplated hereby may be abandoned at any time prior to the Effective Time,   
whether before or after approval of the Merger by the stockholders of the       
Company:                                                                        

   (a) By mutual consent of the Boards of Directors of NAC and the
Company;                                                              

       (b) If NAC and the Company shall mutually agree that there shall be
     threatened, instituted or pending any action, proceeding or counterclaim by
or before any court of competent jurisdiction or governmental         
administrative or regulatory agency or commission which, in the mutual
 agreement of NAC and the Company, might permanently restrain, enjoin or
otherwise prohibit the transactions contemplated by this Agreement;   

(c) By either NAC or the Company:                           

             (i) If the Effective Time shall not have occurred by June 30, 2000;

    (ii) If a court of competent jurisdiction or governmental,
      regulatory or administrative agency or commission shall have issued an
    order, decree or ruling or taken any other action which has not been
        lifted (which order, decree or ruling the parties hereto shall use their
      best efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this  
Agreement;                                                      

         (iii) If there has been a material failure to perform or comply
with any of the covenants, obligations, agreements or conditions
        required in this Agreement to be performed or complied with by the other
        party and such nonperformance or noncompliance shall not have been cured
     or eliminated promptly or by its nature cannot be cured or eliminated
promptly; or                                                    

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          (iv) By either party if the other shall have breached any of its
       representations or warranties contained in this Agreement, which breach
        (A) is incapable of being cured by the breaching party or (B) would give
rise to failure of the conditions set forth in Article V.       

   7.2 Procedure and Effect of Termination.  In the event of termination and
abandonment of the Merger by the Company or NAC or both pursuant to Section 7.1 
hereof, written notice thereof shall forthwith be given to the other and this   
Agreement shall terminate and the Merger shall be abandoned, without further    
action by any of the parties hereto. If this Agreement is terminated as provided
herein:                                                                         

    (a) Upon request therefor, each party will redeliver any and all
  documents, work papers and other material of any other party relating to
    the transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same; and               

         (b) No party hereto shall have any liability or further obligation to
any other party to this Agreement except that the provisions of this  
    Section 7.2 and Sections 4.3(b) and 4.8 hereof, shall remain in full force
and effect.                                                           

ARTICLE VIII

GENERAL PROVISIONS

     8.1 Survival of Representations, Warranties, Covenants and Agreements.  The
respective representations, warranties, covenants and agreements of the parties 
hereto, other than those contained in Sections 1.8, 1.9, 4.3(b) and 4.8 hereof, 
shall not survive the Effective Time.                                           

  8.2 Amendment, Modification and Waiver.  Subject to applicable law, this
Agreement may not be amended except by written agreement with the approval of   
the Boards of Directors of NAC and the Company, before or after the meeting of  
stockholders of the Company, at any time prior to the Effective Time with       
respect to any of the terms contained herein, except that the price per Common  
Share or Preferred Share to be paid pursuant to this Agreement to the holders of
Common Shares or Preferred Shares shall in no event be decreased and the form of
consideration to be received by the holders of such Common Shares or Preferred  
Shares in the Merger shall in no event be altered without the approval of such  
holders. The waiver of any term or condition in this Agreement shall only be    
effective if in writing and shall not be construed as a waiver of any subsequent
breach or waiver of the same term or condition, or a waiver of any other term or
condition of this Agreement. Any failure or delay on the part of either party in
exercising any power or right hereunder shall not operate as a waiver thereof,  
nor shall any single or partial exercise of any other right or power hereunder. 

   8.3 Waiver of Compliance; Consents.  Any failure of NAC, on the one hand,
or the Company, on the other hand, to comply with any obligation, covenant,     
agreement or condition herein may be waived in writing by the Company or NAC,   
respectively, but such waiver or failure to insist upon strict compliance with  
such obligation, covenant, agreement or condition shall not operate as a waiver 
of, or estoppel with respect to, any subsequent or other failure. Whenever this 
Agreement requires or permits consent by or on behalf of either party hereto,   
such consent shall be given in writing in a manner consistent with the          
requirements for a waiver of compliance as set forth in this Section 8.3.       

8.4 Severability.  If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public    
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of   
the transactions contemplated hereby is not affected in any manner adverse to   
either party. Upon such determination that any term or other provision is       
invalid, illegal or incapable of being enforced, the parties hereto shall       
negotiate in good faith to modify this Agreement so as to effect the original   
intent of the parties as closely as possible in a mutually acceptable manner in 
order that the transactions contemplated hereby be consummated as originally    
contemplated to the greatest extent possible.                                   

     8.5 Fees and Expenses.  Whether or not the Merger is consummated, all costs
and expenses incurred in connection with the Merger, this Agreement and the     
transactions contemplated hereby will be paid by the party incurring such       
expenses.                                                                       
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8.6 No Third Party Beneficiaries.  Except for the provisions of this  
Agreement relating to Indemnified Parties, this Agreement shall be binding upon 
and inure solely to the benefit of each party hereto and their permitted        
successors, and nothing in this Agreement, express or implied, is intended to   
confer upon any other person or entity any legal or equitable rights benefit or 
remedy of any nature whatsoever under or by reason of this Agreement.           

8.7 Additional Agreements.  Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to    
take, or cause to be taken, all action, and to do, or cause to be done, all     
things necessary, proper or advisable under applicable laws and regulations to  
consummate and make effective the transactions contemplated by this Agreement.  
In case at any time after the Effective Time any further action is necessary or 
desirable to carry out the purposes of this Agreement, the proper officers and  
directors of each corporation which is a party to this Agreement shall take all 
such necessary action.                                                          

  8.8 Notices.  All notices and other communications hereunder shall be in
writing and shall be deemed duly given or made as of (i) the date delivered     
personally against written receipt or (ii) five days after mailing if mailed by 
registered or certified mail (return receipt requested); to the parties at the  
following addresses (or at such other address for a party as shall be specified 
by like notice):                                                                

(a) if to NAC:                                              

NNI Acquisition Corporation                               
c/o Crown Communications Corporation                      
650 Massachusetts Avenue, N.W.                            
Washington, DC 20001                                      
Attn: President                                           
Facsimile: (202) 408-8496                                 

with a copy under separate cover to:                            

Arthur E. Cirulnick, Esquire                              
Venable, Baetjer, Howard & Civiletti, LLP                 
1615 L Street, N.W., Suite 400                            
Washington, D.C. 20036                                    
Facsimile: (202) 429-3231                                 

(b) if to the Company:                                      

The Nostalgia Network, Inc.                               
650 Massachusetts Avenue, N.W.                            
Washington, D.C. 20001                                    
Attn: President                                           
Facsimile: (202) 289-6632                                 

with a copy under separate cover to:                            

Robert Kostecka, Esquire                                  
Caplan, Buckner, Rohrbaugh & Kostecka Chtd.               
3 Bethesda Metro, Suite 430                               
Bethesda, MD 20814                                        
Facsimile: (301) 718-8358                                 

  8.9 Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the conflict
of laws rules thereof.                                                          

8.10 Counterparts.  This Agreement may be executed in two or more     
counterparts, each of which shall be deemed an original, but all of which       
together shall constitute one and the same agreement.                           

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8.11 Headings.  The article and section headings contained in this    
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation of 
this Agreement.                                                                 

   8.12 Entire Agreement.  This Agreement, including the exhibits hereto and
the documents and instruments referred to herein, constitutes the entire        
agreement of the parties hereto in respect of the subject matter contained      
herein. There are no agreements, restrictions, promises, representations,       
warranties, covenants or undertakings, other than those expressly set forth or  
referred to herein. This Agreement supersedes all prior agreements and          
understandings between the parties with respect to such subject matter.         

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above on its behalf by its duly        
authorized officers.                                                            

                               The Nostalgia Network, Inc.

                                 By:    /s/ SQUIRE D. RUSHNELL
                                            ------------------------------------
                                Name: SQuire D. Rushnell
                                            Title: President and Chief Executive
                   Officer

                               NNI ACQUISITION CORPORATION

                               By:       /s/ DONG MOON JOO
                                            ------------------------------------
                           Name: Dong Moon Joo
                        Title: President

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                                                                       EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
THE NOSTALGIA NETWORK, INC. 

   The Nostalgia Network, Inc., a corporation existing under the laws of the
State of Delaware, hereby certifies as follows:                                 

  1.  The name of the corporation is THE NOSTALGIA NETWORK, INC.

         2.  The original Certificate of Incorporation of this corporation was
filed with the Secretary of State of the State of Delaware on July 15,
   1987. Certificate of Ownership and Merger was filed with the Secretary of
State of the State of Delaware on October 9, 1987 and Certificates of 
Amendment of the Certificate of Incorporation of this corporation were
   filed with the Secretary of State of the State of Delaware on October 25,
1990 and June 15, 1992.                                               

          3.  This Restated Certificate of Incorporation restates and integrates
  and further amends the provisions of the Certificate of Incorporation of
  the Corporation (as previously amended) and has been adopted pursuant to
  the provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware.                                                

     4.  The Certificate of Incorporation of the corporation is hereby
further amended and restated to read in its entirety as follows:      

            FIRST:  The name of the corporation is THE NOSTALGIA NETWORK, INC.

          SECOND:  The name of the registered agent and the address of the
    registered office of the Corporation in the State of Delaware is The
   Corporation Trust Company, Corporation Trust Center, 1209 N. Orange
Street, Wilmington, Delaware 19801, County of New Castle.       

            THIRD:  The purposes of the Corporation are to engage in, promote,
conduct and carry on any lawful acts or activities for which    
      corporations may be organized under the Delaware General Corporate Law
of the State of Delaware, as amended (the "DGCL").              

            FOURTH:  The total number of shares of stock which the Corporation
       shall have authority to issue is Ten Thousand (10,000) shares of Common
Stock, par value One Cent ($0.01) per share.                    

 FIFTH:  The Corporation is to have perpetual existence.

           SIXTH:  The private property or assets of the stockholders of the
        Corporation shall not to any extent whatsoever be subject to the payment
of the debts of the Corporation.                                

        SEVENTH:  Elections of directors need not be by written ballot
unless otherwise provided in the Bylaws of the Corporation.     

           EIGHTH:  The number of directors of the Corporation shall be such
        number as from time to time shall be fixed by, or in the manner provided
  in, the Bylaws of the Corporation. None of the directors need be a
stockholder or a resident of the State of Delaware.             

           NINTH:  No director shall be personally liable to the Corporation
    or its stockholders for monetary damages for any breach of fiduciary
  duty by such director as a director. Notwithstanding the foregoing
sentence, a director shall be liable to the extent provided by  
      applicable law (i) for breach of the director's duty of loyalty to the
       Corporation or its stockholders, (ii) for acts or omissions not in good
       faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL or (iv) for any  
transaction from which the director derived an improper personal
     benefit. All references in this paragraph to a director shall also be
       deemed to refer to any other person who, pursuant to a provision of the
      certificate of incorporation in accordance with Section 141 subsection
  (a) of the DGCL, exercises or performs any of the powers or duties
       otherwise conferred or imposed upon the board of directors by the DGCL.
No amendment                                                    

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       to or repeal of this Article NINTH shall apply to or have any effect on
     the liability or alleged liability of any director of the Corporation
       for or with respect to any acts or omissions of such director occurring
prior to such amendment.                                        

             TENTH:  In furtherance and not in limitation of the rights, powers,
      privileges and discretionary authority granted or conferred by DGCL or
       other statutes or laws of the State of Delaware, the Board of Directors
is expressly authorized:                                        

     A.  To make, amend, alter or repeal the Bylaws of the
Corporation;                                              

             B.  To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation;   

              C.  To set apart out of any funds of the Corporation available
        for dividends, a reserve or reserves for any proper purpose and to
        reduce any such reserve in the manner in which it was created; and

               D.  To adopt from time to time Bylaw provisions with respect to
         indemnification of directors, officers, employees, agents and other
         persons as it shall deem expedient and in the best interests of the
Corporation and to the extent permitted by law.           

             ELEVENTH:  The books of the Corporation may be kept (subject to any
     provision contained in the statutes) outside the State of Delaware at
        such place or places as may be designated from time to time by the Board
of Directors or in the Bylaws of the Corporation.               

       TWELFTH:  The Corporation reserves the right to amend, alter,
      change or repeal any provisions herein contained, in the manner now or
       hereafter prescribed by statute, and all rights, powers, privileges and
        discretionary authority granted or conferred herein upon stockholders or
directors are granted subject to this reservation.              

       5.  This Amended and Restated Certificate of Incorporation has been
  duly approved and adopted by the Board of Directors of this Corporation.

       6.  This Amended and Restated Certificate of Incorporation has been
    duly adopted of the stockholders of the Corporation in accordance with the
provisions of Sections 228, 242 and 245 of the DGCL.                  

  IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed and executed in its corporate name by 
SQuire D. Rushnell, its President and CEO, and affirmed and acknowledged by     
Willard R. Nichols, its Secretary, this      day of                ,      .     

                               THE NOSTALGIA NETWORK, INC.

       By:
                                            ------------------------------------
                            Name: SQuire D. Rushnell
                          Its: President and CEO

ATTEST:                                                                         

---------------------------------------------------------                       
Willard R. Nichols, Secretary                                                   

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THE NOSTALGIA NETWORK, INC. 

1996 STOCK OPTION PLAN
(AS ADOPTED JUNE 5, 1996) 

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THE NOSTALGIA NETWORK, INC. 

1996 STOCK OPTION PLAN

1.  PURPOSE AND EFFECT ON FORMER PLANS.                               

    The purpose of this Plan is to strengthen The Nostalgia Network, Inc. (the
"Company"), by providing an incentive to its employees, officers, and directors 
and thereby encouraging them to devote their abilities and industry to the      
success of the Company's business enterprise. It is intended that this purpose  
be achieved by extending to employees, officers, and directors of the Company   
and its Subsidiaries an added long-term incentive for high levels of performance
and unusual efforts through the grant of Incentive Stock Options and            
Nonqualified Stock Options. After the Effective Date of this Plan, no further   
awards shall be made under The Nostalgia Network, Inc. 1987 Stock Option Plan or
The Nostalgia Network, Inc. Incentive and Nonqualified Stock Option Plan (1990) 
(collectively, the "Former Plans"). Each award outstanding under a Former Plan  
as of the Effective Date of this Plan shall remain outstanding and continue to  
be subject to the terms of the Former Plan and the award agreement under which  
such award was granted. Each Share that is available for the granting of new    
awards under either of the Former Plans as of the Effective Date of this Plan   
and each Share that is the subject of an award under either of the Former Plans 
but is not issued prior to the time that such award expires or otherwise        
terminates shall, after the Effective Date of this Plan, not be available for   
the granting of awards under either of the Former Plans, but shall instead be   
available for the granting of Options under this Plan.                          

2.  DEFINITIONS.                                                      

For purposes of the Plan:                                             

2.1  "Adjusted Fair Market Value" means, in the event of a Change in  
Control, the greater of (i) the highest price per Share paid to holders of the  
Shares in any transaction (or series of transactions) constituting or resulting 
in a Change in Control or (ii) the highest Fair Market Value of a Share during  
the ninety (90) day period ending on the date of a Change in Control.           

 2.2  "Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option.                                     

2.3  "Board" means the Board of Directors of the Company.             

2.4  "Cause" means:                                                   

         (a) for purposes of Section 6.4, the commission of an act of fraud or
   intentional misrepresentation or an act of embezzlement, misappropriation
    or conversion of assets or opportunities of the Company or any Subsidiary,
and                                                                   

         (b) for all other purposes, unless otherwise defined in the Agreement
  evidencing a particular Option, an Eligible Individual's (i) intentional
   failure to perform reasonably assigned duties, (ii) dishonesty or willful
     misconduct in the performance of duties, (iii) involvement in a transaction
   in connection with the performance of duties to the Company or any of its
   Subsidiaries thereof which transaction is adverse to the interests of the
 Company or any of its Subsidiaries and which is engaged in for personal
profit or (iv) willful violation of any law, rule or regulation in    
     connection with the performance of duties (other than traffic violations or
similar offenses).                                                    

2.5  "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in     
value) in the Shares or exchange of Shares for a different number or kind of    
shares or other securities of the Company, by reason of a reclassification,     
recapitalization, merger, consolidation, reorganization, spin-off, split-up,    
issuance of warrants or rights or debentures, stock dividend, stock split or    
reverse stock split, cash dividend, property dividend, combination or exchange  
of shares, repurchase of shares, change in corporate structure or otherwise.    

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     2.6  A "Change in Control" shall mean the occurrence during the term of the
Plan of:                                                                        

    (a) An acquisition (other than directly from the Company) of any
    voting securities of the Company (the "Voting Securities") by any "Person"
   (as the term person is used for purposes of Section 13(d) or 14(d) of the
  Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other
   than Concept Communications Corp. or any of its affiliates, collectively,
    "Concept"), immediately after which such Person has "Beneficial Ownership"
  (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
(i) thirty percent (30%) or more of the combined voting power of the  
  Company's then outstanding Voting Securities and (ii) a number of Voting
Securities greater than the aggregate number of Voting Securities then
    Beneficially Owned by Concept; provided, however, in determining whether a
   Change in Control has occurred, Voting Securities which are acquired in a
    "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control     
    Acquisition" shall mean an acquisition by (i) an employee benefit plan (or
  a trust forming a part thereof) maintained by (A) the Company or (B) any
    corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or     
indirectly, by the Company (for purposes of this definition, a        
    "Subsidiary") (ii) the Company or its Subsidiaries, or (iii) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined); 

        (b) The individuals who, as of June 5, 1996 are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least a
majority of the members of the Board; provided, however, that if the  
    election, or nomination for election by the Company's common stockholders,
  of any new director was approved by a vote of at least a majority of the
 Incumbent Board, such new director shall, for purposes of this Plan, be
   considered as a member of the Incumbent Board; provided further, however,
   that no individual shall be considered a member of the Incumbent Board if
     such individual initially assumed office as a result of either an actual or
 threatened "Election Contest" (as described in Rule 14a-l 1 promulgated
under the Exchange Act) or other actual or threatened solicitation of 
 proxies or consents by or on behalf of a Person other than the Board (a
    "Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or                      

(c) Approval by stockholders of the Company of:             

     (i) A merger, consolidation or reorganization involving the
 Company, unless such merger, consolidation or reorganization is a
   "Non-Control Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the Company where:   

            (A) the stockholders of the Company, immediately before such
         merger, consolidation or reorganization, own directly or indirectly
         immediately following such merger, consolidation or reorganization,
        at least seventy percent (70%) of the combined voting power of the
          outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving 
           Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger,  
consolidation or reorganization,                          

           (B) the individuals who were members of the Incumbent Board
       immediately prior to the execution of the agreement providing for
        such merger, consolidation or reorganization constitute at least a
        majority of the members of the board of directors of the Surviving
       Corporation, or a corporation beneficially directly or indirectly
 owning a majority of the Voting Securities of the Surviving
Corporation, and                                          

              (C) no Person other than (i) the Company, (ii) any Subsidiary,
           (iii) any employee benefit plan (or any trust forming a part thereof)
  maintained by the Company, the Surviving Corporation, or any
           Subsidiary, or (iv) any Person who, immediately prior to such merger,
        consolidation or reorganization had Beneficial Ownership of thirty
           percent (30%) or more of the then outstanding Voting Securities), has
          Beneficial Ownership of thirty percent (30%) or more of the combined
         voting power of the Surviving Corporation's then outstanding voting
securities.                                               

       (ii) A complete liquidation or dissolution of the Company; or
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        (iii) An agreement for the sale or other disposition of all or
        substantially all of the assets of the Company to any Person (other than
a transfer to a Subsidiary).                                    

   Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial      
Ownership of more than the permitted amount of the then outstanding Voting      
Securities as a result of the acquisition of Voting Securities by the Company   
which, by reducing the number of Voting Securities then outstanding, increases  
the proportional number of shares Beneficially Owned by the Subject Persons,    
provided that if a Change in Control would occur (but for the operation of this 
sentence) as a result of the acquisition of Voting Securities by the Company,   
and after such share acquisition by the Company, the Subject Person becomes the 
Beneficial Owner of any additional Voting Securities which increases the        
percentage of the then outstanding Voting Securities Beneficially Owned by the  
Subject Person, then a Change in Control shall occur.                           

2.7  "Code" means the Internal Revenue Code of 1986, as amended.      

    2.8  "Committee" means a committee, as described in Section 3.1, appointed
by the Board to administer the Plan and to perform the functions set forth      
herein.                                                                         

2.9  "Company" means The Nostalgia Network, Inc.                      

2.10  "Director Option" means an Option granted pursuant to Section 6.

   2.11  "Disability" means a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a period of   
one hundred eighty (180) consecutive days.                                      

2.12  "Disinterested Director" means a director of the Company who is 
"disinterested" within the meaning of Rule 16b-3 under the Exchange Act.        

   2.13  "Effective Date" means the effective date of the Plan as determined
by the Board pursuant to Section 19.                                            

  2.14  "Eligible Individual" means any director (other than a Nonemployee
Director), officer or employee of the Company or a Subsidiary, or any consultant
or advisor who is receiving cash compensation from the Company or a Subsidiary, 
designated by the Committee as eligible to receive Options subject to the       
conditions set forth herein.                                                    

2.15  "Employee Option" means an Option granted pursuant to Section 5.

     2.16  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     2.17  "Fair Market Value" on any date means the average of the high and low
sales prices of the Shares on such date on the principal national securities    
exchange on which such Shares are listed or admitted to trading, or, if such    
Shares are not so listed or admitted to trading, the arithmetic mean of the per 
Share highest bid price and per Share lowest asked price on such date as quoted 
on the National Association of Securities Dealers Automated Quotation System or 
such other market in which such prices are regularly quoted, or, if there have  
been no published bid or asked quotations with respect to Shares on such date,  
the Fair Market Value shall be the value established by the Board in good faith 
and, in the case of an Incentive Stock Option, in accordance with Section 422 of
the Code.                                                                       

  2.18  "Former Plans" means The Nostalgia Network, Inc. 1987 Stock Option
Plan and The Nostalgia Network, Inc. Incentive and Nonqualified Stock Option    
Plan (1990), collectively.                                                      

    2.19  "Incentive Stock Option" means an Option satisfying the requirements
of Section 422 of the Code and designated by the Committee as an Incentive Stock
Option.                                                                         

    2.20  "Nonemployee Director" means a director of the Company who is not an
employee of the Company or any Subsidiary.                                      

     2.21  "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.                                                                   

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2.22  "Option" means a Nonqualified Stock Option, an Incentive Stock  
Option, a Director Option, or any or all of them.                               

  2.23  "Optionee" means a person to whom an Option has been granted under
the Plan.                                                                       

    2.24  "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.         

2.25  "Plan" means The Nostalgia Network, Inc. 1995 Stock Option Plan.

2.26  "Pooling Transaction" means an acquisition of the Company in a  
transaction which is intended to be treated as a "pooling of interests" under   
generally accepted accounting principles.                                       

2.27  "Shares" means the common stock, par value $.04 per share of the
Company.                                                                        

    2.28  "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company. 

2.29  "Successor Corporation" means a corporation, or a parent or     
subsidiary thereof within the meaning of Section 424(a) of the Code, which      
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.                                                                   

   2.30  "Ten-Percent Stockholder" means an Eligible Individual, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within the 
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
or of a Parent or a Subsidiary.                                                 

3.  ADMINISTRATION.                                                   

3.1  The Plan shall be administered by the Committee which shall hold 
meetings at such times as may be necessary for the proper administration of the 
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist  
of a majority of the members of the Committee and a majority of a quorum may    
authorize any action. Any decision or determination reduced to writing and      
signed by a majority of all of the members of the Committee shall be as fully   
effective as if made by a majority vote at a meeting duly called and held. The  
Committee shall consist of at least two (2) directors of the Company each of    
whom shall be a Disinterested Director. No member of the Committee shall be     
liable for any action, failure to act, determination or interpretation made in  
good faith with respect to this Plan or any transaction hereunder, except for   
liability arising from his or her own willful misfeasance, gross negligence or  
reckless disregard of his or her duties. The Company hereby agrees to indemnify 
each member of the Committee for all costs and expenses and, to the extent      
permitted by applicable law, any liability incurred in connection with defending
against, responding to, negotiating for the settlement of or otherwise dealing  
with any claim, cause of action or dispute of any kind arising in connection    
with any actions in administering this Plan or in authorizing or denying        
authorization to any transaction hereunder.                                     

3.2  Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:                            

     (a) determine those Eligible Individuals to whom Employee Options
    shall be granted under the Plan and the number of such Employee Options to
 be granted and to prescribe the terms and conditions (which need not be
   identical) of each such Employee Option, including the purchase price per
Share subject to each Employee Option, and make any amendment or      
     modification to any Option Agreement consistent with the terms of the Plan;

  (b) to construe and interpret the Plan and the Options granted
    hereunder and to establish, amend and revoke rules and regulations for the
   administration of the Plan, including, but not limited to, correcting any
   defect or supplying any omission, or reconciling any inconsistency in the
 Plan or in any Agreement, in the manner and to the extent it shall deem
necessary or advisable so that the Plan complies with applicable law  
including Rule 16b-3 under the Exchange Act and the Code to the extent
   applicable, and otherwise to make the Plan fully effective. All decisions
and determinations by the                                             

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Committee in the exercise of this power shall be final, binding and   
     conclusive upon the Company, its Subsidiaries, the Optionees, and all other
persons having any interest therein;                                  

          (c) to determine the duration and purposes for leaves of absence which
     may be granted to an Optionee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;        

        (d) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and                           

          (e) generally, to exercise such powers and to perform such acts as are
    deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.                                             

4.  Stock Subject to the Plan.                                        

   4.1  The maximum number of Shares that may be made the subject of Options
granted under this Plan is the aggregate number of Shares that would have been  
available for new awards under the Former Plans after the Effective Date of this
Plan (but for the prospective termination of the Former Plans), including the   
Shares that were available for new grants under each of the Former Plans as of  
the Effective Date of this Plan and the Shares that are subject to awards       
granted under either of the Former Plans which Shares are not issued prior to   
the expiration or other termination of such awards (including Shares subject to 
awards that expire or terminate after the expiration of the term of a Former    
Plan). Upon a Change in Capitalization the maximum number of Shares shall be    
adjusted in number and kind pursuant to Section 9. The Company shall reserve for
the purposes of the Plan, out of its authorized but unissued Shares or out of   
Shares held in the Company's treasury, or partly out of each, such number of    
Shares as shall be determined by the Board.                                     

   4.2  Upon the granting of an Option, the number of Shares available under
Section 4.1 for the granting of further Options shall be reduced by the number  
of Shares subject to such Option.                                               

4.3  Whenever any outstanding Option or portion thereof expires, is   
canceled or is otherwise terminated for any reason without having been exercised
or payment having been made in respect of the entire Option (including any      
outstanding Options under either of the Former Plans), the Shares allocable to  
the expired, canceled or otherwise terminated portion of the Option may again be
the subject of Options granted hereunder.                                       

  4.4  Notwithstanding anything contained in this Section 4, the number of
Shares available for Options at any time under the Plan shall be reduced to such
lesser amount as may be required pursuant to the methods of calculation         
necessary so that the exemptions provided pursuant to Rule 16b-3 under the      
Exchange Act will continue to be available for transactions involving all       
current and future Options. In addition, during the period that any Options     
remain outstanding under the Plan, the Committee may make good faith adjustments
with respect to the number of Shares attributable to such Options for purposes  
of calculating the maximum number of Shares available for the granting of future
Options under the Plan, provided that following such adjustments the exemptions 
provided pursuant to Rule 16b-3 under the Exchange Act will continue to be      
available for transactions involving all current and future Options.            

5.  Option Grants for Eligible Individuals.                           

  5.1  Authority of Committee.  Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible          
Individuals who will receive Employee Options, the terms and conditions of which
shall be set forth in an Agreement.                                             

5.2  Purchase Price.  The purchase price or the manner in which the   
purchase price is to be determined for Shares under each Employee Option shall  
be determined by the Committee and set forth in the Agreement; provided,        
however, that the purchase price per Share under each Incentive Stock Option    
shall not be less than 100% of the Fair Market Value of a Share on the date the 
Incentive Stock Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).                                          

 5.3  Maximum Duration.  Employee Options granted hereunder shall be for
such term as the Committee shall determine, provided that an Incentive Stock    
Option shall not be exercisable after the                                       
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expiration of ten (10) years from the date it is granted (five (5) years in the 
case of an Incentive Stock Option granted to a Ten-Percent Stockholder) and a   
Nonqualified Stock Option shall not be exercisable after the expiration of ten  
(10) years from the date it is granted. The Committee may, subsequent to the    
granting of any Employee Option, extend the term thereof but in no event shall  
the term as so extended exceed the maximum term provided for in the preceding   
sentence.                                                                       

  5.4  Vesting.  Subject to Section 7.4, each Employee Option shall become
exercisable in such installments (which need not be equal) and at such times as 
may be designated by the Committee and set forth in the Agreement. To the extent
not exercised, installments shall accumulate and be exercisable, in whole or in 
part, at any time after becoming exercisable, but not later than the date the   
Employee Option expires. The Committee may accelerate the exerciseability of any
Employee Option or portion thereof at any time.                                 

   5.5  Modification.  No modification of an Employee Option shall adversely
alter or impair any rights or obligations under the Employee Option without the 
Optionee's consent.                                                             

6.  Option Grants for Nonemployee Directors.                          

     6.1  Grant.  Director Options shall be granted to each Nonemployee Director
on the first business day of August of each year that the Plan is in effect.    
Each Director Option granted shall be in respect of 3,000 Shares. Such Options  
shall be evidenced by an Agreement containing such other terms and conditions   
not inconsistent with the provisions of this Plan as determined by the Board;   
provided, however, that such terms shall not vary the price, amount or timing of
Director Options provided under this Section 6, including provisions dealing    
with vesting, forfeiture and termination of such Director Options.              

 6.2  Purchase Price.  The purchase price for Shares under each Director
Option shall be equal to 100% of the Fair Market Value of such Shares on the    
date immediately preceding the date of grant.                                   

    6.3  Vesting.  Subject to Sections 6.4 and 7.4, each Director Option shall
become exercisable with respect to 33 1/3% of the Shares subject thereto        
effective as of each of the first, second, and third anniversaries of the grant 
date; provided, however, that the Optionee continues to serve as a Director as  
of such dates. If an Optionee ceases to serve as a Director for any reason, the 
Optionee shall have no rights with respect to that portion of a Director Option 
which has not then vested pursuant to the preceding sentence and the Optionee   
shall automatically forfeit that portion of the Director Option which remains   
unvested.                                                                       

   6.4  Duration.  Each Director Option shall terminate on the date which is
the tenth anniversary of the grant date, unless terminated earlier as follows:  

        (a) If an Optionee's service as a Director terminates for any reason
 other than Disability, death or Cause, the Optionee may for a period of
   three (3) months after such termination exercise his or her Option to the
 extent, and only to the extent, that such Option or portion thereof was
    vested and exercisable as of the date the Optionee's service as a Director
  terminated, after which time the Option shall automatically terminate in
full.                                                                 

          (b) If an Optionee's service as a Director terminates by reason of the
 Optionee's resignation or removal from the Board due to Disability, the
     Optionee may, for a period of one (1) year after such termination, exercise
   his or her Option to the extent, and only to the extent, that such Option
or portion thereof was vested and exercisable, as of the date the     
Optionee's service as Director terminated, after which time the Option
shall automatically terminate in full.                                

        (c) If an Optionee's service as a Director terminates for Cause, the
 Option granted to the Optionee hereunder shall immediately terminate in
full and no rights thereunder may be exercised.                       

       (d) If an Optionee dies while a Director or within three (3) months
  after termination of service as a Director as described in clause (a) of
    this Section 6.4 or within twelve (12) months after termination of service
  as a Director as described in clause (b) of this Section 6.4, the Option
 granted to the Optionee may be exercised at any time within twelve (12)
 months after the Optionee's death by the person or persons to whom such
  rights under the Option shall pass by will, or by the laws of descent or
distribution,                                                         
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 after which time the Option shall terminate in full; provided, however,
     that an Option may be exercised to the extent, and only to the extent, that
the Option or portion thereof was exercisable on the date of death or 
earlier termination of the Optionee's services as a Director.         

    6.5  Limitations on Amendment.  The provisions in this Section 6 shall not
be amended more than once every six months, other than to comport with changes  
in the Code or the rules and regulations thereunder.                            

7.  TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.                   

7.1  Non-Transferability.  No Option granted hereunder shall be       
transferable by the Optionee to whom granted except by will or the laws of      
descent and distribution, and an Option may be exercised during the lifetime of 
such Optionee only by the Optionee or his or her guardian or legal              
representative. The terms of such Option shall be final, binding and conclusive 
upon the beneficiaries, executors, administrators, heirs and successors of the  
Optionee.                                                                       

     7.2  Method of Exercise.  The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of shares to be 
purchased and accompanied by payment therefor and otherwise in accordance with  
the Agreement pursuant to which the Option was granted. The purchase price for  
any Shares purchased pursuant to the exercise of an Option shall be paid in full
in cash upon such exercise. Notwithstanding the foregoing, the Committee shall  
have discretion to determine at the time of grant of each Employee Option or at 
any later date (up to and including the date of exercise) that the form of      
payment acceptable in respect of the exercise of such Employee Option may       
consist of either of the following (or any combination thereof): (i) cash or    
(ii) the transfer of Shares to the Company upon such terms and conditions as    
determined by the Committee. Any Shares transferred to the Company as payment of
the purchase price under an Option shall be valued at their Fair Market Value on
the day preceding the date of exercise of such Option. In addition, both        
Employee Options and Director Options may be exercised through a registered     
broker-dealer pursuant to such cashless exercise procedures (other than Share   
withholding) which are, from time to time, deemed acceptable by the Committee.  
The Optionee shall deliver the Agreement evidencing the Option to the Secretary 
of the Company who shall endorse thereon a notation of such exercise and return 
such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)  
shall be issued upon exercise of an Option and the number of Shares that may be 
purchased upon exercise shall be rounded to the nearest number of whole Shares. 

   7.3  Rights of Optionees.  No Optionee shall be deemed for any purpose to
be the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company shall 
have issued and delivered Shares to the Optionee and (iii) the Optionee's name  
shall have been entered as a stockholder of record on the books of the Company. 
Thereupon, the Optionee shall have full voting, dividend, and other ownership   
rights with respect to such Shares, subject to such terms and conditions as may 
be set forth in the applicable Agreement.                                       

     7.4  Effect of Change in Control.  In the event of a Change in Control, all
Options outstanding on the date of such Change in Control shall become          
immediately and fully exercisable. In addition, to the extent set forth in an   
Agreement evidencing the grant of an Employee Option, an Optionee will be       
permitted to surrender for cancellation within sixty (60) days after such Change
in Control any Employee Option or portion of an Employee Option to the extent   
not yet exercised and the Optionee will be entitled to receive a cash payment in
an amount equal to the excess, if any, of (x) (A) in the case of a Nonqualified 
Stock Option, the greater of (1) the Fair Market Value, on the date preceding   
the date of surrender, of the Shares subject to the Employee Option or portion  
thereof surrendered or (2) the Adjusted Fair Market Value of the Shares subject 
to the Employee Option or portion thereof surrendered or (B) in the case of an  
Incentive Stock Option, the Fair Market Value, on the date preceding the date of
surrender, of the Shares subject to the Employee Option or portion thereof      
surrendered, over (y) the aggregate purchase price for such Shares under the    
Employee Option or portion thereof surrendered; provided, however, that in the  
case of an Employee Option granted within six (6) months prior to the Change in 
Control to any Optionee who may be subject to liability under Section 16(b) of  
the Exchange Act, such Optionee shall be entitled to surrender for cancellation 
his or her Employee Option during the sixty (60) day period commencing upon the 
expiration of six (6) months from the date of grant of any such Employee Option.
In the event an Optionee's employment                                           
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with, or service as a Director of, the Company is terminated by the Company     
following a Change in Control each Option held by the Optionee that was         
exercisable as of the date of termination of the Optionee's employment or       
service shall remain exercisable for a period ending not before the earlier of  
the first anniversary of the termination of the Optionee's employment or service
or the expiration of the stated term of the Option.                             

8.  EFFECT OF A TERMINATION OF EMPLOYMENT.                            

     The Agreement evidencing the grant of each Option shall set forth the terms
and conditions applicable to such Option upon a termination or change in the    
status of the employment of the Optionee by the Company, a Subsidiary or a      
Division (including a termination or change by reason of the sale of a          
Subsidiary or a Division), which, except for Director Options, shall be as the  
Committee may, in its discretion, determine at the time the Option is granted or
thereafter.                                                                     

9.  ADJUSTMENT UPON CHANGES IN CAPITALIZATION.                        

9.1  In the event of a Change in Capitalization, the Committee shall  
conclusively determine the appropriate adjustments, if any, to the (i) maximum  
number and class of Shares or other stock or securities with respect to which   
Options may be granted under the Plan, (ii) maximum number and class of Shares  
or other stock or securities with respect to which Options may be granted to any
Eligible Individual during the term of the Plan, (iii) the number and class of  
Shares or other stock or securities which are subject to outstanding Options    
granted under the Plan and the purchase price therefor, if applicable, and (iv) 
the number and class of Shares or other securities in respect of which Director 
Options are to be granted under Section 6.                                      

     9.2  Any such adjustment in the Shares or other stock or securities subject
to outstanding Incentive Stock Options (including any adjustments in the        
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise    
permitted by Sections 422 and 424 of the Code.                                  

   9.3  If, by reason of a Change in Capitalization, or an Optionee shall be
entitled to exercise an Option with respect to new, additional or different     
shares of stock or securities, such new, additional or different shares shall   
thereupon be subject to all of the conditions, restrictions and performance     
criteria which were applicable to the Shares subject to the Option prior to such
Change in Capitalization.                                                       

10.  EFFECT OF CERTAIN TRANSACTIONS.  Subject to Sections 7.4 or as   
otherwise provided in an Agreement, in the event of (i) the liquidation or      
dissolution of the Company or (ii) a merger or consolidation of the Company (a  
"Transaction"), the Plan and the Options issued hereunder shall continue in     
effect in accordance with their respective terms, except that following a       
Transaction each Optionee shall be entitled to receive in respect of each Share 
subject to any outstanding Options, as the case may be, upon exercise of any    
such Option, the same number and kind of stock, securities, cash, property, or  
other consideration that each holder of a Share was entitled to receive in the  
Transaction in respect of a Share; provided, however, that such stock,          
securities, cash, property, or other consideration shall remain subject to all  
of the conditions, restrictions and performance criteria which were applicable  
to the Options prior to such Transaction.                                       

11.  INTERPRETATION.                                                  

    11.1  The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Committee shall interpret and administer the provisions of 
the Plan or any Agreement in a manner consistent therewith. Any provisions      
inconsistent with such Rule shall be inoperative and shall not affect the       
validity of the Plan.                                                           

   11.2  The Director Options described in Section 6 are intended to qualify
as formula awards under Rule 16b-3 promulgated under the Exchange Act (thereby  
preserving the disinterested status of Nonemployee Directors receiving such     
awards) and the Committee shall interpret and administer the provisions of the  
Plan or any Agreement in a manner consistent therewith. Any provisions          
inconsistent with the foregoing intent shall be inoperative and shall not affect
the validity of the Plan.                                                       

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12.  POOLING TRANSACTIONS.                                            

Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change in Control which is also intended to         
constitute a Pooling Transaction, the Committee shall take such actions, if any,
which are specifically recommended by an independent accounting firm retained by
the Company to the extent reasonably necessary in order to assure that the      
Pooling Transaction will qualify as such, including but not limited to (i)      
deferring the vesting, exercise, payment or settlement with respect to any      
Option, (ii) providing that the payment or settlement in respect of any Option  
be made in the form of cash, Shares or securities of a successor or acquirer of 
the Company, or a combination of the foregoing and (iii) providing for the      
extension of the term of any Option to the extent necessary to accommodate the  
foregoing, but not beyond the maximum term permitted for any Option.            

13.  TERMINATION AND AMENDMENT OF THE PLAN.                           

    The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option may be granted thereafter.      
Subject to Section 6.5, the Board may sooner terminate the Plan and the Board   
may at any time and from time to time amend, modify or suspend the Plan;        
provided, however, that:                                                        

        (a) No such amendment, modification, suspension or termination shall
   impair or adversely alter any Options theretofore granted under the Plan,
except with the consent of the Optionee, nor shall any amendment,     
    modification, suspension or termination deprive any Optionee of any Shares
   which he or she may have acquired through or as a result of the Plan; and

       (b) To the extent necessary under Section 16(b) of the Exchange Act
  and the rules and regulations promulgated thereunder or other applicable
     law, no amendment shall be effective unless approved by the stockholders of
the Company in accordance with applicable law and regulations.        

14.  NON-EXCLUSIVITY OF THE PLAN.                                     

   The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangement or as     
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the       
granting of stock options otherwise than under the Plan, and such arrangements  
may be either applicable generally or only in specific cases.                   

15.  LIMITATION OF LIABILITY.                                         

 As illustrative of the limitations of liability of the Company, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:   

       (i) give any person any right to be granted an Option other than at
the sole discretion of the Committee (except to the extent provided in
Section 6 hereof);                                                    

     (ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;                          

    (iii) limit in any way the right of the Company to terminate the
employment of any person at any time; or                              

    (iv) be evidence of any agreement or understanding, expressed or
    implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.                    

16.  REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.                  

    16.1  Except as to matters of federal law, this Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with 
the laws of the State of Delaware without giving effect to conflicts of laws    
principles thereof.                                                             

    16.2  The obligation of the Company to sell or deliver Shares with respect
to Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state                     
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securities laws, and the obtaining of all such approvals by governmental        
agencies as may be deemed necessary or appropriate by the Committee.            

     16.3  The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain 
for Eligible Individuals granted Incentive Stock Options the tax benefits under 
the applicable provisions of the Code and regulations promulgated thereunder.   

  16.4  Each Option is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or      
qualification of Shares issuable pursuant to the Plan is required by any        
securities exchange or under any state or federal law, or the consent or        
approval of any governmental regulatory body is necessary or desirable as a     
condition of, or in connection with, the grant of an Option or the issuance of  
Shares, no Options shall be granted or payment made or Shares issued, in whole  
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.

  16.5  Notwithstanding anything contained in the Plan or any Agreement to
the contrary, in the event that the disposition of Shares acquired pursuant to  
the Plan is not covered by a then current registration statement under the      
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise 
exempt from such registration, such Shares shall be restricted against transfer 
to the extent required by the Securities Act and Rule 144 or other regulations  
thereunder. The Committee may require any individual receiving Shares pursuant  
to an Option granted under the Plan, as a condition precedent to receipt of such
Shares, to represent and warrant to the Company in writing that the Shares      
acquired by such individual are acquired without a view to any distribution     
thereof and will not be sold or transferred other than pursuant to an effective 
registration thereof under said Act or pursuant to an exemption applicable under
the Securities Act or the rules and regulations promulgated thereunder. The     
certificates evidencing any of such Shares shall be appropriately legended to   
reflect their status as restricted securities as aforesaid.                     

17.  MULTIPLE AGREEMENTS.                                             

  The terms of each Option may differ from other Options granted under the
Plan at the same time, or at some other time. The Committee may also grant more 
than one Option to a given Eligible Individual during the term of the Plan,     
either in addition to, or in substitution for, one or more Options previously   
granted to that Eligible Individual.                                            

18.  WITHHOLDING OF TAXES.                                            

    18.1  At such times as an Optionee recognizes taxable income in connection
with the receipt of Shares or cash hereunder (a "Taxable Event"), the Optionee  
shall pay to the Company an amount equal to the federal, state and local income 
taxes and other amounts as may be required by law to be withheld by the Company 
in connection with the Taxable Event (the "Withholding Taxes") prior to the     
issuance, or release from escrow, of such Shares or the payment of such cash.   
The Company shall have the right to deduct from any payment of cash to an       
Optionee an amount equal to the Withholding Taxes in satisfaction of the        
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay   
Withholding Taxes to the Company, the Optionee may make a written election (the 
"Tax Election"), which may be accepted or rejected in the discretion of the     
Committee to have withheld a portion of the Shares then issuable to him or her  
having an aggregate Fair Market Value, on the date preceding the date of such   
issuance, equal to the Withholding Taxes, provided that in respect of an        
Optionee who may be subject to liability under Section 16(b) of the Exchange Act
either: (i) (A) the Tax Election is made at least six (6) months prior to the   
date of the Taxable Event and (B) the Tax Election is irrevocable with respect  
to all Taxable Events of a similar nature occurring prior to the expiration of  
six (6) months following a revocation of the Tax Election; or (ii) (A) the      
Optionee makes the Tax Election at least six (6) months after the date the      
Option was granted, (B) the Option is exercised during the ten (10) day period  
beginning on the third business day and ending on the twelfth business day      
following the release for publication of the Company's quarterly or annual      
statement of sales and earnings (a "Window Period") and (C) the Tax Election is 
made during the Window Period in which the related Option is exercised or prior 
to such Window Period and subsequent to the immediately preceding Window Period.
Notwithstanding the foregoing, the Committee may, by the adoption of rules or   

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otherwise, (i) modify the provisions of this Section 18.1 (other than as regards
Director Options) or impose such other restrictions or limitations on Tax       
Elections as may be necessary to ensure that the Tax Elections will be exempt   
transactions under Section 16(b) of the Exchange Act, and (ii) permit Tax       
Elections to be made at such other times and subject to such other conditions as
the Committee determines will constitute exempt transactions under Section 16(b)
of the Exchange Act.                                                            

 18.2  If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or      
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock   
Option within the two-year period commencing on the day after the date of the   
grant or within the one-year period commencing on the day after the date of     
transfer of such Share or Shares to the Optionee pursuant to such exercise, the 
Optionee shall, within ten (10) days of such disposition, notify the Company    
thereof, by delivery of written notice to the Company at its principal executive
office.                                                                         

19.  EFFECTIVE DATE                                                   

     The effective date of the Plan shall be as determined by the Board, subject
only to the approval by the affirmative vote of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a    
meeting of stockholders duly held in accordance with the applicable laws of the 
State of Delaware within twelve (12) months of the adoption of the Plan by the  
Board.                                                                          

THE NOSTALGIA NETWORK, INC. 

STOCK OPTION AGREEMENT

This Stock Option Agreement (this "Agreement") is made as of the      
              day of             , 1998, by and between The Nostalgia Network,
Inc. (the "Company"), a Delaware corporation, and,               , a member of  
the Company's Board of Directors (the "Director").                              

W I T N E S S E T H:

 A.  The Board of Directors of the Company (the "Board") has adopted The
Nostalgia Network, Inc. 1996 Stock Option Plan (the "Plan") for the purpose of  
providing an incentive to selected directors, officers and employees of the     
Company and encouraging them to devote their abilities and industries to the    
success of the Company. Unless otherwise defined herein, capitalized terms shall
have the same meaning as in the Plan.                                           

  B.  The Plan provides for the grant of an option to Director as provided
herein.                                                                         

NOW, THEREFORE, it is hereby agreed as follows:                       

1. GRANT OF OPTION.  Subject to and upon the terms, conditions and    
restrictions set forth in this Agreement and the Plan, a copy of which is       
attached hereto, the Company hereby grants to Director, as of the Grant Date, an
option (the "Option") to purchase up to 3,000 shares (the "Shares") of the      
common stock, par value $.04 per share, of the Company from time to time during 
the Option Term (as defined in Section 3 hereof) at the Exercise Price provided 
for herein.                                                                     

2. EXERCISE PRICE.  The price at which Director shall be entitled to  
purchase Shares upon the exercise of this Option shall be $     per share.      

    3. OPTION TERM.  The term of the Option (the "Option Term") shall commence
on                (the "Grant Date") and, unless earlier terminated in          
accordance with the terms of the Plan or this Agreement, shall terminate at 5:00
p.m., Washington, D.C. time, on                (the "Expiration Date"). Upon the
Expiration Date or earlier termination of this Option as provided herein, the   
Option shall expire, cease to be exercisable and be of no further force or      
effect except as may be expressly provided herein.                              

  4. OPTION NONTRANSFERABLE.  Neither this Agreement nor Director's rights
hereunder shall be transferable nor assignable by Director other than by will or
by the laws of descent and distribution, and the Option may be exercised, during
Director's lifetime, only by Director.                                          

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    5. EXERCISE.  Unless otherwise provided in this Agreement or the Plan, the
Option shall entitle Director to purchase in whole at any time or in part from  
time to time, 1,000 of the Shares beginning on                , an additional   
1,000 of the Shares beginning on                and an additional 1,000 of the  
Shares beginning on                . Each such right of purchase shall be       
cumulative and shall continue, unless sooner exercised or terminated as herein  
provided, during the remainder of the Option Term. Exercisable installments may 
be exercised in whole or in part and, to the extent not exercised, shall be     
exercisable at any time on or before the Expiration Date or earlier termination 
of the Option Term. This Option shall be subject in all respects to the Plan.   

     6. TERMINATION.  The Option shall terminate prior to the Expiration Date as
follows:                                                                        

(a) If the Director ceases to be a member of the Board (a   
     "Termination") and the Termination is for any reason other than Disability,
  death or Cause, the Director may, for a period of three (3) months after
     the Termination, exercise the Option provided, and only to the extent that,
   the Option or portion thereof is vested and exercisable as of the date of
the Termination after which time the Option shall terminate in full.  

          (b) If the Termination is by resignation or removal due to Disability,
the Director may, for a period of one (1) year after the Termination, 
  exercise the Option provided, and only to the extent that, the Option or
portion thereof is vested and exercisable, as of the date of the      
Termination, after which time the Option shall terminate in full.     

   (c) If the Termination is for Cause, the Option shall terminate
immediately in full.                                                  

        (d) If Termination is the result of death while a Director or within
  three (3) months after Termination other than for Disability or Cause or
 within twelve (12) months after Termination by reason of the Director's
    resignation or removal from the Board due to Disability, the Option may be
    exercised at any time within twelve (12) months after the Director's death
   by Director's legal representative provided, and only to the extent that,
the Option or portion thereof is vested and exercisable on the date of
Termination.                                                          

7.  MANNER OF EXERCISE.                                               

   To exercise this Option with respect to all or any part of the Shares for
which this Option is then exercisable, Director must take the following actions 
(in addition to any specified in the Plan):                                     

       (a) Provide the Secretary of the Company with ten (10) days written
    notice of such exercise, by providing to the Company a fully completed and
executed Option Exercise Form a copy of which is attached hereto;     

        (b) Furnish to the Company appropriate documentation that the person
  exercising the Option, if other than Director, has the right to exercise
this Option on behalf of and for Director;                            

          (c) If requested, deliver to the Company a signed statement, in a form
   satisfactory to the Company, confirming that each of the representations,
     warranties, acknowledgments and agreements contained in paragraph 15 hereof
is true as to Director as of the date of exercise;                    

        (d) Furnish to the Company such additional agreements, undertakings,
documents or information as the Company or its counsel may reasonably 
request.                                                              

     8.  LIABILITY OF COMPANY.  The inability of the Company to obtain approval,
after the Company exercises its reasonable efforts to obtain such approval, from
any regulatory body having authority deemed by the Company to be necessary to   
the lawful issuance and sale of any Shares pursuant to this Option shall relieve
the Company of any liability in respect of its failure to deliver and sell the  
Shares as to which such approval shall not have been obtained.                  

9.  SUCCESSORS AND ASSIGNS.  Subject to the terms of the Plan, the    
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, devisees, legal representatives and      
assigns of Director, and the successors and assigns of the Company.             

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 10.  CONSTRUCTION.  This Agreement and this Option are made and granted
pursuant to the Plan and are in all respects limited by and subject to the      
express terms and provisions of the Plan.                                       

 11.  GOVERNING LAW.  The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Delaware.          

     12.  STOCKHOLDER RIGHTS.  Neither the Director, nor any person who succeeds
to the Option by will or by the laws of descent and distribution, shall have any
rights of a stockholder of the Company with respect to any Shares to be         
delivered upon exercise of the Option unless, and only to the extent that, the  
Option shall have been duly and lawfully exercised in accordance with all       
requirements for exercise of the Option pursuant to its terms, this Agreement   
and/or the Plan.                                                                

13.  NOTICES.  Except as otherwise provided herein, all notices to the
Company shall be addressed to the Secretary of the Company at the principal     
office of the Company, and all notices to Director shall be addressed to        
Director at the address of Director on file with the Company or its             
Subsidiaries, or to such other address as either party may designate to the     
other in writing. A notice shall be deemed to be given if and when enclosed in a
properly addressed sealed envelope deposited, first class postage prepaid, with 
the United States Postal Service. In lieu of giving notice by mail, written     
notices under this Agreement may be given by personal delivery to Director or to
the Secretary of the Company (as the case may be) or by facsimile at the last   
known facsimile number designated by either party. Notices given by facsimile   
shall be deemed given upon receipt of facsimile confirmation.                   

  14.  SEVERABILITY.  In the event any provision of this Agreement (or any
part thereof) is, or is for any reason adjudged to be, void, unlawful,          
unenforceable or invalid, then disregarding such provision or provisions (or any
void, unlawful, unenforceable or invalid part thereof), the remaining provisions
hereof shall be valid and be carried into full force and effect.                

15.  REPRESENTATIONS AND WARRANTIES OF DIRECTOR.                      

 Director hereby represents, warrants and acknowledges to the Company as
follows:                                                                        

(a) As of the Grant Date, Director does not own, directly or
    indirectly, more than ten percent (10%) of the total combined voting power
or value of all classes of voting stock of the Company.               

          (b) Director will acquire and hold the Shares purchased on exercise of
    this Option for his or her own account and not with the view to the resale
    or distribution thereof, except for resales or distributions in accordance
     with federal and state securities laws, and that Director will not directly
    or indirectly transfer all, any portion of, or any interest in, any Shares
  acquired pursuant to the exercise of this Option (or solicit an offer to
transfer all or any portion thereof), except pursuant to either (i) an
   effective and current registration statement (a "Registration Statement")
under the Securities Act of 1933, as amended (the "Act"), or (ii) an  
applicable exemption from the registration requirements of the Act the
 availability of which exemption shall, at the option of the Company, be
   confirmed by an opinion of counsel for the Director in form and substance
satisfactory to the Company and its counsel.                          

       (c) Director acknowledges that (i) this Option may not be exercised
unless the Shares are the subject of a Registration Statement or an   
 exemption from registration under the Act is available; (ii) the Shares
must be held indefinitely unless registered or an exemption from      
     registration is available under the Act and any applicable state securities
     laws; (iii) the Company is under no obligation to register the Shares or to
  comply with any exemption from registration, including those portions of
   Rule 144 under the Act ("Rule 144") to be complied with by the transferor
   of the Shares; (iv) if Rule 144 is available for sales of the Shares (and
   there is no assurance that Director will be able to sell under Rule 144),
     such sales in reliance upon Rule 144 may be made only after the Shares have
   been held for the requisite holding period and may also be subject to the
    volume limitations of Rule 144; and (v) Director must continue to bear the
  economic risk of an investment in the Shares for an indefinite period of
time after the exercise of this Option.                               

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       (d) Director acknowledges that all certificates representing shares
  transferred pursuant to this Agreement, unless subject to a Registration
Statement, will bear the following restrictive legend:                

   "The shares represented by this certificate have not been
       registered under the Securities Act of 1933, as amended, and may not be
        transferred or hypothecated without prior registration under said Act or
       any exemption therefrom established to the satisfaction of the issuer."

      (e) Director acknowledges that if counsel advises the Company that
   registration of the Shares under the Act or that listing of the Shares on
   any exchange is required prior to delivery thereof, the Company shall not
   be required to deliver the Shares unless and until the Company is advised
   by its counsel that registration and/or listing has been completed and is
    effective. Director understands that the Company is under no obligation to
effectuate such registration or listing and may issue stop transfer   
 instructions to its transfer agent with respect to the Shares delivered
upon exercise of this Option.                                         

  17.  MISCELLANEOUS.  This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, subject to the provisions of the 
Plan. Any prior agreements, promises, understandings, representations or        
warranties relating to the subject matter hereof are of no force or effect.     
Paragraph headings in this Agreement are for convenience and are not a part of  
the agreement of the parties, and shall not be used in the construction hereof. 
Whenever the context of this Agreement requires, references to the singular     
shall be deemed to include the plural and the plural the singular, and the      
masculine the feminine, and the feminine the masculine.                         

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate on its behalf by its duly authorized officer and Director has also    
executed this Agreement in duplicate, all as of the day and year first above    
written.                                                                        

                               THE NOSTALGIA NETWORK, INC.

       By:
                                          --------------------------------------

       Its
                                          --------------------------------------

            DIRECTOR

                                          --------------------------------------

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THE NOSTALGIA NETWORK, INC. 

1996, 1990, 1987 STOCK OPTION PLANS 

                                                        [Enlarge/Download Table]

                                                                            VESTING              OPTIONS      OPTIONS  
                        STATUS OF  DATE OF   EXPIRATION           EXERCISE  PERIOD    OPTIONS   EXPIRED OR   CURRENTLY 
RECIPIENT                EMPLOY.    GRANT       DATE     SHARES    PRICE    (YEARS)  EXERCISED  CANCELLED   OUTSTANDING
---------               ---------  --------  ----------  -------  --------  -------  ---------  ----------  -----------
                                                                                                                       
Employee A.............     A      08/16/95  8/16/2005    15,000   $1.00       3                              15,000   
Employee A.............     A      10/08/92                2,000   $1.57       3         0             0       2,000   
Employee A.............     A      09/13/90                1,000   $0.63       3         0             0       1,000   
Employee B.............     A      08/16/95  8/16/2005    29,000   $1.00       3                              29,000   
Employee B.............     A      10/08/92                4,000   $1.57       3         0             0       4,000   
Employee B.............     A      09/13/90                1,000   $0.63       3         0             0       1,000   
Employee C.............     A      08/16/95  8/16/2005    29,000   $1.00       3                              29,000   
Employee C.............     A      10/08/92               10,000   $1.57       3         0             0      10,000   
Employee C.............     A      09/13/90               30,000   $0.63       3         0             0      30,000   
Employee C.............     A      09/23/88               12,000   $1.25       3         0        12,000           0   
Employee D.............     A      08/16/95  8/16/2005     4,000   $1.00       3                               4,000   
Employee D.............     A      10/08/92                1,000   $1.57       3         0             0       1,000   
Employee D.............     A      09/04/91                  500   $0.48       3         0             0         500   
Employee D.............     A      09/13/90                  500   $0.63       3         0             0         500   
Employee E.............     A      08/16/95  8/16/2005     4,000   $1.00       3                               4,000   
Employee F.............            08/16/95  8/16/2005    29,000   $1.00       3                              29,000   
(deceased)                                                                                                             
                                                         -------                                                       
                                                         172,000                                                       
                                                         =======                                                       

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THE NOSTALGIA NETWORK, INC. 

DIRECTORS' STOCK OPTIONS SCHEDULE 

                                                        [Enlarge/Download Table]

                              PRIOR PLAN            8/1/96             8/1/97             8/3/98             8/2/99      
                           -----------------  ------------------  -----------------  -----------------  -----------------
                           VESTED   UNVESTED  VESTED    UNVESTED  VESTED   UNVESTED  VESTED   UNVESTED  VESTED   UNVESTED
                           ------   --------  -------   --------  ------   --------  ------   --------  ------   --------
                                                                                                                         
Christopher Cates......... 20,000     --        3,000             2,000     1,000    1,000     2,000     --       3,000  
Floyd Christofferson......     --     --        3,000             2,000     1,000    1,000     2,000     --       3,000  
Diane M. Faure............     --     --        3,000             2,000     1,000    1,000     2,000     --       3,000  
Dong Moon Joo.............     --     --        3,000             2,000     1,000    1,000     2,000     --       3,000  
Hiroshi Goto..............     --     --           --        --      --        --    1,000     2,000     --       3,000  
Dr. S. Robert Lichter.....     --     --           --        --      --        --    1,000     2,000     --       3,000  
Frederick W. Newton.......     --     --           --        --      --        --    1,000     2,000     --       3,000  
Phillip Sanchez                --     --        2,000             2,000     1,000    1,000     2,000     --       3,000  
  (Chrman)................                                                                                               
Robert J. Wussler.........     --     --        3,000             2,000     1,000    1,000     2,000     --       3,000  
SQuire D. Rushnell Stk                                                                                                   
  Option Agreement                                                                                                       
  As of 5-13-96...........                    629,880   209,960                                                          



                            TOTAL                                                                                        
                           VESTED                                                                                        
                           -------                                                                                       
                                                                                                                         
Christopher Cates.........  26,000                                                                                       
Floyd Christofferson......   6,000                                                                                       
Diane M. Faure............   6,000                                                                                       
Dong Moon Joo.............   6,000                                                                                       
Hiroshi Goto..............   1,000                                                                                       
Dr. S. Robert Lichter.....   1,000                                                                                       
Frederick W. Newton.......   1,000                                                                                       
Phillip Sanchez              5,000                                                                                       
  (Chrman)................                                                                                               
Robert J. Wussler.........   6,000                                                                                       
SQuire D. Rushnell Stk                                                                                                   
  Option Agreement                                                                                                       
  As of 5-13-96........... 629,880                                                                                       

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CHATSWORTH SECURITIES LLC 

October 18, 1999                                                                

The 144 Committee                                                               
The Nostalgia Network, Inc.                                                     
650 Massachusetts Avenue, NW                                                    
Washington, D.C. 20001                                                          

Gentlemen:                                                                      

   We understand that Crown Communications Corporation ("Crown"), a Delaware
corporation, desires to enter into a merger transaction with The Nostalgia      
Network, Inc. ("Nostalgia"), a Delaware corporation, pursuant to which Nostalgia
and a subsidiary of Crown will merge (the "Merger"). As part of the Merger, all 
of the stockholders of Nostalgia will receive cash for their shares of Nostalgia
Common Stock at a price of $0.07 per share (including the holders of shares of  
Nostalgia's Preferred Stock, who will receive consideration for their shares on 
an as converted Basis). Upon consummation of the Merger, Crown and its          
affiliates will be the sole stockholders of Nostalgia, and Nostalgia shall cease
to be an SEC reporting company.                                                 

     You have asked for our opinion as to whether the offer price for the Merger
is fair from a financial point of view to the minority holders of shares of     
Nostalgia.                                                                      

For purposes of the opinion set forth herein, we have:                

 (i)  reviewed certain publicly available financial statements and other
information of Nostalgia;                                   

(ii) reviewed certain internal financial and operating data concerning
Nostalgia prepared by the management of Nostalgia;          

     (iii) discussed the past and current operations and financial condition and
           the prospects of Nostalgia, including information relating to certain
         strategic, financial and operational issues, with senior executives
of Nostalgia;                                             

  (iv) reviewed the reported prices and trading activity for the Nostalgia
Common Stock;                                               

     (v)  compared the financial performance of Nostalgia and prices and trading
 activity of Nostalgia Common Stock with that of certain other
comparable publicly-traded companies and their securities;  

    (vi) performed such other analyses and considered such other factors as we
have deemed appropriate.                                    

We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information received by us for the purposes of 
this opinion. With respect to the internal financial statements and other       
financial and operating data, including forecasts, and discussions relating to  
the strategic, financial and operational benefits anticipated from the Merger,  
we have assumed that they have been reasonably prepared on bases reflecting the 
best currently available estimates and judgments of the prospects of Crown and  
Nostalgia. We have also relied upon, without independent verification, the      
assessment by the management of Crown and Nostalgia of the strategic and other  
benefits expected to result from the Merger. We have not made any independent   
valuation or appraisal of the assets or liabilities of Crown or Nostalgia nor   
have we been furnished with any such appraisals. Our opinion is necessarily     
based on financial, economic, market and other conditions as in effect on, and  
the information made available to us as of, the date hereof. This opinion is for
the use and benefit of The 144 Committee and the Board of Directors of The      
Nostalgia Network, Inc. Our opinion does not address the merits of the          
underlying decision by Crown to engage in the Merger and does not constitute a  
recommendation to any stockholder of Nostalgia.                                 

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   On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the cash offer price to all shareholders of Nostalgia for
their shares of Nostalgia Common Stock at a price of $0.07 per share (including 
the holders of shares of Nostalgia's Preferred Stock, who will receive          
consideration for their shares on an as converted basis) is fair from a         
financial point of view to the holders of Nostalgia Common Stock.               

                     Very truly yours,

                             CHATSWORTH SECURITIES LLC

                                 /s/ CHATSWORTH SECURITIES LLC

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SEC. 262. APPRAISAL RIGHTS.                                                     

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this  
section with respect to such shares, who continuously holds such shares through 
the effective date of the merger or consolidation, who has otherwise complied   
with subsection (d) of this section and who has neither voted in favor of the   
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the    
fair value of the stockholder's shares of stock under the circumstances         
described in subsections (b) and (c) of this section. As used in this section,  
the word "stockholder" means a holder of record of stock in a stock corporation 
and also a member of record of a nonstock corporation; the words "stock" and    
"share" mean and include what is ordinarily meant by those words and also       
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a       
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository. 

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be 
effected pursuant to sec. 251(other than a merger effected pursuant to sec.     
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec. 
264 of this title:                                                              

      (1) Provided, however, that no appraisal rights under this section
  shall be available for the shares of any class or series of stock, which
    stock, or depository receipts in respect thereof, at the record date fixed
    to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or    
    consolidation, were either (i) listed on a national securities exchange or
     designated as a national market system security on an interdealer quotation
     system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no    
appraisal rights shall be available for any shares of stock of the    
  constituent corporation surviving a merger if the merger did not require
    for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.              

          (2) Notwithstanding paragraph (1) of this subsection, appraisal rights
     under this section shall be available for the shares of any class or series
   of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to   
   sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:                                           

           a. Shares of stock of the corporation surviving or resulting from
        such merger or consolidation, or depository receipts in respect thereof;

             b. Shares of stock of any other corporation, or depository receipts
    in respect thereof, which shares of stock (or depository receipts in
    respect thereof) or depository receipts at the effective date of the
      merger or consolidation will be either listed on a national securities
 exchange or designated as a national market system security on an
      interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;     

       c. Cash in lieu of fractional shares or fractional depository
   receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or                                                   

            d. Any combination of the shares of stock, depository receipts and
   cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this  
paragraph.                                                      

          (3) In the event all of the stock of a subsidiary Delaware corporation
     party to a merger effected under sec. 253 of this title is not owned by the
    parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.   

  (c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any    
class or series of its stock as a result of an amendment to its certificate of  
incorporation, any merger or consolidation in which the corporation is a        
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a            
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provision, the procedures of this section, including those set forth in         
subsections (d) and (e) of this section, shall apply as nearly as is            
practicable.                                                                    

(d) Appraisal rights shall be perfected as follows:                   

        (1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a  
  meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
 record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that    
appraisal rights are available for any or all of the shares of the    
   constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such    
     stockholder's shares shall deliver to the corporation, before the taking of
    the vote on the merger or consolidation, a written demand for appraisal of
    such stockholder's shares. Such demand will be sufficient if it reasonably
 informs the corporation of the identity of the stockholder and that the
   stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not 
   constitute such a demand. A stockholder electing to take such action must
     do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or  
 resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
   favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or                      

        (2) If the merger or consolidation was approved pursuant to sec. 228
    or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days      
thereafter, shall notify each of the holders of any class or series of
    stock of such constituent corporation who are entitled to appraisal rights
  of the approval of the merger or consolidation and that appraisal rights
 are available for any or all shares of such class or series of stock of
  such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the   
   effective date of the merger or consolidation, such notice shall be given
    by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to  
    appraisal rights. Such notice may, and, if given on or after the effective
   date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder 
    entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting     
corporation the appraisal of such holder's shares. Such demand will be
    sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the    
appraisal of such holder's shares. If such notice did not notify      
   stockholders of the effective date of the merger or consolidation, either
     (i) each such constituent corporation shall send a second notice before the
     effective date of the merger or consolidation notifying each of the holders
  of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or   
 consolidation or (ii) the surviving or resulting corporation shall send
  such a second notice to all such holders on or within 10 days after such
    effective date; provided, however, that if such second notice is sent more
    than 20 days following the sending of the first notice, such second notice
   need only be sent to each stockholder who is entitled to appraisal rights
   and who has demanded appraisal of such holder's shares in accordance with
     this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either 
   notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of     
determining the stockholders entitled to receive either notice, each  
  constituent corporation may fix, in advance, a record date that shall be
     not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
   consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
  record date shall be the close of business on the day next preceding the
day on which the notice is given.                                     

(e) Within 120 days after the effective date of the merger or         
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to   
appraisal rights, may file a petition in the Court of Chancery demanding a      
determination of the value of the stock of all such stockholders.               
Notwithstanding the foregoing, at any time within 60 days after the             
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effective date of the merger or consolidation, any stockholder shall have the   
right to withdraw such stockholder's demand for appraisal and to accept the     
terms offered upon the merger or consolidation. Within 120 days after the       
effective date of the merger or consolidation, any stockholder who has complied 
with the requirements of subsections (a) and (d) hereof, upon written request,  
shall be entitled to receive from the corporation surviving the merger or       
resulting from the consolidation a statement setting forth the aggregate number 
of shares not voted in favor of the merger or consolidation and with respect to 
which demands for appraisal have been received and the aggregate number of      
holders of such shares. Such written statement shall be mailed to the           
stockholder within 10 days after such stockholder's written request for such a  
statement is received by the surviving or resulting corporation or within 10    
days after expiration of the period for delivery of demands for appraisal under 
subsection (d) hereof, whichever is later.                                      

 (f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which   
shall within 20 days after such service file in the office of the Register in   
Chancery in which the petition was filed a duly verified list containing the    
names and addresses of all stockholders who have demanded payment for their     
shares and with whom agreements as to the value of their shares have not been   
reached by the surviving or resulting corporation. If the petition shall be     
filed by the surviving or resulting corporation, the petition shall be          
accompanied by such a duly verified list. The Register in Chancery, if so       
ordered by the Court, shall give notice of the time and place fixed for the     
hearing of such petition by registered or certified mail to the surviving or    
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at    
least 1 week before the day of the hearing, in a newspaper of general           
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication  
shall be approved by the Court, and the costs thereof shall be borne by the     
surviving or resulting corporation.                                             

(g) At the hearing on such petition, the Court shall determine the    
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an   
appraisal for their shares and who hold stock represented by certificates to    
submit their certificates of stock to the Register in Chancery for notation     
thereon of the pendency of the appraisal proceedings; and if any stockholder    
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.                                                               

    (h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or        
consolidation, together with a fair rate of interest, if any, to be paid upon   
the amount determined to be the fair value. In determining such fair value, the 
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of 
interest which the surviving or resulting corporation would have had to pay to  
borrow money during the pendency of the proceeding. Upon application by the     
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery 
or other pretrial proceedings and may proceed to trial upon the appraisal prior 
to the final determination of the stockholder entitled to an appraisal. Any     
stockholder whose name appears on the list filed by the surviving or resulting  
corporation pursuant to subsection (f) of this section and who has submitted    
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally          
determined that such stockholder is not entitled to appraisal rights under this 
section.                                                                        

 (i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court 
may direct. Payment shall be so made to each such stockholder, in the case of   
holders of uncertificated stock forthwith, and the case of holders of shares    
represented by certificates upon the surrender to the corporation of the        
certificates representing such stock. The Court's decree may be enforced as     
other decrees in the Court of Chancery may be enforced, whether such surviving  
or resulting corporation be a corporation of this State or of any state.        

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  (j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon        
application of a stockholder, the Court may order all or a portion of the       
expenses incurred by any stockholder in connection with the appraisal           
proceeding, including, without limitation, reasonable attorney's fees and the   
fees and expenses of experts, to be charged pro rata against the value of all   
the shares entitled to an appraisal.                                            

  (k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of  
this section shall be entitled to vote such stock for any purpose or to receive 
payment of dividends or other distributions on the stock (except dividends or   
other distributions payable to stockholders of record at a date which is prior  
to the effective date of the merger or consolidation); provided, however, that  
if no petition for an appraisal shall be filed within the time provided in      
subsection (e) of this section, or if such stockholder shall deliver to the     
surviving or resulting corporation a written withdrawal of such stockholder's   
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as       
provided in subsection (e) of this section or thereafter with the written       
approval of the corporation, then the right of such stockholder to an appraisal 
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems  
just.                                                                           

(l) The shares of the surviving or resulting corporation to which the 
shares of such objecting stockholders would have been converted had they        
assented to the merger or consolidation shall have the status of authorized and 
unissued shares of the surviving or resulting corporation.                      

(8 Del. C. 1953, sec. 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, sec. 24;  
57 Del. Laws, c. 148, sec.sec. 27-29; 59 Del. Laws, c. 106, sec. 12; 60 Del.    
Laws, c. 371, sec.sec. 3-12; 63 Del. Laws, c. 25, sec. 14; 63 Del. Laws, c. 152,
sec.sec. 1, 2; 64 Del. Laws, c. 112, sec.sec. 46-54; 66 Del. Laws, c. 136,      
sec.sec. 30-32; 66 Del. Laws, c. 352, sec. 9; 67 Del. Laws, c. 376, sec.sec. 19,
20; 68 Del. Laws, c. 337, sec.sec. 3, 4; 69 Del. Laws, c. 61, sec. 10; 69 Del.  
Laws, c. 262, sec.sec. 1-9; 70 Del. Laws, c. 79, sec. 16; 70 Del. Laws, c. 186, 
sec. 1; 70 Del. Laws, c. 299, sec.sec. 2, 3; 70 Del. Laws, c. 349, sec. 22; 71  
Del. Laws, c. 120, sec. 15; 71 Del. Laws, c. 339, sec.sec. 49-52.)              

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THE NOSTALGIA NETWORK, INC. 

[ARROW] Tear at Perforation [ARROW] 

  The Special Meeting of Stockholders of The Nostalgia Network, Inc. will be
held                     , at 11:00 a.m., at                            

1. MERGER OF NNI ACQUISITION CORPORATION WITH AND INTO THE NOSTALGIA    
NETWORK, INC.                                                     

                           [ ] FOR         [ ] AGAINST         [ ] ABSTAIN

                         The undersigned hereby acknowledges receipt of a Notice
             of Special Meeting of Stockholders of The Nostalgia
            Network, Inc. called for       , 2000, and a Proxy
                Statement for the Meeting prior to the signing of this
proxy.                                

                                                   Dated:                 , 2000
                                             -----------------------

                                                   -----------------------------

                                                   -----------------------------

                                                 Please sign exactly as your
                                               name(s) appear(s) on this
                                              proxy. When signing in a
                                              representative capacity,
                                        please give title.

                     PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD
                    USING THE ENCLOSED ENVELOPE.

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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 SPECIAL                    
MEETING OF STOCKHOLDERS TO BE HELD ON , 2000 AND ANY                    
ADJOURNMENT THEREOF.                    

The undersigned, being a stockholder of THE NOSTALGIA                   
NETWORK, INC. ("NOSTALGIA"), hereby authorizes                                  
and              , and each of them, as               
proxies, with the full power of substitution, to represent                      
the undersigned at the Special Meeting of Stockholders of                       
Nostalgia to be held at                                                         
               on              ,
2000 at 11:00 a.m., local time, and at any adjournments or                      
postponements 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 Nostalgia will be voted                   
as specified. If no specification is made, shares will be                       
voted FOR the matters set forth on the reverse side and IN                      
ACCORDANCE WITH THE DISCRETION OF THE PROXIES as to any                         
other matter which may properly come before the Meeting.                        

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PREM14A’ Filing		Date		First		Last			Other Filings
		5/12/06		68
		3/31/02		35		66
		1/1/01		35		47
		6/30/00		12		92			10-Q
		2/11/00		2		15
Filed on:		2/2/00							SC 13E3
		1/27/00		11		24
		1/11/00		2		19
		1/7/00		19		36
		1/4/00		19
		1/1/00		35		77
		12/31/99		11		54			10-K405
		12/30/99		35
		12/20/99		19
		10/27/99		35
		10/26/99		19
		10/21/99		18		90
		10/20/99		14
		10/18/99		11		115
		10/14/99		18
		10/13/99		18
		10/8/99		18					SC 13D/A
		10/7/99		18
		10/5/99		18
		9/30/99		14		74			10-Q
		9/24/99		18
		9/23/99		24
		9/10/99		35		77
		9/8/99		18
		8/27/99		24
		8/24/99		35		77
		6/28/99		18
		6/9/99		35		77
		4/5/99		53					8-K
		4/2/99		53
		4/1/99		53					8-K,  8-K/A
		3/31/99		42		77			10-K405,  10-Q
		3/27/99		35		77
		3/23/99		51		56
		3/22/99		35		77
		3/16/99		22
		3/2/99		43
		2/1/99		23
		1/26/99		35		43
		1/11/99		23
		1/7/99		23
		1/1/99		51		64
		12/31/98		38		85			10-K405
		9/30/98		45		55			10-Q
		8/3/98		22
		3/31/98		72					10-Q
		1/1/98		10		25
		12/31/97		48		73			10-K405,  NT 10-K
		12/15/97		63
		3/31/97		72					10-K,  10-Q
		1/1/97		67		68
		12/31/96		49		73			10-K,  SC 13D/A
		6/5/96		98		100			DEF 14A
		5/13/96		68		71			8-K
		12/31/95		59					10-K,  10-K/A,  NT 10-K
		3/29/95		36
		12/30/93		32
		6/15/92		96
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