SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number 0-24796
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
(Exact name of registrant as specified in its charter)
BERMUDA N/A
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Clarendon House, Church Street, Hamilton HM CX Bermuda
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 441-296-1431
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for each shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of August 10, 1996
----- ---------------------------------
Class A Common Stock, par value $.01 10,406,799
Class B Common Stock, par value $.01 8,078,297
<PAGE>
<TABLE>
<CAPTION>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
($000's)
ASSETS June 30, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 25,348 53,210
Investments in marketable securities 4,352 10,652
Restricted cash 1,600 4,216
Accounts receivable (net of allowances of $1,947, $1,105) 35,581 32,475
Program rights costs 10,809 9,219
Value-added tax recoverable 180 733
Advances to affiliates 1,008 953
Prepaid expenses 5,696 5,270
--------------- --------------
Total current assets 84,574 116,728
INVESTMENT IN UNCONSOLIDATED AFFILIATES 16,691 12,433
LOANS TO AFFILIATES 7,003 6,272
PROPERTY, PLANT & EQUIPMENT (net of depreciation of $15,219, $10,281) 56,345 51,699
PROGRAM RIGHTS COSTS 11,331 10,496
BROADCAST LICENSE COSTS AND OTHER INTANGIBLES (net of amortization of $1,053, $1,007) 2,319 2,365
LICENSE ACQUISITION COSTS (net of amortization of $454, $54) 4,323 4,723
GOODWILL 1,674 1,510
ORGANIZATION COSTS (net of amortization of $886, $507) 963 1,337
DEVELOPMENT COSTS (net of allowance of $3,834, $4,373) 23,034 10,127
DEFERRED TAXES 1,610 559
OTHER ASSETS 3,578 3,778
--------------- --------------
Total assets 213,445 222,027
=============== ==============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY June 30, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable 11,031 12,956
Accrued liabilities 13,968 9,804
Duties and other taxes payable 616 288
Income taxes payable 23,971 15,946
Dividend payable 1,633 -
Current portion of obligations under capital lease 1,607 2,111
Current portion of credit facilities 410 2,661
Advances from affiliates -- 2,687
--------------- --------------
Total current liabilities 53,236 46,453
DEFERRED INCOME TAXES 2,721 2,317
OBLIGATIONS UNDER CAPITAL LEASE 8,066 8,747
LONG-TERM PORTION OF CREDIT FACILITIES 6,519 6,766
OTHER LIABILITIES 402 173
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 16,750 18,635
SHAREHOLDERS' EQUITY:
Preferred Stock, $0.01 par value: authorized: 5,000,000 shares;
issued and outstanding: none - -
Class A Common Stock, $0.01 par value: authorized:
30,000,000 shares; issued and outstanding:
10,406,799 shares at June 30, 1996 and 10,294,549 at
December 31, 1995 104 103
Class B Common Stock, $0.01 par value: authorized:
15,000,000 shares; issued and outstanding:
8,078,297 shares 81 81
Additional paid-in capital 188,785 187,997
176,872 Class A Treasury stock of $0.01 par value (2,476) (2,476)
--------------- --------------
186,309 185,521
Accumulated deficit (60,381) (48,001)
Cumulative currency translation adjustment (362) 1,232
--------------- --------------
Total shareholders' equity 125,751 138,936
--------------- --------------
Total liabilities and shareholders' equity 213,445 222,027
=============== ==============
</TABLE>
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Cash Flows
($000's)
<TABLE>
<CAPTION>
For the six months
ended June 30,
------------------
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (12,380) (4,769)
Adjustments to reconcile net loss to net cash generated from
operating activities:
Equity in loss of unconsolidated affiliates 5,936 6,766
Depreciation & amortization 16,862 9,688
Minority interest in income (loss) of consolidated subsidiaries 1,144 3,923
Valuation allowance for development costs 413 900
Stock compensation charge - 810
Changes in assets & liabilities:
Accounts receivable (3,675) (8,891)
Related party receivable - 235
Program rights costs (13,787) (12,863)
Value-added tax recoverable 458 (131)
Advances to affiliates (2,899) -
Prepaid expenses (545) (2,308)
Other assets (127) 99
Accounts payable 1,558 (386)
Accrued liabilities 4,159 2,501
Income & other taxes payable 8,347 7,064
Other liabilities - 1,225
------- -------
Net cash from operating activities 5,464 3,863
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated affiliates (9,444) (16,543)
Investments in marketable securities 6,300 -
Restricted cash 2,524 -
Acquisition of fixed assets (10,670) (2,168)
Purchase of subsidiary operation (2,962) -
Dividends paid to minority shareholders (1,396)
Payments for broadcast license costs and other intangibles - (99)
Development costs (14,349) (3,256)
------- -------
Net cash used in investing activities (29,997) (22,066)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Current portion of credit facilities (2,108) (2,297)
Payments under capital lease (776) (780)
Advances to affiliates (731) -
Repayment of loans of subsidiary operation - -
Capital contributed by shareholders 789 -
------- -------
Net cash used in financing activities (2,826) (3,077)
------- -------
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON CASH (503) 219
Net decrease in cash and cash equivalents (27,862) (21,061)
CASH AND CASH EQUIVALENTS, beginning of period 53,210 42,002
------- -------
CASH AND CASH EQUIVALENTS, end of period 25,348 20,941
======= =======
</TABLE>
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Shareholders' Equity (Deficit)
For the Six Month Period Ended June 30, 1996
($000's)
<TABLE>
<CAPTION>
Cumulative
Class A Class B Additional Currency
Common Common Paid-in Treasury Accumulated Translation
Stock Stock Capital Stock Deficit(1) Adjustment Total
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 103 81 187,997 (2,476) (48,001) 1,232 138,936
Foreign Currency Translation Adjustment -- -- -- -- -- (1,594) (1,594)
Capital contributed by Shareholders 1 -- 788 -- -- -- 789
Net loss -- -- -- -- (12,380) -- (12,380)
--------- --------- --------- --------- --------- --------- ---------
BALANCE, June 30, 1996 104 81 188,785 (2,476) (60,381) (362) (125,751)
========= ========= ========= ========= ========= ========= =========
</TABLE>
- ----------
1) Of the accumulated deficit of $60,381,000 at June 30, 1996, $38,317,000
represents loss in unconsolidated affiliates.
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Operations
($000's, except per share data)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
---------------------------- --------------------------
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
GROSS REVENUES 48,045 35,634 76,935 58,197
Discounts and agency commissions (9,495) (7,083) (15,130) (10,959)
-------------- ------------- -------------- -------------
NET REVENUES 38,550 28,551 61,805 47,238
STATION EXPENSES:
Operating costs and expenses 11,931 7,041 24,423 13,204
Amortization of programming rights 5,963 3,461 10,269 6,492
Depreciation of station fixed assets and other intangibles 3,175 1,639 6,109 3,196
-------------- ------------- -------------- -------------
Total station operating costs and expenses 21,069 12,141 40,801 22,892
Selling, general and administrative expenses 5,797 1,868 8,735 2,939
-------------- ------------- -------------- -------------
CORPORATE EXPENSES:
Corporate operating costs and development expenses 3,982 3,407 7,173 5,439
Stock compensation charge 0 355 0 810
-------------- ------------- -------------- -------------
3,982 3,762 7,173 6,249
OPERATING INCOME 7,702 10,780 5,096 15,158
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES (3,167) (3,236) (5,936) (6,766)
INTEREST AND OTHER INCOME 442 500 1,079 959
INTEREST EXPENSE (525) (1,124) (1,532) (2,134)
FOREIGN CURRENCY EXCHANGE (LOSS) GAIN (1,235) (392) (1,630) 115
-------------- ------------- -------------- -------------
Net (loss) profit before provision for income taxes 3,217 6,528 (2,923) 7,332
Provision for income taxes (6,309) (5,177) (8,313) (8,178)
-------------- ------------- -------------- -------------
Net (loss) profit before minority interest (3,092) 1,351 (11,236) (846)
MINORITY INTEREST IN (LOSS) INCOME
OF CONSOLIDATED SUBSIDIARIES (1,538) (2,726) (1,144) (3,923)
-------------- ------------- -------------- -------------
Net Loss (4,630) (1,375) (12,380) (4,769)
-------------- ------------- -------------- -------------
PER SHARE DATA
Net (Loss) per share (0.25) (0.10) (0.67) (0.34)
Weighted average number of common shares outstanding (000's) 18,447 14,021 18,447 14,021
</TABLE>
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Notes to Consolidated Financial Statements
June 30, 1996
1. ORGANIZATION AND BUSINESS
Central European Media Enterprises Ltd., a Bermuda corporation ("CME"), was
formed in June 1994. Through its predecessor companies, CME has been in
operation since 1991. CME, together with its subsidiaries (CME and its
subsidiaries are collectively referred to as the "Company"), develops, owns and
operates national and regional commercial television stations and networks in
the newly emerging markets of Central and Eastern Europe and regional commercial
television stations in Germany.
The Company owns a 66% interest in Ceska Nezavisla Televizni Spolecnost
s.r.o. ("Nova TV"), which broadcasts as the only private national television
station in the Czech Republic. On August 1, 1996, the Company entered into an
agreement with Ceska Sporitelna Bank ("CS") for the purchase of CS's entire 22%
economic interest and 20% of CS' voting rights for a purchase price of Kc 1
billion (approximately $36 million) (the "CS Agreement"). The agreement and
subsequent registration of the Company's increased ownership in Nova TV are
subject to Czech laws (See Note 5 of Notes to Consolidated Financial
Statements).
In Slovenia, the Company launched "POP TV" in December 1995 together with
MMTV1 d.o.o. Ljubljana ("MMTV") (formerly known as Boutique MMTV) and Tele 59
d.o.o. Maribor ("Tele 59"), (MMTV and Tele 59 are together referred to as the
"Slovenian Broadcasters") through the formation of the company Produkcija Plus
d.o.o. ("Pro Plus" or "POP TV"). Pro Plus provides programming to the Slovenian
Broadcasters and other affiliated stations and sells national advertising in
conjunction with POP TV programming. The Company owns 58% of the equity of Pro
Plus, but has an effective economic interest of 72%, as a result of a 33%
economic interest in MMTV and a 33% economic interest in Tele 59, each of which
have a 21% interest in Pro Plus. The Slovenian Broadcasters and one other
affiliate began broadcasting "POP TV" in December 1995.
In Romania, the Company and two local partners, Adrian Sarbu and Ion Tiriac
operate "PRO TV" through the formation of Media Pro International S.A. ("Media
Pro International" or "Pro TV"), a commercial television network. The Company
holds a 77.5% equity interest in Media Pro International, although the Company's
partners hold options valid through October 1997 which, if exercised, would
reduce the Company's interest to approximately 66%. Media Pro International
launched operations in December 1995.
In addition, in Hungary the Company holds a 95% ownership interest in 2002
Consulting and Servicing Limited Liability Company ("2002") which has a 97.4%
indirect beneficial ownership interest in Videovox Studio Limited Liability
Company ("Videovox"), a Hungarian dubbing and production company acquired by
2002 in May 1996 which, thus far, has generated only limited revenues and
expenses. Videovox's operating results for the period from 1 May 1996 through 30
June 1996 have been consolidated in the accompanying financial statements.
The Company owns a 52.6% non-controlling interest in PULS ("PULS", formerly
known as 1A Berlin), a regional television station based in Berlin, Germany, and
a 50% interest (non-voting profit participation) in Franken Funk & Fernsehen
GmbH ("FFF"), which owns 74.8% of a regional television station in Nuremberg,
Germany, NMF Neue Medien Franken GmbH and Co., K.G. ("NMF"). The Company's
interest in PULS increased to 52.6% as of June 30, 1996 from 48.48% at December
31, 1995 as a result of additional capital calls paid by the Company and not
satisfied by the other partners of PULS. The Company has a 49% non-controlling
interest, and a 50% economic interest in Sachsen Funk und Fernsehen GmbH,
Germany ("SFF") which owns 33.33% equity interest in Sachsen Fernsehen Betriebs
KG, a regional TV station in Leipzig and Dresden, Germany.
The Company continues to pursue and develop opportunities for television
broadcasting throughout Central and Eastern Europe and on a regional
5
<PAGE>
basis in Germany. The Company has formed Slovenska Televizna Spolocnost s.r.o.
("STS") in Slovakia with Markiza - Slovakia s.r.o. which expects to launch
Markiza TV during the third quarter 1996. The Company has an effective 80%
economic interest in STS. In accordance with the Company's accounting policies,
assets purchased and funds used to support pre operating activities of Markiza
TV are classified in Development Costs in the accompanying consolidated
financial statements in the amount of approximately $17 million. The Company
also has interests in companies seeking licenses or seeking to expand upon
regional licenses in Poland, Ukraine and Hungary.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with the
accounting principles generally accepted in the United States. In the opinion of
management, these consolidated financial statements include all adjustments
necessary to fairly state the Company's financial position and results of
operations. The results for the six months ended June 30, 1996 are not
necessarily indicative of the results expected for the year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company's wholly-owned subsidiaries, Nova TV, PRO TV, POP TV, and Videovox
as consolidated entities and reflect the interests of the minority owners of
Nova TV, PRO TV, POP TV, and Videovox in the six months ended June 30, 1996 and
two months ended June 30, 1996, respectively. POP TV and PRO TV began operations
in December of 1995, Videovox was acquired on May 1, 1996 and thus Nova TV was
the only consolidated entity for the six months ended June 30, 1995. The results
of the operating stations, PULS, FFF, and SFF, in which the Company has minority
or non-controlling ownership interests, are included in the accompanying
consolidated financial statements as investments in unconsolidated affiliates
using the equity method. The Company's investments in broadcast operations under
development, which includes Markiza TV, and other broadcast development
opportunities are reflected in the balance sheet as development costs.
Net Loss Per Share
Net loss per share was computed by dividing the Company's net loss by the
weighted average number of Common Shares (both Class A and Class B) and common
share equivalents outstanding during the period ended June 30, 1996. The impact
of outstanding options and warrants has not been included in the computation of
net loss per share, as the effect of their inclusion would be anti-dilutive.
3. DIVIDENDS
In March 1996, Nova TV declared a total dividend of Kc 330,000,000
($12,066,000) to all shareholders of which Kc 116,325,00 ($4,153,000) was paid
to the Company in May 1996 with the remainder of Kc 116,325,000 ($4,213,000)
scheduled to be paid to the Company in November 1996. In connection with the CS
Agreement, the Company is entitled to receive CS's remaining 1995 dividend of
approximately Kc 38.8 million (approximately $1.4 million) scheduled to be paid
in November 1996.
6
<PAGE>
4. SUMMARY FINANCIAL INFORMATION FOR PULS AND FFF
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
PULS FFF PULS FFF
------ ------ ------- ------
$'000 $'000 $'000 $'000
------ ------ ------- ------
<S> <C> <C> <C> <C>
Current assets 4,899 2,543 6,938 2,538
Non-current assets 14,137 2,606 15,971 3,308
Current liabilities (5,212) (2,305) (5,678) (1,410)
Non-current liabilities (7,469) (9,458) (9,081) (9,526)
------ ----- ------ -----
Net assets 6,355 (6,614) 8,150 (5,090)
------ ----- ------ -----
<CAPTION>
For the six months ended
June 30, 1996 June 30, 1995
------------- -------------
PULS FFF PULS FFF
------ ------ ------- ------
$'000 $'000 $'000 $'000
------ ------ ------- ------
<S> <C> <C> <C> <C>
Net revenues 1,665 2,375 1,593 1,980
Operating loss (9,561) (1,675) (11,520) (2,913)
Net loss (9,655) (1,771) (11,831) (3,346)
</TABLE>
The Company's share of the losses of PULS, FFF and SFF accounted for by the
equity method for the six months ended June 30, 1996 and 1995 were $5,936,000
and $6,766,000, respectively.
As of June 30, 1996 FFF had DM 11 million ($7.3 million) in loans from the
Company. The loans bear an annual interest rate of 10.5%. The Company has agreed
to subordinate its claims under the loans to all other claims against FFF.
5. SUBSEQUENT EVENTS
Czech Republic
On August 1, 1996, the Company entered into an agreement (the "CS
Agreement") with Ceska Sporitelna Bank ("CS") for the purchase of CS's 22%
economic and 20% of CS's voting rights in Nova TV for a purchase price of Kc 1
billion (approximately $36,000,000). In connection with the CS Agreement, the
Company is to receive CS's remaining 1995 dividend of Kc 38.8 million
(approximately $1.4 million) scheduled to be paid in November 1996 as well as
88% of all future dividends declared. If the increase in the Company's economic
ownership from 66% to 88% of Nova TV had been in effect for the whole of 1996,
then the Company's Attributable Broadcast Cash Flow for Nova TV would have
increased by $5.4 million for the six month period ended June 30, 1996.
In connection with the CS Agreement, the Company has entered into a loan
agreement with CS to finance 85% of the purchase price. The remainder of the
purchase price Kc 150 million ($5,500,000) will be paid by the Company on
November 15, 1996 out of its cash balances. The CS loan will be drawn in August
1996 and April 1997 in the amounts of Kc 450 million ($16,298,000) and Kc 400
million ($14,487,000), respectively to fund purchase price payments due at those
times, and bears annual interest at the rate of 12.9% p.a. The agreement and
subsequent registration of the Company's increased ownership are subject to
Czech laws.
7
<PAGE>
Romania
On July 12, 1996, the Company announced its intention to exercise its
option within the next few months to buy 49% of the shares of PRO TV, SRL, an
affiliate station of Media Pro International owned by the Company's partners
(Adrian Sarbu and Ion Tiriac) on terms that have yet to be finalized. This
option was granted to the Company through the terms of the partnership agreement
for Media Pro International.
Credit Agreement
The Company has received offers from banks and is currently negotiating
final terms and conditions of the offers to fully underwrite a $50 million long
term revolving credit facility (the "Potential Corporate Debt Facility") . The
Potential Corporate Debt Facility, after terms and conditions have been
successfully negotiated, is subject to satisfactory documentation of final due
diligence to be performed by the bank. In connection with these negotiations,
CME's subsidiary, CME Media Enterprises B.V. CME BV entered into a bridge loan
facility, on July 16, 1996, for $10,000,000 with ING Bank which matures on
September 30, 1996 and bears annual interest at a rate of 1.5 per annum above
LIBOR. The shares of CME BV have been pledged as security for this loan. Both
CME and CME's subsidiary Central European Media Enterprises N.V. have guaranteed
repayment of the facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
Central European Media Enterprises Ltd ("CME") is a Bermuda corporation.
CME together with its subsidiaries (CME together with its subsidiaries are
collectively referred to as the "Company" and the term subsidiaries includes
each corporation or partnership in which CME has a direct or indirect equity or
voting interest) owns, develops and operates national private commercial
television stations and networks in the newly emerging markets of Central and
Eastern Europe and regional private commercial television stations in Germany.
The Company operates the leading national television station in the Czech
Republic, has interests in regional stations in Berlin, Nuremberg, Leipzig and
Dresden, Germany, has launched national television broadcasting networks in
Romania and Slovenia in December 1995 and holds a 95% ownership interest in 2002
Consulting and Servicing Limited Liability Company ("2002") which acquired a
97.4% interest in a production and dubbing studio in Hungary in May 1996. These
operations broadcast to an aggregate of approximately 27 million people. The
Company expects to commence broadcast operations in the Slovak Republic and
increase its technical coverage in Romania during 1996, thus extending its reach
to a projected 35 million people. In addition, the Company anticipates
commencing broadcast operations in Hungary in 1997 and is pursuing broadcast
development opportunities in Hungary, Poland, Ukraine, Germany and other
regions.
The Company owns a 66% interest in Ceska Nezavisla Televizni Spolecnost
s.r.o. ("Nova TV"), which broadcasts as the only private national television
station in the Czech Republic with a market share of approximately 65-70% in the
country. On August 1, 1996, the Company entered into an agreement with Ceska
Sporitelna Bank ("CS")for the purchase of CS's 22% economic interest and 20% of
CS' voting rights in Nova TV for a purchase price of Kc 1 billion (approximately
$36 million) (See Note 5 to the Notes to the Consolidated Financial Statements).
The Company owns a 58% equity and a 72% effective economic interest in Pro Plus,
a national television network launched in December 1995 which currently
broadcasts "POP TV" to 72% of the population in Slovenia. The Company holds a
77.5% equity interest in Media Pro International, a Romanian television network
launched in December 1995 which currently broadcasts "PRO TV" to approximately
9.6 million people (although the Company's partners hold options which, if
exercised, would reduce the Company's interest to approximately 66%.) In Hungary
the Company holds a 95% ownership interest in 2002 Consulting and Servicing
Limited Liability Company ("2002") which has a 97.4% indirect beneficial
ownership interest in Videovox Studio Limited Liability Company ("Videovox"), a
Hungarian dubbing and production company acquired in May 1996 which, thus far,
has limited revenues and expenses. The Company also owns a 52.6% non-controlling
interest in PULS ("PULS", formerly known as 1A Berlin), a regional television
station based in Berlin, Germany, and a 50% interest
8
<PAGE>
(non-voting profit participation) in Franken Funk & Fernsehen GmbH ("FFF"),
which owns 74.8% of a regional television station in Nuremberg, Germany, NMF
Neue Medien Franken GmbH and Co., K.G. ("NMF"). The Company's interest in PULS
increased to 52.6% during the six months ended June 30, 1996 from 48.48% at
December 31, 1995 as a result of additional capital calls paid by the Company
and not satisfied by the other partners of PULS. Additionally, the Company has
formed Slovenska Televizna Spolocnost s.r.o. in Slovakia which expects to launch
Markiza TV on August 30, 1996 and by the end of the third quarter of 1996 which
will broadcast to approximately 2.7 million people. The Company has an effective
80% economic interest in STS.
The Company's revenues are derived principally from the sale of television
advertising to local, national and international advertisers. The Company also
engages in certain barter transactions in which the stations exchange unsold
commercial advertising time for goods and services such as programming,
broadcasting equipment, car rentals and newspaper advertising space. The
experience of the television industry is that advertising sales tend to be
lowest during the third quarter of each calendar year, which includes the summer
holiday schedules (typically July and August) and highest during the fourth
quarter of each calendar year.
The primary expenses incurred in operating broadcast stations are employee
salaries, programming costs, broadcast transmission expenses and selling,
general and administrative expenses. Certain of the Company's operations do not
require the direct incurrence of broadcast transmission expenses. License fees
payable to government entities in connection with securing television licenses
from government authorities, if any, are usually minimal. However, the Company
incurs significant development expenses, including funding and negotiating with
local partners, researching and preparing license applications, preparing
business plans and conducting pre-operating activities.
The Company conducts all of its operations through subsidiaries.
Accordingly, the primary internal sources of the Company's cash are dividends
and other distributions from its subsidiaries. The Company's ability to obtain
dividends or other distributions is subject to, among other things, restrictions
on dividends under applicable local laws and foreign currency exchange
regulations of the jurisdictions in which its subsidiaries operate. The
subsidiaries' ability to make distributions or otherwise repatriate funds to the
Company are also subject to their having sufficient funds from their operations
legally available for the payment thereof which are not needed to fund their
operations, obligations or other business plans and, in some cases, the approval
of the other partners, stockholders or creditors of these entities. The laws
under which the Company's currently operating subsidiaries are organized provide
generally that dividends may be declared by the partners or shareholders out of
yearly profits subject to the maintenance of registered capital and required
reserves and after the recovery of accumulated losses based on the local
statutory accounting principles in each country.
9
<PAGE>
The following table sets forth certain operating data for the six months
ended June 30, 1996 and 1995 respectively, and for the year ended December 31,
1995 (dollars in thousands). For the six months ended June 30, 1995, Nova TV was
the only operation included as a consolidated entity in the figures below. POP
TV and PRO TV began operations in December 1995 while Videovox was acquired on
May 1, 1996.
<TABLE>
<CAPTION>
Unaudited
---------
Six months ended
------------------------- Year ended
June 30, June 30, December 31,
1996 1995 1995
-------- -------- ------------
(1)
<S> <C> <C> <C>
Operating Data:
Net revenues................................................... 61,514 47,238 98,919
Less:
Station operating expenses..................................... (40,426) (22,892) (53,451)
Station selling, general and administrative expenses........... (8,374) (2,939) (6,816)
Station operating income....................................... 12,714 21,407 38,652
Depreciation of assets......................................... 6,098 3,196 7,251
Amortization of programming rights............................. 10,269 6,492 16,319
Cash program rights costs...................................... (13,787) (12,863) (24,040)
Broadcast cash flow............................................ 15,294 18,232 38,182
Broadcast cash flow margin..................................... 24.9% 38.6% 38.6%
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1996 For the six months
-------------------------------------- ended June 30,
1995
------------------
PRO TV POP TV Nova TV Nova TV
------ ------ ------- -------
<S> <C> <C> <C> <C>
Operating Data for Consolidated Broadcast
Operations (1):
Net revenues ....................................... 4,980 3,656 52,878 47,238
Less:
Station operating expenses ......................... (7,730) (6,275) (26,421) (22,892)
Station selling, general and administrative expenses (2,253) (1,765) (4,356) (2,939)
Station operating income (loss) .................... (5,003) (4,384) 22,101 21,407
Depreciation of assets ............................. 1,149 1,163 3,786 3,196
Amortization of programming rights ................. 1,453 620 8,196 6,492
Cash program rights costs .......................... (3,118) (927) (9,742) (12,863)
Broadcast cash flow ................................ (5,519) (3,528) 24,341 18,232
Broadcast cash flow margin ......................... - - 46.0% 38.6%
Broadcast cash flow attributable to the Company
(66%(2) 77.5% and 72% of Broadcast cash
flow for Nova TV, Pro TV, and POP TV,
respectively) ...................................... (4,277) (2,541) 16,065(2) 12,033
Pro Forma Broadcast cash flow atributable to the
Company from Nova TV (88%(3)) .................... 21,420(3)
</TABLE>
(1) Does not include the results of operations of Videovox, a Hungarian
production and dubbing studio, acquired on May 1, 1996.
(2) Broadcast cash flow for a 66% interest in Nova TV.
(3) Pro Forma Broadcast cash flow for Nova TV includes the additional 22%
interest from the Ceska Sporitelna Agreement as if the Ceska Sporitelna
Agreement had been effective from January 1, 1996.
10
<PAGE>
"Broadcast cash flow" is a broadcasting industry measure of performance and
defined as net revenues, less station operating expenses excluding depreciation
and amortization, station selling, general and administrative expenses, and cash
program rights costs. "Broadcast cash flow margin" is Broadcast cash flow
divided by net revenues. "Broadcast cash flow attributable to the Company" is
Broadcast Cash Flow which is attributable to the Company based on the Company's
effective economic interest in PRO TV and POP TV, and a 66% existing interest in
Nova TV along with the additional 22% interest in Nova TV as if the Ceska
Sporitelna had been in effect from January 1, 1996. Cash program rights costs
represent cash payments for current programs payable and such payments do not
necessarily correspond to program use. The Company has included broadcast cash
flow because it is commonly used in the broadcast industry as a measure of
performance. Broadcast cash flow should not be considered as a substitute
measure of operating performance or liquidity prepared in accordance with
generally accepted accounting principles.
Broadcast cash flow for the Company was $15.3 million for the six months
ended June 30, 1996. Nova TV's Broadcast Cash Flow Margin reached 53.8% in the
second quarter 1996, an increase of approximately 66% over the second quarter
1995. For the six months ended June 30, 1996 Nova TV's broadcast cash flow
increased by 33.5% to $24.3 million over the same period 1995 . Nova TV's
stronger Broadcast cash flow was driven by increased net revenues. Net revenues
for the second quarter 1996 increased $3.7 million or 13.0% over the same period
1995. For the first six months of 1996 net revenues increased $5.6 million or
11.9% over the same period 1995. In local currency terms the increase was more
dramatic as net revenues for the second quarter of 1996 increased 21.6% over the
same period 1995. For the six months period ended June 30 1996 Net Revenues in
local currency increased 16.3% over the same period 1995. In addition to
stronger revenues, Nova TV has begun to realize the financial benefits of its
1995 initiative to significantly increase the size of its program library and
lock in lower programming costs. Cash payments for programming for the second
quarter 1996 decreased $3.7 million to $5.5 million from $9.2 million. For the
first six months of 1996 cash payments for programming decreased by $3.1 million
to $9.7 million from $12.9 million for the first six months of 1995.
Nova TV's positive Broadcast Cash Flow was offset by negative Broadcast
cash flow from POP TV and PRO TV of $3.5 million and $5.5 million, respectively,
in the six month period ended June 30, 1996.
On August 1, 1996, the Company entered into the CS Agreement to purchase an
additional 22% interest in Nova TV. Had the Ceska Sporitelna Agreement been in
effect since January 1, 1996, Broadcast cash flow attributable to the Company
would have been increased by approximately 33.3% or $5.3 million to $21.4
million from $16.1 million for the six month period ended June 30, 1996 (See
Note 5 to Notes to the Consolidated Financial Statements).
Application of Accounting Principles
Although the operations are largely in foreign currencies, the Company
prepares its financial statements in United States dollars and in accordance
with generally accepted accounting principles in the United States (See Foreign
Currency section below for the effects of foreign exchange movements). The
Company's consolidated operating statements include the results of Nova TV, PRO
TV, POP TV, and Videovox and separately set forth the minority interest
attributable to other owners of Nova TV, PRO TV, POP TV, and Videovox for the
six months ended June 30, 1996. POP TV and PRO TV began operations in December
1995 while Videovox was acquired in May 1996; thus Nova TV was the only
consolidated entity for the six months ended June 30, 1995. The results of other
broadcast operations, PULS, FFF and SFF, are accounted for using the equity
method which reflects the Company's share of the net income or losses in those
operations. The Company's investments in broadcast operations under development
and other broadcast development opportunities are reflected on the balance sheet
as development costs.
11
<PAGE>
Foreign currency
The Company and its subsidiaries generate revenues primarily in Czech
korunas (iKci), Romanian lei ("ROL"), Slovenian tolar ("SIT") and German marks
(iDMi), and incur substantial operating expenses in those currencies. The Czech
koruna, Romanian lei and Slovenian tolar are managed currencies with limited
convertibility. The Company also incurs operating expenses of programming in
United States dollars and other foreign currencies. Within the Management's
Discussion and Analysis of the Financial Condition and Results of Operations,
for entities operating in economies that are considered non-highly inflationary
which include Nova TV and POP TV balance sheet accounts are translated from
foreign currencies into United States dollars at the relevant period-end
exchange rate; statement of operations accounts are translated from foreign
currencies into United States dollars at the weighted average exchange rates for
the respective periods. The resulting translation adjustments are reflected in a
component of shareholders' equity with no effect on the consolidated statements
of operations. PRO TV operates in an economy qualifying as highly inflationary.
Accordingly, non-monetary assets are translated at historical exchange rates and
monetary assets are translated at current exchange rates. Translation
adjustments are included in the determination of the income. Currency
translation adjustments relating to transactions of the Company in currencies
other than the functional currency of the entity involved are reflected in the
operating results of the Company. The official exchange rates for the Czech
koruna, Romanian lei, Slovenian tolar and market exchange rate for the German
mark, at the end of, and during, the periods indicated were as follows:
The Company's results of operations and financial position for the six
months ended June 30 ,1996 have been impacted by changes in foreign currency
exchange rates since December 31, 1995. In the highly inflationary economy in
Romania, PRO TV indexes sales contracts to the US Dollar in order to minimize
the effects of Romanian Lei devaluations. The Czech Koruna, German Mark,
Romanian Lei, Slovenian Tolar have all weakened against the dollar as shown
below:
<TABLE>
<CAPTION>
Balance Sheet Income Statement
At Six months Six months
December At June 30, Movement ended June ended June 30, Movement
31, 1995 1996 % 30, 1995 1996 %
-------- ----------- -------- ---------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Czech koruna
equivalent of $1.00 26.60 27.61 -3.80 26.44 27.46 -3.86
Romanian lei
equivalent of $1.00 2,578 3,028 -17.46 2,402* 2,888 -20.23
Slovenian tolar
equivalent of $1.00 126 136.61 -8.42 126** 134.34 -6.62
German mark
equivalent of $1.00 1.43 1.52 -6.29 1.43 1.50 -4.90
</TABLE>
* Average exchange rate from December 1, 1995 through December 31, 1995 only.
** Average exchange rate from December 15, 1995 through December 31, 1995 only.
As a result, the underlying Czech Koruna and Slovenian Tolar assets and
liabilities of Nova TV and POP TV, respectively, will have decreased by 3.8% and
8.4%, respectively, in dollar terms due to foreign exchange movements. Media Pro
International's monetary assets and liabilities will have decreased by up to
17.5% during the six month period ended June 30, 1996 depending on the time they
remained outstanding during the period. Likewise, investments in unconsolidated
affiliates (1A Berlin and FFF, both in Germany) will have decreased 6.29% in
dollar terms.
Nova TV's operating income, together with interest costs and minority
interest, is approximately 4% lower than would be the case had the weighted
average exchange rate for the six months ended June 30, 1996 remained the same
as for the six months ended June 30 ,1995.
12
<PAGE>
POP TV and PRO TV's operating losses, together with interest costs and
minority interest, are approximately 6.62% and 20.23%, respectively, lower than
would be the case had the weighted average exchange rate for the six months
ended June 30, 1996 remained the same as for the year ended December 31, 1995
(subject to certain adjustments to Media Pro International profit and loss items
which are derived from non-monetary assets and liabilities). Similarly, equity
in loss of unconsolidated affiliates was 4.9% lower than would have been the
case had weighted average exchange rates remained unchanged.
Results of Operations
POP TV and PRO TV were launched in December 1995 while Videovox was
acquired in May 1996. Therefore, certain fluctuations in profit and loss
activity in the three months ended June 30, 1996 and 1995 and the six months
ended June 30, 1996 and 1995 are consistently explained by the addition of the
POP TV, PRO TV and Videovox operations.
Three months ended June 30, 1996 compared to three months ended June 30, 1995
A comparison between the operating income(loss) for consolidated entities
in the three months ended June 30, 1996 and 1995 is shown below for references
purposes:
<TABLE>
<CAPTION>
Certain Operating Data: for three months ended
June 30, 1996
-------------
Corporate Total
(in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME
------------ ------- ------ ------ -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 32,258 3,429 2,572 291 0 38,550
Total Station Expenses (16,086) (5,330) (4,714) (736) 0 (26,866)
Corporate expenses 0 0 0 0 (3,982) (3,982)
------- ------ ------ -------- -------- -------
Net Operating Income / (Loss) 16,172 (1,901) (2,142) (445) (3,982) 7,702
<CAPTION>
for three months ended
June 30, 1995
-------------
Corporate Total
(in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME
------------ ------- ------ ------ -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 28,551 - - - 0 28,551
Total Station Expenses (14,009) - - - 0 (14,009)
Corporate expenses 0 0 0 0 (3,762) (3,762)
------- ----- ----- ------ ------- ------
Net Operating Income / (Loss) 14,542 - - - (3,762) 10,780
</TABLE>
The Company's consolidated net revenues increased $9,999,000, or 35%, to
approximately $38,550,000 for the three months ended June 30, 1996. The strong
growth in net revenues in the second quarter of 1996 was primarily due to Nova
TV's strongest second quarter in its history and the addition of the POP TV and
PRO TV operations. Nova TV's net revenues increased by $3,706,000, or 13%, to
$32,258,000 for the three months ended June 30, 1996, while POP TV's and PRO
TV's net revenues were $2,572,000 and $3,429,000, respectively, for the three
months ended June 30, 1996. The Company expects continued growth in net revenues
for Nova TV, POP TV and PRO TV for the remainder of 1996 although a seasonal
decrease in the net revenues is expected in the third quarter. Since the Company
has a minority ownership or non-controlling interest in PULS and FFF, losses
incurred by PULS, FFF and SFF are accounted for under the equity method and,
therefore, no revenues are presented in respect of these entities.
Total station expenses increased by $12,857,000 to $26,866,000 for the
three months ended June 30, 1996. POP TV and PRO TV total station expenses were
$4,714,000 and $5,330,000, respectively, while Nova TV's station expenses
increase by $2,079,000, or 14%, to $16,088,000 for the three months ended June
30, 1996. The
13
<PAGE>
increase in total station expenses for Nova TV relate primarily to
increased scope of operations as well as increased programming amortization on
Nova TV's larger program library.
Corporate operating costs and development expenses for the three months
ended June 30 1996 and 1995, are $3,982,000 and $3,762,000, respectively,
increasing $220,000, or 6%.
Interest and Other Income decreased by $58,000 or 12%, to $442,000 for the
three month period ended June 30, 1996.
Interest expense decreased by $599,000, or 53%, to $525,000 for the three
month period ended June 30, 1996 from $1,124,000 for the three month period
ended June 30, 1995 primarily due to the pay down of debt at Nova TV.
As a result of these factors, the net loss of the Company increased by
$3,255,000 to $4,630,000 for the three months ended June 30, 1996 from
$1,375,000 for the three months ended June 30, 1995.
Six months ended June 30, 1996 compared to the six months ended June 30, 1995
A comparison between the operating income(loss) for consolidated entities
in the six months ended June 30, 1996 and 1995 is shown below for reference
purposes:
<TABLE>
<CAPTION>
Certain Operating Data: for six months ended
June 30, 1996
-------------
Corporate Total
(in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME
------------ ------- ------ ------ -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 52,878 4,980 3,656 291 0 61,805
Total Station Expenses (30,777) (9,983) (8,040) (736) 0 (49,536)
Corporate expenses 0 0 0 0 (7,173) (7,173)
------- ------ ------ ---- ------ -------
Net Operating Income / (Loss) 22,101 (5,003) (4,384) (445) (7,173) 5,096
<CAPTION>
for six months ended
June 30, 1995
-------------
Corporate Total
(in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME
------------ ------- ------ ------ -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 47,238 - - - 0 47,238
Total Station Expenses (25,831) - - - 0 (25,831)
Corporate expenses 0 - - - (6,249) (6,249)
------- ------ ------ ------- ------ -------
Net Operating Income / (Loss) 21,407 0 0 0 (6,249) 15,158
</TABLE>
The Company's consolidated net revenue increased $14,567,000, or 30%, to
approximately $61,805,000 for the six months ended June 30, 1996 from
$47,238,000 for the same period in 1995. This increase is primarily attributable
to the increase in advertising revenues earned by Nova TV which increased by
$5,640,000 to $52,878,000 in the six months ended June 30, 1996, and the
Company's new operations, PRO TV and POP TV, which had net revenues of
$4,980,000 and $3,656,000, respectively, in the six months ended June 30, 1996.
Since the Company has a minority ownership or non-controlling interest in PULS
and FFF, losses incurred by PULS and FFF are accounted for under the equity
method and, therefore, no revenues are presented in respect of these entities.
Total station expenses increased by $17,909,000 to $40,801,000 in the six
months ended June 30, 1996. As a percentage of net revenues, total station
operating costs and expenses increased from 48% in the six months ended June 30,
1995 to 66% for the six months ended June 30, 1996. These expenses represent the
costs associated with the operations of Nova TV, PRO TV, POP TV and Videovox,
including amortization of programming rights of
14
<PAGE>
$10,269,000 and $6,492,000, and depreciation of station assets and amortization
of other intangibles of $6,109,000 and $3,196,000 in the six months ended June
30, 1996 and 1995, respectively. The increase in station operating costs and
expenses is primarily attributable to the addition of the Company's new
operations, PRO TV, POP TV, and Videovox, which had total station expenses of
$9,983,000, $8,040,000 and $736,000, respectively, and partially to increased
scope of operations of Nova TV and amortization on Nova TV's larger program
library.
Station selling, general and administrative expenses increased by
$5,796,000 to $8,735,000 in the six months ended June 30, 1996 from $2,939,000
for the same period in 1995. As a percentage of net revenues, station selling,
general and administrative expenses increased from 6% for the six months ended
June 30, 1995 to 14% for the six months ended June 30, 1996. This increase in
station selling, general and administrative expenses as a percentage of net
revenues is primarily the result of additional station selling, general and
administrative expenses from the Company's start up of PRO TV and POP TV.
Corporate operating costs and development expenses in the six months ended
June 30, 1996 and 1995 were $7,173,000 and $5,439,000, respectively, increasing
$1,734,000, or 32%. This increase is primarily due to the Company's increased
scope of operations.
Operating income decreased $10,062,000 as the Company generated operating
income of $5,096,000 in the six months ended June 30, 1996 compared to operating
income of $15,158,000 in the six months ended June 30, 1995. The overall
decrease in the Company's operating results is primarily attributable to
operating losses from the Company's new operations, PRO TV and POP TV, both
launched in December 1995, and partially to increased corporate and development
expenses.
Loss in unconsolidated affiliated companies decreased by $830,000 to
$5,936,000 for the six months ended June 30, 1996 from $6,766,000 for the six
months ended June 30, 1995. The Company's share of losses in PULS for the six
months ended June 30, 1996 was lower despite the Company's increase in ownership
from 43.3% at June 30, 1995 to 52.6% at June 30, 1996. PULS has begun a new
local programming format which has reduced operating costs as well as slightly
increasing net revenues. In addition, losses at FFF have also decreased as a
result of a similar change in its programming format and slightly increased net
revenues.
Interest and other income increased by $120,000, or 13%, to $1,079,000 for
the six months ended June 30, 1996.
Interest expense decreased $602,000, or 28%, to $1,532,000 during the six
months ended June 30, 1996 from $2,134,000 in the six months ended June 30,
1995. This is primarily due to lower debt levels at Nova TV, including the early
repayment of debt, during the six month period ended June 30, 1996 compared to
the same period in 1995.
Provision for income taxes was $8,313,000 for the six months ended June 30,
1996 and $8,178,000 for the six months ended June 30, 1995. The income tax
provision in the six months ended June 30, 1996 and 1995 primarily relates to
income taxes payable in the Czech Republic on Nova TV pre-tax profits which have
increased due to increased net income at Nova TV, offset by an income tax rate
of 41% in the six months ended June 30, 1995 and an income tax rate of 39% in
the six months ended June 30, 1996.
Minority interest in (income) loss of consolidated subsidiaries was
($1,144,000) in the six months ended June 30, 1996 and ($3,923,000) in the six
months ended June 30, 1995. This decrease is primarily the result of losses for
the Company's new operations PRO TV and POP TV launched in December 1995.
As a result of these factors, the net loss of the Company was $12,380,000
and $4,769,000 for the six months ended June 30, 1996 and 1995, respectively.
15
<PAGE>
Liquidity and Capital Resources
Cash provided by operating activities was $5,464,000 for the six months
ended June 30, 1996 and $3,863,000 for the six months ended June 30, 1995. This
increase was due to increased sales and accounts receivable collections at Nova
TV, offset by cash used to fund the start-up of operations at POP TV and PRO TV.
Accounts receivable increased by $12,022,000, or 51%, to $35,581,000, net
of currency fluctuations, from $23,559,000 at June 30, 1996 for the same period
in 1995. This is primarily due to increased sales at Nova TV and the addition of
accounts receivable from PRO TV and POP TV. Current liabilities increased by
$25,120,000, 89%, to $53,236,00 at June 30, 1996 from $28,116,000 at June 30,
1995, principally as a result of increased income and other taxes payable,
programming contracts, and increased accounts payable and accrued liabilities
related to the Company's new operations, PRO TV and POP TV.
Cash used in investing activities was $29,997,000 and $22,066,000 for the
six months ended June 30, 1996 and 1995, respectively, primarily due to fixed
asset acquisition in the Company's new operations, PRO TV and POP TV, and higher
capitalized development costs for the six months ended June 30, 1996. In the six
month period ended June 30, 1996 the Company invested $10,670,000 in property,
plant and equipment to continue the buildout of the POP TV and PRO TV operations
as well as to further strengthen the capital base of Nova TV. Also during the
six month period ended June 30, 1996, $14,349,000 was invested in development
activities related primarily to equipment and programming for Markiza TV
(expected to launch in August 1996). During the six months ended June 30, 1996,
the Company sold $6,300,000 of marketable securities and $2,000,000 of
restricted cash was made available by the Hungarian government subsequent to the
privatization of Videovox, to partially fund these investments.
The Company's investment in unconsolidated affiliates increased, net of
currency fluctuations, to $16,691,000 as of June 30, 1996 from $12,433,000 as of
December 31, 1995. This is a result of additional investments in PULS of DM
12,500,000 ($8,360,000) and FFF of DM 1,500,000 ($1,084,000), partially offset
by the Company's share of the losses in PULS of DM 7,491,000 ($4,994,000) and
FFF of DM 1,329,000 ($942,000) for the six months ended June 30, 1996. The
investments reflect an additional capital call of DM 10,000,000 ($6,570,302) for
PULS and an additional loan of DM 1,500,000 ($985,545) to FFF during the six
months ended June 30, 1996.
Cash used in financing activities was $2,826,000 and 3,077,000 for the six
months ended June 30, 1996 and 1995, respectively, principally consisting of the
repayment of bank loans, loans to affiliates and repayment of advances from
affiliates.
The Company's initial public offering completed in October 1994 raised net
proceeds of $68.8 million from the issuance of 5,462,500 shares of Class A
Common Stock. Proceeds of the Company's initial public offering have been used
to fund the Company's operations (approximately $16.0 million), development
activities (approximately $27.0 million), overhead (approximately $8.1 million)
and to repay the loans and advances from affiliates in the amounts described
above. In November 1995, the Company completed a second public offering of
4,000,000 shares of Class A Common Stock (the `1995 Offering') which raised $
86,574,000 of net proceeds.
Concurrent with the 1995 Offering, the Company's largest shareholder,
Ronald S. Lauder, was issued 297,346 shares of Class A Common Stock at the price
to public in the Offering less underwriting discounts and commissions in
exchange for a note of the Company in the principal amount of $6,500,000 held by
him.
The Company was paid a dividend of approximately $1,400,000 in 1995 by Nova
TV. In March 1996, Nova TV declared a dividend of Kc 330,000,000 ($12,066,000)
of which Kc 116,325,00 ($4,153,000) was paid to the Company in May 1996 with the
remainder of Kc 116,325,000 ($4,213,000) scheduled to be paid to the Company in
November 1996. As part of the CS Agreement, the Company is entitled to receive
CS's remaining 1995 dividend of Kc 38.8 million (approximately $1.4 million)
scheduled to be paid in November 1996 as well as 88% of all future dividends
declared. After the receipt of the remaining 1995 Nova TV dividend, based on the
Company's original 66% interest in Nova TV, which totals $4,213,000, the Company
will have received 107% of its original US dollar investment in Nova TV made
approximately 2.5 years earlier.
16
<PAGE>
The Company has received offers from banks and is currently negotiating
final terms and conditions of the offers to fully underwrite a $50 million long
term revolving credit facility (the "Potential Corporate Debt Facility"). The
Potential Corporate Debt Facility, after terms and conditions have been
successfully negotiated, is subject to satisfactory documentation of final due
diligence to be performed by the bank. In connection with these negotiations,
CME's subsidiary CME Media Enterprises B.V. ("CME BV") entered into a bridge
loan facility, on July 16, 1996, for $10,000,000 with ING Bank which matures on
September 30, 1996 and bears annual interest as a rate of 1.6 per annum above
LIBOR. The shares of CME BV have been pledged as security for this loan. Both
CME and another subsidiary, Central European Media Enterprises N.V. have
guaranteed repayment of this facility.
On August 1, 1996, the Company entered into an agreement with Ceska
Sporitelna Bank ("CS") for the purchase of CS's 22% economic interest and 20% of
CS voting rights in Nova TV for a purchase price of Kc 1 billion ($36 million).
The Company has also entered into a loan agreement with CS to finance 85% of the
purchase price. The remainder of the purchase price Kc 150 million ($5,500,000)
will be paid by the Company on November 15, 1996 out of the Company's cash
balances. The agreement and subsequent registration of the Company's increased
ownership are subject to Czech laws. The CS loan will be drawn in August 1996
and April 1997 and in the amounts of Kc 450,000,000 ($16,298,000) and Kc
400,000,000 ($14,487,000), respectively to fund purchase payments due at those
times, and the loan bears an interest rate of 12.9% annually. Quarterly
repayments on the loan are required in the amount of Kc 22,500,000 ($815,000)
during the period from November 1997 through November 1998, Kc 42,500,000
($1,539,000) during the period from February 1999 through August 2002, and Kc
20,000,000 ($724,000) during the period from November 2002 through November
2003.
Primarily, as a result of the 1995 Offering and the results of operations
of Nova TV in 1995 and 1996, the Company had cash of $25,348,000 at June 30,
1996 ($53,210,000 at December 31, 1995) and marketable securities of $4,352,000
at June 30, 1996 ($10,652,000 at December 31, 1995) available to finance its
future activities.
The Company has made and will continue to make investments to develop
broadcast operations in Central and Eastern Europe and regions of Germany. The
Company's cash needs for those investment activities exceed cash generated from
operations, resulting in external financing requirements that may be satisfied
through bank debt facilities or other means.
The Company expects that Nova TV's future cash requirements will continue
to be satisfied through operating cash flows and available borrowing facilities.
Nova TV currently has two loan facilities with Ceska Sporitelna, the first
facility consists of a long term loan due on December 30, 1999 in the principal
amount of Kc 300 million ($11.0 million) and currently bears interest at a rate
of 14.5% per annum, subject to change based on fluctuations in the lender's base
rate, of which Kc 180,000,000 ($6,519,000) was outstanding at June 30, 1996.
Principal payments of Kc 60,000,000 ($2,194,000) are due each year on this
facility. In January 1996 Nova TV paid the Kc 60,000,000 due on this facility
for 1996. The second facility is line of credit loan, obtained in November 1995,
for an amount up to Kc 250,000,000 ($9,141,000) bearing interest at a rate of
12% per annum. This facility was unutilized at June 30, 1996. These loans are
secured by Nova TV's equipment, vehicles and receivables.
In exchange for certain assets, PRO TV has assumed the payment of two loans
from an affiliated entity, payable to Tiriac bank of Romania, which is partially
owned by a PRO TV investor. The principal portion of the first loan is $250,000
which bears interest at a rate of 12% per annum. This loan has variable monthly
payments with a final balloon payment of $165,000 due in September 1996. The
second loan in the sum of $300,000, was fully repaid with interest at the end of
May 1996. The first loan is secured by certain equipment of Media Pro
International.
Under the partnership agreement for PULS, the Company is not required to
contribute any additional capital to PULS; however, if any of the partners in
PULS, including the Company, do not fund future capital requirements their
equity interest in PULS may be diluted. In the six months ended June 30, 1996,
the Company funded additional capital contributions of DM 12,500,000
($8,360,000) to PULS of which DM 2,500,000 ($1,642,576) related to a 1995
capital call. In addition, in the six months ended June 30, 1996 the Company
funded
17
<PAGE>
a shareholder loan to FFF of DM 1,500,000 ($985,545). PULS and FFF are
expected to require additional funding of DM 10,000,000 ($6,666,667) and DM
500,000 ($ 333,333), respectively.
Except for the Company's working capital requirements and completing the
funding of television stations in Romania, Slovenia, and Slovakia, the Company's
future cash needs will depend on management's acquisition and development
decisions. The Company is actively engaged in the development of additional
investment opportunities in broadcast licenses and investments in existing
broadcasting companies throughout Germany and Central and Eastern Europe. The
Company incurs limited expenses in identifying and pursuing broadcast
opportunities before any investment decision is made. The Company anticipates
making additional investments in other broadcast operations, supplemented by
capital raised from local financial strategic partners as well as local debt and
lease financing, to the extent that it is available and appropriate for each
project.
The laws under which the Company's currently operating subsidiaries and
affiliates are organized provide generally that dividends may be declared by the
partners or shareholders out of yearly profits subject to the maintenance of
registered capital, required reserves and after the recovery of accumulated
losses. In the case of the Company's Dutch and Netherlands Antilles
subsidiaries, the Company's voting power is sufficient to compel the making of
distributions. Subsequent to the registration of the Ceska Sporitelna Agreement,
However, the Company's voting power will be is not sufficient to compel Nova TV
to make distributions. In the case of PULS, the PULS Partnership Agreement
provides that if profits are available for distribution, 66 2/3% of the
partnership interest may require that 40% of such profits be placed in reserves
until DM 16,700,000 are reserved. All profits in excess thereof must be
distributed. The agreement relating to FFF does not contain restrictions on
distributions out of available profits. In the case of PRO TV, dividends may be
paid from the profits of PRO TV subject to a reserve of 5% of annual profits
until the aggregate reserves equal to 20% of PRO TV's registered capital. A
majority vote can compel PRO TV to make distributions. In the case of POP TV,
the Company's voting power is not sufficient to compel the payment of dividends.
There are no legal reserve requirements in Slovenia. The laws of countries where
the Company is developing operations contain restrictions on the payment of
dividends.
The Company believes that the net proceeds of the 1995 Offering together
with the Company's current cash balances, cash generated from Nova TV, potential
corporate debt facilities, and local financing of broadcast operations and
broadcast operations under development should be adequate to satisfy the
Company's operating and capital requirements for approximately 12 months. This
is a forward looking statement and the Company's actual need for additional
capital and the timing thereof may vary materially depending largely on the
Company's acquisition and development decisions as set forth above in "Liquidity
and Capital Resources."
18
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July, 1996, the Company, along with the Company's Slovenian partners,
entered into an agreement to purchase 66% of the shares of Kanal A, a private
television station in Slovenia ("the Kanal A Agreement"). Scandinavian Broadcast
Systems, S.A. ("SBS"), which purportedly has certain rights in Kanal A through a
Shareholders and Subscription Agreement and Loan Note Agreement, has challenged
the enforceability of the Kanal A Agreement in court in England. Both the
Company and SBS have filed for and been granted injunctions which prevent the
other party from taking certain steps to implement their own agreements or block
the other sides' agreement(s). The Company has instituted legal action in
Slovenia asking the courts there to resolve the matter.
Various competitors of PULS and NMF have instituted legal action against
the media authorities for Berlin-Brandenburg and the Nuremberg area seeking to
overturn their decisions to award broadcast licenses to PULS and NMF,
respectively. These actions were instituted in 1994, and there have been no
proceedings in relation thereto in the last 15 months. An unfavorable decision
in either of these actions could have a material adverse effect on the Company.
The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company is not presently a party
to any such litigation which could reasonably be expected to have a material
adverse effect on its business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The following are the results of voting by shareholders present or
represented at the Annual Meeting of Shareholders held on May 3, 1996.
a) Election of Directors: The following persons, as named in CME's proxy,
were elected to serve as Directors of CME until the next annual meeting of
shareholders or until their respective successors have been elected and
qualified:
Votes for Abstain
Leonard M. Fertig 82,951,121 15,567
Andrew Gaspar 82,951,121 15,567
Ronald S. Lauder 82,951,121 15,567
Mark Palmer 82,951,121 15,567
Robert Rayne 82,951,121 15,567
Herbert S. Schlosser 82,951,121 15,567
Nicolas G. Trollope 82,951,121 15,567
b) Adoption of the 1995 Stock Option Plan: The 1995 Stock Option Plan was
adopted. There were 81,867,876 votes cast for approval, 374,292 against and
3,070 votes abstaining.
c) Adoption of the financial statements: The financial statements of CME for the
fiscal year ended December 31, 1995, together with the auditors' report thereon,
were adopted. There were 82,940,921 votes cast for approval, 23,967 against, and
1,800 votes abstaining.
d) Approval of independent auditors: Approval of independent auditors: Arthur
Andersen were selected as auditors of CME for the fiscal year ending December
31, 1996. There were 82,964,421 votes cast for approval, 1,467 against and 800
votes abstaining.
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are attached:
Exhibit
-------
27.01 Financial Data Schedule
10.01 Quota Purchase Agreement for Videovox
10.02 Amendment to the Quota Purchase Agreement for Videovox
10.03 Ceska Sporitelna - CME BV, Transfer Agreement
10.04 Ceska Sporitelna - CME BV, Annex to Transfer Agreement
10.05 Ceska Sporitelna - CME BV, Loan Agreement
10.06 Ceska Sporitelna - CME BV, Agreement on a future
Agreement
10.07 ING bank - CME BV, Bridge Loan Agreement
10.08 ING bank - CME BV, Share Pledge Agreement
b) No reports on Form 8-K were filed during the quarter ended
March 31, 1995.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Leonard M. Fertig
Date: August 14, 1996 -----------------------------
Leonard M. Fertig
Chief Executive Officer
(Duly Authorized Officer)
/s/ John A. Schwallie
Date: August 14, 1996 -----------------------------
John A. Schwallie
Chief Financial Officer
(Principal Financial Officer)
21
<PAGE>
Exhibit Index
Exhibit Page Number
27.01 Financial Data Schedule 24
10.01 Quota Purchase Agreement for Videovox
10.02 Amendment to the Quota Purchase Agreement for Videovox
10.03 Ceska Sporitelna - CME BV, Transfer Agreement
10.04 Ceska Sporitelna - CME BV, Annex to Transfer Agreement
10.05 Ceska Sporitelna - CME BV, Loan Agreement
10.06 Ceska Sporitelna - CME BV, Agreement on a future Agreement
10.07 ING bank - CME BV, Bridge Loan Agreement
10.08 ING bank - CME BV, Share Pledge Agreement
22
QUOTA PURCHASE AGREEMENT
between the State Privatization and Holding Company (1113 Budapest, Ujpest
rakpart 31-33; Representative: Attila Lascsik, Managing Director) as the Seller
(hereinafter "APV Rt." or "Seller") and
the Magyarhang Dubbing and Production Limited Liability Company (1024 Budapest,
Keleti Karoly u. 42/A; Representative: Gyorgy Balo, Manager) as the Buyer
(hereinafter Buyer) (hereinafter together the Parties)
on the date and place given below, relating to the sale of APV Rt's 90% quota in
Videovox Studio Limited Liability Company (1021 Budapest, Huvosvolgyi ut 64.)
(hereinafter Company or Videovox) , in accordance with resolution no. 41/1996
(I.17.) and resolution no. 181/1996 (III.20) amending the former , under the
following conditions:
WHEREAS,
APV Rt. Quota refers to the quota owned exclusively by the Seller and which
represents Company's 100% quota;
Court of Registration refers to the Registration Court of the Metropolitan
Court;
Parties refer to the Buyer and the Seller together;
Invitation refers to the invitation to bid issued by the Seller on 22 October
1995 for the sale of the Seller's Quota;
Land Registry Office refers to the Metropolitan Districts' Land Registry Office;
Resolution refers to resolution no. 41/1996 (I.17.) made on 17 January 1996 at
the meeting of APV Rt's Board of Directors, and to resolution no. 181/1996
(III.20.) amending the former resolution;
Information Memorandum refers to the information booklet which was made
available to the bidders by the Seller after the Invitation was published, and
which could be purchased from 27 October 1995;
Real Property refers to the site and the buildings on the site registered in the
Land Registry Office under lot no. 11126 and property sheet no. 606, and the
address of which is 64. Huvosvolgyi ut, District 2 of Budapest;
<PAGE>
Hungarian Dubbing and Video Company refers to the state-owned company which was
the legal predecessor of the Company before its transformation into a business
entity on 30 September 1994;
Maximum Capital Increase refers to section 4.1. of the Agreement stipulating the
amount by which the Seller shall raise the original capital and which shall be
carried out within 365 days after Closing;
Separation Agreement refers to the agreement concluded between Hungarian Dubbing
and Video Company and Pannionia Film Company on 30 March 1994, pertaining to the
theoretical division, 3583/4158 (Hungarian Dubbing and Video Company) and
575/4158 (Pannonia Film Company) respectively, between the Parties, of the
Management right of the Site;
Minimum Capital Increase refers to section 4.2. of the Agreement where the Buyer
undertakes to fulfill the minimum capital increase required by the Seller by 15
May 1996;
Employees' Quota refers to the quota the face value of which is 16,830,000 HUF,
that is: Sixteen million eight hundred and thirty thousand Hungarian Forints,
and which has been put aside from the APV Rt. quota for the employees to
purchase;
Self-Government refers to the Self-government of District 2 of Budapest;
Bid refers to the documents containing the Buyer's bid to buy the Quota,
submitted in response to the Invitation on 22 November 1995; and the letter,
dated 29 November 1995 and 7 December 1995, explaining the section in the bid
referring to the settlement proposition concerning the Real Property;
Pannonia refers to Pannonia Limited Liability Company, registered by the Court
of Registration under no. Cg: 01-09-365537. 100% of Pannonia's stake is owned by
the Seller and, after the Separation, it shall be entitled to 13.83% ownership,
currently purchased outside the land register, on the basis of the Separation
Agreement dated 30 March 1994, the property assessment prepared by Flax-Men
Consultancy Limited Liability Company on 31 March 1994 and the balance sheet
dated 30 September 1994, and, from among the buildings on the Site, the
ownership of the buildings described in the Separation and Division Agreement;
<PAGE>
Pannonia Film Studio refers to the state-owned company, operating as the common
legal predecessor of the Hungarian Dubbing and Video Company and the Pannonia
Film Company;
Pannonia Film Company refers to the state-owned company operating as Pannonia's
legal predecessor before its transformation into a business entity on 30
September 1994;
Full Development Plan refers to the plan which is required in order to carry out
the physical division of the Site, based on the theoretical shares of 3583/4158
(Videovox share) and 575/4158 (Pannonia share. The plan was prepared in
accordance with the National Construction Regulations and the Budapest Town
Development Regulations;
Agreement refers to this quota purchase agreement;
Separation refers to the organisational separation of the Hungarian Dubbing and
Video Company and Pannonia Film Company as of 1 July 1986;
Resolution of the Separation refers to the resolution of the Ministry of
Education dated 30 June 1986 on the Separation;
Separation Agreement refers to the agreement dated 24 April 1986 facilitating
the Shares of Pannonia Film Company and the Hungarian Dubbing and Video Company
from the assets of Pannonia Film Studio;
Consultant refers to Barents Group LLC who participated in the preparation of
the Information Memorandum at the Seller's request;
Company refers to Videovox Studio Limited Liability Company the 100% of which is
owned by the Seller and which is registered by the Court of Registration under
no. Cg: 01-09-365451, and which shall be entitled to a 86.17% ownership share,
currently purchased outside the land register, on the basis of the Separation
Agreement dated 30 March 1994, the property assessment prepared by Coopers &
Lybrand Limited Liability Company on 31 March 1994 and the balance sheet dated
30 September 1994, and, from among the buildings on the Site, the ownership of
the buildings described in the Separation and Division Agreement. The Company's
registered capital at closing is 168,340,000 HUF, that is: one hundred and
sixty-eight million three hundred and forty thousand Hungarian Forints;
<PAGE>
Site refers to the site, without buildings, at 64. Huvosvolgyi ut, District 2 of
Budapest, registered by the Land Registry Office under lot no. 11126 and
property sheet no. 606;
Quota refers to the stake in the Company representing 90% of the Company's
registered capital and having a face value of 151,600,000 HUF, that is: one
hundred and fifty-one million six hundred thousand Hungarian Forints, and which
Quota was offered for sale by the Seller in the Invitation;
Purchase Price refers to the Purchase Price stipulated in section 2.1. of this
Agreement as the Purchase Price of the Quota which is to be paid by the Buyer in
accordance with the conditions set out in this Agreement.
APV Rt's Board of Directors, in accordance with the evaluation criteria
published in the Information Memorandum, declared the Buyer the winner of the
tender and has published this in the Resolution. On the basis of the above, the
Parties agree in the following:
1. THE PURCHASE AND SALE OF THE QUOTA
1.1. Upon the terms and subject to the conditions of this Agreement, the
Seller shall sell and the Buyer shall buy, in accordance with the conditions set
out in his bid, the Seller's Quota in the Company and which Quota is owned
exclusively by the Seller, and which Quota represents 90% of the company's
original capital and the face value of which is 151,600,000 HUF, that is: one
hundred and fifty one million six hundred thousand Hungarian Forints.
1.2. The Buyer declares that the declaration, required for the conclusion
of this quota purchase agreement, was made without any undue illegal influence.
2. THE PURCHASE PRICE
2.1. In full consideration of the sale and transfer of the Quota, and upon
the terms and subject to the conditions of this Agreement, the Buyer shall pay,
in accordance with the conditions stipulated in points from 2.2 to 2.5 below,
640,523,898 HUF, that is: six hundred and forty million five hundred and
twenty-three thousand eight hundred and ninety-eight Hungarian Forints , which
represents 423.00% rate of the face value of the Quota.
<PAGE>
2.2. The Buyer shall pay the 638,523,898 HUF, that is: six hundred and
thirty eight million five hundred and twenty-three thousand eight hundred and
ninety-eight Hungarian Forint Purchase Price in Compensation Coupons calculated
at value added interest. The Seller shall include the remaining 2,000,000 HUF,
that is: two million Hungarian Forints deposited by the Buyer in cash on 21
November 1995 in the Seller's account no. 203-60650-7007 held at the Hungarian
Foreign Trade Bank Co. Ltd., opened for the purpose of receiving deposit money .
The Certificate of the payment of the deposit money (hereinafter Deposit Money)
can be found in Appendices 1.1. and 1.2. attached to the Bid.
2.3. Within 7 days after the Closing, the Buyer shall deposit with the
Budapest Shares and Investment Bank Co. Ltd. 638,523,898 HUF, that is: six
hundred and thirty eight million five hundred and twenty-three thousand eight
hundred and ninety-eight Hungarian Forints in Compensation Coupons which will be
calculated at a 174.2% interest rate added to the face value.
2.4. The original receipt of deposit of the Compensation Coupons, described
under point 2.2. of this Agreement, (hereinafter Receipt of Deposit) issued to
the Buyer, together with the letter of assignment (hereinafter Letter of
Assignment), providing the assignment of the above Compensation Coupons to the
Seller, shall be handed over by the Buyer within 7 working days after Closing.
2.5. In addition to the Purchase Price, the Buyer shall pay a further
1,000,000 HUF, that is: one million Hungarian Forints in privatization costs to
the Seller in cash within 7 working days after Closing. Said amount shall be
transferred to the Seller's account no. 19017004 - 00220026 - 00007014 held at
the National Bank of Hungary.
3. PAYMENT OF THE PURCHASE PRICE
3.1. The privatization cost, described in section 2.5. above, shall be
considered paid on the day when the Seller presents a copy of the transfer order
to the Seller, certifying that the said amount has been transferred to the
Seller's account no. 19017004 - 00220026 - 00007014 held at the National Bank of
Hungary Co. Ltd. The Seller shall issue a receipt to the Buyer, confirming the
payment of the privatization cost, when the certificate of the transfer is
presented.
<PAGE>
3.2. The Purchase Price set out in point 2.2. of this Agreement shall be
considered paid on the day when the Buyer presents to the Seller the Receipt of
Deposit and the Letter of Assignment , as set out in point 2.4. of this
Agreement. Upon presentation of the Receipt of Deposit and the Letter of
Assignment, the Seller shall issue a certificate to the Buyer, confirming the
payment of the Purchase Price, in accordance with the prescriptions given above.
3.3. The Purchase Price shall be considered paid on the day both receipts
of confirmation, as described in points 3.1. and 3.2. above, are received. On
this day the Seller shall transfer to the Buyer all of its right, title and
interest in the Quota. The issuing of the certificate, as described in point
3.2. above, means the transfer of the ownership.
3.4. Should the Buyer fail to pay the Purchase Price or the privatization
cost, it shall pay the Seller, from the date of default in payment, a default
interest which shall be double the current Hungarian National Bank base rate.
The default interest can only be paid in cash by transferring the amount due to
the Seller's account no. 19017004 - 00220026 - 00007014 held at the National
Bank of Hungary Co. Ltd.
3.5. The Seller is entitled to claim damages from the Buyer on event of
delay or non-fulfillment. If the Buyer does not present the Receipt of Deposit
and the Letter of Assignment by the date stipulated in point 2.4. above, the
Seller is entitled to cancel the Agreement.
4. THE OBLIGATIONS OF THE BUYER
4.1. The Buyer undertakes to raise the Company's registered capital by
480,000,000 HUF, that is: four hundred and eighty million Hungarian Forints
(Maximum Capital Increase) in the following manner:
4.2. The Buyer shall raise the Company's registered capital by 15 May 1996
the latest by 100,000,000 HUF, that is: one hundred million Hungarian Forints in
cash (Minimum Capital Increase), and shall present to the Seller a certificate,
as prescribed in point 4.5. above, within the time stipulated thereof,
evidencing the accomplishment of the capital increase.
4.3. The Buyer shall raise the Company's registered capital by a further
380,000,000 HUF, that is: three hundred and eighty million Hungarian Forints
within 365 days from Closing. The Buyer shall present a certificate to the
Seller within 30 days of the deadline stipulated in said point for the
completion of the raising of the registered capital, as prescribed in point 4.6.
below, evidencing the accomplishment of the capital increase.
<PAGE>
4.4. The Minimum Capital Increase, as described in point 4.1. above, shall
be considered accomplished on the day when the Buyer presents to the Seller the
resolution of the Company's general meeting on the Minimum Capital Increase
together with the certified copy of the application submitted to the
Registration Court, a copy of the transfer order evidencing that the amount of
the Minimum Capital Increase has been transferred to the Company's account, and
a valid Court of Registration order.
4.5. The Maximum Capital Increase, as described in point 4.1. above, shall
be considered accomplished on the day when the Buyer presents to the Seller the
resolution of the Company's general meeting on the Maximum Capital Increase
together with the certified copy of the application submitted to the
Registration Court and a valid Court of Registration order. Should the Buyer
accomplish the Maximum Capital Increase in instalments, all the amounts by which
the original capital of the Company was raised, if accomplished within the
deadline stipulated in point 4.3. above, shall be added up.
4.6. If the Buyer does not fulfill his obligations set out in point 4.2.
above, the Seller may, on the basis of the bank guarantee issued on 23 November
1995 by Internationale Nederlanden Bank (Hungary) Co. Ltd. (1061 Budapest,
Andrassy u. 9.), call on the Bank to pay 100,000,000 HUF, that is: one hundred
million Hungarian Forints because of the Buyer's violation of the Agreement.
This amount may only be used to raise the Company's registered capital in order
to fulfill the Minimum Capital Increase obligations, and the members' meeting
will vote accordingly.
The Buyer undertakes to convene, without delay, the members' meeting, a
requirement if the capital is to be raised, and shall make a resolution at this
meeting which will ensure that the 100,000,000 HUF. capital increase is
accomplished.
4.7. The Seller in the Invitation undertook to offer the quota, the face
value of which is 16,830,000 HUF, that is: sixteen million eight hundred and
thirty Hungarian Forints, which represents 10% of the Company's registered
capital, after the tender is closed, in accordance with APV Rt. UV's resolution
no. 526/1995 (X.17.), for sale to the employees of the company at the rate
indicated in the Buyer's bid, with a maximum 50% concession on the concession
package. The Seller shall fulfill his obligation stipulated in said point
thereof within 1 year of Closing.
<PAGE>
The Buyer agrees to buy, at a purchase price corresponding to the purchase rate
of the Quota stipulated in point 2.1. of this Agreement, the Employees' Quota or
that portion of the Employees' Quota which has not been bought by the employees
within the date open for the purchasing of the Employees' Quota, within 60 days
of the expiry of the deadline stipulated for the purchasing of the Employees'
Quota, and the payment shall be made in accordance with the provisions in point
2.2. of this Agreement.
The Seller guarantees that the face value of the Employees' Quota, stipulated in
said point, shall not change after Closing, and that the raising of the
registered capital, after Closing, shall under no circumstances proportionally
change the face value.
4.8. Regarding the Seller's sale of the Employees' Quota, the Buyer waives
its preemption right, set out in ss.171 of the Law on Economic Organizations,
relating to the Employees' Quota sold by the Seller up till the stipulated
deadline. This waiver shall not prejudice the Buyer to exercise its preemption
right relating to the sale of the employees' quota purchased from the Employees'
Quota to third parties.
The Buyer guarantees to coordinate with APV Rt. and shall vote, at the members'
meeting convened because of the employees' quotas to be sold in accordance with
the Invitation and this Agreement, in favour of the company's not wishing to
exercise its preemption right, and that the members' meeting not appointing a
third person to exercise the preemption right.
4.9. The Buyer hereby acknowledges that the Seller is entitled to receive
the dividend due to a member (Seller) which may have accumulated in 1995. The
Buyer agrees that at the members' meeting approving the Company's 1995 balance
sheet, it shall vote to facilitate the paying of the dividend to the Seller, and
shall transfer it without delay to the Seller's account no. 232-90107-8000 held
at the National Bank of Hungary.
4.10. The Buyer agrees to report to the Seller of the fulfillment of the
obligations, stipulated in this Agreement, from the date of the transfer of the
ownership rights of the Quota as set out in point 3.3. of this Agreement, until
the date of fulfillment of the Maximum Capital Increase obligation.
4.11. The Buyer agrees to direct and manage the Company, and to exercise
its ownership rights in accordance with its bid, which constitutes the Appendix
of this Agreement.
<PAGE>
5. OBLIGATIONS OF THE SELLER
5.1. The Seller agrees that during the period between the Closing and the
date of the transfer of the ownership rights of the Quota, as stipulated in
point 3.3. of this Agreement, it shall not, unless expressly requested by the
Buyer, make any decisions affecting the operation of the Company. Thus, the
Seller agrees that:
(i) as the current owner of the Company, it shall order the Company's
managing director in a resolution of founding, not to make any statement in
the name of the Company and not to undertake any obligations, bar the legal
statements the managing director has been expressly ordered to make by the
Seller in order to execute this Agreement, during the period between the
Closing and the date of the assignment of the ownership rights of the
Quota, as stipulated in point 3.3. of this Agreement;
(ii) it shall not amend the Company's Founding Charter;
(iii) except in the cases stipulated in this Agreement, it shall not
encumber its quota in the Company or any part thereof, and shall not ensure
any right in the quota or any part thereof, and shall not make a decision
on the sale of its quota in the Company or on the raising or decreasing of
the registered capital;
(iv) it shall not encumber or dispose of any part or all of the
Company's property;
Furthermore, the Seller agrees not to take any action relating to the
Company during this period without the Buyer's prior written approval, the
giving of which the Buyer cannot refuse without a valid reason. The Seller
is financially responsible for any damage incurred as a result of the
violation of the conditions in said point.
6. PROVISIONS RELATING TO THE REAL PROPERTY
6.1 The Parties hereby acknowledge that: the Company's legal predecessor
was Pannonia Film Studio, a state-owned company set up in 1951. Pannonia Film
<PAGE>
Studio was the sole manager of the Real Property. In accordance with the
provisions of the Resolution on Separation, Pannonia Film Studio ceased to exist
as of 1 July 1986; the Ministry of Education split it into two companies: the
Hungarian Dubbing and Video Company and the Pannonia Company. The Resolution on
Separation makes provisions concerning the division of the state property,
formerly managed by Pannonia Film Studio, between the Hungarian Dubbing and
Video Company and the Pannonia Company. In order to execute the provisions of
the Resolution on Separation, on 24 April 1986, the Hungarian Dubbing and Video
Company and the Pannonia Company concluded the Separation Agreement, in which
the Parties agree that:
6.1.1. The Site, the main building, the two porter's lodges and the
reverbatory chamber shall be managed by the Hungarian Dubbing and Video
Company, while Pannonia Company shall have the management rights of the
Drawing Pavilion, the Clasp building, the two wooden buildings and the
container buildings. The Separation Agreement provides that the primary
future objective of both companies is to build a new head office for
Pannonia Film Company on Budakeszi ut, District 2 of Budapest, so that the
buildings vacated on the Real Property can be used by the Hungarian Dubbing
and Video Company for expansion.
6.1.2. On the basis of the Resolution on Separation and the Separation
Agreement, the sole management right of the Real Property was registered in
favour of the Hungarian Dubbing and Video Company, and this record does not
specify separately the buildings managed by Pannonia Film Company and
Hungarian Dubbing and Video Company on the Real Property. In order to
settle this matter, the Hungarian Dubbing and Video Company and Pannonia
Company concluded the Separation Agreement on 30 March 1994, under which
agreement, Pannonia Film Company assigns the management right of the Clasp
building to the Hungarian Dubbing and Video Company which, in exchange,
assignes Pannonia Film Company the management right of the 575/4158
theoretical share of the Site. The separation of the management right, in
accordance with the Separation Agreement, was requested at the Land
Registry Office by both companies, and this application has been recorded
under note no.194.932/94.
6.2. As of 30 September 1994, The Hungarian Dubbing and Video Company and
Pannonia Film Studio were transformed into business entities, resulting in the
formation of the Company from the Hungarian Dubbing and Video Company, and
Pannonia from the Pannonia Film Company. On the basis of the Company's
<PAGE>
transformation balance sheet, the part of the Real Property owned by the
Hungarian Dubbing and Video Company, as indicated in the Separation Agreement,
was assigned to the Company, on the basis of the property assessment dated 31
March 1994 and the balance sheet dated 30 September 1994, prepared by Coopers &
Lybrand (both documents constitute part of the Appendix attached to this
Agreement). At Closing, the Land Registry Office has not yet entered the name of
the new owner of the Real Property in its records.
6.3. Provisions relating to the settlement of the ownership of the Real
Property
In accordance with the prescriptions of the Invitation, the Buyer has to give
details in his bid about the further development of the real property at 64-66
Huvosvolgyi ut, Budapest, where the head offices of both Videovox and Pannonia
are to be found.
The prescriptions of the resolutions on founding no. 70/1996 (III.20) and
79/1996 (III.20), brought in the basis of the Buyer's bid and the Resolution,
provide that Pannonia and Videovox conclude an Agreement and a Separation and a
Termination of Joint Property Ownership Agreement, to be found in Appendix 5 of
this Agreement, in order to settle the ownership of the Real Property.
In accordance with the above, the Buyer is obliged to have the plan of the
separation, from the Tarogato ut side, of the property at 64-66. Huvosvolgyi ut
prepared, and submit the documents required for the separation to the competent
authorities, within 30 days of the Agreement, in Appendix 5 of this Agreement,
coming into force. In addition, it has to bear and advance the costs of the
procedure, and agree that if the detailed plan of development is not submitted
by the prescribed deadline due to some fault of the Buyer, it shall be obliged
to pay 15,000,000 HUF, that is: fifteen million Hungarian Forints in penalty to
the Seller.
On event of the Self-government's issuing the legally binding permit for the
separation of the property, the Buyer shall be obliged to pay Pannonia
55,000,000 HUF + VAT, that is: fifty million Hungarian Forints plus VAT as the
price of the Pavilion, Pannonia's moving expenses and the cost of the
construction of its new building.
<PAGE>
If the Self-government does not bring a legally binding resolution on the
separation of the property by 30 August 1996 the latest, Pannonia, in accordance
with the founding resolution no. 70/1996 (III.20.), shall be obliged to sell to
Videovox its 13.87% property share and the buildings in its ownership, by 30
September 1996 as stipulated in the Agreement in Appendix 5 of this Agreement,
for the following purchase prices: 28,490,000 HUF, that is: twenty-eight million
four hundred and ninety thousand Hungarian Forints for the property share;
22,100,000 HUF + VAT, that is: twenty-two million one hundred thousand Hungarian
Forints plus VAT for the pavilion; 33,410,000 HUF + VAT, that is: thirty-three
million four hundred and ten thousand Hungarian Forints plus VAT for Pannonia's
moving expenses and the cost of constructing its planned new building.
7. DECLARATIONS AND WARRANTIES
7.1. The Seller warranties and guarantees with no stipulated deadline that
7.1.1. the Company has been duly incorporated with the Registration Court
under Registration no. Cg: 01-09-002445;
7.1.2. it is the sole owner of the Quota;
7.1.3. it has made available to the Company 86.17% of the Site, the main
building, the two caretaker's lodges and the Clasp building, as described
in the property assessment dated 31 March 1994 and the balance sheet dated
30 September 1994, prepared by Coopers & Lybrand , and has made available
to Pannonia 13.83% of the Site, the Drawing Pavilion, the two wooden houses
and the two container buildings, as described in the property assessment
dated 31 March 1994, and the balance sheet dated 30 September 1994,
prepared by Flax-Men Limited Liability Company. All of the above documents
can be found in the Appendices of this Agreement.
7.1.4. third parties do not have preemption rights, cannot buy options or
obtain any other right relating to the Quota;
7.1.5. it is fully entitled to, on the basis of the decision made as the
result of the assessment of the bids submitted in response to the
Invitation for the sale of the Company's Quota, to conclude a Quota
Purchase Agreement for the sale of the Quota in its ownership with the
Buyer on the basis of its bid.
<PAGE>
7.1.6. it shall, with a founding resolution, divide its quota in the
company in accordance with the proportion stipulated in point 1.1. of this
Agreement, in order to facilitate its assignment.
7.2. The Buyer represents that
7.2.1. it has requested the Company to provide all the facts, data and
information necessary for it to make its bid, submitted on 22 November
1995, and that it has studied the documents made available to it by the
Company;
7.2.2. it had the possibility to obtain all the facts, data and information
necessary to prepare its Bid, submitted on 22 November 1995. It has studied
the information and the documents, the Company's business, financial and
legal position necessary for the conclusion of this Agreement, and it does
not need any further information and documents in order to fulfill the
terms of this Agreement. It is familiar with the Company's position, its
bookkeeping, contracts and other documents, its work contracts, and it has
studied the Company's books, balance sheets, which constitute the basis of
the bid, and that it shall only put forward claims concerning guarantee,
warranty and damages, which are based on the Seller's declarations or
obligations in this Agreement, or if the Seller violates the prescriptions
of this Agreement or legal regulations;
7.2.3. it is familiar with the Company's Deed of Foundation and the
amendments thereof, and it accepts the terms of the Deed of Foundation;
7.2.4 it considers the terms of his bid contractually binding.
8. SETTLING LEGAL DISPUTES
8.1. The parties agree that all disputes arising out of this Agreement
shall be primarily settled through negotiations. Should the Parties be unable to
settle such disputes, they agree to undertake the exclusive jurisdiction of the
(Budapest) Metropolitan Court.
8.2. This Agreement shall be governed by Hungarian Law.
<PAGE>
8.3. The Provisions of the Civil Code and Law VI of 1988 on Economic
Organizations shall apply to those issues which are not dealt with in this
Agreement.
9. MISCELLANEOUS
9.1. If any part of this Agreement shall be invalid or unenforceable, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remaining part. In such instances, the Parties shall amend the invalid
part or regulation in a manner so as to be able to accomplish, with the invalid
part or regulation, the originally desired economic objective.
9.2. All notices, declarations, announcements or any statements pertaining
to this Agreement, or the amendment of this Agreement shall only be valid if
given in writing. The Parties agree that all notices, declarations,
announcements or statements addressed to each other and pertaining to this
Agreement shall be sent to the following addresses:
If to the Seller: Attila Lascsik, Managing Director
State Privatization and Holding Company
(1133 Budapest, Ujpest rakpart 31-33.)
Fax: 267-6698
If to the Buyer: Gyorgy Balo, Manager
Magyarhang Dubbing and Production Ltd.
(1024 Budapest, Keleti Karoly u. 42/A)
Fax: 315-0501
Should the addresses given in this Agreement change, this shall only be
considered valid by the other party if the party in question informs the other
party of the change in writing, the only exception being if there is a pertinent
legal regulation.
<PAGE>
10. THE COMING INTO FORCE OF THE AGREEMENT
This agreement shall come into force on Closing.
Budapest, 26 April 1996
- ---------------------------------------- ----------------------------------
APV Rt. Magyarhang Kft
Representative: Attila Lascsik Representative: Gyorgy Balo
Managing Director Manager
AMENDMENT TO THE
QUOTA PURCHASE AGREEMENT
between the State Privatization and Holding Company (1113 Budapest, Ujpest
rakpart 31-33; Representative: Attila Lascsik, Managing Director) as the Seller
(hereinafter "APV Rt." or "Seller") and
the Magyarhang Dubbing and Production Limited Liability Company (1024 Budapest,
Keleti Karoly u. 42/A; Representative: Gyorgy Balo, Manager) as the Buyer
(hereinafter Buyer) (hereinafter together the Parties) on the date and in the
place given below:
The Parties, as of 26 April 1996, shall amend, as follows, the Quota Purchase
Agreement (hereinafter Agreement) dated 26 April 1996, providing for the
purchase of Videovox Studio Limited Liability Company's (1021 Budapest,
Huvosvolgyi ut 64.) 90% quota, because of a mistake in the figures:
1. From among the definitions of the Agreement, the definition of the Quota
shall be amended as follows.
"Quota refers to the stake in the Company representing 90% of the Company's
registered capital and having a face value of 151,510,000 HUF, that is: one
hundred and fifty-one million five hundred and ten thousand Hungarian Forints,
and which Quota was offered for sale by the Seller in the Invitation",
2. Point 1.1. of the Agreement shall be amended as follows:
"1.1. Upon the terms and subject to the conditions of this Agreement, the Seller
shall sell and the Buyer shall buy, in accordance with the conditions set out in
his bid, the Seller's Quota in the Company and which Quota is owned exclusively
by the Seller, and which Quota represents 90% of the company's original capital
and the face value of which is 151,510,000 HUF, that is: one hundred and fifty
one million five hundred and ten thousand Hungarian Forints."
In other respects the Agreement shall remain unchanged.
Budapest, 7 May 1996
- ------------------------------------- --------------------------------
On behalf of APV Rt. On behalf of Magyarhang Kft.
Attila Lascsik Gyorgy Balo
Managing Director Manager
AGREEMENT ON TRANSFER
OF PARTICIPATION INTEREST
pursuant to the Section 115 of the Commercial Code
This Agreement on Transfer of Participation Interest ("Agreement") is entered
into this 17th day of July, 1996 between the following Parties:
The Parties to this Agreement are:
1. Eeska spo0itelna, a. s., with its registered office at Prague 1, Na P0ikopi
29, 113 98, IDN 45 24 47 82, represented by Ing. Jaroslav Klapal, the
Chairman of the Board of Directors and the General Director and JUDr.
Rudolf Hanus, the Vice-Chairman of the Board of Directors and the Deputy to
the General Director ("Transferor").
2. CME MEDIA ENTERPRISES B.V., with its registered office at Leidseplein 29,
Amsterdam, Netherlands, represented by Leonard M. Fertig, Managing Director
("Transferee").
("Parties")
Recitals
1. The Company. The Company means Eeska nezavisla televizni spoleenost, spol.
s r. o., a limited liability company organised and registered under the
laws of the Czech Republic, with its registered seat at Vladislavova 20,
Prague 1 ("Company" or the "_NTS"), IDN 49616668.
2. The Participation Interests. The Company has a total of 3 Participation
Interests registered, which represent 100% of the registered capital of the
Company. The registered capital of the Company is 400,000,000 CZK.
3. The Transferor. The Transferor owns Participation Interest which is
representative of 22% of the registered capital of the Company which is
representative of contribution of 88,000,000 CZK.
1
<PAGE>
Article I.
Transfer of Participation Interest
1. The Transferor offers and transfers and the Transferee accepts and acquires
the part of the Transferor's Participation Interest in the Company which is
representative of contribution of 80,000,000 CZK.
3. During next 3 years following the enforceability of this Agreement,
Transferee has an exclusive right to demand the Transferor to transfer the
balance of his Participation Interest, which is representative of
contribution of 8,000,000 CZK, to the Transferee or to a third party
specified by the Transferee, and the Transferor is obliged to transfer such
balance of his Participation Interest to the specified party. The
consideration for such additional transfer is included in the price
pursuant to Article II. of this Agreement.
Article II.
Purchase Price
The purchase price for the Participation Interest is one billion (1.000.000.000
CZK) Czech Crowns.
Article III.
Representations and warranties of the Transferor
1. Transferor possesses an unlimited ownership of the Participation Interest
described above, and declares that the Participation Interest is not
pledged or encumbered in any way and the Participation Interest is
transferable pursuant to the Memorandum of Association.
2. No action which could dilute or modify the rights of Transferee as an owner
of the Participation Interest has been taken or is pending.
3. The Transferor is not in bankruptcy or in a situation which could lead to
its liquidation.
4. The Transferor made and shall make all substantial decisions for the
transfer.
2
<PAGE>
5. The Transferor submitted to the General Meeting of the Company held before
the execution of this Agreement the changes of the Memorandum of
Association and obtained an approval with the proposal (i) to divide the
Participation Interest into two parts, in order to facilitate the transfer
of the part which is representative of the contribution of 80,000,000 CZK
to the Transferee immediately following the signing of this Agreement and
the part representative of the contribution of 8,000,000 CZK which will
remain in Transferor's ownership on the conditions stated in Article I.
para 3. of this Agreement and (ii) the proposal to change the Memorandum of
Association of the Company in order to incorporate that a request for an
approval of the transfer of the Participation Interests need not be filed
with the Council of the Czech Republic of TV and Radio Broadcasting.
Article IV.
Representations and warranties of the Transferee
1. The Transferee is a private company duly incorporated, organised and
existing under the laws of the Netherlands.
2. The Transferee has the power and authority to execute and deliver this
Agreement. Such execution, delivery and performance have been duly
authorised by all necessary corporate action on its part. This Agreement
has been duly executed and delivered by its duly binding obligations
enforceable against it in accordance with the terms hereof except.
3. The execution, delivery and performance of this Agreement will not:
3.1 violate or conflict with any provision of Transferee's internal
regulations; or
3.2 violate in any respect any the laws of the Czech Republic and the
Netherlands; or
3.3 violate, conflict with, or constitute a breach of default of the
Transferor in any respect.
4. No consent, approval or authorisation of, or declaration of filing with any
public authority, is required by Transferee for the valid execution of this
agreement.
5. There are no claims, actions, suits proceedings or investigations pending
or, to the best or Transferee's knowledge, which if adversely determined,
would restrain or enjoying the consummation of the transactions contemplate
by this Agreement or declare unlawful the transactions or events
contemplated by this Agreement or cause any of such transaction to
rescinded.
Article V.
Companies Registry
The both Parties notify the Executives of the Company will register the changes
in the formation documents of the Company in the Companies Registry.
<PAGE>
Article VI.
Final clauses
1. Force majeure. Either Party is not responsible for any failure to perform
its obligations hereunder due to force majeure, which shall include, but
not be limited to, fires, floods, natural disasters, wars, acts of God, or
due to any other cause beyond the reasonable control of the Party. If force
majeure shall occur, the affected Party shall promptly give notice thereof
to the other Party and use its best efforts to cure or correct such event
of force majeure.
2. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision hereof. Any announcement regarding the Agreement shall be given
to the second Party by registered letter with notice of receipt or by fax
confirmed by letter and shall be deemed served the day of the reception of
the letter or of the fax.
3. Entire Agreement. This Agreement constitutes the entire agreement between
the Parties. Any amendment to this Agreement must be executed in writing
and signed by the Parties. This Agreement supersedes any existing verbal
arguments.
4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Czech Republic.
5. Arbitration.
5.1 All disputes between the Parties arising in connection with this
Agreement or related to the breach of it, validity of it or rights
related to it, which can be solved by the conciliation pursuant to the
Section 99 of the Civil Procedure Act, shall be finally settled
pursuant to the Act No. 216/1994 Coll., on arbitration and the
execution of the arbitration settlements, by three Arbitrators.
5.2 Each Party appoints one Arbitrator, the appointed Arbitrators then
elect the Chair Arbitrator. If the Party does not appoint the
Arbitrator within 30 days after the delivery of the request of the
second Party, or if the appointed Arbitrators are not able to elect
the Chair Arbitrator within the same period, the Chair Arbitrator
shall be appointed by the Arbitration Court.
5.3 The arbitration will take place in Prague.
5.4 The arbitration shall be governed by the laws of the Czech Republic,
but the Arbitrators may decide pursuant to the principle of the
equity.
5.5 The Parties shall respect the arbitration settlement and realise it
immediately.
<PAGE>
6. Language. This Agreement is made in the English and Czech language versions
of this Agreement. The Czech version is prevailing.
7. Addresses. For the purpose of this Agreement, the addresses of the Parties
shall be the following:
For Transferor: ____________________
____________________
____________________
Fax: ____________________
For Transferee: ____________________
____________________
____________________
Fax: ____________________
8. Validity and enforceability. This Agreement is valid and enforceable upon
the signature of the Agreement by both Parties.
9. Final provisions. The Agreement is executed in six counterparts in both
languages. Both Parties will take three counterpart in both languages.
Executed at Prague, Czech Republic, this 17th day of July, 1996.
By and on behalf of the Transferor:
____________________
____________________
By and on behalf of the Transferee:
____________________
____________________
AGREEMENT ON TRANSFER OF
PARTICIPATION INTEREST
pursuant to the Section 115 of the Commercial Code
This Agreement on Transfer of Participation Interest ("Agreement") is entered
into this 17th day of July, 1996 between the following Parties:
The Parties to this Agreement are:
1. Ceska sporitelna, a. s., with its registered office at Prague 1, Na Prikope
29, 113 98, IDN 45 24 47 82, represented by JUDr. Karel Kotrba, the
Vice-Chairman of the Board of Directors and the First Deputy to the General
Director and JUDr. Rudolf Hanus, the Member of the Board of Directors and
the Deputy to the General Director ("Transferor").
2. CME MEDIA ENTERPRISES B.V., with its registered office at Leidseplein 29,
Amsterdam, Netherlands, represented by Leonard M. Fertig, Managing Director
("Transferee").
("Parties")
Recitals
1. The Company. The Company means Ceska nezavisla televizni spolecnost, spol.
s r. o., a limited liability company organised and registered under the
laws of the Czech Republic, with its registered seat at Vladislavova 20,
Prague 1 ("Company" or the "CNTS"), IDN 49616668.
2. The Participation Interests. The Company has a total of 3 Participation
Interests registered, which represent 100% of the registered capital of the
Company. The registered capital of the Company is 400,000,000 CZK.
3. The Transferor. The Transferor owns Participation Interest which is
representative of 22% of the registered capital of the Company which is
representative of contribution of 88,000,000 CZK.
<PAGE>
Article I.
Transfer of Participation Interest
1. The Transferor offers and transfers and the Transferee accepts and acquires
the part of the Transferor's Participation Interest in the Company which is
representative of contribution of 80,000,000 CZK.
3. During next 3 years following the enforceability of this Agreement,
Transferee has a right to demand the Transferor to transfer the balance of
his Participation Interest, which is representative of contribution of
8,000,000 CZK, to the Transferee or to a third party specified by the
Transferee, and the Transferor is obliged to transfer such balance of his
Participation Interest to the specified party. The consideration for such
additional transfer is included in the price pursuant to Article II. of
this Agreement.
Article II.
Purchase Price
The purchase price for the Participation Interest is one billion (1.000.000.000
CZK) Czech Crowns.
Article III.
Representations and warranties of the Transferor
1. Transferor possesses an unlimited ownership of the Participation Interest
described above, and declares that the Participation Interest is not
pledged or encumbered in any way and the Participation Interest is
transferable pursuant to the Memorandum of Association.
2. No action which could dilute or modify the rights of Transferee as an owner
of the Participation Interest has been taken or is pending.
<PAGE>
3. The Transferor is not in bankruptcy or in a situation which could lead to
its liquidation.
4. The Transferor made and shall make all substantial decisions for the
transfer.
5. The Transferor submitted to the General Meeting of the Company held before
the execution of this Agreement the changes of the Memorandum of
Association and obtained an approval with the proposal (i) to divide the
Participation Interest into two parts, in order to facilitate the transfer
of the part which is representative of the contribution of 80,000,000 CZK
to the Transferee immediately following the signing of this Agreement and
the part representative of the contribution of 8,000,000 CZK which will
remain in Transferor's ownership and (ii) the proposal to change the
Memorandum of Association of the Company in order to incorporate that a
request for an approval of the transfer of the Participation Interests need
not be filed with the Council of the Czech Republic of TV and Radio
Broadcasting.
Article IV.
Representations and warranties of the Transferee
1. The Transferee is a private company duly incorporated, organised and
existing under the laws of the Netherlands.
2. The Transferee has the power and authority to execute and deliver this
Agreement. Such execution, delivery and performance have been duly
authorised by all necessary corporate action on its part. This Agreement
has been duly executed and delivered by its duly binding obligations
enforceable against it in accordance with the terms hereof except.
3. The execution, delivery and performance of this Agreement will not:
3.1 violate or conflict with any provision of Transferee's internal
regulations; or
3.2 violate in any respect any the laws of the Czech Republic and the
Netherlands; or
<PAGE>
3.3 violate, conflict with, or constitute a breach of default of the
Transferor in any respect . 4. No consent, approval or authorisation
of, or declaration of filing with any public authority, is required by
Transferee for the valid execution of this agreement.
5. There are no claims, actions, suits proceedings or investigations pending
or, to the best or Transferee's knowledge, which if adversely determined,
would restrain or affect the consummation of the transactions contemplate
by this Agreement or declare unlawful the transactions or events
contemplated by this Agreement or cause any of such transaction to
rescinded.
Article V.
Companies Registry
The both Parties notify the Executives of the Company will register the changes
in the formation documents of the Company in the Companies Registry.
Article VI.
Final clauses
1. Force majeure. Either Party is not responsible for any failure to perform
its obligations hereunder due to force majeure, which shall include, but
not be limited to, fires, floods, natural disasters, wars, acts of God, or
due to any other cause beyond the reasonable control of the Party. If force
majeure shall occur, the affected Party shall promptly give notice thereof
to the other Party and use its best efforts to cure or correct such event
of force majeure.
2. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision hereof. Any announcement regarding the Agreement shall be given
to the second Party by registered letter with notice of receipt or by fax
confirmed by letter and shall be deemed served the day of the reception of
the letter or of the fax.
3. Entire Agreement. This Agreement constitutes the entire agreement between
the Parties. Any amendment to this Agreement must be executed in writing
and signed by the Parties. This Agreement superceeds any existing verbal
arguments.
<PAGE>
4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Czech Republic.
5. Arbitration.
5.1 All disputes between the Parties arising in connection with this
Agreement or related to the breach of it, validity of it or rights
related to it, which can be solved by the conciliation pursuant to the
Section 99 of the Civil Procedure Act, shall be finally settled
pursuant to the Act No. 216/1994 Coll., on arbitration and the
execution of the arbitration settlements, by three Arbitrators.
5.2 Each Party appoints one Arbitrator, the appointed Arbitrators then
elect the Chair Arbitrator. If the Party does not appoint the
Arbitrator within 30 days after the delivery of the request of the
second Party, or if the appointed Arbitrators are not able to elect
the Chair Arbitrator within the same period, the Chair Arbitrator
shall be appointed by the Arbitration Court.
5.3 The arbitration will take place in Prague.
5.4 The arbitration shall be governed by the laws of the Czech Republic,
but the Arbitrators may decide pursuant to the principle of the equity
and the Parties expressly authorise them to do it.
5.5 The Parties shall respect the arbitration settlement and realise it
immediately.
<PAGE>
6. Language. This Agreement is made in the English and Czech language versions
of this Agreement. The Czech version is prevailing.
7. Addresses. For the purpose of this Agreement, the addresses of the Parties
shall be the following:
For Transferor: Ceska sporitelna, a.s.
Na Prikope 29
113 98 Praha 1
Fax: + 42 2 6107 3070
For Transferee: CME Media Enterprises B.V.
Leidseplein 29
Amsterdam
the Netherlands
Fax: + 44 171 292 7901
8. Validity and enforceability. This Agreement is valid and enforceable upon
the signature of the Agreement by both Parties.
9. Final provisions. The Agreement is executed in six counterparts in both
languages. Both Parties will take three counterpart in both languages.
Executed at Prague, Czech Republic, this 17th day of July, 1996.
By and on behalf of the Transferor:
------------------------------
By and on behalf of the Transferee:
------------------------------
<PAGE>
ANNEX TO
THE AGREEMENT ON TRANSFER
OF PARTICIPATION INTEREST
This Annex dated on 17th of July, 1996 to the Agreement on Transfer of
Participation Interest ("Agreement") dated on 17th day of July, 1996 ("Annex")
is entered between the following Parties:
The parties:
1. Ceska Sporitezna, a. s., with its registered office at Prague 1, Na P0ikopi
29, 113 98, IDN: 45 24 47 82, represented by JUDr. Karel Kotrba, the
Vice-Chairman of the Board of Directors and the First Deputy to the General
Director and JUDr. Rudolf Hanus, the Member of the Board of Directors and
the Deputy to the General Director ("Transferor").
2. CME MEDIA ENTERPRISES B.V., with its registered office at Leidseplein 29,
Amsterdam, Netherlands, represented by Leonard M. Fertig, Managing Director
("Transferee").
("Parties")
Recitals
Parties to the Agreement on Transfer of Participation Interest dated on 17th day
of July, 1996, agreed on this Annex.
Article I.
Terms of payment of the purchase price
1. The purchase price shall be paid as follows:
1.1 450,000,000 CZK shall be paid within 30 days after the enforceability
of this Agreement. The purchase price (or its parts) shall be
transferred onto the account being notified by the transferor to the
Transferee.
1.2. 150.000.000 CZK shall be paid on or before 15th day of November 1996
in cash to the Transferor's account.
1.3 The balance of the purchase price shall be paid in the amount of
400,000,000 CZK on or before the end of April 1997.
<PAGE>
Article II.
Representations and warranties of the Transferor
Transferor provides a loan to the Transferee for the payment of the balance of
the purchase price described in Article I. para 1.1 a 1.3 of the Annex. The Loan
shall be for the Transferee's disposition as stated in the Loan Agreement.
Article III.
Representations and warranties of the Transferee
Transferee has the financial ability to pay the purchase price and shall respect
the term's Loan Agreement, under the conditions determined by this Annex.
Article IV.
Confidentiality and disclosures
1. Transferor and Transferee undertake to maintain as private and
confidential:
(a) all negotiations relating to the purchase of the Participation
Interest pursuant to this Agreement; and
(b) any expert opinions and reports prepared on the basis of
information provided by the company and/or the Parties;
2. The Transferor and the Transferee undertakes to refrain from providing any
and all information relating to (a) and (b), except for any direct or
indirect subsidiary, parent or affiliate, which shall be bound by the same
confidentiality undertaking as provided herein above.
3. Information is understood to include all material, reports, contracts,
accounting and business documents, drawings, photographs and other
documents provided on the basis of the Agreement.
4. This undertaking of confidentiality does not apply to information: already
known by one Party before received from the other Party; publicly known;
agreed to by both Parties or provided pursuant to the orders of the
appropriate state bodies.
2
<PAGE>
5. This undertaking of confidentiality is valid until the balance of the
Participation Interest has been transferred pursuant to the Article I. of
the Agreement.
6. The Parties shall keep this Annex secret and confidential. No press release
or any other public disclosure of this Annex shall be made without a prior
written consent of the other Party.
Article V.
Final clauses
1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Czech Republic.
2. Language. This Agreement is made in the English and Czech language versions
of this Agreement. The Czech version is prevailing.
3. Validity and enforceability. This Agreement is valid and enforceable upon
the signature of the Agreement by both Parties.
4. Special provision. The Parties acknowledge that the Council for Radio and
TV Broadcasting of the Czech Republic was requested to cancel the
conditions of the broadcasting licence No. 001/1993 issued by the Council
on February 9, 1993 to CET 21, spol. s r. o., including, but not limited
the condition No. 17 and such decision has not been entered by the Council.
The Parties assume that pursuant to the Act No. 301/1995 Coll. amending the
Act No. 468/1991 Coll., on Radio and TV Broadcasting, as amended, this
condition is not enforceable. With respect to the legal security and
continuous validity of the licence No. 001/1993 the Parties shall be
obliged in the event the court has entered an enforceable decision that an
approval is for such transfer necessary and in the absence of Council
enforceable decision to approval such transfer to transfer back to each
other the Participation Interest and their price paid in order to restore
the original status of the Parties before the conclusion of this Agreement.
5. Final provision. The Agreement is executed in six counterparts in both
languages. Both Parties will take three counterpart in both languages.
3
<PAGE>
Executed at Prague, Czech Republic this 17th day of July 1996.
By and on behalf of the Transferor:
- --------------------------
By and on behalf of the Transferee:
- --------------------------
4
LOAN AGREEMENT
1. Ceska sporitelna, a. s., Prague 1, Na Prikope 29, ZIP Code 113 98 ICO (Org.
Ident. No.): 45 24 47 82 represented by JUDr. Karel Kotrba, the
Vice-chairman of the Board of Directors and the First Deputy to the General
Director and JUDr. Rudolf Hanus, the Member of the Board of Directors and
the Deputy to the General Director
(hereinafter referred to as "Sporitelna")
and
2. CME Media Enterprises B. V., with its registered office at Leidseplein 29,
1017 PS Amsterdam, represented by Leonard Martin Fertig, Managing Director
(hereinafter referred to as "the Client")
enter
pursuant to Section 497 and the following of the Commercial Code No.
513/1991 Coll. as amended (hereinafter referred to as "the Commercial
Code") into the following
Loan Agreement:
I.
1. Sporitelna agrees to lend to the Client a long term investment loan to pay
up a portion of the purchase price for the Participation interest in the
firm Ceska nezavisla televizni spolecnost, spol. s r. o., equal to
850,000,000 CZK (in words: eight hundred fifty million Czech Crowns).
The loan facilities will be placed to the credit account No.
4503-324951-988/0800 opened with the Ceska Sporitelna, a. s., Subsidiary in
Prague.
2. The parties hereunder have agreed upon an interest rate of 12.9% p.a. which
shall be applicable until the loan has been repaid and settled.
<PAGE>
3. Sporitelna shall sequentially transfer the loan facilities into the account
No. 27-2295750106-988/0800 on the basis of the Agreement on Transfer of
Participation Interest and the Agreement on a Future Agreement.
II.
1. The parties to this Agreement agree, that the loan facilities as described
in Article 1 above may be used only for the purpose specified under Article
I. Paragraph 1.
2. If the Client fails to meet this contractual obligation Sporitelna will be
entitled to proceed in accordance with Article IX. hereof,
3. In checking the purpose for which the loan facilities are drawn up
Sporitelna reserves the right to proceed in accordance with Article VIII.
hereof.
III.
1. The parties hereunder agree that the loan will be drawn up sequentially in
two amounts i.e. 450 million not later than on or before 30 days after the
signing of this Agreement and 400 million in April 1997.
IV.
1. Sporitelna and the Client agree that the last date to repay the loan is set
to expire on 20 November 2003.
2. The Client covenants to make repayments on the loan quarterly always by
20th day of the 2nd, 5th, 8th and 11th month commencing on 20 November
1997. The installments shall be paid as follows:
November 1997 - November 1998 CZK 22,500,000
February 1999 - August 2002 CZK 42,500,000
November 2002 - November 2003 CZK 20,000,000
The last installment shall be paid at 20 November 2003.
3. The Client covenants to pay the agreed interest in accordance with Article
I. hereof always by the last day of the quarter of the year beginning with
the 4th quarter of the year 1996. The payment of interest shall be
preferred to a repayment of loan. The payment is stated in Article VIII
paragraph 2.
4. The Client is entitled to prepay the facilities drawn up under the loan
before the repayment days set out in the Agreement subject to notification
of such a repayment to Sporitelna not less than 30 days before the
prepayment day,
2
<PAGE>
V.
1. Any delay in any installment or interest payment (Article IX paragraph 1)
is a material breach of the terms and conditions of this Agreement.
Sporitelna will debit any amount overdue (interest, installment) into
unpaid installments check accounts and will charge the respective amount
with the interest rate up to the rate specified in Article I. paragraph 2
hereof as of the first day following the due repayment date for such an
amount until the amount has been discharged.
Sporitelna is entitled to charge a contractual penalty on any amount
overdue (installments, interests) equal up to 10% p. a., if the client will
not pay the installments or agreed interest stated in Article IV.
VI.
1. Sporitelna is entitled to charge the Client for the services in connection
with the provision, administration and enforcement of the loan facilities
as well as with the interest payment a fee listed on the Ceska sporitelna,
a. s., Price List applicable for banking transactions made in Czech Crowns
and being in force on the date of billing the respective transaction.
2. The Client agree to pay to Sporitelna the fees charged pursuant to
Paragraph 1 of this Article by the last day of each quarter of the year
beginning with the 4th quarter of the year 1996.
VII.
1. The Client undertakes to maintain the current (checking) account No.
324951-988/0800 with Ceska sporitelna, a. s., Subsidiary in Prague, for the
entire period of the loan. Moreover, the Client undertakes to place or to
keep in this account such an amount of money that at any time the
Sporitelna receivables become due the amount credited to the account be
sufficient to cover such receivables according to the following Paragraph
of this Article.
2. The Client agrees that Sporitelna may cover its receivables becoming due in
the course of discharging the loan (such as payable installments, interest,
fees and contractual penalty under Article V. hereof ) out of the current
account No. 324951-998/0800 maintained pursuant to Paragraph 1 of this
Article with the Ceska sporitelna, a. s. Subsidiary in Prague, without the
necessity to receive any prior Client's order or advising the Client
thereof. In addition, the Client authorizes Sporitelna to issue the payment
documents required to settle the respective amounts and to make the
payments thereof at the due date of the said receivables prior to other
payments which Sporitelna should make out of the above current account
following the Client's order on this date.
3
<PAGE>
3. As to the contractual penalty agreed in Article V. hereof the right to
charge it is established on the moment when Sporitelna acknowledges the
breach of the Client's duties as stated in Article V. paragraph 2 of this
Agreement.
4. By payment of the contractual penalty the right of Sporitelna to be
compensated for damages incurred by Sporitelna due to the non-fulfillment
of the Clients obligations secured by this contractual penalty according to
the Article V. paragraph 2 of this Agreement remains unaffected.
VIII.
1. Besides the right to check the purpose for which the loan is disbursed
Sporitelna is entitled to examine the Client's financial standing and other
facts concerning the Client which existence could result in the necessity
to change the contractual conditions and terms on and subject to which the
loan has been provided or in jeopardizing the repayment of the loan. The
Client agrees to enable the Sporitelna to inspect and to examine the
Client's financial standing and other circumstances set out in this
Paragraph.
2. In order to secure the Sporitelna's rights defined in Paragraph 1 of this
Article the Client covenants:
- to promptly notify Sporitelna of all facts which might be prejudicial
to the loan repayment or as the case may be could result in any change
of the conditions and terms on and subject to which the loan has been
provided, especially the Client shall notify Sporitelna of any change
to the Client's assets (property) extending beyond the ordinary course
of business and in addition shall submit the updated financial and
income statements if the premises under which the Loan Agreement was
made have Changed;
n- to inform Sporitelna on any changes to its organization and legal
status (such as merger, division, entry of another quota holder, quota
holder's death, changes in the Company's statutory bodies, going to
bankruptcy and settlement procedure, alterations to small trade
license or the Commercial Register etc.) which duty applies also to
the preparation stage thereof or the time before starting of the
respective procedure. The Client also undertakes to provide Sporitelna
with a proof that the above indicated changes actually exist;
- to inform Sporitelna of its intention to transfer the object with
respect to which the loan has been provided to another legal entity
before such intention has been effected and to ask Sporitelna for its
consent thereto.
At any time before the Loan has been fully repaid the Client undertakes to
assume no action which might even partly jeopardize the satisfaction of the
Sporitelna as creditor.
4
<PAGE>
IX.
Should Sporitelna in exercising its rights under Article VIII. above determine
any fact which could be prejudicial to the loan repayment especially if the
Client fails to perform its duties, Sporitelna will be entitled to take with
respect to the Client to suspend further loan disbursements if the loan has not
been yet paid out in full and to discuss immediately such situation with the
Client with the objective to take measures to remedy the situation,
X.
In respect of the character of the loan transaction the parties hereunder have
agreed to provide the following security of the monetary receivables and its
accessories payable to Sporitelna under this Loan Agreement:
- the Agreement on a Future Agreement between Ceska sporitelna, a.s.,
and CME Media Enterprises B.V. concluded on August 1, 1996.
XI.
The parties hereunder agree that the following events establish a material
breach of this Agreement:
a) the Client will use the loan in contradiction with the purpose as
stated in Article I paragraph 1;
b) the Client is in arrears with payment of at least two installments for
more than three months;
c) the Client is in arrears with payment of interest for more than three
months;
d) the Client has been dissolved as entrepreneurial entity;
5
<PAGE>
2. Should the above circumstances as stated in paragraph 1 of this Agreement
occur Sporitelna will be entitled to terminate the Agreement or to give a
notice of termination and to request the repayment of all the loan (or its
amounts actually disbursed) including interest and all payable receivables.
The termination shall take effect on the day of its delivery in writing to
the Client. The notice of termination is to be given one month in advance
and begins with the first day of the calendar month next following the
month in which the notice was served.
3. In any other case of violation of the duties on the part of the Client and
affecting the relations arising from this Agreement Sporitelna shall be
entitled to terminate the Agreement by giving a one month prior notice. The
paragraph 2 shall be effective in this case.
4. The Client is entitled to terminate this Agreement without stating grounds
by giving one month prior notice. The Client is however obligated to repay
all disbursement on the loan together with their accessories as well as any
outstanding receivables payable to Sporitelna. The notice of termination
begins as stated in paragraph 2.
5. All notices are deemed orderly served beginning with the third day
following the return to Sporitelna of the notice letter which could not
have been delivered if the letter had been sent over to the Client's
registered office address determined on the date of execution of this
Agreement or to its last known address notified by the Client in writing.
XII.
1. The Client agrees that Sporitelna discloses, if it thinks practicable and
reasonable, a banker's information referred to in Section 38 paragraph 1 of
the Act on Banks (Bank Secrecy) to satisfy the needs of financial
institutions. To ensure due payment transactions Sporitelna may upon a
written request of another bank provide particulars of the Client's bank.
2. Unless provided otherwise in this Agreement the relations between the
Client and Sporitelna are governed by the applicable law and regulations.
6
<PAGE>
XIII.
1. This Agreement takes effect on the day of its signing by both the parties
hereunder and ends, except of the events defined in Article XI. hereof by
fulfillment of all obligations arising from this Agreement.
2. Any modifications to any particular part of this Agreement may be made only
by agreement of both parties hereof and in the form of written amendments.
3. Both parties hereof agree that by any amendment to this Loan Agreement no
change may be made which would result in increase on the agreed total loan
amount, change to the purpose for which the loan has been provided or
change in the person of the debtor. All such modification may be made only
by execution of a new loan agreement.
XIV.
1. This Agreement shall be governed by the laws of the Czech Republic.
2. This Agreement has been made in two counterparts of which each has power of
the Loan Agreement original deed.
3. Sporitelna has obtained one counterpart and the Client has also obtained
one counterpart of the Agreement.
In Prague, date: August 1, 1996 In Prague, date: August 1, 1996
On behalf of Sporitelna: On behalf of Client:
------------------------------- -------------------------------
JUDr. Karel Kotrba Leonard M. Fertig
_______________________________ Passport No.: _________
JUDr. Rudolf Hanus
The personal identity and the
Signature has been proved by:
-------------------------------
(Name and signature of the
Sporitelna's official)
7
Ceska sporitelna, a. s.
Prague Central Office
Loan Department
Section of Loan Transactions
This day, month, and year, with reference to Section 289 and following
provisions of the Act No. 513/1991 Coll., as later amended (hereinafter referred
to as "Commercial Code"),
Ceska sporitelna, a. s., with the registered office at Prague 1, Na Prikope 29,
113 98, OIN: 45 24 47 82, represented by JUDR. Karel Kotrba, the Vice-Chairman
of the Board of Directors and the First Deputy to the General Director and JUDR.
Rudolf Hanus, the Member of the Board of Directors and the Deputy to the General
Director
(hereinafter called "the Authorized Party")
and
CME Media Enterprises B. V., with the registered office at Amsterdam, the
Netherlands, Leidseplein 29, represented by Leonard Martin Fertig, Managing
Director
(hereinafter called "the Committed Party")
(hereinafter jointly called "the Parties")
enter into the following
AGREEMENT ON A FUTURE AGREEMENT
I.
The Parties state that on this day, month, and year, they have already closed:
a) the Agreement on Transfer of the Participation Interest, in which the
Authorized Party transfers to the Committed Party a parts of the Participation
Interest in Ceska nezavisla televizni spolecnost, limited liability company,
with
<PAGE>
its registered office at Prague 1, Vladislavova 20, OIN: 49 61 66 68
(hereinafter only "Television Company"), which share is representative of the
contribution of 80,000,000 CZK (in words: eighty million Czech crowns), and in
which the Parties have agreed on the option right of the Committed Party to the
remaining part of the Participation Interest of the Authorized Party in the
Television Company which is representative of the contribution of 8,000,000 CZK
(in words: eight million Czech crowns) (hereinafter only "Agreement on Transfer
of Participation Interest")
b) the Loan Agreement subject to which the Authorized Party undertakes to confer
on the Committed Party an investment loan which is to be used for covering of a
portion of compensation for the transfer of the Participation Interest in
accordance with the Agreement on Transfer of the Participation Interest
(hereinafter only "Loan Agreement")
II.
1. The Parties have agreed that by the 90th (in words: ninetieth) day following
the date on which this Agreement takes effect the Parties enter into an
Agreement on Transfer of a Part of the Participation Interest of the Committed
Party in the Television Company, which is equal to the capital contribution of
80,000,000 CZK (in words: eighty million Czech Crowns), whereby the Committed
Party will transfer to the Authorized party that part of the Participation
Interest at a price that will be equal to the market price of the part of the
Participation Interest in the Television Company as determined by an independent
internationally recognized auditor agreed upon by both Parties, but which price
shall in no case be lower than the price that the Committed Party has paid to
the Authorized Party at the date of signing of the Agreement on Transfer of an
Participation Interest.
2. The Parties have agreed that if the option as per Article I. a) of this
Agreement is exercised, then by the 90th (in words: ninetieth) day following the
date on which this Agreement has become effective the Parties shall enter into
an Agreement on Transfer of a Part of Participation Interest of the Committed
Party in the Television Company, which is equal to the capital contribution of
88,000,000 CZK (in words: eighty eight million Czech Crowns), whereby the
Committed Party will transfer to the Authorized party that part of the
Participation Interest at a price that will be equal to the market price of the
part of the Participation Interest in the Television Company as determined by an
independent internationally recognized auditor agreed upon by both the Parties,
but which price will in no case be lower than the price that the Committed Party
<PAGE>
has paid to the Authorized Party at the date of the signing of the Agreement on
Transfer of an Participation Interest.
III.
For the purpose of closing the Agreement as per Article II. of this Agreement,
the Parties undertake to develop the necessary cooperation, to make necessary
decisions, and to take any additional necessary steps.
IV.
If the Committed Party fails to fulfill the commitment to close the Agreement as
per Article II. of this Agreement or any other commitments as per Article II.,
the Authorized Party can demand that the contents of the Agreement be determined
by the Court with jurisdiction or by a person designated by the Authorized
Party.
V.
In the event that the Committed Party refuses to enter with the Authorized Party
into the Agreement under Article II hereof or if the Committed Party refuses to
enter into such an Agreement under the conditions and terms set forth in Article
II., or in the event that the Committed Party fails to receive the required
consent of the Participants, the Television Company's bodies, or other
authorities whose approval may be necessary for the closing of such an Agreement
on Transfer of an Participation Interest to the Authorized Party, the Committed
Party undertakes to pay the Authorized Party a contractual penalty in the amount
of the non repaid portion of the Loan extended by the Authorized Party to the
Committed Party in accordance with the Loan Agreement, including accessories.
VI.
1. This Agreement is governed by the laws of the Czech Republic.
2. Arbitration Clause:
<PAGE>
2.1 All property disputes between the Parties that may arise from or in
connection with this Agreement including its breach, validity, and rights in
connection therewith and that could be settled by conciliation in accordance
with the provisions of Section 99 of the Civil Court Proceedings Rules, will be
finally decided in accordance with the Act No. 216/1994 Coll., on Arbitration
proceedings and on Implementation of Arbitration Awards, will be resolved by
three arbitrators.
2.2 Each Party shall appoint one arbitrator, and the appointed arbitrators shall
designate one presiding arbitrator. If the Party that should appoint an
arbitrator fails to do so within thirty days following the receipt of a notice
by the other party, or if the appointed arbitrators are unable to agree on the
person of the presiding arbitrator within the same period of time, the
arbitrator or the presiding arbitrator will be appointed by Court.
2.3 Arbitration proceedings shall be held in Prague.
2.4 In making the decision, the arbitrators shall follow the Czech Republic
substantive law applicable to such dispute, but they can decide the dispute in
accordance with the equity principles, for which application they have the
expressed authorization of the Parties.
2.5 The Parties undertake to respect the announced arbitration award, and to
fulfill it immediately.
3. This Agreement has been made in the Czech and English languages however the
Czech version shall prevail.
VII.
This Agreement enters into force on the date of its signing by both the Parties.
The Agreement takes effect on the fruitless expiration of the 180th (in words:
one hundred eightieth) day following the date as of which the Committed Party
should have paid but failed to pay an installment stipulated for the repayment
of the extended Loan under the Loan Agreement.
<PAGE>
VIII.
Any changes to this Agreement can be made in writing only, in the form of
supplements subject the consent of both the Parties. This Agreement has been
executed in two copies in each language version, having the validity of the
original, and each Party will receive one copy of each version.
IX.
The Parties confirm that this Agreement expresses their true and free will to
fulfill the aforementioned arrangements. The Parties declare that they have read
this Agreement, that they agree to its content, and that this Agreement was not
negotiated under duress or under unilaterally unfavorable conditions. In
evidence whereof, the authorized representatives of the Parties affix their
signatures hereto.
In Prague on August 1, 1996
for the Authorized Party for the Committed Party
Ceska sporitelna, a. s. CME MEDIA ENTERPRISES B. V.
with the registered office with the registered office
at Prague 1, Na Prikope 29 in the Netherlands, Amsterdam,
Leidseplein 29
________________________________ ___________________________
JUDR. Karel Kotrba Leonard Martin Fertig
Vice-Chairman of the Board of Managing Director
Directors and the First Deputy
to the General Director
________________________________
JUDR. Rudolf Hanus
Member of the Board of Directors
and the Deputy to the General Director
I hereby certify that this photocopy is a true and exact
copy of the produced original o 4 pages.
<PAGE>
Notary's office, Prague 1, Jindrisska 20
date: 1 August 1996
/Signature/ /Seal/
Mgr. Petr Michal Mgr. Sarka Zwierzynova
Assistant notary Notary in Prague
by authorization of
the Notary in Prague
Sarka Zwierzynova
--------------------
I, the undersigned sworn interpreter of English language (appointed by the
Decree of Minister of Justice, Ref.No.1940/85), hereby certify that the above is
a true and exact translation of the Document written in the Czech language and
attached hereto.
In Prague Petr Rezac
Date, August 2, 1996 Severovychodni-VI 629/9
141 00 Prague 4
Tel./Fax No. 02/764457
DATED JULY 16, 1996
CME MEDIA ENTERPRISES B.V.
as Borrower
and
ING BANK N.V.
as Lender
----------------------------
FACILITY AGREEMENT
US$ 10,000,000
----------------------------
<PAGE>
CONTENTS
Number Clause Heading Page
----
1. Definitions...................................................... 1
2. Terms and Conditions of the Credit Facility...................... 3
2.1 Amount and currency.............................................. 3
2.2 Purpose ......................................................... 3
2.3 Availability..................................................... 3
2.4 Interest Rate and payment of Interest............................ 3
2.5 Fees............................................................. 3
2.6 Drawdown and Final Maturity...................................... 3
2.7 Security......................................................... 4
2.8 Particular Covenants............................................. 4
2.9 Conditions Precedent............................................. 4
2.10 Expenses......................................................... 4
3. General Terms and Conditions of the Credit Facility.............. 4
3.1 Termination...................................................... 4
3.2 Prepayment by the Borrower....................................... 4
3.3 Payment by the Borrower.......................................... 5
3.4 Method of Drawing of Advances and Selection of Interest Periods.. 5
3.5 Notice of Drawing: Indemnification............................... 5
3.6 Increase of costs................................................ 5
3.7 Representations and Warranties................................... 6
3.8 General Covenants................................................ 6
3.9 Default ......................................................... 7
3.10 Exercise of rights............................................... 8
3.11 General Conditions............................................... 8
3.12 Governing law / Choice of Jurisdiction........................... 8
3.13 Notices ......................................................... 8
Appendix
Appendix 1 Form of Notice of Drawing
Appendix 2 Form of Guarantee
Appendix 3 Form of Share Pledge Agreement
Appendix 4 The Bank's General Terms and Conditions
<PAGE>
THIS AGREEMENT is made on the 16th day of July 1996
BETWEEN:
1. CME MEDIA ENTERPRISES B.V., a company incorporated under the laws of The
Netherlands, with its principal offices at 1017 PS Amsterdam, Leidseplein
29, The Netherlands (the "Borrower")
2. ING BANK N.V., a company incorporated under the laws of The Netherlands,
with its principal offices at 1077 ZZ Amsterdam, Strawinskylaan 2631 and
its business address at 1102 MG Amsterdam, Bijlmerplein 888, The
Netherlands (the "Bank")
IT IS HEREBY AGREED as follows:
1. DEFINITIONS
In this Agreement, unless the context requires otherwise, the following
terms, as used herein, have the following respective meanings:
Advance: the principal amount of the advance made or to be made under the
Facility by the Bank to the Borrower pursuant to Section 2.3;
Banking Day: a day (other than a Saturday or Sunday) on which banks and
foreign exchange markets are generally open for business in London and
Amsterdam;
Borrowing Date: the date specified as the Borrowing Date in the Notice of
Drawing delivered by the Borrower to the Bank pursuant to Section 3.4;
Event of Default: as defined in Section 3.9;
Facility: as defined in Section 2.1;
Final Maturity Date: the earlier of (i) September 30, 1996 and (ii) the
date on which the Borrower has no obligation to the Bank under the Facility
and the Bank has no obligation to lend any funds to the Borrower under the
Facility;
Guarantee: the guarantee executed or to be executed by the Guarantors in
the form, or substantially in the form, set out in Appendix 2;
Guarantors: Central European Media Enterprises Ltd., a company incorporated
under the laws of Bermuda and Central European Media Enterprises N.V., a
company incorporated under the laws of the Netherlands Antilles jointly and
severally;
<PAGE>
Interest Period: for each Advance, the consecutive periods of one week or
one month (as specified by the Borrower in the Notice of Drawing or
otherwise determined pursuant to Section 3.4), each of which shall start on
the day of the last preceding such period, provided that (a) any Interest
Period which would otherwise end during the month preceding, or extend
beyond, the then anticipated Final Maturity Date, shall be of such duration
that it shall end on the Final Maturity Date, (b) if two or more Interest
Periods end at the same time, then, on the last day of those Interest
Periods, the Advances to which they relate shall be consolidated into (and
thereafter, except as otherwise provided herein, treated in all respects
as) a single Advance, and (c) any Interest Period that would otherwise end
on a day that is not a Banking Day shall be extended to the next succeeding
Banking Day.
LIBOR: in relation to any relevant sum and any relevant Interest Period:
a) the offered rate per annum, if any, for deposits in dollars (rounded
upwards to four decimal places) for the relevant Interest Period
appearing on Telerate Page 3750 on the Telerate Services (or such
other page or service as may replace Telerate Page 3750 or the
Telerate Service, as the case may be, for the purpose of displaying
London Interbank Offered Rates) (the "Telerate Screen") as at 11.00
a.m. on the Quotation Date.
b) if at or about such time the relevant rate does not appear on the
Telerate Screen for purposes of paragraph a) above, the rate per annum
determined by the Bank to be equal to the arithmetic mean (rounded
upwards, if not already such a multiple, to the nearest whole multiple
of 1/16th of 1%) of the respective rates (as notified to the Bank) by
each of the Reference Banks as being the rate per annum at which
deposits in dollars in an amount comparable to such sum are offered by
the Reference Banks to prime banks in the London Interbank Market
deposits in dollars for the relevant Interest Period at or about 11.00
a.m. on the Quotation Date.
Notice of Drawing: a notice in the form set out in Appendix 1;
Quotation Date: in relation to any relevant period, the day on which
quotations would ordinarily be given by prime banks in the London Interbank
Market for deposits in Dollars for delivery on the first day of that
period; provided that if there is more than one such day the Quotation Date
shall be the latest such day.
Reference Banks: Barclays Bank Plc, Bank of Tokyo, Bankers Trust Company of
New York and National Westminster Bank Plc, or any other bank agreed upon
between the Bank and the Borrower.
Share Pledge Agreement: the share pledge agreement executed or to be
executed among Central European Media Enterprises N.V., the Borrower and
the Bank in the form, or substantially in the form, set out in Appendix 3.;
- 2 -
<PAGE>
2. TERMS AND CONDITIONS OF THE CREDIT FACILITY
2.1 Amount and currency The Bank agrees, subject to the terms and conditions
set forth in this Agreement, to lend to the Borrower from time to time
amounts such that the aggregate principal amount lent by the Bank to the
Borrower shall not exceed US$ 10,000,000 (ten million U.S. dollars), at any
one time outstanding (the "Facility").
2.2 Purpose The Borrower shall use the proceeds of the Facility for the
financing of general working capital requirements for the development of
its broadcast operations.
2.3 Availability Each Advance shall be drawn in a principal amount of not less
than US$ 1,000,000 (one million U.S. dollars) and integral multiples
thereof.
2.4 Interest Rate and payment of Interest The Borrower agrees to pay to the
Bank interest in respect of any Advance at the rate of 1.6% per annum above
LIBOR.
Interest in respect of an Advance shall be due and payable on the earlier
of (a) the last day of any Interest Period relating to such Advance and (b)
any maturity prior to the stated maturity (by acceleration or otherwise) of
such Advance. Interest shall accrue on the principal amount of each Advance
commencing on the appropriate Borrowing Date until repaid in full at the
rate determined by the Bank in accordance with the provisions of this
Agreement in respect of the Interest Period chosen by the Borrower.
Interest shall be calculated on the number of calendar days actually
elapsed on the basis of a year of 360 days.
2.5 Fees The Borrower agrees to pay to the Bank the following fees and charges:
Closing fee: 0.50% flat on the aggregate principal maximum amount of
the Facility, payable to the Bank upon execution of this
Agreement; 0.25% of which will be reduced from any
arrangement/facility fee payable if the Bank enters into
another facility agreement with the Borrower and/or Central
European Media Enterprises N.V. within one year as of June
27, 1996.
Commitment Fee: 0,30% per annum on the average daily unused portion of
the Facility from the date of execution of (i) this
Agreement, (ii) the Guarantee and (iii) the Share Pledge
Agreement until the Final Maturity Date, payable on the
Final Maturity Date.
2.6 Drawdown and Final Maturity The Facility shall be effective as of the date
of the fulfillment of the conditions precedent as set forth in Section 2.9
hereof until the Final Maturity Date. All outstandings, including interest
and any other charges, must be fully repaid on the Final Maturity Date.
- 3 -
<PAGE>
2.7 Security In order to secure the payment of any and all amounts outstanding
under this Agreement, the following securities will be provided to the
Bank: (i) the Guarantee; (ii) the Share Pledge Agreement.
2.8 Particular Covenants The Borrower undertakes:
i that throughout the continuation of the Facility and so long as any
sum is or may become payable under this Agreement the Borrower will
not, unless the Bank otherwise agrees in writing, sell or transfer all
or any of its present or future assets which could have a material
adverse effect on its business or financial condition in respect of
its compliance with its obligations under this Agreement;
ii to register the pledge of shares pursuant to the Share Pledge
Agreement in the shareholdersregister of the Borrower and to provide
the Bank with a copy of the relevant pages of the shareholdersregister
within 20 (twenty) days as of the execution date of the Share Pledge
Agreement.
2.9 Conditions Precedent The Bank shall not be obliged to make the Facility
available to the Borrower unless and until the Bank has received (a) the
Closing fee in full, unless credited to the Bank against the first Advance
and (b) the following documents and evidence which shall be subject to the
satisfaction (or waiver) by the Bank:
(i) this Agreement duly executed by the parties;
(ii) the Guarantee duly executed by the Guarantors;
(iii) the Share Pledge Agreement duly executed by Central European Media
Enterprises N.V., the Borrower and the Bank.
2.10 Expenses The Borrower agrees to reimburse the Bank for actual expenses,
including legal fees, if any, incurred by the Bank for the preparation of
this Agreement and all related agreements thereto.
3. GENERAL TERMS AND CONDITIONS OF THE CREDIT FACILITY
3.1 Termination Without prejudice to any other provision of this Agreement, the
principal amounts of each Advance (together with interest due but not yet
paid) and other charges, if any, shall be due and payable on the Final
Maturity Date.
3.2 Prepayment by the Borrower The Borrower may prepay any or all Advances
without premium or penalty, in whole or in part, in amounts not less than
US$ 1,000,000 and integral multiples of US$ 1,000,000 by paying to the Bank
the principal amount being prepaid, together with all accrued interest on
such Advance
- 4 -
<PAGE>
or Advances to the date of prepayment on the last day of an Interest
Period. Amounts so prepaid may not be reborrowed.
3.3 Payment by the Borrower Any payments by the Borrower hereunder shall be
made on the relevant due date in funds immediately available in New York
City to the Bank at the Bank's account number 001.1.643293 with the Chase
Manhattan Bank in New York City or at such other account as the Bank may
hereafter specify by prior written notice to the Borrower. Whenever any
payment of principal of, or interest on, any Advance shall be due on a day
which is not a Banking Day, the date for payment thereof shall be extended
to the next succeeding Banking Day, provided that, if such next succeeding
Banking Day is in a calendar month other than the calendar month in which
the date for payment would otherwise fall, the date for payment shall be
the immediately preceding Banking Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
3.4 Method of Drawing of Advances and Selection of Interest Periods
a) The Borrower shall give the Bank a Notice of Drawing at or before
11.00 a.m. (Amsterdam time) on the third Banking Day before the
proposed date specifying (a) the proposed Borrowing Date, which shall
be a Banking Day not less than two weeks prior to the Final Maturity
Date, (b) the amount of the Advance and (c) the relevant Interest
Period for such Advance which might be an Interest Period of one week
or one month for the Advance in question; if the Borrower fails to
make such a selection for the Interest Period, the Interest Period for
any Advance shall be one week.
b) Subject to the terms and conditions set forth in this Agreement, not
later than 11.00 a.m. (Amsterdam time) on the Borrowing Date, the Bank
shall make available the amount of any Advance as specified in the
relevant Notice of Drawing in funds immediately available in
Amsterdam, to the Borrower at its account number 02.19.91.642 at the
Bank (in Amsterdam), or at such other accounts in such other locations
as the Borrower may specify by prior written notice to the Bank.
3.5 Notice of Drawing: Indemnification If for any reason an Advance is not
drawn in accordance with a Notice of Drawing, the Borrower shall on demand
pay to the Bank such amount (if any) as the Bank may certify to be
necessary to indemnify or compensate it for any loss or expense incurred in
liquidating or redeploying funds acquired or arranged for the purpose of
the proposed Advance or in terminating any such arrangement or otherwise as
a consequence of the proposed Advance not having been drawn in accordance
with the Notice of Drawing.
3.6 Increase of costs The Bank shall promptly notify the Borrower of any
increased costs incurred by the Bank by reason of the introduction of, or
any change in, any law or regulation applicable to the Bank. In such case,
the Borrower shall pay to the Bank from time to time on demand such
additional amounts as the Bank may certify to be necessary to compensate
the Bank for such increased costs. Such
- 5 -
<PAGE>
certificate shall be conclusive and binding on the Borrower in the absence
of manifest error. The Borrower shall be at liberty at any time after
receipt of such notice, to prepay all or part of the amounts outstanding
under the Facility.
3.7 Representations and Warranties The Borrower represents and warrants to the
Bank that:
i the Borrower is a company duly incorporated and validly existing under
the laws of the Netherlands and has the power and authority to own and
dispose of its properties, has all licenses and approvals which are
material to conduct its business and to enter into and consummate the
transactions contemplated in this Agreement;
ii the making and performance of this Agreement have been duly and
validly authorized by all necessary corporate action on behalf of the
Borrower;
iii the Borrower's shareholding, corporate structure and activities as
submitted to the Bank by the Borrower fairly, accurately and fully
represent the situation of the Borrower and its shareholder and
subsidiaries;
iv there is no litigation or other proceedings presently in process,
pending or threatening that might have a material adverse effect on
the Borrower's business or financial condition in respect of its
compliance with its obligations under this Agreement.
3.8 General Covenants The Borrower agrees that until full and final repayment
of all indebtedness and liabilities incurred hereunder has been received
and unless the Bank waives compliance in writing, the Borrower will:
i as soon as possible after becoming aware of it, give prompt notice to
the Bank of any and all Events of Default under the terms of this
Agreement;
ii give prompt written notice to the Bank of any significant changes in
its shareholding and/or its corporate structure;
iii supply the Bank with the following:
a) latest financial statements (balance sheet and profit & loss
account) of the Borrower;
b) upon request by the Bank, the Borrower will provide the Bank with
periodic information regarding the development of the business
activities of the Borrower;
c) any other information concerning the affairs of the Borrower
which is relevant to the Facility or which the Bank may
reasonably request.
- 6 -
<PAGE>
iv not (a) consolidate or merge with or into any other party, (b)
liquidate, wind up or dissolve itself, (c) pledge, hypothecate,
abandon, lease, directly or indirectly, all or any part of its assets
(except in the ordinary course of business);
v the Facility is offered on the basis that the Bank ranks at least
pari-passu with all other present and future unsecured and
unsubordinated indebtedness of the Borrower.
3.9 Default The principal of, accrued interest on any and all outstanding
amounts, as well as possible other charges - as the case may be - under
this Agreement shall become immediately due and payable at the option of
and upon first written demand by the Bank, if any of the following events
(each an Event of Default) occurs:
i payment of any amount is not received by the Bank when due and such
failure continues for a period of 5 (five) Banking Days without
remedy;
ii any formal action is taken to reorganize, wind up, liquidate or
dissolve the Borrower;
iii any representation or warranty made by the Borrower under this
Agreement or by Central European Media Enterprises N.V. pursuant to
the Share Pledge Agreement or any certificate or document furnished
pursuant hereto or thereto shall at any time prove to be incorrect in
any material respect when so made, deemed made or furnished;
iv the Borrower shall default in the performance of any term, covenant or
agreement contained in this Agreement (other than Section 3.9 (i) and
such failure continues for a period of 10 (ten) Banking Days without
remedy;
v the Borrower shall have been called in default in the performance of
any other agreement between the Borrower and the Bank, provided
however, that such default is likely to have a material adverse effect
on the business or financial condition of the Borrower in respect of
its compliance with its obligations under this Agreement;
vi if there shall occur any material adverse change in the assets or
operation or financial conditions of the Borrower which, in the
opinion of the Bank, may reasonably be expected to affect the ability
of the Borrower to comply with all or any of its respective
obligations hereunder;
vii if the Borrower files a petition for bankruptcy ("faillissement"), if
such petition is filed against the Borrower, if the Borrower is
declared bankrupt or insolvent, or if the Borrower applies for a
moratorium of payment ("surseance van betaling");
- 7 -
<PAGE>
Upon becoming aware of an Event of Default, the Bank shall promptly notify
the Borrower of the Event of Default in writing. Such notice of an Event of
Default shall also entitle the Bank, in its sole discretion, to enforce any
collateral granted in connection with the obligations of the Borrower under
this Agreement at any time after the last day of the Remedy Period.
The Borrower shall hold the Bank harmless of and indemnify the Bank against
any losses or expenses which the Bank may sustain or incur as a consequence
of any Event of Default as stipulated hereinabove.
The interest rate applicable to such amounts in default shall be the rate
specified in Section 2.4 plus an additional 2% (two percent) per annum from
the date of the Event of Default until the actual date of payment of such
amounts.
3.10 Exercise of rights Failure and/or delay on the part of the Bank in
exercising any right or power under this Agreement shall not operate as a
waiver thereof, unless signed by the Bank in writing; nor shall any single
or partial exercise of any such right or power preclude any other or future
exercise thereof or the exercise of any other power or right. The rights
and remedies provided for in this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.
3.11 General Conditions The Bank's General Terms and Conditions, as in effect
from time to time, and as set forth in Appendix 4 shall supplement the
terms of this Agreement, provided that in the event of any conflict between
the Bank's General Terms and Conditions and the terms of this Agreement,
the terms of this Agreement shall prevail.
3.12 Governing law This agreement shall be governed and construed in accordance
with the laws of the Netherlands.
Choice of Jurisdiction The parties hereto submit, in the Bank's interest,
to the non-exclusive jurisdiction of the District Court of Amsterdam, the
Netherlands, in connection with any conflicts and disputes arising out of
or in connection with this Agreement.
3.13 Notices All notices, requests and other communications hereunder shall be
in writing (facsimile transmission or similar writing). Each such notice,
request or other communication shall be effective if given by facsimile
transmission, when received or if given by any other means, when delivered
at the address specified in this Section. Any such notice, request, demand
or communication shall be delivered or addressed as follows:
(i) if to the Borrower, to it at:
CME Media Enterprises B.V.
Leidseplein 29
1017 PS Amsterdam
The Netherlands
- 8 -
<PAGE>
Attn.: Victoria Rogers
Facsimile: (31) 20 638 4022
with copies to:
CME Group
18 D'Arblay Street
London W1V 3FP
United Kingdom
Attn.: Mr. John Diess
Facsimile: 44 171 292 7903
(ii) if to the Bank, to it at:
ING Bank N.V.
De Amsterdamse Poort
Amsterdam-Zuidoost
P.O. Box 1800, HE 02.02
1000 BV Amsterdam
The Netherlands
Facsimile: (31) 20 563 5505
Attn.: Erica Bischoff
or at such other address or telex number as any party hereto may designate
by written notice to the other party hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered by their duly authorized officers as of the day and year first
above written.
CME MEDIA ENTERPRISES B.V. ING BANK N.V.
- ------------------------- -------------------------
By: By:
Title: Title:
- ------------------------- -------------------------
By: By:
Title: Title:
- 9 -
<PAGE>
APPENDIX 1
FORM OF NOTICE OF DRAWING
ING Bank N.V.
Attn.: Media Finance Group
Bijlmerplein 888
1102 MG AMSTERDAM-Z.O.
The Netherlands
US$ 10,000,000 Facility Agreement
Gentlemen:
Pursuant to the provisions of the Facility Agreement dated July __, 1996 (the
"Facility Agreement") among CME Media Enterprises B.V. (the "Borrower") and ING
Bank N.V. (the "Bank"), the Borrower hereby request that the Bank makes an
Advance in the aggregate amount of US$ __________ on ________________, being a
Banking Date (the "Borrowing Date") and hereby designates the Interest Period of
an Advance to be
______________.
The undersigned hereby certifies that after due investigation:
(a) the Borrower has performed and complied with all agreements and conditions
contained in the Facility Agreement required to be performed or complied
with by it prior to or on the date hereof;
(b) no Event of Default has occurred and is continuing on the date hereof; and
(c) the representations and warranties of the Borrower contained in the
Facility Agreement were true, complete and correct when made and are true,
complete and correct on the date hereof.
All capitalized terms not otherwise defined herein shall have the same meaning
as set forth in the Facility Agreement.
IN WITNESS WHEREOF, this Notice of Drawing has been executed this ____ day of
________, 1996.
CME Media Enterprises B.V.
_________________________ _________________________
By: By:
Title: Title:
<PAGE>
APPENDIX 2
July ___, 1996
From: Central European Media Enterprises N.V.
Central European Media Enterprises Ltd.
TO: ING Bank N.V., Amsterdam (the "Bank")
Dear Sirs,
1. Central European Media Enterprises N.V. of Willemstad, Curacao, The
Nether-lands Antilles and Central European Media Enterprises Ltd. of
Bermuda, (collectively the "Guarantors" and each individually a
"Guarantor") refer to the facility letter from the Bank to CME Media
Enterprises B.V. of Amsterdam, The Nether- lands (the "Borrower") dated 10
July 1996 (the "Facility Letter") which term includes all variations
thereof from time to time in force) in relation to a proposed credit
facility of US$ 10 million.
2. In consideration of the Bank at the request of the Guarantors granting a
credit facility to the Borrower as described in the Facility Letter, the
Guarantors jointly and severally as primary obligor, unconditionally and
irrevocably (i) guarantee to the Bank by way of continuing guarantee the
payment when due of all amounts payable by the Borrower under the Facility
Letter, and (ii) agree that if and each time that the Borrower shall fail
to make any payments as and when the same become due under the Facility
Letter the Guarantors will on demand (without requiring the Bank first to
take steps against the Borrower, the other Guarantor, or any other person)
pay to the Bank such amounts (as to which the certificate of the Bank shall
in the absence of manifest error be conclusive) in the currency in which
such amounts are payable by the Borrower free of all deductions whatsoever
together with interest thereon from the date of demand until the date of
payment at the rate specified in the Facility Letter. If deductions must be
made by law then the Guarantors will pay such additional amounts as may be
necessary to ensure that the Bank receives the full amount provided for.
3. The obligations of each Guarantor hereunder shall not be affected by any
matter of thing which but for this provision might operate to affect such
obligations including without limitation (i) any time or indulgence granted
to or composition with the Borrower, the other Guarantor, or any other
person, (ii) the taking, variation, renewal or release of, or neglect to
perfect or enforce, any rights, remedies or securities against the
Borrower, the other Guarantor, or any other person or (iii) any
unenforceability or invalidity of, the other Guarantor, any obligations of
the
<PAGE>
Borrower so that this Guarantee shall be construed as if there were no such
unenforceability or invalidity.
4. Each Guarantor warrants that this Guarantee is its legally binding
obligation enforceable in accordance with its terms and that all necessary
governmental consents and authorisations for the giving and implementation
of this Guarantee have been obtained.
5. Until all amounts which may be or become payable under the Facility Letter
have been irrevocably paid in full, any Guarantor shall not by virtue of
this Guarantee be subrogated to any rights of the Bank or claim in
competition with the Bank against the Borrower, the other Guarantor, or any
other person.
6. The Guarantor will reimburse the Bank all costs incurred by the Bank in
connection with the preparation and the enforcement of this Guarantee.
7. This Guarantee shall be governed by with the laws of The Netherlands. For
the benefit of the Bank solely, each Guarantor hereby submits to the
jurisdiction of the Amsterdam courts.
Yours faithfully
_____________________
For and on behalf of
Central European Media Enterprises N.V.
_____________________
For and on behalf of
Central European Media Enterprises Ltd.
-13-
<PAGE>
APPENDIX 3
<PAGE>
APPENDIX 4
SHARE PLEDGE AGREEMENT
This day, the eighteenth day of July, nineteen hundred and ninety-six, appeared
before me, Monique Martina Johanna Maria Wijnhoven, Esq, deputy civil law notary
residing at Amsterdam, hereinafter referred to as the "civil law notary",
representing the office of Hendrik van Wilsum, Esq., a civil law notary in
Amsterdam, who is absent on leave: ___________ Mister Tjien Hauw Liem, Esq.,
deputy civil law notary, residing at 1186 BB Amstelveen, Karmel 10, born at
Jakarta, Indonesia, on the sixteenth day of March, nineteen hundred and
sixty-three, married, holder of the Dutch passport with number: M191593 acting
for the purposes hereof as attorney in fact of:
1. Central European Media Enterprises N.V., a limited liability company,
established under the laws of the Netherlands Antilles, having its
registered office at Curacao (Netherlands Antilles), and with address:
Kaya Douwe Zalm 1-L, Curacao, hereinafter referred to as the "Pledgor",
and as such representing the Pledgor;
2. ING Bank N.V., a limited liability company, having its registered
office at Amsterdam, with address: Strawinskylaan 2631, 1077 ZZ
Amsterdam, in this respect officiating at Bijlmerplein 888, 1102 MG
Amsterdam, hereinafter referred to as the "Pledgee", and as such
representing the Pledgee; and
3. CME Media Enterprises B.V., a private company with limited liability,
having its registered office at Amsterdam, The Netherlands, and with
address: Leidseplein 29, 1017 PS Amsterdam, hereinafter referred to as
the "Company", and as such representing the Company.
The powers of attorney granted to the deponent, the existence of which has been
sufficiently demonstrated to me, a civil law notary, are evidenced by three
non-notarial powers of attorney which will be attached to this document.
The deponents have declared:
WHEREAS:
- - On the sixteenth day of July, nineteen hundred ninety-six the Pledgee
and the Company entered into a Facility Agreement (hereinafter referred
to as the "Facility Agreement") with regard to a credit facility up to
a principal aggregate amount of ten million United States Dollars (US$
10,000,000.--), granted by the Pledgee to the Company under the terms
and conditions as set forth in the Facility Agreement.
- - Under section 2.7 of the Facility Agreement, the Pledgor (as well as
another party) shall grant to the Pledgee, in order to secure the
payment of any and all amounts outstanding under the Facility
Agreement, irrevocable and unconditional guarantee (hereinafter
referred to as the "Guarantee").
- - In order to effectuate the Guarantee, the Pledgor has issued a letter
to the Pledgee, a copy of which is attached hereto (hereinafter
referred to as the "Guarantee Letter"), in which the Pledgor
unconditionally and irrevocably, by way of continuing guaranty
guarantees the payment when due of all amounts payable by the Pledgor
under the Facility Agreement, under all such terms and conditions as
specified in the Guarantee Letter.
DESCRIPTION OF THE SHARES
1. The Pledgor is holder of the following shares in the Company's capital
stock:
- the one hundred and ninety-nine thousand nine hundred
ninety-eight (199,998) shares, numbered 1 up to and including
199,998, each share with a par value of one Dutch Guilder (NLG
1.--), which shares will hereinafter be referred to as the
"Shares".
The Pledgor acquired the Shares following a share transfer pursuant to
a notarial deed of share transfer, executed before H. van Wilsum, Esq.,
a civil law notary in Amsterdam, on the nineteenth day of September
nineteen hundred and ninety-four.
2. The Articles of Incorporation of the Company do not exclude the right
to create a pledge on shares of the Company.
CREATION OF PLEDGE / PROVISIONS
Article 1.
Pledge ("vestiging van pandrecht")
1.1 The Pledgor hereby grants a first ranking right of pledge on the Shares
to the Pledgee and the Pledgee hereby accepts such pledge from the
Pledgor.
1.2 The pledge as described in Article 1.1. shall be a security for any and
all of the present or future, actual or contingent obligations owed to
the Pledgee by the Pledgor, pursuant to the Guarantee Letter.
Article 2.
Warranties
2.1 The Pledgor represents, warrants and guarantees that:
a. the Shares constitute one hundred percent (100%) of the issued
and outstanding capital stock of the Company;
b. the Shares are owned by the Pledgor free and clear in full and
unencumbered ownership and there is no right of usufruct,
charge, lien or other encumbrance of whatever nature on the
Shares, except for the pledge created by this deed, and no
depositary receipts in respect to the Shares have been issued;
c. the Pledgor is entitled and has full legal capacity to pledge
the Shares to the Pledgee;
d. the Shares have been fully paid-up;
e. the execution and performance of this deed does not and will
not violate or contravene:
- any provisions of the laws of the Netherlands;
- the Articles of Incorporation of the Pledgor;
- any credit, loan, pledge or other agreement binding on
the Pledgor;
f. the Company has not been dissolved and no resolution to
dissolve the Company has been adopted by its general meeting
of shareholders;
g. this deed creates a valid first ranking right of pledge over
the Shares in favor of the Pledgee.
Article 2.
Voting rights
For the duration of this Pledge the voting rights in respect of the Shares shall
remain vested in the Pledgor.
The Pledgee does not have the rights conferred by law on holders of depositary
receipts issued for shares with the cooperation of a company.
Article 3.
Default
3.1. If and when the Pledgor is in default:
a. the Pledgee shall be entitled to exercise all rights and to
pursue all remedies which are granted to it under Netherlands
law, which rights and remedies include:
- a public sale of the Shares in accordance with and
subject to Netherlands law; or
- a sale of the Shares in a manner prescribed by the
president of the competent Netherlands court,
including the possibility to accept the Shares in
payment of the debt, or part thereof, for an amount
to be determined by such court, whereby in all cases
the net proceeds of such sale or the amount
determined by the competent court for which the
Shares shall remain with the Pledgee, as the case may
be, are deducted from the outstanding debt, including
principal sum, interest, fee and costs. The
restrictions with respect to a transfer of shares as
may be provided in the Articles of Incorporation of
the Company shall apply to the transfer of the Shares
by the Pledgee, or the remaining of the Shares with
the Pledgee. The Pledgee shall exercise all rights to
which the Pledgor is entitled in respect to the
transfer of shares of the Company. The Pledgor, in
its capacity as the Company's shareholder, shall be
under the obligation to adopt and to vote in favour
of a resolution to grant approval to a transfer of
the Shares by the Pledgee, or the remaining of the
Shares with the Pledgee, as required under the
transfer restrictions ("blokkeringsregeling") as
contained in the Company's Articles of Incorporation,
and hereby grants irrevocable power of attorney to
the Pledgee to adopt and to vote in favour of such
resolution on its behalf.
b. The Pledgee shall be entitled to collect any and all (cash)
dividends, (cash) distributions, and (cash) liquidation
proceeds with respect to the Shares.
Article 4.
Without the prior written consent of the Pledgee:
a. the Pledgor shall not create any (further) pledges, charges,
rights of usufruct, liens or other encumbrances of whatever
nature on the Shares, and will not transfer the Shares,
whether or not in exchange for depositary receipts;
b. the Company shall not give any cooperation to the issuance of
depositary receipts for shares in its capital stock.
Article 5.
Evidence
The existence and the size of debt, is fully evidenced by (extracts) from the
books and records of the Pledgee, provided that no contrary evidence is
produced.
Article 6.
Costs
All costs in connection with this agreement including costs incurred in
enforcing any rights under this agreement shall be for the account of the
Pledgor.
Article 7.
Termination
As soon as the pledge created under this agreement has terminated, in whole or
in part, the Pledgee shall, at the request and expense of the Pledgor, execute
and deliver to the Pledgor a proper instrument or instruments acknowledging the
satisfaction and termination of the pledge, or in case of a partial release,
indicating which shares have been released from this pledge.
Article 8.
No rescission
To the fullest extent permitted by applicable law, the Pledgor hereby waives its
right to rescind ("ontbinden") or avoid ("vernietigen") the legal acts
("rechtshandelingen") represented by this Deed.
Article 9.
Governing law
This agreement shall be governed by and construed in accordance with the laws of
The Netherlands.
Final provisions.
1. Acknowledgment
The Company acknowledges the present pledge and shall cause the required notes
to be entered into the shareholders' register of the Company. The Company shall
as soon as practicable after the execution of this Deed issue a certified copy
of the relevant pages of the shareholders' register of the Company evidencing
that the present pledge has been entered therein.
2. Headings
The underlined headings have been included for easy reference only.
The deponent is known to me, a civil law notary, and the identity of the
deponents of this deed has been established by means of the appropriate
documents mentioned above. WITNESSED THIS DEED, the original of which was drawn
up and executed in Amsterdam at the date first noted above.
After the purport of this deed was explained to the deponent, he declared that
he had taken note of its contents and waived a full reading thereof. After a
limited reading, this deed was subsequently signed by the deponent and me, a
civil law notary.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 26,948
<SECURITIES> 4,352
<RECEIVABLES> 37,528
<ALLOWANCES> (1,947)
<INVENTORY> 0
<CURRENT-ASSETS> 84,574
<PP&E> 71,564
<DEPRECIATION> (15,219)
<TOTAL-ASSETS> 213,445
<CURRENT-LIABILITIES> 53,236
<BONDS> 0
0
0
<COMMON> 185
<OTHER-SE> 186,309
<TOTAL-LIABILITY-AND-EQUITY> 213,445
<SALES> 61,805
<TOTAL-REVENUES> 61,805
<CGS> 40,801
<TOTAL-COSTS> 56,709
<OTHER-EXPENSES> (5,936)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,532
<INCOME-PRETAX> (2,923)
<INCOME-TAX> 8,313
<INCOME-CONTINUING> (12,380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,380)
<EPS-PRIMARY> (0.67)
<EPS-DILUTED> 0
</TABLE>
