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 September 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 November 13, 1996
- ----- -----------------------------------
Class A Common Stock, par value $.01 16,249,398
Class B Common Stock, par value $.01 7,592,903
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
($000s)
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1996 1995
(unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 14,309 53,210
Investments in marketable securities 1,817 10,652
Restricted cash 1,600 4,216
Accounts receivable (net of allowances of $2,148, $1,105) 22,051 32,475
Program rights costs 10,842 9,219
Value-added tax recoverable 67 733
Advances to affiliates 2,741 953
Prepaid expenses 6,749 5,270
-------- --------
Total current assets 60,176 116,728
INVESTMENT IN UNCONSOLIDATED AFFILIATES 39,830 12,433
LOANS TO AFFILIATES 24,306 6,272
PROPERTY, PLANT & EQUIPMENT (net of depreciation
of $18,549, $10,281) 58,131 51,699
PROGRAM RIGHTS COSTS 11,442 10,496
BROADCAST LICENSE COSTS AND OTHER INTANGIBLES (net
of amortization of $1,370, $1,007) 2,036 2,365
LICENSE ACQUISITION COSTS (net of amortization of $654, $54) 4,123 4,723
GOODWILL 29,644 1,510
ORGANIZATION COSTS (net of amortization of $858, $507) 1,044 1,337
DEVELOPMENT COSTS (net of allowance of $3,627, $4,373) 17,373 10,127
DEFERRED TAXES 1,734 559
OTHER ASSETS 3,158 3,778
-------- --------
Total assets 252,997 222,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY September 30, December 31,
1996 1995
------------- -----------
CURRENT LIABILITIES:
Accounts payable 11,997 12,956
Accrued liabilities 19,025 9,804
Duties and other taxes payable 1,030 288
Income taxes payable 7,885 15,946
Dividend payable 1,355 --
Current portion of obligations under capital lease 1,729 2,111
Current portion of credit facilities 25,402 2,661
Current portion of investment payable 10,864 --
Advances from affiliates 324 2,687
-------- --------
Total current liabilities 79,611 46,453
DEFERRED INCOME TAXES 2,886 2,317
OBLIGATIONS UNDER CAPITAL LEASE 7,740 8,747
LONG-TERM PORTION OF CREDIT FACILITIES 23,517 6,766
LONG-TERM PORTION OF INVESTMENT PAYABLE 20,415 --
OTHER LIABILITIES -- 173
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 7,356 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:
10,292,504 shares at September 30, 1996 and 10,294,549
at December 31, 1995 103 103
Class B Common Stock, $0.01 par value: authorized:
15,000,000 shares; issued and outstanding:
8,029,797 shares 80 81
Additional paid-in capital 186,521 187,997
176,872 Class A Treasury stock of $0.01 par value - retired -- (2,476)
-------- --------
186,521 185,521
Accumulated deficit (75,073) (48,001)
Cumulative currency translation adjustment (159) 1,232
-------- --------
Total shareholders' equity 111,472 138,936
-------- --------
Total liabilities and shareholders' equity 252,997 222,027
======== ========
</TABLE>
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Operations
($000s, except per share data)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------------- -------------------------
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
GROSS REVENUES 28,289 18,920 105,224 77,117
Discounts and agency commissions (5,857) (3,386) (20,987) (14,345)
----------------------- -------------------------
NET REVENUES 22,432 15,534 84,237 62,772
STATION EXPENSES:
Operating costs and expenses 11,594 6,487 36,017 19,691
Amortization of programming rights 5,171 3,313 15,440 9,805
Depreciation of station fixed assets and other intangibles 3,279 1,679 9,388 4,875
----------------------- -------------------------
Total station operating costs and expenses 20,044 11,479 60,845 34,371
Selling, general and administrative expenses 5,682 1,358 14,417 4,297
----------------------- -------------------------
CORPORATE EXPENSES:
Corporate operating costs and development expenses 4,218 2,551 10,728 7,090
Stock compensation charge -- 50 -- 860
Amortization of goodwill and allowance for development costs 744 600 1,407 1,500
----------------------- -------------------------
4,962 3,201 12,135 9,450
OPERATING (LOSS) INCOME (8,256) (504) (3,160) 14,654
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES (5,621) (3,927) (11,557) (10,693)
INTEREST AND OTHER INCOME 205 147 1,284 1,106
INTEREST EXPENSE (1,382) (1,375) (2,914) (3,509)
FOREIGN CURRENCY EXCHANGE (LOSS) GAIN 713 (47) (917) 68
----------------------- -------------------------
Net loss before provision for income taxes (14,341) (5,706) (17,264) 1,626
Provision for income taxes (885) (1,172) (9,198) (9,350)
-------- --------
Net loss before minority interest in consolidated subsidiaries (15,226) (6,878) (26,462) (7,724)
MINORITY INTEREST IN INCOME (LOSS)
OF CONSOLIDATED SUBSIDIARIES 534 (258) (610) (4,181)
----------------------- -------------------------
Net Loss (14,692) (7,136) (27,072) (11,905)
======================= ========================
PER SHARE DATA
Net loss per common share (0.80) (0.51) (1.48) (0.85)
Weighted average number of common shares outstanding (000's) 18,348 14,021 18,348 14,021
</TABLE>
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Cash Flows
($000s)
For the nine months
ended September 30,
-------------------
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (27,072) (11,905)
Adjustments to reconcile net loss to net cash
generated from operating activities:
Equity in loss of unconsolidated affiliates 11,557 10,693
Depreciation & amortization 27,175 14,680
Minority interest in income (loss) of consolidated
subsidiaries 610 4,181
Valuation allowance for development costs 253 1,500
Stock compensation charge -- 860
Changes in assets & liabilities:
Accounts receivable 9,239 (2,512)
Related party receivable -- 462
Program rights costs (18,656) (18,738)
Value-added tax recoverable 666 (98)
Advances to affiliates (4,174) --
Prepaid expenses (1,376) (3,472)
Other assets -- (60)
Accounts payable (736) (380)
Accrued liabilities 8,905 1,566
Income & other taxes payable (7,700) 7,707
Other liabilities -- 3,305
------- -------
Net cash from operating activities (1,309) 7,789
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated affiliates (32,684) (30,146)
Investments in marketable securities 8,835 2,592
Restricted cash 2,616 --
Acquisition of fixed assets (13,219) (5,110)
Acquisition of minority shareholder's interest (16,839) --
Purchase of subsidiary operation (2,962) --
Dividends paid to minority shareholders (1,396) --
Payments for broadcast license costs, other
assets and intangibles (137) (127)
Development costs (2,873) (6,312)
------- -------
Net cash used in investing activities (58,659) (39,103)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Current portion of credit facilities 22,770 (2,297)
Financing of acquisition of minority shareholder's
interest 16,839 --
Payments under capital lease (1,236) (1,274)
Loans to affiliates (18,034) --
Capital contributed by shareholders 999 --
Long-term payables (171) --
------- -------
Net cash used in financing activities 21,167 (3,571)
------- -------
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON CASH (100) 43
------- -------
Net decrease in cash and cash equivalents (38,901) (34,842)
CASH AND CASH EQUIVALENTS, beginning of period 53,210 42,002
------- -------
CASH AND CASH EQUIVALENTS, end of period 14,309 7,160
====== =====
6
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES, LTD.
Consolidated Statements of Shareholders' Equity (Deficit)
For the Nine Month Period Ended September 30, 1996
($000s)
<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 Transaltion Adjustment -- -- -- -- -- (1,391) (1,391)
Capoital contributed by Shareholders -- (1) 1,000 -- -- -- 999
REtirement of the Treasury Stock -- -- (2,476) 2,476 -- -- --
Net Loss -- -- -- -- (27,072) -- (27,072)
------- --- -------- ------- ------- ------- -------
BALANCE September 30, 1996 103 80 186,521 -- (75,073) (159) 111,472
======= === ======== ======= ======== ======= =======
</TABLE>
- ----------
(1) Of the accumulated deficit of $75,073,000 at September 30, 1996,
$43,938,000 represents loss in unconsolidated affiliates.
<PAGE>
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.
In the Czech Republic, the Company owns a 88% economic interest in Ceska
Nezavisla Televizni Spolecnost s.r.o. ("Nova TV"), the leading private national
television station in the Czech Republic. On August 1, 1996, the Company
increased its economic interest in Nova TV to 88% from 66% through the
acquisition of a 22% economic interest in Nova TV from Ceska Sporitelna Bank
("CS") (the "Additional Nova TV Purchase"). The Company is in the process of
registering the Additional Nova TV Purchase pursuant to Czech law. On an ongoing
basis, after giving effect to the Additional Nova TV Purchase, the Company is
entitled to 88.0% of the total profits of Nova TV and has 86.0% of the voting
power in Nova TV. CET 21 has a 12% equity interest in Nova TV. The Company
entered into an agreement to lend Dr. Vladimir Zelezny, General Director of Nova
TV, funds to finance his purchase of shares in CET 21 in order to increase his
ownership in CET 21 to 60.0%. This loan will mature in five years. As part of
this agreement, Dr. Zelezny has agreed to vote such shares in accordance with
the vote of the Company with respect to certain matters, including dividends.
In Romania, the Company and two local partners, Adrian Sarbu and Ion Tiriac
operate PRO TV, a commercial television network, through Media Pro International
S.A. ("Media Pro International"). 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%. PRO TV launched operations in December 1995 and reaches
approximately 48% of Romania's population. The Company intends to exercise its
option to purchase 49.0% of the equity of PRO TV, SRL, currently owned by
Messrs. Sarbu and Tiriac which holds many of the licenses for the stations which
comprise the PRO TV network. In September 1996, the Company acquired a 95.0%
equity interest in Unimedia SRL ("Unimedia"), which has agreed to acquire a
10.0% equity interest in a consortium, MobilRom ("MobilRom"). MobilRom has
applied for a telecommunications licenses in Romania. Adrian Sarbu owns the
remaining 5.0% of UniMedia. It is anticipated that MobilRom will not have active
operations unless it is awarded such a license.
In Slovenia, the Company launched POP TV in December 1995 together with
MMTV d.o.o. Ljubljana ("MMTV") (formerly known as Boutique MMTV) and Tele 59
d.o.o. Maribor ("Tele 59"), through the formation of Produkcija Plus d.o.o.
("Pro Plus"). POP TV provides programming to and sells advertising for MMTV,
Tele 59 and an additional affiliate, Robin TV. 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. POP TV reaches approximately 75% of
Slovenia's population. In July 1996, the Company, together with MMTV and Tele 59
entered into an agreement to purchase a 66.0% equity interest in Kanal A, a
privately owned television station in Slovenia, which competes with POP TV (the
"Kanal A Agreement"), which would increase POP TV's broadcast reach to
approximately 85% of the Slovenian population. There is currently an injunction
in effect preventing the completion of the Kanal A Agreement (See "Legal
Proceedings").
2
<PAGE>
In the Slovak Republic, the Company has an 80.0% economic and a 49.0%
voting interest in Slovenska Televizna Spolocnost s.r.o. ("STS") which launched
Markiza TV as a national television station on August 31, 1996. Markiza TV
reaches approximately 60% of the Slovak Republic's population.
In Hungary, the Company holds a 95% ownership interest in 2002 Consulting
and Servicing Limited Liability Company ("2002"), the entity through which the
Company intends to develop broadcast operations in Hungary. 2002 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.
The Company owns a 55.95% non-controlling interest in PULS ("PULS"), a
regional television station based in Berlin, Germany. The partners of PULS have
retained a financial advisor to seek one or more strategic partners for PULS.
Such a strategic partner would be expected to acquire a significant equity
interest in PULS and assume responsibility for PULS' operations. Such a
strategic investment would be anticipated to significantly dilute the Company's
equity investment in PULS and to decrease the Company's future funding
obligations to PULS. Such investment also could result in a material reduction
of the carrying value of the Company's equity investment in PULS, which is
$12,389,000 as of September 30, 1996, and a corresponding charge against the
Company's earnings in the period incurred. Regardless of whether a transaction
with a strategic investor is consummated, there is no assurance that the Company
may not have to take a reduction of all or a portion of the carrying value of
PULS. The Company owns 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 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, which operates regional
television stations in Leipzig and Dresden, Germany. A reduction of the carrying
value of PULS, or other factors, might cause the Company to reduce all or part
of the carrying value of the Company's investments in FFF and SFF, which were
$5,990,000 and $730,000, respectively, as of September 30, 1996. At the date of
filing the Company's Form 10-Q for the quarter ended September 30, 1996, the
Company does consider the value of PULS TV, FFF and SFF to be impaired.
In Ukraine, the Company recently acquired a 50.0% interest in a group of
companies, including Innova Film GmbH (collectively, the "Studio 1+1 Group"),
which has the right through August 2000 to broadcast programming and sell
advertising on one of Ukraine's public television stations, UT-1, for a
specified number of hours per week, including during prime time. In anticipation
of the privatization of all or part of the second Ukraine public television
station, UT-2, one of the partners of Studio 1+1 Group is actively seeking
rights to broadcast on UT-2. If such partner is successful in obtaining such
broadcast rights, the Company anticipates that the Studio 1+1 Group will
broadcast programming and sell advertising on UT-2 instead of UT-1. UT-1 reaches
approximately 98% of Ukraine's population while UT-2 reaches approximately 95%
of Ukraine's population. The Company's investment in Studio 1+1 Group of
$8,000,000, as of September 30, 1996, is classified in development costs in the
accompanying financial statements and was unpaid as of September 30, 1996.
In Poland, the Company has an agreement with the Polish media group ITI
which formed TVN Sp.z.o.o. ("TVN"), to seek national and regional television
broadcast licenses in Poland. In October 1996, the Polish National Radio and
Television Council made public its intention to award nine television
frequencies for Northern Poland, plus Warsaw and Lodz to TVN. It is anticipated
that the administrative process which is a requirement in order for the final
awards to be granted will be completed by the end of 1996 (See "Subsequent
Events"). ITI holds 67.0% of the equity in TVN and the Company holds the
remaining 33.0%. TVN recently exercised an option pursuant to which it has now
acquired a 49.0% interest in Televisja Wisla Sp.z.o.o. ("TV Wisla"), which
operates a television station in southern Poland.
3
<PAGE>
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 nine months ended September 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 for the nine months ended September 30,
1996. POP TV and PRO TV began operations in December 1995, Videovox was acquired
on May 1, 1996 and thus Nova TV was the only consolidated entity for the nine
months ended September 30, 1995. The results of the operating stations, Markiza
TV, 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 broadcast operations under development, which includes Studio 1+1
and TVN, 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 September 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 dividend of Kc 330,000,000 ($12,066,000)
of which 116,325,00 ($4,153,000) was paid to the Company in May 1996 and of
which Kc 116,325,000 ($4,294,000) was paid to the Company in September 1996.
4. SUMMARY FINANCIAL INFORMATION FOR MARKIZA TV, PULS AND FFF
September 30, 1996 December 31, 1995
-------------------------------- ----------------------
Markiza TV PULS FFF PULS FFF
$'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- --------
Current assets $ 17,359 $ 4,745 $ 2,310 $ 6,938 $ 2,538
Non-current assets 24,025 13,518 2,498 15,971 3,308
Current liabilities (10,978) (3,511) (2,735) (5,678) (1,410)
Non-current liabilities (10,613) (8,266) (9,744) (9,081) (9,526)
-------- -------- -------- -------- --------
Net assets 19,793 6,486 (7,671) 8,150 (5,090)
======== ======== ======== ======== ========
For the nine months ended
--------------------------------------------------------
September 30, 1996 December 31, 1995
-------------------------------- ----------------------
Markiza TV PULS FFF PULS FFF
$'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- --------
Net revenues 1,195 2,519 3,395 2,450 2,818
Operating loss (2,276) (14,021) (2,604) (18,211) (4,517)
Net loss (2,481) (14,078) (2,779) (18,593) (5,201)
4
<PAGE>
The Company's share of the losses of Markiza TV, PULS, FFF and SFF are
accounted for by the equity method for the nine months ended September 30, 1996.
Investments in Markiza TV were reclassified from developments costs to
investments in unconsolidated affiliates on the station's launch date, August
31, 1996. The Company's share of losses of Markiza TV, PULS, FFF and SFF
accounted for by the equity method for the nine months ended September 30, 1996
were $11.6 million.
As of September 30, 1996 FFF had DM 11.0 million ($7.6 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.
The Company had loans to Markiza TV of $9,000,000 as of September 30, 1996.
These loans bear an annual interest rate of 6.0% and are to be repaid in no
earlier than five years in accordance with local legal requirements for
shareholder loans.
5. SUBSEQUENT EVENTS
Public Offering
On November 4, 1996, the Company consumated the offering of 4,800,000
shares of Class A Common Stock (the "1996 Offering"). The 1996 Offering raised
$132.0 million, less underwriting discounts and commissions and issuance and
other related expenses of approximately $7.3 million. On November 12, 1996, the
underwriters for the 1996 Offering consumated the exercise of their option (the
"Overallotment Option") to purchase an additional 720,000 shares of Class A
Common Stock pursuant to the 1996 Offering. The consummation of the
Overallotment Option raised $19.8 million of proceeds, less underwriting
discount and commissions of approximately $1.0 million.
Loan Facility
CME, Central European Media Enterprises N.V., CME's Netherlands Antilles
Subsidiary ("CME NV'), and CME BV (collectively, the "CME Borrowers") have
executed a term sheet with ING pursuant to which ING and a group of banks would
provide the CME Borrowers, with a revolving loan facility in the aggregate of up
to $50.0 million (the "Potential Revolving Loan Facility"). The Potential
Revolving Loan Facility would bear interest at rates per annum ranging from 2.0%
to 3.5% over LIBOR, depending on the financial performance of the CME Borrowers,
and would mature on November 30, 2001, except that the maximum commitment would
be reduced incrementally every six months beginning on June 30, 1999. The
outstanding principal amount at any time on the Potential Revolving Loan
Facility could not exceed the maximum commitment at such time. Under the
Potential Revolving Loan Facility, the CME Borrowers would pay commitment,
arrangement and underwriting fees. The Potential Revolving Loan Facility would
be secured by a pledge of CME BV's equity interests in CME's operating
Subsidiaries, a pledge of CME NV's equity interest in CME BV, a security
interest on all of the assets of CME, and a lien on intercompany loans and
current account balances of the CME Borrowers. The Potential Revolving Loan
Facility also would contain affirmative and negative covenants, including
limitations on additional borrowing, financial covenants (such as limits on
consolidated indebtedness to consolidated net worth and consolidated
indebtedness to consolidated broadcast cash flow), a negative pledge on the
assets of the CME Borrowers, a prohibition on dividend payments to the holders
of the Common Stock of CME, and restrictions on mergers and sales and transfers
of assets. There can be no assurance that the Potential Revolving Loan Facility
will be consummated.
Lauder Promissory Note
5
<PAGE>
In October 1996, the Company executed a Promissory Note in favor of Ronald
S. Lauder pursuant to which Mr. Lauder agreed to make loans of up to $20.0
million to the Company (the "Lauder Loan"). The Lauder Loan carried interest of
2.0% over LIBOR and provided Mr. Lauder with warrants exercisable for up to
100,000 shares of Class A Common Stock. The Lauder Loan was repaid in accordance
with its terms at the consummation of the 1996 Offering. Based on the aggregate
advances made by Mr. Lauder of $14.0 million, Mr. Lauder has received warrants
exercisable for 70,000 shares of the Class A Common Stock at an exercise price
of $30.25 per share, which warrants will be exercisable for 4 years commencing
on October 2, 1997.
Radio Alfa
During 1995 the Company entered into loan and consulting agreements with
Radio Nova Alfa ("Radio Alfa"), which broadcasts as the only private national
radio station in the Czech Republic, with the intention of converting loans made
by the Company to equity upon the approval of the Czech Radio and Television
Council. In October 1996, the Czech Radio and Television Council issued an
opinion to cancel one of the license conditions attached to the licenses through
which Radio Alfa broadcast. The cancellation of this condition will allow the
Company to convert loans totaling approximately $3.7 million as of September 30,
1996 into equity interest in Radio Alfa.
Poland
In October 1996, the Polish National Radio and Television Council made
public its intention to award nine television frequencies for Northern Poland,
plus Warsaw and Lodz to TVN, the Company's subsidiary. It is anticipated that
the administrative process which is a requirement in order for the final awards
to be granted will be completed by the end of 1996. ITI holds 67.0% of the
equity in TVN and the Company holds the remaining 33.0%. TVN recently exercised
an option pursuant to which it has now acquired a 49.0% interest in TV Wisla,
which operates a television station in southern Poland that broadcasts to
approximately 7.8 million people.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The Company is the leading television broadcaster in Central and Eastern
Europe, broadcasting to an aggregate of 77.1 million people in five countries in
the region and additional 8.9 million people in Germany bringing the total to 86
million people. The Company operates the leading national television station in
the Czech Republic and the Company's operations in Romania and Slovenia command
the leading audience share within their areas of broadcast reach. The Company
recently commenced operations in the Slovak Republic and Ukraine and has
operations under development in Poland and Hungary which potentially could reach
an additional 50 million people. The Company's strategy is to continue to
capitalize on the substantial market opportunities created by the emergence of
private commercial television and the corresponding significant growth of
television advertising expenditures in these markets.
The Company's revenues are derived principally from the sale of television
advertising to local, national and international advertisers. To a limited
extent, the Company also engages in certain barter transactions in which its
broadcast operations exchange unsold commercial advertising time for goods and
services such as programming, broadcasting equipment, hotel rooms, car rentals
and newspaper advertising space. The Company experiences seasonality with
advertising sales tending to be lowest during the third quarter of each calendar
year,
6
<PAGE>
which includes the Summer holiday schedule (typically July and August) and
highest during the fourth quarter of each calendar year.
The primary expenses incurred in operating broadcast stations are
programming costs, employee salaries, 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
as well as restructuring existing affiliate entities which hold the licenses.
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 to the Company are also subject to
the legal availability of sufficient operating funds which are not needed for
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 local statutory
accounting principles.
SELECTED COMBINED FINANCIAL INFORMATION - BROADCAST CASH FLOW
The following table sets forth certain combining operating data for the
years ended December 31, 1995 and 1994 and the nine months ended September 30,
1996 and 1995 (dollar in thousands) for national television broadcast entities
or networks. This is supplemental information presented solely for additional
analysis of the consolidated statements and not as a presentation of financial
position and results of operations of each component. Regional television
stations in Germany are not included in this analysis as these operations are
dissimilar from those of national television broadcast entities as regional
television stations in Germany purchase only limited amounts of programming but
broadcast primarily self produced shows. Furthermore, the partners of PULS have
retained a financial advisor to seek one or more strategic partners for PULS
(See Note 1, "Organization and Business"). The investments in the German
operations are accounted for under the equity method and operating data for
these companies are set forth in Note 4.
The Company accounts for its 80% economic interest in Markiza TV using the
equity method of accounting. Under this method of accounting, the Company's
interest in net earnings or losses of Markiza TV is included in the consolidated
earnings and an adjustment is made to the carrying value at which the investment
is recorded on the Consolidated Balance Sheet. The following supplementary
unaudited combined information includes certain financial statement captions of
Markiza TV on a line-by-line basis as is done for the Company's consolidated
entities, Nova TV, PRO TV and POP TV.
7
<PAGE>
For the year ended December 31, 1995 and the nine months ended September
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 and
Markiza TV began operations in August 1996. The Company believes that this
combined operating data provides useful disclosure.
(Unaudited)
For the nine months ended
Year ended December 31, September 30,
----------------------- -------------------------
1994 1995 1995 1996(1)
---- ---- ---- -------
Operating Data (1):
Net revenues ................. $ 53,566 $ 98,919 $ 62,772 $ 84,716
Station operating expenses ... (36,083) (53,451) (34,371) (62,679)
Selling, general and
administrative expenses ...... (6,009) (6,816) (4,297) (14,457)
-------- -------- -------- --------
Station operating income ..... 11,474 38,652 24,104 7,580
Depreciation of assets ....... 3,773 7,251 4,875 9,681
Amortization of programming
rights ..................... 10,403 16,319 9,805 16,039
Cash program rights costs .... (13,417) (24,040) (18,738) (21,852)
-------- -------- -------- --------
Broadcast cash flow .......... $ 12,233 $ 38,182 $ 20,046 $ 11,448
======== ======== ======== ========
Broadcast cash flow margin ... 23% 39% 32% 14%
Broadcast cash flow
attributable to the Company .. 8,074 25,200 13,230 12,260(3)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------------------------
1995 1996 1996 1996 1996 1996 1996
---- ---- ---- ---- ---- ---- ----
Nova TV Nova TV PRO TV POP TV Subtotal(2) Markiza Adjusted
------- ------- ------ ------ ----------- -------- --------
TV Total(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net revenues ................... $ 62,772 $ 70,327 $ 7,975 $ 5,219 $ 83,521 $ 1,195 $ 84,716
Station operating expense ...... (34,371) (39,453) (11,515) (9,284) (60,252) (2,427) (62,679)
Selling, general and
administrative expenses ........ (4,297) (5,947) (4,012) (3,454) (13,413) (1,044) (14,457)
-------- -------- -------- -------- -------- -------- --------
Station operating income ....... 24,104 24,927 (7,552) (7,519) 9,856 (2,276) 7,580
Depreciation of assets ......... 4,875 5,712 1,763 1,880 9,355 326 9,681
Amortization of programming
rights ......................... 9,805 12,360 2,205 875 15,440 599 16,039
Cash program rights costs ...... (18,738) (13,152) (3,581) (1,923) (18,656) (3,196) (21,852)
-------- -------- -------- -------- -------- -------- --------
Broadcast cash flow ............ 20,046 29,847 (7,165) (6,687) 15,995 (4,547) 11,448
======== ======== ======== ======== ======== ======== ========
Broadcast cash flow margin ..... 32% 42% -- -- 19% -- 14%
Broadcast cash flow attributable
to the Company ................. 13,230 26,265(3) (5,553) (4,815) 15,897(3) (3,638) 12,260(3)
</TABLE>
8
<PAGE>
(1) Represents combined operating data for national television broadcast
entities which includes Markiza TV, on a line-by-line basis, which is
accounted for using the equity method of accounting in the accompanying
consolidated financial statements, and does not include regional television
stations in Germany which purchase only limited amounts of programming and
Videovox, a Hungarian dubbing and production company. Furthermore, the
partners in PULS have retained a financial advisor to seek one or more
strategic partners for PULS (See Note 1, "Organization and Business").
(2) Includes consolidated television broadcast entities only.
(3) Reflects the Additional Nova TV Purchase on August 1, 1996 as if such
acquisition had been effective from January 1, 1996.
"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 Nova TV, PRO TV, POP TV and Markiza TV as of
September 30, 1996 which was 88%, 77.5%, 72% and 80%, respectively. The Company
acquired the additional 22% economic interest in Nova TV on August 1, 1996
pursuant to the Additional Nova TV Purchase (which is in the process of being
registered under Czech law). 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.
Total broadcast cash flow for the nine months ended September 30, 1996 was
$11,448,000. For the nine months ended September 30, 1996, Nova TV's broadcast
cash flow increased by 49% to $29,847,000 from $20,046,000 in the same period in
1995; while broadcast cash flow attributable to the Company from Nova TV would
have increased by 99%, or $13,035,000, had the Additional Nova TV Purchase (See
Note 1. "Organization and Business") been effective from January 1, 1996
compared to $13,230,000 in the same period in 1995. Nova TV's stronger broadcast
cash flow was primarily the result of increased net revenues and lower
programming rights costs during the period. Lower program rights costs in 1996
are in part the result of Nova TV's 1995 investment in programming for future
periods to achieve lower program costs. As anticipated by the Company, for the
nine months ended September 30, 1996, Nova TV's broadcast cash flow has
continued to be partially offset by negative broadcast cash flow of PRO TV
($7,165,000), POP TV ($6,687,000) and Markiza TV ($4,547,000) as these stations
continue to build out operations and invest in programming for future periods.
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. 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
nine months ended September 30, 1996. POP TV and PRO TV began operations in
9
<PAGE>
December 1995 while Videovox was acquired in May 1996. Nova TV was the only
consolidated entity for the nine months ended September 30, 1995. The results of
other broadcast operations, Markiza TV, 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.
Foreign currency
The Company and its subsidiaries generate revenues primarily in Czech
korunas ("KC"), Romanian lei ("ROL"), Slovenian tolar ("SIT") German marks
("DM") and Slovak korunas ("SK"), and incur substantial operating expenses in
those currencies. The Romanian lei, Slovenian tolar and Slovak koruna are
managed currencies with limited convertibility. The Company also incurs
operating expenses of programming in United States dollars and other foreign
currencies. 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 Slovak koruna and market
exchange rate for the German mark, at the end of, and during, the periods
indicated were as follows:
<TABLE>
<CAPTION>
Income Statement
Balance Sheet ----------------
------------- Nine
Nine Months months
At At ended ended Movement
December September Movement September September %
31, 1995 30, 1996 % 30, 1995 30, 1996
-------- -------- - -------- --------- -
<S> <C> <C> <C> <C> <C> <C>
Czech koruna equivalent of 26.60 26.94 -1 26.50 27.27 -3
$1.00
Romanian lei equivalent of 2,578 3,261 -26 2,402(1) 2,987 -24
$1.00
Slovak koruna equivalent of 29.69 30.96 -8 29.68(2) 30.96(3) -4
$1.00
Slovenian tolar equivalent of 126 136 -8 126(4) 135 -7
$1.00
German mark equivalent of 1.43 1.5 -5 1.42 1.52 -7
$1.00
</TABLE>
(1) Average exchange rate from December 1, 1995 through December 31, 1995 only.
(2) Average for 1995.
(3) Average for September 1996.
(4) Average exchange rate from December 15, 1995 through December 31, 1995
only.
The Company's results of operations and financial position for the nine
months ended September 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 United States dollar
in order to minimize the effects of Romanian lei devaluations. The Czech koruna,
German mark, Romanian lei, Slovenian tolar and the Slovak koruna have all
weakened against the United States dollar in the nine months ended September 30,
1996 as shown above.
10
<PAGE>
As a result, the underlying Czech koruna and Slovenian tolar assets and
liabilities of Nova TV and POP TV, respectively, have decreased by 1% and 8%,
respectively, in dollar terms during the nine months ended September 30, 1996
due to foreign exchange movements. PRO TV's monetary assets and liabilities have
decreased by up to 26% during the nine month period ended September 30, 1996
depending on the time they remained outstanding during the period.
Nova TV's operating income, together with interest costs and minority
interest, is approximately 3% lower than would be the case had the weighted
average exchange rate for the nine months ended September 30, 1996 remained the
same as for the nine months ended September 30,1995.
PRO TV's and POP TV's operating losses, together with interest costs and
minority interest, are approximately 24% and 7%, respectively, lower than would
be the case had the weighted average exchange rate for the nine months ended
September 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 losses in unconsolidated affiliates in Germany, PULS and FFF, and in the
Slovak Republic, Markiza TV, will have decreased 7% and 4% in dollar terms,
respectively.
11
<PAGE>
Supplemental Operating Data
(Unaudited)
The following table sets forth certain combining operating data for the
three months ended September 30, 1996 and 1995 and the nine months ended
September 30, 1996 and 1995. For the three and nine months ended September 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, Videovox in
May 1996, and Markiza TV in August 1996.
(000s of $) For the three months For the nine months
ended September 30, ended September 30,
-------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
Net Revenue:
Nova TV - Czech Republic $ 17,449 $ 15,534 $ 70,327 $ 62,772
PRO TV - Romania 2,995 -- 7,975 --
POP TV - Slovenia 1,563 -- 5,219 --
Videovox - Hungary 425 -- 716
-------- -------- -------- --------
Total 22,432 15,534 84,237 62,772
Total Station Expense:
Nova TV - Czech Republic 14,623 12,837 45,400 38,668
PRO TV - Romania 5,544 -- 15,527 --
POP TV - Slovenia 4,698 -- 12,738 --
Videovox - Hungary 861 -- 1,597
-------- -------- -------- --------
Total 25,726 12,837 75,262 38,668
EBITDA:
Nova TV - Czech Republic 4,752 4,376 30,639 28,979
PRO TV - Romania (1,935) -- (5,789) --
POP TV - Slovenia (2,418) -- (5,639) --
-------- -------- -------- --------
Total 399 4,376 19,211 28,979
Operating profit (loss)
Nova TV - Czech Republic 2,826 2,697 24,927 24,104
PRO TV - Romania (2,549) -- (7,552) --
POP TV - Slovenia (3,135) -- (7,519) --
Videovox - Hungary (436) -- (881)
-------- -------- -------- --------
Total (3,294) 2,697 8,975 24,104
Equity in loss of unconsolidated
entities
German operations (PULS, (3,542) (3,927) (9,478) (10,693)
FFF and SFF)
Slovak entity (Markiza TV) (2,079) -- (2,079)
-------- -------- -------- --------
Total (5,621) (3,927) (11,557) (10,693)
12
<PAGE>
Results of Operations
Three months ended September 30, 1996 compared to three months ended September
30, 1995
The Company's consolidated net revenues increased 44.4%, or $6,898,000, to
approximately $22,432,000 for the three months ended September 30, 1996 compared
to the same period in 1995. In the three months ended September 30, 1996, Nova
TV's net revenues from advertising sales increased by 21%, or $2,725,000,
compared to the same period in 1995 while net revenues from game shows and
barter transactions were lower by $810,000. Nova TV has decreased the volume of
barter programs and is realizing less income from game shows. As a result, Nova
TV's net revenues in the three months ended September 30, 1996, increased by
$1,915,000, or 12%, to $17,449,000 compared to the same period last year. The
increase in Nova TV's net revenue from advertising sales was due to the
continued increase of the total advertising market in the Czech Republic and
Nova TV's ability to maintain a market share of 65-70%. PRO TV's and POP TV's
net revenues were $2,995,000 and $1,563,000, respectively, for the three months
ended September 30, 1996. Since the Company has a minority ownership or
non-controlling interest in Markiza TV, PULS, FFF and SFF, losses incurred by
Markiza TV, PULS, FFF and SFF are accounted for under the equity method and,
therefore, no revenues are presented in respect of these entities.
Total station operating costs and expenses increased by $8,565,000 to
$20,044,000 for the three months ended September 30, 1996. The increase in total
station operating costs and expenses was primarily due to PRO TV's, POP TV's,
and Videovox's total station operating costs and expenses which were $3,783,000,
$3,009,000 and $218,000, respectively, and to a lesser extent an increase in
Nova TV's total station operating costs and expenses of $1,553,000, or 13.5%, to
$13,032,000 for the three months ended September 30, 1996. The increase in Nova
TV's total station operating costs and expenses is primarily due to the
increased scope of operations of Nova TV and amortization on Nova TV's larger
program library. Without the effects of increases in program amortization and
depreciation in the three months ended September 30, 1996 over the three months
ended September 30, 1995, Nova TV's total station operating costs and expenses
increased by 4%, or $455,000, in the three months ended September 30, 1996.
Additional distribution costs were incurred at PRO TV as the station expanded
its broadcast reach from approximately 33% at December 31, 1995 to approximately
48% at September 30, 1996.
Selling, general and administrative expenses increased by $4,324,000 to
$5,682,000 in the three months ended September 30, 1996 from $1,358,000 in the
three months ended September 30, 1995. The increase in selling, general and
administrative expenses was primarily due to the selling, general and
administrative expenses of PRO TV and POP TV which were $1,761,000 and
$1,689,000, respectively, in the three months ended September 30, 1996 and to a
lesser extent the increase in Nova TV's selling, general and administrative
expenses of $233,000, or 17%, to $1,591,000 in the three months ended September
30, 1996 from $1,358,000 in the three months ended September 30, 1995. In the
three months ended September 30, stations generally increase their marketing
efforts in anticipation of the fourth quarter of 1996.
Corporate operating costs and development expenses for the three months
ended September 30 1996 and 1995, are $4,218,000 and $2,551,000 respectively,
increasing $1,667,000, or 65%. The increase was primarily due to the Company's
increased scope of operations over the same period in 1995, which includes the
Company's new projects in Poland, Ukraine, and Hungary, the launch of Markiza TV
in August 1996 and development activities in other countries.
Equity in losses of unconsolidated affiliates was $5,621,000 for the three
months ended September 30, 1996 compared to $3,927,000 in the same period in
1995. The increase was primarily attributable to the Company's share of losses
of Markiza TV (launched in August 1996) which totaled $2,079,000; offset by a
reduction of $713,000, or 18%, of the
13
<PAGE>
Company's share of losses in PULS and FFF compared to the same period in 1995
(See Note 1 "Organization and Business").
For the three months ended September 30, 1996, the Company net loss was
$14,692,000 compared to $7,136,000 for the same period in 1995. The increase in
net loss is primarily attributable to the anticipated losses from stations
launched after September 30, 1995, which includes PRO TV, POP TV, Markiza TV and
SFF and increased corporate and development costs; partially offset by stronger
results for Nova TV compared to the same period in 1995.
Nine months ended September 30, 1996 compared to the nine months ended September
30, 1995
For the nine months ended September 30, 1996, consolidated net revenue
totaled $84,237,000 compared to $62,772,000 for the same period last year,
representing an increase of 34%. In the nine months ended September 30, 1996,
Nova TV's net revenues from advertising sales increased by 17%, or $9,307,000,
compared to the same period in 1995 while net revenues from game shows and
barter transactions were lower by $1,752,000. Nova TV has decreased the volume
of barter programs and is realising less income from game shows. As a result,
Nova TV's net revenues in the nine months ended September 30, 1996, increased by
$7,555,000, or 12%, to $70,327,000 compared to the same period last year. The
increase in Nova TV's net revenues was due to the continued increase of the
total advertising market in the Czech Republic and Nova TV's ability to maintain
a market share of 65-70%. Net revenues for PRO TV and POP TV were $7,975,000 and
$5,219,000, respectively, during the period. Since the Company has a minority
ownership or non-controlling interest in Markiza TV, PULS, FFF and SFF, losses
incurred by Markiza TV, PULS, FFF and SFF are accounted for under the equity
method and, therefore, no revenues are presented in respect of these entities in
the accompanying consolidated financial statements.
Total station operating costs and expenses increased by $26,474,000 to
$60,845,000 in the nine months ended September 30, 1996. As a percentage of net
revenues, total station operating costs and expenses increased from 54.8% in the
nine months ended September 30, 1995 to 72.2% for the nine months ended
September 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 $15,440,000 and $9,805,000, and depreciation of station
assets and amortization of other intangibles of $9,388,000 and $4,875,000 in the
nine months ended September 30, 1996 and 1995, respectively. The increase in
total 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 operating costs and expenses of $11,515,000, $9,284,000 and $593,000,
respectively, and partially to the increased scope of operations of Nova TV and
amortization on Nova TV's larger program library. Without the effect of the
increase in program amortization and depreciation in the nine months ended
September 30, 1996 over the nine month period ended September 30, 1995, Nova
TV's total station operating costs and expenses increased by $1,690,000, or 9%,
from the same period in 1995. Additional distribution costs were incurred at PRO
TV as the station expanded its broadcast reach from approximately 33% at
December 31, 1995 to approximately 48% at September 30, 1996.
Station selling, general and administrative expenses increased by
$10,120,000 to $14,417,000 in the nine months ended September 30, 1996 from
$4,297,000 for the same period in 1995. As a percentage of net revenues, station
selling, general and administrative expenses increased from 6.8% for the nine
months ended September 30, 1995 to 17.1% for the nine months ended September 30,
1996. This increase in station selling, general and administrative expenses as a
percentage of net revenues was primarily the result of additional station
selling, general and administrative expenses from PRO TV and POP TV, as during
the nine months ended September 30, 1996 these companies were in the early stage
of operations and did not have proportionate revenues to Nova TV. In the nine
months ended
14
<PAGE>
September 30, 1996, Nova TV's station selling, general and administrative
expenses increased by $1,650,000, or 38%, to $5,947,000 due to increased public
relations and marketing primarily during the six months ended June 30, 1996.
Corporate operating costs and development expenses in the nine months ended
September 30, 1996 and 1995 were $10,728,000 and $7,090,000, respectively,
increasing $3,638,000, or 51%. The increase was primarily due to the Company's
increased scope of operations over the same period in 1995, which includes the
Company's new projects in Poland, Ukraine, and Hungary, the launch of Markiza TV
in August 1996 and development activities in other countries.
Operating income (loss) decreased $17,814,000 as the Company generated
operating loss of $3,160,000 in the nine months ended September 30, 1996
compared to operating income of $14,654,000 in the nine months ended September
30, 1995. The overall decrease in the Company's operating results was primarily
attributable to anticipated operating losses from the Company's new operations,
PRO TV and POP TV, both launched in December 1995, and to a lesser extent to
increased corporate and development expenses; partially offset by the increase
in operating income of Nova TV over the same period in 1995.
Equity in loss in unconsolidated affiliates increased by $864,000 to
$11,557,000 for the nine months ended September 30, 1996 from $10,693,000 for
the nine months ended September 30, 1995. The Company's share of the losses of
Markiza TV which was launched in August 1996 totaled $2,079,000. The Company's
share of losses in PULS and FFF decreased by $1,542,000, or 14% for the nine
months ended September 30, 1996. The Company's share of losses in PULS for the
nine months ended September 30, 1996 was lower despite the Company's increase in
ownership from 43.57% at September 30, 1995 to 55.95% at September 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 $178,000, or 16% to $1,284,000 for
the nine months ended September 30, 1996.
Interest expense decreased $595,000, or 17%, to $2,914,000 during the nine
months ended September 30, 1996 from $3,509,000 in the nine months ended
September 30, 1995. This is primarily due to lower debt levels at Nova TV,
including the early repayment of debt, during the nine month period ended
September 30, 1996 compared to the same period in 1995; partially offset by
interest expense from a corporate bridge loan facility (See "Bridge Loan" in
Liquidity and Capital Resources).
Provision for income taxes was $9,198,000 for the nine months ended
September 30, 1996 and $9,350,000 for the nine months ended September 30, 1995.
The income tax provision in the nine months ended September 30, 1996 and 1995
primarily related to income taxes payable in the Czech Republic on Nova TV
pre-tax profits which have increased due to higher net income at Nova TV, offset
by an income tax rate of 41% in the nine months ended September 30, 1995 and an
income tax rate of 39% in the nine months ended September 30, 1996.
Minority interest in (income) loss of consolidated subsidiaries was
$610,000 in the nine months ended September 30, 1996 and $4,181,000 in the nine
months ended September 30, 1995. This decrease was primarily the result of
losses for the Company's new operations PRO TV and POP TV launched in December
1995, partially offset by the minority interest in income in Nova TV.
Primarily as a result of these factors, the net loss of the Company was
$27,072,000 and $11,905,000 for the nine months ended September 30, 1996 and
1995, respectively.
15
<PAGE>
Liquidity and Capital Resources
Cash provided/(used) in operating activities was ($1,309,000) for the nine
months ended September 30, 1996 and $7,789,000 for the nine months ended
September 30, 1995. This decrease was primarily due to funding of the start-up
of operations at POP TV and PRO TV as these entities are in the early stage of
operations; offset by increased sales and accounts receivable collections by
Nova TV.
Accounts receivable increased by $5,009,000, or 29%, to $22,051,000, net of
currency fluctuations, from $17,042,000 at September 30, 1995. The increase in
accounts receivable is due primarily to increased sales at Nova TV and the
addition of accounts receivable balances for PRO TV and POP TV which were
launched in December 1995. Current liabilities increased by $52,238,000 to
$79,611,000 at September 30, 1996 from $27,373,000 at September 30, 1995,
principally as a result of a corporate bridge facility of $25,000,000, payables
of $8,000,000 related the purchase an economic interest in the Studio 1+1 Group,
increased income and other taxes payable, program contracts, accounts payable
and accrued liabilities related to the Company's new operations, PRO TV and POP
TV.
Cash used in investing activities was $58,659,000 and $39,103,000 for the
nine months ended September 30, 1996 and 1995, respectively. The increase is
attributable primarily to payments made in connection with the Additional Nova
TV Purchase and fixed asset acquisitions in the Company's new operations, PRO TV
and POP TV; offset by the marketable securities sold during the period. In the
nine month period ended September 30, 1996, the Company invested $13,219,000 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. During
the nine months ended September 30, 1996, the Company sold $8,835,000 of
marketable securities and $2,616,000 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 $39,830,000 as of September 30, 1996 from $12,433,000
as of December 31, 1995. This was primarily a result of additional investments
in PULS of DM 19,500,000 ($13,000,000), FFF of DM 2,000,000 ($1,334,000) and the
reclassification of development cost for SFF of $1,055,000 and Markiza TV of
$22,793,000 from development cost to investment in unconsolidated affiliates;
partially offset by the Company's share of the losses in PULS of DM 11,502,000
($7,668,000) , FFF of DM 2,226,000 ($1,484,000), SFF of DM 563,000 ($325,000)
and Markiza TV of SK 64,366,000 ($2,079,000) for the nine months ended September
30, 1996.
Cash provided/(used) in financing activities was $21,167,000 and
($3,571,000) for the nine months ended September 30, 1996 and 1995,
respectively. The increase in cash provided in financing activities consisted of
primarily loans from CS to purchase the Additional Nova TV Purchase and the
corporate loan bridge facility; offset by loans to affiliates which primarily
consisted of a $9,000,000 loan to Markiza TV and a $5,220,000 loan to Dr.
Zelezny.
The Company's operations to date have been financed primarily through
public offerings of shares of Class A Common Stock in October 1994 (the "IPO")
and November 1995 (the "1995 Offering") which raised net proceeds of $68.8
million and $86.5 million , respectively. Prior to the IPO, the Company relied
on certain affiliates for capital in the form of debt and equity financing.
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 ($4,294,000) was paid to the Company in September
1996. After the receipt of the dividend paid in September 1996, based on the
Company's original
16
<PAGE>
investment for its 66% interest in Nova TV, the Company has received 107% of its
original United States dollar investment in Nova TV made approximately 2.5 to 3
years earlier.
CME BV currently has bridge loan facility (the "Bridge Loan"), for up to
$25.0 million with ING Bank N.V. ("ING"). As of September 30, 1996, $25,000,000
was outstanding on the Bridge Loan which matures on November 30, 1996 and bears
annual interest at a rate of 1.6% per annum above LIBOR. The shares of CME BV
have been pledged by CME NV as security for the Bridge Loan. Both CME and CME NV
have guaranteed repayment of the Bridge Loan. The Bridge Loan contains financial
covenants (such as limits on consolidated indebtedness to consolidated net worth
and consolidated indebtedness to consolidated broadcast cash flow). The Bridge
Loan will be repaid with the proceeds of the 1996 Offering.
Primarily, as a result of the 1995 Offering, the Bridge Loan and the
results of operations of Nova TV in 1995 and 1996, the Company had cash of
$14,309,000 at September 30, 1996 ($53,210,000 at December 31, 1995) and
marketable securities of $1,817,000 at September 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. 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.
On November 4, 1996, the Company consumated the offering of 4,800,000
shares of Class A Common Stock (the "1996 Offering"). The 1996 Offering raised
$132.0 million, less underwriting discounts and commissions and issuance and
other related expenses of approximately $7.3 million. On November 12, 1996, the
underwriters for the 1996 Offering consummated the exercise of their option (the
"Overallotment Option") to purchase an additional 720,000 shares of Class A
Common Stock pursuant to the 1996 Offering. The consummation of the
Overallotment Option raised $19.8 million of proceeds, less underwriting
discount and commissions of approximately $1.0 million.
CME, Central European Media Enterprises N.V., CME's Netherlands Antilles
Subsidiary ("CME NV'), and CME BV (collectively, the "CME Borrowers") have
executed a term sheet with ING pursuant to which ING and a group of banks
contemplate providing the CME Borrowers with a revolving loan facility in the
aggregate of up to $50.0 million (the "Potential Revolving Loan Facility"). The
Potential Revolving Loan Facility would bear interest at rates per annum ranging
from 2.0% to 3.5% over LIBOR, depending on the financial performance of the CME
Borrowers and would mature on November 30, 2001, except that the maximum
commitment would be reduced incrementally every six months beginning on June 30,
1999. The outstanding principal amount at any time on the Potential Revolving
Loan Facility could not exceed the maximum commitment at such time. Under the
Potential Revolving Loan Facility, the CME Borrowers would pay commitment,
arrangement and underwriting fees. The Potential Revolving Loan Facility would
be secured by a pledge of CME BV's equity interests in CME's operating
Subsidiaries, a pledge of CME NV's equity interest in CME BV, a security
interest on all of the assets of CME, an assignment of all distributions from
CME's operating Subsidiaries and a lien on intercompany loans and current
account balances of the CME Borrowers. The Potential Revolving Loan Facility
also would contain affirmative and negative covenants, including limitations on
additional borrowing, financial covenants (such as limits on consolidated
indebtedness to consolidated net worth and consolidated indebtedness to
consolidated broadcast cash flow), a negative pledge on the assets of the CME
Borrowers, a prohibition on dividend payments to the holders of the Common Stock
of CME, and restrictions on mergers and sales and transfers of assets. There can
be no assurance that the Potential Revolving Loan Facility will be consummated.
In October 1996, the Company executed a Promissory Note in favor of Ronald
S. Lauder pursuant to which Mr. Lauder agreed to make loans of up to $20.0
million to the Company (the "Lauder Loan"). The Lauder Loan carried interest of
2.0% over LIBOR and
17
<PAGE>
provided Mr. Lauder with warrants exercisable for up to 100,000 shares of Class
A Common Stock. The Lauder Loan was repaid in accordance with its terms at the
consummation of the 1996 Offering. Based on the aggregate advances made by Mr.
Lauder of $14.0 million, Mr. Lauder has received warrants exercisable into
70,000 shares of the Class A Common Stock at an exercise price of $30.25 per
share, which warrants will be exercisable for 4 years commencing on October 2,
1997.
On August 1, 1996, the Company entered into the Additional Nova TV Purchase
for the purchase of CS's 22% economic interest and virtually all of CS's voting
rights in Nova TV for a purchase price of Kc 1 billion ($37.1 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 ($5,607,000)
will be paid by the Company on November 15, 1996 out of the Company's cash
balances. The CS loan was drawn in August 1996 and will be drawn in April 1997
in the amounts of Kc 450,000,000 ($16,704,000) and Kc 400,000,000 ($14,848,000),
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 ($835,000) during the period from
November 1997 through November 1998, Kc 42,500,000 ($1,578,000) during the
period from February 1999 through August 2002, and Kc 20,000,000 ($742,000)
during the period from November 2002 through November 2003.
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 CS. The first facility consists
of a long term loan due on December 30, 1999 in the principal amount of Kc 300
million ($11.1) 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 ($6,682,000) was outstanding at September 30, 1996. Principal
payments of Kc 60,000,000 ($2,227,000) 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 a line of credit loan, obtained in November 1995, for an
amount up to Kc 250,000,000 ($9,280,000) bearing interest at a rate of 12% per
annum. This facility was unutilized at September 30, 1996. These loans are
secured by Nova TV's equipment, vehicles and receivables.
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. Since September 1995, the partners have
approved capital calls aggregating DM34,500,000 ($22,697,000). The Company has
agreed to fund DM32,000,000 ($21,053,000) of which DM29,650,000 ($20,168,000)
has been funded until September 30, 1996.
The Partners of PULS have retained a financial advisor to seek one or more
strategic partners for PULS. Such strategic partner would be expected to acquire
a significant equity interest in PULS and assume responsibility for PULS'
operations. Such a strategic investment would be anticipated to significantly
dilute the Company's equity interest in PULS and to decrease the Company's
future funding obligations to PULS. Such investment also could result in a
material reduction of the carrying value of the Company's equity investment in
PULS, which was $12.4 million as of September 30, 1996, and a corresponding
charge against the Company's earnings in the period incurred. Regardless of
whether a transaction with a strategic investor is consummated, there is no
assurance that the Company may not have to take a reduction of all or a portion
of the carrying value of PULS. In addition, a reduction of the carrying value of
PULS, or other factors, might cause the Company to reduce all or part of the
carrying value of the Company' s investments in FFF and SFF, which were $5.9
million and $0.7 million, respectively, as of September 30, 1996.
Except for the Company's working capital requirements and completing the
funding of television stations in Romania, Slovenia, the Slovak Republic and
Ukraine, 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 Central
18
<PAGE>
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. If MobilRom is awarded a telecommunications
license in Romania, the Company will be obligated to fund MobilRom in the amount
of approximately $3.5 million within 15 days after such award and up to an
additional $6.5 million during the next 12 months. The Company's aggregate
funding commitment with respect to MobilRom is up to $16.0 million.
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. The Company's voting power is sufficient to compel Nova TV to
make distributions. In the case of PRO TV, distributions may be paid from the
profits of PRO TV subject to a reserve of 5% of annual profits until the
aggregate reserves equal 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. In the case of Markiza TV, distributions may
be paid from net profits subject to an initial reserve requirement of 10% of net
profits until the reserve fund equals 5% of registered capital. The Company's
voting power in Markiza TV is not sufficient to compel the distributions of
dividends. 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. 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 1996 Offering together
with the Company's current cash balances, cash generated from Nova TV, the
Potential Revolving Loan Facility, 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 to 18 months.
This filing with the Securities and Exchange Commission ("SEC") contains
forward-looking statements. All statements, other than statements of historical
facts, included herein, that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the future are
forward-looking statements. Future events and actual results could differ
materially from the forward-looking statements contained herein depending
largely on the Company's acquisition and development decisions and the risk
factors contained in the Company's other filings with the SEC.
19
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 1996, the Company, together with MMTV and Tele 59, 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 to the equity of Kanal A pursuant
to various agreements, has challenged the validity of the Kanal A Agreement in a
United Kingdom court. Both the Company and SBS have been granted injunctions by
the United Kingdom courts preventing SBS, in the case of the Company, and the
Company, in the case of SBS, from taking certain actions either to enforce such
entity's claim to equity in Kanal A or to block the claim of the other entity to
equity in Kanal A. The Company has instituted action in a Slovenian court
requesting that courts in Slovenia resolve these claims.
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 12 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
None.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are attached:
Exhibit
-------
10.01 Vladimir Zelezny - CME Loan Agreement dated August 1, 1996
10.02 Promissory Note in Favor of Ronald S. Lauder dated October
2, 1996
10.03 Ronald S. Lauder Warrant for the Purchase of Shares dated
October 2, 1996
10.04 Articles of Association for Mobil Rom S.A. dated September
26, 1996
10.05 Company Agreement for the creation of Mobil Rom S.A. dated
September 26, 1996
10.06 GSM General Agreement dated September 26, 1996
10.07 Unimedia Assignment of Shares Agreement dated September 22,
1996
10.08 Additional Agreement for Unimedia dated September 22, 1996
10.09 Unimedia Warranties dated September 26, 1996
10.10 Agreement between CME, Boris Fuchsmann, Alexander
Rodniansky and Innova Film GmbH in English dated October
25, 1996 10.11 Agreement between CME, Boris Fuchsmann,
Alexander Rodniansky and Innova Film GmbH in German dated
October 25, 1996
10.12 TVN-Realbud Agreement dated September 4, 1996
10.13 TVN-Realbud Agreement dated September 4, 1996
10.14 TVN-Realbud Agreement dated September 6, 1996
10.15 Appendix to the TVN-Realbud Agreement dated September 19,
1996
10.16 TVN-Realbud Share Sale Agreement dated October 30, 1996
10.17 Appendix No. 2 to the Supplementary Agreement dated October
30, 1996
10.18 Poland Street Lease Agreement dated April 2, 1996
27.01 Financial Data Schedule
b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
21
<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: November 14, 1996 -----------------------------
Leonard M. Fertig
Chief Executive Officer
(Duly Authorized Officer)
/s/ John A. Schwallie
Date: November 14, 1996 -----------------------------
John A. Schwallie
Chief Financial Officer
(Principal Financial Officer)
22
<PAGE>
Exhibit Index
Exhibit Page
------- ----
10.01 Vladimir Zelezny - CME Loan Agreement dated August 1, 1996
10.02 Promissory Note in Favor of Ronald S. Lauder dated October 2, 1996
10.03 Ronald S. Lauder Warrant for the Purchase of Shares dated October 2,
1996
10.04 Articles of Association for Mobil Rom S.A. dated September 26, 1996
10.05 Company Agreement for the creation of Mobil Rom S.A. dated September
26, 1996
10.06 GSM General Agreement dated September 26, 1996
10.07 Unimedia Assignment of Shares Agreement dated September 22, 1996
10.08 Additional Agreement for Unimedia dated September 22, 1996
10.09 Unimedia Warranties dated September 26, 1996
10.10 Agreement between CME, Boris Fuchsmann, Alexander Rodniansky and
Innova Film GmbH in English dated October 25, 1996 10.11 Agreement
between CME, Boris Fuchsmann, Alexander Rodniansky and Innova Film GmbH
in German dated October 25, 1996
10.12 TVN-Realbud Agreement dated September 4, 1996
10.13 TVN-Realbud Agreement dated September 4, 1996
10.14 TVN-Realbud Agreement dated September 6, 1996
10.15 Appendix to the TVN-Realbud Agreement dated September 19, 1996
10.16 TVN-Realbud Share Sale Agreement dated October 30, 1996
10.17 Appendix No. 2 to the Supplementary Agreement dated October 30, 1996
10.18 Poland Street Lease Agreement dated April 2, 1996
27.01 Financial Data Schedule
23
LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement") is made as of August 1, 1996 ("Effective
Date"):
BETWEEN:
(1) PhDr. Vladimir Zelezny, an individual residing at Sibeliova 45, Praha 6,
Czech Republic, with birth number 450303/951 ("Borrower");
and
(2) CME Media Enterprises B.V., a limited liability company organized and
existing under the laws of the Netherlands, with its registered address at
Leidseplein 29, Amsterdam, the Netherlands ("Lender").
The Borrower and the Lender are hereinafter individually referred to as a
"Party" and collectively referred to as the "Parties".
WHEREAS:
A. Ceska Nezavisla Televizna Spolecnost, s.r.o. ("CNTS") is a limited
liability company organized and existing under the laws of the Czech
Republic.
B. CET 21 s.r.o. is a limited liability company organized and existing under
the laws of the Czech Republic, with its registered office at V Jame 12,
Prague 1 ("CET 21 s.r.o.").
C. CET 21 a.s. is a joint stock company organized and existing under the laws
of the Czech Republic, with its registered office at V Jame 12, Prague 1
("CET 21 a.s.").
D. For purposes of this Agreement, the terms:
"CET 21 Participation Interest" shall mean an interest in CET 21 s.r.o. (in
Czech "obchodni podil") measured as a percentage of the registered capital
of CET 21 s.r.o.;
"CNTS Participation Interest" shall mean an interest in CNTS (in Czech
"obchodni podil") measured as a percentage of the registered capital of
CNTS;
"CET 21 Shares" shall mean the issued bearer shares of CET 21 a.s., each
having a nominal value of 1,000 Czech Crowns.
E. The following persons (collectively, and also in their capacity
referred to in Recital G, the "Sellers") have the following stated CET 21
Participation Interests and wish to sell a specified portion of their
respective CET 21 Participation Interests to the Borrower pursuant to
those certain Agreements of the Transfer of the Part of the Business Share
entered into between the Borrower and each of the Sellers on July 1, 1996
(together, the "CET 21 Participation Interest Agreements"):
<PAGE>
(a) Prof. Josef Alan has a 16.67% CET 21 Participation Interest and wishes
to sell a 8.33% CET 21 Participation Interest;
(b) Dr. Peter Huncik has a 16.67% CET 21 Participation Interest and wishes
to sell a 12.5% CET 21 Participation Interest;
(c) Mgr. Vlastimil Venclik has a 16.67% CET 21 Participation Interest and
wishes to sell a 8.33% CET 21 Participation Interest; and
(d) Prof. Fedor Gal has a 14.15% CET 21 Participation Interest and wishes
to sell a 14.15% CET 21 Participation Interest.
F. CET 21 s.r.o. holds a license granted by the Council of the Czech Republic
for Radio and Television Broadcasting ("Council"), dated 9 February 1993,
comprising the decision of the Council and general conditions of License
No. 001/1993, as amended by a decision of the Council dated 11 May 1993
("License") and the clarification of condition No. 24 of 4 February 1994.
On January 2, 1996, CET 21 s.r.o. applied to Council, under an amendment to
Act Number 468/1991 on the Operation of Radio and Television Broadcasting,
effective from January 1, 1996, for the deletion of certain conditions from
the License, including Condition No. 17. As of the Effective Date, CET 21
s.r.o. is awaiting a resolution of the Council deleting such conditions.
G. The Sellers have the following shareholdings in CET 21 a.s. and wish to
sell a specified portion of their respective CET 21 Shares to the Borrower
pursuant to those certain Agreements of the Purchase of Shares entered into
between the Borrower and each of the Sellers on July 1, 1996 (together, the
"CET 21 Share Agreements"):
(a) Prof. Josef Alan has 206 CET 21 Shares and wishes to sell 103 CET 21
Shares;
(b) Dr. Peter Huncik has 206 CET 21 Shares and wishes to sell 155 CET 21
Shares;
(c) Mgr. Vlastimil Venclik has 206 CET 21 Shares and wishes to sell 103
CET 21 Shares; and
(d) Prof. Fedor Gal has 176 CET 21 Shares and wishes to sell 176 CET 21
Shares.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties hereby agree as follows:
1. LOAN AMOUNT
The Lender shall, subject to and in accordance with the provisions of this
Agreement, provide a loan ("Loan") to the Borrower in the aggregate principal
amount of $4,700,000 U.S. dollars (four million seven hundred thousand U.S.
dollars) ("Loan Amount").
2
<PAGE>
2. CONDITIONS PRECEDENT
The Lender's obligation to disburse the Loan Amount to the Borrower is subject
to the fulfilment (to the Lender's satisfaction) of the following:
(a) the CET 21 Participation Interest Agreements and CET 21 Share
Agreements remain in full force and effect and the CET 21 Participant
Interest Agreements have been submitted to the executive (jednatel) of
CET 21 s.r.o.;
(b) CET 21 s.r.o. has received a valid and effective resolution of the
Council deleting Condition 17 of the License;
(c) the Borrower has executed the Security Documents (as defined in
Article 8.1 below) and carried out all of his other obligations as
provided in Article 8.1;
(d) the Borrower has obtained all relevant Czech foreign exchange permits
as may be required by Czech law in connection with the transactions
contemplated herein or in the Security Documents;
(e) as of the Effective Date, there have been no amendments or changes to
any applicable laws or regulations or the occurrence of any facts,
events or circumstances which would, in the Lender's sole opinion,
affect the legality of the transactions contemplated hereunder or the
ability of the Lender to obtain repayment of the Loan Amount or
payment of any interest thereon.
The Lender may, in its sole and absolute discretion, exercise business judgement
and waive in writing any of the above conditions precedent.
3. USE OF PROCEEDS
3.1 The proceeds of the Loan shall be used by the Borrower as follows:
(a) to acquire 43.31% of the CET 21 Participation Interests from the
Sellers as contemplated in the CET 21 Participation Interest
Agreements ("Additional CET 21 Participation Interests"); and
(b) to acquire 537 CET 21 Shares from the Sellers as contemplated in the
CET 21 Share Agreements ("Additional CET 21 Shares"); and
(c) to facilitate the future acquisition of the Target CNTS Participation
Interest (as defined in Article 3.2 (b)) as provided in this
Agreement.
3.2 The Borrower acknowledges that:
(a) he is able to acquire the Additional CET 21 Participation Interests
from the Sellers purely by virtue of the Lender lending the Loan
Amount to the Borrower;
3
<PAGE>
(b) he may be able in the future to acquire from CET 21 s.r.o. a 5.2% CNTS
Participation Interest ("Target CNTS Participation Interest") as
discussed by the Parties at the CNTS general meeting and meetings of
the CNTS committee of representatives purely by virtue of (i)
acquiring the Additional CET 21 Participation Interests from the
Sellers and (ii) the Lender lending the Loan Amount to the Borrower;
and
(c) the Lender has previously advanced $520,000 U.S. dollars on behalf of
the Borrower to the Sellers as a partial advance payment for the
Additional CET 21 Participation Interests.
4. DISBURSEMENT OF THE LOAN AMOUNT
4.1 The Lender shall disburse the Loan Amount after the date on which, in the
Lender's sole discretion, the conditions specified in Article 2 above have
been met ("Disbursement Date").
4.2 The Lender may, in its sole discretion (i) disburse the Loan Amount in
whole or in part, (ii) disburse the Loan Amount directly to the Sellers on
behalf of the Borrower, to the Borrower or as otherwise determined by the
Lender and/or (iii) disburse the Loan Amount in U.S. dollars or in such
other currency as determined by the Lender at the exchange rate prevailing
on the day of such disbursement; provided, however, that notwithstanding
any disbursements in a currency other than U.S. dollars, the Borrower shall
be required to repay the Loan Amount and make any other payments as
required hereunder to the Lender in U.S. dollars (or such other currency as
designated by the Lender in its sole discretion); and further provided,
that the Lender shall have no liability in respect of the application of
the Loan proceeds by the Borrower.
5. TERM OF THE LOAN
The term of the Loan shall commence on the Effective Date and shall terminate on
the fifth anniversary of the Effective Date ("Loan Term"); provided, however,
that the Loan Term shall also include any period during which all or a portion
of the Loan Amount or Interest Payments (as defined in Article 6.1)
remain outstanding or due and payable.
6. INTEREST ON LOAN
6.1 The Borrower shall pay to the Lender, by way of interest on the Loan, an
amount equal to all dividends, distributions or payments of whatever nature
which are attributable, distributed or payable to the Borrower in
connection with the Additional CET 21 Participation Interests, the
Additional CET 21 Shares or the Target CNTS Participation Interest or any
interest in successors thereof (less any Czech income taxes which may be
levied against the Borrower with respect to such dividends, distributions
or payments) ("Interest Payments") until such time as one of the following
events has occurred: (i) the Loan Amount is repaid in full (or extinguished
as provided hereunder) and all Interest Payments which are due and payable
4
<PAGE>
hereunder have been paid in full or (ii) the conditions specified in
Article 10.4 have been met or (iii) the Release Events (as defined in
Article 9.3 below) have occurred.
6.2 The Borrower shall procure that all Interest Payments are paid by CET 21
s.r.o., CET 21 a.s. and CNTS directly to the Lender to such account as may
be designated from time to time by the Lender. All Interest Payments shall
be payable to the Lender on the day which other participants or
shareholders (as the case may be) in CET 21 s.r.o., CET 21 a.s. or CNTS are
entitled to receive their respective dividends, distributions or payments.
7. REPAYMENT
7.1 Except as provided in Articles 9.3, 10.3 or 10.4, the Borrower shall repay
to the Lender the Loan Amount in full within 30 calendar days of the fifth
anniversary of the Effective Date, together with all accrued and unpaid
Interest Payments and any other sums owing to the Lender under this
Agreement.
7.2 All principal repayments and Interest Payments shall be made without set
off or counterclaim or any restriction or condition and free of any tax or
other deductions or withholdings of any nature.
7.3 Any payments made by Borrower hereunder shall be applied first to any
Interest Payments due and payable and then to repayment of any outstanding
balance of the principal Loan Amount.
7.4 The payment of all amounts hereunder to the Lender shall be made to an
account as designated from time to time by the Lender.
8. SECURITY FOR THE LOAN
8.1 In order to secure the payment and repayment obligations of the Borrower
hereunder, the Borrower hereby agrees on the Effective Date:
(a) to execute (with his signature verified by notary) in valid form
agreements upon future agreements in a form acceptable to the Lender
in its sole discretion, such agreements to provide for the transfer to
the Lender of (i) the Additional CET 21 Participation Interests, (ii)
the Target CNTS Participation Interest and (iii) the Additional CET 21
Shares;
(b) to execute (with his signature verified by notary) undated agreements
in a form acceptable to the Lender in its sole discretion, such
agreements to provide for the transfer to the Lender of (i) the
Additional CET 21 Participation Interests in the event of an Event of
Default (as defined in Article 10.1) or as otherwise provided herein,
(ii) the Target CNTS Participation Interest and (iii) the Additional
CET 21 Shares;
5
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(c) to grant powers of attorney to the Lender in a form acceptable to the
Lender in its sole discretion, such powers of attorney to permit the
Lender on behalf of the Borrower to execute, initial and enter into
agreements to dispose of (i) the Additional CET 21 Participation
Interests in the event of an Event of Default (as defined in Article
10.1) or as otherwise provided herein, (ii) the Target CNTS
Participation Interest and (iii) the Additional CET 21 Shares, and to
take all actions required to dispose of the same;
(d) to deliver to the Lender the bearer share certificates corresponding
to the Additional CET 21 Shares;
(e) to execute a promissory note in favor of the Lender for the Loan
Amount in a form acceptable to the Lender in its sole discretion
("Promissory Note"), which Promissory Note may only be utilized by the
Lender upon the occurrence of an Event of Default;
(f) to execute a trust agreement, governed by the laws of the State of New
York, in a form acceptable to the Lender in its sole discretion
("Trust Agreement");
(g) to grant powers of attorney to the Lender in a form acceptable to the
Lender in its sole discretion to exercise the Borrower's rights in the
general meetings of CET 21 s.r.o., CET 21 a.s. and CNTS and to receive
Interest Payments from such entities.
All documents specified in this Article 8.1 shall be referred to
collectively as the "Security Documents".
8.2 Except as specifically permitted in writing by the Lender or as
specifically provided for in this Agreement, the Borrower shall not (nor
enter into agreements to) pledge, hypothecate, sell, transfer, bequeath,
will or otherwise dispose of the Additional CET 21 Participation Interests,
the Target CNTS Participation Interest and/or the Additional CET 21 Shares.
In the event of any such transaction, the Lender, in addition to any other
remedies or rights the Lender may have hereunder, shall be entitled to all
proceeds arising out of such transaction.
8.3 Until such time as the Loan Amount and all outstanding Interest Payments
are paid and repaid in full or extinguished as provided hereunder, the
Borrower agrees to exercise all voting rights associated with the Target
CNTS Participation Interest, the Additional CET 21 Participation Interests,
the Additional CET 21 Shares or interests in any successor entity thereof
only as directed by the Lender.
8.4 The Borrower agrees:
(a) during the Loan Term to use his best efforts to obtain a waiver from
the remaining participants in CET 21 s.r.o. with respect to any rights
of first refusal they may have in the event that the Borrower were to
be required to
6
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transfer the Additional CET 21 Participation Interests to the Lender
by operation of this Agreement, any of the Security Documents or
otherwise; and
(b) that the Additional CET 21 Participation Interests, the Target CNTS
Participation Interest and the Additional CET 21 Shares are not to be
included in the Borrower's estate eligible for distribution to the
Borrower's heirs and are subject to the provisions of this Agreement
and the Security Documents and agrees to provide the Lender within two
months of the Disbursement Date with a notarized copy of a statement
from the Borrower which is acceptable to the Lender ("Statement")
indicating the same. The Borrower agrees not to modify or rescind the
Statement without the prior written consent of the Lender;
(c) to cause an effective and valid amendment of the memorandum of
association of CET 21 s.r.o. to be adopted and registered with the
appropriate Czech Companies Register, such amendment to provide that
(i) the Lender, as a participant in CET 21 s.r.o., shall have a veto
right over any decision of whatever nature which is to be taken by the
participants' meeting of CET 21 s.r.o. and (ii) the Borrower is able
to sell, transfer or otherwise dispose of the Additional CET 21
Participation Interests only to the Lender (or to such other entity as
designated by the Lender) ("Amendment").
8.5 The Lender may at any time during the Loan Term in its sole discretion
provide to the Borrower a written notice of the Lender's intention to
acquire all or a portion of the Additional CET 21 Participation Interests,
the Target CNTS Participation Interest or the Additional CET 21 Shares
("Acquisition Notice"). Upon the receipt of an Acquisition Notice by the
Borrower, the Lender may utilize (and date as required) the Security
Documents in order to carry out such acquisition, and the Borrower shall
execute any further documents and undertake any further actions requested
by the Lender, in order to: (i) permit the Lender to exercise any corporate
rights (including general meeting voting rights) in respect of such
participation interests or shares and (ii) effect the transfer of such
participation interests or shares to the Lender (or such other entity as
designated by the Lender).
8.6 All costs associated with the transfer or transfers of the Additional CET
21 Participation Interests, the Borrower's CNTS Participation Interest or
the Additional CET 21 Shares from the Borrower to the Lender shall be borne
by the Lender.
8.7 The Borrower shall from time to time execute any further documents which
the Lender deems necessary in order to achieve the objectives of this
Article 8 and this Agreement.
8.8 The Parties agree that under the Trust Agreement the Lender shall be the
beneficial owner of the Additional CET 21 Participation Interests during
the Loan Term. In the event of any disputes, the Parties agree that the
provisions of the Trust Agreement shall prevail over any provision which
may relate to the inheritance laws of the Czech Republic.
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9. ACQUISITION OF CNTS PARTICIPATION INTERESTS
9.1 Upon the acquisition by the Borrower of the Additional CET 21 Participation
Interests, the Borrower agrees to use his best efforts (i) to cause CET 21
s.r.o. to sell to, or otherwise transfer to, the Borrower the Target CNTS
Participation Interest and (ii) to acquire the Target CNTS Participation
Interest.
9.2 Immediately upon the acquisition by the Borrower of the Target CNTS
Participation Interest, the Borrower agrees to transfer, and to take all
actions required to transfer, to the Lender (or such entity as designated
by the Lender) the Target CNTS Participation Interest and the Additional
CET 21 Shares. The Lender may utilize (and date) the Security Documents in
order to carry out such transfers.
9.3 The Lender agrees (i) to extinguish any repayment obligations of the
Borrower with respect to the Loan Amount, (ii) except as provided in
Articles 9.4 (f) and 9.5 below, to refrain from using its rights under this
Agreement and the Security Documents to acquire the Additional CET 21
Participation Interests, (iii) to cancel the Promissory Note and (iv) to
pay to the Borrower a fee equal to $100,000 U.S. dollars ("Fee") if each of
the following events has occurred to the satisfaction of the Lender
(together, the "Release Events"):
(a) the transfer of the Target CNTS Participation Interest from the
Borrower to the Lender is valid and effective and has been registered
with the applicable Czech Companies Register;
(b) the Additional CET 21 Shares have been validly and effectively
transferred to the Lender;
(c) the Amendment is valid and effective;
(d) all Interests Payments due and payable to the Lender hereunder have
been paid to the Lender; and
(e) the Borrower has complied with all (and is not in breach of any) of
his obligations as provided in this Agreement.
9.4 Upon the occurrence of the Release Events, the Parties agree that the
following conditions shall apply:
(a) the Borrower shall have the right to all dividends, distributions or
payments of whatever nature which are attributable, distributed or
payable to the Borrower in connection with the Additional CET 21
Participation Interests;
(b) notwithstanding Article 8.3, the Borrower shall continue to exercise
all voting rights associated with the Additional CET 21 Participation
Interests or interests in any successor entity thereof only as
directed by the Lender;
8
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(c) the Lender, as a participant in CET 21 s.r.o., shall have a veto right
over any decision of whatever nature which is to be taken by the
participants' meeting of CET 21 s.r.o.;
(d) only the Lender shall be given a right of first refusal to purchase or
obtain the Additional CET 21 Participation Interests from the
Borrower;
(e) the Borrower shall be able to sell, transfer or otherwise dispose of
the Additional CET 21 Participation Interests only to the Lender (or
to any entity as designated by the Lender) and shall not (without the
prior written consent of the Lendor which consent may be withheld or
granted by the Lendor in its sole discretion) nor enter into
agreements to pledge, hypothecate, sell, transfer, bequeath, will or
otherwise dispose of the Additional CET 21 Participation Interests;
(f) in the event of the Borrower's death or incapacitation, (y) the
Additional CET 21 Participation Interests shall immediately be
transferred from the Borrower to the Lender (or to any entity as
designated by the Lender) for a purchase price equal to the nominal
value of such participation interests and (z) the Lender shall have
the right to utilize (and date) the Security Documents in order to
carry out such transfer.
9.5 In the event that the Borrower violates any of his obligations as provided
in Article 9.4, the Borrower agrees:
(a) to pay to the Lender a penalty amount equal to $20,000,000 U.S.
dollars; and
(b) immediately to transfer, and to take all actions required to transfer,
to the Lender (or such entity as designated by the Lender) the
Additional CET 21 Participation Interests; the Lender may utilize (and
date) the Security Documents in order to carry out such transfer.
9.6 The Lender shall pay the Fee to such account as designated by the Borrower.
9.7 The provisions of this Article 9 shall survive the termination of this
Agreement.
10. EVENTS OF DEFAULT AND LENDER'S RIGHTS
10.1 The following shall constitute an Event of Default in relation to the Loan:
(a) a breach by the Borrower of any of its obligations hereunder,
including, without limitation, a breach by the Borrower of any
undertakings or representations in Articles 8, 9 or 11;
(b) a breach by the Borrower of any of its obligations under the CET 21
Participation Interest Agreements, the CET 21 Share Agreements or any
of the Security Documents;
9
<PAGE>
(c) a failure by the Borrower to repay the Loan Amount when due;
(d) the Lender does not receive an Interest Payment as provided in Article
6;
(e) any of the Security Documents, the CET 21 Participation Interest
Agreements or the CET 21 Share Agreements become invalid or
unenforceable;
(f) the Borrower's failure to adhere to instructions of the Lender on
voting in the general meetings of CET 21 s.r.o., CET 21 a.s. or CNTS;
(g) the Borrower files for bankruptcy, dies or becomes incompetent, or a
party files a bankruptcy or similar petition against the Borrower.
10.2 The Borrower agrees that any Event of Default hereunder shall be deemed an
event of default and material breach by the Borrower of its obligations
under all other agreements or contracts which the Borrower has entered into
(or will enter into) with the Lender or with any subsidiary or affiliate of
the Lender, hereby (i) providing the Lender with the right to terminate
such agreements and contracts and (ii) effectively amending such agreements
or contracts. Any such subsidiary or affiliate shall be deemed a third
party beneficiary of this Article 10.2.
10.3 Upon the occurrence of any Event of Default, the Lender may, in its sole
discretion:
(a) notify the Borrower that the balance of the Loan Amount outstanding
and all other sums payable under this Agreement are immediately due
and payable ("Default Notice"), whereupon with the giving of such
Default Notice the balance of the Loan Amount outstanding and all
other sums payable under this Agreement shall be immediately due and
payable by the Borrower; or
(b) exercise any of its rights under, and use, the Security Documents,
including the right to date and use any undated Security Documents; or
(c) exercise any other remedies or rights available to Lender under any
applicable law.
10.4 Borrower's repayment obligation with respect to the Loan Amount shall be
extinguished at such time as (i) the Lender acquires the Additional CET 21
Participation Interests by operation of the provisions of a Security
Document or otherwise, (ii) CET 21 s.r.o. still has the Target CNTS
Participation Interest and (iii) the Borrower or any other party has no
right (whether direct or indirect) to acquire the Target CNTS Participation
Interest from CET 21 s.r.o.
11. UNDERTAKINGS; REPRESENTATIONS AND WARRANTIES
11.1 The Borrower undertakes and covenants to the Lender that he shall:
10
<PAGE>
(a) notify the Lender of all correspondence and documents received by the
Borrower which concern the Additional CET 21 Participation Interests,
the Additional CET 21 Shares and the Target CNTS Participation
Interest and permit the Lender and/or any professional advisers
appointed by the Lender to examine such correspondence;
(b) promptly inform the Lender of the occurrence or prospective occurrence
of any Event of Default or any events or circumstances which could
materially and adversely affect the financial condition of the
Borrower or his ability to perform its obligations under this
Agreement or the Security Documents.
11.2 Upon the request of the Lender, the Borrower shall provide the Lender with
all documents or correspondence in the Borrower's possession relating to
the Additional CET 21 Participation Interests, the Additional CET 21 Shares
or the Target CNTS Participation Interest.
11.3 The Borrower represents and warrants to the Lender (as of the Effective
Date and during the Loan Term) that (i) he has the full legal capacity to
enter into this Agreement and perform his obligations hereunder and (ii) he
is not subject to any bankruptcy petitions or proceedings or other legal
actions which may adversely affect his ability to carry out his obligations
hereunder.
12. INDEMNITY
The Borrower agrees to indemnify and hold harmless the Lender from and against
any and all liabilities, claims, damages, penalties, costs and expenses of
whatever nature (including, without limitation, reasonable attorneys' fees and
expenses incurred in connection with enforcing any rights hereunder or under the
Security Documents) arising out of the Borrower's failure to comply with the
terms of this Agreement or any Security Document.
13. AMENDMENT, WAIVER AND SEVERABILITY
13.1 Any amendment or waiver of any provision of this Agreement and any waiver
of any default under this Agreement shall only be effective if made in
writing and signed by the Lender.
13.2 If any provision of this Agreement is invalid, ineffective, unenforceable
or illegal for any reason, such decision shall not affect the validity or
enforceability of any or all of the remaining provisions. The Parties agree
that should any provision of this Agreement be invalid or unenforceable,
they shall promptly enter into good faith negotiations to amend such
provision in such a way that, as amended, it is valid and legal and to the
maximum extent possible carries out the original intent of the Parties as
to the issue or issues in question.
13.2 The failure of the Lender to exercise any right or power given to it under
this Agreement or to insist upon strict compliance with the terms of this
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Agreement by the other Party, shall not constitute a waiver of the terms
and conditions of this Agreement with respect to any subsequent breach
thereof, nor a waiver by the Lender of its rights at any time thereafter to
require strict compliance with all the terms of this Agreement.
14. ASSIGNMENT
The Lender may assign or transfer any of its rights or obligations under this
Agreement without the prior consent of the Borrower. The Borrower shall not,
without the prior written consent of the Lender, assign or transfer any of its
rights and/or obligations under this Agreement, such consent to be withheld or
granted by the Lender in its sole discretion.
15. GOVERNING LAW, DISPUTE RESOLUTION AND INTERPRETATION
15.1 This Agreement shall be governed by and construed in accordance with the
laws of the Netherlands without giving effect to the conflicts of laws
provisions thereof.
15.2 All disputes, controversies or claims arising out of or in connection with
this Agreement shall be finally settled in accordance with the UNCITRAL
Arbitration Rules in force as of the Effective Date; provided, however,
that the Lender, and only the Lender, may in its sole discretion elect to
commence legal action against the Borrower in the courts (or other relevant
tribunal or forum) of the Czech Republic and the Borrower hereby submits to
the jurisdiction of such Czech courts, tribunals or forums. For the
avoidance of doubt, the Borrower hereby waives any right to commence legal
or equitable action arising out of or in connection with any dispute,
controversy or claim arising out of or in connection with this Agreement in
any forum, court or tribunal other than by arbitration in Amsterdam as
provided in this Article 15.
15.3 There shall be three arbitrators. The appointing authority shall be the
President of the Amsterdam Chamber of Commerce. If the appointing authority
refuses to act or fails to appoint an arbitrator within 30 days of the
receipt of the parties' request therefor, any party may request the
Secretary-General of the Permanent Court of Arbitration at the Hague to
designate an appointing authority.
15.4 The language of arbitration proceedings shall be English; all submissions
and awards in relation to the arbitration shall be conducted in English.
The place of arbitration shall be Amsterdam.
15.5 This Agreement is executed in six original copies in the English language,
with six copies for each Party.
15.6 The provisions of this Article 15 shall survive the expiration or
termination of this Agreement.
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16. NOTICES
All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be in writing and shall be deemed
validly given upon personal delivery or on the day of being sent by telecopy or
overnight courier service:
(a) to the Lender at:
CME Media Enterprises B.V.
Leidseplein 29
Amsterdam, the Netherlands
with a copy to:
CME Group
18 D'Arblay Street
London W1V 3FP
United Kingdom
Facsimile: 44-171-292-7901
(b) to the Borrower at:
PhDr. Vladimir Zelezny
Sibeliova 45
Praha 6, Czech Republic
or at such other address and telecopy number as either Party may designate by
written notice to the other Party.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
Effective Date.
CME Media Enterprises B.V. PhDr. Vladimir Zelezny
/s/Leonard M. Fertig /s/Vladimir Zelezny
---------------------- ----------------------
By: Leonard M. Fertig
13
TERM PROMISSORY NOTE
October 2, 1996
FOR VALUE RECEIVED, Central European Media Enterprises Ltd., a Bermuda
corporation ("CME"), promises to pay to the order of Ronald S. Lauder
("Lauder"), or assigns, on the earlier of the date of closing of the public
offering of CME's Class A Common Stock covered by SEC Registration Statement No.
333-12699 (or any public offering in lieu thereof) (in either case, a "Public
Offering") or October 1, 1998, at Lauder's New York City offices or at such
other place as Lauder may from time to time designate, the lesser of (i)
$20,000,000, and (ii) the unpaid principal amount as reflected on Annex A
hereto, which amount shall be payable in United States dollars. Lauder is hereby
authorized by CME to record on Annex A hereto the amount of (i) loans made by
Lauder to CME and (ii) each payment of principal received by Lauder, it being
understood, however, that failure to make any such notation shall not affect the
rights of Lauder or the obligations of CME hereunder in respect of this Note.
Loans hereunder shall be made only in $2,000,000 increments on five days prior
written notice to Lauder and shall not exceed an aggregate of $20,000,000,
provided that Lauder shall not be obligated to make any advance if an Event of
Default (or any event which with the giving of notice would constitute an Event
of Default) has occurred and is continuing, provided further that Lauder shall
not be required to make any advance on or after the maturity date hereof.
The following terms shall apply to this Note:
I. Interest. Interest shall accrue and be payable on the outstanding
principal amount of this Note at an annual rate from time to time of LIBOR plus
2%, payable on November 1, 1996 and the first business day of each month
thereafter (each a "Payment Date"). LIBOR for this purpose shall be one month
LIBOR as such rate shall appear on the business day prior to each Payment Date
on the Telerate page 3750 (rounded upward, if necessary, to the nearest 1/16th
of 1%) for deposits in U.S. dollars for a one-month period.
<PAGE>
2. Payment not on a Business Day. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required to close,
such payment shall be made on the next succeeding business day and such
extension of time shall in such case be included in computing interest in
connection with such payment.
3. Prepayment. CME may, upon at least five days' notice, prepay this Note,
in whole or in increments of $2,000,000, without premium or penalty, provided
that CME shall reimburse Lauder within five days after demand for any resulting
loss or expense incurred by him in prepaying his funding sources, but only those
funding sources which have provided him with funding carrying an interest rate
based on LIBOR, after any prepayment (or payment upon the closing of a Public
Offering) by CME of $10,000,000 or more. In the event that the interest period
under Lauder's funding sources expires after CME delivers a notice of prepayment
(or payment in the case of a Public Offering) but before CME makes the
prepayment (or payment in the case of a Public Offering), Lauder agrees that any
borrowings (or continuation of outstanding borrowings) from his funding sources
supporting his loan to CME will be made using the shortest interest period
available to him.
4. Costs and Expenses. CME shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by Lauder in
collecting or enforcing this Note.
5. Defaults. (a) The occurrence of any of the following shall
constitute an "Event of Default", but, in the case of clauses (iv), (v) or
(vi) below, only after Lauder has given written notice to the Company
declaring such event an "Event of Default":
(i) failure to pay principal when due;
(ii) the commencement by CME of any case, proceeding or other
action relating to it in bankruptcy or seeking any relief under any
bankruptcy, insolvency, or similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; CME shall apply for a
receiver, custodian or trustee for itself or for all or a substantial part
of its property; CME shall make a general assignment for the benefit of
its creditors; CME shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or CME shall take any
action indicating its consent to, approval of, or acquiescence in any of
the foregoing;
(iii) any other commencement of any case, proceeding or other
action against CME in bankruptcy or seeking any relief under any
bankruptcy, insolvency, or similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; or a receiver, custodian
or trustee for CME or for all or a
<PAGE>
substantial part of its property shall be appointed; and in each such case
such condition shall continue unstayed and in effect for a period of 90
days;
(iv) failure to pay within five days of the due date thereof
any interest, fees or other amounts (other than principal) payable
hereunder;
(v) judgments or orders for the payment of money individually,
or in the aggregate, in excess of $10,000,000 shall be rendered against
CME and such judgments or orders shall continue unpaid, unstayed on or
pending appeal, undischarged, unbonded or undismissed, in each case for a
period of 30 days or more; and
(vi) CME shall fail to make payment in respect of any Debt
which individually, or in the aggregate, is outstanding in a principal
amount of at least 10,000,000, when due or within the applicable grace
period, or any event of condition shall occur which results in the
acceleration of the maturity of any such Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of
such Debt or any person acting on such holder's behalf to accelerate the
maturity thereof.
"Debt" of any person means at any date, without duplication, (i) all
obligations of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations of such person to reimburse any bank or other person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a lien on any asset of such person, whether or not such Debt is
otherwise an obligation of such person and (vii) all Debt of others guaranteed
by such person.
(b) CME shall notify Lauder of the occurrence of any Event of
Default promptly after CME obtains knowledge thereof;
(c) Upon the occurrence of any Event of Default, all amounts payable
hereunder shall automatically and immediately become due and payable and
commitments to make any further advances shall terminate;
6. Waivers. (a) CME hereby waives presentment, demand for payment, notice
of dishonor, notice of protest, and protest in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note.
<PAGE>
(b) No delay by Lauder in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise. No waiver or
modification of the terms hereof shall be valid unless set forth in writing by
Lauder.
7. Subordination. (a) Principal, interest on and any other amount due in
respect of loans under this Note shall, as provided in (b) and (c) below, be
subordinated and made junior to the payment of the principal, interest and any
other amount due in respect of amounts due (the "ING Loan") to ING Bank N.V.
("ING").
(b) Subject to subparagraph (c) below, until the ING Loan shall have
been paid in full, the Company shall not make any direct or indirect payment or
reduction (whether by way of loan, set-off or otherwise) in respect of the
principal amount of, or interest on or any other amount due in respect of this
Note, whether such amount shall have become payable on maturity, by acceleration
or otherwise, if on the date such payment would (but for this Section (b)) be
payable pursuant to this Note (hereinafter referred to as a "Payment Date"), (i)
the Company shall have failed to make payments required to be made on or with
respect to the ING Loan as and when the same became or becomes due and payable
and such failures to pay have not been cured or waived, (ii) any Default (as
defined in the agreement pursuant to which the ING Loan was extended by ING) or
event of default shall have occurred and be continuing under such agreement,
whether or not ING shall, pursuant to such agreement, have declared all or any
portion of the ING Loan due and payable in full on the basis of the occurrence
of such default or event of default, or (iii) if such a Default or event of
default shall not be continuing, but ING shall, pursuant to the ING Loan, have
declared all or any portion of the ING Loan due and payable in full on the basis
of the occurrence of such Default or event of default and such acceleration
shall not have been specifically rescinded in writing by ING.
Payments on this Note which are not otherwise prohibited pursuant to this
Section 7 from being made, may be made, but only upon, subject and pursuant to
the other terms and provisions set forth herein.
(c) In the event of (x) any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, readjustment of debt, arrangement,
composition, assignment for the benefit of creditors, or other similar
proceeding relative to the Company, as such, or its property, or (y) any
proceeding for voluntary liquidation, dissolution or other winding up or
bankruptcy proceedings relative to the Company, then the ING Loan shall first be
paid in full before any payment or distribution of any character, whether in
cash, securities, obligations or other property, shall be made in respect to
this Note.
8. Assignability. This Note may be assigned by the holder hereof, in whole
or in part, at any time or from time to time but shall not be assignable by the
Company without the prior written consent of the holder.
<PAGE>
9. Binding Nature. This Note shall inure to the benefit of and be
enforceable by Lauder and his heirs, executors, successors and assigns and shall
be binding and enforceable against CME and its assigns and successors.
10. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
11. Indemnity. CME agrees to indemnify Lauder and hold Lauder harmless
from and against any and all liabilities, losses, damages, costs and expenses of
any kind, including, without limitation, the reasonable fees and disbursements
of counsel, which may be incurred by Lauder in connection with any
investigative, administrative or judicial proceeding (whether or not Lauder
shall be designated a party thereto) brought or threatened relating to or
arising out of or in connection with this Note or any actual or proposed use of
proceeds hereunder, provided that Lauder shall not have the right to be
indemnified under this Section 11 for his own gross negligence or willful
misconduct.
12. Appointment of Agent. CME hereby appoints Andrew Gaspar with offices
at the date of this Note at 767 Fifth Avenue, Suite 4200, New York, New York
10153, as its authorized agent on which any and all legal process may be served
in any action, suit or proceeding, which is brought in any New York Court (as
defined in Section 13). CME agrees that service of process in respect of it upon
such agent shall be deemed to be effective service of process upon it in any
action, suit or proceeding referred to in this Section which is brought in any
New York Court. CME agrees that the failure of such agent to give notice to it
of any such service shall not impair or affect the validity of such service or
any judgment rendered in any action, suit or proceeding based thereon. If for
any reason such agent shall cease to be available to act as such, CME agrees to
designate a new agent in the Borough of Manhattan, The City of New York, on the
terms and for the purposes of this Section, and CME shall, as soon as
practicable, give notice to Lauder of such new agent. Nothing herein shall be
deemed to limit the ability of Lauder to serve any such legal process in any
other manner permitted by applicable law or to obtain jurisdiction over CME or
bring actions, suits or proceedings against CME in such other jurisdictions, and
in such manner, as may be permitted by applicable law.
<PAGE>
13. Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law. Any action or proceedings to enforce
or arising out of this Note may be commenced in any court of the State of New
York or in the United States District Court for the Southern District of New
York (any such court, a "New York Court"). CME agrees that venue will be proper
in such courts in any such matters, and agrees that New York is the most
convenient forum for litigation in any suit, action or legal proceeding. CME
agrees that a final judgment in any such action or proceeding may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
Section 14. Successors and Assigns. The provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
IN WITNESS WHEREOF, CME has executed this Note as of the date first above
written.
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
By: _____________________________________
Name:
Title:
Agreed to and acknowledged by:
______________________________
Ronald S. Lauder
<PAGE>
ANNEX A
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Schedule of Loans Owed to
Ronald S. Lauder Pursuant to Note
Date Amount Borrowed Amount Repaid Unpaid Principal
- ---- --------------- ------------- ----------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. NEITHER THIS WARRANT NOR SUCH
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED
OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND THE
APPLICABLE RULES AND REGULATIONS THEREUNDER.
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Warrant for the Purchase of Shares of Common Stock
up to 100,000 Shares
FOR VALUE RECEIVED, CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. (the
"Company"), a Bermuda corporation, hereby certifies that RONALD S. LAUDER, or
his registered assigns (the "Holder") is entitled, subject to the provisions of
this Warrant, to purchase from the Company, at any time or from time to time
during the Exercise Period, as hereinafter defined, an aggregate (subject to
adjustment from time to time as hereinafter set forth) of up to 100,000 fully
paid and nonassessable shares of Class A Common Stock of the Company, par value
$0.01 per share, at a purchase price per share equal to the Exercise Price as
hereinafter defined. The number of Warrant Shares issuable upon exercise of this
Warrant shall be subject to reduction based on the highest amount of principal
payable, at any one time, by the Company to the Holder (the "Maximum Loan"),
pursuant to that certain Term Promissory Note (the "Note"), dated October 2,
1996, by the Company and payable to the Holder, after the date of the Note and
prior to the date of repayment in full thereof. Such reduction shall be computed
by reducing the number of Warrant Shares (as defined herein) in proportion to
the amount (if any) by which $20,000,000 exceeds the Maximum Loan as provided in
Exhibit A hereto. The term "Common Stock" shall mean the aforementioned Class A
Common Stock, par value $0.01 per share, of the Company, together with any other
equity securities that may be issued by the Company in substitution therefor.
The number of shares of Common Stock to be received upon the exercise of this
Warrant and the Exercise Price are subject to adjustment from time to time as
hereinafter set forth.
<PAGE>
Section I. Definitions. The following terms, as used herein, have the
following respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required to close.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period of time from October 2, 1997 until 5:00
P.M., local time in New York City, on October 1, 2001.
"Exercise Price" shall be the lesser of 110% of the price to public as set
forth on the cover of the final prospectus contained in Registration Statement
No. 333-12699 or $32.00 per share of Common Stock (subject to adjustment from
time to time as hereinafter set forth).
"Warrant Shares" means the shares of Common Stock deliverable upon
exercise of this Warrant, as adjusted from time to time, except as provided in
Section 9 hereof.
Section 2. Exercise of Warrant. Subject to the provisions of Section 10,
this Warrant may be exercised in whole or in part, at any time or from time to
time, during the Exercise Period, by presentation and surrender hereof to the
Company at its principal office at the address set forth on the signature page
hereof (or at such other address as the Company may hereafter notify the Holder
in writing), or at the office of its stock transfer agent or warrant agent, if
any, with the Purchase Form annexed hereto duly executed and accompanied by
proper payment of the Exercise Price for the number of Warrant Shares specified
in such form. The Exercise Price shall be paid in cash, in currency of the
United States of America or by reduction in outstanding amounts due under the
Note. If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable hereunder. Upon receipt by the Company of this Warrant and such
Purchase Form, together with the applicable Exercise Price, at such office, in
proper form for exercise, the Holder shall be deemed to be the holder of record
of the Warrant Shares, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such Warrant
Shares shall not then be actually delivered to the Holder. The Company shall pay
any and all documentary stamp or similar issue taxes payable in respect of the
issue of the
2
<PAGE>
Warrant Shares. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of certificates representing Warrants or Warrant Shares in a name other than
that of the Holder at the time of surrender for exercise and, until the payment
of such tax, shall not be required to issue such Warrant Shares.
Section 3. Reservation of Shares. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and nonassessable, free and clear of all liens,
security interests, charges and other encumbrance or restrictions on sale and
free and clear of all preemptive rights, subject, however, to the provisions of
Section 10.
Section 4. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange,
the current market value shall be the last reported sale price of the
Common Stock on such exchange on the last Business Day prior to the date
of exercise of this Warrant or if no such sale is made on such day, the
mean of the closing bid and asked prices for such day on such exchange; or
(ii) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of
the last bid and asked prices reported on the last Business Day prior to
the date of the exercise of this Warrant (A) by the National Association
of Securities Dealers, Inc. Automated Quotation System or (B) if reports
are unavailable under clause (A) above by the National Quotation Bureau
Incorporated; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported,
the current market
3
<PAGE>
value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
Section 5. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other Warrants of different
denominations, entitling the Holder or Holders thereof to purchase in the
aggregate the same number of Warrant Shares. The Holder of this Warrant shall be
entitled without obtaining the consent of the Company, to assign its interest in
this Warrant in whole or in part to any person or persons, subject to the
provisions of Section 10. Subject to the provisions of Section 10, upon
surrender of this Warrant to the Company, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer tax, the Company
shall, without charge, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees named in such instrument of assignment and, if the
Holder's entire interest is not being assigned, in the name of the Holder, and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation hereof
at the office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or for which it may be exchanged. Upon receipt
by the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver a new Warrant
of like tenor and date.
Section 6. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
Section 7. Anti-dilution Provisions. In case the Company shall, while this
Warrant remains in effect, (i) declare a dividend or make a distribution on its
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class), (ii) subdivide shares of its
Common Stock into a greater number of shares, (iii) combine its outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), the Holder shall be entitled to purchase
the aggregate number and kind of shares which, if the Warrant had
4
<PAGE>
been exercised immediately prior to such event, the Holder would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination or reclassification; and the Exercise
Price shall automatically be adjusted immediately after the record date, in the
case of a dividend or distribution, or the effective date, in the case of a
subdivision, combination or reclassification, to allow the purchase of such
aggregate number and kind of shares for an aggregate Exercise Price no greater
than the aggregate Exercise Price that would have been payable if this Warrant
had been exercised in full immediately prior to such event. Such adjustments
shall be made successively whenever any event listed above shall occur.
No adjustment pursuant to this Section 7 in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one whole share; provided however, that any
adjustments which by reason of this sentence are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 7 shall be made to the nearest share. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 7, the Holder shall become entitled to receive any shares of the capital
stock of the Company other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in this
Section 7, and the provisions of this Warrant with respect to the Common Stock
shall apply on like terms to any such other shares.
Section 8. Officers' Certificate. Whenever the number of Warrant Shares
purchasable hereunder shall be adjusted as required by the provisions of Section
7, the Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office an officers' certificate showing the
adjusted number of Warrant Shares purchasable hereunder determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officers' certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officers' certificate shall be made available at all reasonable times for
inspection by the Holder or any holder of a Warrant executed and delivered
pursuant to Section 4 hereof and the Company shall, forthwith after each such
adjustment, mail a copy, by certified mail, of such certificate to the Holder or
any such holder.
Section 9. Reclassification, Reorganization, Consolidation
5
<PAGE>
or Merger. In case of any Reorganization Transaction (as hereinafter defined),
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares of stock and
other securities and property receivable upon such Reorganization Transaction by
a holder of the number of shares of Common Stock that might have been received
upon exercise of this Warrant immediately prior to such Reorganization
Transaction. Any such provision shall include provision for adjustments in
respect of such shares of stock and other securities and property that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Warrant. The foregoing provisions of this Section 9 shall similarly apply
to successive Reorganization Transactions. For purposes of this Section 9,
"Reorganization Transaction" shall mean (excluding any transaction covered by
Section 7) any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company (other than a subdivision or
combination of the outstanding Common Stock and other than a change in the par
value of the Common Stock) or any consolidation or merger of the Company with or
into another corporation (other than a merger in which the Company is the
continuing corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock issuable
upon exercise of this Warrant) or any sale, lease transfer or conveyance to
another corporation of the property and assets of the Company as an entirety.
Section 10. Transfer to Comply with the Securities Act of 1933. The
Holder, by his acceptance hereof, represents and warrants that he is acquiring
the Warrants and any Warrant Shares for investment purposes, for his own account
and not in conjunction with any other person, directly or indirectly, and not
with an intent to sell or distribute the Warrants or any Warrant Shares except
in compliance with applicable United States federal and state securities law in
a manner which would not result in the issuance of the Warrants being treated as
a public offering. Neither this Warrant nor any of the Warrant Shares, nor any
interest in either, may be sold, assigned, pledged, hypothecated, encumbered or
in any other manner transferred or disposed of, in whole or in part, except in
compliance with applicable United States federal and state securities laws and
the terms and conditions hereof. Each Certificate for Warrant Shares issued upon
exercise of this Warrant, unless at the time of exercise such Warrant Shares are
registered under the Act, shall bear the following legend:
This certificate and the securities evidenced hereby have not been
registered under the Securities Act of 1933. Neither this certificate nor
such
6
<PAGE>
securities nor any interest or participation therein may be sold,
assigned, pledged, hypothecated, encumbered or in any other manner
transferred or disposed of except in compliance with the Securities Act of
1933 and the applicable rules and regulations thereunder.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such legend unless, in the
reasonable opinion of counsel for the Company, the securities represented
thereby need no longer be subject to the restriction contained herein. The
provisions of this Section 10 shall be binding upon all subsequent holders of
certificates bearing the above legend and all subsequent holders of this
Warrant, if any.
Section 11. Listing on Securities Exchanges. The Company shall use its
best efforts to list on each national securities exchange on which any Common
Stock may at any time be listed, subject to official notice of issuance upon the
exercise of this Warrant, and shall use its best efforts to maintain, so long as
any other shares of its Common Stock shall be so listed, such listing of all
shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall use its best efforts to so list on each national
securities exchange, and shall use its best efforts to maintain such listing of,
any other shares of capital stock of the Company issuable upon the exercise of
this Warrant if and so long as any shares of capital stock of the same class
shall be listed on such national securities exchange by the Company. Any such
listing shall be at the Company's expense.
Section 12. Availability of Information. The Company shall comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act to the
extent it is required to do so under the Exchange Act. The Company shall also
cooperate with each Holder of any Warrants and holder of any Warrant Shares in
supplying such information as may be necessary for such holder to complete and
file any information reporting forms currently or hereafter required by the
Securities and Exchange Commission as a condition to the availability of an
exemption from the Act for the sale of any Warrants or Warrant Shares. The
provisions of this Section 12 shall survive termination of this Warrant, whether
upon exercise of this Warrant in full or otherwise.
Section 13. Taxes. (a) Withholding Taxes. All payments made by or on
behalf of the Company pursuant to or in connection with this Warrant or the Note
to or for the account of the Holder, shall be made free and clear of, and
without deduction or withholding for or on account of any Indemnifiable Taxes,
unless such deduction or withholding is required by applicable law. If
7
<PAGE>
any such deduction or withholding is required by applicable law, the Company
shall(i) promptly notify the Holder of such requirement, (ii) pay the amount so
required to be deducted or withheld to the applicable taxing authority on a
timely basis, and (iii) pay to such Holder such additional amounts ("Additional
Amounts") as may be necessary in order that the net amount received by such
Holder, after and free and clear of any required deduction or withholding for or
on account of Indemnifiable Taxes (including any required deduction or
withholding for or on account of Indemnifiable Taxes with respect to such
Additional Amounts), shall equal the amount such Holder would have received had
no such deduction or withholding for or on account of Indemnifiable Taxes been
required.
(b) Other Taxes. The Company shall pay and shall indemnify and hold
harmless the Holder against all Taxes, excluding income taxes, that may be
payable in respect of the preparation, execution, delivery, filing, recordation,
registration or enforcement of this Warrant or the Note or any document to be
furnished under or in connection with any thereof or the offer, issue or initial
sale of the Notes, or any modification, amendment or waiver under or in respect
of this Warrant or the Note.
(c) Survival. Notwithstanding anything else to the contrary herein
provided, the right of the Holder to receive payments under this Section 13
shall survive the sale, exchange or other disposition of the Note, any
prepayment or payment in whole or in part of any Note and the termination of
this Warrant.
(d) Definitions. "Taxes" mean any present or future taxes, levies,
imposts, duties, charges or fees of any nature whatsoever, together with any
related penalties, interest thereon or additions thereto, now or hereafter
imposed by any government or any political subdivision or taxing authority
thereof or therein. "Indemnifiable Taxes" mean all Taxes other than Taxes
imposed on the net income of the Holder imposed by (i) the jurisdiction under
the laws of which such Holder is organized (or, in the case of an individual,
the jurisdiction of which such individual is a citizen) or (ii) a jurisdiction
in which the Holder has a permanent establishment or permanent representative to
which the Note is attributable.
Section 14. Successors and Assigns. The provisions
hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
by its duly authorized officer and to be dated as of
8
<PAGE>
October 2, 1996.
CENTRAL EUROPEAN MEDIA ENTERPRISES, LTD.
By:______________________________________
Title:
9
<PAGE>
EXHIBIT A
The number of Warrant Shares shall be computed as follows. If the Maximum
Loan is less than $20,000,000, or equal to an amount between the Maximum Loan
Amounts shown on this table, the related Warrant Share amount shall be computed
on a pro rata basis on a ratio of 10,000 Warrant Shares per $2,000,000 payable
pursuant to the Note.
Maximum Loan Warrant Shares
------------ --------------
$20,000,000 100,000
$18,000,000 90,000
$16,000,000 80,000
$14,000,000 70,000
$12,000,000 60,000
$10,000,000 50,000
$ 8,000,000 40,000
$ 6,000,000 30,000
$ 4,000,000 20,000
$ 2,000,000 10,000
<PAGE>
WARRANT EXERCISE FORM
Dated ________________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _____________ shares of Common Stock and hereby
makes payment of _____________ in payment of the exercise price thereof.
----------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name____________________________________________________________________________
(please typewrite or print in block letters)
Address_________________________________________________________________________
Signature______________________________________________
----------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________________________________
hereby sells, assigns and transfers unto
Name____________________________________________________________________________
(please typewrite or print in block letters)
Address_________________________________________________________________________
its right to purchase ___________ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint ___________________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Date: ______________________, 19__
Signature________________________________
ANNEX A
ARTICLES OF ASSOCIATION
OF MOBIL ROM S.A.
----------------
<PAGE>
ARTICLES OF ASSOCIATION
2.
TABLE OF CONTENTS
ARTICLE 1 Corporate Name
ARTICLE 2 Legal Form
ARTICLE 3 Registered Office
ARTICLE 4 Duration
ARTICLE 5 Objects
ARTICLE 6 Share Capital
ARTICLE 7 Form of the Shares
ARTICLE 8 Rights and Obligations attached to the Shares
ARTICLE 9 Changes to Share Capital
ARTICLE 10 Transfer of Shares
ARTICLE 11 Governing Bodies of the Company
ARTICLE 12 General Meeting of Shareholders
ARTICLE 13 General Meetings of Shareholders - Conditions of Attendance-
Quorum - Right of Vote
ARTICLE 14 Board of Directors
ARTICLE 15 Financial Year
ARTICLE 16 Allocation and Distribution of Profits
ARTICLE 17 Accounting
ARTICLE 18 Auditors
ARTICLE 19 Dissolution
ARTICLE 20 Notices
ARTICLE 21 Arbitration
ARTICLE 22 Registration of the Company
ANNEX
ANNEX 1 Company's Logo (Article 1)
<PAGE>
ARTICLES OF ASSOCIATION
3.
CHAPTER I
COMPANY NAME, LEGAL FORM, REGISTERED OFFICE,
DURATION AND OBJECTS
ARTICLE 1 - CORPORATE NAME
The company's name shall be Mobil Rom. The company shall also use the logo
described in Annex 1 to these Articles of Association.
In all invoices, announcements, publications and other documents issued by the
company, the company's name will be followed by the words "joint stock company"
(in Romanian) or the initials S.A., with a statement of the subscribed and paid
up share capital as shown in the most recently approved balance sheet, the
number under which the company is registered at the commercial registry and the
address of the company's registered office.
ARTICLE 2 - LEGAL FORM
The company is set up as a Romanian joint stock company governed by article 8
and the other relevant articles of law no. 31/1990, law no. 35/1991 as modified
by law no. 57/93, the provisions of the Company Agreement and those set out in
these Articles.
The company's legal form may be changed by a resolution of the General Meeting
of shareholders, in accordance with the requirements set out below regarding
quorum and majority.
The company shall be liable for its obligations to the extent of its assets.
The liability of the shareholders is limited to their contributions to the
capital of the company required by the Company Agreement and these Articles of
Association. They shall not have any liability whatsoever for the debts or
obligations of the company, unless they have not paid up their shares in full
and then only to the extent of the unpaid amount.
The company shall not have any liability for the debts or obligations of the
shareholders.
ARTICLE 3 - REGISTERED OFFICE
The registered office of the company is situated at Calea Dorobantilor 7, Sector
1, Hotel Dorobanti, Bucharest, Romania.
It may be transferred to any other address in Romania by resolution of the
General Meeting of shareholders in accordance with Romanian law.
<PAGE>
ARTICLES OF ASSOCIATION
4.
The company may open branches, branch offices, agencies, shops, plants and
warehouses anywhere in Romania, subject to the provisions of Romanian law and to
a decision of the General Meeting.
ARTICLE 4 - DURATION
The company is created for an indefinite period and may be dissolved in the
cases provided for by law or as described in Article 19 of these Articles of
Association.
ARTICLE 5 - OBJECTS
The objects of the company shall be:
(a) to design, build, finance, operate and maintain a GSM cellular network in
Romania;
(b) to commercialise and provide cellular mobile telecommunications services in
Romania together with any other type of telecommunications or
telecommunications related services;
(c) to buy and/or import all relevant equipment (telecommunication,
electromechanical, transmission, computer, etc.), supplies and spare parts
to (i) set up, operate and maintain the GSM network in Romania and (ii)
provide any other type of telecommunications or telecommunications related
services in Romania;
(d) to import and trade in all types of telecommunications equipment, supplies
and spare parts and related services in Romania;
(e) to engage in any kind of contract with Romanian or foreign companies or
individuals for (i) the provision and import, as the case may be, of know-
how, management services and technology and (ii) the assignment and supply
of personnel to the company;
(f) to enter into contracts in relation to the acquisition or disposal or
occupation or use of space, land, offices and sites in relation to the
carrying out of the above activities;
(g) generally to engage in all types of investment in the telecommunications
field; and
(h) to engage in such other activities as are incidental to or necessary for
the activities described above.
CHAPTER II
SHARE CAPITAL - SHARES
ARTICLE 6 - SHARE CAPITAL
Final amount of share capital in Lei (equivalent of US $120,000,000) to be
determined according to the Lei/US $ exchange rate on the date of certification
of the articles which shall occur only between the date of the official
announcement of the award of the Licence to the consortium and the date that is
15 days later
6.1 The company's subscribed share capital is of Lei [_________], the
shareholders agreeing that, as at the date of signature of these Articles,
this is equivalent in Lei of
<PAGE>
ARTICLES OF ASSOCIATION
5.
US $120 million, (applying an exchange rate of [________ rate published by
the Central Bank of Romania on the date of signature of the Articles of
Association before a public notary, which shall occur not less that 15 days
following the official announcement by the Ministry of the award of the
Licence to the company _____]. The share capital is to be paid up in cash,
unless otherwise agreed between the shareholders in which case the value of
any contribution in kind shall be determined by the constitutive General
Meeting in accordance with Article 21 of law no 31/1990.
30% of the company's share capital has been paid up by the shareholders on
_____ [date not to be later than 15 days following the official
announcement by the Ministry of the award of the Licence to the company],
the Romanian shareholders having paid their contribution in Lei and the
foreign shareholder having paid its contribution in US dollars. The unpaid
portion of the share capital shall be paid up by the shareholders within 15
days of the request therefor from the Board of Directors, in accordance
with the dates set forth in the business plan of the company.
The total share capital is divided into 12,000 registered shares, each
having a nominal value of Lei [_____ to be calculated dividing the capital
in Lei by 12,0O0_____].
The company's shares have been subscribed and partially paid up on the date
of signature of these Articles, as follows:
1. France Telecom Mobiles International [______ or Substituted Entity
pursuant to Clause 3.2 of the General Agreement _____]: 6,120 shares
representing 51% of the company's share capital, and having a total
nominal value of Lei [000000] being the equivalent, as at the date
hereof, of US $61,200,000 (sixty one million two hundred thousand US
Dollars), (applying the exchange rate referred to above) and of which
30% or US $20,400,000 (twenty million four hundred thousand US
Dollars) has been paid up in cash;
2. Tomen Telecom Project (Romania) Co Srl.: 720 shares representing 6% of
the company's share capital and having a total nominal value of Lei
[000000], and of which 30% or Lei [000000] has been paid up in cash;
3. Alcatel Network Systems Romania SA: 360 shares representing 3% of the
company's share capital and having a total nominal value of Lei
[000000], and of which 30% or Lei [000000] has been paid up in cash;
and
4. MBL Computers Srl.: 600 shares representing 5% of the company's share
capital and having a total nominal value of Lei [000000], and of which
30% or Lei [000000] has been paid up in cash;
5 Radcom Srl.: 600 shares representing 5% of the company's share capital
and having a total nominal value of Lei [000000], and of which 30% or
Lei [000000] has been paid up in cash;
6 MEDIACOM 95 Srl.: 2,400 shares representing 20% of the company's share
capital and having a total nominal value of Lei [000000], and of which
30% or Lei [000000] has been paid up in cash; and
7. Unimedia Srl: 1,200 shares representing 10% of the company's share
capital and having a total nominal value of Lei [000000], and of which
30% or Lei [000000] been paid up in cash.
<PAGE>
ARTICLES OF ASSOCIATION
6.
6.2 Contributions of the shareholders have been deposited on the account
opened, in the name of the company, in the books of Societe Generale,
Bucharest.
ARTICLE 7 - FORM OF THE SHARES
The shares are equal and indivisible.
The shares issued by the company are registered shares. A resolution of the
General Meeting of shareholders may decide to transform some or all of the
registered shares into bearer shares.
Shares shall be recorded in the share register in accordance with applicable
laws and regulations.
ARTICLE 8 - RIGHTS AND OBLIGATIONS ATTACHED TO THE SHARES
Each share confers on its holder an equal right to the profits of the company
and to all assets held by the company.
Each share entitles its holder to one vote in all votes and deliberations of the
General Meeting of shareholders, subject to the provisions of Article 67 of law
no 31/1990.
The rights and obligations conferred by shares are transferred to all new
holders thereof provided the transfer has been made in accordance with Romanian
law, the Company Agreement (as amended from time to time) and these Articles of
Association. The holding of a share implies the obligation to abide by the terms
of the Company Agreement (as amended from time to time) and these Articles of
Association.
ARTICLE 9 - CHANGES TO SHARE CAPITAL
9.1 Increase in capital
The share capital may be increased through any means authorised by Romanian
law, pursuant to a decision of the General Meeting.
If a capital increase is to be carried out in whole or in part by way of
contributions in kind, the resolution of the General Meeting in respect of
the capital increase, and also the related amendments to the Company
Agreement and to these Articles, shall all include a description of the
contribution in kind, the name of the contributor and the number of shares
issued.
Any decision to increase the capital of the company shall be published in
the Monitorul Official.
Each shareholder shall have a preferential right of subscription to all
capital increases, in proportion to its shareholding in the company at the
time of such
<PAGE>
ARTICLES OF ASSOCIATION
7
increase. The shareholders shall have, from the date of publication of the
decision to increase, a period of one month to exercise such preferential
subscription right. After this period, the shares may be offered to the
public.
9.2 Decrease in capital
The capital may also be reduced pursuant to a decision of the General
Meeting for any reason and in any manner whatsoever, provided that the
conditions for the amendment of the Company Agreement and these Articles of
Association are complied with. However such reduction shall not in any
circumstances affect the principle of equality among the shareholders.
Any decrease in the share capital of the company shall become effective two
(2) months after the publication in the Monitorul Official of the decision
of the General Meeting. The decision shall comply with legal requirements
regarding minimum capital and shall set out both the reasons for the
decrease and the manner in which it is to be effected.
ARTICLE 10 - TRANSFER OF SHARES
No shareholder shall effect any transfer, assignment or other disposal of all or
any part of its shareholding in the company ("Transfer(s)"), except in
accordance with the following provisions of this Article 10.
10.1 Approval of the General Meeting of shareholders
Until the third anniversary of the date of registration of the company at
the commercial registry, any proposed Transfer of shares in the company
shall be subject to the prior approval of the shareholders in General
Meeting. If any such transfer is approved by the General Meeting of
shareholders, the procedure described in Article 10.2 below shall apply.
10.2 Transfer Procedure
Any proposed Transfer of shares in the company (whether during or after the
3 year period mentioned in Article 10.1 above) shall give rise to a right
of pre-emption in favour of the other shareholder(s) pro rata to their
respective shareholdings.
(a) Notice of Intention to Transfer
Any shareholder wishing to transfer all or part of its shareholding
(the "Proposing Shareholder") shall send a notice to that effect to
the Executive Manager and to the Board of Directors. Such notice shall
set out details of the shares it proposes to transfer (the "Transfer
Shares"), the identity of the proposed buyer (the "Buyer"), plus a
deed from the Buyer in a form satisfactory to the Board of Directors
undertaking to adhere to the Company Agreement.
If the General Meeting has approved the proposed Transfer under the
provisions of Article 10.1 or if such approval is not required, the
Board of Directors shall appoint an international firm of auditors
present in Bucharest
<PAGE>
ARTICLES OF ASSOCIATION
8.
to determine the fair market value of the Transfer Shares for the
purposes of the operation of the pre-emption provisions. Such a firm
shall act as expert and not as an arbitrator and its fees and expenses
shall be borne by the Proposing Shareholder. Following the expert's
appointment, the Board of Directors shall send the shareholders copy
of the Proposing Shareholder's notice and inform them of such
appointment.
(b) Notice of Proposed Transfer
Within 30 days of receipt of the expert's evaluation of the Transfer
Shares, the Executive Manager shall send the shareholder(s) (including
the Buyer, if the Buyer is a shareholder) a notice (the "Notice"),
with copy to the Proposing Shareholder, setting out the fair market
value per Transfer Share as determined by the expert, and the number
of Transfer Shares to which each shareholder shall be entitled if all
the shareholders exercise their pre-emption rights.
(c) Notice of Exercise
Each shareholder shall have 30 days from receipt of the Notice to
inform the Executive Manager of whether it intends to exercise its
pre- emption right and the maximum number of Transfer Shares which it
would be prepared to purchase. Any shareholder who fails to reply
within such 30 day period shall be deemed to have waived the exercise
of its pre-emption right in respect of the Transfer Shares.
(d) Transfer to Buyer
If the total number of Transfer Shares which the shareholders are
willing to purchase is less than the number of Transfer Shares, the
Proposing Shareholder shall be entitled to proceed with the Transfer
to the Buyer strictly in accordance with the terms notified to the
General Meeting provided that such Transfer occurs within 60 days of
the Notice.
(e) Pre-emption
Where the total number of Transfer Shares which the shareholders are
willing to purchase is equal to or less than the number of Transfer
Shares, the Proposing Shareholder shall transfer the Transfer Shares
to the shareholders exercising their pre-emption right at the price
determined by the expert pursuant to Article 10.2.a above; provided
that:
(i) where the total number of Transfer Shares which the shareholders
are willing to purchase is greater than the number of Transfer
Shares, the Transfer Shares shall be transferred to them pro rata
their existing shareholdings, subject to any maximum number of
Transfer Shares indicated by any of them; and
(ii) where the operation of these pre-emption provisions would result
in the number of shareholders falling below the minimum required
under Romanian law, one of the Transfer Shares shall be
transferred to a Director appointed on the nomination of one of
the shareholders exercising its pre-emption right, it being
agreed that such share shall
<PAGE>
ARTICLES OF ASSOCIATION
9
be deemed to be held by such shareholder when calculating the
percentage of shares held by such shareholder for the purposes of
the operation of Article 14.2.
The Transfer shall take place at a date to be determined by the
Executive Manager within 60 days of the Notice. All transfer and stamp
duties in relation to the Transfer to the shareholders shall be borne
by the purchasing shareholders.
10.3 Transfer to Affiliate
A Transfer by a shareholder of all or part of its interest in the company
to an Affiliate shall not be subject to the restrictions set out in
Articles 10.1 and 10.2 above provided that:
(a) such shareholder gives the other shareholders prior written notice of
the planned Transfer, such notice to include a commitment by the
shareholder to retain control of the legal entity to which it
transfers its shares, and stating that (without prejudice to the
above) in the event of the loss of such control, the substitution of
the Affiliate shall automatically cease to have effect from the date
of such loss of control. The shareholder shall also undertake in such
notice to inform the other shareholders forthwith upon any such loss
of control;
(b) with such notice, the transferring shareholder shall provide the
Company and the other shareholders with the original of a deed
executed by the proposed Affiliate transferee in which it undertakes
that, should the Transfer be allowed to proceed, it will (i) be bound
by the same obligations as those binding upon the transferring
shareholder pursuant to the Company Agreement and these Articles of
Association, and (ii) at its own cost, secure all official approvals
necessary for the Transfer to proceed;
(c) the transferring shareholder shall also undertake to be jointly and
severally liable with the Affiliate transferee for the performance of
its obligations under the Company Agreement and these Articles of
Association; and
(d) the transferring shareholder shall provide satisfactory evidence to
the other shareholders that the proposed transferee is its Affiliate.
Any such Affiliate transferee which subsequently ceases to be an Affiliate
of the transferring shareholder shall transfer back such transferred
shares. The other shareholders shall not have any pre-emptive rights in
respect of any such Transfer by a former Affiliate transferee of its shares
in the company back to the shareholder having transferred such interest to
it.
For the purposes of these Articles of Association, "Affiliate" means, in
relation to any person, any other person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with, such person. For the purposes of this definition and
of this Article, the term "control" as applied to any person means the
possession, directly or indirectly, of any of the
<PAGE>
ARTICLES OF ASSOCIATION
10.
following: (i) ownership of more than half of the capital or business
assets, or (ii) the power to exercise more than half of the voting rights,
or (iii) the power to appoint more than half of the members of the
administrative board or bodies legally representing such person.
10.4 Transfer to Original Shareholder
A Transfer by a shareholder of all or part of its interest in the company
to one of the founding shareholders of the company shall not be subject to
the restrictions set out in Articles 10.1 and 10.2 above provided that:
(a) the transferring shareholder gives the other shareholders prior
written notice of the Transfer; and
(b) with such notice, the transferring shareholder shall provide the
company and the other shareholders with the original of a deed
executed by the founding shareholder transferee in which it
undertakes, at its own cost, to secure all official approvals
necessary for the Transfer to proceed.
10.5 Invalid Transfer
In the event that any shareholder effects a Transfer otherwise than in
accordance with Article 10 or, where applicable, does not fulfil the
requirements laid down in Article 10.3 above, the rights attached to the
shares in question shall be suspended until such time as the breach has
been remedied.
CHAPTER III
GOVERNING BODIES AND MANAGEMENT OF THE COMPANY
ARTICLE 11 - GOVERNING BODIES OF THE COMPANY
The governing bodies of the company shall be the General Meeting of shareholders
and the Board of Directors.
ARTICLE 12 - GENERAL MEETING OF SHAREHOLDERS
12.1 The highest governing body of the company shall be the General Meeting of
shareholders, which shall consist of the shareholders or their
representatives.
Each share held by a shareholder shall carry one vote subject to the
provisions of Article 10.4 above and to the timely payment of the unpaid
portion of the shares.
The will of the shareholders shall be expressed by decisions of the General
Meeting which shall be binding on all shareholders, irrespective of whether
they were absent dissenting or incapacitated.
<PAGE>
ARTICLES OF ASSOCIATION
11.
12.2 General Meetings of shareholders may be ordinary ("Ordinary General
Meetings") or extraordinary ("Extraordinary General Meetings").
12.3 The Ordinary General Meeting shall be held at least once a year, within 3
months of the end of the company's financial year. The Ordinary General
Meeting shall have the following powers.
(a) to discuss, approve or modify the company's balance sheet and annual
profit and loss accounts, after hearing the Board of Directors' and
auditors' reports;
(b) distribution of profits and coverage of losses;
(c) appointment of members of the Board of Directors, subject to the
provisions of Article 14 below;
(d) removal from office of any member of the Board of Directors;
(e) appointment, dismissal and determination of the conditions of
remuneration of the auditors of the company;
(f) assessment of the company's management;
(g) to decide on the annual budget and the policy and development plans
and programs for the financial year;
(h) to decide on any material change to the Business Plan of the company
in respect of the Licence, which, as a result, increases the amount of
the "investment" (see "cash flow statement after financing"
section of the Business Plan) or "total operating expenses"
estimated amounts by more than 3 per cent over the next 3 years;
(i) decision on the pledge, mortgage, lease or closing down of any
business unit of the company;
(j) decision on the incurring by the company of a debt in excess of US $
one (1) million or its equivalent in any other currency; and
(k) approval of any contracting obligation on behalf of the company the
value of which exceeds US $ one (1) million or its equivalent in any
other currency.
Ordinary General Meetings shall be convened by the Chairman of the Board of
Directors or the Executive Manager.
12.4 Extraordinary General Meetings shall be held whenever the Board of
Directors or the Executive Manager deems it appropriate or if requested (i)
by the auditors of the company or (ii) by one or several shareholders
representing at least ten per cent (10%) of the capital of the company or
(iii) by a Director pursuant to Article 14.2.
Extraordinary General Meetings are convened by the Chairman of the Board
of Directors, the Executive Manager or by any person or persons entitled
to request an Extraordinary General Meeting pursuant to this Article 12.4.
Resolutions on any subject may be considered at Extraordinary General
Meetings. However decisions on the following matters shall be taken
exclusively at Extraordinary General Meetings.
(a) amendments to the Company Agreement or to the Articles of Association
of the company;
(b) increase or decrease in the share capital of the company;
<PAGE>
ARTICLES OF ASSOCIATION
12.
(c) approval of any transfer of shares during the first 3 years following
the date of registration of the company in the commercial register;
(d) acquisitions of companies by purchase of assets or shares;
(e) any event of merger of the company, its amalgamation, sale of
substantially all its assets and winding-up or dissolution of the
company;
(f) approval of the conclusion of any contract between the company and any
shareholder holding at least 5% of the company's share capital, an
Affiliate of any such shareholder or an employee, manager, director or
shareholder of any such shareholder;
(g) approval of the signature of the GSM telecommunications licence
agreement to be entered into with the Ministry of Telecommunications
and any material amendment thereof;
(h) approval of the signature of the interconnection agreement to be
entered between the company and Rom Telecom in relation to the
interconnection of the Company's network and the fixed network
operated by Rom Telecom; and
(i) any other matter entrusted to the competence of the Extraordinary
General Meeting.
12.5 Written notice of any General Meeting shall be sent to all the shareholders
at least fifteen (15) days prior to the date on which the meeting is
scheduled. It shall be sent by registered letter or by facsimile (with
confirmation by mail) to the address appearing in the share register.
All notices of General Meetings shall contain the agenda for the meeting,
together with draft resolutions relating to any amendment to the Company
Agreement and the Articles of Association in the event that such amendment
is put on the agenda of the General Meeting. The notice shall also specify
the time, date and place of the meeting.
12.6 General Meetings shall be held at the registered office of the company or
at such other place as may be specified in the notice of the meeting and
agreed beforehand by the shareholders.
12.7 Any decision required or permitted to be taken at a General Meeting of
shareholders may be taken by a written resolution signed by all the
shareholders of the company and such resolution shall be valid and binding
on the shareholders and the company notwithstanding the fact that such
resolution may have been signed at different times or places or that such
resolution may be set forth on more than one instrument.
ARTICLE 13 - GENERAL MEETINGS OF SHAREHOLDERS - CONDITIONS OF
ATTENDANCE - QUORUM - RIGHT OF VOTE
13.1 Shareholders shall be entitled to vote at the General Meeting of
shareholders only if they have been registered in the share register of the
company.
13.2 Decisions of the Ordinary General Meeting are validly made if adopted at
General Meetings reaching the quorums and with the majorities specified in
Article 74 of law
<PAGE>
ARTICLES OF ASSOCIATION
13.
no 31/1990, except that decisions specified in paragraphs (d), (h), and (i)
of Article 12.3 are passed by a vote in favour of at least 75% of the share
capital present or represented at the General Meeting.
13.3 Decisions of the Extraordinary General Meeting are validly made if adopted
at General Meetings reaching the quorums and with the majorities specified
in Article 76 of the law no 31/1990, except that
(a) decisions specified in paragraphs (a) to (f) of Article 12.4 above are
passed by a vote in favour of at least 75% of the share capital
present or represented at the General Meeting; and
(b) decisions specified in paragraphs (g) and (h) of Article 12.4 above
are passed by a vote in favour of at least 90% of the share capital
present or represented at the General Meeting.
13.4 General Meetings shall be chaired by the Chairman of the Board of Directors
or in his absence by any member of the Board of Directors.
13.5 A shareholder may be represented by another shareholder at a General
Meeting, provided that such other shareholder has been appointed as proxy
by a written instrument.
13.6 Minutes of the deliberations of the General Meeting shall be drawn up and
shall include the information required by Romanian law. The minutes shall
be drawn up and signed by the chairman of the General Meeting and the
Executive Manager or by any two members of the Board of Directors
specifically appointed by the Board of Directors. Copies of or extracts
from these minutes may be certified as true copies by the Executive
Manager.
In the absence of an attendance sheet, the signatures of all the
shareholders present shall be entered on the minutes.
ARTICLE 14 - BOARD OF DIRECTORS
14.1 The company shall be managed by a Board of Directors consisting of seven
(7) members appointed for a two (2) year term, by the General Meeting. The
shareholders shall exercise their votes in General Meetings in such manner
that at all times:
(a) during such time as Unimedia Srl holds at least 10% of the company's
paid-up share capital, one Directors shall be a candidate nominated by
Unimedia;
(b) during such time as Mediacom 95 Srl holds at least 20% of the
company's paid-up share capital, two Directors shall be candidates
nominated by Mediacom; and
(c) during such time as FTMI [___ or Substituted Entity pursuant to Clause
3.2 of the General Agreement ___] holds over 50% of the company's
paid-up share capital, four Directors shall be candidates nominated
by FTMI.
<PAGE>
ARTICLES OF ASSOCIATION
14.
Directors shall be individuals, and need not be either Romanian nationals
or shareholders of the company. Directors may be re-elected. A Director may
be removed from office at any time and for any reason, by resolution of the
General Meeting.
The first Board of Directors shall be as stated in the Company Agreement.
In the event of any vacancy on the Board of Directors, a General Meeting of
shareholders shall be convened to appoint the missing member.
14.2 Meetings of the Board of Directors may be convened by any Director at least
once each month.
The Directors shall usually be given at least 21 days' notice of each Board
meeting but, where three Directors, nominated by at least two different
shareholders, agree on reasonable grounds that it is urgent that the Board
be convened on shorter notice, 7 days' prior notice shall be sufficient. In
such case, the Directors convening the meeting shall use their best efforts
to notify the other Directors by telephone or by facsimile and shall state
in their notice why they consider the shorter notice to be justified. A
Board meeting shall not be deemed to have been duly convened unless notice
thereof has been sent to the Executive Manager.
No business shall be transacted at any Board meeting unless a quorum of
Directors is present. On the first convening of a meeting, the quorum shall
be 5 Directors. Where a quorum is not present at a duly convened Board
meeting, all the Directors shall forthwith be notified by facsimile and
mail that the meeting shall be postponed to the same time and place 7 days
later. At such adjourned Board meeting, the quorum shall be 4 Directors.
Meetings of the Board shall be chaired by a Chairman to be elected by the
Directors.
Decisions of the Board of Directors shall be adopted by simple majority of
the aggregate number of Directors. However, decisions for the confirmation
of the appointment by the Executive Manager of any senior officer of the
company having the position of manager shall require a vote in favour of 5
Directors.
In the event that the Board of Directors is unable to reach a decision on
any matter considered as urgent or important by any member of the Board,
such member may convene an Extraordinary General Meeting to resolve the
issue.
14.3 The Board of Directors is in charge of the general management of the
company. To this effect, the Board of Directors shall carry out all acts
necessary for this management within the limits of the company's objects
and subject to those powers expressly reserved by Romanian law to the
General Meeting.
The main powers of the Board of Directors are as follows
- to observe and cause the implementation of the resolutions of the
General Meeting of shareholders;
<PAGE>
ARTICLES OF ASSOCIATION
15.
- to appoint the Executive Manager who shall be in charge of the
operations of the company and its day to day management;
- to confirm the appointment by the Executive Manager of any senior
officer of the company having the position of manager;
- to review and supervise the activities of the company;
- to decide on the company's policies and strategies in accordance with
resolutions of the General Meeting of shareholders;
- to authorise the execution by the company of any contract involving
the assumption by the company of any obligation whose value exceeds US
$ one hundred thousand (US Dollars 100,000) or its equivalent in any
other currency;
- to decide on any other matters, in accordance with Romanian law.
The Board of Directors shall have the right to delegate part of its powers.
Any delegation of powers given to a person other than a Director, the
Executive Manager or a manager of the company, shall be (i) limited to
specified acts or activities and (ii) for a limited period of time not to
exceed 12 months.
14.4 The operations of the company and its day to day management shall be
entrusted to an Executive Manager appointed by the Board of Director on the
proposal of FTMI.
The Executive Manager is not a Director of the company but is entitled to
attend, as an observer, all meetings of the Board of Directors. The
Executive Manager is under the supervision of the Board of Directors to
which he shall report regularly.
The Executive Manager is authorised to represent the company vis-a-vis
third parties but only within the limits set by the Board of Directors. For
the avoidance of doubt, the Board of Directors shall not be entitled to
delegate to the Executive Manager any powers going beyond the limits on the
Board's powers.
The Chairman of the Board of Directors or two Directors acting jointly may
also represent the company vis-a-vis third parties but only if and to the
extent specifically authorised to do so by a decision of the Board of
Directors.
14.5 The Executive Manager may delegate part of his powers to the managers of
the company (technical, financial, administrative and commercial managers)
or to any other employee of the company. It is agreed that (i) each
shareholder shall be entitled to propose experienced candidates for the
different positions of manager and (ii) the Financial Manager and the
Technical Manager shall be selected amongst candidates proposed by FTMI.
However such delegation and appointment shall be ratified by the Board of
Directors.
14.6 The employment conditions and the remuneration of the Executive Manager and
the managers will be specified in an employment contract to be entered into
by the company and the relevant manager. The terms and conditions of such
employment contracts shall be approved by the Board of Directors.
<PAGE>
ARTICLES OF ASSOCIATION
16.
CHAPTER IV
FINANCIAL YEAR - DIVIDENDS - ACCOUNTANCY AND COMPANY'S AUDIT
ARTICLE 15 - FINANCIAL YEAR
The company's financial year shall run from 1 January to 31 December each year.
As an exception, the first financial year shall begin from the registration of
the company at the Commercial Registry and shall end on the following 31
December.
ARTICLE 16 - ALLOCATION AND DISTRIBUTION OF PROFITS
16.1 The profit and loss statement summarising the profits and expenditure of
the financial year shall show the profits of the financial year, after
deduction of depreciation and reserves.
At least five per cent (5%) of the profit of each financial year, (minus
previous losses carried forward) shall be put into the legal reserve fund
except that this shall cease to be mandatory once the monies in such
reserve fund amount to at least one fifth of the share capital. If for any
reason the amounts in the reserve fund at any time fall below one fifth of
the share capital, further contributions to the reserve fund shall be made
in accordance with the above.
The distributable profit shall consist of the profit of the financial year,
plus the profit carried forward, minus any previous losses and sums
allocated to reserves pursuant to Romanian law, the Company Agreement and
these Articles of Association.
16.2 The General Meeting of shareholders shall decide either the distribution of
the net profit as dividends to the shareholders in proportion to their
shareholdings, or its retention for use in the company's activity and
investments. Payment of the dividends to the shareholders shall occur not
later than 3 months after the date of the General Meeting having decided
the distribution of dividends, subject to any other resolution of the
General Meeting of shareholders.
16.3 The Chairman of the Board of Directors shall register a copy of the
company's balance sheet and profit and loss account with the commercial
registry and the Internal Revenue Authority, along with the Board of
Directors' report, the auditors' report and the decision of the General
Meeting.
ARTICLE 17 - ACCOUNTING
17.1 Reports and Budget
The Board of Directors shall prepare quarterly reports to keep the
shareholders informed of the activities of the Company during the previous
quarter These reports shall contain all relevant information and data
concerning the situation of the
<PAGE>
ARTICLES OF ASSOCIATION
17.
Company and its activities such as turnover, gross profit, operating
profit, ordinary net profit, investments, capital employment and cash flow
together with such other information as the General Meeting of the
shareholders may require.
The Board of Directors shall prepare an accounting report every semester in
Lei and in US Dollars.
The Board of Directors shall prepare the annual budget in Lei and in US
Dollars to be approved by the General Meeting of the shareholders.
17.2 Accounting standards
The company's books of account shall comply in all respects with the
requirements of Romanian law. The accounting standards to be used by the
company shall also, to the extent permitted under Romanian law, comply with
generally accepted and internationally used accrual basis debit and credit
accounting system.
17.3 Banks accounts
The company may open bank accounts in Lei and in any other currency with
any Romanian bank or authorised bank within Romania. The person(s)
authorised validly to sign banking documents on behalf of the company are
to be appointed by the Board of Directors.
ARTICLE 18 - AUDITORS
A specialist authorised to practice in Romania shall be hired, with the approval
of the General Meeting, as auditor of the company to review all evidence,
accounting books, report forms and accounting files of the company. A second
specialist, meeting the same requirements, shall be hired (also with the General
Meeting's approval) to act as alternate to such auditor.
The auditor shall keep the Board of Directors informed as to any irregularities
or infringements of legal or corporate requirements it has uncovered during its
review. The auditor shall be obliged to bring to the notice of the General
Meeting the most serious cases of default.
The Chairman of the Board of Directors shall give proper notice to the auditor
of the convening of each General Meeting. Where the auditors have been so duly
notified, their absence from a General Meeting shall not render such meeting
invalid.
CHAPTER V
DISSOLUTION - LIQUIDATION - MERGER - ARBITRATION
ARTICLE 19 - DISSOLUTION
<PAGE>
ARTICLES OF ASSOCIATION
18.
The company's dissolution shall take place on the occurrence of any of the
following:
(a) impossibility for the company either to commence or continue
performance of its objects;
(b) the passing of a resolution by the General Meeting to dissolve the
company;
(c) the insolvency or bankruptcy of the company; or
(d) the amount of the share capital falling beneath the minimum required
by Romanian law unless the shareholders decide to increase the share
capital.
The dissolution of the company shall be registered and published in the
Monitorul Official in accordance with Romanian law. Any such dissolution shall
become effective, with regard to third parties, thirty (30) days after such
publication.
The company shall be liquidated on its dissolution. The liquidation shall be
carried out by one or more liquidators appointed unanimously by the shareholders
or, failing unanimity, by the competent court on the request of any shareholder
or member of the Board of Directors.
Liquidation is carried out in accordance with Romanian law. The entry "company
in liquidation" and the name of the liquidator or liquidators, shall appear on
all papers and documents issued by the company.
The net proceeds of liquidation shall firstly be used to refund the amount of
any of the company's shares which have not been refunded. The balance shall be
distributed among the shareholders in proportion to their holding of paid up
share capital prior to the liquidation
ARTICLE 20 - NOTICES
Except as otherwise provided in these Articles of Association, all notices
required or permitted to be given pursuant or in reference to these Articles of
Association shall be in writing and shall be valid and sufficient if sent by
registered airmail, or facsimile (confirmed by mail), addressed as follows:
- to the company by the shareholders: to the company's registered office
or such other address as may be notified by the Executive Manager
- to the shareholders by the company or by one of the shareholders: to
the address of such shareholder(s) as entered in the share register.
Notices given as herein provided shall be considered to have been given seven
(7) days after the sending thereof.
ARTICLE 21 - ARBITRATION
<PAGE>
ARTICLES OF ASSOCIATION
19.
The shareholders and the company shall seek to resolve by amicable settlement
any dispute arising between them in relation to these Articles of Association.
In the event of a failure to reach an amicable settlement, any shareholder or
the company may refer the dispute to arbitration for final settlement under the
rules of conciliation and arbitration of the International Chamber of Commerce,
Paris, by one or more arbitrators appointed in accordance with the said rules.
Any such arbitration shall be held in Geneva and shall be subject to the Swiss
Code of Obligations to the extent that the status of the company is not
concerned. In this case, Romanian law shall apply. All proceedings shall be in
the English language.
ARTICLE 22 - REGISTRATION OF THE COMPANY
The shareholders hereby authorise Mrs. Petrovici Liana or Mr. Dascalu Ion, to
take all steps necessary or appropriate for the proper registration of the
Company with the Commercial Registry of Bucharest.
The Articles of Association are executed in the number of copies required by
Romanian law.
All the copies have the same legal value.
Executed at [_______________], on [_____ date to be determined being between the
official announcement by the Ministry of the award of the Licence to the company
and the following 15 days ______]
Nota: Signed by the parties on 26/9/96 to indicate their willingness to
execute the articles as a binding document between the date of the official
announcement of the award of the Licence to the consortium and the following 15
days
<PAGE>
ARTICLES OF ASSOCIATION
20.
FRANCE TELECOM MOBILES INTERNATIONAL:
[___ or Substituted Entity pursuant to Clause 3.2 of the General Agreement ___]:
Signature: __________________________
Name.
Title:
TOMEN TELECOM PROJECT (ROMANIA) CO SRL:
Signature: __________________________
Name:
Title:
ALCATEL NETWORK SYSTEMS ROMANIA SA:
Signature: __________________________
Name:
Title:
MBL COMPUTERS SRL (trading as Computerland):
Signature: __________________________
Name:
Title:
RADCOM SRL:
Signature: __________________________
Name:
Title:
MEDIACOM 95 SRL:
Signature: __________________________
Name:
Title:
<PAGE>
ARTICLES OF ASSOCIATION
21.
UNIMEDIA:
Signature: __________________________
Name:
Title:
<PAGE>
ARTICLES OF ASSOCIATION
22.
ANNEX 1
COMPANY'S LOGO
COMPANY AGREEMENT
for the creation of
MOBIL ROM S.A.
between
(1) France Telecom Mobiles International
(2) Tomen Telecom Project (Romania) CO Srl.
(3) Alcatel Network Systems Romania SA
(4) MBL Computers Srl. (trading as Computerland)
(5) Radcom Srl.
(6) Mediacom 95 Srl.
and
(7) Unimedia Srl
<PAGE>
COMPANY AGREEMENT 2
THIS COMPANY AGREEMENT FOR THE CREATION OF MOBIL ROM S.A. (the "Company
Agreement") IS MADE THIS [_________] DAY OF [_______] 1996 BETWEEN:
1. FRANCE TELECOM MOBILES INTERNATIONAL, a joint stock company duly organised
and existing under the laws of France, having its main offices at 4~/45
Boulevard Romain Rolland, 75672 - Paris, France, duly represented by ~
hereinafter called "FTMI" [or Substituted Entity pursuant to Clause 3.2 of
the General Agreement ];
2. TOMEN TELECOM PROJECT (ROMANIA) Co SRL, a limited liability company, duly
organised and existing under the laws of Romania, having its registered
offices at "Diplomat Hotel", Ap. 1-4, Str. Sevastopol 13-17, Sector 1,
Bucharest, registered with the Register of Commerce of Bucharest under no J
40/25646/ 1993, duly represented by [___________] hereinafter called
"Tomen";
3. ALCATEL NETWORK SYSTEMS ROMANIA, a joint stock company duly organised and
existing under the laws of Romania, having its registered offices at St. Gh
Lazar 9, 1900 Timisoara, registered with the Timisoara Register of Commerce
under no 35/3345/91, duly represented by [________] hereinafter called
"Alcatel Romania");
4. MBL COMPUTERS SRL (trading as Computerland), a limited liability company
duly organised and existing under the laws of Romania, having its registered
offices at 15 Bulevardul Unirii, Sector 5, Bucharest, registered with the
Bucharest Register of Commerce under no J40/6l 19/91, duly represented by
[________], hereinafter called "Computerland";
5. RADCOM SRL, a limited liability company duly organised and existing under
the laws of Romania, having its registered offices at 2-4 Calea Herastrau
Street. Bucharest, registered with the Register of Commerce of Bucharest
under no J40/10148,"38.04.1993, duly represented by [________], hereinafter
called "Radcom";
6. MEDIACOM 95, a limited liability company duly organised and existing under
the laws of Romania, having its registered offices at 155, Calea Victoriei,
bloc D sector 1, Bucharest, registered with the Register of Commerce of
Bucharest under noJ/40/1751/1995, duly represented by [________],
hereinafter called "Aediacorn"; and
7. UNIMEDIA SRL, a limited liability company duly organised and existing unde~
the laws of Romania, having its registered offices at 155, Calea Victoriei,
Sector 1. Bucharest, registered with the Register of Commerce of Bucharest
under no J40/l59_ 1995 duly represented by [________], hereinafter called
"Unimedia"; and
FTMI, Tomen, Alcatel Romania, Computerland, Radcom, Mediacom and Unimedia are
hereinafter sometimes referred to individually as a "shareholder" and
collectively as the JJV "shareholders".
<PAGE>
COMPANY AGREEMENT 3
WHEREAS:
(A) In June 1996, the Ministry of Communications of Romania (the "Ministry")
issued a tender for the award of a licence (the "Licence") to install and
operate a GSM cellular .network in Romania.
(B) On 26 September 1996, the parties to this Company Agreement concluded an
agreement (the "General Agreement") in which they set Out (i) the
conditions under which they would prepare a joint offer in response to the
above tender and, as the case may be, the Licence would be negotiated with
the Ministry, and (ii) their respective obligations regarding the
establishment and financing of a Romanian joint stock company to implement
the Licence in the event of their joint offer being successful. The General
Agreement included in particular an undertaking by the parties hereto to
execute this Company Agreement with the Articles of Association annexed
hereto in the event of the offer being successful.
(C) On [________], the Ministry officially announced its selection of the
parties hereto as winners of the tender.
(D) Pursuant to the General Agreement, the parties hereto now wish to conclude
this Company Agreement to create between themselves a Romanian joint stock
company in accordance with the provisions of law no.31/1990 and law
no.35/1991 as modified by law no.57/93.
IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1 - CORPORATE NAME
The company's name shall be Mobil Rom. The company shall also use the logo
described in Annex 1 to the Articles of Association attached hereto as Annex A.
In all invoices, announcements, publications and other documents issued by the
company, the company's name will be followed by the words "joint stock company"
(in Romanian) or the initials S.A., with a statement of the subscribed and paid
up share capital as shown in the most recently approved balance sheet, the
number under which the company is registered at the commercial registry and the
address of the company's registered office.
CLAUSE 2 - LEGAL FORM
The company is set up as a Romanian joint stock company governed by article 8
and the other relevant articles of law n0 31/1990, lawn0 35/1991 as modified by
law n0 57/93, the Articles of Association attached hereto as Annex A and the
provisions of this Company Agreement.
The company's legal form may be changed by a resolution of the General Meeting
of shareholders, in accordance with the requirements set out in this Company
Agreement and the Articles regarding quorum and majority.
<PAGE>
COMPANY AGREEMENT 4
The company shall be liable for its obligations to the extent of its assets.
The liability of the shareholders is limited to their contributions to the
capital of the company required by this Company Agreement and the Articles. They
shall not have any liability whatsoever for the debts or obligations of the
company, unless they have not paid up their shares in full and then only to the
extent of the unpaid amount.
The company shall not have any liability for the debts or obligations of the
shareholders.
CLAUSE 3 - REGISTERED OFFICE
The registered office of the company is situated at Calea Dorobantilor 7, Sector
1, Hotel Dorobanti, Bucharest, Romania.
It may be transferred to any other address in Romania by resolution of the
General Meeting of shareholders in accordance with Romanian law.
The company may open branches, branch offices, agencies, shops, plants and
warehouses anywhere in Romania, subject to the provisions of Romanian law and to
a decision of the General Meeting.
CLAUSE 4 - DURATION
The company is created for an indefinite period and may be dissolved in the
cases provided for by law or as described in Article 19 of the Articles.
CLAUSE 5 - OBJECTS
The objects of the company shall be:
(a) to design, build, finance, operate and maintain a GSM cellular network in
Romania;
(b) to commercialise and provide cellular mobile telecommunications services in
Romania together with any other type of telecommunications or
telecommunications related services;
(c) to import all relevant equipment (telecommunication, electromechanical,
transmission, computer, etc.), supplies and spare parts to (i) set up,
operate and maintain the GSM network in Romania and (ii) provide any other
type of telecommunications or telecommunications related services in
Romania;
(d) to import and trade in all types of telecommunications equipment, supplies
and spare parts and related services in Romania;
(e) to engage in any kind of contract with Romanian or foreign companies or
individuals for (i) the provision and import, as the case may be, of
know-how, management services and technology and (ii) the assignment and
supply of personnel to the company;
<PAGE>
COMPANY AGREEMENT 5
(f) to enter into contracts in relation to the acquisition or disposal or
occupation or use of space, land, offices and sites in relation to the
carrying out of the above activities;
(g) generally to engage in all types of investment in the telecommunications
field; and
(h) to engage in such other activities as are incidental to or necessary for
the activities described above.
CLAUSE 6 - SHARE CAPITAL
Final amount of share Capital in Lei (equivalent of US $ 120,000,000) to be
determined according to the Lez/US $ exchange rate on the date of certification
of the articles which shall occur only between the date of the official
announcement of the award of the Licence to the consortium and the date that is
15 days later
6.1 The company's subscribed share capital is of Lei[________], the
shareholders agreeing that, as at the date of signature of this Company
Agreement and the Articles, this is the equivalent in Lei of US ~ 120
million, (applying an exchange rate of [_______ rate published by the
Central Bank of Romania on the date of signature of the Company Agreement
and the Articles of Association before a public notary, which shall occur
not less that 15 days following the official announcement by the Ministry y
of the award of the Licence to the company _____]. The share capital is to
be paid up in cash, unless otherwise agreed between the shareholders, in
which case the value of any contribution in kind shall be determined by the
Constitutive General Meeting in accordance with Article 21 oflawn03l/1990.
30% of the company's share capital has been paid up by the shareholders on
._____ [date not to be later than 15 days following the official
announcement by the Ministry of the award of the Licence to the company],
the Romanian shareholders having paid their contribution in Lei and the
foreign shareholder having paid its contribution in US dollars. The unpaid
portion of the share capital shall be paid up by the shareholders within IS
days of the request therefor from the Board of Directors, in accordance
with the dates set forth in the business plan of the company.
The total share capital is divided into 12,000 registered shares, each
having a nominal value of Lei [_____ to be calculated dividing the capital
in Lei by 12,000______].
The company's shares have been subscribed and partially paid up on the date
of signature of the Company Agreement and the Articles, as follows:
1. FTMI: 6, 20 shares representing 51 % of the company's share capital,
and having a total nominal value of Lei [________] being the
equivalent, as at the date hereof, of US ~ 61,200,000 (sixty one
million two hundred thousand US Dollars), (applying the exchange rate
referred to above) and of which 30 % or US $ 20,400,000 (twenty
million four hundred thousand US Dollars) has been paid up in cash;
2. Tomen: 720 shares representing 6 % of the company's share capital and
having a total nominal value of Lei [________] and of which 30 % or
Lei [________] has been paid up in cash.
3. Alcatel Romania: 360 shares representing 3 % of the company's share
capital and having a total nominal value of Lei [________], and of
which 30% has been paid up in cash;
<PAGE>
COMPANY AGREEMENT 6
4. Computerland: 600 shares representing 5 % of the company's share
capital and having a total nominal value of Lei [________], and of
which 30 % or Lei [________] has been paid up in cash;
5. Radcom: 600 shares representing 5 % of the company's share capital and
having a total nominal value of Lei [________], and of which 30 O/o or
Lei [________] has been paid up in cash;
6. Mediacom: 2,400 shares representing 20 % of the company's share
capital and having a total nominal value of Lei [________], and of
which 30 % or Lei [________] has been paid up in cash; and
7. Unimedia: 1,200 shares representing 10 % of the company's share
capital and having a total nominal value of Lei [________], and of
which 30 % or Lei [________] has been paid up in cash.
The shareholders have the respective corporate name and principal
office and are organised and existing under the laws of the country
set out for each of them at the beginning of this Company Agreement.
6.2 Contributions of the shareholders have been deposited on the account
opened, in the name of the company, in the books of Societe Generale,
Bucharest.
6.3 The company's share capital may be increased or decreased in accordance
with the terms of the Articles.
CLAUSE 7 - FORM OF THE SHARES
The shares are equal and indivisible.
The shares issued by the company are registered shares. A resolution of the
General Meeting of shareholders may decide to transform some or all of the
registered shares into bearer shares.
Shares shall be recorded in the share register in accordance with applicable
laws and regulations.
CLAUSE 8 - RIGHTS AND OBLIGATIONS ATTACHED TO THE SHARES
Each share confers on its holder an equal right to the profits of the company
and to all assets held by the company.
Each share entitles its holder to one vote in all votes and deliberations of the
General Meeting of shareholders, subject to the provisions of Article 67 of law
n0 31/1990.
The rights and obligations conferred by shares are transferred to all new
holders thereof provided the transfer has been made in accordance with Romanian
law, the Articles and this Company Agreement. The holding of a share implies the
obligation to abide by the terms of this Company Agreement and the Articles,
particularly in respect of the transfer of shares.
<PAGE>
COMPANY AGREEMENT 7
CLAUSE 9 - GENERAL MEETING OF SHAREHOLDERS
9.1 The highest governing body of the company shall be the General Meeting of
shareholders, which shall consist of the shareholders or their
representatives.
Each share held by a shareholder shall carry one vote, subject to the
provisions of Article 10.4 of the Articles and to the timely payment of the
unpaid portion of the shares.
The will of the shareholders shall be expressed by decisions of the General
Meeting which shall be binding on all shareholders, irrespective of whether
they were absent, dissenting or incapacitated.
9.2 General Meetings of shareholders may be ordinary ("Ordinary General
Meetings") or extraordinary ("Extraordinary General Meetings").
9.3 The Ordinary General Meeting shall be held at least once a year, within 3
months of the end of the company's financial year. The Ordinary General
Meeting shall have the following powers:
(a) to discuss, approve or modify the company's balance sheet and annual
profit and loss accounts, after hearing the Board of Directors' and
auditors' reports;
(b) distribution of profits and coverage of losses;
(c) appointment of members of the Board of Directors, subject to the
provisions of Article 14 of the Articles;
(d) dismissal of any members of the Board of Directors;
(e) appointment, dismissal and determination of the conditions of
remuneration of the auditors of the company;
(f) assessment of the company's management;
(g) to decide on the annual budget and the policy and development plans
and programs for the financial year;
(h) to decide on any material change to the Business Plan of the company
in respect of the Licence, which, as a result, increases the amount of
the "investment" (see "cash flow statement after financing"
section of the Business Plan) or "total operating expenses"
estimated amounts by more than 3 per cent over the next 3 years;
(i) decision on the pledge, mortgage, lease or closing down of any
business unit of the company;
(j) decision on the incurring by the company of a debt in excess of US $
one (1) million or its equivalent in any other currency; and
(k) approval of any contracting obligation on behalf of the company the
value of which exceeds US $ one (1) million or its equivalent in any
other currency.
Ordinary General Meetings shall be convened by the Chairman of the Board of
Directors or the Executive Manager.
9.4 Extraordinary General Meetings shall be held whenever the Board of
Directors or the Executive Manager deems it appropriate or if requested (i)
by the auditors of the company or (ii) by one or several shareholders
representing at least ten percent (10%)
<PAGE>
COMPANY AGREEMENT 8
of the capital of the company or (iii) by a Director pursuant to Article
14.2 of the Articles.
Extraordinary General Meetings are convened by the Chairman of the Board of
Directors, the Executive Manager or by any person or persons entitled to
request an Extraordinary General Meeting pursuant to this Clause 9.4.
Resolutions on any subject may be considered at Extraordinary General
Meetings. However, decisions on the following matters shall be taken
exclusively at an Extraordinary General Meeting:
(a) amendments to the Company Agreement or to the Articles of Association
of the company,
(b) increase or decrease in the share capital of the company;
(c) approval of any transfer of shares during the first 3 years following
the date of registration of the company in the commercial register;
(d) acquisitions of companies by purchase of assets or shares;
(e) any event of merger of the company, its amalgamation, sale of
substantially all its assets and winding-up or dissolution of the
company;
(f) approval of the conclusion of any contract between the company and any
shareholder holding at least 5 % of the company's share capital, an
Affiliate of any such shareholder or an employee, manager, director or
shareholder of any such shareholder;
(g) approval of the signature of the GSM telecommunications licence
agreement to be entered into with the Ministry of Telecommunications
and any material amendment thereof;
(h) approval of the signature of the interconnection agreement to be
entered between the company and Rom Telecom in relation to the
interconnection of the Company's network and the fixed network
operated by Rom Telecom; and
(i) any other matter entrusted to the competence of the Extraordinary
General Meeting.
9.5 Written notice of any General Meeting shall be sent to all the shareholders
at least fifteen (15) days prior to the date on which the meeting is
scheduled. It shall be sent by registered letter or by facsimile (with
confirmation by mail) to the address appearing in the share register.
All notices of General Meetings shall contain the agenda for the meeting,
together with draft resolutions relating to any amendment to the Company
Agreement and the Articles of Association in the event that such amendment
is put on the agenda of the General Meeting. The notice shall also specify
the time, date and place of the meeting.
9.6 General Meetings shall be held at the registered office of the company or
at such other place as may be specified in the notice of the meeting and
agreed beforehand by the shareholders.
9.7 Any decision required or permitted to be taken at a General Meeting of
shareholders may be taken by a written resolution signed by all the
shareholders of the company and such resolution shall be valid and binding
on the shareholders and the company
<PAGE>
COMPANY AGREEMENT 9
notwithstanding the fact that such resolution may have been signed at
different times or places or that such resolution may be set forth on more
than one instrument.
CLAUSE 10 - GENERAL MEETINGS OF SHAREHOLDERS - CONDITIONS OF ATTENDANCE - QUORUM
- RIGHT OF VOTE
l0.1 Shareholders shall be entitled to vote at the General Meeting of
shareholders only if they have been registered in the share register of
the company.
10.2 Decisions of the Ordinary General Meeting are validly made if adopted at
General Meetings reaching the quorums and with the majorities specified in
Article 74 of law n0 31/1990, except that decisions specified in
paragraphs (d), (h), and (i) of Clause 9.3 above are passed by a vote in
favour of at least 75 % of the share capital present or represented at the
General Meeting. .
10.3 Decisions of the Extraordinary General Meeting are validly made if adopted
at General Meetings reaching the quorums and with the majorities specified
in Article 76 of the law n0 31/1990, except that (a)decisions specified in
paragraphs (a) to (f) of Clause 9.4 above are passed by a vote in favour
of at least 75 % of the share capital present or represented at the
General Meeting; and (b)decisions specified in paragraphs (g) and (h) of
Clause 9.4 above are passed by a vote in favour of at least 90 % of the
share capital present or represented at the General Meeting.
10.4 General Meetings shall be chaired by the Chairman of the Board of
Directors or in his absence by any member of the Board of Directors.
10.5 A shareholder may be represented by another shareholder at a General
Meeting, provided that such other shareholder has been appointed as proxy
by a written instrument.
10.6 Minutes of the deliberations of the General Meeting shall be drawn up and
shall include the information required by Romanian law. The minutes shall
be drawn up and signed by the chairman of the General Meeting and the
Executive Manager or by any two members of the Board of Directors
specifically appointed by the Board of Directors. Copies of or extracts
from these minutes may be certified as true copies by the Executive
Manager.
In the absence of an attendance sheet, the signatures of all the
shareholders present shall be entered on the minutes.
CLAUSE 11 - BOARD OF DIRECTORS
11.1 The company shall be managed by a Board of Directors consisting of seven
(7) members appointed for a two (2) year term, by the General Meeting The
shareholders shall exercise their votes in General Meetings in such manner
that at all times:
<PAGE>
COMPANY AGREEMENT 10
(a) during such time as Unimedia holds at least 10% of the company's
paid-up share capital, one Directors shall be a candidate nominated
by Unimedia;
(b) during such time as Mediacom holds at least 20% of the company's
paid-up share capital, two Directors shall be candidates nominated
by Mediacom.' and
(c) during such time as [__ or Substitutled Entity pursuant to Clause
3.2 of the General Agreement ___] holds over 50% of the company's
paid-up share capital, four Directors shall be candidates nominated
by FTMJ.
Directors shall be individuals, and need not be either Romanian nationals
or shareholders of the company. Directors may be re-elected. A Director
may be removed from office at any time and for any reason, by resolution
of the General Meeting.
In the event of any vacancy on the Board of Directors, a General Meeting
of shareholders shall be convened to appoint the missing member.
11.2 The first Board of Directors shall be appointed on the company's setting
up date and shall be composed as follows.
Mr Adrian Sarbu a Romanian national
Nicolac Badea a Romanian national
Mr Dean Chisiu a US national
Mr Jean-Baptiste de BOISSIERE a French national
Mrs Brigitte BOURGOIN a French national
Mr Jean-Fran~ois BEALDOIN a French national
Mrs Chantal CRAVE a French national
11.3 Meetings of the Board of Directors shall be held in accordance with
Article 14 of the Articles and the powers and duties of the Board shall be
as specified in the said Article.
CLAUSE 12 - AUDITORS
The company shall have a single auditor. The first such auditor shall be Mihela
Danalache, a Romanian national with Adriana Grosu, also a Romanian national)
acting as alternate.
CLAUSE 13 - ALLOCATION AND DISTRIBUTION OF PROFITS
13.1 The distributable profit shall consist of the profit of the financial
year, plus the profit carried forward, minus any previous losses and sums
allocated to reserves pursuant to Romanian law, this Company Agreement and
the Articles of Association.
13.2 The General Meeting of shareholders shall decide either the distribution
of the net profit as dividends to the shareholders in proportion to their
shareholdings, or its retention for use in the company's activity and
investments. Payment of the dividends to the shareholders shall occur not
later than 3 months after the date of the General Meeting having decided
the distribution of dividends, subject to any other resolution of the
General Meeting of shareholders.
<PAGE>
COMPANY AGREEMENT 11
13.3 The Chairman of the Board of Directors shall register a copy of the
company's balance sheet and profit and 1055 account with the commercial
registry and the Internal Revenue Authority, along with the Board of
Directors' report, the auditors' report and the decision of the General
Meeting.
CLAUSE 14 - ARBITRATION
The shareholders and the company shall seek to resolve by amicable settlement
any dispute arising between them in relation to this Company Agreement.
In the event of a failure to reach an amicable settlement, any shareholder or
the company may refer the dispute to arbitration for final settlement under the
rules of conciliation and arbitration of the International Chamber of Commerce,
Paris, by one or more arbitrators appointed in accordance with the said rules.
Any such arbitration shall be held in Geneva and shall be subject to the Swiss
Code of Obligations to the extent that the status of the company is not
concerned. In this case, Romanian law shall apply. All proceedings shall be in
the English language.
CLAUSE 15 - PRE-REGISTRATION ACTS AND EXPENSES
It is acknowledged that, pursuant to Clause 4 of the General Agreement, the sums
described in Annex B were incurred by FTMI, Unimedia, Mediacom, Computerland and
Radcom on behalf of the company prior to its registration and the shareholders
agree that such sums shall be reimbursed to FTMI, Unimedia, Mediacom,
Computerland and Radcom by the company promptly after its registration.
It is also acknowledged that the acts and obligations described in Annex B were
carried out or assumed by the shareholders on behalf of the company prior to it
registration and the shareholders shall cause the company to ratio such acts and
obligations in accordance with Romanian law immediately following its
registration.
CLAUSE 16 - FINAL PROVISIONS
This Company Agreement shall come into effect on the registration of the company
at the commercial registry.
This Company Agreement may be modified from time to time in accordance with
Article 12 of the Articles of Association.
The Company Agreement is executed in the number of copies required by Romanian
law.
All the copies have the same legal value.
<PAGE>
COMPANY AGREEMENT 12
Executed at [___________], on [____ date to be determined being between the
official announcement by the Ministry of the award of the Licence to the company
and the following 15 days_____] before [oooooo] public notary
FRANCE TELECOM MOBILES INTERNATIONAL:
[___or Substituted Entity pursuant to Clause 32 of the General Agreement__]:
Signature: _____________________
TOMEN TELECOM PROJECT (ROMANIA) CO SRL:
Signature: _____________________
ALCATEL NETWORK SYSTEMS ROMANIA SA:
Signature: _____________________
MBL COMPUTERS SRL (trading as Computerland):
Signature: _____________________
RADCOM SRL
Signature: _____________________
<PAGE>
COMPANY AGREEMENT 13
MEDIACOM 95 SRL:
Signature: _____________________
UNIMEDIA:
Signature: _____________________
<PAGE>
ANNEX B
PRE-REGISTRATION ACTS AND EXPENSES
-----------
This annex shall list the costs and expenses incurred by FTMI, Unimedia,
Mediacom, Computerland and Radcom in respect of the preparation and promotion of
the GSM Offer and the incorporation of the Company, provided that such amounts
are either within the relevant budget or limits specified in the General
Agreement or have otherwise been approved by the Executive Committee set up
under the General Agreement.
The annex shall also list the undertakings and other obligations undertaken on
behalf of the Company pursuant to the General Agreement. These shall consist in
particular of undertakings made in the GSM Offer and contracts concluded prior
to the registration of the Company.
GENERAL AGREEMENT
<PAGE>
GENERAL AGREEMENT
2.
TABLE OF CONTENTS
CLAUSE 1 Preparation of the GSM Offer
CLAUSE 2 Consortium Council and Consortium Executive Committee
CLAUSE 3 Creation of the Company
CLAUSE 4 Expenses incurred prior to the registration of the Company
CLAUSE 5 Financing of the Company's activities
CLAUSE 6 Board of Directors
CLAUSE 7 Share Transfer
CLAUSE 8 Conduct of Business
CLAUSE 9 Exclusivity
CLAUSE 10 Confidentiality
CLAUSE 11 Effective Date - Duration
CLAUSE 12 Assignment
CLAUSE 13 Representation and Warranties
CLAUSE 14 Governing Law
CLAUSE 15 Arbitration
CLAUSE 16 Notices
CLAUSE 17 Entire Agreement
CLAUSE 18 Modifications of this General Agreement
CLAUSE 19 Waiver
CLAUSE 20 Severability
ANNEXES
Annex 1 Company Agreement (with Articles of Association)
Annex 2 Business Plan
Annex 3 Preliminary Budget
Annex 4 Shareholding Structure of the Parties
<PAGE>
GENERAL AGREEMENT
3.
THIS GENERAL AGREEMENT (the "General Agreement") is entered into on 26
September, 1996, by and among:
1. FRANCE TELECOM MOBILES INTERNATIONAL, a joint stock company duly organised
and existing under the laws of France, having its main offices at 41/45
Boulevard Romain Rolland, 75672 - Paris, France, duly represented by Mrs
Chantal Crave, hereinafter called "FTMI";
2 TOMEN TELECOM PROJECT (ROMANIA) Co SRL, a limited liability company, duly
organised and existing under the laws of Romania, having its registered
offices at "Diplomat Hotel", Ap. 114, Str. Sevastopol 13-17, Sector 1,
Bucharest, registered with the Register of Commerce of Bucharest under no.
J 40/25646/1993, duly represented by Mr. Shinichiro Hisatorni, hereinafter
called "Tomen";
3. ALCATEL NETWORK SYSTEMS ROMANIA, a joint stock company duly organised and
existing under the laws of Romania, having its registered offices at St.
Gh. Lazar 9, 1900 Timisoara, registered with the Timisoara Register of
Commerce under no. 35/3345/91, duly represented by Mr. Dan Bedros,
hereinafter called "Alcatel Romania";
4. MBL COMPUTERS SRL (trading as Computerland), a limited liability company
duly organised and existing under the laws of Romania, having its
registered offices at 15 Bulevardul Unirii, Sector 5, Bucharest,
registered with the Bucharest Register of Commerce under no. J40/6119/91,
duly represented by Mr. Nicolae Badea, President, hereinafter called
"Computerland";
5. RADCOM SRL, a limited liability company duly organised and existing under
the laws of Romania, having its registered offices at 2-4 Calea Herastrau
Street, Bucharest, registered with the Register of Commerce of Bucharest
under no. J40/10148/08.04.1993, duly represented by Mr. Gabriel Dogaru,
President, hereinafter called "Radcom";
6. MEDIACOM 95, a limited liability company duly organised and existing under
the laws of Romania, having its registered offices at 155 Calea Victoriei,
bloc D1, sector 1, Bucharest, registered with the Register of Commerce of
Bucharest under no. J/40/1751/1995, duly represented by Mr. Liviu
Gheorghe, hereinafter called "Mediacom"; and
7. UNIMEDIA SRL, a limited liability company duly organised and existing
under the laws of Romania, having its registered offices at 155, Calea
Victoriei, Sector 1, Bucharest, registered with the Register of Commerce
of Bucharest under no. J40/1592/1995, duly represented by Mr. Dean Chisiu,
hereinafter called "Unimedia"; and
Each a "Party" and together the "Parties".
<PAGE>
GENERAL AGREEMENT
4.
1. In June 1996, the Ministry of Communications of Romania (the "Ministry")
issued a tender for the award of a licence (the "Licence") to install and
operate a GSM cellular network in Romania.
2. It is not a requirement tender instructions issued by the Ministry that
the "corporate body" that will operate the GSM network be already
established and registered at the time of submission of the offer (the
"GSM Offer") sent in response to the tender issued by the Ministry. Under
the tender instructions, the Corporate Body may be established "after
winning the tender but before granting of the Licence".
3. The Parties wish to (i) jointly prepare and submit a GSM Offer to the
Ministry and (ii) should the Licence be awarded to them, establish between
themselves a Romanian joint stock company (the "Company") to implement the
Licence.
4. The Parties wish to set out in this General Agreement (i) the conditions
under which the GSM Offer will be prepared and, as the case may be, the
Licence will be negotiated with the Ministry, (ii) the respective
obligations of the Parties with respect to the establishment and financing
of the Company, and (iii) the terms and conditions under which the Company
shall perform the Licence.
NOW, IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1. PREPARATION OF THE GSM OFFER
1.1 The Parties hereby agree to co-operate on a mutual and exclusive basis
with each other in the preparation and submission of the GSM Offer and to
share all information in connection therewith. The GSM Offer will be
submitted in the joint names of the Parties acting as a group of companies
(the "Consortium") but on behalf of the Company to be established pursuant
to this General Agreement.
1.2 The Parties acknowledge that FTMI has set up a project team (the "Project
Team") for the purposes of preparing the GSM Offer, and agree to
co-operate and liaise with the Project Team forthwith after execution of
this General Agreement, in order to have the GSM Offer documents
substantially completed and agreed upon in due time, so that they can be
filed with the Ministry by the 26th September, 1996 (the "Deadline").
Such co-operation shall include, in particular, but shall not be limited
to,
(a) the timely delivery to the Project Team (in English or Romanian, as
appropriate) of any document or information which may be reasonably
required from that Party in connection with the preparation of the
GSM Offer;
<PAGE>
GENERAL AGREEMENT
5.
(b) providing general support to the Project Team by sharing the
respective information, skills and expertise they possess and which
are needed for preparing the GSM Offer; and
(c) each Party making representatives available in FTMI's offices in
Paris, from 23 September, 1996 to the Deadline, in order to act on
behalf of and represent that party on any matter relating to the GSM
Offer and the implementation of this General Agreement.
1.3 The GSM Offer documents will be made available at FTMI's offices in Paris
from 21st September, 1996 for review by the Parties. The Parties will be
permitted to review the documents but not to make any copy thereof.
1.4 The business plan (the "Business Plan") in relation to the implementation
of the License, attached hereto as Annex 2, is agreed by the Parties. Any
material change shall require the approval of the Consortium Council to be
set up under Clause 2 below. For the purposes of this General Agreement,
"material change" shall mean any change which would result in an increase
in the cash flow requirements of the Company over the following 3 years.
However, for the avoidance of doubt, pursuant to Clause 5.1, no
shareholder shall be obliged to subscribe to any increase in the capital
of the Company to the extent that such increase would result in the
Company's capital exceeding the equivalent in Lei of US $ 160 million and
no shareholder shall be under any obligation to advance sums or grant any
shareholder's loan to the Company.
1.5 Alcatel Romania hereby undertakes to instruct Bancorex to issue the bank
guarantee of US $ 100,000 required under the tender documentation to
accompany the GSM Offer.
CLAUSE 2 CONSORTIUM COUNCIL AND CONSORTIUM EXECUTIVE COMMITTEE
2.1 Pending the registration of the Company, the Consortium shall be
represented and managed by the Consortium Council and the Executive
Committee, as defined hereafter.
2.2 The Consortium Council shall consist of a representative of each Party,
each having a number of votes equal to the percentage of its prospective
participation (the "Prospective Participation") in the Company as set
forth in Article 6 of the Articles of Association.
Consortium Council meetings shall be held whenever requested by the
Executive Committee or any Party. Written notice of any Consortium
Committee meeting shall normally be given 4 days in advance of the date on
which the meeting is scheduled. Written notice may validly be sent by
facsimile. Other procedural matters shall generally be subject to the
rules laid down in Articles 12 and 13 of the Articles of Association
except that the Consortium Council will be chaired by any member of the
Executive Committee.
<PAGE>
GENERAL AGREEMENT
6.
The authority of the Consortium Council shall extend to all matters
relating to the GSM Offer and to the implementation of this General
Agreement. In particular, the Consortium Council shall
(a) supervise the Executive Committee;
(b) define the strategy of the Consortium in relation to (i) the
preparation of the GSM Offer, (ii) marketing and commercial action
and (iii), as the case may be, the conduct of negotiations with the
Ministry;
(c) approve the common expenses to be incurred on behalf of the
Consortium in relation to the GSM Offer and the implementation of
this General Agreement;
(d) delegate such authority to the Executive Committee as shall be
necessary for the proper representation of the Consortium,
(e) approve all contracting obligations to be entered into by the
Executive Committee on behalf of the Consortium; and
(g) decide on all other matters in relation to the GSM Offer and the
implementation of this General Agreement.
Decisions of the Consortium Council shall require the affirmative vote of
at least 90 % of the Prospective Participation of the Parties.
2.3 The Executive Committee shall consist of two persons, one being appointed
by FTMI and the other by the other Parties. Each Executive Member shall
have an alternate to attend and vote at Executive Committee meetings or to
sign on his behalf, in the event of his absence.
FTMI hereby appoints Mrs. Chantal CRAVE as Executive Committee member, her
alternate being Mr. Baudoin ROGER. The other Parties appoint Mr. Adrian
SARBU as Executive Committee member, his alternate being Mr. Nicolae
BADEA.
The Executive Committee members shall act jointly, except as may be
specifically otherwise decided by the Consortium Council.
The Executive Committee is authorised to represent the Consortium vis a
vis third parties but only within the limits set by the Consortium Council
or this General Agreement. The Executive Committee shall report regularly
to the Consortium Council. In general, the Executive Committee shall
supervise the preparation of the GSM Offer, provide guidance to the
Project Team and monitor its progress, conduct negotiations with the
Ministry and undertake all activities and actions necessary to implement
decisions of the Consortium Council.
The Executive Committee may delegate part of its powers to any officer
appointed by it for this purpose.
The Parties hereby grant the Executive Committee the following powers:
(a) the Executive Committee shall be authorised to sign and submit the
GSM Offer on behalf of the Parties provided no material change (as
this expression is defined in Clause 1.4 above) is made to the
Business Plan;
<PAGE>
GENERAL AGREEMENT
7.
(b) the Executive Committee shall be authorised to approve common
expenses to be incurred on behalf of the Consortium up to a maximum
aggregate of US $ 4 million.
2.4 Except as otherwise expressly provided in this General Agreement, all
decisions pertaining to the purposes of this General Agreement that are
approved by the Consortium Council or, where appropriate, by the Executive
Committee, shall be binding upon the Parties and no Party shall have any
authority to make any decision pertaining to the purposes of this General
Agreement without the consent of the Consortium Council or, where
appropriate, the Executive Committee.
CLAUSE 3 CREATION OF THE COMPANY
3.1 The Parties agree and undertake to have the Company established and
incorporated as soon as possible after the date (the "Adjudication Date")
of the official announcement by the Ministry of the award of the Licence
to the Company.
In this respect the Parties agree to perform the following actions, as
soon as possible and in any event no later than 15 days after the
Adjudication Date:
(i) to execute the Company Agreement, in the form attached hereto as
Annex 1 and, as required by law, before a public notary, together
with the Articles of Association attached to the Company Agreement
and any other documents which may be reasonably necessary in
connection with the registration of the Company at the commercial
registry;
(ii) to subscribe the amount of the capital in the proportion and in the
amounts set out in Article 6 of the Articles of Association by
crediting their respective amounts of the capital to the account
opened in the name of the Company with Societe' Generale in Romania;
and
(iii) to take such other action or to sign such other documents as shall
be reasonably necessary in order to have the Company fully
incorporated and registered.
The Parties shall cause the Company to take over all and any obligations
incurred by the Consortium in accordance with the provisions hereof on
behalf of or for the account of the Company.
3.2 The Parties hereby agree that FTMI shall have an option, exercisable at
any time from the date hereof until the 10th day following the
Adjudication Date, to substitute for itself in its rights and obligations
under this General Agreement (including under the Company Agreement and
the Articles of Association) any corporate body of which at least 90 % of
the share capital and voting rights are held by FTMI (the "Substituted
Entity"). The Parties shall not proceed with the registration of the
Company or the execution of the Company Agreement pursuant to Clause 3.1
above until after the expiry of such option period or the exercise by FTMJ
of its option, as the case may be.
<PAGE>
GENERAL AGREEMENT
8.
Following any exercise by FTMI of the above option:
(a) the Substituted Entity shall undertake in writing to adhere to this
General Agreement;
(b) the Substituted Entity shall be substituted for FTMI in all its
rights and obligations hereunder, with the sole exception of Clause
4;
(c) ETMI shall cease to be a Party to this General Agreement (except for
the purposes of Clause 4);
(d) the Company Agreement shall be executed following the substitution
of all references to FTMI therein and in the Articles of Association
(other than in Clause 15 and Annex B of the Company Agreement) by
references to the Substituted Entity; and
(e) the Company shall be created with the Substituted Entity as one of
the original shareholders and the Substituted Entity shall be deemed
to be one of the original signatories of this General Agreement.
3.3 Should any Party default (the "Defaulting Party") in the timely
performance of any of its obligations set forth under Clause 3.1 above,
the other Party(ies) (the "Non Defaulting Party") shall be entitled, but
shall not be obliged, if the Defaulting Party has not remedied such
default within 7 days of a notice to do so, and without prejudice to any
other remedy available at law, to take over and assume pro rata the
Defaulting Party's Prospective Participation in the Company and/or part or
all of the Defaulting Party's rights and obligations under this General
Agreement. If one or more of the Non Defaulting Parties shall elect not to
take over its pro rata share of the rights and obligations of the
Defaulting Party, the other Non Defaulting Party(ies) may elect to take
over such share of the rights and obligations of the Defaulting Party, pro
rata their respective Prospective Participation in the Company.
CLAUSE 4 EXPENSES INCURRED PRIOR TO THE REGISTRATION OF THE COMPANY
4.1 The Parties acknowledge that each of (i) FTMI and (ii) Unimedia, Mediacom,
Computerland and Radcom (jointly the "Romanian Promoters") have incurred
and will incur until the Deadline expenses and costs in respect of the
preparation of the GSM Offer. The budget (the "Preliminary Budget") for
those expenses is attached hereto as Annex 3. Expenses or costs in
addition to those listed in this Annex 3 shall be firstly approved by the
Executive Committee.
The Parties agree that, should the Licence be awarded to the Company and
the Company be incorporated, such expenses and costs shall be reimbursed
to FTMI and the Romanian Promoters by the Company on submission of
appropriate invoices and supporting documents, provided they have been
incurred in accordance with the Preliminary Budget or otherwise approved
by the Executive Committee.
<PAGE>
GENERAL AGREEMENT
9.
Should the Licence not be awarded to the Company, each Party undertakes to
reimburse expenses and costs incurred by FTMI and the Romanian Promoters,
pro rata its Prospective Participation in the Company but on the basis
that in this case the amount of reimbursable expenses and costs of FTMI
shall be equal to a lump sum of US $300,000 and of the Romanian Promoters
shall be equal to a lump sum being the equivalent in Lei of US $ 100,000.
4.2 The Parties agree that, from the Deadline until the Adjudication Date,
expenses and costs may be incurred in respect of the promotion of the GSM
Offer. The budget for any such expenses is limited to US $ 800,000 which
shall be financed (i) for the first US $ 250,000 of expenses, through
contributions made by FTMI (60 %) and the Romanian Promoters (40 %), and
(ii) for expenses from US $ 250,000 to US $ 800,000, 100 % by FTMI.
Such expenses shall be reimbursed to FTMJ and the Romanian Promoters by
the Company, if the Licence is awarded to the Company, or by the Parties
in proportion to their Prospective Participation in the Company, if the
Licence is not awarded to the Company.
4.3 The Parties further agree that from the Adjudication Date until
registration of the Company, expenses and costs may be incurred by the
Consortium in relation to the negotiation of the Licence and the
incorporation and registration of the Company. The estimated budget for
such expenses and costs is set at US $ 2 million. These expenses and costs
will be financed by FTMI (60 %) and the Romanian Promoters (40 %) and will
be reimbursed to each of them by the Company upon its registration.
CLAUSE 5 FINANCING OF THE COMPANY'S ACTIVITIES
5.1 The Parties recognise that the capital requirements for the implementation
of the Licence are those indicated in the Business Plan and agree that the
amount of such capital requirements shall be financed through capital
contributions of the Parties in the amounts specified in the Business
Plan. For the avoidance of doubt, no shareholder shall be obliged to
subscribe to any increase in the capital of the Company to the extent that
such increase would result in the Company's capital exceeding the
equivalent in Lei of US $ 160 million.
5.2 The initial amount of the capital of the Company shall be the equivalent
in Lei of US $ 120 million. Thirty per cent (30 %) of this amount is to be
contributed in cash by the Parties within 15 days of the Adjudication
Date. The remainder shall be paid as shall be requested by the Board of
Directors of the Company in accordance with the dates set out in the
detailed Business Plan.
5.3 The Parties agree to increase the capital of the Company from US $ 120
million to US $ 155 million before 31st December, 1998 in order to meet
the additional capital requirements of the Company.
<PAGE>
GENERAL AGREEMENT
10.
The Parties undertake to exercise their voting rights in the Company so
that the capital of the Company be so increased and to subscribe to and
pay for the new shares pro rata their respective participation in the
Company.
5.4 All capital contributions from the Parties shall be in cash except as may
be otherwise agreed by the General Meeting of shareholders.
5.5 Each Party hereby grants to the other Parties an irrevocable option (the
"Purchase Option"), exercisable in the event of the occurrence of a
"Triggering Event" (as defined below), to purchase not less than all of
the shares in the Company held by it, directly or indirectly (the
"Purchased Shares").
Any of the other Parties (the "Remaining Parties") may upon the occurrence
of a Triggering Event send notice (the "Exercise Notice") to the Party
causing the Triggering Event, with copy to the Executive Manager, of such
occurrence and of its intention to exercise the Purchase Option. Any of
the Remaining Parties may exercise the Purchase Option through sending an
Exercise Notice at any time within 60 days of the occurrence of the
Triggering Event (after which time it is irrevocably forfeited).
The Executive Manager shall then send to each Remaining Party a notice
indicating the number of shares to which each Party shall be entitled if
all the Remaining Parties exercise their rights under the Purchase Option.
The procedure described in paragraphs (c) to (e) of Article 10.2 of the
Articles of Association shall apply for the distribution of the Purchased
Shares among the Remaining Parties but, for the avoidance of doubt, the
price shall be as stated in the succeeding paragraph.
The purchase price for the Purchased Shares shall be the amount paid up on
the shares. The closing of the purchase shall occur within 60 days of the
Exercise Notice (or the first Exercise Notice, if more than one Remaining
Party has sent an Exercise Notice) and transfer and stamp duties shall be
borne by the Remaining Parties purchasing the Purchased Shares.
For the purposes of this Clause 5.5 a "Triggering Event" shall mean any
default of a Party in the performance of any of its obligations as set
forth under Clause 5.3 above which is not remedied within 60 days of a
notice requesting him to do so, sent by any non defaulting Party.
CLAUSE 6 BOARD OF DIRECTORS
6.1 The Parties agree to exercise their votes in General Meetings in such
manner that at all times:
(a) during such time as Unimedia holds at least 10% of the Company's
paid-up share capital, one member of the Company's Board of
Directors shall be a candidate nominated by Unimedia;
<PAGE>
GENERAL AGREEMENT
11.
(b) during such time as Mediacom holds at least 20% of the Company's
paid-up share capital, two members of the Company's Board of
Directors shall be candidates nominated by Mediacom;
(c) during such time as FTMI holds over 50% of the Company's paid-up
share capital, four members of the Company's Board of Directors
shall be candidates nominated by FTMI.
6.2 For the purposes of the future operation of this Clause 6, the Parties
hereby agree that the members of the first Board of Directors to be
appointed pursuant to Clause 11.2 of the Company Agreement were nominated
as follows:
Mr Dean Chisiu nominated by Unimedia;
Messrs Nicolae Badea and Adrian Sarbu nominated by Mediacom; Mr
Jean-Baptiste de BOISSIERE, Mrs Brigitte BOURGOIN, Mr Jean-Francois
BEAUDOIN and Mrs Chantal CRAVE nominated by FTMI.
CLAUSE 7 SHARE TRANSFER
7.1 The Parties undertake and agree not to Transfer (as such term is defined
in Article 10 of the Articles of Association) their shares in the Company
except in accordance with the provisions of Article 10 of the said
Articles of Association.
7.2 The Parties acknowledge that the draft Licence contains (and it is likely
that the final Licence shall also contain) certain restrictions relating
to the Transfer by the Parties of their shares in the Company.
The Parties agree that, in addition to the restrictions contained in
Article 10 of the Articles of Association,
(a) any Transfer of shares in the Company shall be subject to the prior
approval of the Ministry, to the extent required by the Licence; and
(b) no Transfer of shares shall occur if, as a consequence of such
Transfer, the Ministry shall be entitled to modify the terms and
conditions of the Licence, except if (i) the extent of the
modifications to the Licence has been agreed in advance with the
Ministry and (ii) the Company is willing to accept such agreed
modifications.
7.3 (a) For the purposes of this Clause 7.3, "Right of Control" in respect
of any Party to this General Agreement shall mean the holding in
aggregate by the shareholders of such Party at the date hereof (as
described in Annex 4 hereto) of over half of the capital of such
Party together with the right to appoint over half the members of
the board of directors of such Party.
In the event that the shareholders as at the date hereof (as
described in Annex 4 hereof) of any Party cease to hold together the
Right of Control in respect of such Party, such Party shall be
deemed to have sent a notice of intention to Transfer its shares in
the Company under Article 10.2 of the Articles of Association and
the other shareholders shall have the option to purchase the shares
held by such Party
<PAGE>
GENERAL AGREEMENT
12.
in the Company pro rata in accordance with the procedure set out in
Article 10.2. The Party in question shall notify, the Executive
Manager and the Board of Directors of the Company of such event.
(b) The provisions and procedure of Clause 7.3 (a) above shall also
apply in the event of any dissolution, scission, merger,
amalgamation or other similar event in respect of any Party to this
General Agreement.
(c) The provisions of Clause 7.3(a) and (b) shall be valid until the
termination of the Licence, unless the Parties decide to amend such
terms in accordance with Clause 18.
(d) The provisions of this Clause 7 shall not be interpreted as
restricting in any way the right of any Party to enter into any
commercial contract with a third party, including in accordance with
articles 2.5.1 and 2.5.6 of the Romanian Commercial Code, to the
extent that any such contract does not come within any restriction
contained in any other provision of this General Agreement.
7.4 Where the shares of the Company are transferred by a Party to this General
Agreement to a third party who is not a signatory to this General
Agreement, it shall be an express condition of such Transfer that such
third party shall give an undertaking in writing to adhere to and be bound
by the terms and conditions of this General Agreement.
In addition, where shares in the Company are transferred to a signatory of
this General Agreement, it shall be an express condition of such Transfer
that the transferee gives an undertaking in writing to adhere to and be
bound by any obligations of the transferring shareholder under this
General Agreement which are in addition to those already assumed hereunder
by the transferee as a signatory hereof.
Any Transfer not complying with this requirement shall be null and void.
CLAUSE 8 CONDUCT OF BUSINESS
8.1 Each of the Parties agrees to exercise its respective rights hereunder and
as a shareholder in the Company (insofar as it lawfully can) so as to
ensure that:
(i) the Company performs and complies with all its obligations under the
Licence; and
(ii) the Company conducts its business in accordance with sound and good
business practice.
8.2 In the selection of its suppliers, the Company shall always give priority
rights to each of the Parties with respect to the operations and services
that each of them are able to provide; it being expressly agreed that:
(i) no exclusivity rights shall be granted to any of the Parties, the
Company remaining free to select any other supplier; and
(ii) any services or operations to be provided by a Party to the Company
shall be subject to standard commercial practice and on an
arms-length basis.
<PAGE>
GENERAL AGREEMENT
13.
8.3 Equipment supply for the Company shall be carried out strictly in
accordance with arms-length principles and standard commercial bidding
practices.
CLAUSE 9 EXCLUSIVITY
9.1 Each Party agrees that neither it nor any of its Affiliates (as defined in
Article 10.3 of the Articles) shall be involved, directly or indirectly,
either individually or through participation in or supporting of another
company or any other third party:
(i) in any discussion, negotiation or activities for the purposes of
preparing and submitting an offer other than the GSM Offer, in
relation to the bid issued by the Ministry; and
(ii) in any other cellular telecommunication activity in Romania.
9.2 This exclusivity provision shall be binding upon each Party throughout the
term of this General Agreement and until whichever shall be the later of
(i) the date on which the Licence is awarded to any other bidder than the
Company, or (ii) the expiry of a 6 month period following the Deadline, if
the Licence is not awarded, or (iii) the expiry of a one-year period
following the date on which that Party transferred all of its shares in
the Company, if the Licence has been awarded to the Company.
9.3 However, for the avoidance of doubt, the provisions of Clauses 9.1 and 9.3
shall not be interpreted as restricting in any way the freedom of Alcatel
Romania to supply cellular telecommunications equipment to any other
company in Romania or for use in Romania, provided that this does not
adversely affect the ability of Alcatel Romania to perform any equipment
supply or service contract which it may concluded with the Company
pursuant to Clause 8 above.
CLAUSE 10 CONFIDENTIALITY
10.1 All communications between the Parties, the Company and/or any of them and
all information and other materials supplied to or received by any of them
from the others which is either marked "confidential" or is by its nature
intended to be for the knowledge of the recipient(s) alone, and all
information concerning the business transactions and the financial
arrangements of the Parties or the Company with any person with whom any
of them is in a confidential relationship with regard to the matter in
question coming to the knowledge of the recipient shall be kept
confidential by the recipient unless or until the recipient party can
reasonably demonstrate that any such communication, information and
material is, or part of it is, in the public domain through no fault of
its own, whereupon to the extent that it is in the public domain or is
required to be disclosed by law or in pursuance of employment duties, this
obligation shall cease.
10.2 The Parties shall use reasonable endeavours to procure the observance of
the above-mentioned restrictions by the Company and shall take reasonable
steps to minimise the risk of disclosure of confidential information, by
ensuring that only they themselves
<PAGE>
GENERAL AGREEMENT
14.
and such of their employees and directors whose duties will require them
to possess any of such information shall have access thereto, and will be
instructed to treat the same as confidential. Each Party shall be
responsible for any breach of the confidentiality of such information by
any of its employees or directors.
10.3 The obligation contained in this Clause 10 shall survive, notwithstanding
the termination of this General Agreement, without limit in time except
and until such confidential information enters the public domain as set
out above.
CLAUSE 11 EFFECTIVE DATE - DURATION
11.1 This General Agreement shall be effective as of the date of its signature
by the Parties and, except as otherwise provided in Clause 11.3 below,
shall remain in force and effect, in respect of each Party, until creation
of the Company and thereafter so long as that Party holds shares in the
Company.
11.2 The expiry of this General Agreement for any reason shall neither release
any Party from any liability, obligation or agreement which, pursuant to
any provisions of this General Agreement, is to survive or be performed
after such termination nor shall it release any Party from its liability
to pay any sums of money accrued, due and payable to the other or to
discharge its then accrued and unfulfilled obligations.
11.3 Notwithstanding Clause 11.1, this General Agreement shall terminate for
the following reasons:
(a) the official notification that the Company is not selected as the
winning bidder;
(b) the License is not granted for whatever reason within six months of
the Deadline;
(c) the General Meeting of shareholders resolving to dissolve the
Company;
(d) the insolvency or bankruptcy of the Company; and
(e) the decrease of the share capital of the Company under the minimum
required by the Romanian law unless the Parties decide to increase
the share capital.
11.4 The termination of this General Agreement, for any reason, shall not be
deemed a waiver or release of, or otherwise prejudice or affect, any
rights, remedies or claims, whether for damages or otherwise, which any
Party may then possess under this General Agreement or which arise as a
result of such termination, all of which rights, remedies and claims shall
survive such termination.
CLAUSE 12 ASSIGNMENT
This General Agreement and the rights and obligations hereunder are personal to
the Parties hereto, and shall not be assigned by any of the Parties hereto,
voluntarily or by operation of law, to any third party, without the express
prior written consent of the other Parties, such consent not to be unreasonably
withheld. Such assignments shall be on the basis that the assignee executes an
undertaking that it will be bound by the terms and conditions of this General
Agreement. The provisions of this Clause 12 are without prejudice to Clause 3.2.
<PAGE>
GENERAL AGREEMENT
15.
CLAUSE 13 REPRESENTATION AND WARRANTIES
Each Party represents and warrants to the others as follows:
(a) it is duly organised and validly existing as a separate legal entity
under the laws of its country of incorporation, and has full legal
right, power and authority to enter into this General Agreement and
to perform all its obligations hereunder;
(b) this General Agreement has been duly authorised by all necessary
corporate or administrative action, has been executed by its duly
authorised representatives and constitutes a legal valid and binding
obligation of that Party enforceable in accordance with its terms;
(c) the execution, delivery and performance of this General Agreement do
not violate any provisions of its organisation or foundation
documents, or any contract or agreement to which it is a party or by
which it or any of its assets is bound, or the laws of its country
of residence; and
(d) with the exception of FTMI for which certain authorisations or
approvals are required under Romanian law, no approval, consent or
licence are required to be obtained by that Party in Romania, in
order to enable it to enter into this General Agreement and to
perform its obligations hereunder.
CLAUSE 14 GOVERNING LAW
The validity, construction and performance of this General Agreement shall be
governed by and interpreted in accordance with the Swiss Code of Obligations, to
the extent permitted by Romanian law. Romanian law shall apply to the status of
the Company.
This General Agreement is signed in the English language.
CLAUSE 15 ARBITRATION
All disputes arising out of or in connection with this General Agreement which
cannot be settled amicably between the Parties shall be finally settled under
the rules of conciliation and arbitration of the International Chamber of
Commerce, Paris, by one or more arbitrators appointed in accordance with the
said rules, such arbitration shall be held in Geneva, Switzerland, and is
subject to the Swiss Code of Obligations as provided for in Clause 13 above to
the extent the status of the Company is not concerned. In such a case, Romanian
law shall apply. All proceedings shall be in the English language.
<PAGE>
GENERAL AGREEMENT
16.
CLAUSE 16 NOTICES
Except as otherwise provided in this General Agreement, all notices required or
permitted to be given pursuant or in reference to this General Agreement shall
be in writing and shall be valid and sufficient if sent by registered airmail or
facsimile (confirmed by mail), addressed as follows:
To FRANCE TELECOM MOBILES
INTERNATIONAL: FRANCE TELECOM MOBILES INTERNATIONAL
41/45, boulevard Romain Rolland
75672 Paris Cedex 14 - France
Attn. President JB de Boissiere
To TOMEN TELECOM PROJECT: TOMEN TELECOM PROJECT
"Diplomat Hotel"
Ap. 114, Str. Sevastopol 13-17, sector 1
Bucharest, Romania
Attn. President
To ALCATEL NETWORK
SYSTEMS ROMANIA: ALCATEL NETWORK SYSTEMS ROMANIA
St. Gh. Lazar 9,
1900 Timisoara,
Attn. Mr Dan Bedros
To MBL Computers SRL: MBL COMPUTERS SRL
5 Unirii Avenue, Sector 5,
Bucharest, Romania
Attn. President
To RADCOM: RADCOM
strada Gara Herastrau 2-4
etaj 2
Sector 2
Bucharest, Romania
Attn. General Manager
To MEDIACOM 95: MEDIACOM 95
155 Calea Victoriei, bloc D1, sector 1
Bucharest, Romania
Attn. General Manager
<PAGE>
GENERAL AGREEMENT
17.
To UNIMEDIA: UNIMEDIA SRL
155, Calea Victoriei,
Sector 1,
Bucharest, Romania
Attn. President
Any Party hereto may change its address by a notice given to the other Parties
hereto, in the manner set forth above. Notices given as herein provided shall be
considered to have been given seven (7) days after the mailing thereof.
CLAUSE 17 ENTIRE AGREEMENT
This General Agreement, together with the Annexes hereto, constitute the entire
agreement of the Parties with respect to the subject matter contained herein and
supersedes all prior negotiations and understandings between them, whether
written or oral, and no amendment to this General Agreement will be effective,
unless it is in writing and executed by the Parties.
CLAUSE 18 MODIFICATIONS OF THIS GENERAL AGREEMENT
No amendment or change hereof or addition hereto shall be effective or binding
on any Party, unless set forth in writing and executed by the respective duly
authorised representative of each of the Parties hereto.
CLAUSE 19 WAIVER
The failure with or without intent of any Party to insist upon the performance
by any other Party of any term or provision of this General Agreement in strict
conformity with the literal requirements hereof shall not be treated or deemed
to constitute a modification of any term or provision hereof, nor shall such
failure or election be deemed to constitute a waiver of the right of such Party
at any time whatsoever thereafter to insist upon performance by the other,
strictly in accordance with any term or provision hereof. All terms, conditions
and obligations under this General Agreement shall remain in full force and
effect at all times during the term of this General Agreement, except otherwise
changed or modified by any mutual written agreement of the Parties hereto.
CLAUSE 20 SEVERABILITY
Should any provision of this General Agreement be declared invalid or
unenforceable by any court of competent jurisdiction or any other entity
empowered to do so, the remainder of this General Agreement shall be valid and
enforceable to the fullest extent permitted by applicable law.
<PAGE>
GENERAL AGREEMENT
18.
IN WITNESS WHEREOF, the Parties have executed this General Agreement by their
duly authorised representatives the day and year first above written.
Executed in Bucharest
On 26 September 1996
In 10 copies
---
FRANCE TELECOM MOBILES INTERNATIONAL:
Signature: /s/ Chantal Crave
--------------------------------
Name: Chantal Crave
Title: Vice President Business Development
TOMEN TELECOM PROJECT ROMANIA) CO SRL:
Signature: /s/ Shinichiro Hisathomi
--------------------------------
Name: Shinichiro Hisathomi
Title: General Manager
ALCATEL NETWORK SYSTEMS ROMANIA SA:
Signature: /s/ Dan Bedros
--------------------------------
Name: Dan Bedros
Title: President General Manager
MBL COMPUTERS SRL (trading as Computerland):
Signature: /s/ Nicolae Badea
--------------------------------
Name: Nicolae Badea
Title: President
RADCOM SRL:
Signature: /s/ Gabriel Eugen Dogaru
--------------------------------
Name: Gabriel Eugen Dogaru
Title: General Manager
<PAGE>
GENERAL AGREEMENT
19.
MEDIACOM 95 SRL:
Signature: /s/ Liviu Gheorghe
--------------------------------
Name: Liviu Gheorghe
Title: General Manager
UNIMEDIA:
Signature: /s/ Dean Chisiu
--------------------------------
Name: Dean Chisiu
Title: Administrator
<PAGE>
GENERAL AGREEMENT
20.
ANNEX 1
FORM OF COMPANY AGREEMENT
(WITH FORM OF ARTICLES OF ASSOCIATION ANNEXED)
<PAGE>
GENERAL AGREEMENT
21.
ANNEX 2
BUSINESS PLAN
N.B: The Business Plan forming this Annex has been signed and initialled by the
Parties to show their agreement and is contained in a separate document.
<PAGE>
GENERAL AGREEMENT
22.
ANNEX 3
PRELIMINARY BUDGET
<PAGE>
GENERAL AGREEMENT
23.
ANNEX 4
SHAREHOLDING STRUCTURE OF THE PARTIES
1. FRANCE TELECOM MOBILES INTERNATIONAL
- 90.29 % COGECOM
- 9.71 % Telediffusion de France
2. ALCATEL NETWORK SYSTEMS ROMANIA
- 51% Alcatel CIT (France)
- 31.6% Datatim SA (Romania)
- 9.7% IFC (World Bank, USA)
- 6% Rom Telecom (Romania)
- 0.85% PGI (Romania)
- 0.85% IIRUC (Romania)
3. TOMEN TELECOM PROJECT (ROMANIA) CoSRL
- 100 % Tomen Corporation (Japan)
4. UNIMEDIA SRL
- 95 % Central European Media Enterprises B.V.
- 5% Mr Adrian SARBU
5. MBL COMPUTERS SRL (trading as Computerland)
- 50 % MBL International
- 16 % Nicolae Badea
- 34 % Black Sea Corporation
6. RADCOM
- 43% MBL International
- 29 % Black Sea Corporation
- 14 % Nicolae Badea
- 14 % Gabriel Eugen Dogaru
<PAGE>
GENERAL AGREEMENT
24.
7. MEDIACOM SRL
- 95% Mr Adrian SARBU.
- 5% Liviu Gheorghe
ASSIGNMENT OF SHARES AGREEMENT
Concluded between:
MEDIA PRO SRL, a Romanian legal entity, having its registered office in
Bucharest 135, Calea Victorici, Etaj 8, Sector.1 registered in the Register of
Comerce under number J40/4996/1991 represented by Mr. Adrian Sarbu, General
Manager.
Iliescu George Marius- Romanian citizen, residing in Bucharest, 20 Justinian
Street, Sector 2, represented by Mrs. Liana Petrovici - legal representative,
Bratulescu Theodor ~Mihai - Romanian citizen, residing in Bucharest, 79 1 Mai
Bv., Bloc 15, Ap.60, Sector 1, represented by Mrs. Liana Petrovici - legal
representative,
as, "Assignor - Shareholders"
as shareholders of UNIMEDIA SRL having its registered office in Bucharest 155,
Calea Victoriei, Bloc Dl, Etaj 7, Sector.1 registered in the Register of Comerce
under number J40/159211995
and,
Mr. Adrian Sarbu - Romanian citizen, residing in Bucharest, 2-4 Turgheniev
Street, Sector 1
CME Enterprises B.V. a limited liability company organised and exiting under the
law of the Nethaderland with its registered office at 29 Laidseplain, Amsterdam
represented by Dean Chisiu.
as, "Third Party - Assignees'
that have agreed the present " Assignment of Shares Agreement', pursuant to:
1. SC Media Pro SRL , shareholder of UNIMEDIA SRL Company assign to the "Third
Party Assigne" - CME Enterprises BV, a number of 18 shares numbered I to 18,
equivalent of 90.000 lei, representing 90% of the registered capital.
2. The undersigned Iliescu George Marius shareholder of UNIMEDIA SRL Company
assign to the "Third Party Assigne" - CME Enterprises BV one share, numbered 19,
equivalent of 5.000 lei representing 5% of the registered capital.
The shares bought by the "Third Party- CMB Enterprises B.V." have been paid to
SC Media Pro SRL and Mr. Iliescu George Marius, at the value in USD,
respectively 30 USD, at a rate of 3,220.5 Lei/USD.
1
<PAGE>
3. The undersigned Bratulescu Theodor Mihai shareholder of UNIMEDJA SRL Company
assign to Mr. Adrian Sarbu, one share, numbered 20, equivalent of 5.000 lei
representing 5% of the registered capital.
The share has been paid at the value of 5,000 Lei, on the date of the drafting
of the present Assignment of Shares Agreement .
According to those assignments, the Assignor - Shareholders, Media Pro SRL,
Iliescu George Marius and Bratulescu Theodor Mihai understand to withdraw from
UNIMEDJA SRL Company, having no more claims to that Company.
4. Guarentes
4.1. Warranties of the Assignors:
4.1.1. The Assignors have the right to assign their shares in the Company, such
right implying the transfer of the rights and liabilities relating to those
shares.
4.1.2. They have the capacity to enter into the present Assignment of Shares
Agreement.
4.1.3. They are not party or subject to any decision that could hinder the
conclusion of the present Agreement Company or impede the parties to fulfil
their obligations there in. 4.1.4. They are not involved in any litigation that
ban or limit, their capacity to transfer the shares. There are no court actions
pending against any shareholder regarding the share parts to be transfered.
4.1.5. The assignors warrant that the transfered share are free of any changes.
4.1.6. S.C. Media Pro warrants that the transfer of shares is legally made and
was approved by the General Meeting of the Shareholders.
4.2. Warranties of the Asignees.
4.2.1. The Assignes hereby warrant to the Assignors that they have the right to
buy shares in UNIM~DIA.
4.2.2. That they have the capacity to enter into the present Agreement.
4.2.3. They are not party or subject to any decision that could hinder the
conclusion of the present Agreement Company or impede the parties to fulfil
their obligations there in.
4.2.4. They are not involved in any litigation that ban or limit, their capacity
to transfer the shares. There arc no court actions pending against any assignors
the share parts to be obtain.
4.2.5. CMB warrants to the assignors that the buying of shares and the transfer
have been duty and validly authorised by the Bord of Directors of C.M.B.
The amendments of the Statutes and Company Agreement, occured as a result of the
present Assignment of Shares Agreernent will be registered by Addendum.
2
<PAGE>
The amendments of the Statutes and Company Agreement, occured as a result of the
present Assignment of Shares Agreeement will be registred by Addendum.
Drafted and signt in Bucharest in six copies, authenticated by the Public Notary
Vladica Ratiu Gheorghe, on the date of the authentication.
ASSIGNORS, ASSIGNEES,
SC MEDIA PRO SRL Adrian Sarbu
represented by,
Adrian Sarbu CME Media Enterprises B~V
ILIBSCU GEORGE MARIUS represented by,
BRATULESCU TEODOR MIHAI Dean Chisiu
represented by,
Liana Petrovici
3
ADDITIONAL AGREEMENT No. 1
to the Company Agreement and Statute of
UNIMEDIA COMPANY LTD.
Authenticated with no. ______ from 22.09.1995
Company Registered on RRC with no. J 40/ 1592/ 1995
This Additional Agreement is made this 09.25-th day of 1996 between :
MEDIA PRO LTD. - a limited liability Company duly organized and existing
under the laws of Romania, having his registered offices at 135 Calea
Victoriei, floor 8, sector 1, Bucharest, registered with the Register of
Commerce of Bucharest under no. J 40/4996/1991, duly represented by Mr.
Adrian Sarbu - Manager Director;
ILIESCU GEORGE-MARIUS - Romanian citizen, residing at Justinian Street no.
20, sector 2, Bucharest, represented through legal mandate by Liana
Petrovici;
BRATULESCU THEODOR-MIHAI - Romanian citizen, living at 1 MAI Av. No.79,
Bl. 15, Sc. B, Ap. 60, Sector 1, Bucharest, represented through legal
mandate by Liana Petrovici;
having the legal capacity of "assigning associates"
and
CME MEDIA ENTERPRISES BV - a limited liability Company duly organized and
existing under the laws of Holland, having his registered offices at 29
Leidseplein, Amsterdam, Holland, duly represented by Mr. Dean Chisiu -
Legal Mandate;
ADRIAN SARBU - Romanian citizen, residing at Turgheniev Street No.2-4,
sector 1, Bucharest;
having the legal capacity of "assignees"
whereas, they concluded the present Aditional Agreement to the Company Agreement
and Statute of UNIMEDIA COMPANY LTD., according to the decision of the General
Assembly of the associates dated 09. 25-th. of 1996, as follows :
I. The cession of the Social Parts owned by the Assigning Associates MEDIA PRO
LTD, Iliescu George Marius and Bratulescu Theodor to Assignees CME MEDIA
ENTREPRISES BV LTD and Adrian Sarbu, according to conveyance Agreement
authenticated with no. 192 from 25.09.1996 by Vladica Ratiu Gheorghe, Public
Notary.
<PAGE>
II. Increasing of the Company's Social Capital with the amount of 33.900.000
lei, representing cash contribution, from which is 10.000 USD, equivalent to
32.205.000 lei (3220,5 lei/USD) paid by the new associate - CME MEDIA
ENTERPRISES BV LTD and 1.695.000 lei, cash contribution paid by the new
associate - Adrian Sarbu.
The incease is made by paying 6.780 social parts, each consisting of 5.000
lei numbered from 21 to 6.800, inclusively.
III. According to the Increase of the Social Capital Art. 5 of the Company
Agreement and Art. 7 of the Statute will be amended as follows :
"The Social Capital and accounting documents of the Company are registered in
lei.
The Social Capital is 34.000.000 lei cash.
The Social Capital consists of 6.800 equal Social Parts, each one valued at
5.000 lei.
The Social Parts are numbered from 1 to 6.800, inclusively, divided between the
Associates as follows:
CME MEDIA ENTERPRISES BV LTD - 32.300.000 lei, cash, equivalent to 10.030 USD
(3.220,5 lei/USD), whichown 6.400 Social Parts, numbered from 1 to 19 and from
21 to 6.461, inclusively, representing 95% of the Social Capital value, paid in
USD.
SARBU ADRIAN - 1.700.000 lei, cash, who owns 340 Social Parts, respectively, one
social part numbered 20 and Social Parts numbered from 6.462 to 6.800,
inclusively, representing 5% of the Social Capital value, paid in lei.
The Social Capital will be paid as of the date of registration of this Agreement
at the Romanian Register of Commerce.
The present Additional Agreement is included in the Company Agreement and the
Statute and is executed and signed in 6 copies before - Vladica Ratiu Gheorghe -
Public Notary, this authentication day :
On behalf of On behalf of
SC MEDIA PRO SRL CME MEDIA ENTREPRISES BV
ADRIAN SARBU DEAN CHISIU
In behalf of
Iliescu George Marius Adrian Sarbu
Bratulescu Theodor
Liana Petrovici
2
WARRANTIES
The managing directors of SC UNIMEDIA SRL, warrant that:
1. SC UNIMEDIA is a Romanian legal person that is organized on the basis of
Law 31/1990.
2. The conclusion and the execution of this agreement or any other documents
of the assignors or the execution of the transactions that arise from this
contract by the partners/assignors :
a) did not violate any stipulations of the company agreement, articles,
the statute, or any others documents of the company.
b) did not violate or cause damage to any preemption or option right of
any other agreement.
c) did not require the authorization, the agreement, the approval, the
exemption, or other action of any party.
d) did not violate any law or order to which the company is subject.
3) The company has no direct or indirect indebtedness, liabilities, claims,
losses, damages, deficiencies, obligations or responsibilities, known or
unknown, liquidated or unliquidated, accrued, absolute, contingent or
otherwise, which individually or in the aggregate are material to the
condition, assets, liabilities, business, or operations of the company.
The partners have no knowledge of any circumstances, conditions, or events
that may hereafter give rise to any liabilities of the company, except as
set forth in the present agreement.
4) The company is not in a state of liquidation or reorganization, and is not
in litigation with other persons that may affect in any way the company or
its business.
5) The company has presented all relevant financial information regarding the
Company and this information constitutes a correct description of the
financial situation of the Company as of the date of this Agreement.
6) The Manager Director of UNIMEDIA puts at the disposal of the
assignees/third parties the accounting balance dated 30.06.1996. From the
patrimony situation of that date results a certain relationship between
the Company's debts and the Company's assets, respectively, the total
assets. The Managing Directors of UNIMEDIA warrant that the financial
state on 25.09.1996 is similar, meaning that the relationship between the
debts and Company's assets, respectively, the total assets, is materially
the same.
Executed in 2 copies, in Bucharest, 25.09.1996
We have enclosed the accounting balance of 30.06.1996 herewith.
Managing Directors
Liviu Gheorghe
Roxana Grigoruta
Translation
Roll of deeds no. 50/1996
Done
in Frankfurt am Main on October 25, 1996
before me the undersigned notary public
Hans-Georg Feick
with his office at Frankfurt am Main
appeared today:
Dr. Rainer Magold, attorney at law, with business adress at Bethmannstr. 50-54,
60311 Frankfurt/Main,
- - the person appeared is personally known to the notary -
not acting in his own name but on behalf of -
1. the deponent ad 1):
CME Media Enterprises B.V.,
Hirsch Gebouw,
Leidseplein 29,
1017 PS Amsterdam,
The Netherlands,
2. the deponent ad 2):
<PAGE>
Mr. Boris Fuchsmann, businessman in Dusseldorf,
born on 12 February 1947,
3. the deponent ad 3):
Mr. Alexander Rodniansky, Movie Director in Dusseldorf-Oberkassel, born on
2 July 1961,
4. the deponent ad 4):
Innova Film GmbH,
Friedrich-Ebert-Str. 31-33
40210 Dusseldorf,
Federal Republic of Germany,
- being registered with the Commercial Register of the Local Court of
Dusseldorf under reg.no. HRB 27705 - as attorney-in-fact without
authorization but promising to submit to the notary confirmations of
powers-of-attorney as soon as possible, including an exemption from the
restrictions under Sec. 181 Civil Code.
A. Share Transfer
I. The person appeared declares: The deponent ad 2) and the deponent ad 3)
are the sole shareholders of the deponent ad 4). The deponent ad 2) and
the deponent ad 3) each hold a share in the nominal value of DM 25,000 (in
words German marks twenty-five thousand) in the deponent ad 4). The stated
share capital of the deponent ad 4) amounts to DM 50,000 (in words: German
marks fifty thousand). The shares are fully paid up.
Pursuant to the Acquisition, Cooperation and Investment Agreement and the
Arbitration Agreement between the deponents of September 30, 1996, which
at the request of the person appearing will be attached hereto as Exhibits
1 and 2, the deponents ad 2) and 3) sold to the deponent ad 1) of the
respective shares a partial share each of DM 12,500, and undertook to
transfer to the deponent ad 1) such partial shares in conformity with the
German rules as to the form of a transaction. As a precautionary matter,
such Acquisition, Cooperation and Investment Agreement and the Arbitration
Agreement are hereby confirmed pursuant to Sec. 141 Civil Code provided
that Sec. 19.1.1 of Exhibit 1 will continue to apply. Now, the person
appearing requested that, by way of implementation of the Acquisition,
Cooperation and Investment Agreement of September 30, 1996, the following
share transfers be recorded:
1. The deponent ad 2) herewith splits his share in the deponent ad 4)
in the nominal value of DM 25,000 (in words: German marks
twenty-five thousand) into two shares each having a nominal value of
DM 12,500 (in words: German marks twelve thousand five hundred) and
assigns with economic effect as from January 1, 1997 a share in the
nominal value of DM 12,500 (in words: German marks twelve thousand
five hundred) to the deponent ad 1). The deponent ad 1) accepts the
assignment of the share. The right to receive dividends shall be
transferred to the deponent ad 1) effective as from January 1, 1997.
<PAGE>
2. The deponent ad 3) herewith splits his share in the deponent ad 4)
in the nominal value of DM 25,000 (in words: German marks
twenty-five thousand) into two shares each having a nominal value of
DM 12,500 (in words: German marks twelve thousand five hundred) and
assigns with economic effect as from January 1, 1997 a share in the
nominal value of DM 12,500 (in words: German marks twelve thousand
five hundred) to the deponent ad 1). The deponent ad 1) accepts the
assignment of the share. The right to receive dividends shall be
transferred to the deponents ad 1) effective as from January 1,
1997.
II. Now, the ownership allocation in the deponent ad 4) is as follows:
Shareholder Share interest in % Nominal Value
----------- ------------------- -------------
Deponent ad 1) 50 DM 12,500
DM 12,500
Deponent ad 2) 25 DM 12,500
Deponent ad 3) 25 DM 12,500
III. The person appeared further declares: The deponent ad 1) herewith notifies
pursuant to Sec. 16 sub-section 1 of the German Limited Liability
Companies Act (GmbHG) to the deponent ad 2) in his capacity as managing
director of the deponent ad 4) the transfer of the shares specified in
Secs. A. I. 1. and A. I. 2. above.
B. Spinn-Off Obligation
The deponent ad 4) agrees to fulfil its spin-off obligations under Sec.
6.6.15 of the Acquisition, Cooperation and Investment Agreement (Exhibit
1) on or before December 31, 1996 provided that the deponent ad 4) will
have only assets and liabilities left which relate to the television in
the Ukraine. In all other respects the Company will not have any open
liabilities.
C. Shareholders' resolutions
Further, the person appeared declares: The deponent ad 1), the deponent ad
2) and the deponent ad 3) are the sole shareholders of the deponent ad 4).
Waiving all requirements provided by law and the articles of incorporation
as to form and notice of convening a shareholders' meeting an
extraordinary shareholders' meeting of the deponent ad 4) is held and the
following resolutions are unanimously adopted:
1. The Articles of Incorporation of the Company in a completely revised
new version shall read as follows:
"Articles of Incorporation of Innova Film GmbH
Section 1
Corporate Name and Seat of the Company
(1) The Company shall have the corporate name of Innova Film GmbH
(2) The Company shall have its seat in Dusseldorf.
Section 2
Purpose of the Company
(1) The purpose of the Company shall be to produce motion
pictures, videos and television programs as well as to acquire
and grant distribution rights regarding motion pictures,
videos and television programs and the broadcasting of
television programs in Ukraine.
(2) The Company shall be entitled to take all measures which are
beneficial for the purposes of the Company. The Company shall
be entitled to establish branches, to have an interest in
other undertakings of the same or a similar kind and also to
act as an unlimited partner.
Section 3
Share Capital
The share capital of the Company shall equal DM 50,000 (in words: fifty
thousand German marks).
Section 4
Duration of the Company
The Company is established for an indefinite period of time.
Section 5
Fiscal Year
The fiscal year of the Company is the calendar year.
Section 6
Shareholders' Meetings
(1) A shareholders' meeting shall be convened if a shareholders'
resolution is necessary or if a shareholder requests the
management of the Company to call a shareholders' meeting. In
any event, a shareholders' meeting shall be held each year
within two months after the annual accounts have been
submitted.
(2) Shareholders' meetings shall be called by the managing
directors. Each managing director shall have the sole right to
call a shareholders' meeting.
<PAGE>
(3) Notice of a shareholders' meeting specifying the place, the
day, the hour and the agenda shall be dispatched to each
shareholder by registered mail at least four weeks prior to
ordinary shareholders' meetings and at least two weeks prior
to extraordinary shareholders' meetings. The periods commence
on the day following the day on which the notice is mailed.
For the purpose of calculating the periods, the day of the
meeting shall not be taken into account.
(4) If at least 51% of the share capital is represented at the
shareholders' meeting there is a quorum. If less than 51% of
the share capital of the Company is present, a new
shareholders' meeting shall be convened without delay and with
the same agenda observing the provisions set forth in
sub-section (3) above; such shareholders' meeting may transact
business regardless of the percentage of the shares of the
Company being present if this has been indicated in the
notice.
(5) Shareholders' meetings are held at the seat of the Company.
They may be held in another place for good reasons. The
chairman, who presides over the meeting, is elected by the
shareholders' meeting with the majority of the votes cast. If
no majority decision is achieved, the shareholder who received
the highest number of votes or a proxy designated by him shall
preside over the meeting. The next following shareholders'
meeting shall be chaired by the minority shareholder who is
appointed by the minority shareholders, or by his proxy. If
the minority shareholders fail to agree on the chairman, the
shareholders' meeting shall be chaired by the shareholder who
received the highest number of votes or by a proxy designated
by him. Each shareholder may be represented at a shareholders'
meeting by another shareholder or a third person, who is bound
to observe confidentiality by virtue of his profession. Any
other shareholder may request such representative to produce a
written power of attorney.
(6) If all shareholders are present in person or by proxy and have
agreed to adopt resolutions, shareholders' resolutions may be
adopted without observing the requirements as to form and
notice of convening a shareholders' meeting provided by law
and the articles of incorporation.
Section 7
Shareholders' Resolutions
(1) Shareholders' resolutions are adopted at meetings. Outside a
meeting shareholders' resolutions may be adopted in writing,
by telefax, telegraph or orally, also via telephone, if each
shareholder participates in the vote, unless otherwise
provided by mandatory law.
<PAGE>
(2) In order to provide evidence, written minutes of each
shareholders' resolution shall be prepared promptly,
indicating the day and the form as well as the contents of the
resolution and the votes, save for such cases in which
shareholders' resolutions are recorded in notarial deeds. If a
resolution is adopted in a meeting, the minutes are to be
signed by the chairman. A copy of the minutes shall be
promptly dispatched to each shareholder.
(3) Shareholders' resolutions are adopted with the majority of the
votes cast, unless a qualified majority is required by statute
or the articles of incorporation. Each of DM 100 of a share
quota entitles to one vote.
(4) As provided by law, the shareholders' meeting resolves on the
following matters with a majority of three fourths of the
votes cast:
(a) amendments to the articles of incorporation;
(b) voluntary liquidation of the Company.
Section 8
Area of Responsibility of the Shareholders
(1) The following matters are subject to the shareholders'
determination:
(a) the conclusion, amendment or termination of management
agreements with managing directors or Prokurists;
(b) the approval of the annual business plan and the annual
operating budget, as well as their amendment;
(c) the approval of the annual statement of accounts, the
distribution of profits, interim payments of anticipated
profits and the methods for covering losses;
(d) the appointment of the auditors and the approval of
their report;
(e) the decision to issue bonds or other types of
securities.
(2) To the extent not mentioned above, the shareholders shall have
the competences set forth in Section 46 German Limited
Liability Companies Act (GmbHG).
Section 9
Management and Representation
(1) The Company may have two or more managing directors. They are
appointed or removed by the shareholders in the following
manner:
<PAGE>
(a) The shareholder CME Media Enterprises B.V., with its
address at Hirsch Gebouw, Leidseplein 29, 1017 PS
Amsterdam, The Netherlands, (hereinafter referred to as
"CME") shall have the sole right to nominate one of the
managing directors with overall responsibility for
finance.
(b) The shareholders Boris Fuchsmann and Alexander
Rodniansky shall have the right jointly to nominate an
additional managing director. If those shareholders are
unable to reach agreement on the nomination of a
managing director, an appointment cannot be effected
validly.
(c) Managing directors must be elected and appointed by the
unanimous vote of the shareholders' meeting. Any
managing director may be removed by the vote of 50% of
the shareholders.
d) If the Company employs a finance director, CME or the
managing director appointed by CME shall have the sole
right to nominate the same. Boris Fuchsmann and
Alexander Rodniansky shall jointly have the right to
nominate the sales director if such is being employed by
the Company. Also in this case an unanimous
shareholders' resolution will be necessary. With respect
to the removal of the finance director and sales
director a vote of 50% of the shareholders will be
sufficient.
The right to nominate managing directors shall not be
attached to the shareholders personally. Each holder of
the share shall be entitled to such rights.
(2) The shareholders shall be entitled to nominate Prokurists
instead of managing directors to the positions referred to in
Section 9(1) above. In that case the provisions of Section
9(1) shall apply accordingly.
(3) If the Company has only one managing director, he shall have
has sole authority to represent the Company. If two or more
managing directors have been appointed, the Company shall be
represented by either two managing directors jointly or one
managing director jointly with a Prokurist. The shareholders'
meeting may resolve that one or more managing directors may
have sole authority to represent the Company and may be
exempted from the restrictions of Section 181 German Civil
Code (BGB).
(4) Notwithstanding the provisions of Section 9(3) above, the
entering into, the amendment or termination of agreements or
other documents (or series of agreements, contracts or other
documents) or any bank transactions or any other business
transaction having a value of over DM 50,000 (in words:
Deutsch Mark fifty thousand) (or a duration of more than one
year irrespective of their value) may only be effected jointly
by (a) a managing director appointed pursuant to Section
9(1)(b) above and (b) a managing director or Prokurist, as the
case may be, appointed pursuant to Section 9(1)(b) above.
<PAGE>
(5) Irrespective of their authority to represent the Company with
respect to third parties, the managing directors shall be
required to observe for internal Company purposes the
instructions issued by the shareholders and are obligated to
apply for the prior general or particular consent of the
shareholders in order to carry out the following transactions:
(a) the commencement of any litigation or arbitration or the
entering into of any settlement agreement with a value
exceeding DM 25,000 (in words: Deutsch Mark twenty-five
thousand);
(b) the determination of the remuneration or salary of any
managing director or member of the senior management;
(c) unless the same is included in the annual operating
budget the acquisition, sale or other disposition of
real estate and capital assets, if the book value or the
consideration exceed DM 50,000 (in words: Deutsch Mark
fifty thousand);
(d) the licensing, selling or other disposition of any of
the Company's trade or services marks, logos, trade
marks and designs;
(e) the sale or other disposition of the Company's ownership
interests in subsidiaries, in particular the sale or
other disposition of the Company's ownership interests
in "Intermedia", vul. Dehtyarovska 3, Kiev, a company
organized under the laws of Ukraine (hereinafter
"Intermedia"), as well as the approval of the sale or
other disposition by Intermedia of Intermedia's
ownership interests in "Studio 1+1", a company organized
under the law of Ukraine (hereinafter "Studio 1+1");
(f) the exercise of any of the Company's rights resulting
from ownership interests in subsidiaries;
(g) any of the transactions specified in Section 9(4) above;
(h) the granting of any loan, credit, guarantee, indemnity
or similar obligation to, in respect of, any person
other than "Ukraine Ad Holding Co.", a company organized
under the law of The Netherlands, "International Media
Services Ltd.", a company organized under the laws of
Bermuda, (hereinafter "IMS"), CME, "Prioritet Ltd.", a
company organized under the laws of Ukraine,
(hereinafter "Prioritet"), Intermedia or Studio 1+1,
except for any undertaking which is made or given in the
ordinary course of business and does not exceed or
involve an obligation of more than DM 25,000 (in words:
Deutsch Mark twenty-five thousand);
<PAGE>
(i) the raising of loans or credits exceeding DM 25,000 (in
words: Deutsch Mark twenty-five thousand);
(j) the acquisition, liquidation, termination or
establishment of subsidiaries, branches and
representative offices and any changes in their scope of
business;
(k) the entering into of joint ventures, partnerships
(including silent partnerships) or consortiums;
(l) the making of any capital investment or other capital
expenditure or undertaking of obligations which alone
(or when aggregated with any related investment or
expenditure or undertaking in the same fiscal year)
exceed DM 25.000 (in words: Deutsch Mark twenty-five
thousand);
(m) the conclusion of any business transaction or
undertaking of obligations which is not been provided
for in the relevant business plan or annual budgets or
which exceeds the amount allocated to the relevant area
of business activities in the relevant business plan or
annual budget;
(n) the granting or revocation of general powers of
attorney;
(o) the conclusion, amendment or termination of contracts
with shareholders and related enterprises.
(6) Any mandate or other agreement entered into between the
Company and the managing directors shall include provisions
referring to the limitations on authority as specified in the
articles of incorporation.
Section 10
Transfer of Shares
Notwithstanding any other provision herein, any transfer or split of
shares or parts of such shares, as well as any other disposal of shares or
parts of shares shall require to prior written approval of all
shareholders. Such approval shall not be required in the case of a sale or
transfer of shares or parts of shares to other shareholders or to a
company whose majority shareholder is one of the shareholders hereunder,
as well as in case of a sale or transfer of shares or parts of shares to
Vadim Rabinowitch, or a company whose majority shareholder is Vadim
Rabinowitch. In other cases, approval may be withheld only if there is an
important reason.
Section 11
Right of First Refusal
(1) In case of a sale of shares or parts of shares to third parties the
other shareholders shall have a right of first refusal. If a
shareholder sells his share or parts thereof to a third party the
other
<PAGE>
shareholders shall have a right of first refusal pro rata to their
shareholding. Together with the notification of his intention to
sell, the seller shall advise forth with the other shareholders of
the contents of the agreement concluded with the purchaser. The
other shareholders shall be requested in writing to state whether or
not they intend to execute this right of first refusal. They shall
be entitled to acquire the share or parts of shares pro rata to this
shareholding, at the conditions of the sales agreement entered into.
To the extent a shareholder does not exercise his right of first
refusal or does not exercise it in time, each of the remaining other
shareholders shall have such right of first refusal in the same
proportion his shareholding bears to the shareholding of the other
remaining shareholders.
The right of first refusal may be exercised only within a period of
15 days from the date of receipt of the written notification and
must be exercised in writing vis-a-vis the seller.
(2) The sellers shall have no right of first refusal, if shares or parts
of shares are sold to other shareholders or to companies whose
majority shareholder is one of the shareholders hereunder and in
cases of a sale of shares or parts of shares to Mr. Vadim
Rabinovitch or to a company whose majority shareholder is Mr.
Rabinovitch.
(3) If the right of first refusal is not exercised or is not exercised
in time, the seller shall be authorized to transfer the share or
part of share to the third party, subject to the provisions of Sec.
10 and the right of first refusal of the other shareholders under
Sec. II(I) hereof.
Section 12
Redemption of Shares
(1) Shares may be subject to redemption.
(2) A share may be redeemed without the shareholders' approval if
(a) the share is seized by a creditor of the shareholder or is
subject to other acts of execution and the execution is not
averted within two months or, at the latest, prior to the
compulsory sale of the share;
(b) a shareholder is subject to bankruptcy or composition
proceedings or if the institution of such proceedings was
rejected due to the insufficiency of the bankrupt's estate or
if the shareholder has to render a sworn statement as to the
accuracy of a summary of assets and liabilities submitted by
him to the court;
(c) there is a legal reason for the exclusion of the shareholder
from the Company; or
(d) the shareholder sues for dissolution of the Company or gives
notice of his withdrawal from the Company.
(3) If a share is owned by two or more shareholders jointly, the share
may be redeemed pursuant to Section 12(2) above if the provisions
set forth therein are
<PAGE>
applicable to one or more of them.
(4) The redemption of a share is effected by notification of the
management and requires a shareholders' resolution adopted with the
majority of the votes cast. A shareholder whose shares are to be
redeemed is excluded from voting.
(5) The shareholder is entitled to receive compensation for the share
redeemed in the amount of its market value. The market value shall
be determined with binding effect for all shareholders by a
certified public accounting firm jointly appointed by all
shareholders. If the shareholders fail to agree on that request, the
certified public accounting firm, which must be one of the six
largest international public accounting firms (so-called "Big Six")
shall, at the request of any shareholder, be determined by the
President of the Chamber of Commerce at Dusseldorf.
Section 13
Annual Accounts
The management shall draw up the annual accounts (balance sheet,
profit and loss account, appendix) and the report on the economic
situation for any fiscal year within the first three months of the
following fiscal year; as long as the Company has the status of a
"kleine Kapitalgesellschaft" within the meaning of Section 267
German Commercial Code (HGB) said documents may, within the ordinary
course of business, be drawn up later, but not later than within the
first six months of the following fiscal year. The documents are to
be submitted to the shareholders' meeting for approval with a
recommendation on the distribution of the profits.
Section 14
Profits and Losses
The profits are distributed pursuant to Section 29 of the German
Limited Liability Companies Act (GmbHG).
Section 15
Written Form
Any agreement regarding the corporate relationship between the
shareholders or between the Company and the shareholders shall
become effective only if made in writing, unless mandatory law
provides for notarization. The same shall apply to a waiver of the
requirement of written form.
Section 16
Notifications
Notifications of the Company shall be published only in the Federal
Gazette (Bundesanzeiger) of the Federal Republic of Germany.
<PAGE>
Section 17
Severability
Should any provision of these articles of incorporation be or
become, wholly or partly, invalid or unenforceable or should these
articles of incorporation be incomplete, this shall not affect the
validity and the enforceability of the remaining provisions hereof.
In lieu of the invalid or unenforceable provision, the parties shall
agree upon a valid and enforceable provision serving the purpose of
the invalid or unenforceable provision. In case of a gap in these
articles of incorporation, the parties shall agree upon a provision
which, according to the purpose of these articles of incorporation,
they would have agreed upon if they had considered the matter."
2. The share splits specified in Secs. A. I. 1. and A. I. 2. above are
approved.
The shareholders' meeting is herewith closed.
C. Approval
The person appeared further declares: The deponent ad 2) approves in his
capacity as sole managing director of the deponent ad 4) having the sole
authority to represent the deponent ad 4) the split of the share in the
nominal amount of DM 25,000 into two shares each of DM 12,500 as specified
in Secs. A. I. 1. and A. I. 2. above in connection with the sale and
transfer of one partial share each to the deponent ad 1).
D. Costs
The costs triggered by this notarial deed and its execution shall be borne
by the deponent ad 1).
The person appearing stated to be fully conversant in the English
language. He waived the right to demand German translations of Exhibits 1
and 2 hereto. The recording notary is also conversant in the English
language.
The above deed and the exhibits were read by the notary to the person
appearing and was approved by him and was signed in his own hand by the
person appearing and by the notary as follows:
Herr Dr. Rainer Magold, Rechtsanwalt, geschaftsansassig
Bethmannstr. 50-54, 60311 Frankfurt am Main,
- personlich bekannt -
nach seiner Erklarung handelnd nicht im eigenen Namen, sondern
als vollmachtsloser Vertreter
1. der Vertretenen zu 1):
<PAGE>
CME Media Enterprises B.V.,
Hirsch Gebouw,
Leidseplein 29,
1017 PS Amsterdam,
Niederlande,
sowie
2. des Vertretenen zu 2):
Herrn Boris Fuchsmann, Kaufmann in Dusseldorf,
geboren am 12. Februar 1947,
3. des Vertretenen zu 3):
Herrn Alexander Rodniansky, Regisseur in Dusseldorf-Oberkassel, geboren am 2.
Juli 1961,
4. der Vertretenen zu 4):
Innova Film GmbH,
Friedrich-Ebert-Str. 31-33
40210 Dusseldorf,
Bundesrepublik Deutschland,
- - eingetragen im Handelsregister des Amtsgerichts Dusseldorf unter HRB 27705 -
mit dem Versprechen, Vollmachtsbestatigungen der Vertretenen 1)-4), nach denen
er von den Beschrankungen aus ss. 181 BGB befreit ist, umgehend nachzureichen.
A. Abtretungen
I. Der Erschienene erklart: Die Vertretenen zu 2) und 3) sind die alleinigen
Gesellschafter der Vertretenen zu 4). Der Vertretene zu 2) und der
Vertretene zu 3) halten an der Vertretenen zu 4) jeweils einen
Geschaftsanteil im Nennbetrag von DM 25.000,- (in Worten: Deutsche Mark
funfundzwanzig tausend). Das Stammkapital der Vertretenen zu 4) betragt DM
50.000,- (in Worten: Deutsche Mark funfzigtausend).Die Geschaftsanteile
sind voll eingezahlt.
In dem zwischen den Vertretenen am 30. September 1996 abgeschlossenen
Acquisition, Cooperation and Investment
<PAGE>
Agreement und Arbitration Agreement, die auf Wunsch des Erschienenen als
Anlagen 1 und 2 zu dieser Verhandlung genommen werden, haben die
Vertretenen zu 2) und 3) jeweils aus ihren Geschaftsanteilen
Teilgeschaftsanteile mit einem Nennbetrag von jeweils DM 12.500 an die
Vertretene zu 1) verkauft und sich verpflichtet, diese
Teilgeschaftsanteile an die Vertretene zu 1) den deutschen
Formvorschriften entsprechend abzutreten. Diese Acquisition, Cooperation
and Investment Agreement und Arbitration Agreement vom 30. September 1996
werden hiermit vorsorglich gema(beta) ss. 141 BGB bestatigt mit der
ausdrucklichen Ma(beta)gabe, da(beta) Ziff. 19.1.1 der Anlage 1 weiter
Geltung hat.
Nunmehr bittet der Erschienene, in Vollzug des Acquisition, Cooperation
and Investment Agreement vom 30. September 1996 folgende
Abtretungserklarungen zu beurkunden:
1. Der Vertretene zu 2) teilt zunachst seinen Geschaftsanteil im Nennbetrag
von DM 25.000,- (in Worten: Deutsche Mark funfundzwanzig tausend) in zwei
Geschaftsanteile im Nennbetrag von jeweils DM 12.500,- (in Worten:
Deutsche Mark zwolftausendfunfhundert) und tritt einen Teilgeschaftsanteil
im Nennbetrag von DM 12.500,- (in Worten: Deutsche Mark
zwolftausend-funfhundert) mit wirtschaftlicher Wirkung zum 1. Januar 1996
an die Vertretene zu 1) ab. Die Vertretene zu 1) nimmt die Abtretung an.
Das Gewinnbezugsrecht geht ab dem 1. Januar 1997 auf die Vertretene zu 1)
uber.
2. Der Vertretene zu 3) teilt zunachst seinen Geschaftsanteil im Nennbetrag
von DM 25.000,- (in Worten: Deutsche Mark funfundzwanzig tausend) in zwei
Geschaftsanteile im Nennbetrag von jeweils DM 12.500,- (in Worten:
Deutsche Mark zwolftausendfunfhundert) und tritt einen Teilgeschaftsanteil
im Nennbetrag von DM 12.500,- (in Worten: Deutsche Mark
zwolftausend-funfhundert) mit wirtschaftlicher Wirkung zum 1. Januar 1996
an die Vertretene zu 1) ab. Die Vertretene zu 1) nimmt die Abtretung an.
Das Gewinnbezugsrecht geht ab dem 1. Januar 1997 auf die Vertretene zu 1)
uber.
<PAGE>
II. Die Geschaftsanteile an der Vertretenen zu 4) werden nunmehr wie folgt
gehalten:
Gesellschafter Anteil in % Nennbetrag
-------------- ----------- ----------
Vertretene zu 1) 50 DM 12.500,-
DM 12.500,-
Vertretener zu 2) 25 DM 12.500,-
Vertretener zu 3) 25 DM 12.500,-
III. Der Erschienene erklart weiter: Die Vertretene zu 1) meldet hiermit den
Erwerb der Geschaftsanteile nach A. I. 1 und A. I. 2. dieser Urkunde bei
dem Vertretenen zu 2) in seiner Eigenschaft als Geschaftsfuhrer der
Vertretenen zu 4) nach ss. 16 Abs. 1 GmbHG an.
B. Ausgliederungsverpflichtung
Die Vertretene zu 4) sagt zu, die in Ziff. 6.6.15 des Acquisition,
Cooperation und Investment Agreement (Anlage 1) enthaltene
Ausgliederungsverpflichtungen bis zum 31. Dezember 1996 zu erfullen mit
der Ma(beta)gabe, da(beta) die Vertretene zu 4) nur noch jene Aktiva
(Vermogenswerte) und Passiva, die mit dem Fernsehen in der Ukraine
verbunden sind, besitzen wird. Sie wird im ubrigen keine offenen
Verbindlichkeiten haben.
C. Gesellschafterbeschlusse
Der Erschienene erklart weiter: Die Vertretenen zu 1) bis 3) sind die
alleinigen Gesellschafter der Vertretenen zu 4). Nunmehr halten die
Vertretenen zu 1) bis 3) unter Verzicht auf alle gesetzlichen und
gesellschafts- vertraglichen Formen und Fristen der Einberufung und
Ankundigung eine au(beta)erordentliche Gesellschafterversammlung der
Vertretenen zu 4) ab und beschlie(beta)en einstimmig:
1. Der Gesellschaftsvertrag der Gesellschaft wird wie folgt vollstandig neu
gefa(beta)t:
<PAGE>
"Gesellschaftsvertrag der Innova Film GmbH
ss. 1
Firma und Sitz
der Gesellschaft
(1) Die Firma der Gesellschaft lautet:
Innova Film GmbH (2) Die Gesellschaft hat ihren Sitz in Dusseldorf.
ss. 2
Gegenstand des Unternehmens
(1) Gegenstand des Unternehmens ist die Produktion von Filmen, Videos
und Fernsehprogrammen sowie der Kauf und die Vergabe von
Vertriebsrechten an Filmen, Videos und Fernsehprogrammen und die
Ausstrahlung von Fernsehprogrammen in der Ukraine.
(2) Die Gesellschaft kann alle dem Gesellschaftszweck forderlichen
Tatigkeiten vornehmen. Sie ist berechtigt, Zweigniederlassungen zu
errichten und sich an anderen Unternehmen gleicher oder ahnlicher
Art zu beteiligen, auch unter Ubernahme der personlichen Haftung.
ss. 3
Stammkapital
Das Stammkapital der Gesellschaft betragt DM 50.000,- (in Worten: Deutsche
Mark funfzigtausend).
ss. 4
Dauer der Gesellschaft
Die Gesellschaft ist auf unbestimmte Zeit errichtet.
<PAGE>
ss. 5
Geschaftsjahr
Das Geschaftsjahr der Gesellschaft ist das Kalenderjahr.
ss. 6
Gesellschafterversammlungen
(1) Die Gesellschafterversammlung ist einzuberufen, wenn eine
Beschlu(beta)fassung der Gesellschafter erforderlich wird oder wenn
ein Gesellschafter die Einberufung einer Gesellschafterversammlung
bei der Geschaftsfuhrung der Gesellschaft beantragt. In jedem Fall
ist jahrlich eine Gesellschafterversammlung innerhalb von zwei
Monaten nach Vorlage des Jahresabschlusses abzuhalten.
(2) Gesellschafterversammlungen werden durch die Geschaftsfuhrer
einberufen. Jeder Geschaftsfuhrer ist allein einberufungsberechtigt.
(3) Die Einberufung erfolgt durch eingeschriebenen Brief an jeden
Gesellschafter unter Angabe von Ort, Tag, Zeit und Tagesordnung mit
einer Frist von mindestens vier Wochen bei ordentlichen
Gesellschafterversammlungen und von mindestens zwei Wochen bei
au(beta)erordentlichen Gesellschafterversammlungen. Der Lauf der
Frist beginnt mit dem der Aufgabe zur Post folgenden Tag. Der Tag
der Versammlung wird bei Berechnung der Frist nicht mitgezahlt.
(4) Eine Gesellschafterversammlung ist nur beschlu(beta)fahig, wenn
mindestens 51 % des Stammkapitals vertreten sind. Sind weniger als
51 % des Stammkapitals vertreten, ist unter Beachtung von Abs. 3
unverzuglich eine neue Gesellschafterversammlung mit gleicher
Tagesordnung einzuberufen. Diese ist ohne Rucksicht auf das
vertretene Stammkapital beschlu(beta)fahig, falls hierauf in der
Einberufung hingewiesen wird.
(5) Gesellschafterversammlungen finden am Sitz der Gesellschaft statt.
Sie konnen aus begrundetem Anla(beta) an einem anderen Ort
abgehalten werden. Die Gesellschafterversammlung wahlt mit Mehrheit
der abgegebenen Stimmen einen Vorsitzenden, der
<PAGE>
die Versammlung leitet. Kommt keine Mehrheit zustande, so leitet der
Gesellschafter mit der gro(beta)ten Stimmenzahl bzw. der von ihm
bestellte Vertreter die Versammlung. Die darauf folgende
Gesellschafterversammlung leitet einer der
Minderheitsgesellschafter, auf den sich die
Minderheitsgesellschafter einigen, bzw. dessen Vertreter, die
Versammlung. Kommt zwischen den Minderheitsgesellschaftern keine
Einigung zustande, leitet der Gesellschafter mit der gro(beta)ten
Stimmenzahl bzw. der von ihm bestellte Vertreter die Versammlung.
Jeder Gesellschafter kann sich in Gesellschafterversammlungen durch
einen anderen Gesellschafter oder einen zur Berufsverschwiegenheit
verpflichteten Dritten vertreten lassen. Jeder andere Gesellschafter
kann verlangen, da(beta) sich der Bevollmachtigte durch schriftliche
Vollmacht legitimiert.
(6) Sind samtliche Gesellschafter anwesend oder vertreten und mit der
Beschlu(beta)fassung einverstanden, so konnen Beschlusse auch dann
gefa(beta)t werden, wenn die fur die Einberufung und Ankundigung
geltenden gesetzlichen oder gesellschaftsvertraglichen Vorschriften
nicht eingehalten worden sind.
ss. 7
Gesellschafterbeschlusse
(1) Die Beschlusse der Gesellschafter werden in Versammlungen
gefa(beta)t. Au(beta)erhalb von Versammlungen konnen sie, soweit
nicht zwingendes Recht eine andere Form vorschreibt, durch
schriftliche, fernschriftliche, telegrafische oder mundliche, auch
fernmundliche Abstimmung gefa(beta)t werden, wenn sich jeder
Gesellschafter an der Abstimmung beteiligt.
(2) Soweit uber Gesellschafterbeschlusse nicht eine notarielle
Niederschrift aufgenommen wird, ist uber jeden
Gesellschafterbeschlu(beta)zu Beweiszwecken unverzuglich eine
Niederschrift anzufertigen, welche den Tag und die Form der
Beschlu(beta)fassung, den Inhalt des Beschlusses und die
Stimmabgaben anzugeben hat. Soweit der Beschlu(beta)in einer
Versammlung gefa(beta)t wird, ist die Niederschrift vom Vorsitzenden
zu unterzeichnen. Die Niederschrift ist jedem Gesellschafter
abschriftlich unverzuglich zuzusenden.
<PAGE>
(3) Gesellschafterbeschlusse werden mit der Mehrheit der abgegebenen
Stimmen gefa(beta)t, soweit nicht Gesetz oder dieser
Gesellschaftsvertrag eine qualifizierte Mehrheit vorsehen. Je DM
100,- eines Geschaftsanteiles gewahren eine Stimme.
(4) Wie gesetzlich vorgeschrieben, beschlie(beta)t die
Gesellschafterversammlung uber folgende Angelegenheiten mit einer
Mehrheit von drei Vierteln der abgegebenen Stimmen:
a) Satzungsanderung;
b) die Auflosung der Gesellschaft.
ss. 8
Aufgabenkreis der Gesellschafter
(1) Der Bestimmung der Gesellschafter unterliegen:
(a) Abschlu(beta), Anderung oder Beendigung von Dienstvertragen mit
Geschaftsfuhrern und Prokuristen;
(b) Bestatigung des jahrlichen Geschaftsplans und des operativen
Jahresbudgets sowie deren Anderung;
(c) Feststellung des Jahresabschlusses, Ergebnisverwendung,
Vorabausschuttungen sowie das Verfahren der Abdeckung von Verlusten;
(d) Bestellung der Abschlu(beta)prufer und die Bestatigung ihres
Berichts;
(e) Entscheidung uber die Ausgabe von Schuldverschreibungen oder
sonstigen Wertpapieren.
(2) Soweit nicht bereits vorstehend aufgefuhrt, bleibt der Aufgabenkreis der
Gesellschafter gem. ss. 46 GmbHG unberuhrt.
<PAGE>
ss. 9
Geschaftsfuhrung und Vertretung
(1) Die Gesellschaft hat zwei oder mehrere Geschaftsfuhrer. Sie werden von den
Gesellschaftern nach folgendem Verfahren bestellt und abberufen:
a) Der Gesellschafter CME Media Enterprises B.V., Hirsch Gebouw,
Leidseplein 29, 1017 PS Amsterdam, Niederlande, (im folgenden "CME")
hat das ausschlie(beta)liche Recht, einen Geschaftsfuhrer mit
Gesamtverantwortung fur die Finanzen vorzuschlagen.
b) Die Gesellschafter Boris Fuchsmann und Alexander Rodniansky haben
gemeinsam das Recht, einen weiteren Geschaftsfuhrer vorzuschlagen.
Konnen diese Gesellschafter keine Einigung uber die Person des
Geschaftsfuhrers erzielen, kann eine Bestellung nicht wirksam
erfolgen.
c) Fur die Wahl und Bestellung der Geschaftsfuhrer ist ein einstimmiger
Beschlu(beta) der Gesellschafterversammlung erforderlich. Fur die
Abberufung eines Geschaftsfuhrers ist es ausreichend, wenn 50% der
Gesellschafter dafur stimmen.
d) Falls die Gesellschaft einen Finanzdirektor einstellt, so steht CME
bzw. dem von CME benannten Geschaftsfuhrer das alleinige
Vorschlagsrecht zu. Boris Fuchsmann und Alexander Rodniansky haben
gemeinsam das alleinige Vorschlagsrecht bei der Einstellung eines
Vertriebsleiters. Auch hier ist jeweils ein einstimmiger
Beschlu(beta) der Gesellschafter erforderlich. Fur die Kundigung des
Finanzdirektors bzw. der Vertriebsleiter ist es ausreichend, wenn
50% der Gesellschafter dafur stimmen.
Das Vorschlagsrecht ist nicht an die Person des Gesellschafters
gebunden. Es steht dem jeweiligen Inhaber des Geschaftsanteils zu.
(2) Anstelle von Geschaftsfuhrern konnen die Gesellschafter fur die vorstehend
in Abs. (1) aufgefuhrten Positionen auch Prokuristen vorschlagen. Die
Regelungen des Abs. (1) gelten dann entsprechend.
<PAGE>
(3) Hat die Gesellschaft nur einen Geschaftsfuhrer, so wird sie durch diesen
allein vertreten. Hat sie mehrere Geschaftsfuhrer, so wird sie durch zwei
Geschaftsfuhrer gemeinschaftlich oder einen Geschaftsfuhrer in
Gemeinschaft mit einem Prokuristen vertreten. Durch Beschlu(beta)der
Gesellschafterversammlung kann einzelnen oder mehreren Geschaftsfuhrern
die Befugnis zur Einzelvertretung sowie Befreiung von den Beschrankungen
desss. 181 BGB erteilt werden.
(4) Ungeachtet der Bestimmungen in Abs. 3 konnen der Abschlu(beta), die
Anderung oder Beendigung von Vertragen oder anderen Rechtsgeschaften,
deren Wert umgerechnet DM 50.000,- (in Worten Deutsche Mark
funfzigtausend) ubersteigt, die - ungeachtet ihres Wertes - eine Laufzeit
von mehr als einem Jahr haben sowie samtliche Rechtsgeschafte mit oder
gegenuber Banken und anderen Kreditinstituten, nur gemeinschaftlich von
einem nach Abs. 1 lit. b) und einem nach Abs. 1 lit. a) bestellten
Geschaftsfuhrer bzw. Prokuristen vorgenommen werden.
(5) Unbeschadet ihrer Befugnis, die Gesellschaft gegenuber Dritten zu
vertreten, haben die Geschaftsfuhrer im Innenverhaltnis gegenuber der
Gesellschaft die Anweisungen einzuhalten, die von den Gesellschaftern
beschlossen werden, und die vorhergehende allgemeine oder besondere
Einwilligung der Gesellschafter zur Durchfuhrung der folgenden Geschafte
einzuholen:
a) Einleitung von Gerichts- oder Schiedsverfahren und zum Abschlu(beta)
von Vergleichen mit einem Gegenstands- oder Streitwert von
umgerechnet uber DM 25.000,- (in Worten: funfundzwanzigtausend);
b) die Bestimmung der Hohe der Vergutung oder des Gehalts der
Geschaftsfuhrer und Fuhrungskrafte;
c) Erwerb, Verau(beta)erung oder anderweitigen Verfugung uber
Immobilien oder anderes Anlagevermogen, soweit diese nicht im
jahrlichen Geschaftsplan enthalten sind, wenn der Buchwert oder die
Gegenleistung umgerechnet DM 50.000,- (in Worten: Deutsche Mark
funfzigtausend) ubersteigt;
<PAGE>
d) Erteilung von Lizenzen, Verau(beta)erung oder anderweitigen
Verfugung uber Waren- oder Dienstleistungszeichen, Logos, Marken und
Designs;
e) Verau(beta)erung oder anderweitige Verfugung uber die Beteiligung
der Gesellschaft an Tochtergesellschaften, insbesondere die
Verau(beta)erung oder sonstige Verfugung uber die Beteiligung an der
Gesellschaft ukrainischen Rechts "Intermedia", vul. Dehtyarovska 3,
Kiev, (im folgenden "Intermedia") sowie die Zustimmung zur
Verau(beta)erung von oder anderweitigen Verfugung uber Beteiligung
an der Gesellschaft ukrainischen Rechts in Firma "Studio 1+1" (im
folgenden "Studio 1+1") durch Intermedia;
f) Ausubung der Rechte, die der Gesellschaft auf Grund ihrer
Beteiligung an Tochtergesellschaften zustehen;
g) die vorstehend in Abs. 4 genannten Geschafte;
h) Gewahrung von Darlehen, Krediten, Garantien, Burgschaften,
Freistellungen oder ahnliche Rechtsgeschafte, mit Ausnahme solcher,
welche die Gesellschaft niederlandischen Rechts in Firma "Ukraine Ad
Holding Co.", die Gesellschaft bermudischen Rechts in Firma
"International Media Services Ltd." (im folgenden: "IMS"), CME oder
die Gesellschaften ukrainischen Rechts in Firma "Prioritet Ltd." (im
folgenden "Prioritet"), Intermedia oder Studio 1+1 betreffen, oder
die zum gewohnlichen Geschaftsbetrieb gehoren und eine
Verbindlichkeit von nicht mehr als umgerechnet DM 25.000,- (in
Worten: Deutsche Mark zehntausend) zum Gegenstand haben;
i) Erhohung von Darlehen oder Krediten, die umgerechnet DM 25.000,- (in
Worten: Deutsche Mark funfundzwanzig tausend) ubersteigen;
j) Erwerb oder Aufgabe von Beteiligungen, Grundung oder Auflosung von
Tochtergesellschaften, Niederlassungen und Reprasentanzen sowie
Anderung ihres geschaftlichen Tatigkeitsbereichs;
<PAGE>
k) Beteiligung an Joint Ventures, Gesellschaften (auch stillen
Gesellschaften) oder Konsortien;
l) Durchfuhrung von Investitionen oder sonstigem Kapitalaufwand oder
die Eingehung von Verpflichtungen, die entweder fur sich allein oder
gemeinsam mit einer damit zusammenhangenden Investition,
Kapitalaufwand oder Verpflichtung in demselben Geschaftsjahr
umgerechnet DM 25.000,-- (in Worten: Deutsche Mark
funfundzwanzigtausend) ubersteigen;
m) Abschlu(beta) von Geschaften oder Eingehung von Verbindlichkeiten,
die im jeweiligen Geschaftsplan bzw. Jahresbudget nicht vorgesehen
sind oder den diesem Geschaftsbereich im jeweiligen Geschaftsplan
bzw. Jahrsbudget zugewiesenen Betrag ubersteigen;
n) Erteilung und zum Widerruf von Generalvollmachten;
o) Abschlu(beta), Anderung oder Aufhebung von Vertragen mit
Gesellschaftern und verbundenen Unternehmen;
(6) In jedem Vertrag zwischen der Gesellschaft und einem Geschaftsfuhrer ist
auf die Beschrankungen der Vertretungsbefugnis der Geschaftsfuhrer, die
sich aus diesem Gesellschaftsvertrag ergeben, zu verweisen.
<PAGE>
ss. 10
Verfugung uber Geschaftsanteile
Ungeachtet anderer Bestimmungen dieses Gesellschaftsvertrages bedarf die
Verau(beta)erung oder Teilung von Geschaftsanteilen oder Teilen von
Geschaftsanteilen sowie jede andere Verfugung uber Geschaftsanteile oder
Teile von Geschaftsanteilen der vorherigen schriftlichen Zustimmung aller
Gesellschafter. Dieser Zustimmung bedarf es nicht bei der Verau(beta)erung
bzw. Ubertragung von Geschaftsanteilen oder Teilen von Geschaftsanteilen
an Gesellschafter oder eine Gesellschaft an der der Gesellschafter
mehrheitlich beteiligt ist sowie im Falle einer Verau(beta)erung bzw.
Ubertragung von Geschaftsanteilen oder Teilen von Geschaftsanteilen an
Herrn Vadim Rabinovitch oder an eine Gesellschaft, an der Herr Vadim
Rabinovitch mehrheitlich beteiligt ist.
Im ubrigen darf die Zustimmung nur verweigert werden, wenn hierfur
wichtige Grunde vorliegen.
ss. 11
Vorkaufsrechte
(1) Bei der Verau(beta)erung von Geschaftsanteilen oder Teilen von
Geschaftsanteilen an Dritte stehen den ubrigen Gesellschaftern
Vorkaufsrechte zu. Verau(beta)ert ein Gesellschafter seinen
Geschaftsanteil ganz oder teilweise an Dritte, so haben die anderen
Gesellschafter ein Vorkaufsrecht auf diese Geschaftsanteile entsprechend
ihrer Beteiligungsquote. Der Verau(beta)erer ist verpflichtet, mit der
Anzeige der Verkaufsabsicht den Inhalt des mit dem Kaufer geschlossenen
Vertrages den ubrigen Gesellschaftern unverzuglich schriftlich
mitzuteilen. Die ubrigen Gesellschafter sind schriftlich zur Erklarung
uber die Ausubung des Vorkaufsrechts aufzufordern. Sie sind entsprechend
ihrer Beteiligungsquote berechtigt, den Geschaftsanteil oder Teil des
Geschaftsanteils zu den Bedingungen des geschlossenen Vertrages zu
erwerben. Soweit ein Gesellschafter nicht oder nicht fristgerecht von
seinem Vorkaufsrecht Gebrauch macht, steht dieses den ubrigen
Gesellschaftern einzeln in dem Verhaltnis zu, in welchem die Nennbetrage
der von ihnen gehaltenen Geschaftsanteile zueinander stehen.
Das Vorkaufsrecht kann nur binnen einer Frist von 15 Tagen, gerechnet ab
dem Empfang der schriftlichen Mitteilung und nur durch schriftliche
Erklarung gegenuber dem Verkaufer ausgeubt werden.
<PAGE>
(2) Den Gesellschaftern steht kein Vorkaufsrecht zu, wenn Geschaftsanteile
oder Teile von Geschaftsanteilen an Gesellschafter oder Gesellschaften
verau(beta)ert werden, an denen der Gesellschafter mehrheitlich beteiligt
ist sowie im Falle der Verau(beta)erung eines Geschaftsanteils oder Teilen
von Geschaftsanteilen an Herrn Vadim Rabinovitch, bzw. an eine
Gesellschaft, an der Herr Rabinovitch mehrheitlich beteiligt ist.
(3) Wird das Vorkaufsrecht nicht oder nicht fristgerecht ausgeubt, ist der
Verkaufer berechtigt, den Geschaftsanteil bzw. Teilgeschaftsanteil unter
Beachtung der Bestimmungen in ss. 10 und des weiteren Vorkaufsrechts der
ubrigen Gesellschafter nach ss. 11 Abs. 1 dieses Gesellschaftsvertrages an
den Dritten zu ubertragen.
ss. 12
Einziehung von Geschaftsanteilen
(1) Die Einziehung (Amortisation) von Geschaftsanteilen ist zulassig.
(2) Die Einziehung des Geschaftsanteiles eines Gesellschafters ohne dessen
Zustimmung ist zulassig, wenn
a) der Geschaftsanteil von einem Glaubiger des Gesellschafters
gepfandet oder sonstwie in diesen vollstreckt wird, und die
Vollstreckungsma(beta)nahme nicht innerhalb von zwei Monaten,
spatestens bis zur Verwertung des Geschaftsanteils, aufgehoben wird;
b) uber das Vermogen des Gesellschafters das Konkurs- oder
Vergleichsverfahren eroffnet oder die Eroffnung eines solchen
Verfahrens mangels Masse abgelehnt wird, oder der Gesellschafter die
Richtigkeit seines Vermogensverzeichnisses an Eides Statt zu
versichern hat;
c) in der Person des Gesellschafters ein seine Ausschlie(beta)ung
rechtfertigender Grund vorliegt; oder
d) der Gesellschafter Auflosungsklage erhebt oder seinen Austritt aus
der Gesellschaft erklart.
(3) Steht ein Geschaftsanteil mehreren
<PAGE>
Mitberechtigten ungeteilt zu, so ist Einziehung gema(beta) Abs. 2 auch zulassig,
wenn dessen Voraussetzungen nur in der Person eines Mitberechtigten vorliegen.
(4) Die Einziehung wird durch die Geschaftsfuhrung erklart. Sie bedarf eines
Gesellschafterbeschlusses, der mit Mehrheit der abgegebenen Stimmen
gefa(beta)t wird. Dem betroffenen Gesellschafter steht kein Stimmrecht zu.
(5) Die Einziehung erfolgt gegen Zahlung einer Vergutung in Hohe des
Verkehrswertes des Geschaftsanteiles. Der Verkehrswert wird von einer von
den Gesellschaftern einvernehmlich bestimmten
Wirtschaftsprufungsgesellschaft mit verbindlicher Wirkung fur alle
Gesellschafter festgelegt. Kommt zwischen den Gesellschaftern daruber
keine Einigung zustande, bestimmt auf Antrag eines Gesellschafters der
Prasident der Industrie- und Handelskammer Dusseldorf die
Wirtschaftprufungsgesellschaft aus den Reihen der sechs gro(beta)ten
internationalen Wirtschaftsprufungsgesellschaften (sog. "Big Six").
ss. 13
Jahresabschlu(beta)
Die Geschaftsfuhrung hat den Jahresabschlu(beta) (Bilanz, Gewinn- und
Verlustrechnung, Anhang) sowie einen Lagebericht in den ersten drei
Monaten des Geschaftsjahres fur das vorangegangene Geschaftsjahr
aufzustellen; solange die Gesellschaft eine sogenannte kleine
Kapitalgesellschaft im Sinne des ss. 267 des Handelsgesetzbuches ist, und
es einem ordnungsgema(beta)en Geschaftsgang entspricht, durfen die
genannten Unterlagen auch spater, spatestens jedoch innerhalb der ersten
sechs Monate des Geschaftsjahres aufgestellt werden. Der
Gesellschafterversammlung sind die Unterlagen mit einem Vorschlag uber die
Gewinnverwendung zur Feststellung vorzulegen.
<PAGE>
ss. 14
Gewinn und Verlust
Die Gewinnverwendung richtet sich nach ss. 29 GmbHG.
ss. 15
Schriftform
Alle das Gesellschaftsverhaltnis betreffenden Vereinbarungen zwischen
Gesellschaftern oder zwischen der Gesellschaft und Gesellschaftern
bedurfen zu ihrer Wirksamkeit der Schriftform, soweit nicht kraft Gesetzes
eine notarielle Beurkundung vorgeschrieben ist. Dies gilt auch fur einen
etwaigen Verzicht auf das Erfordernis der Schriftform.
ss. 16
Bekanntmachungen
Die Bekanntmachungen der Gesellschaft erfolgen nur im Bundesanzeiger fur
die Bundesrepublik Deutschland.
ss. 17
Salvatorische Klausel
Sollte eine Bestimmung dieses Gesellschaftsvertrags ganz oder teilweise
unwirksam sein oder unwirksam werden oder sollte er eine Lucke enthalten,
so wird dadurch die Gultigkeit des Gesellschaftsvertrags im ubrigen nicht
beruhrt. In einem solchen Fall ist anstelle der unwirksamen Bestimmung
eine solche wirksame Bestimmung zu vereinbaren, die dem Sinn und Zweck der
unwirksamen Bestimmung entspricht. Im Fall einer Vertragslucke ist eine
Bestimmung zu vereinbaren, die dem entspricht, was nach Sinn und Zweck
dieses Gesellschaftsvertrags vereinbart worden ware, hatten die
Vertragsparteien die Angelegenheit von vornherein bedacht."
2. Die unter A. I. 1. sowie A. I. 2. dieser Urkunde vorgenommenen Teilungen
von Geschaftsanteilen werden hiermit genehmigt.
Die Gesellschafterversammlung ist damit geschlossen.
C. Genehmigungen
<PAGE>
Sodann erklart der Erschienene: Der Vertretene zu 2) genehmigt hiermit in
seiner Eigenschaft als Geschaftsfuhrer der Vertretenen zu 4) die unter A.
I. 1. sowie A. I. 2. dieser Urkunde vorgenommenen Teilungen der
Geschaftsanteile von jeweils DM 25.000 in jeweils zwei Geschaftsanteilen
im Nennwert von DM 12.500 im Zusammenhang mit dem Verkauf und der
Ubertragung je eines Teilgeschaftsanteils an die Vertretene zu 1).
D. Kostentragung
Die durch diese Urkunde und ihre Durchfuhrung entstehenden Kosten und
Steuern tragt die Vertretene zu 1).
Der Erschienene erklarte, der englischen Sprache voll machtig zu sein. Der
Erschienene verzichtete auf sein Recht, von den Anlagen 1 und 2 deutsche
Ubersetzungen verlangen zu konnen. Der beurkundende Notar ist ebenfalls
der englischen Sprache machtig.
Vorstehende Niederschrift samt Anlagen wurde dem Erschienenen in Gegenwart
des Notars vorgelesen, von ihm genehmigt und eigenhandig von ihm und dem
Notar wie folgt unterschrieben:
THE AGREEMENT
On this 4 - th day of September 1996, in Warsaw, between
TVN Sp. z o.o. with its seat in Warsaw, hereinafter referred to as "TVN",
represented by Jan Wejchert, acting on the basis of the power-of-attorney from
September 2, 1996,
and
Przedsiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Sp. z o.o. with
its seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the management board Ryszard Sciborowski,
the following agreement was executed:
Whereas the parties hereto executed an agreement (hereinafter referred to as the
"Agreement") concerning commencement of capital cooperation in respect to
Telewizja Wisla Sp. z o.o. (hereinafter referred to as "Wisla") on September 4,
1996;
Whereas the parties hereto desire to specify some of the conditions of capital
cooperation described in the Agreement;
Now therefore the parties hereto agree as follows:
Article 1
1. A part of the advance payment in the amount constituting PLN equivalent of
2.958.000 (two million nine hundred fifty eight thousand) American
dollars, mentioned in art. 6 item 1 letter a) of the Agreement, shall be
transferred into the bank account of REALBUD in ING Bank Warsaw
(hereinafter referred to as the "Bank") exclusively for the purposes of
REALBUD payment for the shares in the share capital of Wisla, purchased by
REALBUD in the following number from the entities listed below:
- 18,487 (eighteen thousand four hundred eighty seven) shares from
Korporacja Gospodarcza Efekt S.A.;
- 9,500 (nine thousand five hundred) shares from Ekokonsorcjum - Efekt
Sp. z o.o.;
- 3,347 (three thousand three hundred forty seven) shares from
Wojciech Szczerba.
<PAGE>
2. The bank account agreement shall expressly include a restriction
concerning the Bank's obligation to perform orders regarding the funds on
the bank account, by authorizing the payments to the bank accounts of the
entities listed in item 1 of the sale price for the shares in the share
capital of Wisla, being sold by such entities (including stamp duty). The
basis for performance of payments by the Bank shall be presentation of
originals of share sale agreements with the entities listed in item 1 by
REALBUD, and REALBUD's statement concerning the establishment for the
benefit of TVN of a pledge on 31,334 (thirty one thousand three hundred
thirty four) shares in the share capital acquired by REALBUD in accordance
with submitted sale agreements, with enclosed thereto consent of the
supervisory board of Wisla for such pledge establishment.
Article 2
1. TVN is hereby obligated to purchase 3,450 (three thousand four hundred
fifty) shares in the share capital of Wisla from REALBUD immediately after
obtainment of the supervisory board's consent for such sale by REALBUD and
statement of the remaining shareholders concerning waiver of their
pre-emption right. REALBUD is obligated to immediately apply for
obtainment of the supervisory board's consent and the statement of the
remaining shareholders, and to sell the above mentioned shares.
2. The parties hereto agree that the sale price of the shares mentioned in
item 1 shall be the product of the number of shares and PLN unit price
paid by REALBUD to the entities mentioned in art. 1 item 1. The price for
the purchased shares shall be paid by debiting a part of the advance
payment, being PLN equivalent of the amount of 2,958,000 (two million nine
hundred fifty eight thousand) American dollars, paid into the bank account
of REALBUD at the Bank, in accordance with provisions of art. 6 item 1
letter a) of the Agreement.
3. The shares purchased by TVN in accordance with provisions of this article
shall be credited towards the Shares mentioned in art. 2 of the Agreement.
Article 3
1. After fulfillment of conditions mentioned in articles 3, 4 and 5 item 2 of
the Agreement and in the period of the time
<PAGE>
provided therein, REALBUD is obligated to sell to TVN, and TVN is
obligated to purchase from REALBUD the remaining part of shares purchased
by REALBUD from the entities mentioned in art. 1 item 1. Such shares shall
be purchased in addition to the Shares and the Further Shares mentioned in
art. 2 and art. 5 of the Agreement.
2. The parties hereto agree that the sale price of the shares mentioned in
item 1 shall be the product of the number of those shares and their PLN
unit price paid by REALBUD to the entities mentioned in art. 1 item 1.
3. Taking into consideration the essence of the legal relationship between
the parties of this agreement in respect to obligations of REALBUD to sell
the Shares and the Further Shares, REALBUD hereby grants Altheimer & Gray
Polska Sp. z o.o an irrevocable power-of-attorney to execute sale
agreements of the Shares and the Further Shares in the name of REALBUD,
subject to fulfillment of conditions mentioned in art. 3 in respect to the
Shares, and art. 5 item 2 in respect to the Further Shares.
Article 4
All amendments to this agreement shall require written form, otherwise
they shall be null and void.
Article 5
This agreement was executed in one copy.
REALBUD Sp. z o.o. TVN Sp. z o.o
THE AGREEMENT
On this 4 - th day of September 1996, in Warsaw, between
TVN Sp. z o.o. with its seat in Warsaw, hereinafter referred to as "TVN",
represented by Jan Wejchert, acting on the basis of the power-of-attorney from
September 2, 1996, and
Przedsiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Sp. z o.o. with
its seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the management board Ryszard Sciborowski,
the following agreement was executed:
Whereas REALBUD possesses the controlling interest constituting 71.3 % of the
share capital of Telewizja Wisla Sp. z o.o. (hereinafter referred to as "Wisla")
and desires to gain for Wisla a strategic investor, which shall ensure further
development of Wisla's activity within the scope provided for in the concession
for broadcasting television programs;
Whereas TVN applied for a concession for broadcasting television programs in the
second concession procedure, and in case such concession is granted, TVN is
prepared, pursuant to suggestions of the National Board of Broadcasting and
Television, to participate in creation of a federation of regional broadcasters
of television programs;
Whereas TVN and Wisla, considering the process of creation of federation of
regional broadcasters of television programs as a significant factor for
survival on the market of regional broadcasters of television programs, signed
on May 7, 1996 the Letter of Intent envisaging the possibility of mutual
program, commercial and production cooperation;
Whereas, considering development of competition on the market of television
programs broadcasting, especially the entry of powerful cable television
broadcasters and satellite television broadcasters, such as HBO and CLT, as well
as Wisla's needs to obtain immediate financial means, the intensification of
efforts in respect to creation of a federation of regional broadcasters of
television programs becomes necessary;
Whereas TVN possesses proper human and financial resources and is prepared to
provide Wisla with program and financial support;
Now therefore the Parties hereto agree as follows:
Article 1
<PAGE>
REALBUD hereby declares and ensures TVN that:
1) Wisla is a limited liability company registered in the commercial register
held by the District Court for Cracow-Sr--dmiescie, under No RHB
_________;
2) The share capital of Wisla amounts to 11,500,000 (eleven million and five
hundred thousand) PLN and is divided into 115,000 (one hundred and fifteen
thousand) equal and indivisible shares of the value of 100 (one hundred)
PLN each, which were entirely covered by contributions of shareholders who
acquired such shares. Current list of shareholders, delivered to the
register court, constitutes Enclosure No 1 to this agreement;
3) Equal rights and obligations are connected with all shares of Wisla's
share capital, and none of the shareholders exercises any particular and
personally granted rights;
4) REALBUD is the owner of 81,987 (eighty one thousand and nine hundred
eighty seven thousand) shares in the share capital of Wisla, which are
free of any liens or any other encumbrances relating to obligatory or
proprietary rights established to the benefit of third parties, except for
40,000 (forty thousand) shares pledged to the benefit of Bank Wsp--lpracy
Regionalnej as a security of Wisla's loan;
5) Wisla's assets amount to _________ million PLN, and its liabilities amount
to 17.5 million PLN, including 14.5 million PLN of obligations towards
banks, from which the main creditor is Bank Rozwoju Eksportu. Wisla's
statement of assets and liabilities signed by the President of the
management board of Wisla constitutes Enclosure No 2 to this agreement.
6) The profits of Wisla in 1995 did not exceed PLN equivalent of 5,000,000
(five million) ECU.
Article 2
1. REALBUD is hereby obligated to sell 56,350 shares in the share capital of
Wisla, constituting 49 % of this capital (hereinafter referred to as the
"Shares"), to the benefit of TVN, for the price being equivalent of
5,000,000 (five million) American dollars in accordance with the "fixing"
rate published by the National Bank of Poland (hereinafter referred to as
the "Rate") on a date, in which an agreement to sell the Shares shall be
executed, with reservation of provisions of art. 3 item 5.
2. TVN is hereby obligated to purchase the Shares from REALBUD for the price
specified in item 1 of this article.
3. REALBUD and TVN obligations provided for in item 1 and 2 shall, in respect
to the sale
2
<PAGE>
and purchase of the Shares, be deemed as preliminary agreement to sell the
Shares in the meaning of art. 389-390 of the Civil code, and the promised
Shares sale agreement should be executed until October 31, 1996, with
reservation of fulfillment of conditions specified in art. 3 and
fulfillment of obligations specified in art. 4, by REALBUD. TVN has the
right to unilateral written waiver of one or more conditions specified in
art. 3 items 1-2 and 5-6, which are deemed reserved for the benefit of
TVN.
4. REALBUD obligation to execute the promised Shares sale agreement shall be
deemed entirely fulfilled if, but not later than on the date on which the
agreement with REALBUD shall be executed, one or more from the rest of
shareholders of Wisla sell TVN the same number of shares in the share
capital of Wisla, which shares, with the shares sold to TVN by REALBUD,
shall constitute 49 % of the share capital of Wisla.
5. REALBUD obligation to execute the promised Shares sale agreement shall
also be deemed entirely fulfilled if, on the basis of a resolution
concerning increase of the share capital, adopted by the shareholders'
meeting of Wisla providing for acquisition, by TVN, of such number of
shares in an increased share capital which shall constitute 49 % of this
capital after increase, TVN acquires such shares and the register court
registers amendment to the by-laws of the company accompanying such share
capital increase, not later than within the period specified in item 3.
Article 3
Execution of the Shares sale agreement is subject to the following:
1) obtainment of a concession for television programs broadcasting by
Wisla, within the scope not narrower than the scope specified in the
decision of the Chairman of the National Board of Broadcasting and
Television from November 23, 1994, concerning grant of concession to
broadcast television program to Wisla, with reservation of
possibility of exclusion of transmitter in Katowice, however Wisla
shall use its best efforts in order to obtain such transmitter;
2) obtainment of a concession for television programs broadcasting by
TVN in present concession procedure commenced on the basis of the
announcement of the National Board of Broadcasting and Television
published in Gazeta Wyborcza dated February 25-26, 1995;
3) consent of TVN's supervisory board to acquire shares in the share
capital of Wisla or, amendment of the yearly budget and the plan of
activity by inclusion of acquisition of shares in the share capital
of Wisla by the shareholders' meeting of TVN;
3
<PAGE>
4) REALBUD shall obtain a consent from the remaining shareholders and
supervisory board of Wisla for proportional, or other agreed, sale
of the Shares to the benefit of TVN, and if one or more shareholders
does not participate in such sale, such shareholders shall not
exercise their pre-emption right in respect to the Shares.
5) final register court decision on registration of amendments to
Wisla's by-laws resulting in: (i) TVN shall obtain the right to
directly appoint the President of management board of Wisla and such
additional number of Wisla management and supervisory board members
which, in case of odd number of members of those bodies, shall
jointly be the highest number not exceeding the half number of
members of a given body; (ii) dismissal or suspension in its
activity of the President or members of the management or
supervisory board appointed by TVN shall require voting for adoption
of such resolution, respectively, by TVN as the shareholder of
Wisla, or members of the supervisory board appointed by TVN; and
(iii) representation of Wisla in respect to third parties shall
require cooperation of two members of the management board,
including the President of the management board; and in the event
specified in art. 2 item 5, amendment of the by-laws of the company
should also include the increase of the share capital;
6) conformity of declarations and statements of REALBUD, as provided
for in art. 1, with the factual and legal state for the date of the
Shares sale. In case if, on the basis of performed by an auditor
financial audit of Wisla, on TVN order, the actual financial state
of Wisla is worse (lower assets and/or higher liabilities) by more
than 10 % in comparison with declarations contained in art. 1 item
5, the sale price for the Shares specified in art. 2 item 1 shall be
decreased by the same %; in case the financial state of Wisla is
worse by more than 30 %, TVN has the right to rescind this
agreement.
Article 4
1. REALBUD is obligated following the date of this agreement execution:
1) to obtain, within 21 days from the date of this agreement execution,
a consent mentioned in art. 3 item 4, or cause a resolution
concerning increase of the share capital of Wisla, consistent with
the contents of art. 2 item 5, to be adopted;
2) not to sell or encumber with any obligation or proprietary rights
established for the benefit of third parties (including obligation
to sell) any shares possessed in the share capital of Wisla;
3) to exercise its pre-emption right in respect to all shares in the
share capital of
4
<PAGE>
Wisla which may by offered for sale by other shareholders;
4) to exercise all rights of the shareholder possessing the controlling
interest in the share capital of Wisla in order to ensure that Wisla
shall not perform any legal actions, without prior written consent
of TVN, which would result in (i) sale or encumbrance of Wisla's
assets of aggregate PLN value exceeding the amount of 50,000 (fifty
thousand) American dollars, calculated in accordance with the Rate
on the date of such legal actions performance or, (ii) Wisla's
liabilities exceeding in aggregate the equivalent in PLN of the
amount of 100,000 (one hundred thousand) American dollars,
calculated in accordance with the Rate on the date of performance of
such legal actions.
2. REALBUD is also obligated to designate a part of the sale price for the
Shares, being equivalent in PLN of the amount of 1,000,000 (one million)
American dollars, for the increase of the share capital of Wisla, which
shall be performed after receipt of the entire amount of price for the
Shares by REALBUD, and within the scope of such increase TVN shall perform
conversion specified in art. 6 item 2.
Article 5
1. Notwithstanding REALBUD's obligation to sell the Shares, in case the
Shares are sold, REALBUD is also obligated, subject to obtainment of the
National Board of Broadcasting and Television consent for taking control
over Wisla by TVN, to sell to TVN further shares constituting 2 % of the
share capital of Wisla on the date of sale agreement execution
(hereinafter referred to as the "Further Shares"). The price to be paid
for the Further Shares shall equal the product of the number of the
Further Shares and the unit price of the Share resulting from art. 2 item
1.
2. REALBUD's obligation contained in item 1 above shall be deemed as
preliminary agreement for the sale of the Further Shares in the meaning of
art. 389-390 of the Civil code, and the promised sale agreement of the
Further Shares should be executed until August 31, 1997, subject to
obtainment of the National Board of Broadcasting and Television consent,
specified in item 1.
3. REALBUD's obligation to execute the promised sale agreement of the Further
Shares shall be deemed entirely performed if Ryszard Sciborski, within the
period specified in item 1 above, alone or with other persons being
members of Wisla's authorities on the date of this agreement execution,
contributes the Further Shares to the share capital of TVN in exchange for
TVN's shares constituting 2 % of the share capital of TVN on the date of
adoption of a resolution concerning increase of the share capital of TVN
by the
5
<PAGE>
Further Shares.
Article 6
1. In exchange for obligations undertaken by REALBUD, TVN is obligated:
a) make an advance payment, subject to establishment of a pledge
mentioned in the next sentence, into the bank account of REALBUD in
ING Bank in Warsaw, amounting to PLN equivalent of the amount of
4,458,000 (four million four hundred fifty eight thousand) American
dollars, calculated in accordance with the Rate on the date of the
transfer, however a part of such advance payment, constituting PLN
equivalent of the amount of 2,958,000 (two million nine hundred
fifty eight thousand) American dollars, shall be transferred until
September 10, 1996, and a part of the advance payment, constituting
PLN equivalent of the amount of 1,500,000 (one million five hundred
thousand) American dollars, shall be transferred until September 16,
1996, subject to Wisla's obtainment of the concession mentioned in
art. 3 item 1.
In order to secure the repayment of the advance payment, in case the
promised Shares sale agreement is not executed, including return in
double amount if the promised sale agreement is not executed due to
the fault of REALBUD, REALBUD shall establish, after obtainment of
Wisla's supervisory board consent, a pledge to the benefit of ING
Bank Warsaw on all shares possessed in the share capital of Wisla,
which are not subject to the pledge pursuant to art. 1 item 4,
retaining the right to vote with respect to all pledged shares.
b) to arrange, within the period not longer than until September 16,
1996, subject to Wisla's obtainment of the concession mentioned in
art. 3 item 1, a loan from ING Bank Warsaw to the benefit of Wisla.
The loan to the benefit of Wisla shall amount to 1,000,000 (one
million) American dollars or equivalent of such amount in PLN. Wisla
shall transfer the ownership of agreed upon with the bank
transmitting equipment as a security for the loan repayment.
2. In case the Shares sale agreement is executed, TVN shall take over Wisla's
debt resulting from the loan mentioned in item 1 letter b). The amount of
all TVN's claim towards Wisla resulting from the loan shall be converted
into share capital of Wisla.
3. After transfer of the ownership of Shares to TVN, Wisla and REALBUD, with
participation of TVN, shall commence renegotiation of loan agreements
executed by Wisla with the banks. The purpose of renegotiations shall be
an assumption of guarantees relating to a part of Wisla loans from REALBUD
by TVN, so as the proportions of
6
<PAGE>
the amounts of loans guaranteed by TVN and REALBUD shall reflect the
proportions of TVN and REALBUD share in the share capital of Wisla (for
the purposes of determining this proportion the shares possessed by TVN
and REALBUD in Wisla constitute 100 % of its share capital).
Article 7
Taking into consideration the essence of the legal relationship between
the parties of this agreement in respect to obligations of REALBUD to sell
the Shares and the Further Shares, REALBUD hereby grants Altheimer & Gray
Polska Sp. z o.o an irrevocable power-of-attorney to execute sale
agreements of the Shares and the Further Shares in the name of REALBUD,
subject to fulfillment of conditions mentioned in art. 3 in respect to the
Shares, and art. 5 item 2 in respect to the Further Shares.
Article 8
All amendments of this agreement shall require written form, otherwise
they shall be null and void.
Article 9
This agreement was executed in one copy.
REALBUD Sp. z o.o. TVN Sp. z o.o.
7
THE AGREEMENT
On this 6th day of September 1996, in Warsaw, between
TVN Sp. z o.o. with its seat in Warsaw, hereinafter referred to as "TVN",
represented by Jan Wejchert, acting on the basis of the power-of-attorney from
September 2, 1996,
and
Przedssiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Sp. z o.o. with
its seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the management board Ryszard Sciborowski,
the following agreement was executed:
Article 1
1. REALBUD hereby sells and TVN hereby purchases 3,450 (three thousand four
hundred fifty) shares in the initial capital of Telewizja Wisla Sp. z o.o.
(hereinafter referred to as "Wisla") for 100 (one hundred) PLN each.
2. The parties hereto agree that the sale price of shares mentioned in item
1, hereinafter referred to as the "Shares", shall be PLN equivalent of the
amount of 319,302 (three hundred nineteen thousand three hundred two)
American dollars, calculated in accordance with the "fixing" rate
published by the National Bank of Poland.
3. The price was transferred into the bank account of REALBUD in ING Bank
Warsaw.
Article 2
REALBUD hereby declares and ensures TVN that:
1) Wisla is a limited liability company registered in the commercial register
held by the District Court for Cracow-Sr--dmiescie, under No RHB
_________;
2) The initial capital of Wisla amounts to 11,500,000 (eleven million and
five hundred thousand) PLN and is divided into 115,000 (one hundred and
fifteen thousand) equal and indivisible shares of the value of 100 (one
hundred) PLN each, which were entirely covered by contributions of
shareholders who acquired such shares;
<PAGE>
3) Equal rights and obligations are connected with all shares of Wisla's
initial capital, and none of the shareholders exercises any particular and
personally granted rights;
4) REALBUD is the owner of the shares, which are free of any liens or any
other encumbrances relating to obligatory or proprietary rights
established to the benefit of third parties; 5) The profits of Wisla did
not exceed PLN equivalent of 5,000,000 (five million) ECU in 1995.
Article 3
1. This agreement was executed with suspension condition and the legal
effects provided for in hereto are subject to obtainment of the
supervisory board of Wisla consent for the sale of shares mentioned in
art. 1 item 1 and statement of the rest of the shareholders of Wisla
concerning the waiver of their pre-emption right. REALBUD is obligated to
immediately apply for the consent of the supervisory board and the
statement of the rest shareholders of Wisla.
2. In case the conditions mentioned in item 1 are not fulfilled until October
31, 1996, TVN has the right to terminate this agreement.
Article 4
All amendments to this agreement shall require written form, otherwise
they shall be null and void.
Article 5
This agreement was executed in one copy.
REALBUD Sp. z o.o. TVN Sp. z o.o.
APPENDIX TO THE AGREEMENT
On September 19, 1996
TVN Ltd. with its seat in Warsaw, hereinafter referred to as "TVN" represented
by Mr. Mariusz Walter - the President of the Management Board and Mr. Wojciech
Prokofii - the member of the Management Board
and
Przedsiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Ltd. with its
seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the Management Board Mr. Ryszard Sciborowski
have agreed to the following appendix amending the agreement concluded on
September 4, 1996 by and between the parties stipulated above (hereinafter
referred to as the "Supplementary Agreement") concerning polishing up of the
resolutions to the agreement on the commencement of the capital cooperation with
reference to Telewizja Wisla Ltd. (hereinafter referred to as "Wisla").
Whereas, Krajowa Rada Radiofonii i Telewizji ("KRRiTV") intends to limit the
maximum shareholding of TVN in the share capital of Wisla to 49% in the
concession which is to be issued to Wisla.
The parties agreed as follows:
Article 1
1. The obligation of REALBUD to sell the shares in the share capital of Wisla
referred to in art. 3 par. 1 of the Supplementary Agreement (hereinafter
referred to as the "Shares") shall be the obligation concerning both TVN,
as well as the entity stipulated by TVN as authorized to claim the
execution of the Sale of Shares Agreement (hereinafter referred to as the
"Authorized Entity". In the case of execution of the Sale of Shares
Agreement with the Authorized Entity, the obligation of REALBUD to execute
such
<PAGE>
agreement is unconditional and REALBUD shall be obliged to execute the
Sale of Shares Agreement on the first order of the Authorized Entity
dispatched up to August 31, 1997.
2. An irrevocable power of attorney granted by REALBUD to Altheimer and Gray
Polska Ltd. in art. 3 par. 3 of the Supplementary Agreement shall include
the execution of the Sale of Shares Agreement with the Authorized Entity.
Article 2
Other provisions of the Supplementary Agreement shall not be amended.
Article 3
The hereby appendix has been issued in one counterpart.
REALBUD LTD. TVN LTD.
/illegible signature/ /illegible signature/
<PAGE>
APPENDIX No 1 TO THE AGREEMENT
On September 19, 1996
TVN Ltd. with its seat in Warsaw, hereinafter referred to as "TVN" represented
by Mr. Mariusz Walter - the President of the Management Board and Mr. Wojciech
Prokofi - the member of the Management Board
and
Przedsiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Ltd. with its
seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the Management Board Mr. Ryszard Sciborowski
have agreed to the following appendix amending the agreement concluded on
September 4, 1996 by and between the parties stipulated above (hereinafter
referred to as the "Agreement") concerning polishing up of the resolutions to
the agreement on the commencement of the capital cooperation with reference to
Telewizja Wisla Ltd. (hereinafter referred to as "Wisla").
Whereas, REALBUD applied to TVN for modifications in the form of the payment
stipulated in the Advance Payment Agreement;
Whereas, Krajowa Rada Radiofonii i Telewizji ("KRRiTV") intends to limit the
maximum shareholding of TVN in the share capital of Wisla to 49% in the
concession which is to be issued to Wisla.
The parties agreed as follows:
Article 1
1. A part of the advance payment referred to in art. 6 par. 1 item a) of the
Agreement in the amount constituting the equivalent in zlotys of 1,500,000
(one million five hundred thousand) American dollars, shall be payable in
the form of an irrevocable letter of credit opened by Bank Rozwoju
Eksportu S.A. (hereinafter referred to as the "Bank"). For the purposes of
establishing the zloty equivalent of the above mentioned amount, the
purchase rate for American dollars applied by the Bank on the date of
opening the letter of credit shall be used.
2. The letter of credit referred to in par. 1 shall be valid up to October
31, 1996. In order to obtain by REALBUD the payment from the letter of
credit, the Bank shall be obliged to obtain the following documents:
1) copy of the letter of TV Wisla Ltd. to KRRiTV, confirming the
receipt of the letter by KRRiTV on 13.09.1996, together with the
copies of the following documents attached thereto: a)list of
shareholders of TV Wisla Ltd, stating that TVN Ltd. is the owner of
3,450 (three thousand four hundred and fifty) shares in the share
capital of TV Wisla Ltd, with the confirmation of the Register Court
as of 13.09.1996.
b) consent of the supervisory board of TV Wisla Ltd. for the
disposal by REALBUD Ltd. of 3,450 shares in the share capital
of TV Wisla Ltd. for the benefit of TVN Ltd.
c) representation of Mr. Boguslaw Zieba stating that he gives up
the preemptive right to which he is entitled, with reference
to 3,450 shares disposed by REALBUD for the benefit of TVN
Ltd.
2) copy of the new concession for the distribution of a regional
television programme granted by KRRiTV Wisla Ltd.
Article 2
1. The obligation of REALBUD to sell Other Shares pursuant to art. 5 par. 1
and 2 of the Agreement shall be the obligation concerning both TVN, as
well as the entity stipulated by TVN as authorized to claim the execution
of the Sale of Other Shares Agreement (hereinafter referred to as the
"Authorized Entity"). In the case of execution of the Sale of Other Shares
Agreement with the Authorized Entity, the obligation of REALBUD to execute
such agreement is unconditional and REALBUD shall be obliged to execute
the Sale of Other Shares Agreement on the first order of the Authorized
Entity dispatched within the time limit referred to in art. 5 par. 2 of
the Agreement.
2. An irrevocable power of attorney granted by REALBUD to Altheimer & Gray
Polska Ltd. in art. 7 of the Agreement shall include the execution of the
Sale of Shares Agreement with the Authorized Entity.
Article 3
Other provisions of the Supplementary Agreement shall not be amended.
Article 4
The hereby appendix has been issued in one counterpart.
REALBUD LTD. TVN LTD.
/illegible signature/ /illegible signature/
SHARE SALE AGREEMENT
On this 30 - th day of October 1996, in Warsaw, between specified below
shareholders of Telewizja Wisla Sp. z o.o., a company entered in the commercial
register held by the District Court in Cracow for Cracow Sr--dmiescie under No
RHB 4913 (hereinafter referred to as "Wisla"),
TVN Sp. z o.o. with its seat in Warsaw, hereinafter referred to as "TVN",
represented by the President of the Management Board Mariusz Walter and the
member of the Management Board Ryszard Knauff,
and
Przedsiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Sp. z o.o. with
its seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the Management Board Ryszard Sciborowski,
the following agreement was executed:
Whereas, the Parties to this agreement executed, on September 4, 1996, the
agreement ("the Preliminary Agreement") obligating REALBUD to sell 56,350 shares
in the share capital of Telewizja Wisla Sp. z o.o. (hereinafter referred to as
"Wisla), constituting 49 % of the share capital, to the benefit of TVN;
Whereas, TVN purchased 3450 shares in the share capital of Wisla from REALBUD as
of September 6, 1996;
Whereas, according to the Preliminary Agreement dated September 4, 1996,
execution of the promised sale agreement is subject to fulfillment of numerous
conditions, from which conditions reserved on behalf of TVN may be unilaterally
waived by TVN, TVN hereby deems the condition specified in art. 3 item 1 as
fulfilled and waives conditions specified in art. 3 item 2 and 5 of the
Preliminary Agreement.
The Parties hereto agree as follows:
Article 1
1. REALBUD hereby sells and TVN hereby purchases 52,900 (fifty two thousand
nine hundred) shares in the share capital of Wisla, valued at 100 PLN (one
hundred) each (hereinafter referred to as "the Shares").
2. The purchase price for the Shares constitutes PLN equivalent of the amount
of 4,693,877.55 USD (four million six hundred ninety three thousand eight
hundred seventy
<PAGE>
seven dollars and fifty five cents) in accordance with the "fixing" rate
published by the National Bank of Poland ("the Rate").
3. TVN made an advance payment on account of the price specified in item 2
(i) to the bank account of REALBUD in ING Bank in Warsaw, being PLN
equivalent of 2,958,000 USD (two million nine hundred fifty eight thousand
dollars) and, (ii) opened the letter of credit in Bank Rozwoju Eksportu
S.A. for the amount being PLN equivalent of 1.500.000 USD (one million
five hundred thousand). From an aggregate advance payment made by TVN,
being PLN equivalent of 4,458,000 USD (four millions four hundred fifty
eight thousand dollars), the amount being PLN equivalent of 319,302 USD
(three hundred ninety thousand three hundred two dollars) was accepted as
the purchase price for 3,450 shares in the share capital of Wisla
purchased by TVN on September 6, 1996. The remaining part of the price
payable for the Shares constitutes PLN equivalent of 555,159.55 USD (five
hundred fifty five thousand one hundred seventy nine dollars and fifty
five cents), calculated in accordance with the Rate, and such amount shall
be transferred to the bank account of REALBUD in Bank Rozwoju Eksportu
S.A. not later than November 5, 1996.
4. The ownership of the Shares shall be transferred to TVN at the moment of
transfer of the amount specified in the last sentence of item 3 to the
bank account of REALBUD.
Article 2
REALBUD hereby represents and ensures TVN that it is the owner of the
Shares, which are free of liens and any other encumbrances relating to
obligatory or proprietary rights established to the benefit of third
parties.
Article 3
The Parties hereto agree that pursuant to * 11 of the uniform text of the
Articles of Association of Wisla, disposal of shares between the
shareholders does not require obtainment of the Supervisory Board's
consent, nor is otherwise restricted.
Article 4
Each of the Parties has the right to inform the Management Board of Wisla
on the transfer of ownership of the Shares to the benefit of TVN and
require this fact to be stated in the share register book, and submit a
new list of shareholders at the District Court, pursuant to art. 188 of
the Commercial code.
Article 5
All amendments to this agreement shall require written form, otherwise
they shall be null
2
<PAGE>
and void.
Article 6
The stamp duty resulting from the sale of the Shares shall be paid by the
Parties hereto in equal parts.
Article 7
This agreement was executed in two copies, one for each Party.
- ---------------------------
Przedsiebiorstwo Realizacji TVN Sp. z o.o.
i Koordynacji Budownictwa
"REALBUD" Sp. z o.o.
3
ANNEX NO 2 TO THE SUPPLEMENTARY AGREEMENT
On this 30 - th day of October 1996,
TVN Sp. z o.o. with its seat in Warsaw, hereinafter referred to as "TVN",
represented by Mariusz Walter - the President of the Management Board and
Ryszard Knauff - the member of the Management Board,
and
Przedsiebiorstwo Realizacji i Koordynacji Budownictwa "REALBUD" Sp. z o.o. with
its seat in Cracow, hereinafter referred to as "REALBUD", represented by the
President of the Management Board Ryszard Sciborowski,
agreed this annex amending the agreement executed between the Parties hereto as
of September 4, 1996 (hereinafter referred to as "the Supplementary Agreement"),
concerning specification of provisions of the agreement concerning establishment
of capital co - operation in respect to Telewizja Wisla Sp. z o.o. (hereinafter
referred to as "Wisla"), as amended by the annex dated September 19, 1996.
Article 1
1. Not later than by November 12, 1996, TVN shall transfer to the bank
account of REALBUD in Bank Rozwoju Eksportu S.A. the amount being PLN
equivalent of 2,500,000 USD (two millions five hundred thousand dollars),
calculated in accordance with the "fixing" rate published by the National
Bank of Poland ("the Rate") on the date of transfer performance, as an
advance payment for the purchase of shares in the share capital of Wisla,
mentioned in art. 3 item 1 of the Supplementary Agreement (hereinafter
referred to as "the Shares"), from REALBUD.
2. In case of purchase performed by TVN, as well as by an entity indicated by
TVN as empowered to demand execution of the share sale agreement, the
amount of advance payment mentioned in item 1 shall constitute the part of
the purchase price for the Shares. The share sale agreement shall be
executed not later than by December 20, 1996.
Article 2
1. REALBUD is obligated, immediately after obtainment of advance payment
specified in art. 1 item 1, to:
1) vote for increase of the share capital of Telewizja Wisla Sp. z o.o.
(hereinafter referred to as "Wisla") for the amount being at least
PLN equivalent of 2,000,000
<PAGE>
USD (two million dollars), calculated in accordance with the Rate,
and acquire against cash payment shares in increased share capital
in the amount being PLN equivalent of 500,000 USD (five hundred
thousand dollars), subject to acquisition of shares in increased
share capital of Wisla in the amount being PLN equivalent of
1,500,000 USD (one million five hundred thousand dollars) by TVN or
entities indicated by TVN, and
2) lift the pledge established to the benefit of Bank Wsp--lpracy
Regionalnej on 40,000 shares of REALBUD in the share capital of
Wisla, and establish the pledge on such shares to the benefit of
TVN.
2. The Parties hereto are obligated to agree with the bank (banks) being
Wisla's creditors, by November 30, 1996, TVN's assumption from REALBUD of
part of guarantees for credits taken by Wisla, so the proportion of the
amounts of credits guaranteed by TVN reflects the respective shareholdings
of TVN (including entities indicated by TVN as empowered to purchase the
Shares) and REALBUD in the share capital of Wisla.
3. In case of non - fulfillment of any of the obligations specified in item 1
by REALBUD, not later than by December 13, 1996, with reservation of
condition mentioned in paragraph 2, REALBUD shall be obligated to pay to
the benefit of TVN contractual penalty in the amount being PLN equivalent
of 450,000 USD (four hundred fifty thousand dollars), which contractual
penalty shall constitute the part of the purchase price for the Shares.
Article 3
The remaining provisions of the Supplementary Agreement are not subject to
amendment.
Article 4
This annex was executed in two copies, one for each party.
- ------------------ --------------
REALBUD Sp. z o.o. TVN Sp. z o.o.
2
DATED 1996
LEASE
relating to
Third Floor
52/53 Poland Street London W1
SECURUM PROPERTY HOLDINGS LIMITED (1)
CME DEVELOPMENT CORPORATION INC (2)
<PAGE>
DATE 1996
PARTIES
(1) SECURUM PROPERTY HOLDINGS LIMITED whose registered office is at One St
Paul's Churchyard London EC4M 8AJ of the first part; and
(2) CME DEVELOPMENT CORPORATION INC of 18 d'Arblay Street London W1V 3FP
WITNESSETH as follows:
1 IN these presents unless the context otherwise requires the following
expressions have the meanings hereby assigned to them respectively that
is to say:-
(a) "the Building" means the building situate and known as 52/53
Poland Street, London W1
(b) "conduits" means tanks pipes sprinklers wires cables drains
meters ducts trunking sewers gutters other service media and
associated apparatus and other items of a like nature
(c) "the demised premises" means the premises described in the First
Schedule
(d) "the insured risks" means the risk of fire lightning storm
tempest flood earthquake aircraft bursting of pipes malicious
damage and such other risks as the Landlord may from time to time
reasonably require
(e) "the Landlord" means the first named party and the person for the
time being entitled to the reversion immediately expectant on the
determination of the term
(f) "the Planning Acts" means the Town & Country Planning Acts 1990
as amended
<PAGE>
(g) "these presents" means this Lease and any instrument made
hereunder or supplemental hereto
(h) "the Principal Rent" means the sum of (pound)33,450 per annum
subject to renewal in accordance with clause 6
(i) "review date" means the date specified in clause 6.1 of this
Lease
(j) "the Tenant" means the second named party and its successors in
title and assigns
(k) "the Headlease" means the Lease dated 25th March 1964 and made
between Mamos Garage Limited and Site Improvements Limited
(l) "the term" means the term of years hereby granted
(m) covenants made by or binding on any party which for the time
being comprises more than one person shall be deemed to be joint
and several
(n) any reference to any statute shall be deemed to include any
by-laws statutory instruments rules regulation orders notices
directions consents or permissions made under it
(o) any covenant by the Tenant not to do any act or thing includes a
covenant not to suffer or permit the doing of that act or thing
(p) any reference to costs which are or may be payable by the Tenant
or against which the Tenant covenants to indemnify the Landlord
shall include all reasonable solicitors' surveyors' architects'
and other fees disbursements and irrecoverable Value Added Tax
and other expenditure reasonably incurred by the Landlord on its
own account or by the insurers or any other person interested in
the demised premises
-2-
<PAGE>
(q) "Prescribed Rate" means the rate of interest which is from time
to time 2% above the Base Rate for the time being of the Royal
Bank of Scotland
2 IN consideration of the rents hereby reserved and the covenants on the
part of the Tenant hereinafter contained the Landlord HEREBY DEMISES
unto the Tenant ALL THOSE demised premises subject to all existing
easements liberties privileges quasi-easements ____ rights benefits and
advantages affecting the same (if any) TOGETHER with the easements and
rights at all times for the Tenant (in common with the Landlord and all
other persons similarly entitled and so far as necessary for the
enjoyment of the demised premises) specified in the Second Schedule
EXCEPT AND RESERVED unto the Landlord and all persons authorised by the
Landlord or otherwise entitled thereto the easements and rights
specified in the Third Schedule TO HOLD the demised premises unto the
Tenant for the term of ten years commencing on and including __________
_______________________ and expiring on _____________________ YIELDING
AND PAYING therefor from and including _________________ during the term
unto the Landlord FIRST for three months from ________________ a
peppercorn (if demanded) and thereafter the Principal Rent by equal
quarterly payments in advance on the usual quarter days in every year
the first payment to be made on __________________ AND SECONDLY by way
of further or additional rent throughout the term a sum calculated and
payable in accordance with the Fourth Schedule
3 THE Tenant HEREBY COVENANTS with the Landlord to the intent that the
obligation shall continue throughout the term as follows:-
(1) To pay the rents hereby reserved at the times and in the manner
aforesaid without any deduction and not to exercise or seek to exercise
any right or claim to withhold rent or any right or claim to set-off
(2) (a) To pay and discharge all existing and future rates taxes
duties charges assessments outgoings and impositions (whether
parliamentary local or
-3-
<PAGE>
otherwise and whether of a capital revenue non-recurring or
wholly novel nature) which are now or may be at any time
hereafter assessed charged or imposed upon the demised premises
or on the owner or occupier in respect thereof of any thing done
thereon other than the receipt of rent or any dealing with the
reversion on the term or pending separate assessment of the
demised premises a fair proportion to be determined by the
Landlord of any sum payable in respect of property of which the
demised premises form part
(b) in the last twelve months of the term (howsoever determined) to
pay all general rates in full and not to claim empty property
relief in respect of the demised premises
(3) In 1998 and 2002 and the last three months of the term (howsoever
determined) to paint clean or otherwise treat as the case may be all the
inside structure and other internal parts of the demised premises
usually or requiring to be painted cleaned or otherwise treated with two
coats of good quality paint or other suitable material of good quality
in a proper and workmanlike manner and generally to redecorate the
interior of the demised premises and afterwards grain varnish wash strip
stop distemper colour paper or otherwise decorate in the usual manner
all parts usually or requiring to be so dealt with provided that the
colour and method of all such painting and other works of decoration in
the last year of the term (howsoever determined) shall first be approved
by the Landlord in writing such approval not to be unreasonably withheld
or delayed
(4) To put and keep the demised premises in good and substantial repair and
condition and to replace from time to time if beyond repair all
Landlord's fixtures and fittings damage by the insured risks excepted
save where the insurance effected by the Landlord is vitiated avoided or
forfeited or the payment of the money thereunder or if any part thereof
is refused or withheld by reason of the act or omission of the
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Tenant or any person deriving title under the Tenant or their
respective agents servants or licensees
(5) At the expiration or sooner determination of the term:
(a) quietly to yield up the demised premises (except lessee's and
trade fixtures and fittings which may or at the request of the
Landlord shall be removed prior to the expiration or sooner
determination of the term) in a condition consistent with the due
performance and observance by the Tenant of its covenants in
these presents
(b) without prejudice to sub-clause (a) above if any alterations or
additions shall have been made to the demised premises during the
term to reinstate the demised premises (if so required by the
Landlord but not otherwise) to the state and condition thereof
prior to the making of such alterations and additions
(c) to remove from the Building every sign notice or other
notification belonging to the Tenant or any person deriving title
under the Tenant
(d) to make good all damage caused by the removal of fittings
furniture and effects belonging to the Tenant or any person
deriving title under the Tenant to the reasonable satisfaction of
the Landlord and if the Tenant fails to leave the demised
premises in such condition to pay to the Landlord the cost of
taking such steps as may be necessary or expedient to remedy such
default
(6) (a) To comply with every enactment (which expression in this
sub-clause includes any and every statute already or hereafter to
be passed and every order regulation bye-law or direction already
or hereafter to be made or issued under or in pursuance of any
such Act) and every provision requirement or direction of any
governmental local or other competent authority relating to or
affecting the demised premises or any alterations or
-5-
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additions thereto or the employment of persons or the conduct of
any trade or business thereupon or any fixtures fittings plant
machinery or chattels for the time being therein
(b) To execute all works and obtain all certificates and licences and
provide and maintain all arrangements which by or under any such
enactment or any such provision requirement or direction are or
may be directed or required to be executed obtained and
maintained upon or in respect of the demised premises or any
alterations or additions thereto or the employment of persons or
the conduct of any trade or any fixtures fittings plant machinery
or chattels as aforesaid whether by the Landlord or the Tenant
provided that nothing in this sub-clause shall entitle the Tenant
to make any alterations or additions to the demised premises
otherwise than in accordance with the Tenant's covenants in that
behalf contained in these presents
(7) Upon receipt to deliver to the Landlord a copy of any communication made
given or issued by any government department local authority or other
competent authority relating to or affecting the demised premises and at
the Tenant's cost to make or join in making such objections
representations or appeals against or in respect thereof as the Landlord
may reasonably require
(8) (a) To comply with the Planning Acts so far as affecting the
demised premises and any development already or hereafter to be
carried out executed done or omitted thereon or the use thereof
for any purpose
(b) To obtain from the relevant planning authority all licences
consents and permissions and to serve such notices as may be
required for the carrying out of any development on the demised
premises but so that notwithstanding any approval granted under
these presents the Tenant shall not make any application for such
licence consent or permission
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without the previous written consent of the Landlord (which shall
not be unreasonably withheld or delayed)
(c) If any such licence consent or permission is granted subject to
conditions not to carry out such development or institute or
continue such use before security for the compliance with such
conditions has been produced to the Landlord and acknowledged by
it in writing as satisfactory such acknowledgement not to be
unreasonably withheld
(d) To pay and satisfy any charge or levy imposed under the Planning
Acts in respect of the carrying out of maintenance of any such
development as aforesaid
(e) Before the expiration or sooner determination of the term and
unless the Landlord shall otherwise direct to carry out in a good
and workmanlike manner with suitable materials of good quality
any works stipulated to be carried out to the demised premises by
a date subsequent to such expiration or sooner determination as a
condition of any planning permission which may have been granted
during the term and implemented in whole or in part
(9) To permit the Landlord and persons authorised by the Landlord to enter
upon the demised premises without interruption at any reasonable time
upon prior written notice except in the case of emergency for the
purpose of inspecting and measuring the same and carrying out its
obligations under these presents
(10) To diligently commence and make good all breaches of the Tenant's
covenants contained in these presents of which written notice shall have
been given by the Landlord to the Tenant within two months after the
giving of such notice or sooner if requisite and if the Tenant shall at
any time make default in the performance of any such covenants of which
notice has been given as aforesaid to permit the Landlord
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and all persons authorised by the Landlord to take such steps as may to
it seem necessary or expedient to remedy the same (but without prejudice
to the rights of re-entry hereinafter contained)
(11) To permit the Landlord and its agents to enter upon the demised premises
at any time during the last six months of the term (howsoever
determined) to affix and retain upon the demised premises notice boards
or bills for reletting the same provided that such noticeboards so far
as is practicable do not curtail the access of light and air to the
premises
(12) To permit the Landlord and persons authorised by the Landlord at all
reasonable times after reasonable prior written notice (save in
emergency) to enter and remain upon the demised premises with or without
equipment and materials and to erect scaffolding outside the demised
premises and to place ladders on the demised premises for the exercise
of the easements and rights reserved by these presents and such
covenants conditions and restrictions (if any) as may affect any
reversion immediately or mediately expectant on the term the person
exercising such right causing as little inconvenience as reasonably
possible to the Tenant's enjoyment of the demised premises and as soon
as reasonably practicable making good any damage caused to the demised
premises or any of the Tenant's fixtures or possessions
(13) To indemnify the Landlord against all reasonable and proper costs
arising from or in contemplation of
(a) the preparation and service of any notices or proceedings under
Sections 146 and 147 of the Law of Property Act 1925 or the
Leasehold Property (Repairs) Act 1938 and the inspection and
supervision of the works required to be done thereunder and the
taking of steps subsequent to any such notice notwithstanding
forfeiture is avoided otherwise than by relief granted by the
Court
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(b) the effecting of any forfeiture not requiring such notice
(c) the recovery of such sums of money due hereunder including the
levy or attempted levy of any distress
(d) the preparation and service of all notices and schedules (whether
statutory or otherwise) relating to wants of repair to the
demised premises or other breaches of any of the Tenant's
covenants contained in these presents and the inspection and
supervision of any works required to be done thereunder whether
served during the term or after the termination thereof
(howsoever determined)
(e) any application for a consent licence or approval whether it is
granted or refused or proffered subject to any qualification or
condition or whether the application is withdrawn or abandoned
(14) (a) Not to do or bring or keep on the demised premises anything
which might increase the risk of fire or explosion or which in
the reasonable opinion of the Landlord may cause nuisance damage
annoyance or inconvenience to the Landlords or the owners or
occupiers of other parts of the Building or any adjoining or
neighbouring property or depreciate the value of the demised
premises or the Building
(b) Not to do anything whereby the insurance effected on the Building
may become void or voidable
(c) To comply with the recommendations or requirements of the
insurers of the Building and the local fire officer
(d) If the Building is damaged or destroyed by any risk insured
against by the Landlord and the policy of insurance in respect
thereof is vitiated avoided or forfeited or the payment of the
money thereunder or of any part thereof is
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<PAGE>
refused or withheld by reason of the act or default of the Tenant
or any person deriving title under the Tenant or their respective
agents servants or licensees then and in every such case
forthwith to pay to the Landlord an amount equal to the sum so
refused or withheld
(15) To insure all plate glass if any in the demised premises against damage
or destruction in the full re-instatement cost thereof in the joint
names of the Landlord and Tenant in some insurance office to be approved
by the Landlord (such approval not to be unreasonably withheld) and to
hold all money received by virtue of any such insurance upon trust to be
forthwith laid out in reinstating the damage or destruction in respect
of which it shall have been paid and to make up any deficiency out of
its own money
(16) Not to effect any insurance of the demised premises against any risks
which are from time to time insured against by the Landlord and to hold
any monies received from any policy effected in breach thereof upon
trust for the Landlord
(17) To give notice as soon as reasonably practicable in writing to the
Landlord of any destruction or damage to the demised premises and of any
defect which would or might give rise to any obligation on the
Landlord's part to do or refrain from doing any act or thing in order to
comply with the duty of care imposed by the Defective Premises Act 1972
(18) (a) Not to make any alterations or additions to the demised
premises or its installations conduits or services or to unite
the same with any other premises save as provided in this
sub-clause
(b) Not without the consent of the Landlord (such consent not to be
unreasonably withheld or delayed) to make any internal
non-structural alteration
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<PAGE>
(c) Not to commence any alterations or additions before all necessary
licences approvals permissions and consents from the relevant
governmental local and other competent authorities the Superior
Landlords and the insurers have been produced to the Landlord and
acknowledged by it in writing as satisfactory
(d) To carry out any alterations or additions approved by the
Landlord in a good and workmanlike manner with suitable materials
of good quality to the reasonable satisfaction of the Landlord
strictly in accordance with all such licences approvals
permissions and consents and the plans and specifications
approved by the Landlord without causing any nuisance to the
owners or occupiers of any other parts of the Building or any
neighbouring premises
(e) To remove upon demand any alterations or additions made in
contravention of this sub-clause or in respect of which any
licence approval permission or consent is withdrawn or lapses and
make good all damage caused by such removal and restore all parts
of the demised premises affected thereby to a good and
substantial condition and properly decorated to the reasonable
satisfaction of the Landlord
(19) (a) Not to use the demised premises for any dangerous noxious noisy
offensive illegal or immoral purpose nor for any auction or
public meeting
(b) Not to institute any change of use before all necessary licences
approvals permissions and consents from the relevant governmental
local and other competent authorities the insurers and other
persons interested in the demised premises have been produced to
the Landlord and acknowledged by it in writing as satisfactory
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<PAGE>
(c) Subject to paragraphs (a) and (b) of this sub-clause not to use
the demised premises otherwise than as offices
(20) Not to submit any part of the Building to any excessive load nor to
suspend any excessive weight from the ceilings or structure of the
Building
(21) Not to load or unload or receive delivery of or despatch any goods
otherwise than in the areas and through the entrances designated for
such purposes by the Landlord and not to leave any article or vehicle so
that such areas or means of access to the Building are blocked to
pedestrians or vehicles or so that access is precluded hindered or
inconvenienced
(22) Not to overload or obstruct the conduits serving the demised premises or
to discharge into any pipes drains or sewers any trade effluent (as
defined in the Public Health (Drainage of Trade Premises) Act 1937) or
any harmful matter or substance
(23) Not to obstruct or interfere with the ventilating louvers and grilles
situate in or serving the demised premises and not to install or operate
in the demised premises any equipment machinery or apparatus which may
cause the efficiency of the heating ventilation and air cooling system
of the Building to be diminished or impaired or the balance thereof
interfered with
(24) Not to darken or obstruct any windows belonging to the demised premises
or permit any new window opening doorway or other easement to be made or
acquired in or against the demised premises and in case any such window
opening doorway or other easement shall be made or acquired to forthwith
give written notice thereof to the Landlord and at the request and cost
of the Landlord to adopt such means as the Landlord may reasonably
require for preventing the acquisition of any such easement
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<PAGE>
(25) (a) Alienation of part absolutely prohibited
(i) Not to charge or assign or underlet part only of the Premises
(ii) Not save as hereinafter permitted to part with or share
possession or occupation of the whole of the Premises or any part
thereof PROVIDED THAT occupation of the Premises or any part
thereof as a licensee only by a company which is a member of the
same group (as that expression is defined in Section 42 of the
Landlord and Tenant Act 1954) as the Tenant shall not be a breach
of this covenant
PROVIDED FURTHER THAT
(1) no legal estate or other right or tenancy shall be created
(2) the Tenant shall forthwith give the Landlord notice in writing of
the identity of such company the relationship of the company to
the Tenant the area occupied the date of occupation and proposed
date of vacation
(3) the Tenant shall procure (and hereby covenants to this effect)
that the company shall vacate the Premises immediately upon
whichever is the earlier of the date of the termination of the
Term and the date on which such company ceases to be a member of
the same group
(25) (b) Assignment permitted
Not to assign the whole of the Premises other than in accordance
with the following terms and conditions
(i) (if the Landlord so reasonably requires) the Assignee shall
provide a guarantor or guarantors acceptable to the Landlord who
shall covenant (jointly and severally if more than one) with the
Landlord on the terms
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<PAGE>
referred to in the Sixth Schedule or on such other terms as the
Landlord may reasonably require
(ii) the Tenant shall obtain the consent of the Landlord which shall
not be unreasonably withheld and shall be by deed containing
covenants by the intended assignee directly with the Landlord for
the residue of the Term to pay the Rents and to perform and
observe the Tenant's covenants (including this covenant)
(25) (c) Charging Permitted
Not to charge the whole of the Premises without the consent of
the Landlord such consent not to be unreasonably withheld
(25) (d) Underletting Permitted
(i) Not to underlet the whole of the Premises without the consent of
the Landlord such consent not to be unreasonably withheld
(ii) Not to underlet the whole of the Premises other than in
accordance with the following terms and conditions
(a) shall be the best rent obtainable without taking a fine or
premium and shall not be commuted or payable more than one
quarter in advance
(b) Prior to the grant of any such underlease an order of the
Court shall be obtained pursuant to the provisions of
Section 38(4) of the Landlord and Tenant Act 1954 (as
amended by Section 5 of the Law of Property Act 1969)
authorising the exclusion of Section 24-28 of such Act in
relation to the tenancy intended to be created by the
underlease and a certified copy of such order shall be
produced to the Landlord
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<PAGE>
(iii) To incorporate in every permitted underlease of
(1) a covenant that the undertenant shall not assign charge
or underlet part only of the premises thereby demised
(2) a covenant that the undertenant shall not assign or charge
the whole of the premises thereby demised without the
consent of both the Landlord and the Tenant under this
Lease
(3) a covenant that the undertenant shall not further underlet
the whole or part of the premises thereby demised
(4) a covenant that the undertenant shall not part with or
share possession of occupation or declare a trust in
respect of the premises thereby demised save by save of an
assignment charge or underlease pursuant to the provisions
hereinbefore contained
(5) a covenant by the undertenant (which the Tenant hereby
covenants to enforce) prohibiting the undertenant from
causing or suffering any act or thing upon or in relation
to the premises underlet inconsistent with or in breach of
the provisions of this Lease and
(6) a condition for re-entry in the form referred to in
clause 5(1) hereof
(25) (e) Upon and permitted underlease to procure that the undertenant
shall give a direct covenant under seal in favour of the Landlord
to observe and perform the covenants and conditions on the part
of the Tenant contained in this Lease (save as to payment of
rent) in so far as the same relate to or affect the premises
underlet and to ensure that a guarantor or guarantors acceptable
to the Landlord guarantee such covenant in such terms as the
Landlord may from time to time require
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<PAGE>
(25) (f) The Tenant shall obtain the approval of the Landlord's
solicitors to the principal terms of any underlease (and if
requested) the form of the proposed underlease before granting
the same (such approval not to be unreasonably withheld or
delayed)
(25) (g) In connection with any underlease the Tenant shall
(i) not consent to or participate in any variation or addition
to any such underlease (or any of the terms thereof)
without the consent of the Landlord such consent not to be
unreasonably withheld or delayed and
(ii) enforce all the covenants and obligations of the
undertenant thereunder and not expressly or by implication
waive any breach of the same and
(26) Within thirty days after any assignment assent mortgage or charge or
release or vacation of any mortgage or charge or devolution of or other
instrument relating to the demised premises or any estate or interest
therein however remote or inferior to give notice to the solicitors for
the time being of the Landlord and produce to them for their retention a
certified copy of the deed or instrument effecting the same or any
Probate or Letters of Administration and pay a reasonable registration
fee
(27) To indemnify the Landlord against
(a) any tax or imposition which becomes payable during the term by
reason of any act or omission of the Tenant or persons deriving
title under the Tenant which but for such act or omission would
not have been payable
(b) all actions or costs claims demands and expenses whatsoever
arising as a result of any breach or non-observance of the
Tenant's covenants and
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<PAGE>
conditions contained in these presents or by reason of any act or
default of the Tenant or their respective agents servants or
licensees
(28) Not to display on the demised premises so as to be visible from outside
any aerial signboard fascia placard sign poster blind bill advertisement
or illuminated sign without the Landlord's prior written consent
(29) To produce without delay if so reasonably required such evidence as the
Landlord may reasonably require to satisfy itself that the Tenant's
covenants contained in these presents have been complied with and
particulars of all derivative or occupational rights existing in respect
of the demised premises however remote or inferior
(30) To pay to the Landlord if so required and without prejudice to the
Landlord's other remedies (as well after as before any judgment)
interest at the rate of four per centum per annum above the base rate of
The Royal Bank of Scotland Plc from time to time on any sum or sums
becoming due under these presents (whether or not formally demanded) and
not paid within fourteen days of the same becoming due from the date of
payment
(31) To keep clean the exterior and the interior of the glass in the windows
and doors of the demised premises
(32) (a) The Tenant will pay to the Landlord on delivery of a proper
Value Added Tax invoice any Value Added Tax due on taxable
supplies made under this Lease including such tax upon the rents
hereby reserved. All sums payable under these presents shall be
deemed to be tax exclusive
(b) The Tenant will indemnify and keep indemnified the Landlord in
respect of any Value Added Tax paid or payable by the Landlord
levied upon any cost or expense (not itself being entitled under
the terms of this Lease to recover
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from the Tenant such amounts of Value Added Tax) to be paid by
the Tenant on demand
(33) To observe and perform and procure that its servants agents and visitors
observe and perform such reasonable regulations as the Landlord or its
agent may from time to time make for the control security or management
of the Building or any part thereof or the comfort safety or convenience
of the tenants occupiers or other persons resorting thereto
(34) To observe and perform the covenants and conditions on the part of the
lessee contained in the Headlease insofar as the same relate to or
affect the demised premises and are not the responsibility of the
Landlord hereunder and save for payment of rent and any other sums
payable by the Landlord to the Superior Landlord under the Headlease and
save for any other matters which would otherwise be inconsistent with
the terms of this Lease (which shall prevail)
4 THE Landlord HEREBY COVENANTS with the Tenant as follows
(1) That the Tenant paying the rents hereby reserved and observing and
performing the covenants on its part herein contained shall peaceably
hold and enjoy the demised premises during the term without any lawful
interruption by the Landlord or any person lawfully claiming under or in
trust for it
(2) To repair decorate maintain renew rebuild and clean the main structure
foundations walls roofs staircases window frames and external parts of
the Building and all conduits plant equipment and appliances in or about
the Building other than those which are the responsibility of the Tenant
or any other tenant or occupier of the Building so as to keep the
Building and all conduits plant equipment and appliances in good repair
and condition
(3) Subject to paragraph 6(e) of the Fourth Schedule and to the Tenant
paying the sums payable in accordance with the Fourth Schedule to
provide the services and
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<PAGE>
discharge the functions referred to in the Fifth Schedule having regard
to principles of good estate management
(4) To insure the Building against the insured risks in such sum as the
Landlord shall reasonably determine as representing the full rebuilding
and reinstatement cost (including sums for demolition and site clearance
architects' and other fees Value Added Tax and a due allowance for cost
increases over the likely rebuilding period) of the Building and at
least three years' loss of rent in respect thereof (which may be
calculated having regard to impending rent reviews) and also for public
liability and property owners' insurance in some insurance office of
repute or with underwriters provided that the Landlord shall not be
obliged to insure any fixtures and fittings which may be installed by
the Tenant (whether the Landlord's or Tenant's fixtures and fittings) or
any additions or improvements to the demised premises until the Tenant
has notified the Landlord in writing of the value or reinstatement cost
thereof (but so that the Landlord may from time to time at its
discretion increase the amount of the insurance)
(5) To supply to the Tenant on request particulars of any policy of
insurance effected hereunder sufficient to enable the Tenant to know the
full extent of the premises and the fixtures and fittings covered the
risks and the sums insured and any exceptions exclusions conditions or
limitations to which the policy is subject
(6) To apply all moneys received under such insurance (other than sums
relating to rent) in rebuilding or reinstating (so far as such insurance
moneys shall extend) the Building to the same or no less suitable and
convenient state as before the loss or damage occurred such rebuilding
or reinstatement to be effected with all reasonable despatch and
diligence after all necessary consents and approvals have been obtained
save that if the Landlord shall be unable to rebuild or reinstate the
Building and within thirty six months of the happening of the loss or
damage shall so notify the Tenant in writing the Landlord's obligation
in that respect and these
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presents shall determine and the Landlord shall be entitled to retain
the whole of such monies without prejudice to any further right or
remedy of the Landlord
(7) To pay the rents reserved by and observe and perform the covenants on
the part of the lessee contained in the Headlease save insofar as they
are the responsibility of the Tenant hereunder
5 PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that:-
(1) (a) if the rents hereby reserved or any part thereof shall be in
arrears for twenty-one days after the same shall have become due
(whether legally demanded or not) or
(b) in the event of any breach of any of the Tenant's covenants
contained in these presents
(c) if the Tenant or any surety who at any time guarantees the
obligations of the Tenant (being a body corporate) shall have an
order made or a resolution passed for its winding up or shall
otherwise enter voluntary winding up or if a petition is
presented or a meeting is convened for the purpose of considering
a resolution for its winding up (other than voluntary winding up
of a solvent company for the purpose of amalgamation or
reconstruction) or shall have a receiver or administrative
receiver appointed over all or any of its assets or if the
equivalent occurs under the laws of the place of incorporation of
the Tenant or the surety in the instance of being bodies
corporate or
(d) if an administration order is made in respect of the Tenant or
such surety (being a body corporate) or a petition for such an
order is presented or if the equivalent occurs under the laws of
the place of incorporation of the Tenant or the surety in the
instance of being bodies corporate or
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<PAGE>
(e) if the Tenant or such surety (being a body corporate) calls a
meeting of its creditors or any of them or makes an application
to the Court under Section 425 of the Companies Act 1985 or a
meeting is convened pursuant to Section 3 of the Insolvency Act
l986 to consider a proposal for a voluntary arrangement under
Part I of the 1986 Act in relation to the Tenant or such surety
(being a body corporate) or enters into any arrangement scheme
compromise moratorium or composition with its creditors or any of
them or suffers any distress or execution to be levied on the
demised premises or enters into a transaction to which section
423 of the Insolvency Act 1986 applies or is unable to pay its
debts within the meaning of Section 123 of the Insolvency Act
1986 or if the equivalent occurs under the laws of the place of
incorporation of the Tenant or the surety in the instance of
being bodies corporate or
(f) if the Tenant or such surety (being an individual or if more than
one individual then any of them) shall be subject to a bankruptcy
order or a petition for such an order is presented or if the
Tenant or such surety shall make any assignment for the benefit
of creditors or make any arrangements with creditors for the
liquidation of debts and liabilities by composition or otherwise
or if the equivalent occurs under the laws of the place of
incorporation of the Tenant or the surety in the instance of
being bodies corporate or
(g) if an application is made in respect of the Tenant or such surety
(being an individual or if more than one individual then any of
them) for an interim order under Section 252 of the Insolvency
Act 1986 or if any such order is made or any meeting is convened
pursuant to Section 257 of the Insolvency Act l986 to consider a
proposal for a voluntary arrangement under Part VIII of the said
Act in relation to the Tenant or such surety or if the Tenant or
such surety enters into any arrangement scheme compromise
moratorium or
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<PAGE>
composition with his creditors or any of them or suffers any
distress or execution to be levied on the demised premises or
enters into a transaction to which Section 423 of the Insolvency
Act 1986 applies or appears to be unable to pay any debt (as
those expressions are defined in Section 268 of the Insolvency
Act 1986) or if the equivalent occurs under the laws of the place
of incorporation of the Tenant or the surety in the instance of
being bodies corporate
it shall be lawful for the Landlord or any person on its behalf to
re-enter upon the demised premises or any part thereof in the name of
the whole and thenceforth peaceably to hold and enjoy the same as if
these presents had not been made without prejudice to any right of
action or remedy of the Landlord
(2) If the demised premises or any part thereof or the means of access
thereto shall be damaged by any of the insured risks so as to be unfit
for occupation and use and the insurance effected by the Landlord shall
not have been vitiated avoided or forfeited or the payment of the money
thereunder or of any part thereof refused or withheld by reason of any
default of the Tenant or any person deriving title under the Tenant or
their respective agents servants or licensees then the Principal Rent
and any amounts attributable to service charge or a fair proportion
thereof according to the nature and extent of the damage sustained shall
be suspended until the demised premises shall again be rendered fit for
occupation and use or until the expiration of such period in respect of
which loss of rent insurance may have been effected (whichever shall be
the earlier) and any dispute concerning this sub-clause shall be
determined by a single arbitrator in accordance with the provisions of
the Arbitration Acts 1950 and 1979
(3) Any licence consent or approval given by the Landlord shall (whether or
not therein expressed) be conditional on the Tenant obtaining all
requisite licences consents permissions or approvals from the relevant
governmental local and other competent
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authorities and from the insurers and any other person interested in the
demised premises and nothing contained or implied in these presents or
in any such licence consent or approval shall be taken to be a covenant
warranty or representation by the Landlord or its agents that the
demised premises can be or is fit to be used for the Tenant's or any
other purpose or that any alteration or addition or change of use which
the Tenant may intend to carry out will not require the approval of the
relevant governmental local or other competent authority the insurers or
any other person interested in the demised premises
(4) If after the termination of the term (howsoever determined) any property
shall remain on the demised premises the Landlord may either in so far
as the same is annexed to the demised premises treat it as having
reverted to the Landlord or as the agent of the Tenant (and the Landlord
is hereby appointed by the Tenant to act on that behalf) remove store
and sell such property and then hold the proceeds of sale after
deducting the costs and expenses of removal storage and sale incurred by
it to the order of the Tenant provided that the Tenant shall indemnify
the Landlord against liability incurred by it to any third party whose
property shall have been dealt with by the Landlord
(5) These presents shall not confer upon or be deemed to include (by
implication or otherwise) in favour of the Tenant any right privilege
estate or interest not expressly herein set out in through over or upon
any land or premises adjoining or near to the demised premises or the
air space thereover or the ground below the foundations thereof
(6) In addition to the said rents any monies falling due under these
presents may be recovered by distress as rent in arrears
(7) The Landlord its servants agents visitors or licensees shall not be
liable or responsible to the Tenant its servants agents visitors or
licensees for any loss injury damage nuisance annoyance or inconvenience
which may be sustained by the Tenant
-23-
<PAGE>
its servants agents visitors or licensees (either personally or to their
property including the demised premises) caused by:-
(a) any failure or defect in or negligent operating of any conduits
or services of the Building not directly under the control of the
Landlord or its agents, or
(b) the act or neglect of any other tenant or occupier of the
Building or their servants agents visitors or licensees
(c) any act of omission or negligence of any porter or other servant
or agent of the Landlord in or about the performance of any duty
relating to the provision of services
(8) Nothing contained or implied in these presents shall impose or be deemed
to impose any restriction on the use of any part of the Building or any
adjoining or neighbouring property or give the Tenant the benefit of or
the right to enforce or to have enforced or to prevent the release or
modification of any covenant agreement or condition entered into in
respect of any other part of the Building or any such adjoining or
neighbouring property or to prevent or restrict in any way the
development thereof
(9) Whenever any fire or other insurance is effected through the Landlord
all sums allowed by way of commission discount or otherwise shall belong
absolutely to the Landlord and the Landlord shall not be required to
account to the Tenant therefor
(10) If at any time it ceases to be practical to determine interest rates by
reference to the base rate of The Royal Bank of Scotland Plc there shall
be substituted for such rate such equivalent rate as the Landlord may
reasonably specify
(11) The Tenant shall not be or become entitled to any compensation under
Section 37 or 59 of the Landlord and Tenant Act 1954 unless the
conditions set forth in Section 38(2) of that Act shall be satisfied in
relation to the Tenant claiming compensation
-24-
<PAGE>
(12) No demand for or receipt of rent no grant of any licence consent or
approval and no acceptance of any document for registration hereunder by
the Landlord or its agent with notice of a breach of any covenant on the
part of the Tenant shall be or be deemed to be a waiver wholly or
partially of any such breach but any such breach shall be deemed to be a
continuing breach of covenant and neither the Tenant nor any person
taking any estate or interest under or through the Tenant shall be
entitled to set up any such demand receipt grant or acceptance in any
action for forfeiture or otherwise
(13) Any notice served under these presents shall be validly served if served
in accordance with Section 196 of the Law of Property Act 1925 as
amended by the Recorded Delivery Service Act 1962
6.1 In this clause (unless the context otherwise requires or admits) the
following words and phrases shall have the following meanings
Word or Phrase Meaning
Review Date respectively the ____________ day of ______________
in the year 2001 or any other date that becomes a
Review Date pursuant to paragraph 6 of this clause
Market Rent the best rent at which the demised premises might
reasonably be expected to be let with vacant
possession by a willing lessor to a willing lessee
without any premium or other consideration in the
open market at the relevant Review Date for a term
of the same duration as the residue of the term or
a term of years whichever shall be the greater with
vacant possession and for the use or uses permitted
under this Lease (or for the actual use or uses if
attracting a higher value) and otherwise upon the
terms of
-25-
<PAGE>
this Lease (other than the amount of rent
hereby reserved but including the provisions for
rent review) on the following assumptions
(a) that all the Landlord's and the Tenant's
covenants in this Lease have been complied
with
(b) that the demised premises are fit and fitted
out for immediate occupation and use
(c) that in case the demised premises have been
destroyed or damaged or have become
inaccessible they have been completely
rebuilt reinstated or rendered accessible
(d) that the demised premises are in a good
state of repair and decorative condition
(e) that the demised premises may lawfully be
used for the uses permitted under this Lease
and/or the use to be assumed for the purpose
of review pursuant to the provisions
hereinbefore contained
(f) that the tenant any undertenant and their
respective successors in title are or would
be able to recover any Value Added Tax
payable hereunder or its or their accounting
with H M Customs & Excise or other
responsible authority immediately after the
same is paid
(g) that the Tenant has enjoyed prior to the
relevant review date a rent free period of
sufficient length to
-26-
<PAGE>
allow the Tenant to fit out the demised
premises in accordance with the Tenant's
requirements to the intent that no discount
shall be made in ascertaining the Market
Rent to reflect such rent free period or
other concession or inducement and that the
market rent shall be that which would be
payable after the expiry of such rent free
period
BUT DISREGARDING
(a) any goodwill attached to the demised
premises by reason of the carrying on
thereat by the Tenant or any undertenant of
any business
(b) any effect on rent of any improvement to the
demised premises made (otherwise than
pursuant to any obligation to the Landlord
contained in this Lease of the Tenant or any
undertenant to carry out such work) by the
Tenant or any undertenant during the term at
the sole expense of the Tenant or any
undertenant and with the consent of the
Landlord and in accordance with all
necessary statutory and by-law consents
(c) the effect on rent of any works or
alterations to the demised premises which
reduce their rental value
(d) the effect on rent of any rent free period
or other concession or inducement which
would or might be given to an incoming
tenant on the grant of a lease of the
demised premises at the relevant Review
-27-
<PAGE>
Date to the intent that no discount shall be
made in ascertaining the Market Rent to
reflect such rent free period or other
concession or inducement and that the Market
Rent shall be that which would be payable
after the expiry of every such rent free
period and after receipt of such concession
or inducement
(e) any restraint or restriction on the right to
recover or increase rent imposed by any Act
President the President for the time being of the Royal
Institution of Chartered Surveyors or his duly
appointed deputy or any person authorised by the
President to make appointments on his behalf
Surveyor a surveyor agreed upon by the Landlord and the
Tenant or in default of agreement appointed by the
President
agree or agreed agree or agreed in writing between the Landlord
and the Tenant
6.2 From each Review Date the Principal Rent shall be such as may at any
time be agreed between the Landlord and the Tenant as the Principal Rent
payable from that Review Date or (in default of such agreement)
whichever is the greater of
6.2.1 the Market Rent and
6.2.2 the Principal Rent contractually payable immediately before that Review
Date
6.3 If by a date two months before the Review Date the rent payable from
that Review Date has not been agreed the Landlord and the Tenant may
agree upon a person to act as Surveyor who shall determine the Market
Rent but in default of such
-28-
<PAGE>
agreement then the Landlord or the Tenant may at any time whether before
or after the Review Date make application to the President to appoint a
Surveyor to determine the Market Rent and such application shall request
that the Surveyor to be appointed shall be a specialist in the letting
of office premises in the area in which the premises are situate
6.4.1 The Surveyor shall act as an expert and the following provisions shall
apply
6.4.1.1 Unless the Surveyor shall otherwise direct the Landlord and the Tenant
shall each be responsible for one half of the fees of the Surveyor and
if either shall pay the whole thereof he shall be entitled to recover
one half thereof from the other
6.4.1.2 The Surveyor shall request the Landlord and the Tenant to submit to him
within a period not exceeding twenty (20) working days from such date as
he shall direct such representations and cross representations
concerning the amount of the rent and such supporting evidence as they
may wish
6.4.1.3 Within forty-five (45) working days of the appointment or within such
longer period as the Landlord and the Tenant shall agree the Surveyor
shall give to each of them written notice of the amount of market rent
as finally determined
6.4.1.4 The fees of the Surveyor shall be payable in the proportion he shall
direct in his award
6.4.2 If the Surveyor whether appointed as arbitrator or expert refuses to act
or is incapable of acting or dies or fails to give notice of his
determination within the period stipulated above the Landlord or the
Tenant may apply to the President for the further appointment of a
Surveyor which procedure may be repeated as many times as necessary
6.4.3 Any Surveyor appointed under this clause shall be required to produce a
statement of reasons when making his determination
-29-
<PAGE>
6.5 If by a Review Date the Principal Rent payable from that Review Date has
not been ascertained pursuant to this Schedule the Tenant shall continue
to pay the Principal Rent at the rate previously payable and within
fourteen (14) days next after such ascertainment the Tenant shall pay to
the Landlord the difference for the period ending on the day preceding
the quarter day following the date of ascertainment between the
Principal Rent paid and the Principal Rent so ascertained together with
interest on such difference up to the date of ascertainment at 2% below
the Prescribed Rate
6.6 If at any Review Date there is by virtue of any Act a restriction upon
the Landlord's right to review the Principal Rent or if at any time
there is by virtue of any Act a restriction upon the right of the
Landlord to recover the Principal Rent otherwise payable then upon the
ending removal or modification of such restriction (but only once in any
period of review) the Landlord may at any time thereafter give to the
Tenant not less than one month's notice requiring an additional rent
review upon a quarter day specified therein which quarter day shall for
the purposes of this Schedule be a Review Date
6.7 A memorandum of the Principal Rent ascertained from time to time in
accordance with this Schedule shall be signed by and on behalf of the
Tenant and the Landlord respectively and exchanged between them
6.8 Time shall not be of the essence in agreeing or determining the reviewed
rent
7 Having been authorised to do so by order of the Central London County
Court made on the ___ day of ____________ 1996 under the provisions of
Section 38 of the Landlord and Tenant Act 1954 (as amended by Section 5
of the Law of Property Act 1989) the Landlord and the Tenant hereby
agree that the provisions of Sections 24-28 of the said Act shall be
excluded in relation to the tenancy hereby created
-30-
<PAGE>
8 If either the Landlord or the Tenant wishes to determine this Lease on
the fifth anniversary of the term commencement date and shall have given
to the other party not less than six months' prior written notice then
upon the said date this Lease shall determine and cease without
prejudice to the rights and remedies of either the Landlord or the
Tenant against the other in respect of any antecedent claim or breach of
covenant
9 The parties hereby certify that there is no prior agreement for lease
to which this lease gives effect
EXECUTED AS A DEED by the parties hereto
-31-
<PAGE>
FIRST SCHEDULE
All those parts of the third floor of the Building shown for the purpose
of identification only edged red on the plan annexed hereto including
(a) all non-loading walls within the same
(b) the internal plastered coverings and plaster work of the walls
and structure bounding the same
(c) all doors and door frames and secondary glazing
(d) all glass in the windows
(e) all false ceilings and floors and their respective fittings and
supports
(f) the surfaces of the floor slab and ceiling slab
(g) all conduits now or hereafter laid or installed in any part of
the Building and serving exclusively the demised premises
(h) all fixtures and fittings from time to time thereon
but excluding
(a) any part or parts of the Building (other than any conduits
expressly included) lying above the surface of the ceiling slab
or below the surface of the floor slab
(b) all structural parts of the Building and the window frames
-32-
<PAGE>
THE SECOND SCHEDULE
1 The right of passage and running of water soil gas electricity and other
services in and through the conduits made or to be made in upon through
or under the Building
2 The rights to use the showers toilets and lavatory accommodation on the
same and adjacent floors of the Building
3 The right to pass and repass over along and through the entrance doors
reception hall staircases lifts passages and corridors in the Building
for the purposes of access to and egress from the demised premises the
said showers toilets and lavatory accommodation
4 The right in the case of emergency only to pass and repass over along
and through the exit doors staircases passages and corridors of the
Building intended for the use of the tenants and occupiers of the
Building
5 The right and liberty at all reasonable hours and upon giving reasonable
prior notice to enter and remain upon any other part of the Building in
connection with the inspection repair or maintenance of the demised
premises subject to those exercising such right causing as little damage
and inconvenience as possible and making good all damage
-33-
<PAGE>
THE THIRD SCHEDULE
1 The right to erect or alter or to consent to the erection or alteration
of any building for the time being on any adjoining or neighbouring
property notwithstanding that such erection or alteration may diminish
the access of light and air enjoyed by the demised premises and the
right to deal with any such property as it may think fit
2 The right of free and uninterrupted passage and running of water soil
gas electricity and of all other services and supplies through such
conduits as are now or may hereafter be in on or under the Building or
any adjoining or neighbouring property or any buildings now or hereafter
erected thereupon together with the right on reasonable prior written
notice to enter upon the demised premises to inspect repair or maintain
any such conduits
3 The right on reasonable prior written notice to enter upon the demised
premises in connection with the erection alteration improvement repair
or maintenance of any other parts of the Building and for such purpose
to underpin shore up and bond and tie into the structure of the demised
premises making good any damage caused to the demised premises thereby
as soon as reasonably practical
4 The right on reasonable notice to lay or construct new conduits in on or
under the demised premises and to connect into such conduits as are now
or may hereafter be in on or under the demised premises other than
conduits capable of serving only the demised premises the person
exercising such right making good any damage caused to the demised
premises thereby as soon as reasonably practical
5 The rights and liberties to enter upon the demised premises in the
circumstances in which in the covenants by the Tenant contained in these
presents the Tenant covenants to permit such entry making good any
damage caused to the demised premises thereby as soon as reasonably
practical
-34-
<PAGE>
6 The right on reasonable prior notice to enter upon the demised premises
for the purpose of complying with the Landlord's covenants contained in
these presents
7 The right temporarily to close any part of the Building other than the
demised premises and to temporarily discontinue any of the services
subject to the Landlord at all times providing adequate alternative
lavatory accommodation access and other services for use in connection
therewith
8 The right in case of emergency only to pass and repass over and through
the demised premises for the purpose of gaining access to a place of
safety
9 All existing easement quasi-easements privileges and rights whatsoever
now enjoyed (if any) by other parts of the Building or adjoining or
neighbouring property in under over or in respect of the demised
premises as if such parts of such property had at all times heretofore
been in separate ownership and occupation and such matters had been
acquired by prescription or formal grant
-35-
<PAGE>
THE FOURTH SCHEDULE
1 On every quarter day (or within fourteen days of demand if later) the
Tenant shall pay to the Landlord such sum as the Landlord may from time
to time specify to be one quarter of a fair and reasonable estimate of
the service charge for the then current year ending 31st December
(hereinafter called "the Financial Year")
2 The amount of the service charge payable by the Tenant shall be such
percentage (this being the relationship of the net lettable area of the
demised premises to the net lettable area of the Building but so that
such ratio shall be adjusted to take account of relevant factors
including without prejudice to the generality of the foregoing the use
of other areas of the Building) of the Landlord's Expenses which
expression means the aggregate of
(a) all amounts sums costs and expenses which may from time to time
be expended incurred contributed to or become payable by the
Landlord or any person on the Landlord's behalf in complying with
the Landlord's obligations under Clause 4 (save for the payment
of rent under the Headlease) in respect of that year and
(b) a fair provision for the replacement and renewal of apparatus
machinery plant or equipment by means of depreciation or sinking
fund and for future costs outgoings and other expenditure of the
type hereinbefore described which are of a recurring nature
(whether recurring by regular or irregular periods) as the
Landlord may reasonably and fairly attribute to the demised
premises for the Financial Year in question and shall be payable
proportionately in respect of any Financial Year falling partly
within the term
3 As soon as practical after the end of each Financial Year the Landlord
shall prepare a true and fair summary of the Landlord's expenses for the
year and a certificate of
-36-
<PAGE>
the amount of the service charge payable by the Tenant in respect of the
year (which summary and which certificate shall save in the case of
manifest error be conclusive evidence for the purposes hereof of the
matters to which they refer) and deliver copies to the Tenant
4 If the amount so certified is greater than the payments made on account
thereof then the Tenant shall within fourteen days of receipt of such
certificate pay the balance outstanding and if less the Landlord shall
give credit to the Tenant against payment on account for the then
Financial Year or refund the balance to the Tenant if the term has
expired
5 The Tenant may not object to the Landlord's expenses or any item
comprised in them or otherwise on the ground that:
(a) an item of the total costs included at a proper cost might have
been provided or performed at a lower cost or
(b) an item of the total costs fails to comply with an estimate which
was given or
(c) an item of the total costs includes an element of betterment or
improvement of the Building its services or its amenities or
(d) the Tenant disagrees with any estimate of future expenditure
which the Landlord reasonably requires to make provision so long
as the Landlord has acted reasonably and in good faith or
(e) the Tenant disagrees with the Landlord's exercise of any
discretion reserved to it so long as the Landlord has acted
reasonably and properly in reaching the conclusion the Landlord
has reached
6 For the avoidance of doubt it is declared that:-
-37-
<PAGE>
(a) in determining the percentage referred to in paragraph 2 of this
Schedule the Landlord shall work on the basis that the whole of
the Landlord's Expenses in any Financial Year are to be fairly
and equitably apportioned by way of service charge between the
tenants or occupiers of all parts of the Building and (in respect
of any parts of the Building which are unlet but intended for
letting) the Landlord
(b) in calculating the amount of the service charge to be paid by the
Tenant the Landlord may apply the same or different percentages
to constituent elements of the Landlord's expenses
(c) if the Landlord has insufficient moneys in hand on account of
service charges (otherwise than by reason of a default on the
payment of such charges by other tenants or occupiers and
advances its own funds to meet the Landlord's expenses such funds
shall carry interest at two per centum per annum above the base
rate of The Royal Bank of Scotland Plc from the date they are
advanced until reimbursement and such interest shall be added to
and form part of the Landlord's expenses for the Financial Year
in question
(d) the payments demanded on account shall be deemed to be part of
the service charge for the purpose of the reservation of rent and
the covenant by the Tenant to pay the same and
(e) the Landlord shall be entitled after reasonable prior notice to
the Tenant at its reasonable discretion to suspend or discontinue
the provision of the services or other matters set out or
referred to in the Fifth Schedule whether or not substituting
others in their place
(f) (i) the Landlord shall keep the sinking fund payments (if
any) paid by the Tenant in a separate interest earning
deposit account until and
-38-
<PAGE>
save to the extent that they may be required for the
purposes provided for in the Fifth Schedule
(ii) interest on the amounts outstanding to the credit of the
sinking fund account shall be credited to the account net
of any tax payable in respect of such interest
(iii) until actual disbursement such amounts held in the sinking
fund account shall be held by the Landlord for the benefit
of the owners tenants and occupiers of the Building as a
class
(iv) the receipt of the Landlord's successor to the reversion
immediately expectant on the termination of the term shall
relieve the Landlord from any liability as to the future
application of such amounts
7 The provisions of this Schedule shall continue to apply notwithstanding
the fact that the term has determined whether by effluxion of time or
otherwise but only down to the date of such determination
-39-
<PAGE>
THE FIFTH SCHEDULE
1 Washing and painting in appropriate colours and treating in an
appropriate manner all the wood iron cement stucco work and other
exterior surfaces of the Building usually so painted or treated as the
case may be
2 Repairing maintaining renewing and improving the entrance hall landings
staircases passages showers lavatories toilet accommodation and other
parts of the Building which are neither the responsibility of the Tenant
nor of any other tenant or occupier of the Building
3 Keeping such parts in good decorative repair suitably furnished lighted
cleaned and carpeted and provided with fire extinguishing equipment
4 Repairing maintaining renewing and improving security and fire alarm
systems throughout the Building
5 Paying all existing and future rates taxes duties assessments charges
impositions and outgoings whether local or of any other description
which now are or shall at any time be payable in respect of the entirety
of the Building or the common parts of the Building and in the event of
the common parts or any part thereof being assessed or charged together
with any other part of the Building let or available for letting a due
proportion thereof to be conclusively determined by the Landlord
6 Supplying hot water to the Building
7 Operating maintaining repairing and where necessary replacing all plant
equipment and appliances used in the supply of services in the Building
8 Paying all costs and expenses incurred by the Landlord in the running
and management of the Building and the collection of the rents and
service charges (including agents fees where agents are retained or a
sum on account of administrative costs if such matters are dealt with by
the Landlord) and the
-40-
<PAGE>
expenses properly incurred in providing the services of a building
manager and reception maintenance security cleaning and caretaking staff
9 Paying and discharging all costs and expenses payable by the Landlord in
respect of the making repairing maintaining rebuilding altering and
cleansing of all conduits party structures and other conveniences which
shall belong to or be used by the owners and occupiers of the Building
in common with other premises
10 Carrying out in accordance with the directions of the insurers such
works as may be recommended or required by them and are not the
responsibility of the Tenant or of any other tenant or occupier of the
Building
11 Complying with the requirements of any Act of Parliament regulations
orders instruments or bye-laws whether now in existence or hereafter to
be made in respect of those parts of the Building which are not the
responsibility of the Tenant or of any other tenant or occupier of the
Building
12 Discharging any taxes which may be assessed or charged on the Landlord's
expenses or any service charge fund or any income on either of them or
in respect thereof
13 Meeting Value Added Tax (insofar as the same shall be irrecoverable by
the Landlord) or any other tax or assessment incurred or payable by the
Landlord or on its behalf on or in respect of any payment made as part
of the Landlord's expenses
14 Providing and supplying such other services or facilities making such
other payments or carrying out such other repairs improvements and works
(including the provision replacement or improvement of plant and
machinery) as in the reasonable opinion of the Landlord and in the
interest of good estate management may be necessary to maintain the
Building as a high class building or may be for the benefit of the
tenants or occupiers thereof
15 Complying with the terms of the Headlease except for payment of rent
thereunder
-41-
<PAGE>
SIXTH SCHEDULE
Surety's Covenants
1 Guarantee of Tenant's performance
The Surety hereby covenants with the Landlord as a primary obligation
that
1.1 the Tenant will pay the Rents on the days and in manner aforesaid and
will duly perform and observe all the Tenant's covenants herein and that
in case of default the Surety will pay and make good to the Landlord on
demand all loss damages costs and expenses thereby arising or incurred
by the Landlord
1.2 the Surety will enter into any further lease granted by the Landlord to
the Tenant whether pursuant to the Landlord and Tenant Act 1954 or
otherwise to guarantee the obligations of the Tenant under such lease
such guarantee to be on terms identical (mutatis mutandis) to the terms
of this guarantee or on such other terms as may be required by the
Landlord
1.3 in the event that a liquidator or trustee in bankruptcy shall disclaim
or surrender the Lease or the Lease shall be forfeited the Surety shall
if the Landlord so requires by notice given to the Surety within three
(3) months after such event take from the Landlord a new lease of the
Premises for the residue of the Term unexpired at the date of such event
and at the Rents then payable and subject to the terms of this Lease in
every respect and to execute and deliver to the Landlord a counterpart
thereof and to pay to the Landlord the costs thereof
1.4 in the event that the Landlord shall not require the Surety to take up a
lease in accordance with the provisions of paragraph 1.3 then the Surety
shall pay to the Landlord a capital sum in the amount of the Rents that
would have otherwise have been payable under this Lease in respect of
the period of three months from the date of disclaimer surrender or
forfeiture
-42-
<PAGE>
2 It is hereby agreed that
2.1 the Surety shall not be released or discharged in any way from its
obligations under this Lease by
2.1.1 any neglect or forbearance of the Landlord in endeavouring to obtain
payment of the Rents when the same become payable or to enforce
performance or observance of the Tenant's covenants herein and any time
which may be given by the Landlord to the Tenant
2.1.2 any variation of the terms of this Lease
2.1.3 the transfer of the Landlord's reversionary interest immediately
expectant on the termination of the Term
2.1.4 any refusal by the Landlord to accept rent tendered by or on behalf of
the Tenant at a time when the Landlord was entitled to re-enter the
Premises
2.1.5 any legal limitation and/or incapacity of the Tenant and/or any change
in the constitution or powers of the Tenant the Surety or the Landlord
2.1.6 any liquidation administration or bankruptcy of the Tenant or the Surety
2.1.7 any other act omission matter or thing whatsoever whereby but for this
provision the Surety would be released
2.2 The Surety shall not be entitled to participate in or be subrogated to
any security held by the Landlord in respect of the Tenant's obligations
or otherwise to stand in the place of the Landlord in respect of any
such security
2.3 The Surety hereby waives any right to require the Landlord to pursue
against the Tenant any rights which may be available to the Landlord
before proceeding against the Surety
-43-
<PAGE>
2.4 The benefit of this guarantee shall ensure for the successors in title
of the Landlord without the requirement of any express assignment
-44-
<PAGE>
ORIGINAL
Executed as a Deed by )
SECURUM PROPERTY HOLDINGS LIMITED ) [SEAL]
in the presence of: )
Director /s/ [ILLEGIBLE}
Secretary /s/ [ILLEGIBLE}
-45-
<PAGE>
COUNTERPART
Executed as a Deed for and on behalf of )
CME DEVELOPMENT CORPORATION INC )
acting by )
and
-46-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,909
<SECURITIES> 1,817
<RECEIVABLES> 24,199
<ALLOWANCES> (2,148)
<INVENTORY> 0
<CURRENT-ASSETS> 60,176
<PP&E> 76,680
<DEPRECIATION> 18,549
<TOTAL-ASSETS> 252,997
<CURRENT-LIABILITIES> 79,611
<BONDS> 0
0
0
<COMMON> 183
<OTHER-SE> 186,521
<TOTAL-LIABILITY-AND-EQUITY> 252,997
<SALES> 84,237
<TOTAL-REVENUES> 84,237
<CGS> 60,845
<TOTAL-COSTS> 87,397
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 11,557
<INTEREST-EXPENSE> 2,914
<INCOME-PRETAX> 0
<INCOME-TAX> 9,198
<INCOME-CONTINUING> 27,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,072
<EPS-PRIMARY> (1.48)
<EPS-DILUTED> 0
</TABLE>
