-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cfni3Eo6Zl9SzSN1uErGYyirphFFpGhO17IDoon/mQe8Hy9gmZ7jZA+AlG3cPkBL Hbs+qYyxgPPD2Isv9VDxxw== 0001005477-96-000240.txt : 19960816 0001005477-96-000240.hdr.sgml : 19960816 ACCESSION NUMBER: 0001005477-96-000240 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL EUROPEAN MEDIA ENTERPRISES LTD CENTRAL INDEX KEY: 0000925645 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24796 FILM NUMBER: 96614409 BUSINESS ADDRESS: STREET 1: CLARENDON HOUSE CHURCH STREET STREET 2: HAMILTON HM CX CITY: BERMUDA STATE: D0 BUSINESS PHONE: 8092961431 MAIL ADDRESS: STREET 1: CCLARENDON HOUSE STREET 2: HAMILTON HM CX CITY: BERMUDA STATE: D0 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File Number 0-24796 CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. (Exact name of registrant as specified in its charter) BERMUDA N/A (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) Clarendon House, Church Street, Hamilton HM CX Bermuda (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 441-296-1431 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for each shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of August 10, 1996 ----- --------------------------------- Class A Common Stock, par value $.01 10,406,799 Class B Common Stock, par value $.01 8,078,297
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. Consolidated Balance Sheets June 30, 1996 and December 31, 1995 ($000's) ASSETS June 30, December 31, 1996 1995 --------------- -------------- CURRENT ASSETS: Cash and cash equivalents 25,348 53,210 Investments in marketable securities 4,352 10,652 Restricted cash 1,600 4,216 Accounts receivable (net of allowances of $1,947, $1,105) 35,581 32,475 Program rights costs 10,809 9,219 Value-added tax recoverable 180 733 Advances to affiliates 1,008 953 Prepaid expenses 5,696 5,270 --------------- -------------- Total current assets 84,574 116,728 INVESTMENT IN UNCONSOLIDATED AFFILIATES 16,691 12,433 LOANS TO AFFILIATES 7,003 6,272 PROPERTY, PLANT & EQUIPMENT (net of depreciation of $15,219, $10,281) 56,345 51,699 PROGRAM RIGHTS COSTS 11,331 10,496 BROADCAST LICENSE COSTS AND OTHER INTANGIBLES (net of amortization of $1,053, $1,007) 2,319 2,365 LICENSE ACQUISITION COSTS (net of amortization of $454, $54) 4,323 4,723 GOODWILL 1,674 1,510 ORGANIZATION COSTS (net of amortization of $886, $507) 963 1,337 DEVELOPMENT COSTS (net of allowance of $3,834, $4,373) 23,034 10,127 DEFERRED TAXES 1,610 559 OTHER ASSETS 3,578 3,778 --------------- -------------- Total assets 213,445 222,027 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY June 30, December 31, 1996 1995 --------------- -------------- CURRENT LIABILITIES: Accounts payable 11,031 12,956 Accrued liabilities 13,968 9,804 Duties and other taxes payable 616 288 Income taxes payable 23,971 15,946 Dividend payable 1,633 - Current portion of obligations under capital lease 1,607 2,111 Current portion of credit facilities 410 2,661 Advances from affiliates -- 2,687 --------------- -------------- Total current liabilities 53,236 46,453 DEFERRED INCOME TAXES 2,721 2,317 OBLIGATIONS UNDER CAPITAL LEASE 8,066 8,747 LONG-TERM PORTION OF CREDIT FACILITIES 6,519 6,766 OTHER LIABILITIES 402 173 MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 16,750 18,635 SHAREHOLDERS' EQUITY: Preferred Stock, $0.01 par value: authorized: 5,000,000 shares; issued and outstanding: none - - Class A Common Stock, $0.01 par value: authorized: 30,000,000 shares; issued and outstanding: 10,406,799 shares at June 30, 1996 and 10,294,549 at December 31, 1995 104 103 Class B Common Stock, $0.01 par value: authorized: 15,000,000 shares; issued and outstanding: 8,078,297 shares 81 81 Additional paid-in capital 188,785 187,997 176,872 Class A Treasury stock of $0.01 par value (2,476) (2,476) --------------- -------------- 186,309 185,521 Accumulated deficit (60,381) (48,001) Cumulative currency translation adjustment (362) 1,232 --------------- -------------- Total shareholders' equity 125,751 138,936 --------------- -------------- Total liabilities and shareholders' equity 213,445 222,027 =============== ==============
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. Consolidated Statements of Cash Flows ($000's)
For the six months ended June 30, ------------------ 1996 1995 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss (12,380) (4,769) Adjustments to reconcile net loss to net cash generated from operating activities: Equity in loss of unconsolidated affiliates 5,936 6,766 Depreciation & amortization 16,862 9,688 Minority interest in income (loss) of consolidated subsidiaries 1,144 3,923 Valuation allowance for development costs 413 900 Stock compensation charge - 810 Changes in assets & liabilities: Accounts receivable (3,675) (8,891) Related party receivable - 235 Program rights costs (13,787) (12,863) Value-added tax recoverable 458 (131) Advances to affiliates (2,899) - Prepaid expenses (545) (2,308) Other assets (127) 99 Accounts payable 1,558 (386) Accrued liabilities 4,159 2,501 Income & other taxes payable 8,347 7,064 Other liabilities - 1,225 ------- ------- Net cash from operating activities 5,464 3,863 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in unconsolidated affiliates (9,444) (16,543) Investments in marketable securities 6,300 - Restricted cash 2,524 - Acquisition of fixed assets (10,670) (2,168) Purchase of subsidiary operation (2,962) - Dividends paid to minority shareholders (1,396) Payments for broadcast license costs and other intangibles - (99) Development costs (14,349) (3,256) ------- ------- Net cash used in investing activities (29,997) (22,066) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Current portion of credit facilities (2,108) (2,297) Payments under capital lease (776) (780) Advances to affiliates (731) - Repayment of loans of subsidiary operation - - Capital contributed by shareholders 789 - ------- ------- Net cash used in financing activities (2,826) (3,077) ------- ------- IMPACT OF EXCHANGE RATE FLUCTUATIONS ON CASH (503) 219 Net decrease in cash and cash equivalents (27,862) (21,061) CASH AND CASH EQUIVALENTS, beginning of period 53,210 42,002 ------- ------- CASH AND CASH EQUIVALENTS, end of period 25,348 20,941 ======= =======
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. Consolidated Statements of Shareholders' Equity (Deficit) For the Six Month Period Ended June 30, 1996 ($000's)
Cumulative Class A Class B Additional Currency Common Common Paid-in Treasury Accumulated Translation Stock Stock Capital Stock Deficit(1) Adjustment Total --------- --------- --------- --------- --------- --------- --------- BALANCE, December 31, 1995 103 81 187,997 (2,476) (48,001) 1,232 138,936 Foreign Currency Translation Adjustment -- -- -- -- -- (1,594) (1,594) Capital contributed by Shareholders 1 -- 788 -- -- -- 789 Net loss -- -- -- -- (12,380) -- (12,380) --------- --------- --------- --------- --------- --------- --------- BALANCE, June 30, 1996 104 81 188,785 (2,476) (60,381) (362) (125,751) ========= ========= ========= ========= ========= ========= =========
- ---------- 1) Of the accumulated deficit of $60,381,000 at June 30, 1996, $38,317,000 represents loss in unconsolidated affiliates. CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. Consolidated Statements of Operations ($000's, except per share data)
For the three months For the six months ended June 30, ended June 30, ---------------------------- -------------------------- 1996 1995 1996 1995 (unaudited) (unaudited) (unaudited) (unaudited) ----------- ----------- ----------- ----------- GROSS REVENUES 48,045 35,634 76,935 58,197 Discounts and agency commissions (9,495) (7,083) (15,130) (10,959) -------------- ------------- -------------- ------------- NET REVENUES 38,550 28,551 61,805 47,238 STATION EXPENSES: Operating costs and expenses 11,931 7,041 24,423 13,204 Amortization of programming rights 5,963 3,461 10,269 6,492 Depreciation of station fixed assets and other intangibles 3,175 1,639 6,109 3,196 -------------- ------------- -------------- ------------- Total station operating costs and expenses 21,069 12,141 40,801 22,892 Selling, general and administrative expenses 5,797 1,868 8,735 2,939 -------------- ------------- -------------- ------------- CORPORATE EXPENSES: Corporate operating costs and development expenses 3,982 3,407 7,173 5,439 Stock compensation charge 0 355 0 810 -------------- ------------- -------------- ------------- 3,982 3,762 7,173 6,249 OPERATING INCOME 7,702 10,780 5,096 15,158 EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES (3,167) (3,236) (5,936) (6,766) INTEREST AND OTHER INCOME 442 500 1,079 959 INTEREST EXPENSE (525) (1,124) (1,532) (2,134) FOREIGN CURRENCY EXCHANGE (LOSS) GAIN (1,235) (392) (1,630) 115 -------------- ------------- -------------- ------------- Net (loss) profit before provision for income taxes 3,217 6,528 (2,923) 7,332 Provision for income taxes (6,309) (5,177) (8,313) (8,178) -------------- ------------- -------------- ------------- Net (loss) profit before minority interest (3,092) 1,351 (11,236) (846) MINORITY INTEREST IN (LOSS) INCOME OF CONSOLIDATED SUBSIDIARIES (1,538) (2,726) (1,144) (3,923) -------------- ------------- -------------- ------------- Net Loss (4,630) (1,375) (12,380) (4,769) -------------- ------------- -------------- ------------- PER SHARE DATA Net (Loss) per share (0.25) (0.10) (0.67) (0.34) Weighted average number of common shares outstanding (000's) 18,447 14,021 18,447 14,021
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. Notes to Consolidated Financial Statements June 30, 1996 1. ORGANIZATION AND BUSINESS Central European Media Enterprises Ltd., a Bermuda corporation ("CME"), was formed in June 1994. Through its predecessor companies, CME has been in operation since 1991. CME, together with its subsidiaries (CME and its subsidiaries are collectively referred to as the "Company"), develops, owns and operates national and regional commercial television stations and networks in the newly emerging markets of Central and Eastern Europe and regional commercial television stations in Germany. The Company owns a 66% interest in Ceska Nezavisla Televizni Spolecnost s.r.o. ("Nova TV"), which broadcasts as the only private national television station in the Czech Republic. On August 1, 1996, the Company entered into an agreement with Ceska Sporitelna Bank ("CS") for the purchase of CS's entire 22% economic interest and 20% of CS' voting rights for a purchase price of Kc 1 billion (approximately $36 million) (the "CS Agreement"). The agreement and subsequent registration of the Company's increased ownership in Nova TV are subject to Czech laws (See Note 5 of Notes to Consolidated Financial Statements). In Slovenia, the Company launched "POP TV" in December 1995 together with MMTV1 d.o.o. Ljubljana ("MMTV") (formerly known as Boutique MMTV) and Tele 59 d.o.o. Maribor ("Tele 59"), (MMTV and Tele 59 are together referred to as the "Slovenian Broadcasters") through the formation of the company Produkcija Plus d.o.o. ("Pro Plus" or "POP TV"). Pro Plus provides programming to the Slovenian Broadcasters and other affiliated stations and sells national advertising in conjunction with POP TV programming. The Company owns 58% of the equity of Pro Plus, but has an effective economic interest of 72%, as a result of a 33% economic interest in MMTV and a 33% economic interest in Tele 59, each of which have a 21% interest in Pro Plus. The Slovenian Broadcasters and one other affiliate began broadcasting "POP TV" in December 1995. In Romania, the Company and two local partners, Adrian Sarbu and Ion Tiriac operate "PRO TV" through the formation of Media Pro International S.A. ("Media Pro International" or "Pro TV"), a commercial television network. The Company holds a 77.5% equity interest in Media Pro International, although the Company's partners hold options valid through October 1997 which, if exercised, would reduce the Company's interest to approximately 66%. Media Pro International launched operations in December 1995. In addition, in Hungary the Company holds a 95% ownership interest in 2002 Consulting and Servicing Limited Liability Company ("2002") which has a 97.4% indirect beneficial ownership interest in Videovox Studio Limited Liability Company ("Videovox"), a Hungarian dubbing and production company acquired by 2002 in May 1996 which, thus far, has generated only limited revenues and expenses. Videovox's operating results for the period from 1 May 1996 through 30 June 1996 have been consolidated in the accompanying financial statements. The Company owns a 52.6% non-controlling interest in PULS ("PULS", formerly known as 1A Berlin), a regional television station based in Berlin, Germany, and a 50% interest (non-voting profit participation) in Franken Funk & Fernsehen GmbH ("FFF"), which owns 74.8% of a regional television station in Nuremberg, Germany, NMF Neue Medien Franken GmbH and Co., K.G. ("NMF"). The Company's interest in PULS increased to 52.6% as of June 30, 1996 from 48.48% at December 31, 1995 as a result of additional capital calls paid by the Company and not satisfied by the other partners of PULS. The Company has a 49% non-controlling interest, and a 50% economic interest in Sachsen Funk und Fernsehen GmbH, Germany ("SFF") which owns 33.33% equity interest in Sachsen Fernsehen Betriebs KG, a regional TV station in Leipzig and Dresden, Germany. The Company continues to pursue and develop opportunities for television broadcasting throughout Central and Eastern Europe and on a regional 5 basis in Germany. The Company has formed Slovenska Televizna Spolocnost s.r.o. ("STS") in Slovakia with Markiza - Slovakia s.r.o. which expects to launch Markiza TV during the third quarter 1996. The Company has an effective 80% economic interest in STS. In accordance with the Company's accounting policies, assets purchased and funds used to support pre operating activities of Markiza TV are classified in Development Costs in the accompanying consolidated financial statements in the amount of approximately $17 million. The Company also has interests in companies seeking licenses or seeking to expand upon regional licenses in Poland, Ukraine and Hungary. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with the accounting principles generally accepted in the United States. In the opinion of management, these consolidated financial statements include all adjustments necessary to fairly state the Company's financial position and results of operations. The results for the six months ended June 30, 1996 are not necessarily indicative of the results expected for the year. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company's wholly-owned subsidiaries, Nova TV, PRO TV, POP TV, and Videovox as consolidated entities and reflect the interests of the minority owners of Nova TV, PRO TV, POP TV, and Videovox in the six months ended June 30, 1996 and two months ended June 30, 1996, respectively. POP TV and PRO TV began operations in December of 1995, Videovox was acquired on May 1, 1996 and thus Nova TV was the only consolidated entity for the six months ended June 30, 1995. The results of the operating stations, PULS, FFF, and SFF, in which the Company has minority or non-controlling ownership interests, are included in the accompanying consolidated financial statements as investments in unconsolidated affiliates using the equity method. The Company's investments in broadcast operations under development, which includes Markiza TV, and other broadcast development opportunities are reflected in the balance sheet as development costs. Net Loss Per Share Net loss per share was computed by dividing the Company's net loss by the weighted average number of Common Shares (both Class A and Class B) and common share equivalents outstanding during the period ended June 30, 1996. The impact of outstanding options and warrants has not been included in the computation of net loss per share, as the effect of their inclusion would be anti-dilutive. 3. DIVIDENDS In March 1996, Nova TV declared a total dividend of Kc 330,000,000 ($12,066,000) to all shareholders of which Kc 116,325,00 ($4,153,000) was paid to the Company in May 1996 with the remainder of Kc 116,325,000 ($4,213,000) scheduled to be paid to the Company in November 1996. In connection with the CS Agreement, the Company is entitled to receive CS's remaining 1995 dividend of approximately Kc 38.8 million (approximately $1.4 million) scheduled to be paid in November 1996. 6 4. SUMMARY FINANCIAL INFORMATION FOR PULS AND FFF
June 30, 1996 December 31, 1995 ------------- ----------------- PULS FFF PULS FFF ------ ------ ------- ------ $'000 $'000 $'000 $'000 ------ ------ ------- ------ Current assets 4,899 2,543 6,938 2,538 Non-current assets 14,137 2,606 15,971 3,308 Current liabilities (5,212) (2,305) (5,678) (1,410) Non-current liabilities (7,469) (9,458) (9,081) (9,526) ------ ----- ------ ----- Net assets 6,355 (6,614) 8,150 (5,090) ------ ----- ------ ----- For the six months ended June 30, 1996 June 30, 1995 ------------- ------------- PULS FFF PULS FFF ------ ------ ------- ------ $'000 $'000 $'000 $'000 ------ ------ ------- ------ Net revenues 1,665 2,375 1,593 1,980 Operating loss (9,561) (1,675) (11,520) (2,913) Net loss (9,655) (1,771) (11,831) (3,346)
The Company's share of the losses of PULS, FFF and SFF accounted for by the equity method for the six months ended June 30, 1996 and 1995 were $5,936,000 and $6,766,000, respectively. As of June 30, 1996 FFF had DM 11 million ($7.3 million) in loans from the Company. The loans bear an annual interest rate of 10.5%. The Company has agreed to subordinate its claims under the loans to all other claims against FFF. 5. SUBSEQUENT EVENTS Czech Republic On August 1, 1996, the Company entered into an agreement (the "CS Agreement") with Ceska Sporitelna Bank ("CS") for the purchase of CS's 22% economic and 20% of CS's voting rights in Nova TV for a purchase price of Kc 1 billion (approximately $36,000,000). In connection with the CS Agreement, the Company is to receive CS's remaining 1995 dividend of Kc 38.8 million (approximately $1.4 million) scheduled to be paid in November 1996 as well as 88% of all future dividends declared. If the increase in the Company's economic ownership from 66% to 88% of Nova TV had been in effect for the whole of 1996, then the Company's Attributable Broadcast Cash Flow for Nova TV would have increased by $5.4 million for the six month period ended June 30, 1996. In connection with the CS Agreement, the Company has entered into a loan agreement with CS to finance 85% of the purchase price. The remainder of the purchase price Kc 150 million ($5,500,000) will be paid by the Company on November 15, 1996 out of its cash balances. The CS loan will be drawn in August 1996 and April 1997 in the amounts of Kc 450 million ($16,298,000) and Kc 400 million ($14,487,000), respectively to fund purchase price payments due at those times, and bears annual interest at the rate of 12.9% p.a. The agreement and subsequent registration of the Company's increased ownership are subject to Czech laws. 7 Romania On July 12, 1996, the Company announced its intention to exercise its option within the next few months to buy 49% of the shares of PRO TV, SRL, an affiliate station of Media Pro International owned by the Company's partners (Adrian Sarbu and Ion Tiriac) on terms that have yet to be finalized. This option was granted to the Company through the terms of the partnership agreement for Media Pro International. Credit Agreement The Company has received offers from banks and is currently negotiating final terms and conditions of the offers to fully underwrite a $50 million long term revolving credit facility (the "Potential Corporate Debt Facility") . The Potential Corporate Debt Facility, after terms and conditions have been successfully negotiated, is subject to satisfactory documentation of final due diligence to be performed by the bank. In connection with these negotiations, CME's subsidiary, CME Media Enterprises B.V. CME BV entered into a bridge loan facility, on July 16, 1996, for $10,000,000 with ING Bank which matures on September 30, 1996 and bears annual interest at a rate of 1.5 per annum above LIBOR. The shares of CME BV have been pledged as security for this loan. Both CME and CME's subsidiary Central European Media Enterprises N.V. have guaranteed repayment of the facility. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction Central European Media Enterprises Ltd ("CME") is a Bermuda corporation. CME together with its subsidiaries (CME together with its subsidiaries are collectively referred to as the "Company" and the term subsidiaries includes each corporation or partnership in which CME has a direct or indirect equity or voting interest) owns, develops and operates national private commercial television stations and networks in the newly emerging markets of Central and Eastern Europe and regional private commercial television stations in Germany. The Company operates the leading national television station in the Czech Republic, has interests in regional stations in Berlin, Nuremberg, Leipzig and Dresden, Germany, has launched national television broadcasting networks in Romania and Slovenia in December 1995 and holds a 95% ownership interest in 2002 Consulting and Servicing Limited Liability Company ("2002") which acquired a 97.4% interest in a production and dubbing studio in Hungary in May 1996. These operations broadcast to an aggregate of approximately 27 million people. The Company expects to commence broadcast operations in the Slovak Republic and increase its technical coverage in Romania during 1996, thus extending its reach to a projected 35 million people. In addition, the Company anticipates commencing broadcast operations in Hungary in 1997 and is pursuing broadcast development opportunities in Hungary, Poland, Ukraine, Germany and other regions. The Company owns a 66% interest in Ceska Nezavisla Televizni Spolecnost s.r.o. ("Nova TV"), which broadcasts as the only private national television station in the Czech Republic with a market share of approximately 65-70% in the country. On August 1, 1996, the Company entered into an agreement with Ceska Sporitelna Bank ("CS")for the purchase of CS's 22% economic interest and 20% of CS' voting rights in Nova TV for a purchase price of Kc 1 billion (approximately $36 million) (See Note 5 to the Notes to the Consolidated Financial Statements). The Company owns a 58% equity and a 72% effective economic interest in Pro Plus, a national television network launched in December 1995 which currently broadcasts "POP TV" to 72% of the population in Slovenia. The Company holds a 77.5% equity interest in Media Pro International, a Romanian television network launched in December 1995 which currently broadcasts "PRO TV" to approximately 9.6 million people (although the Company's partners hold options which, if exercised, would reduce the Company's interest to approximately 66%.) In Hungary the Company holds a 95% ownership interest in 2002 Consulting and Servicing Limited Liability Company ("2002") which has a 97.4% indirect beneficial ownership interest in Videovox Studio Limited Liability Company ("Videovox"), a Hungarian dubbing and production company acquired in May 1996 which, thus far, has limited revenues and expenses. The Company also owns a 52.6% non-controlling interest in PULS ("PULS", formerly known as 1A Berlin), a regional television station based in Berlin, Germany, and a 50% interest 8 (non-voting profit participation) in Franken Funk & Fernsehen GmbH ("FFF"), which owns 74.8% of a regional television station in Nuremberg, Germany, NMF Neue Medien Franken GmbH and Co., K.G. ("NMF"). The Company's interest in PULS increased to 52.6% during the six months ended June 30, 1996 from 48.48% at December 31, 1995 as a result of additional capital calls paid by the Company and not satisfied by the other partners of PULS. Additionally, the Company has formed Slovenska Televizna Spolocnost s.r.o. in Slovakia which expects to launch Markiza TV on August 30, 1996 and by the end of the third quarter of 1996 which will broadcast to approximately 2.7 million people. The Company has an effective 80% economic interest in STS. The Company's revenues are derived principally from the sale of television advertising to local, national and international advertisers. The Company also engages in certain barter transactions in which the stations exchange unsold commercial advertising time for goods and services such as programming, broadcasting equipment, car rentals and newspaper advertising space. The experience of the television industry is that advertising sales tend to be lowest during the third quarter of each calendar year, which includes the summer holiday schedules (typically July and August) and highest during the fourth quarter of each calendar year. The primary expenses incurred in operating broadcast stations are employee salaries, programming costs, broadcast transmission expenses and selling, general and administrative expenses. Certain of the Company's operations do not require the direct incurrence of broadcast transmission expenses. License fees payable to government entities in connection with securing television licenses from government authorities, if any, are usually minimal. However, the Company incurs significant development expenses, including funding and negotiating with local partners, researching and preparing license applications, preparing business plans and conducting pre-operating activities. The Company conducts all of its operations through subsidiaries. Accordingly, the primary internal sources of the Company's cash are dividends and other distributions from its subsidiaries. The Company's ability to obtain dividends or other distributions is subject to, among other things, restrictions on dividends under applicable local laws and foreign currency exchange regulations of the jurisdictions in which its subsidiaries operate. The subsidiaries' ability to make distributions or otherwise repatriate funds to the Company are also subject to their having sufficient funds from their operations legally available for the payment thereof which are not needed to fund their operations, obligations or other business plans and, in some cases, the approval of the other partners, stockholders or creditors of these entities. The laws under which the Company's currently operating subsidiaries are organized provide generally that dividends may be declared by the partners or shareholders out of yearly profits subject to the maintenance of registered capital and required reserves and after the recovery of accumulated losses based on the local statutory accounting principles in each country. 9 The following table sets forth certain operating data for the six months ended June 30, 1996 and 1995 respectively, and for the year ended December 31, 1995 (dollars in thousands). For the six months ended June 30, 1995, Nova TV was the only operation included as a consolidated entity in the figures below. POP TV and PRO TV began operations in December 1995 while Videovox was acquired on May 1, 1996.
Unaudited --------- Six months ended ------------------------- Year ended June 30, June 30, December 31, 1996 1995 1995 -------- -------- ------------ (1) Operating Data: Net revenues................................................... 61,514 47,238 98,919 Less: Station operating expenses..................................... (40,426) (22,892) (53,451) Station selling, general and administrative expenses........... (8,374) (2,939) (6,816) Station operating income....................................... 12,714 21,407 38,652 Depreciation of assets......................................... 6,098 3,196 7,251 Amortization of programming rights............................. 10,269 6,492 16,319 Cash program rights costs...................................... (13,787) (12,863) (24,040) Broadcast cash flow............................................ 15,294 18,232 38,182 Broadcast cash flow margin..................................... 24.9% 38.6% 38.6%
For the six months ended June 30, 1996 For the six months -------------------------------------- ended June 30, 1995 ------------------ PRO TV POP TV Nova TV Nova TV ------ ------ ------- ------- Operating Data for Consolidated Broadcast Operations (1): Net revenues ....................................... 4,980 3,656 52,878 47,238 Less: Station operating expenses ......................... (7,730) (6,275) (26,421) (22,892) Station selling, general and administrative expenses (2,253) (1,765) (4,356) (2,939) Station operating income (loss) .................... (5,003) (4,384) 22,101 21,407 Depreciation of assets ............................. 1,149 1,163 3,786 3,196 Amortization of programming rights ................. 1,453 620 8,196 6,492 Cash program rights costs .......................... (3,118) (927) (9,742) (12,863) Broadcast cash flow ................................ (5,519) (3,528) 24,341 18,232 Broadcast cash flow margin ......................... - - 46.0% 38.6% Broadcast cash flow attributable to the Company (66%(2) 77.5% and 72% of Broadcast cash flow for Nova TV, Pro TV, and POP TV, respectively) ...................................... (4,277) (2,541) 16,065(2) 12,033 Pro Forma Broadcast cash flow atributable to the Company from Nova TV (88%(3)) .................... 21,420(3)
(1) Does not include the results of operations of Videovox, a Hungarian production and dubbing studio, acquired on May 1, 1996. (2) Broadcast cash flow for a 66% interest in Nova TV. (3) Pro Forma Broadcast cash flow for Nova TV includes the additional 22% interest from the Ceska Sporitelna Agreement as if the Ceska Sporitelna Agreement had been effective from January 1, 1996. 10 "Broadcast cash flow" is a broadcasting industry measure of performance and defined as net revenues, less station operating expenses excluding depreciation and amortization, station selling, general and administrative expenses, and cash program rights costs. "Broadcast cash flow margin" is Broadcast cash flow divided by net revenues. "Broadcast cash flow attributable to the Company" is Broadcast Cash Flow which is attributable to the Company based on the Company's effective economic interest in PRO TV and POP TV, and a 66% existing interest in Nova TV along with the additional 22% interest in Nova TV as if the Ceska Sporitelna had been in effect from January 1, 1996. Cash program rights costs represent cash payments for current programs payable and such payments do not necessarily correspond to program use. The Company has included broadcast cash flow because it is commonly used in the broadcast industry as a measure of performance. Broadcast cash flow should not be considered as a substitute measure of operating performance or liquidity prepared in accordance with generally accepted accounting principles. Broadcast cash flow for the Company was $15.3 million for the six months ended June 30, 1996. Nova TV's Broadcast Cash Flow Margin reached 53.8% in the second quarter 1996, an increase of approximately 66% over the second quarter 1995. For the six months ended June 30, 1996 Nova TV's broadcast cash flow increased by 33.5% to $24.3 million over the same period 1995 . Nova TV's stronger Broadcast cash flow was driven by increased net revenues. Net revenues for the second quarter 1996 increased $3.7 million or 13.0% over the same period 1995. For the first six months of 1996 net revenues increased $5.6 million or 11.9% over the same period 1995. In local currency terms the increase was more dramatic as net revenues for the second quarter of 1996 increased 21.6% over the same period 1995. For the six months period ended June 30 1996 Net Revenues in local currency increased 16.3% over the same period 1995. In addition to stronger revenues, Nova TV has begun to realize the financial benefits of its 1995 initiative to significantly increase the size of its program library and lock in lower programming costs. Cash payments for programming for the second quarter 1996 decreased $3.7 million to $5.5 million from $9.2 million. For the first six months of 1996 cash payments for programming decreased by $3.1 million to $9.7 million from $12.9 million for the first six months of 1995. Nova TV's positive Broadcast Cash Flow was offset by negative Broadcast cash flow from POP TV and PRO TV of $3.5 million and $5.5 million, respectively, in the six month period ended June 30, 1996. On August 1, 1996, the Company entered into the CS Agreement to purchase an additional 22% interest in Nova TV. Had the Ceska Sporitelna Agreement been in effect since January 1, 1996, Broadcast cash flow attributable to the Company would have been increased by approximately 33.3% or $5.3 million to $21.4 million from $16.1 million for the six month period ended June 30, 1996 (See Note 5 to Notes to the Consolidated Financial Statements). Application of Accounting Principles Although the operations are largely in foreign currencies, the Company prepares its financial statements in United States dollars and in accordance with generally accepted accounting principles in the United States (See Foreign Currency section below for the effects of foreign exchange movements). The Company's consolidated operating statements include the results of Nova TV, PRO TV, POP TV, and Videovox and separately set forth the minority interest attributable to other owners of Nova TV, PRO TV, POP TV, and Videovox for the six months ended June 30, 1996. POP TV and PRO TV began operations in December 1995 while Videovox was acquired in May 1996; thus Nova TV was the only consolidated entity for the six months ended June 30, 1995. The results of other broadcast operations, PULS, FFF and SFF, are accounted for using the equity method which reflects the Company's share of the net income or losses in those operations. The Company's investments in broadcast operations under development and other broadcast development opportunities are reflected on the balance sheet as development costs. 11 Foreign currency The Company and its subsidiaries generate revenues primarily in Czech korunas (iKci), Romanian lei ("ROL"), Slovenian tolar ("SIT") and German marks (iDMi), and incur substantial operating expenses in those currencies. The Czech koruna, Romanian lei and Slovenian tolar are managed currencies with limited convertibility. The Company also incurs operating expenses of programming in United States dollars and other foreign currencies. Within the Management's Discussion and Analysis of the Financial Condition and Results of Operations, for entities operating in economies that are considered non-highly inflationary which include Nova TV and POP TV balance sheet accounts are translated from foreign currencies into United States dollars at the relevant period-end exchange rate; statement of operations accounts are translated from foreign currencies into United States dollars at the weighted average exchange rates for the respective periods. The resulting translation adjustments are reflected in a component of shareholders' equity with no effect on the consolidated statements of operations. PRO TV operates in an economy qualifying as highly inflationary. Accordingly, non-monetary assets are translated at historical exchange rates and monetary assets are translated at current exchange rates. Translation adjustments are included in the determination of the income. Currency translation adjustments relating to transactions of the Company in currencies other than the functional currency of the entity involved are reflected in the operating results of the Company. The official exchange rates for the Czech koruna, Romanian lei, Slovenian tolar and market exchange rate for the German mark, at the end of, and during, the periods indicated were as follows: The Company's results of operations and financial position for the six months ended June 30 ,1996 have been impacted by changes in foreign currency exchange rates since December 31, 1995. In the highly inflationary economy in Romania, PRO TV indexes sales contracts to the US Dollar in order to minimize the effects of Romanian Lei devaluations. The Czech Koruna, German Mark, Romanian Lei, Slovenian Tolar have all weakened against the dollar as shown below:
Balance Sheet Income Statement At Six months Six months December At June 30, Movement ended June ended June 30, Movement 31, 1995 1996 % 30, 1995 1996 % -------- ----------- -------- ---------- -------------- -------- Czech koruna equivalent of $1.00 26.60 27.61 -3.80 26.44 27.46 -3.86 Romanian lei equivalent of $1.00 2,578 3,028 -17.46 2,402* 2,888 -20.23 Slovenian tolar equivalent of $1.00 126 136.61 -8.42 126** 134.34 -6.62 German mark equivalent of $1.00 1.43 1.52 -6.29 1.43 1.50 -4.90
* Average exchange rate from December 1, 1995 through December 31, 1995 only. ** Average exchange rate from December 15, 1995 through December 31, 1995 only. As a result, the underlying Czech Koruna and Slovenian Tolar assets and liabilities of Nova TV and POP TV, respectively, will have decreased by 3.8% and 8.4%, respectively, in dollar terms due to foreign exchange movements. Media Pro International's monetary assets and liabilities will have decreased by up to 17.5% during the six month period ended June 30, 1996 depending on the time they remained outstanding during the period. Likewise, investments in unconsolidated affiliates (1A Berlin and FFF, both in Germany) will have decreased 6.29% in dollar terms. Nova TV's operating income, together with interest costs and minority interest, is approximately 4% lower than would be the case had the weighted average exchange rate for the six months ended June 30, 1996 remained the same as for the six months ended June 30 ,1995. 12 POP TV and PRO TV's operating losses, together with interest costs and minority interest, are approximately 6.62% and 20.23%, respectively, lower than would be the case had the weighted average exchange rate for the six months ended June 30, 1996 remained the same as for the year ended December 31, 1995 (subject to certain adjustments to Media Pro International profit and loss items which are derived from non-monetary assets and liabilities). Similarly, equity in loss of unconsolidated affiliates was 4.9% lower than would have been the case had weighted average exchange rates remained unchanged. Results of Operations POP TV and PRO TV were launched in December 1995 while Videovox was acquired in May 1996. Therefore, certain fluctuations in profit and loss activity in the three months ended June 30, 1996 and 1995 and the six months ended June 30, 1996 and 1995 are consistently explained by the addition of the POP TV, PRO TV and Videovox operations. Three months ended June 30, 1996 compared to three months ended June 30, 1995 A comparison between the operating income(loss) for consolidated entities in the three months ended June 30, 1996 and 1995 is shown below for references purposes:
Certain Operating Data: for three months ended June 30, 1996 ------------- Corporate Total (in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME ------------ ------- ------ ------ -------- -------- ------- Net Revenues 32,258 3,429 2,572 291 0 38,550 Total Station Expenses (16,086) (5,330) (4,714) (736) 0 (26,866) Corporate expenses 0 0 0 0 (3,982) (3,982) ------- ------ ------ -------- -------- ------- Net Operating Income / (Loss) 16,172 (1,901) (2,142) (445) (3,982) 7,702 for three months ended June 30, 1995 ------------- Corporate Total (in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME ------------ ------- ------ ------ -------- -------- ------- Net Revenues 28,551 - - - 0 28,551 Total Station Expenses (14,009) - - - 0 (14,009) Corporate expenses 0 0 0 0 (3,762) (3,762) ------- ----- ----- ------ ------- ------ Net Operating Income / (Loss) 14,542 - - - (3,762) 10,780
The Company's consolidated net revenues increased $9,999,000, or 35%, to approximately $38,550,000 for the three months ended June 30, 1996. The strong growth in net revenues in the second quarter of 1996 was primarily due to Nova TV's strongest second quarter in its history and the addition of the POP TV and PRO TV operations. Nova TV's net revenues increased by $3,706,000, or 13%, to $32,258,000 for the three months ended June 30, 1996, while POP TV's and PRO TV's net revenues were $2,572,000 and $3,429,000, respectively, for the three months ended June 30, 1996. The Company expects continued growth in net revenues for Nova TV, POP TV and PRO TV for the remainder of 1996 although a seasonal decrease in the net revenues is expected in the third quarter. Since the Company has a minority ownership or non-controlling interest in PULS and FFF, losses incurred by PULS, FFF and SFF are accounted for under the equity method and, therefore, no revenues are presented in respect of these entities. Total station expenses increased by $12,857,000 to $26,866,000 for the three months ended June 30, 1996. POP TV and PRO TV total station expenses were $4,714,000 and $5,330,000, respectively, while Nova TV's station expenses increase by $2,079,000, or 14%, to $16,088,000 for the three months ended June 30, 1996. The 13 increase in total station expenses for Nova TV relate primarily to increased scope of operations as well as increased programming amortization on Nova TV's larger program library. Corporate operating costs and development expenses for the three months ended June 30 1996 and 1995, are $3,982,000 and $3,762,000, respectively, increasing $220,000, or 6%. Interest and Other Income decreased by $58,000 or 12%, to $442,000 for the three month period ended June 30, 1996. Interest expense decreased by $599,000, or 53%, to $525,000 for the three month period ended June 30, 1996 from $1,124,000 for the three month period ended June 30, 1995 primarily due to the pay down of debt at Nova TV. As a result of these factors, the net loss of the Company increased by $3,255,000 to $4,630,000 for the three months ended June 30, 1996 from $1,375,000 for the three months ended June 30, 1995. Six months ended June 30, 1996 compared to the six months ended June 30, 1995 A comparison between the operating income(loss) for consolidated entities in the six months ended June 30, 1996 and 1995 is shown below for reference purposes:
Certain Operating Data: for six months ended June 30, 1996 ------------- Corporate Total (in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME ------------ ------- ------ ------ -------- -------- ------- Net Revenues 52,878 4,980 3,656 291 0 61,805 Total Station Expenses (30,777) (9,983) (8,040) (736) 0 (49,536) Corporate expenses 0 0 0 0 (7,173) (7,173) ------- ------ ------ ---- ------ ------- Net Operating Income / (Loss) 22,101 (5,003) (4,384) (445) (7,173) 5,096 for six months ended June 30, 1995 ------------- Corporate Total (in 000's $) Nova TV PRO TV POP TV VideoVox Expenses CME ------------ ------- ------ ------ -------- -------- ------- Net Revenues 47,238 - - - 0 47,238 Total Station Expenses (25,831) - - - 0 (25,831) Corporate expenses 0 - - - (6,249) (6,249) ------- ------ ------ ------- ------ ------- Net Operating Income / (Loss) 21,407 0 0 0 (6,249) 15,158
The Company's consolidated net revenue increased $14,567,000, or 30%, to approximately $61,805,000 for the six months ended June 30, 1996 from $47,238,000 for the same period in 1995. This increase is primarily attributable to the increase in advertising revenues earned by Nova TV which increased by $5,640,000 to $52,878,000 in the six months ended June 30, 1996, and the Company's new operations, PRO TV and POP TV, which had net revenues of $4,980,000 and $3,656,000, respectively, in the six months ended June 30, 1996. Since the Company has a minority ownership or non-controlling interest in PULS and FFF, losses incurred by PULS and FFF are accounted for under the equity method and, therefore, no revenues are presented in respect of these entities. Total station expenses increased by $17,909,000 to $40,801,000 in the six months ended June 30, 1996. As a percentage of net revenues, total station operating costs and expenses increased from 48% in the six months ended June 30, 1995 to 66% for the six months ended June 30, 1996. These expenses represent the costs associated with the operations of Nova TV, PRO TV, POP TV and Videovox, including amortization of programming rights of 14 $10,269,000 and $6,492,000, and depreciation of station assets and amortization of other intangibles of $6,109,000 and $3,196,000 in the six months ended June 30, 1996 and 1995, respectively. The increase in station operating costs and expenses is primarily attributable to the addition of the Company's new operations, PRO TV, POP TV, and Videovox, which had total station expenses of $9,983,000, $8,040,000 and $736,000, respectively, and partially to increased scope of operations of Nova TV and amortization on Nova TV's larger program library. Station selling, general and administrative expenses increased by $5,796,000 to $8,735,000 in the six months ended June 30, 1996 from $2,939,000 for the same period in 1995. As a percentage of net revenues, station selling, general and administrative expenses increased from 6% for the six months ended June 30, 1995 to 14% for the six months ended June 30, 1996. This increase in station selling, general and administrative expenses as a percentage of net revenues is primarily the result of additional station selling, general and administrative expenses from the Company's start up of PRO TV and POP TV. Corporate operating costs and development expenses in the six months ended June 30, 1996 and 1995 were $7,173,000 and $5,439,000, respectively, increasing $1,734,000, or 32%. This increase is primarily due to the Company's increased scope of operations. Operating income decreased $10,062,000 as the Company generated operating income of $5,096,000 in the six months ended June 30, 1996 compared to operating income of $15,158,000 in the six months ended June 30, 1995. The overall decrease in the Company's operating results is primarily attributable to operating losses from the Company's new operations, PRO TV and POP TV, both launched in December 1995, and partially to increased corporate and development expenses. Loss in unconsolidated affiliated companies decreased by $830,000 to $5,936,000 for the six months ended June 30, 1996 from $6,766,000 for the six months ended June 30, 1995. The Company's share of losses in PULS for the six months ended June 30, 1996 was lower despite the Company's increase in ownership from 43.3% at June 30, 1995 to 52.6% at June 30, 1996. PULS has begun a new local programming format which has reduced operating costs as well as slightly increasing net revenues. In addition, losses at FFF have also decreased as a result of a similar change in its programming format and slightly increased net revenues. Interest and other income increased by $120,000, or 13%, to $1,079,000 for the six months ended June 30, 1996. Interest expense decreased $602,000, or 28%, to $1,532,000 during the six months ended June 30, 1996 from $2,134,000 in the six months ended June 30, 1995. This is primarily due to lower debt levels at Nova TV, including the early repayment of debt, during the six month period ended June 30, 1996 compared to the same period in 1995. Provision for income taxes was $8,313,000 for the six months ended June 30, 1996 and $8,178,000 for the six months ended June 30, 1995. The income tax provision in the six months ended June 30, 1996 and 1995 primarily relates to income taxes payable in the Czech Republic on Nova TV pre-tax profits which have increased due to increased net income at Nova TV, offset by an income tax rate of 41% in the six months ended June 30, 1995 and an income tax rate of 39% in the six months ended June 30, 1996. Minority interest in (income) loss of consolidated subsidiaries was ($1,144,000) in the six months ended June 30, 1996 and ($3,923,000) in the six months ended June 30, 1995. This decrease is primarily the result of losses for the Company's new operations PRO TV and POP TV launched in December 1995. As a result of these factors, the net loss of the Company was $12,380,000 and $4,769,000 for the six months ended June 30, 1996 and 1995, respectively. 15 Liquidity and Capital Resources Cash provided by operating activities was $5,464,000 for the six months ended June 30, 1996 and $3,863,000 for the six months ended June 30, 1995. This increase was due to increased sales and accounts receivable collections at Nova TV, offset by cash used to fund the start-up of operations at POP TV and PRO TV. Accounts receivable increased by $12,022,000, or 51%, to $35,581,000, net of currency fluctuations, from $23,559,000 at June 30, 1996 for the same period in 1995. This is primarily due to increased sales at Nova TV and the addition of accounts receivable from PRO TV and POP TV. Current liabilities increased by $25,120,000, 89%, to $53,236,00 at June 30, 1996 from $28,116,000 at June 30, 1995, principally as a result of increased income and other taxes payable, programming contracts, and increased accounts payable and accrued liabilities related to the Company's new operations, PRO TV and POP TV. Cash used in investing activities was $29,997,000 and $22,066,000 for the six months ended June 30, 1996 and 1995, respectively, primarily due to fixed asset acquisition in the Company's new operations, PRO TV and POP TV, and higher capitalized development costs for the six months ended June 30, 1996. In the six month period ended June 30, 1996 the Company invested $10,670,000 in property, plant and equipment to continue the buildout of the POP TV and PRO TV operations as well as to further strengthen the capital base of Nova TV. Also during the six month period ended June 30, 1996, $14,349,000 was invested in development activities related primarily to equipment and programming for Markiza TV (expected to launch in August 1996). During the six months ended June 30, 1996, the Company sold $6,300,000 of marketable securities and $2,000,000 of restricted cash was made available by the Hungarian government subsequent to the privatization of Videovox, to partially fund these investments. The Company's investment in unconsolidated affiliates increased, net of currency fluctuations, to $16,691,000 as of June 30, 1996 from $12,433,000 as of December 31, 1995. This is a result of additional investments in PULS of DM 12,500,000 ($8,360,000) and FFF of DM 1,500,000 ($1,084,000), partially offset by the Company's share of the losses in PULS of DM 7,491,000 ($4,994,000) and FFF of DM 1,329,000 ($942,000) for the six months ended June 30, 1996. The investments reflect an additional capital call of DM 10,000,000 ($6,570,302) for PULS and an additional loan of DM 1,500,000 ($985,545) to FFF during the six months ended June 30, 1996. Cash used in financing activities was $2,826,000 and 3,077,000 for the six months ended June 30, 1996 and 1995, respectively, principally consisting of the repayment of bank loans, loans to affiliates and repayment of advances from affiliates. The Company's initial public offering completed in October 1994 raised net proceeds of $68.8 million from the issuance of 5,462,500 shares of Class A Common Stock. Proceeds of the Company's initial public offering have been used to fund the Company's operations (approximately $16.0 million), development activities (approximately $27.0 million), overhead (approximately $8.1 million) and to repay the loans and advances from affiliates in the amounts described above. In November 1995, the Company completed a second public offering of 4,000,000 shares of Class A Common Stock (the `1995 Offering') which raised $ 86,574,000 of net proceeds. Concurrent with the 1995 Offering, the Company's largest shareholder, Ronald S. Lauder, was issued 297,346 shares of Class A Common Stock at the price to public in the Offering less underwriting discounts and commissions in exchange for a note of the Company in the principal amount of $6,500,000 held by him. The Company was paid a dividend of approximately $1,400,000 in 1995 by Nova TV. In March 1996, Nova TV declared a dividend of Kc 330,000,000 ($12,066,000) of which Kc 116,325,00 ($4,153,000) was paid to the Company in May 1996 with the remainder of Kc 116,325,000 ($4,213,000) scheduled to be paid to the Company in November 1996. As part of the CS Agreement, the Company is entitled to receive CS's remaining 1995 dividend of Kc 38.8 million (approximately $1.4 million) scheduled to be paid in November 1996 as well as 88% of all future dividends declared. After the receipt of the remaining 1995 Nova TV dividend, based on the Company's original 66% interest in Nova TV, which totals $4,213,000, the Company will have received 107% of its original US dollar investment in Nova TV made approximately 2.5 years earlier. 16 The Company has received offers from banks and is currently negotiating final terms and conditions of the offers to fully underwrite a $50 million long term revolving credit facility (the "Potential Corporate Debt Facility"). The Potential Corporate Debt Facility, after terms and conditions have been successfully negotiated, is subject to satisfactory documentation of final due diligence to be performed by the bank. In connection with these negotiations, CME's subsidiary CME Media Enterprises B.V. ("CME BV") entered into a bridge loan facility, on July 16, 1996, for $10,000,000 with ING Bank which matures on September 30, 1996 and bears annual interest as a rate of 1.6 per annum above LIBOR. The shares of CME BV have been pledged as security for this loan. Both CME and another subsidiary, Central European Media Enterprises N.V. have guaranteed repayment of this facility. On August 1, 1996, the Company entered into an agreement with Ceska Sporitelna Bank ("CS") for the purchase of CS's 22% economic interest and 20% of CS voting rights in Nova TV for a purchase price of Kc 1 billion ($36 million). The Company has also entered into a loan agreement with CS to finance 85% of the purchase price. The remainder of the purchase price Kc 150 million ($5,500,000) will be paid by the Company on November 15, 1996 out of the Company's cash balances. The agreement and subsequent registration of the Company's increased ownership are subject to Czech laws. The CS loan will be drawn in August 1996 and April 1997 and in the amounts of Kc 450,000,000 ($16,298,000) and Kc 400,000,000 ($14,487,000), respectively to fund purchase payments due at those times, and the loan bears an interest rate of 12.9% annually. Quarterly repayments on the loan are required in the amount of Kc 22,500,000 ($815,000) during the period from November 1997 through November 1998, Kc 42,500,000 ($1,539,000) during the period from February 1999 through August 2002, and Kc 20,000,000 ($724,000) during the period from November 2002 through November 2003. Primarily, as a result of the 1995 Offering and the results of operations of Nova TV in 1995 and 1996, the Company had cash of $25,348,000 at June 30, 1996 ($53,210,000 at December 31, 1995) and marketable securities of $4,352,000 at June 30, 1996 ($10,652,000 at December 31, 1995) available to finance its future activities. The Company has made and will continue to make investments to develop broadcast operations in Central and Eastern Europe and regions of Germany. The Company's cash needs for those investment activities exceed cash generated from operations, resulting in external financing requirements that may be satisfied through bank debt facilities or other means. The Company expects that Nova TV's future cash requirements will continue to be satisfied through operating cash flows and available borrowing facilities. Nova TV currently has two loan facilities with Ceska Sporitelna, the first facility consists of a long term loan due on December 30, 1999 in the principal amount of Kc 300 million ($11.0 million) and currently bears interest at a rate of 14.5% per annum, subject to change based on fluctuations in the lender's base rate, of which Kc 180,000,000 ($6,519,000) was outstanding at June 30, 1996. Principal payments of Kc 60,000,000 ($2,194,000) are due each year on this facility. In January 1996 Nova TV paid the Kc 60,000,000 due on this facility for 1996. The second facility is line of credit loan, obtained in November 1995, for an amount up to Kc 250,000,000 ($9,141,000) bearing interest at a rate of 12% per annum. This facility was unutilized at June 30, 1996. These loans are secured by Nova TV's equipment, vehicles and receivables. In exchange for certain assets, PRO TV has assumed the payment of two loans from an affiliated entity, payable to Tiriac bank of Romania, which is partially owned by a PRO TV investor. The principal portion of the first loan is $250,000 which bears interest at a rate of 12% per annum. This loan has variable monthly payments with a final balloon payment of $165,000 due in September 1996. The second loan in the sum of $300,000, was fully repaid with interest at the end of May 1996. The first loan is secured by certain equipment of Media Pro International. Under the partnership agreement for PULS, the Company is not required to contribute any additional capital to PULS; however, if any of the partners in PULS, including the Company, do not fund future capital requirements their equity interest in PULS may be diluted. In the six months ended June 30, 1996, the Company funded additional capital contributions of DM 12,500,000 ($8,360,000) to PULS of which DM 2,500,000 ($1,642,576) related to a 1995 capital call. In addition, in the six months ended June 30, 1996 the Company funded 17 a shareholder loan to FFF of DM 1,500,000 ($985,545). PULS and FFF are expected to require additional funding of DM 10,000,000 ($6,666,667) and DM 500,000 ($ 333,333), respectively. Except for the Company's working capital requirements and completing the funding of television stations in Romania, Slovenia, and Slovakia, the Company's future cash needs will depend on management's acquisition and development decisions. The Company is actively engaged in the development of additional investment opportunities in broadcast licenses and investments in existing broadcasting companies throughout Germany and Central and Eastern Europe. The Company incurs limited expenses in identifying and pursuing broadcast opportunities before any investment decision is made. The Company anticipates making additional investments in other broadcast operations, supplemented by capital raised from local financial strategic partners as well as local debt and lease financing, to the extent that it is available and appropriate for each project. The laws under which the Company's currently operating subsidiaries and affiliates are organized provide generally that dividends may be declared by the partners or shareholders out of yearly profits subject to the maintenance of registered capital, required reserves and after the recovery of accumulated losses. In the case of the Company's Dutch and Netherlands Antilles subsidiaries, the Company's voting power is sufficient to compel the making of distributions. Subsequent to the registration of the Ceska Sporitelna Agreement, However, the Company's voting power will be is not sufficient to compel Nova TV to make distributions. In the case of PULS, the PULS Partnership Agreement provides that if profits are available for distribution, 66 2/3% of the partnership interest may require that 40% of such profits be placed in reserves until DM 16,700,000 are reserved. All profits in excess thereof must be distributed. The agreement relating to FFF does not contain restrictions on distributions out of available profits. In the case of PRO TV, dividends may be paid from the profits of PRO TV subject to a reserve of 5% of annual profits until the aggregate reserves equal to 20% of PRO TV's registered capital. A majority vote can compel PRO TV to make distributions. In the case of POP TV, the Company's voting power is not sufficient to compel the payment of dividends. There are no legal reserve requirements in Slovenia. The laws of countries where the Company is developing operations contain restrictions on the payment of dividends. The Company believes that the net proceeds of the 1995 Offering together with the Company's current cash balances, cash generated from Nova TV, potential corporate debt facilities, and local financing of broadcast operations and broadcast operations under development should be adequate to satisfy the Company's operating and capital requirements for approximately 12 months. This is a forward looking statement and the Company's actual need for additional capital and the timing thereof may vary materially depending largely on the Company's acquisition and development decisions as set forth above in "Liquidity and Capital Resources." 18 Part II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In July, 1996, the Company, along with the Company's Slovenian partners, entered into an agreement to purchase 66% of the shares of Kanal A, a private television station in Slovenia ("the Kanal A Agreement"). Scandinavian Broadcast Systems, S.A. ("SBS"), which purportedly has certain rights in Kanal A through a Shareholders and Subscription Agreement and Loan Note Agreement, has challenged the enforceability of the Kanal A Agreement in court in England. Both the Company and SBS have filed for and been granted injunctions which prevent the other party from taking certain steps to implement their own agreements or block the other sides' agreement(s). The Company has instituted legal action in Slovenia asking the courts there to resolve the matter. Various competitors of PULS and NMF have instituted legal action against the media authorities for Berlin-Brandenburg and the Nuremberg area seeking to overturn their decisions to award broadcast licenses to PULS and NMF, respectively. These actions were instituted in 1994, and there have been no proceedings in relation thereto in the last 15 months. An unfavorable decision in either of these actions could have a material adverse effect on the Company. The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. The Company is not presently a party to any such litigation which could reasonably be expected to have a material adverse effect on its business or operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS The following are the results of voting by shareholders present or represented at the Annual Meeting of Shareholders held on May 3, 1996. a) Election of Directors: The following persons, as named in CME's proxy, were elected to serve as Directors of CME until the next annual meeting of shareholders or until their respective successors have been elected and qualified: Votes for Abstain Leonard M. Fertig 82,951,121 15,567 Andrew Gaspar 82,951,121 15,567 Ronald S. Lauder 82,951,121 15,567 Mark Palmer 82,951,121 15,567 Robert Rayne 82,951,121 15,567 Herbert S. Schlosser 82,951,121 15,567 Nicolas G. Trollope 82,951,121 15,567 b) Adoption of the 1995 Stock Option Plan: The 1995 Stock Option Plan was adopted. There were 81,867,876 votes cast for approval, 374,292 against and 3,070 votes abstaining. c) Adoption of the financial statements: The financial statements of CME for the fiscal year ended December 31, 1995, together with the auditors' report thereon, were adopted. There were 82,940,921 votes cast for approval, 23,967 against, and 1,800 votes abstaining. d) Approval of independent auditors: Approval of independent auditors: Arthur Andersen were selected as auditors of CME for the fiscal year ending December 31, 1996. There were 82,964,421 votes cast for approval, 1,467 against and 800 votes abstaining. 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) The following exhibits are attached: Exhibit ------- 27.01 Financial Data Schedule 10.01 Quota Purchase Agreement for Videovox 10.02 Amendment to the Quota Purchase Agreement for Videovox 10.03 Ceska Sporitelna - CME BV, Transfer Agreement 10.04 Ceska Sporitelna - CME BV, Annex to Transfer Agreement 10.05 Ceska Sporitelna - CME BV, Loan Agreement 10.06 Ceska Sporitelna - CME BV, Agreement on a future Agreement 10.07 ING bank - CME BV, Bridge Loan Agreement 10.08 ING bank - CME BV, Share Pledge Agreement b) No reports on Form 8-K were filed during the quarter ended March 31, 1995. 20 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. /s/ Leonard M. Fertig Date: August 14, 1996 ----------------------------- Leonard M. Fertig Chief Executive Officer (Duly Authorized Officer) /s/ John A. Schwallie Date: August 14, 1996 ----------------------------- John A. Schwallie Chief Financial Officer (Principal Financial Officer) 21 Exhibit Index Exhibit Page Number 27.01 Financial Data Schedule 24 10.01 Quota Purchase Agreement for Videovox 10.02 Amendment to the Quota Purchase Agreement for Videovox 10.03 Ceska Sporitelna - CME BV, Transfer Agreement 10.04 Ceska Sporitelna - CME BV, Annex to Transfer Agreement 10.05 Ceska Sporitelna - CME BV, Loan Agreement 10.06 Ceska Sporitelna - CME BV, Agreement on a future Agreement 10.07 ING bank - CME BV, Bridge Loan Agreement 10.08 ING bank - CME BV, Share Pledge Agreement 22 EX-10.01 2 QUOTA PURCHASE AGREEMENT QUOTA PURCHASE AGREEMENT between the State Privatization and Holding Company (1113 Budapest, Ujpest rakpart 31-33; Representative: Attila Lascsik, Managing Director) as the Seller (hereinafter "APV Rt." or "Seller") and the Magyarhang Dubbing and Production Limited Liability Company (1024 Budapest, Keleti Karoly u. 42/A; Representative: Gyorgy Balo, Manager) as the Buyer (hereinafter Buyer) (hereinafter together the Parties) on the date and place given below, relating to the sale of APV Rt's 90% quota in Videovox Studio Limited Liability Company (1021 Budapest, Huvosvolgyi ut 64.) (hereinafter Company or Videovox) , in accordance with resolution no. 41/1996 (I.17.) and resolution no. 181/1996 (III.20) amending the former , under the following conditions: WHEREAS, APV Rt. Quota refers to the quota owned exclusively by the Seller and which represents Company's 100% quota; Court of Registration refers to the Registration Court of the Metropolitan Court; Parties refer to the Buyer and the Seller together; Invitation refers to the invitation to bid issued by the Seller on 22 October 1995 for the sale of the Seller's Quota; Land Registry Office refers to the Metropolitan Districts' Land Registry Office; Resolution refers to resolution no. 41/1996 (I.17.) made on 17 January 1996 at the meeting of APV Rt's Board of Directors, and to resolution no. 181/1996 (III.20.) amending the former resolution; Information Memorandum refers to the information booklet which was made available to the bidders by the Seller after the Invitation was published, and which could be purchased from 27 October 1995; Real Property refers to the site and the buildings on the site registered in the Land Registry Office under lot no. 11126 and property sheet no. 606, and the address of which is 64. Huvosvolgyi ut, District 2 of Budapest; Hungarian Dubbing and Video Company refers to the state-owned company which was the legal predecessor of the Company before its transformation into a business entity on 30 September 1994; Maximum Capital Increase refers to section 4.1. of the Agreement stipulating the amount by which the Seller shall raise the original capital and which shall be carried out within 365 days after Closing; Separation Agreement refers to the agreement concluded between Hungarian Dubbing and Video Company and Pannionia Film Company on 30 March 1994, pertaining to the theoretical division, 3583/4158 (Hungarian Dubbing and Video Company) and 575/4158 (Pannonia Film Company) respectively, between the Parties, of the Management right of the Site; Minimum Capital Increase refers to section 4.2. of the Agreement where the Buyer undertakes to fulfill the minimum capital increase required by the Seller by 15 May 1996; Employees' Quota refers to the quota the face value of which is 16,830,000 HUF, that is: Sixteen million eight hundred and thirty thousand Hungarian Forints, and which has been put aside from the APV Rt. quota for the employees to purchase; Self-Government refers to the Self-government of District 2 of Budapest; Bid refers to the documents containing the Buyer's bid to buy the Quota, submitted in response to the Invitation on 22 November 1995; and the letter, dated 29 November 1995 and 7 December 1995, explaining the section in the bid referring to the settlement proposition concerning the Real Property; Pannonia refers to Pannonia Limited Liability Company, registered by the Court of Registration under no. Cg: 01-09-365537. 100% of Pannonia's stake is owned by the Seller and, after the Separation, it shall be entitled to 13.83% ownership, currently purchased outside the land register, on the basis of the Separation Agreement dated 30 March 1994, the property assessment prepared by Flax-Men Consultancy Limited Liability Company on 31 March 1994 and the balance sheet dated 30 September 1994, and, from among the buildings on the Site, the ownership of the buildings described in the Separation and Division Agreement; Pannonia Film Studio refers to the state-owned company, operating as the common legal predecessor of the Hungarian Dubbing and Video Company and the Pannonia Film Company; Pannonia Film Company refers to the state-owned company operating as Pannonia's legal predecessor before its transformation into a business entity on 30 September 1994; Full Development Plan refers to the plan which is required in order to carry out the physical division of the Site, based on the theoretical shares of 3583/4158 (Videovox share) and 575/4158 (Pannonia share. The plan was prepared in accordance with the National Construction Regulations and the Budapest Town Development Regulations; Agreement refers to this quota purchase agreement; Separation refers to the organisational separation of the Hungarian Dubbing and Video Company and Pannonia Film Company as of 1 July 1986; Resolution of the Separation refers to the resolution of the Ministry of Education dated 30 June 1986 on the Separation; Separation Agreement refers to the agreement dated 24 April 1986 facilitating the Shares of Pannonia Film Company and the Hungarian Dubbing and Video Company from the assets of Pannonia Film Studio; Consultant refers to Barents Group LLC who participated in the preparation of the Information Memorandum at the Seller's request; Company refers to Videovox Studio Limited Liability Company the 100% of which is owned by the Seller and which is registered by the Court of Registration under no. Cg: 01-09-365451, and which shall be entitled to a 86.17% ownership share, currently purchased outside the land register, on the basis of the Separation Agreement dated 30 March 1994, the property assessment prepared by Coopers & Lybrand Limited Liability Company on 31 March 1994 and the balance sheet dated 30 September 1994, and, from among the buildings on the Site, the ownership of the buildings described in the Separation and Division Agreement. The Company's registered capital at closing is 168,340,000 HUF, that is: one hundred and sixty-eight million three hundred and forty thousand Hungarian Forints; Site refers to the site, without buildings, at 64. Huvosvolgyi ut, District 2 of Budapest, registered by the Land Registry Office under lot no. 11126 and property sheet no. 606; Quota refers to the stake in the Company representing 90% of the Company's registered capital and having a face value of 151,600,000 HUF, that is: one hundred and fifty-one million six hundred thousand Hungarian Forints, and which Quota was offered for sale by the Seller in the Invitation; Purchase Price refers to the Purchase Price stipulated in section 2.1. of this Agreement as the Purchase Price of the Quota which is to be paid by the Buyer in accordance with the conditions set out in this Agreement. APV Rt's Board of Directors, in accordance with the evaluation criteria published in the Information Memorandum, declared the Buyer the winner of the tender and has published this in the Resolution. On the basis of the above, the Parties agree in the following: 1. THE PURCHASE AND SALE OF THE QUOTA 1.1. Upon the terms and subject to the conditions of this Agreement, the Seller shall sell and the Buyer shall buy, in accordance with the conditions set out in his bid, the Seller's Quota in the Company and which Quota is owned exclusively by the Seller, and which Quota represents 90% of the company's original capital and the face value of which is 151,600,000 HUF, that is: one hundred and fifty one million six hundred thousand Hungarian Forints. 1.2. The Buyer declares that the declaration, required for the conclusion of this quota purchase agreement, was made without any undue illegal influence. 2. THE PURCHASE PRICE 2.1. In full consideration of the sale and transfer of the Quota, and upon the terms and subject to the conditions of this Agreement, the Buyer shall pay, in accordance with the conditions stipulated in points from 2.2 to 2.5 below, 640,523,898 HUF, that is: six hundred and forty million five hundred and twenty-three thousand eight hundred and ninety-eight Hungarian Forints , which represents 423.00% rate of the face value of the Quota. 2.2. The Buyer shall pay the 638,523,898 HUF, that is: six hundred and thirty eight million five hundred and twenty-three thousand eight hundred and ninety-eight Hungarian Forint Purchase Price in Compensation Coupons calculated at value added interest. The Seller shall include the remaining 2,000,000 HUF, that is: two million Hungarian Forints deposited by the Buyer in cash on 21 November 1995 in the Seller's account no. 203-60650-7007 held at the Hungarian Foreign Trade Bank Co. Ltd., opened for the purpose of receiving deposit money . The Certificate of the payment of the deposit money (hereinafter Deposit Money) can be found in Appendices 1.1. and 1.2. attached to the Bid. 2.3. Within 7 days after the Closing, the Buyer shall deposit with the Budapest Shares and Investment Bank Co. Ltd. 638,523,898 HUF, that is: six hundred and thirty eight million five hundred and twenty-three thousand eight hundred and ninety-eight Hungarian Forints in Compensation Coupons which will be calculated at a 174.2% interest rate added to the face value. 2.4. The original receipt of deposit of the Compensation Coupons, described under point 2.2. of this Agreement, (hereinafter Receipt of Deposit) issued to the Buyer, together with the letter of assignment (hereinafter Letter of Assignment), providing the assignment of the above Compensation Coupons to the Seller, shall be handed over by the Buyer within 7 working days after Closing. 2.5. In addition to the Purchase Price, the Buyer shall pay a further 1,000,000 HUF, that is: one million Hungarian Forints in privatization costs to the Seller in cash within 7 working days after Closing. Said amount shall be transferred to the Seller's account no. 19017004 - 00220026 - 00007014 held at the National Bank of Hungary. 3. PAYMENT OF THE PURCHASE PRICE 3.1. The privatization cost, described in section 2.5. above, shall be considered paid on the day when the Seller presents a copy of the transfer order to the Seller, certifying that the said amount has been transferred to the Seller's account no. 19017004 - 00220026 - 00007014 held at the National Bank of Hungary Co. Ltd. The Seller shall issue a receipt to the Buyer, confirming the payment of the privatization cost, when the certificate of the transfer is presented. 3.2. The Purchase Price set out in point 2.2. of this Agreement shall be considered paid on the day when the Buyer presents to the Seller the Receipt of Deposit and the Letter of Assignment , as set out in point 2.4. of this Agreement. Upon presentation of the Receipt of Deposit and the Letter of Assignment, the Seller shall issue a certificate to the Buyer, confirming the payment of the Purchase Price, in accordance with the prescriptions given above. 3.3. The Purchase Price shall be considered paid on the day both receipts of confirmation, as described in points 3.1. and 3.2. above, are received. On this day the Seller shall transfer to the Buyer all of its right, title and interest in the Quota. The issuing of the certificate, as described in point 3.2. above, means the transfer of the ownership. 3.4. Should the Buyer fail to pay the Purchase Price or the privatization cost, it shall pay the Seller, from the date of default in payment, a default interest which shall be double the current Hungarian National Bank base rate. The default interest can only be paid in cash by transferring the amount due to the Seller's account no. 19017004 - 00220026 - 00007014 held at the National Bank of Hungary Co. Ltd. 3.5. The Seller is entitled to claim damages from the Buyer on event of delay or non-fulfillment. If the Buyer does not present the Receipt of Deposit and the Letter of Assignment by the date stipulated in point 2.4. above, the Seller is entitled to cancel the Agreement. 4. THE OBLIGATIONS OF THE BUYER 4.1. The Buyer undertakes to raise the Company's registered capital by 480,000,000 HUF, that is: four hundred and eighty million Hungarian Forints (Maximum Capital Increase) in the following manner: 4.2. The Buyer shall raise the Company's registered capital by 15 May 1996 the latest by 100,000,000 HUF, that is: one hundred million Hungarian Forints in cash (Minimum Capital Increase), and shall present to the Seller a certificate, as prescribed in point 4.5. above, within the time stipulated thereof, evidencing the accomplishment of the capital increase. 4.3. The Buyer shall raise the Company's registered capital by a further 380,000,000 HUF, that is: three hundred and eighty million Hungarian Forints within 365 days from Closing. The Buyer shall present a certificate to the Seller within 30 days of the deadline stipulated in said point for the completion of the raising of the registered capital, as prescribed in point 4.6. below, evidencing the accomplishment of the capital increase. 4.4. The Minimum Capital Increase, as described in point 4.1. above, shall be considered accomplished on the day when the Buyer presents to the Seller the resolution of the Company's general meeting on the Minimum Capital Increase together with the certified copy of the application submitted to the Registration Court, a copy of the transfer order evidencing that the amount of the Minimum Capital Increase has been transferred to the Company's account, and a valid Court of Registration order. 4.5. The Maximum Capital Increase, as described in point 4.1. above, shall be considered accomplished on the day when the Buyer presents to the Seller the resolution of the Company's general meeting on the Maximum Capital Increase together with the certified copy of the application submitted to the Registration Court and a valid Court of Registration order. Should the Buyer accomplish the Maximum Capital Increase in instalments, all the amounts by which the original capital of the Company was raised, if accomplished within the deadline stipulated in point 4.3. above, shall be added up. 4.6. If the Buyer does not fulfill his obligations set out in point 4.2. above, the Seller may, on the basis of the bank guarantee issued on 23 November 1995 by Internationale Nederlanden Bank (Hungary) Co. Ltd. (1061 Budapest, Andrassy u. 9.), call on the Bank to pay 100,000,000 HUF, that is: one hundred million Hungarian Forints because of the Buyer's violation of the Agreement. This amount may only be used to raise the Company's registered capital in order to fulfill the Minimum Capital Increase obligations, and the members' meeting will vote accordingly. The Buyer undertakes to convene, without delay, the members' meeting, a requirement if the capital is to be raised, and shall make a resolution at this meeting which will ensure that the 100,000,000 HUF. capital increase is accomplished. 4.7. The Seller in the Invitation undertook to offer the quota, the face value of which is 16,830,000 HUF, that is: sixteen million eight hundred and thirty Hungarian Forints, which represents 10% of the Company's registered capital, after the tender is closed, in accordance with APV Rt. UV's resolution no. 526/1995 (X.17.), for sale to the employees of the company at the rate indicated in the Buyer's bid, with a maximum 50% concession on the concession package. The Seller shall fulfill his obligation stipulated in said point thereof within 1 year of Closing. The Buyer agrees to buy, at a purchase price corresponding to the purchase rate of the Quota stipulated in point 2.1. of this Agreement, the Employees' Quota or that portion of the Employees' Quota which has not been bought by the employees within the date open for the purchasing of the Employees' Quota, within 60 days of the expiry of the deadline stipulated for the purchasing of the Employees' Quota, and the payment shall be made in accordance with the provisions in point 2.2. of this Agreement. The Seller guarantees that the face value of the Employees' Quota, stipulated in said point, shall not change after Closing, and that the raising of the registered capital, after Closing, shall under no circumstances proportionally change the face value. 4.8. Regarding the Seller's sale of the Employees' Quota, the Buyer waives its preemption right, set out in ss.171 of the Law on Economic Organizations, relating to the Employees' Quota sold by the Seller up till the stipulated deadline. This waiver shall not prejudice the Buyer to exercise its preemption right relating to the sale of the employees' quota purchased from the Employees' Quota to third parties. The Buyer guarantees to coordinate with APV Rt. and shall vote, at the members' meeting convened because of the employees' quotas to be sold in accordance with the Invitation and this Agreement, in favour of the company's not wishing to exercise its preemption right, and that the members' meeting not appointing a third person to exercise the preemption right. 4.9. The Buyer hereby acknowledges that the Seller is entitled to receive the dividend due to a member (Seller) which may have accumulated in 1995. The Buyer agrees that at the members' meeting approving the Company's 1995 balance sheet, it shall vote to facilitate the paying of the dividend to the Seller, and shall transfer it without delay to the Seller's account no. 232-90107-8000 held at the National Bank of Hungary. 4.10. The Buyer agrees to report to the Seller of the fulfillment of the obligations, stipulated in this Agreement, from the date of the transfer of the ownership rights of the Quota as set out in point 3.3. of this Agreement, until the date of fulfillment of the Maximum Capital Increase obligation. 4.11. The Buyer agrees to direct and manage the Company, and to exercise its ownership rights in accordance with its bid, which constitutes the Appendix of this Agreement. 5. OBLIGATIONS OF THE SELLER 5.1. The Seller agrees that during the period between the Closing and the date of the transfer of the ownership rights of the Quota, as stipulated in point 3.3. of this Agreement, it shall not, unless expressly requested by the Buyer, make any decisions affecting the operation of the Company. Thus, the Seller agrees that: (i) as the current owner of the Company, it shall order the Company's managing director in a resolution of founding, not to make any statement in the name of the Company and not to undertake any obligations, bar the legal statements the managing director has been expressly ordered to make by the Seller in order to execute this Agreement, during the period between the Closing and the date of the assignment of the ownership rights of the Quota, as stipulated in point 3.3. of this Agreement; (ii) it shall not amend the Company's Founding Charter; (iii) except in the cases stipulated in this Agreement, it shall not encumber its quota in the Company or any part thereof, and shall not ensure any right in the quota or any part thereof, and shall not make a decision on the sale of its quota in the Company or on the raising or decreasing of the registered capital; (iv) it shall not encumber or dispose of any part or all of the Company's property; Furthermore, the Seller agrees not to take any action relating to the Company during this period without the Buyer's prior written approval, the giving of which the Buyer cannot refuse without a valid reason. The Seller is financially responsible for any damage incurred as a result of the violation of the conditions in said point. 6. PROVISIONS RELATING TO THE REAL PROPERTY 6.1 The Parties hereby acknowledge that: the Company's legal predecessor was Pannonia Film Studio, a state-owned company set up in 1951. Pannonia Film Studio was the sole manager of the Real Property. In accordance with the provisions of the Resolution on Separation, Pannonia Film Studio ceased to exist as of 1 July 1986; the Ministry of Education split it into two companies: the Hungarian Dubbing and Video Company and the Pannonia Company. The Resolution on Separation makes provisions concerning the division of the state property, formerly managed by Pannonia Film Studio, between the Hungarian Dubbing and Video Company and the Pannonia Company. In order to execute the provisions of the Resolution on Separation, on 24 April 1986, the Hungarian Dubbing and Video Company and the Pannonia Company concluded the Separation Agreement, in which the Parties agree that: 6.1.1. The Site, the main building, the two porter's lodges and the reverbatory chamber shall be managed by the Hungarian Dubbing and Video Company, while Pannonia Company shall have the management rights of the Drawing Pavilion, the Clasp building, the two wooden buildings and the container buildings. The Separation Agreement provides that the primary future objective of both companies is to build a new head office for Pannonia Film Company on Budakeszi ut, District 2 of Budapest, so that the buildings vacated on the Real Property can be used by the Hungarian Dubbing and Video Company for expansion. 6.1.2. On the basis of the Resolution on Separation and the Separation Agreement, the sole management right of the Real Property was registered in favour of the Hungarian Dubbing and Video Company, and this record does not specify separately the buildings managed by Pannonia Film Company and Hungarian Dubbing and Video Company on the Real Property. In order to settle this matter, the Hungarian Dubbing and Video Company and Pannonia Company concluded the Separation Agreement on 30 March 1994, under which agreement, Pannonia Film Company assigns the management right of the Clasp building to the Hungarian Dubbing and Video Company which, in exchange, assignes Pannonia Film Company the management right of the 575/4158 theoretical share of the Site. The separation of the management right, in accordance with the Separation Agreement, was requested at the Land Registry Office by both companies, and this application has been recorded under note no.194.932/94. 6.2. As of 30 September 1994, The Hungarian Dubbing and Video Company and Pannonia Film Studio were transformed into business entities, resulting in the formation of the Company from the Hungarian Dubbing and Video Company, and Pannonia from the Pannonia Film Company. On the basis of the Company's transformation balance sheet, the part of the Real Property owned by the Hungarian Dubbing and Video Company, as indicated in the Separation Agreement, was assigned to the Company, on the basis of the property assessment dated 31 March 1994 and the balance sheet dated 30 September 1994, prepared by Coopers & Lybrand (both documents constitute part of the Appendix attached to this Agreement). At Closing, the Land Registry Office has not yet entered the name of the new owner of the Real Property in its records. 6.3. Provisions relating to the settlement of the ownership of the Real Property In accordance with the prescriptions of the Invitation, the Buyer has to give details in his bid about the further development of the real property at 64-66 Huvosvolgyi ut, Budapest, where the head offices of both Videovox and Pannonia are to be found. The prescriptions of the resolutions on founding no. 70/1996 (III.20) and 79/1996 (III.20), brought in the basis of the Buyer's bid and the Resolution, provide that Pannonia and Videovox conclude an Agreement and a Separation and a Termination of Joint Property Ownership Agreement, to be found in Appendix 5 of this Agreement, in order to settle the ownership of the Real Property. In accordance with the above, the Buyer is obliged to have the plan of the separation, from the Tarogato ut side, of the property at 64-66. Huvosvolgyi ut prepared, and submit the documents required for the separation to the competent authorities, within 30 days of the Agreement, in Appendix 5 of this Agreement, coming into force. In addition, it has to bear and advance the costs of the procedure, and agree that if the detailed plan of development is not submitted by the prescribed deadline due to some fault of the Buyer, it shall be obliged to pay 15,000,000 HUF, that is: fifteen million Hungarian Forints in penalty to the Seller. On event of the Self-government's issuing the legally binding permit for the separation of the property, the Buyer shall be obliged to pay Pannonia 55,000,000 HUF + VAT, that is: fifty million Hungarian Forints plus VAT as the price of the Pavilion, Pannonia's moving expenses and the cost of the construction of its new building. If the Self-government does not bring a legally binding resolution on the separation of the property by 30 August 1996 the latest, Pannonia, in accordance with the founding resolution no. 70/1996 (III.20.), shall be obliged to sell to Videovox its 13.87% property share and the buildings in its ownership, by 30 September 1996 as stipulated in the Agreement in Appendix 5 of this Agreement, for the following purchase prices: 28,490,000 HUF, that is: twenty-eight million four hundred and ninety thousand Hungarian Forints for the property share; 22,100,000 HUF + VAT, that is: twenty-two million one hundred thousand Hungarian Forints plus VAT for the pavilion; 33,410,000 HUF + VAT, that is: thirty-three million four hundred and ten thousand Hungarian Forints plus VAT for Pannonia's moving expenses and the cost of constructing its planned new building. 7. DECLARATIONS AND WARRANTIES 7.1. The Seller warranties and guarantees with no stipulated deadline that 7.1.1. the Company has been duly incorporated with the Registration Court under Registration no. Cg: 01-09-002445; 7.1.2. it is the sole owner of the Quota; 7.1.3. it has made available to the Company 86.17% of the Site, the main building, the two caretaker's lodges and the Clasp building, as described in the property assessment dated 31 March 1994 and the balance sheet dated 30 September 1994, prepared by Coopers & Lybrand , and has made available to Pannonia 13.83% of the Site, the Drawing Pavilion, the two wooden houses and the two container buildings, as described in the property assessment dated 31 March 1994, and the balance sheet dated 30 September 1994, prepared by Flax-Men Limited Liability Company. All of the above documents can be found in the Appendices of this Agreement. 7.1.4. third parties do not have preemption rights, cannot buy options or obtain any other right relating to the Quota; 7.1.5. it is fully entitled to, on the basis of the decision made as the result of the assessment of the bids submitted in response to the Invitation for the sale of the Company's Quota, to conclude a Quota Purchase Agreement for the sale of the Quota in its ownership with the Buyer on the basis of its bid. 7.1.6. it shall, with a founding resolution, divide its quota in the company in accordance with the proportion stipulated in point 1.1. of this Agreement, in order to facilitate its assignment. 7.2. The Buyer represents that 7.2.1. it has requested the Company to provide all the facts, data and information necessary for it to make its bid, submitted on 22 November 1995, and that it has studied the documents made available to it by the Company; 7.2.2. it had the possibility to obtain all the facts, data and information necessary to prepare its Bid, submitted on 22 November 1995. It has studied the information and the documents, the Company's business, financial and legal position necessary for the conclusion of this Agreement, and it does not need any further information and documents in order to fulfill the terms of this Agreement. It is familiar with the Company's position, its bookkeeping, contracts and other documents, its work contracts, and it has studied the Company's books, balance sheets, which constitute the basis of the bid, and that it shall only put forward claims concerning guarantee, warranty and damages, which are based on the Seller's declarations or obligations in this Agreement, or if the Seller violates the prescriptions of this Agreement or legal regulations; 7.2.3. it is familiar with the Company's Deed of Foundation and the amendments thereof, and it accepts the terms of the Deed of Foundation; 7.2.4 it considers the terms of his bid contractually binding. 8. SETTLING LEGAL DISPUTES 8.1. The parties agree that all disputes arising out of this Agreement shall be primarily settled through negotiations. Should the Parties be unable to settle such disputes, they agree to undertake the exclusive jurisdiction of the (Budapest) Metropolitan Court. 8.2. This Agreement shall be governed by Hungarian Law. 8.3. The Provisions of the Civil Code and Law VI of 1988 on Economic Organizations shall apply to those issues which are not dealt with in this Agreement. 9. MISCELLANEOUS 9.1. If any part of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the remaining part. In such instances, the Parties shall amend the invalid part or regulation in a manner so as to be able to accomplish, with the invalid part or regulation, the originally desired economic objective. 9.2. All notices, declarations, announcements or any statements pertaining to this Agreement, or the amendment of this Agreement shall only be valid if given in writing. The Parties agree that all notices, declarations, announcements or statements addressed to each other and pertaining to this Agreement shall be sent to the following addresses: If to the Seller: Attila Lascsik, Managing Director State Privatization and Holding Company (1133 Budapest, Ujpest rakpart 31-33.) Fax: 267-6698 If to the Buyer: Gyorgy Balo, Manager Magyarhang Dubbing and Production Ltd. (1024 Budapest, Keleti Karoly u. 42/A) Fax: 315-0501 Should the addresses given in this Agreement change, this shall only be considered valid by the other party if the party in question informs the other party of the change in writing, the only exception being if there is a pertinent legal regulation. 10. THE COMING INTO FORCE OF THE AGREEMENT This agreement shall come into force on Closing. Budapest, 26 April 1996 - ---------------------------------------- ---------------------------------- APV Rt. Magyarhang Kft Representative: Attila Lascsik Representative: Gyorgy Balo Managing Director Manager EX-10.2 3 AMENDMENT TO THE QUOTA PURCHASE AGREEMENT AMENDMENT TO THE QUOTA PURCHASE AGREEMENT between the State Privatization and Holding Company (1113 Budapest, Ujpest rakpart 31-33; Representative: Attila Lascsik, Managing Director) as the Seller (hereinafter "APV Rt." or "Seller") and the Magyarhang Dubbing and Production Limited Liability Company (1024 Budapest, Keleti Karoly u. 42/A; Representative: Gyorgy Balo, Manager) as the Buyer (hereinafter Buyer) (hereinafter together the Parties) on the date and in the place given below: The Parties, as of 26 April 1996, shall amend, as follows, the Quota Purchase Agreement (hereinafter Agreement) dated 26 April 1996, providing for the purchase of Videovox Studio Limited Liability Company's (1021 Budapest, Huvosvolgyi ut 64.) 90% quota, because of a mistake in the figures: 1. From among the definitions of the Agreement, the definition of the Quota shall be amended as follows. "Quota refers to the stake in the Company representing 90% of the Company's registered capital and having a face value of 151,510,000 HUF, that is: one hundred and fifty-one million five hundred and ten thousand Hungarian Forints, and which Quota was offered for sale by the Seller in the Invitation", 2. Point 1.1. of the Agreement shall be amended as follows: "1.1. Upon the terms and subject to the conditions of this Agreement, the Seller shall sell and the Buyer shall buy, in accordance with the conditions set out in his bid, the Seller's Quota in the Company and which Quota is owned exclusively by the Seller, and which Quota represents 90% of the company's original capital and the face value of which is 151,510,000 HUF, that is: one hundred and fifty one million five hundred and ten thousand Hungarian Forints." In other respects the Agreement shall remain unchanged. Budapest, 7 May 1996 - ------------------------------------- -------------------------------- On behalf of APV Rt. On behalf of Magyarhang Kft. Attila Lascsik Gyorgy Balo Managing Director Manager EX-10.3 4 TRANSFER AGREEMENT AGREEMENT ON TRANSFER OF PARTICIPATION INTEREST pursuant to the Section 115 of the Commercial Code This Agreement on Transfer of Participation Interest ("Agreement") is entered into this 17th day of July, 1996 between the following Parties: The Parties to this Agreement are: 1. Eeska spo0itelna, a. s., with its registered office at Prague 1, Na P0ikopi 29, 113 98, IDN 45 24 47 82, represented by Ing. Jaroslav Klapal, the Chairman of the Board of Directors and the General Director and JUDr. Rudolf Hanus, the Vice-Chairman of the Board of Directors and the Deputy to the General Director ("Transferor"). 2. CME MEDIA ENTERPRISES B.V., with its registered office at Leidseplein 29, Amsterdam, Netherlands, represented by Leonard M. Fertig, Managing Director ("Transferee"). ("Parties") Recitals 1. The Company. The Company means Eeska nezavisla televizni spoleenost, spol. s r. o., a limited liability company organised and registered under the laws of the Czech Republic, with its registered seat at Vladislavova 20, Prague 1 ("Company" or the "_NTS"), IDN 49616668. 2. The Participation Interests. The Company has a total of 3 Participation Interests registered, which represent 100% of the registered capital of the Company. The registered capital of the Company is 400,000,000 CZK. 3. The Transferor. The Transferor owns Participation Interest which is representative of 22% of the registered capital of the Company which is representative of contribution of 88,000,000 CZK. 1 Article I. Transfer of Participation Interest 1. The Transferor offers and transfers and the Transferee accepts and acquires the part of the Transferor's Participation Interest in the Company which is representative of contribution of 80,000,000 CZK. 3. During next 3 years following the enforceability of this Agreement, Transferee has an exclusive right to demand the Transferor to transfer the balance of his Participation Interest, which is representative of contribution of 8,000,000 CZK, to the Transferee or to a third party specified by the Transferee, and the Transferor is obliged to transfer such balance of his Participation Interest to the specified party. The consideration for such additional transfer is included in the price pursuant to Article II. of this Agreement. Article II. Purchase Price The purchase price for the Participation Interest is one billion (1.000.000.000 CZK) Czech Crowns. Article III. Representations and warranties of the Transferor 1. Transferor possesses an unlimited ownership of the Participation Interest described above, and declares that the Participation Interest is not pledged or encumbered in any way and the Participation Interest is transferable pursuant to the Memorandum of Association. 2. No action which could dilute or modify the rights of Transferee as an owner of the Participation Interest has been taken or is pending. 3. The Transferor is not in bankruptcy or in a situation which could lead to its liquidation. 4. The Transferor made and shall make all substantial decisions for the transfer. 2 5. The Transferor submitted to the General Meeting of the Company held before the execution of this Agreement the changes of the Memorandum of Association and obtained an approval with the proposal (i) to divide the Participation Interest into two parts, in order to facilitate the transfer of the part which is representative of the contribution of 80,000,000 CZK to the Transferee immediately following the signing of this Agreement and the part representative of the contribution of 8,000,000 CZK which will remain in Transferor's ownership on the conditions stated in Article I. para 3. of this Agreement and (ii) the proposal to change the Memorandum of Association of the Company in order to incorporate that a request for an approval of the transfer of the Participation Interests need not be filed with the Council of the Czech Republic of TV and Radio Broadcasting. Article IV. Representations and warranties of the Transferee 1. The Transferee is a private company duly incorporated, organised and existing under the laws of the Netherlands. 2. The Transferee has the power and authority to execute and deliver this Agreement. Such execution, delivery and performance have been duly authorised by all necessary corporate action on its part. This Agreement has been duly executed and delivered by its duly binding obligations enforceable against it in accordance with the terms hereof except. 3. The execution, delivery and performance of this Agreement will not: 3.1 violate or conflict with any provision of Transferee's internal regulations; or 3.2 violate in any respect any the laws of the Czech Republic and the Netherlands; or 3.3 violate, conflict with, or constitute a breach of default of the Transferor in any respect. 4. No consent, approval or authorisation of, or declaration of filing with any public authority, is required by Transferee for the valid execution of this agreement. 5. There are no claims, actions, suits proceedings or investigations pending or, to the best or Transferee's knowledge, which if adversely determined, would restrain or enjoying the consummation of the transactions contemplate by this Agreement or declare unlawful the transactions or events contemplated by this Agreement or cause any of such transaction to rescinded. Article V. Companies Registry The both Parties notify the Executives of the Company will register the changes in the formation documents of the Company in the Companies Registry. Article VI. Final clauses 1. Force majeure. Either Party is not responsible for any failure to perform its obligations hereunder due to force majeure, which shall include, but not be limited to, fires, floods, natural disasters, wars, acts of God, or due to any other cause beyond the reasonable control of the Party. If force majeure shall occur, the affected Party shall promptly give notice thereof to the other Party and use its best efforts to cure or correct such event of force majeure. 2. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision hereof. Any announcement regarding the Agreement shall be given to the second Party by registered letter with notice of receipt or by fax confirmed by letter and shall be deemed served the day of the reception of the letter or of the fax. 3. Entire Agreement. This Agreement constitutes the entire agreement between the Parties. Any amendment to this Agreement must be executed in writing and signed by the Parties. This Agreement supersedes any existing verbal arguments. 4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Czech Republic. 5. Arbitration. 5.1 All disputes between the Parties arising in connection with this Agreement or related to the breach of it, validity of it or rights related to it, which can be solved by the conciliation pursuant to the Section 99 of the Civil Procedure Act, shall be finally settled pursuant to the Act No. 216/1994 Coll., on arbitration and the execution of the arbitration settlements, by three Arbitrators. 5.2 Each Party appoints one Arbitrator, the appointed Arbitrators then elect the Chair Arbitrator. If the Party does not appoint the Arbitrator within 30 days after the delivery of the request of the second Party, or if the appointed Arbitrators are not able to elect the Chair Arbitrator within the same period, the Chair Arbitrator shall be appointed by the Arbitration Court. 5.3 The arbitration will take place in Prague. 5.4 The arbitration shall be governed by the laws of the Czech Republic, but the Arbitrators may decide pursuant to the principle of the equity. 5.5 The Parties shall respect the arbitration settlement and realise it immediately. 6. Language. This Agreement is made in the English and Czech language versions of this Agreement. The Czech version is prevailing. 7. Addresses. For the purpose of this Agreement, the addresses of the Parties shall be the following: For Transferor: ____________________ ____________________ ____________________ Fax: ____________________ For Transferee: ____________________ ____________________ ____________________ Fax: ____________________ 8. Validity and enforceability. This Agreement is valid and enforceable upon the signature of the Agreement by both Parties. 9. Final provisions. The Agreement is executed in six counterparts in both languages. Both Parties will take three counterpart in both languages. Executed at Prague, Czech Republic, this 17th day of July, 1996. By and on behalf of the Transferor: ____________________ ____________________ By and on behalf of the Transferee: ____________________ ____________________ EX-10.4 5 AGREEMENT ON TRANSFER AGREEMENT ON TRANSFER OF PARTICIPATION INTEREST pursuant to the Section 115 of the Commercial Code This Agreement on Transfer of Participation Interest ("Agreement") is entered into this 17th day of July, 1996 between the following Parties: The Parties to this Agreement are: 1. Ceska sporitelna, a. s., with its registered office at Prague 1, Na Prikope 29, 113 98, IDN 45 24 47 82, represented by JUDr. Karel Kotrba, the Vice-Chairman of the Board of Directors and the First Deputy to the General Director and JUDr. Rudolf Hanus, the Member of the Board of Directors and the Deputy to the General Director ("Transferor"). 2. CME MEDIA ENTERPRISES B.V., with its registered office at Leidseplein 29, Amsterdam, Netherlands, represented by Leonard M. Fertig, Managing Director ("Transferee"). ("Parties") Recitals 1. The Company. The Company means Ceska nezavisla televizni spolecnost, spol. s r. o., a limited liability company organised and registered under the laws of the Czech Republic, with its registered seat at Vladislavova 20, Prague 1 ("Company" or the "CNTS"), IDN 49616668. 2. The Participation Interests. The Company has a total of 3 Participation Interests registered, which represent 100% of the registered capital of the Company. The registered capital of the Company is 400,000,000 CZK. 3. The Transferor. The Transferor owns Participation Interest which is representative of 22% of the registered capital of the Company which is representative of contribution of 88,000,000 CZK. Article I. Transfer of Participation Interest 1. The Transferor offers and transfers and the Transferee accepts and acquires the part of the Transferor's Participation Interest in the Company which is representative of contribution of 80,000,000 CZK. 3. During next 3 years following the enforceability of this Agreement, Transferee has a right to demand the Transferor to transfer the balance of his Participation Interest, which is representative of contribution of 8,000,000 CZK, to the Transferee or to a third party specified by the Transferee, and the Transferor is obliged to transfer such balance of his Participation Interest to the specified party. The consideration for such additional transfer is included in the price pursuant to Article II. of this Agreement. Article II. Purchase Price The purchase price for the Participation Interest is one billion (1.000.000.000 CZK) Czech Crowns. Article III. Representations and warranties of the Transferor 1. Transferor possesses an unlimited ownership of the Participation Interest described above, and declares that the Participation Interest is not pledged or encumbered in any way and the Participation Interest is transferable pursuant to the Memorandum of Association. 2. No action which could dilute or modify the rights of Transferee as an owner of the Participation Interest has been taken or is pending. 3. The Transferor is not in bankruptcy or in a situation which could lead to its liquidation. 4. The Transferor made and shall make all substantial decisions for the transfer. 5. The Transferor submitted to the General Meeting of the Company held before the execution of this Agreement the changes of the Memorandum of Association and obtained an approval with the proposal (i) to divide the Participation Interest into two parts, in order to facilitate the transfer of the part which is representative of the contribution of 80,000,000 CZK to the Transferee immediately following the signing of this Agreement and the part representative of the contribution of 8,000,000 CZK which will remain in Transferor's ownership and (ii) the proposal to change the Memorandum of Association of the Company in order to incorporate that a request for an approval of the transfer of the Participation Interests need not be filed with the Council of the Czech Republic of TV and Radio Broadcasting. Article IV. Representations and warranties of the Transferee 1. The Transferee is a private company duly incorporated, organised and existing under the laws of the Netherlands. 2. The Transferee has the power and authority to execute and deliver this Agreement. Such execution, delivery and performance have been duly authorised by all necessary corporate action on its part. This Agreement has been duly executed and delivered by its duly binding obligations enforceable against it in accordance with the terms hereof except. 3. The execution, delivery and performance of this Agreement will not: 3.1 violate or conflict with any provision of Transferee's internal regulations; or 3.2 violate in any respect any the laws of the Czech Republic and the Netherlands; or 3.3 violate, conflict with, or constitute a breach of default of the Transferor in any respect . 4. No consent, approval or authorisation of, or declaration of filing with any public authority, is required by Transferee for the valid execution of this agreement. 5. There are no claims, actions, suits proceedings or investigations pending or, to the best or Transferee's knowledge, which if adversely determined, would restrain or affect the consummation of the transactions contemplate by this Agreement or declare unlawful the transactions or events contemplated by this Agreement or cause any of such transaction to rescinded. Article V. Companies Registry The both Parties notify the Executives of the Company will register the changes in the formation documents of the Company in the Companies Registry. Article VI. Final clauses 1. Force majeure. Either Party is not responsible for any failure to perform its obligations hereunder due to force majeure, which shall include, but not be limited to, fires, floods, natural disasters, wars, acts of God, or due to any other cause beyond the reasonable control of the Party. If force majeure shall occur, the affected Party shall promptly give notice thereof to the other Party and use its best efforts to cure or correct such event of force majeure. 2. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision hereof. Any announcement regarding the Agreement shall be given to the second Party by registered letter with notice of receipt or by fax confirmed by letter and shall be deemed served the day of the reception of the letter or of the fax. 3. Entire Agreement. This Agreement constitutes the entire agreement between the Parties. Any amendment to this Agreement must be executed in writing and signed by the Parties. This Agreement superceeds any existing verbal arguments. 4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Czech Republic. 5. Arbitration. 5.1 All disputes between the Parties arising in connection with this Agreement or related to the breach of it, validity of it or rights related to it, which can be solved by the conciliation pursuant to the Section 99 of the Civil Procedure Act, shall be finally settled pursuant to the Act No. 216/1994 Coll., on arbitration and the execution of the arbitration settlements, by three Arbitrators. 5.2 Each Party appoints one Arbitrator, the appointed Arbitrators then elect the Chair Arbitrator. If the Party does not appoint the Arbitrator within 30 days after the delivery of the request of the second Party, or if the appointed Arbitrators are not able to elect the Chair Arbitrator within the same period, the Chair Arbitrator shall be appointed by the Arbitration Court. 5.3 The arbitration will take place in Prague. 5.4 The arbitration shall be governed by the laws of the Czech Republic, but the Arbitrators may decide pursuant to the principle of the equity and the Parties expressly authorise them to do it. 5.5 The Parties shall respect the arbitration settlement and realise it immediately. 6. Language. This Agreement is made in the English and Czech language versions of this Agreement. The Czech version is prevailing. 7. Addresses. For the purpose of this Agreement, the addresses of the Parties shall be the following: For Transferor: Ceska sporitelna, a.s. Na Prikope 29 113 98 Praha 1 Fax: + 42 2 6107 3070 For Transferee: CME Media Enterprises B.V. Leidseplein 29 Amsterdam the Netherlands Fax: + 44 171 292 7901 8. Validity and enforceability. This Agreement is valid and enforceable upon the signature of the Agreement by both Parties. 9. Final provisions. The Agreement is executed in six counterparts in both languages. Both Parties will take three counterpart in both languages. Executed at Prague, Czech Republic, this 17th day of July, 1996. By and on behalf of the Transferor: ------------------------------ By and on behalf of the Transferee: ------------------------------ ANNEX TO THE AGREEMENT ON TRANSFER OF PARTICIPATION INTEREST This Annex dated on 17th of July, 1996 to the Agreement on Transfer of Participation Interest ("Agreement") dated on 17th day of July, 1996 ("Annex") is entered between the following Parties: The parties: 1. Ceska Sporitezna, a. s., with its registered office at Prague 1, Na P0ikopi 29, 113 98, IDN: 45 24 47 82, represented by JUDr. Karel Kotrba, the Vice-Chairman of the Board of Directors and the First Deputy to the General Director and JUDr. Rudolf Hanus, the Member of the Board of Directors and the Deputy to the General Director ("Transferor"). 2. CME MEDIA ENTERPRISES B.V., with its registered office at Leidseplein 29, Amsterdam, Netherlands, represented by Leonard M. Fertig, Managing Director ("Transferee"). ("Parties") Recitals Parties to the Agreement on Transfer of Participation Interest dated on 17th day of July, 1996, agreed on this Annex. Article I. Terms of payment of the purchase price 1. The purchase price shall be paid as follows: 1.1 450,000,000 CZK shall be paid within 30 days after the enforceability of this Agreement. The purchase price (or its parts) shall be transferred onto the account being notified by the transferor to the Transferee. 1.2. 150.000.000 CZK shall be paid on or before 15th day of November 1996 in cash to the Transferor's account. 1.3 The balance of the purchase price shall be paid in the amount of 400,000,000 CZK on or before the end of April 1997. Article II. Representations and warranties of the Transferor Transferor provides a loan to the Transferee for the payment of the balance of the purchase price described in Article I. para 1.1 a 1.3 of the Annex. The Loan shall be for the Transferee's disposition as stated in the Loan Agreement. Article III. Representations and warranties of the Transferee Transferee has the financial ability to pay the purchase price and shall respect the term's Loan Agreement, under the conditions determined by this Annex. Article IV. Confidentiality and disclosures 1. Transferor and Transferee undertake to maintain as private and confidential: (a) all negotiations relating to the purchase of the Participation Interest pursuant to this Agreement; and (b) any expert opinions and reports prepared on the basis of information provided by the company and/or the Parties; 2. The Transferor and the Transferee undertakes to refrain from providing any and all information relating to (a) and (b), except for any direct or indirect subsidiary, parent or affiliate, which shall be bound by the same confidentiality undertaking as provided herein above. 3. Information is understood to include all material, reports, contracts, accounting and business documents, drawings, photographs and other documents provided on the basis of the Agreement. 4. This undertaking of confidentiality does not apply to information: already known by one Party before received from the other Party; publicly known; agreed to by both Parties or provided pursuant to the orders of the appropriate state bodies. 2 5. This undertaking of confidentiality is valid until the balance of the Participation Interest has been transferred pursuant to the Article I. of the Agreement. 6. The Parties shall keep this Annex secret and confidential. No press release or any other public disclosure of this Annex shall be made without a prior written consent of the other Party. Article V. Final clauses 1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Czech Republic. 2. Language. This Agreement is made in the English and Czech language versions of this Agreement. The Czech version is prevailing. 3. Validity and enforceability. This Agreement is valid and enforceable upon the signature of the Agreement by both Parties. 4. Special provision. The Parties acknowledge that the Council for Radio and TV Broadcasting of the Czech Republic was requested to cancel the conditions of the broadcasting licence No. 001/1993 issued by the Council on February 9, 1993 to CET 21, spol. s r. o., including, but not limited the condition No. 17 and such decision has not been entered by the Council. The Parties assume that pursuant to the Act No. 301/1995 Coll. amending the Act No. 468/1991 Coll., on Radio and TV Broadcasting, as amended, this condition is not enforceable. With respect to the legal security and continuous validity of the licence No. 001/1993 the Parties shall be obliged in the event the court has entered an enforceable decision that an approval is for such transfer necessary and in the absence of Council enforceable decision to approval such transfer to transfer back to each other the Participation Interest and their price paid in order to restore the original status of the Parties before the conclusion of this Agreement. 5. Final provision. The Agreement is executed in six counterparts in both languages. Both Parties will take three counterpart in both languages. 3 Executed at Prague, Czech Republic this 17th day of July 1996. By and on behalf of the Transferor: - -------------------------- By and on behalf of the Transferee: - -------------------------- 4 EX-10.5 6 LOAN AGREEMENT LOAN AGREEMENT 1. Ceska sporitelna, a. s., Prague 1, Na Prikope 29, ZIP Code 113 98 ICO (Org. Ident. No.): 45 24 47 82 represented by JUDr. Karel Kotrba, the Vice-chairman of the Board of Directors and the First Deputy to the General Director and JUDr. Rudolf Hanus, the Member of the Board of Directors and the Deputy to the General Director (hereinafter referred to as "Sporitelna") and 2. CME Media Enterprises B. V., with its registered office at Leidseplein 29, 1017 PS Amsterdam, represented by Leonard Martin Fertig, Managing Director (hereinafter referred to as "the Client") enter pursuant to Section 497 and the following of the Commercial Code No. 513/1991 Coll. as amended (hereinafter referred to as "the Commercial Code") into the following Loan Agreement: I. 1. Sporitelna agrees to lend to the Client a long term investment loan to pay up a portion of the purchase price for the Participation interest in the firm Ceska nezavisla televizni spolecnost, spol. s r. o., equal to 850,000,000 CZK (in words: eight hundred fifty million Czech Crowns). The loan facilities will be placed to the credit account No. 4503-324951-988/0800 opened with the Ceska Sporitelna, a. s., Subsidiary in Prague. 2. The parties hereunder have agreed upon an interest rate of 12.9% p.a. which shall be applicable until the loan has been repaid and settled. 3. Sporitelna shall sequentially transfer the loan facilities into the account No. 27-2295750106-988/0800 on the basis of the Agreement on Transfer of Participation Interest and the Agreement on a Future Agreement. II. 1. The parties to this Agreement agree, that the loan facilities as described in Article 1 above may be used only for the purpose specified under Article I. Paragraph 1. 2. If the Client fails to meet this contractual obligation Sporitelna will be entitled to proceed in accordance with Article IX. hereof, 3. In checking the purpose for which the loan facilities are drawn up Sporitelna reserves the right to proceed in accordance with Article VIII. hereof. III. 1. The parties hereunder agree that the loan will be drawn up sequentially in two amounts i.e. 450 million not later than on or before 30 days after the signing of this Agreement and 400 million in April 1997. IV. 1. Sporitelna and the Client agree that the last date to repay the loan is set to expire on 20 November 2003. 2. The Client covenants to make repayments on the loan quarterly always by 20th day of the 2nd, 5th, 8th and 11th month commencing on 20 November 1997. The installments shall be paid as follows: November 1997 - November 1998 CZK 22,500,000 February 1999 - August 2002 CZK 42,500,000 November 2002 - November 2003 CZK 20,000,000 The last installment shall be paid at 20 November 2003. 3. The Client covenants to pay the agreed interest in accordance with Article I. hereof always by the last day of the quarter of the year beginning with the 4th quarter of the year 1996. The payment of interest shall be preferred to a repayment of loan. The payment is stated in Article VIII paragraph 2. 4. The Client is entitled to prepay the facilities drawn up under the loan before the repayment days set out in the Agreement subject to notification of such a repayment to Sporitelna not less than 30 days before the prepayment day, 2 V. 1. Any delay in any installment or interest payment (Article IX paragraph 1) is a material breach of the terms and conditions of this Agreement. Sporitelna will debit any amount overdue (interest, installment) into unpaid installments check accounts and will charge the respective amount with the interest rate up to the rate specified in Article I. paragraph 2 hereof as of the first day following the due repayment date for such an amount until the amount has been discharged. Sporitelna is entitled to charge a contractual penalty on any amount overdue (installments, interests) equal up to 10% p. a., if the client will not pay the installments or agreed interest stated in Article IV. VI. 1. Sporitelna is entitled to charge the Client for the services in connection with the provision, administration and enforcement of the loan facilities as well as with the interest payment a fee listed on the Ceska sporitelna, a. s., Price List applicable for banking transactions made in Czech Crowns and being in force on the date of billing the respective transaction. 2. The Client agree to pay to Sporitelna the fees charged pursuant to Paragraph 1 of this Article by the last day of each quarter of the year beginning with the 4th quarter of the year 1996. VII. 1. The Client undertakes to maintain the current (checking) account No. 324951-988/0800 with Ceska sporitelna, a. s., Subsidiary in Prague, for the entire period of the loan. Moreover, the Client undertakes to place or to keep in this account such an amount of money that at any time the Sporitelna receivables become due the amount credited to the account be sufficient to cover such receivables according to the following Paragraph of this Article. 2. The Client agrees that Sporitelna may cover its receivables becoming due in the course of discharging the loan (such as payable installments, interest, fees and contractual penalty under Article V. hereof ) out of the current account No. 324951-998/0800 maintained pursuant to Paragraph 1 of this Article with the Ceska sporitelna, a. s. Subsidiary in Prague, without the necessity to receive any prior Client's order or advising the Client thereof. In addition, the Client authorizes Sporitelna to issue the payment documents required to settle the respective amounts and to make the payments thereof at the due date of the said receivables prior to other payments which Sporitelna should make out of the above current account following the Client's order on this date. 3 3. As to the contractual penalty agreed in Article V. hereof the right to charge it is established on the moment when Sporitelna acknowledges the breach of the Client's duties as stated in Article V. paragraph 2 of this Agreement. 4. By payment of the contractual penalty the right of Sporitelna to be compensated for damages incurred by Sporitelna due to the non-fulfillment of the Clients obligations secured by this contractual penalty according to the Article V. paragraph 2 of this Agreement remains unaffected. VIII. 1. Besides the right to check the purpose for which the loan is disbursed Sporitelna is entitled to examine the Client's financial standing and other facts concerning the Client which existence could result in the necessity to change the contractual conditions and terms on and subject to which the loan has been provided or in jeopardizing the repayment of the loan. The Client agrees to enable the Sporitelna to inspect and to examine the Client's financial standing and other circumstances set out in this Paragraph. 2. In order to secure the Sporitelna's rights defined in Paragraph 1 of this Article the Client covenants: - to promptly notify Sporitelna of all facts which might be prejudicial to the loan repayment or as the case may be could result in any change of the conditions and terms on and subject to which the loan has been provided, especially the Client shall notify Sporitelna of any change to the Client's assets (property) extending beyond the ordinary course of business and in addition shall submit the updated financial and income statements if the premises under which the Loan Agreement was made have Changed; n- to inform Sporitelna on any changes to its organization and legal status (such as merger, division, entry of another quota holder, quota holder's death, changes in the Company's statutory bodies, going to bankruptcy and settlement procedure, alterations to small trade license or the Commercial Register etc.) which duty applies also to the preparation stage thereof or the time before starting of the respective procedure. The Client also undertakes to provide Sporitelna with a proof that the above indicated changes actually exist; - to inform Sporitelna of its intention to transfer the object with respect to which the loan has been provided to another legal entity before such intention has been effected and to ask Sporitelna for its consent thereto. At any time before the Loan has been fully repaid the Client undertakes to assume no action which might even partly jeopardize the satisfaction of the Sporitelna as creditor. 4 IX. Should Sporitelna in exercising its rights under Article VIII. above determine any fact which could be prejudicial to the loan repayment especially if the Client fails to perform its duties, Sporitelna will be entitled to take with respect to the Client to suspend further loan disbursements if the loan has not been yet paid out in full and to discuss immediately such situation with the Client with the objective to take measures to remedy the situation, X. In respect of the character of the loan transaction the parties hereunder have agreed to provide the following security of the monetary receivables and its accessories payable to Sporitelna under this Loan Agreement: - the Agreement on a Future Agreement between Ceska sporitelna, a.s., and CME Media Enterprises B.V. concluded on August 1, 1996. XI. The parties hereunder agree that the following events establish a material breach of this Agreement: a) the Client will use the loan in contradiction with the purpose as stated in Article I paragraph 1; b) the Client is in arrears with payment of at least two installments for more than three months; c) the Client is in arrears with payment of interest for more than three months; d) the Client has been dissolved as entrepreneurial entity; 5 2. Should the above circumstances as stated in paragraph 1 of this Agreement occur Sporitelna will be entitled to terminate the Agreement or to give a notice of termination and to request the repayment of all the loan (or its amounts actually disbursed) including interest and all payable receivables. The termination shall take effect on the day of its delivery in writing to the Client. The notice of termination is to be given one month in advance and begins with the first day of the calendar month next following the month in which the notice was served. 3. In any other case of violation of the duties on the part of the Client and affecting the relations arising from this Agreement Sporitelna shall be entitled to terminate the Agreement by giving a one month prior notice. The paragraph 2 shall be effective in this case. 4. The Client is entitled to terminate this Agreement without stating grounds by giving one month prior notice. The Client is however obligated to repay all disbursement on the loan together with their accessories as well as any outstanding receivables payable to Sporitelna. The notice of termination begins as stated in paragraph 2. 5. All notices are deemed orderly served beginning with the third day following the return to Sporitelna of the notice letter which could not have been delivered if the letter had been sent over to the Client's registered office address determined on the date of execution of this Agreement or to its last known address notified by the Client in writing. XII. 1. The Client agrees that Sporitelna discloses, if it thinks practicable and reasonable, a banker's information referred to in Section 38 paragraph 1 of the Act on Banks (Bank Secrecy) to satisfy the needs of financial institutions. To ensure due payment transactions Sporitelna may upon a written request of another bank provide particulars of the Client's bank. 2. Unless provided otherwise in this Agreement the relations between the Client and Sporitelna are governed by the applicable law and regulations. 6 XIII. 1. This Agreement takes effect on the day of its signing by both the parties hereunder and ends, except of the events defined in Article XI. hereof by fulfillment of all obligations arising from this Agreement. 2. Any modifications to any particular part of this Agreement may be made only by agreement of both parties hereof and in the form of written amendments. 3. Both parties hereof agree that by any amendment to this Loan Agreement no change may be made which would result in increase on the agreed total loan amount, change to the purpose for which the loan has been provided or change in the person of the debtor. All such modification may be made only by execution of a new loan agreement. XIV. 1. This Agreement shall be governed by the laws of the Czech Republic. 2. This Agreement has been made in two counterparts of which each has power of the Loan Agreement original deed. 3. Sporitelna has obtained one counterpart and the Client has also obtained one counterpart of the Agreement. In Prague, date: August 1, 1996 In Prague, date: August 1, 1996 On behalf of Sporitelna: On behalf of Client: ------------------------------- ------------------------------- JUDr. Karel Kotrba Leonard M. Fertig _______________________________ Passport No.: _________ JUDr. Rudolf Hanus The personal identity and the Signature has been proved by: ------------------------------- (Name and signature of the Sporitelna's official) 7 EX-10.6 7 AGREEMENT ON A FUTURE AGREEMENT Ceska sporitelna, a. s. Prague Central Office Loan Department Section of Loan Transactions This day, month, and year, with reference to Section 289 and following provisions of the Act No. 513/1991 Coll., as later amended (hereinafter referred to as "Commercial Code"), Ceska sporitelna, a. s., with the registered office at Prague 1, Na Prikope 29, 113 98, OIN: 45 24 47 82, represented by JUDR. Karel Kotrba, the Vice-Chairman of the Board of Directors and the First Deputy to the General Director and JUDR. Rudolf Hanus, the Member of the Board of Directors and the Deputy to the General Director (hereinafter called "the Authorized Party") and CME Media Enterprises B. V., with the registered office at Amsterdam, the Netherlands, Leidseplein 29, represented by Leonard Martin Fertig, Managing Director (hereinafter called "the Committed Party") (hereinafter jointly called "the Parties") enter into the following AGREEMENT ON A FUTURE AGREEMENT I. The Parties state that on this day, month, and year, they have already closed: a) the Agreement on Transfer of the Participation Interest, in which the Authorized Party transfers to the Committed Party a parts of the Participation Interest in Ceska nezavisla televizni spolecnost, limited liability company, with its registered office at Prague 1, Vladislavova 20, OIN: 49 61 66 68 (hereinafter only "Television Company"), which share is representative of the contribution of 80,000,000 CZK (in words: eighty million Czech crowns), and in which the Parties have agreed on the option right of the Committed Party to the remaining part of the Participation Interest of the Authorized Party in the Television Company which is representative of the contribution of 8,000,000 CZK (in words: eight million Czech crowns) (hereinafter only "Agreement on Transfer of Participation Interest") b) the Loan Agreement subject to which the Authorized Party undertakes to confer on the Committed Party an investment loan which is to be used for covering of a portion of compensation for the transfer of the Participation Interest in accordance with the Agreement on Transfer of the Participation Interest (hereinafter only "Loan Agreement") II. 1. The Parties have agreed that by the 90th (in words: ninetieth) day following the date on which this Agreement takes effect the Parties enter into an Agreement on Transfer of a Part of the Participation Interest of the Committed Party in the Television Company, which is equal to the capital contribution of 80,000,000 CZK (in words: eighty million Czech Crowns), whereby the Committed Party will transfer to the Authorized party that part of the Participation Interest at a price that will be equal to the market price of the part of the Participation Interest in the Television Company as determined by an independent internationally recognized auditor agreed upon by both Parties, but which price shall in no case be lower than the price that the Committed Party has paid to the Authorized Party at the date of signing of the Agreement on Transfer of an Participation Interest. 2. The Parties have agreed that if the option as per Article I. a) of this Agreement is exercised, then by the 90th (in words: ninetieth) day following the date on which this Agreement has become effective the Parties shall enter into an Agreement on Transfer of a Part of Participation Interest of the Committed Party in the Television Company, which is equal to the capital contribution of 88,000,000 CZK (in words: eighty eight million Czech Crowns), whereby the Committed Party will transfer to the Authorized party that part of the Participation Interest at a price that will be equal to the market price of the part of the Participation Interest in the Television Company as determined by an independent internationally recognized auditor agreed upon by both the Parties, but which price will in no case be lower than the price that the Committed Party has paid to the Authorized Party at the date of the signing of the Agreement on Transfer of an Participation Interest. III. For the purpose of closing the Agreement as per Article II. of this Agreement, the Parties undertake to develop the necessary cooperation, to make necessary decisions, and to take any additional necessary steps. IV. If the Committed Party fails to fulfill the commitment to close the Agreement as per Article II. of this Agreement or any other commitments as per Article II., the Authorized Party can demand that the contents of the Agreement be determined by the Court with jurisdiction or by a person designated by the Authorized Party. V. In the event that the Committed Party refuses to enter with the Authorized Party into the Agreement under Article II hereof or if the Committed Party refuses to enter into such an Agreement under the conditions and terms set forth in Article II., or in the event that the Committed Party fails to receive the required consent of the Participants, the Television Company's bodies, or other authorities whose approval may be necessary for the closing of such an Agreement on Transfer of an Participation Interest to the Authorized Party, the Committed Party undertakes to pay the Authorized Party a contractual penalty in the amount of the non repaid portion of the Loan extended by the Authorized Party to the Committed Party in accordance with the Loan Agreement, including accessories. VI. 1. This Agreement is governed by the laws of the Czech Republic. 2. Arbitration Clause: 2.1 All property disputes between the Parties that may arise from or in connection with this Agreement including its breach, validity, and rights in connection therewith and that could be settled by conciliation in accordance with the provisions of Section 99 of the Civil Court Proceedings Rules, will be finally decided in accordance with the Act No. 216/1994 Coll., on Arbitration proceedings and on Implementation of Arbitration Awards, will be resolved by three arbitrators. 2.2 Each Party shall appoint one arbitrator, and the appointed arbitrators shall designate one presiding arbitrator. If the Party that should appoint an arbitrator fails to do so within thirty days following the receipt of a notice by the other party, or if the appointed arbitrators are unable to agree on the person of the presiding arbitrator within the same period of time, the arbitrator or the presiding arbitrator will be appointed by Court. 2.3 Arbitration proceedings shall be held in Prague. 2.4 In making the decision, the arbitrators shall follow the Czech Republic substantive law applicable to such dispute, but they can decide the dispute in accordance with the equity principles, for which application they have the expressed authorization of the Parties. 2.5 The Parties undertake to respect the announced arbitration award, and to fulfill it immediately. 3. This Agreement has been made in the Czech and English languages however the Czech version shall prevail. VII. This Agreement enters into force on the date of its signing by both the Parties. The Agreement takes effect on the fruitless expiration of the 180th (in words: one hundred eightieth) day following the date as of which the Committed Party should have paid but failed to pay an installment stipulated for the repayment of the extended Loan under the Loan Agreement. VIII. Any changes to this Agreement can be made in writing only, in the form of supplements subject the consent of both the Parties. This Agreement has been executed in two copies in each language version, having the validity of the original, and each Party will receive one copy of each version. IX. The Parties confirm that this Agreement expresses their true and free will to fulfill the aforementioned arrangements. The Parties declare that they have read this Agreement, that they agree to its content, and that this Agreement was not negotiated under duress or under unilaterally unfavorable conditions. In evidence whereof, the authorized representatives of the Parties affix their signatures hereto. In Prague on August 1, 1996 for the Authorized Party for the Committed Party Ceska sporitelna, a. s. CME MEDIA ENTERPRISES B. V. with the registered office with the registered office at Prague 1, Na Prikope 29 in the Netherlands, Amsterdam, Leidseplein 29 ________________________________ ___________________________ JUDR. Karel Kotrba Leonard Martin Fertig Vice-Chairman of the Board of Managing Director Directors and the First Deputy to the General Director ________________________________ JUDR. Rudolf Hanus Member of the Board of Directors and the Deputy to the General Director I hereby certify that this photocopy is a true and exact copy of the produced original o 4 pages. Notary's office, Prague 1, Jindrisska 20 date: 1 August 1996 /Signature/ /Seal/ Mgr. Petr Michal Mgr. Sarka Zwierzynova Assistant notary Notary in Prague by authorization of the Notary in Prague Sarka Zwierzynova -------------------- I, the undersigned sworn interpreter of English language (appointed by the Decree of Minister of Justice, Ref.No.1940/85), hereby certify that the above is a true and exact translation of the Document written in the Czech language and attached hereto. In Prague Petr Rezac Date, August 2, 1996 Severovychodni-VI 629/9 141 00 Prague 4 Tel./Fax No. 02/764457 EX-10.7 8 BRIDGE LOAN AGREEMENT DATED JULY 16, 1996 CME MEDIA ENTERPRISES B.V. as Borrower and ING BANK N.V. as Lender ---------------------------- FACILITY AGREEMENT US$ 10,000,000 ---------------------------- CONTENTS Number Clause Heading Page ---- 1. Definitions...................................................... 1 2. Terms and Conditions of the Credit Facility...................... 3 2.1 Amount and currency.............................................. 3 2.2 Purpose ......................................................... 3 2.3 Availability..................................................... 3 2.4 Interest Rate and payment of Interest............................ 3 2.5 Fees............................................................. 3 2.6 Drawdown and Final Maturity...................................... 3 2.7 Security......................................................... 4 2.8 Particular Covenants............................................. 4 2.9 Conditions Precedent............................................. 4 2.10 Expenses......................................................... 4 3. General Terms and Conditions of the Credit Facility.............. 4 3.1 Termination...................................................... 4 3.2 Prepayment by the Borrower....................................... 4 3.3 Payment by the Borrower.......................................... 5 3.4 Method of Drawing of Advances and Selection of Interest Periods.. 5 3.5 Notice of Drawing: Indemnification............................... 5 3.6 Increase of costs................................................ 5 3.7 Representations and Warranties................................... 6 3.8 General Covenants................................................ 6 3.9 Default ......................................................... 7 3.10 Exercise of rights............................................... 8 3.11 General Conditions............................................... 8 3.12 Governing law / Choice of Jurisdiction........................... 8 3.13 Notices ......................................................... 8 Appendix Appendix 1 Form of Notice of Drawing Appendix 2 Form of Guarantee Appendix 3 Form of Share Pledge Agreement Appendix 4 The Bank's General Terms and Conditions THIS AGREEMENT is made on the 16th day of July 1996 BETWEEN: 1. CME MEDIA ENTERPRISES B.V., a company incorporated under the laws of The Netherlands, with its principal offices at 1017 PS Amsterdam, Leidseplein 29, The Netherlands (the "Borrower") 2. ING BANK N.V., a company incorporated under the laws of The Netherlands, with its principal offices at 1077 ZZ Amsterdam, Strawinskylaan 2631 and its business address at 1102 MG Amsterdam, Bijlmerplein 888, The Netherlands (the "Bank") IT IS HEREBY AGREED as follows: 1. DEFINITIONS In this Agreement, unless the context requires otherwise, the following terms, as used herein, have the following respective meanings: Advance: the principal amount of the advance made or to be made under the Facility by the Bank to the Borrower pursuant to Section 2.3; Banking Day: a day (other than a Saturday or Sunday) on which banks and foreign exchange markets are generally open for business in London and Amsterdam; Borrowing Date: the date specified as the Borrowing Date in the Notice of Drawing delivered by the Borrower to the Bank pursuant to Section 3.4; Event of Default: as defined in Section 3.9; Facility: as defined in Section 2.1; Final Maturity Date: the earlier of (i) September 30, 1996 and (ii) the date on which the Borrower has no obligation to the Bank under the Facility and the Bank has no obligation to lend any funds to the Borrower under the Facility; Guarantee: the guarantee executed or to be executed by the Guarantors in the form, or substantially in the form, set out in Appendix 2; Guarantors: Central European Media Enterprises Ltd., a company incorporated under the laws of Bermuda and Central European Media Enterprises N.V., a company incorporated under the laws of the Netherlands Antilles jointly and severally; Interest Period: for each Advance, the consecutive periods of one week or one month (as specified by the Borrower in the Notice of Drawing or otherwise determined pursuant to Section 3.4), each of which shall start on the day of the last preceding such period, provided that (a) any Interest Period which would otherwise end during the month preceding, or extend beyond, the then anticipated Final Maturity Date, shall be of such duration that it shall end on the Final Maturity Date, (b) if two or more Interest Periods end at the same time, then, on the last day of those Interest Periods, the Advances to which they relate shall be consolidated into (and thereafter, except as otherwise provided herein, treated in all respects as) a single Advance, and (c) any Interest Period that would otherwise end on a day that is not a Banking Day shall be extended to the next succeeding Banking Day. LIBOR: in relation to any relevant sum and any relevant Interest Period: a) the offered rate per annum, if any, for deposits in dollars (rounded upwards to four decimal places) for the relevant Interest Period appearing on Telerate Page 3750 on the Telerate Services (or such other page or service as may replace Telerate Page 3750 or the Telerate Service, as the case may be, for the purpose of displaying London Interbank Offered Rates) (the "Telerate Screen") as at 11.00 a.m. on the Quotation Date. b) if at or about such time the relevant rate does not appear on the Telerate Screen for purposes of paragraph a) above, the rate per annum determined by the Bank to be equal to the arithmetic mean (rounded upwards, if not already such a multiple, to the nearest whole multiple of 1/16th of 1%) of the respective rates (as notified to the Bank) by each of the Reference Banks as being the rate per annum at which deposits in dollars in an amount comparable to such sum are offered by the Reference Banks to prime banks in the London Interbank Market deposits in dollars for the relevant Interest Period at or about 11.00 a.m. on the Quotation Date. Notice of Drawing: a notice in the form set out in Appendix 1; Quotation Date: in relation to any relevant period, the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in Dollars for delivery on the first day of that period; provided that if there is more than one such day the Quotation Date shall be the latest such day. Reference Banks: Barclays Bank Plc, Bank of Tokyo, Bankers Trust Company of New York and National Westminster Bank Plc, or any other bank agreed upon between the Bank and the Borrower. Share Pledge Agreement: the share pledge agreement executed or to be executed among Central European Media Enterprises N.V., the Borrower and the Bank in the form, or substantially in the form, set out in Appendix 3.; - 2 - 2. TERMS AND CONDITIONS OF THE CREDIT FACILITY 2.1 Amount and currency The Bank agrees, subject to the terms and conditions set forth in this Agreement, to lend to the Borrower from time to time amounts such that the aggregate principal amount lent by the Bank to the Borrower shall not exceed US$ 10,000,000 (ten million U.S. dollars), at any one time outstanding (the "Facility"). 2.2 Purpose The Borrower shall use the proceeds of the Facility for the financing of general working capital requirements for the development of its broadcast operations. 2.3 Availability Each Advance shall be drawn in a principal amount of not less than US$ 1,000,000 (one million U.S. dollars) and integral multiples thereof. 2.4 Interest Rate and payment of Interest The Borrower agrees to pay to the Bank interest in respect of any Advance at the rate of 1.6% per annum above LIBOR. Interest in respect of an Advance shall be due and payable on the earlier of (a) the last day of any Interest Period relating to such Advance and (b) any maturity prior to the stated maturity (by acceleration or otherwise) of such Advance. Interest shall accrue on the principal amount of each Advance commencing on the appropriate Borrowing Date until repaid in full at the rate determined by the Bank in accordance with the provisions of this Agreement in respect of the Interest Period chosen by the Borrower. Interest shall be calculated on the number of calendar days actually elapsed on the basis of a year of 360 days. 2.5 Fees The Borrower agrees to pay to the Bank the following fees and charges: Closing fee: 0.50% flat on the aggregate principal maximum amount of the Facility, payable to the Bank upon execution of this Agreement; 0.25% of which will be reduced from any arrangement/facility fee payable if the Bank enters into another facility agreement with the Borrower and/or Central European Media Enterprises N.V. within one year as of June 27, 1996. Commitment Fee: 0,30% per annum on the average daily unused portion of the Facility from the date of execution of (i) this Agreement, (ii) the Guarantee and (iii) the Share Pledge Agreement until the Final Maturity Date, payable on the Final Maturity Date. 2.6 Drawdown and Final Maturity The Facility shall be effective as of the date of the fulfillment of the conditions precedent as set forth in Section 2.9 hereof until the Final Maturity Date. All outstandings, including interest and any other charges, must be fully repaid on the Final Maturity Date. - 3 - 2.7 Security In order to secure the payment of any and all amounts outstanding under this Agreement, the following securities will be provided to the Bank: (i) the Guarantee; (ii) the Share Pledge Agreement. 2.8 Particular Covenants The Borrower undertakes: i that throughout the continuation of the Facility and so long as any sum is or may become payable under this Agreement the Borrower will not, unless the Bank otherwise agrees in writing, sell or transfer all or any of its present or future assets which could have a material adverse effect on its business or financial condition in respect of its compliance with its obligations under this Agreement; ii to register the pledge of shares pursuant to the Share Pledge Agreement in the shareholdersregister of the Borrower and to provide the Bank with a copy of the relevant pages of the shareholdersregister within 20 (twenty) days as of the execution date of the Share Pledge Agreement. 2.9 Conditions Precedent The Bank shall not be obliged to make the Facility available to the Borrower unless and until the Bank has received (a) the Closing fee in full, unless credited to the Bank against the first Advance and (b) the following documents and evidence which shall be subject to the satisfaction (or waiver) by the Bank: (i) this Agreement duly executed by the parties; (ii) the Guarantee duly executed by the Guarantors; (iii) the Share Pledge Agreement duly executed by Central European Media Enterprises N.V., the Borrower and the Bank. 2.10 Expenses The Borrower agrees to reimburse the Bank for actual expenses, including legal fees, if any, incurred by the Bank for the preparation of this Agreement and all related agreements thereto. 3. GENERAL TERMS AND CONDITIONS OF THE CREDIT FACILITY 3.1 Termination Without prejudice to any other provision of this Agreement, the principal amounts of each Advance (together with interest due but not yet paid) and other charges, if any, shall be due and payable on the Final Maturity Date. 3.2 Prepayment by the Borrower The Borrower may prepay any or all Advances without premium or penalty, in whole or in part, in amounts not less than US$ 1,000,000 and integral multiples of US$ 1,000,000 by paying to the Bank the principal amount being prepaid, together with all accrued interest on such Advance - 4 - or Advances to the date of prepayment on the last day of an Interest Period. Amounts so prepaid may not be reborrowed. 3.3 Payment by the Borrower Any payments by the Borrower hereunder shall be made on the relevant due date in funds immediately available in New York City to the Bank at the Bank's account number 001.1.643293 with the Chase Manhattan Bank in New York City or at such other account as the Bank may hereafter specify by prior written notice to the Borrower. Whenever any payment of principal of, or interest on, any Advance shall be due on a day which is not a Banking Day, the date for payment thereof shall be extended to the next succeeding Banking Day, provided that, if such next succeeding Banking Day is in a calendar month other than the calendar month in which the date for payment would otherwise fall, the date for payment shall be the immediately preceding Banking Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. 3.4 Method of Drawing of Advances and Selection of Interest Periods a) The Borrower shall give the Bank a Notice of Drawing at or before 11.00 a.m. (Amsterdam time) on the third Banking Day before the proposed date specifying (a) the proposed Borrowing Date, which shall be a Banking Day not less than two weeks prior to the Final Maturity Date, (b) the amount of the Advance and (c) the relevant Interest Period for such Advance which might be an Interest Period of one week or one month for the Advance in question; if the Borrower fails to make such a selection for the Interest Period, the Interest Period for any Advance shall be one week. b) Subject to the terms and conditions set forth in this Agreement, not later than 11.00 a.m. (Amsterdam time) on the Borrowing Date, the Bank shall make available the amount of any Advance as specified in the relevant Notice of Drawing in funds immediately available in Amsterdam, to the Borrower at its account number 02.19.91.642 at the Bank (in Amsterdam), or at such other accounts in such other locations as the Borrower may specify by prior written notice to the Bank. 3.5 Notice of Drawing: Indemnification If for any reason an Advance is not drawn in accordance with a Notice of Drawing, the Borrower shall on demand pay to the Bank such amount (if any) as the Bank may certify to be necessary to indemnify or compensate it for any loss or expense incurred in liquidating or redeploying funds acquired or arranged for the purpose of the proposed Advance or in terminating any such arrangement or otherwise as a consequence of the proposed Advance not having been drawn in accordance with the Notice of Drawing. 3.6 Increase of costs The Bank shall promptly notify the Borrower of any increased costs incurred by the Bank by reason of the introduction of, or any change in, any law or regulation applicable to the Bank. In such case, the Borrower shall pay to the Bank from time to time on demand such additional amounts as the Bank may certify to be necessary to compensate the Bank for such increased costs. Such - 5 - certificate shall be conclusive and binding on the Borrower in the absence of manifest error. The Borrower shall be at liberty at any time after receipt of such notice, to prepay all or part of the amounts outstanding under the Facility. 3.7 Representations and Warranties The Borrower represents and warrants to the Bank that: i the Borrower is a company duly incorporated and validly existing under the laws of the Netherlands and has the power and authority to own and dispose of its properties, has all licenses and approvals which are material to conduct its business and to enter into and consummate the transactions contemplated in this Agreement; ii the making and performance of this Agreement have been duly and validly authorized by all necessary corporate action on behalf of the Borrower; iii the Borrower's shareholding, corporate structure and activities as submitted to the Bank by the Borrower fairly, accurately and fully represent the situation of the Borrower and its shareholder and subsidiaries; iv there is no litigation or other proceedings presently in process, pending or threatening that might have a material adverse effect on the Borrower's business or financial condition in respect of its compliance with its obligations under this Agreement. 3.8 General Covenants The Borrower agrees that until full and final repayment of all indebtedness and liabilities incurred hereunder has been received and unless the Bank waives compliance in writing, the Borrower will: i as soon as possible after becoming aware of it, give prompt notice to the Bank of any and all Events of Default under the terms of this Agreement; ii give prompt written notice to the Bank of any significant changes in its shareholding and/or its corporate structure; iii supply the Bank with the following: a) latest financial statements (balance sheet and profit & loss account) of the Borrower; b) upon request by the Bank, the Borrower will provide the Bank with periodic information regarding the development of the business activities of the Borrower; c) any other information concerning the affairs of the Borrower which is relevant to the Facility or which the Bank may reasonably request. - 6 - iv not (a) consolidate or merge with or into any other party, (b) liquidate, wind up or dissolve itself, (c) pledge, hypothecate, abandon, lease, directly or indirectly, all or any part of its assets (except in the ordinary course of business); v the Facility is offered on the basis that the Bank ranks at least pari-passu with all other present and future unsecured and unsubordinated indebtedness of the Borrower. 3.9 Default The principal of, accrued interest on any and all outstanding amounts, as well as possible other charges - as the case may be - under this Agreement shall become immediately due and payable at the option of and upon first written demand by the Bank, if any of the following events (each an Event of Default) occurs: i payment of any amount is not received by the Bank when due and such failure continues for a period of 5 (five) Banking Days without remedy; ii any formal action is taken to reorganize, wind up, liquidate or dissolve the Borrower; iii any representation or warranty made by the Borrower under this Agreement or by Central European Media Enterprises N.V. pursuant to the Share Pledge Agreement or any certificate or document furnished pursuant hereto or thereto shall at any time prove to be incorrect in any material respect when so made, deemed made or furnished; iv the Borrower shall default in the performance of any term, covenant or agreement contained in this Agreement (other than Section 3.9 (i) and such failure continues for a period of 10 (ten) Banking Days without remedy; v the Borrower shall have been called in default in the performance of any other agreement between the Borrower and the Bank, provided however, that such default is likely to have a material adverse effect on the business or financial condition of the Borrower in respect of its compliance with its obligations under this Agreement; vi if there shall occur any material adverse change in the assets or operation or financial conditions of the Borrower which, in the opinion of the Bank, may reasonably be expected to affect the ability of the Borrower to comply with all or any of its respective obligations hereunder; vii if the Borrower files a petition for bankruptcy ("faillissement"), if such petition is filed against the Borrower, if the Borrower is declared bankrupt or insolvent, or if the Borrower applies for a moratorium of payment ("surseance van betaling"); - 7 - Upon becoming aware of an Event of Default, the Bank shall promptly notify the Borrower of the Event of Default in writing. Such notice of an Event of Default shall also entitle the Bank, in its sole discretion, to enforce any collateral granted in connection with the obligations of the Borrower under this Agreement at any time after the last day of the Remedy Period. The Borrower shall hold the Bank harmless of and indemnify the Bank against any losses or expenses which the Bank may sustain or incur as a consequence of any Event of Default as stipulated hereinabove. The interest rate applicable to such amounts in default shall be the rate specified in Section 2.4 plus an additional 2% (two percent) per annum from the date of the Event of Default until the actual date of payment of such amounts. 3.10 Exercise of rights Failure and/or delay on the part of the Bank in exercising any right or power under this Agreement shall not operate as a waiver thereof, unless signed by the Bank in writing; nor shall any single or partial exercise of any such right or power preclude any other or future exercise thereof or the exercise of any other power or right. The rights and remedies provided for in this Agreement are cumulative and not exclusive of any rights or remedies provided by law. 3.11 General Conditions The Bank's General Terms and Conditions, as in effect from time to time, and as set forth in Appendix 4 shall supplement the terms of this Agreement, provided that in the event of any conflict between the Bank's General Terms and Conditions and the terms of this Agreement, the terms of this Agreement shall prevail. 3.12 Governing law This agreement shall be governed and construed in accordance with the laws of the Netherlands. Choice of Jurisdiction The parties hereto submit, in the Bank's interest, to the non-exclusive jurisdiction of the District Court of Amsterdam, the Netherlands, in connection with any conflicts and disputes arising out of or in connection with this Agreement. 3.13 Notices All notices, requests and other communications hereunder shall be in writing (facsimile transmission or similar writing). Each such notice, request or other communication shall be effective if given by facsimile transmission, when received or if given by any other means, when delivered at the address specified in this Section. Any such notice, request, demand or communication shall be delivered or addressed as follows: (i) if to the Borrower, to it at: CME Media Enterprises B.V. Leidseplein 29 1017 PS Amsterdam The Netherlands - 8 - Attn.: Victoria Rogers Facsimile: (31) 20 638 4022 with copies to: CME Group 18 D'Arblay Street London W1V 3FP United Kingdom Attn.: Mr. John Diess Facsimile: 44 171 292 7903 (ii) if to the Bank, to it at: ING Bank N.V. De Amsterdamse Poort Amsterdam-Zuidoost P.O. Box 1800, HE 02.02 1000 BV Amsterdam The Netherlands Facsimile: (31) 20 563 5505 Attn.: Erica Bischoff or at such other address or telex number as any party hereto may designate by written notice to the other party hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written. CME MEDIA ENTERPRISES B.V. ING BANK N.V. - ------------------------- ------------------------- By: By: Title: Title: - ------------------------- ------------------------- By: By: Title: Title: - 9 - APPENDIX 1 FORM OF NOTICE OF DRAWING ING Bank N.V. Attn.: Media Finance Group Bijlmerplein 888 1102 MG AMSTERDAM-Z.O. The Netherlands US$ 10,000,000 Facility Agreement Gentlemen: Pursuant to the provisions of the Facility Agreement dated July __, 1996 (the "Facility Agreement") among CME Media Enterprises B.V. (the "Borrower") and ING Bank N.V. (the "Bank"), the Borrower hereby request that the Bank makes an Advance in the aggregate amount of US$ __________ on ________________, being a Banking Date (the "Borrowing Date") and hereby designates the Interest Period of an Advance to be ______________. The undersigned hereby certifies that after due investigation: (a) the Borrower has performed and complied with all agreements and conditions contained in the Facility Agreement required to be performed or complied with by it prior to or on the date hereof; (b) no Event of Default has occurred and is continuing on the date hereof; and (c) the representations and warranties of the Borrower contained in the Facility Agreement were true, complete and correct when made and are true, complete and correct on the date hereof. All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Facility Agreement. IN WITNESS WHEREOF, this Notice of Drawing has been executed this ____ day of ________, 1996. CME Media Enterprises B.V. _________________________ _________________________ By: By: Title: Title: APPENDIX 2 July ___, 1996 From: Central European Media Enterprises N.V. Central European Media Enterprises Ltd. TO: ING Bank N.V., Amsterdam (the "Bank") Dear Sirs, 1. Central European Media Enterprises N.V. of Willemstad, Curacao, The Nether-lands Antilles and Central European Media Enterprises Ltd. of Bermuda, (collectively the "Guarantors" and each individually a "Guarantor") refer to the facility letter from the Bank to CME Media Enterprises B.V. of Amsterdam, The Nether- lands (the "Borrower") dated 10 July 1996 (the "Facility Letter") which term includes all variations thereof from time to time in force) in relation to a proposed credit facility of US$ 10 million. 2. In consideration of the Bank at the request of the Guarantors granting a credit facility to the Borrower as described in the Facility Letter, the Guarantors jointly and severally as primary obligor, unconditionally and irrevocably (i) guarantee to the Bank by way of continuing guarantee the payment when due of all amounts payable by the Borrower under the Facility Letter, and (ii) agree that if and each time that the Borrower shall fail to make any payments as and when the same become due under the Facility Letter the Guarantors will on demand (without requiring the Bank first to take steps against the Borrower, the other Guarantor, or any other person) pay to the Bank such amounts (as to which the certificate of the Bank shall in the absence of manifest error be conclusive) in the currency in which such amounts are payable by the Borrower free of all deductions whatsoever together with interest thereon from the date of demand until the date of payment at the rate specified in the Facility Letter. If deductions must be made by law then the Guarantors will pay such additional amounts as may be necessary to ensure that the Bank receives the full amount provided for. 3. The obligations of each Guarantor hereunder shall not be affected by any matter of thing which but for this provision might operate to affect such obligations including without limitation (i) any time or indulgence granted to or composition with the Borrower, the other Guarantor, or any other person, (ii) the taking, variation, renewal or release of, or neglect to perfect or enforce, any rights, remedies or securities against the Borrower, the other Guarantor, or any other person or (iii) any unenforceability or invalidity of, the other Guarantor, any obligations of the Borrower so that this Guarantee shall be construed as if there were no such unenforceability or invalidity. 4. Each Guarantor warrants that this Guarantee is its legally binding obligation enforceable in accordance with its terms and that all necessary governmental consents and authorisations for the giving and implementation of this Guarantee have been obtained. 5. Until all amounts which may be or become payable under the Facility Letter have been irrevocably paid in full, any Guarantor shall not by virtue of this Guarantee be subrogated to any rights of the Bank or claim in competition with the Bank against the Borrower, the other Guarantor, or any other person. 6. The Guarantor will reimburse the Bank all costs incurred by the Bank in connection with the preparation and the enforcement of this Guarantee. 7. This Guarantee shall be governed by with the laws of The Netherlands. For the benefit of the Bank solely, each Guarantor hereby submits to the jurisdiction of the Amsterdam courts. Yours faithfully _____________________ For and on behalf of Central European Media Enterprises N.V. _____________________ For and on behalf of Central European Media Enterprises Ltd. -13- APPENDIX 3 APPENDIX 4 EX-10.8 9 SHARE PLEDGE AGREEMENT SHARE PLEDGE AGREEMENT This day, the eighteenth day of July, nineteen hundred and ninety-six, appeared before me, Monique Martina Johanna Maria Wijnhoven, Esq, deputy civil law notary residing at Amsterdam, hereinafter referred to as the "civil law notary", representing the office of Hendrik van Wilsum, Esq., a civil law notary in Amsterdam, who is absent on leave: ___________ Mister Tjien Hauw Liem, Esq., deputy civil law notary, residing at 1186 BB Amstelveen, Karmel 10, born at Jakarta, Indonesia, on the sixteenth day of March, nineteen hundred and sixty-three, married, holder of the Dutch passport with number: M191593 acting for the purposes hereof as attorney in fact of: 1. Central European Media Enterprises N.V., a limited liability company, established under the laws of the Netherlands Antilles, having its registered office at Curacao (Netherlands Antilles), and with address: Kaya Douwe Zalm 1-L, Curacao, hereinafter referred to as the "Pledgor", and as such representing the Pledgor; 2. ING Bank N.V., a limited liability company, having its registered office at Amsterdam, with address: Strawinskylaan 2631, 1077 ZZ Amsterdam, in this respect officiating at Bijlmerplein 888, 1102 MG Amsterdam, hereinafter referred to as the "Pledgee", and as such representing the Pledgee; and 3. CME Media Enterprises B.V., a private company with limited liability, having its registered office at Amsterdam, The Netherlands, and with address: Leidseplein 29, 1017 PS Amsterdam, hereinafter referred to as the "Company", and as such representing the Company. The powers of attorney granted to the deponent, the existence of which has been sufficiently demonstrated to me, a civil law notary, are evidenced by three non-notarial powers of attorney which will be attached to this document. The deponents have declared: WHEREAS: - - On the sixteenth day of July, nineteen hundred ninety-six the Pledgee and the Company entered into a Facility Agreement (hereinafter referred to as the "Facility Agreement") with regard to a credit facility up to a principal aggregate amount of ten million United States Dollars (US$ 10,000,000.--), granted by the Pledgee to the Company under the terms and conditions as set forth in the Facility Agreement. - - Under section 2.7 of the Facility Agreement, the Pledgor (as well as another party) shall grant to the Pledgee, in order to secure the payment of any and all amounts outstanding under the Facility Agreement, irrevocable and unconditional guarantee (hereinafter referred to as the "Guarantee"). - - In order to effectuate the Guarantee, the Pledgor has issued a letter to the Pledgee, a copy of which is attached hereto (hereinafter referred to as the "Guarantee Letter"), in which the Pledgor unconditionally and irrevocably, by way of continuing guaranty guarantees the payment when due of all amounts payable by the Pledgor under the Facility Agreement, under all such terms and conditions as specified in the Guarantee Letter. DESCRIPTION OF THE SHARES 1. The Pledgor is holder of the following shares in the Company's capital stock: - the one hundred and ninety-nine thousand nine hundred ninety-eight (199,998) shares, numbered 1 up to and including 199,998, each share with a par value of one Dutch Guilder (NLG 1.--), which shares will hereinafter be referred to as the "Shares". The Pledgor acquired the Shares following a share transfer pursuant to a notarial deed of share transfer, executed before H. van Wilsum, Esq., a civil law notary in Amsterdam, on the nineteenth day of September nineteen hundred and ninety-four. 2. The Articles of Incorporation of the Company do not exclude the right to create a pledge on shares of the Company. CREATION OF PLEDGE / PROVISIONS Article 1. Pledge ("vestiging van pandrecht") 1.1 The Pledgor hereby grants a first ranking right of pledge on the Shares to the Pledgee and the Pledgee hereby accepts such pledge from the Pledgor. 1.2 The pledge as described in Article 1.1. shall be a security for any and all of the present or future, actual or contingent obligations owed to the Pledgee by the Pledgor, pursuant to the Guarantee Letter. Article 2. Warranties 2.1 The Pledgor represents, warrants and guarantees that: a. the Shares constitute one hundred percent (100%) of the issued and outstanding capital stock of the Company; b. the Shares are owned by the Pledgor free and clear in full and unencumbered ownership and there is no right of usufruct, charge, lien or other encumbrance of whatever nature on the Shares, except for the pledge created by this deed, and no depositary receipts in respect to the Shares have been issued; c. the Pledgor is entitled and has full legal capacity to pledge the Shares to the Pledgee; d. the Shares have been fully paid-up; e. the execution and performance of this deed does not and will not violate or contravene: - any provisions of the laws of the Netherlands; - the Articles of Incorporation of the Pledgor; - any credit, loan, pledge or other agreement binding on the Pledgor; f. the Company has not been dissolved and no resolution to dissolve the Company has been adopted by its general meeting of shareholders; g. this deed creates a valid first ranking right of pledge over the Shares in favor of the Pledgee. Article 2. Voting rights For the duration of this Pledge the voting rights in respect of the Shares shall remain vested in the Pledgor. The Pledgee does not have the rights conferred by law on holders of depositary receipts issued for shares with the cooperation of a company. Article 3. Default 3.1. If and when the Pledgor is in default: a. the Pledgee shall be entitled to exercise all rights and to pursue all remedies which are granted to it under Netherlands law, which rights and remedies include: - a public sale of the Shares in accordance with and subject to Netherlands law; or - a sale of the Shares in a manner prescribed by the president of the competent Netherlands court, including the possibility to accept the Shares in payment of the debt, or part thereof, for an amount to be determined by such court, whereby in all cases the net proceeds of such sale or the amount determined by the competent court for which the Shares shall remain with the Pledgee, as the case may be, are deducted from the outstanding debt, including principal sum, interest, fee and costs. The restrictions with respect to a transfer of shares as may be provided in the Articles of Incorporation of the Company shall apply to the transfer of the Shares by the Pledgee, or the remaining of the Shares with the Pledgee. The Pledgee shall exercise all rights to which the Pledgor is entitled in respect to the transfer of shares of the Company. The Pledgor, in its capacity as the Company's shareholder, shall be under the obligation to adopt and to vote in favour of a resolution to grant approval to a transfer of the Shares by the Pledgee, or the remaining of the Shares with the Pledgee, as required under the transfer restrictions ("blokkeringsregeling") as contained in the Company's Articles of Incorporation, and hereby grants irrevocable power of attorney to the Pledgee to adopt and to vote in favour of such resolution on its behalf. b. The Pledgee shall be entitled to collect any and all (cash) dividends, (cash) distributions, and (cash) liquidation proceeds with respect to the Shares. Article 4. Without the prior written consent of the Pledgee: a. the Pledgor shall not create any (further) pledges, charges, rights of usufruct, liens or other encumbrances of whatever nature on the Shares, and will not transfer the Shares, whether or not in exchange for depositary receipts; b. the Company shall not give any cooperation to the issuance of depositary receipts for shares in its capital stock. Article 5. Evidence The existence and the size of debt, is fully evidenced by (extracts) from the books and records of the Pledgee, provided that no contrary evidence is produced. Article 6. Costs All costs in connection with this agreement including costs incurred in enforcing any rights under this agreement shall be for the account of the Pledgor. Article 7. Termination As soon as the pledge created under this agreement has terminated, in whole or in part, the Pledgee shall, at the request and expense of the Pledgor, execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of the pledge, or in case of a partial release, indicating which shares have been released from this pledge. Article 8. No rescission To the fullest extent permitted by applicable law, the Pledgor hereby waives its right to rescind ("ontbinden") or avoid ("vernietigen") the legal acts ("rechtshandelingen") represented by this Deed. Article 9. Governing law This agreement shall be governed by and construed in accordance with the laws of The Netherlands. Final provisions. 1. Acknowledgment The Company acknowledges the present pledge and shall cause the required notes to be entered into the shareholders' register of the Company. The Company shall as soon as practicable after the execution of this Deed issue a certified copy of the relevant pages of the shareholders' register of the Company evidencing that the present pledge has been entered therein. 2. Headings The underlined headings have been included for easy reference only. The deponent is known to me, a civil law notary, and the identity of the deponents of this deed has been established by means of the appropriate documents mentioned above. WITNESSED THIS DEED, the original of which was drawn up and executed in Amsterdam at the date first noted above. After the purport of this deed was explained to the deponent, he declared that he had taken note of its contents and waived a full reading thereof. After a limited reading, this deed was subsequently signed by the deponent and me, a civil law notary. EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 26,948 4,352 37,528 (1,947) 0 84,574 71,564 (15,219) 213,445 53,236 0 0 0 185 186,309 213,445 61,805 61,805 40,801 56,709 (5,936) 0 1,532 (2,923) 8,313 (12,380) 0 0 0 (12,380) (0.67) 0
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