WALL STREET JOURNAL: WE CONFIRM OUR STATEMENT

WALL STREET JOURNAL: WE CONFIRM OUR STATEMENT ABOUT TV NOVA

Jan Culik, 7th May, 1997

A. Robert Frank, a staff reporter of Wall Street Journal, based in London, has confirmed the validity of the statement that "The Czech police have launched a criminal investigation into the license arrangement [of TV Nova], since it is illegal to act as a broadcaster without a license. A spokesman said the police have sought an expert opinion in the matter, 'given its complicated nature', and are awaiting the results."

Wall Street Journal fully stands behind the validity of this statement.

It may be that the investigation is in connection with the lawsuit, initiated by Peter Krsak, one of the members of CET 21. This lawsuit is for the first time mentioned in CME's 1996 annual report, released in March 1997. The document states (p.22):

"One of the owners of CET 21 has filed a claim in the Regional Commercial Court in Prague challenging the transfer by four other owners of CET 21 of a portion of their interests in CET 21 to Vladimir Zelezny. This owner of CET 21 interests alleges that the proper procedures were not followed prior to the interests being transferred to Dr. Zelezny. A preliminary injunction was sought with respect to the transfer of these ownership interests and was denied by the Czech Republic Court of Appeals. The underlying claim is still before the Court. 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."

Previous litigation, directed against Nova TV, does not seem to have been expressly mentioned in CME's submissions to SEC.

B. The 1996 CME annual report also seems to contain some contradictions. On page 3, the report states: "In March 1997, the Company acquired an additional 5.2% interest in Nova TV through the retirement of a $5.2 million loan in exchange for such interest (the '1997 Nova TV Purchase'). The Company is in the process of registering the Additional Nova TV Purchase and the 1997 Nova TV Purchase pursuant to Czech law. On an ongoing basis, after giving effect to the Additional Nova TV Purchase and the 1997 Nova TV Purchase, the Company is entitled to 93.2% of the total profits of Nova TV and has 91.2% of the voting power in Nova TV. CET 21 and certain of its partners will own the remaining 6.8% of Nova TV, subject to the registration procedures."

Thus it would appear that CME gave $ 5,2 million to Zelezny so that CME could acquire the 5,2 per cent participation interest in Nova TV from the original members of CET 21, increasing its ownership of Nova TV to 93,2 per cent.

However, on p. 64 of the 1996 annual report, CME states that it "lent" these $5,2 million to Zelezny so that he could obtain 43,31 per cent additional interest in CET 21 for himself:

"During 1996, the Company entered into an agreement to lend the General Director of Nova TV funds totaling $5,200,000 to finance his purchase of interests in CET 21 in order to increase his ownership in CET 21 to 60.0% (p.64)."

However, Zelezny no longer needs to pay the loan back, as it says in an Amendment to the August 1996 Zelezny CME loan agreement, dated 11 March, 1997:

" The Parties further declare that all Release Events (i.e. all the tasks that Zelezny was expected to have accomplished, as listed in the August 1996 CME Zelezny loan agreement, JC) have either occurred or are deemed to have occurred. The Parties, therefore, have agreed to completely release the *** Lender*** (sic, surely this is supposed to be the ***Borrower***, not Lender?) from all of his obligations including but not limited to the repayment of the Loan with any interest which may apply by this Release...."

It also seems to follow from the March 1997 Amendment to the CME-Zelezny loan agreement that CME may have now released Zelezny (under the pressure from Czech media?) from his obligation to vote his CET 21 shares as directed by CME and to obtain for CME a veto over all decisions of CET 21.

The Amendment to the Loan Agreement, dated 11th March 1997, seems to imply this, but it does not spell it out openly.

As quoted above, the Loan Agreement states: "The Parties declare that all Release Events (i.e. all Zelezny's tasks) have either occurred or are deemed to have occurred."

Thus Zelezny may or may not have secured the right of veto for CME over all CET 21 decisions.

In article 2.3. of the Amendment to the Loan Agreement, CME says that Zelezny must not violate " any existing or in the future entered into agreements between CET 21 s.r.o. and CNTS or the Lender [CME] and CNTS". These agreements do not seem to be publicly accessible.

It seems that under pressure from the Czech media, CME has given up its attempts publicly to control Nova TV's licence holder. The 1996 annual report now makes the following concession:

"A representative of CET 21 has certain delay and veto rights on non-economic programming matters related directly to the broadcast license." (p.3) (But Vladimir Zelezny now owns 60 per cent of CET 21.)

CME now has the right " to appoint five of the seven members of Nova TV's Committee of Representatives, which directs the affairs of Nova TV" (p.3) of the 1996 CME annual report..

It would appear that under the pressure of the public gaze, CME has decided to determine the relationship beween Zelezny, CME, CET 21 and Nova TV by confidential agreements which will not be accessible to the public.